What changed in this filing

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Item 1A. Risk Factors

2024-12-13 compared with 2023-12-15 · 61 added, 27 removed, 513 unchanged (15% of the section changed)

33 unchanged sentences

The ownership of our common shares is highly concentrated, which may prevent you and other shareholders from influencing significant corporate decisions and may result in conflicts of interest that could cause our common shares price to decline.

If we fail to meet all applicable Nasdaq Capital Market requirements and Nasdaq determines to delist our common shares, the delisting could adversely affect the market liquidity of our common shares and the market price of our common shares could decrease and our ability to access the capital markets could be negatively impacted.

Risks Related to Our Business, Financial Position and Capital Requirements

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Failure to become and remain profitable would impair our ability to sustain operations and adversely affect the price of our securities and our ability to raise capital.

Our recurring losses from operations have raised substantial doubt regarding our ability to continue as a going concern.

We have recognized recurring losses, and at September 30, 2024, we had an accumulated deficit of $58.6 million.

We anticipate operating losses to continue for the foreseeable future due to, among other things expenses related to ongoing activities to research, develop and commercialize our product candidates.

We expect that our cash and cash equivalents at September 30, 2024, together with the proceeds from the sale of Preferred Shares (as defined below) to PN MPC (as defined below), net proceeds from the HCW ATM (as defined below) and reimbursement of eligibility R&D expenses under the 2023 SIF Agreement, will not be sufficient to fund our operating and capital requirements at least 12 months from the filing of this Form 10-K.

Our forecast of the period of time through which our current financial resources will be adequate to support our operations and the costs to support our general and administrative and research and development activities are forward-looking statements and involve risks and uncertainties.

The financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

The source, timing and availability of any future financing will depend principally upon market conditions, and, more specifically, on the progress of our clinical development programs.

Funding may not be available when needed, at all, or on terms acceptable to us.

Lack of necessary funds may require us, among other things, to delay, scale back or eliminate some or all of our planned clinical trials.

These factors among others create a substantial doubt about our ability to continue as a going concern.

We will need substantial additional funding to finance our operations through regulatory approval of one or more of our product candidates.

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In addition, future debt financing into which we may enter may impose upon us covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, redeem our shares, make certain investments and engage in certain merger, consolidation or asset sale transactions.

In addition, any debt financing would require us to dedicate a portion of our cash resources to the payment of interest and principal, thereby reducing money available to fund working capital, capital expenditures, product development and other general corporate purposes.

If we are unable to raise additional capital when required or on acceptable terms, we may be required to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates, restrict our operations or obtain funds by entering into agreements on unattractive terms, which would likely have a material adverse effect on our business, share price and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained.

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We partially rely on government grants to contribute to our EB05 (paridiprubart) development program.

If we are unable to satisfy our contractual obligations and manage our covenants or meet expected under both SIF agreements, the development of EB05 may be extended, delayed, modified, or terminated and we may be required to repay all or part of the grant earlier than expected.

If we are unable to satisfy our contractual obligations and manage our covenants or meet expected milestones, the development of EB05 may be extended, delayed, modified, or terminated and we may be required to repay all or part of the grant earlier than expected.

In February 2021, we and Edesa Biotech Research signed the 2021 SIF Agreement whereby the Government of Canada agreed to contribute C$14.1 million in nonrepayable funding for an international Phase 2 study and certain pre-clinical experiments.

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We are currently not in default of our obligations per the terms of either SIF agreement.

Our existing and any future indebtedness could adversely affect our ability to operate our business.

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

Nijhawan, our Chief Executive Officer, Secretary and member of our board of directors, providing for an unsecured revolving credit facility in the principal amount of up to $10 million.

Such credit facility combined with our other financial obligations and contractual commitments, including any future indebtedness, could have adverse consequences, including:

requiring us to dedicate a portion of our cash resources to the payment of interest and principal, thereby reducing money available to fund working capital, capital expenditures, product development and other general corporate purposes;

increasing our vulnerability to adverse changes in general economic, industry and market conditions;

subjecting us to restrictive covenants that may reduce our ability to take certain corporate actions or obtain further debt or equity financing;

limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete.

In June 2024, EB05 was selected through a competitive process by the Biomedical Advanced Research and Development Authority (BARDA), as one of three drug candidates for evaluation in a U.S.

government-funded Phase 2 platform study.

The randomized, double-blinded, placebo-controlled, multi-center clinical trial is investigating novel threat-agnostic host-directed therapeutics, including EB05, in hospitalized adult patients with ARDS due to a variety of causes.

We are providing drug products to the study as well as technical support at our own expense.

Given the BARDA-sponsored study opportunity, we have shifted our clinical focus for EB05 to general ARDS from Covid-19 induced ARDS.

Our plan is to await the results of the BARDA-funded study before continuing with our Canadian government-supported Phase 3 study, which had exclusively recruited ARDS patients hospitalized with Covid-19.

As a result, we have discontinued enrollment in a Covid-19 focused Phase 3 study and plan to file a new study design with FDA and Health Canada based on the results of the BARDA-funded ARDS study.

We believe this strategy provides a more efficient and cost-effective path toward a commercially approved therapy for general ARDS, increases the potential commercial opportunity for EB05 and better aligns our development programs with government goals for HDTs as well as interest from potential strategic commercialization and licensing partners.

Any changes we have made and make in the future to our clinical plans and enrollment criteria may limit how data from previously enrolled subjects are utilized by the company for regulatory purposes.

Any failures on our part to satisfy any of our obligations under the above agreements could adversely affect or terminate our development of EB05.

We depend heavily on the success of our drug product candidates.

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If the regulatory agencies determine that more data and information are needed, it could delay and/or negatively impact our ability to obtain regulatory approval to market and sell a particular product candidate.

If the commercial opportunity in chronic ACD, ARDS, vitiligo or fibrotic diseases like systemic sclerosis (SSc) is smaller than we anticipate, our future revenue from our drug candidates will be adversely affected and our business will suffer.

It is critical to our ability to grow and become profitable that we successfully identify patients with chronic ACD, ARDS, vitiligo or SSc.

If the commercial opportunity in vitiligo, chronic ACD, ARDS, or pulmonary fibrosis is smaller than we anticipate, our future revenue from our drug candidates will be adversely affected and our business will suffer.

It is critical to our ability to grow and become profitable that we successfully identify patients with vitiligo, chronic ACD ARDS or pulmonary fibrosis.

Our estimates of the number of people who have these conditions as well as the subset who have the potential to benefit from treatment with EB06, EB01, EB05 or EB07, are based on a variety of sources, including third-party estimates and analyses in the scientific literature, and may prove to be incorrect.

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For example, we remain responsible for ensuring that each of our clinical trials complies with standards, commonly referred to as Good Clinical Practice, and is conducted in accordance with the general investigational plan and protocols for the trial.

If we are not able to establish additional collaborations, we may have to alter our development and commercialization plans.

We may decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of our product candidates.

Collaborations are complex and time-consuming to negotiate and document and we face significant competition in seeking appropriate collaborators.

We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all.

If we are unable to do so, we may have to curtail the development of a product candidate, reduce or delay our development program or one or more of our other development programs, delay our potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense.

If we elect to fund development or commercialization activities on our own, we would likely need to obtain additional capital, which may not be available to us on acceptable terms, or at all.

If we are not able to establish or maintain additional partnerships or collaborations, we may have to alter our development and commercialization plans.

The development of our product candidates and clinical programs and the potential commercialization will require substantial additional capital.

Given the high capital requirement for pivotal clinical studies, our preferred strategy is to seek public and private partners for Phase 3 clinical testing and scale-up.

We face significant competition in seeking appropriate partners and collaborators.

Whether we reach additional definitive agreements for a collaboration or partnership will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.

Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or Health Canada, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally.

The collaborator or partner may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate.

We may not be able to negotiate collaborations or partnerships on a timely basis, on acceptable terms, or at all.

If we are unable to do so, we may have to curtail the development of product candidates, reduce or delay one or more of our development programs, delay potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense.

If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms, or at all.

If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.

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In 2016, we entered into the Yissum License Agreement to obtain exclusive rights to certain know-how, patents and data relating to a pharmaceutical product.

We are using the exclusive rights to develop the product for therapeutic, prophylactic and diagnostic uses in topical dermal applications and anorectal applications, including for the development of EB01 to treat ACD and EB02 to treat HD.

In 2021, we also entered into the Inventor License Agreement to acquire global rights for all fields of use beyond those named under the Yissum License Agreement.

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We must satisfy the continued listing requirements of Nasdaq, to maintain the listing of our common shares on The Nasdaq Capital Market.

As previously reported, on June 22, 2023, we received notice from Nasdaq’s Listing Qualifications Staff indicating that, based upon the closing bid price of our common shares for the prior 30 consecutive business days, we were not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2) (the Bid Price Rule).

We had 180 days, or through December 19, 2023, to regain compliance with the Bid Price Rule.

On October 11, 2023, we effected a one-for-seven reverse split of our common shares.

By letter dated October 25, 2023, Nasdaq advised us that we had regained compliance with the Bid Price Rule.

There can be no assurance that we will be able to continue to maintain compliance with the Nasdaq continued listing requirements, and if we are unable to maintain compliance with the continued listing requirements, including the Bid Price Rule, our securities may be delisted from Nasdaq, which could reduce the liquidity of our common shares materially and result in a corresponding material reduction in the price of our common shares.

There can be no assurance that we will be able to continue to maintain compliance with the Nasdaq continued listing requirements, and if we are unable to maintain compliance with the continued listing requirements, our securities may be delisted from Nasdaq, which could reduce the liquidity of our common shares materially and result in a corresponding material reduction in the price of our common shares.

In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees, suppliers and business development opportunities.

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The price of our common shares could decline if one or more equity analysts downgrade our common shares or if analysts issue other unfavorable commentary or cease publishing reports about us or our business.

Our directors and executive officers have control over us and could delay or prevent a change of corporate control.

As of December 11, 2024, Dr.

Nijhawan, our Chief Executive Officer, beneficially owns 19.99% of our outstanding common shares and all of our executive officers and directors, including Dr.

Nijhawan, beneficially own 23.9% of our common shares.

As a result, such individuals will have the ability, acting together, to significantly influence the election of our directors and the outcome of corporate actions requiring shareholder approval, such as:

(i) a merger or a sale of our company, (ii) a sale of all or substantially all of our assets, and (iii) amendments to our Articles.

This concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to our other shareholders and be disadvantageous to our shareholders with interests different from those individuals.

See “Security Ownership of Certain Beneficial Owners and Management” below for more information regarding the ownership of our outstanding common shares by our executive officers, directors and holders of more than 5% of our common stock, together with their affiliates.

Our Articles allow for our board of directors to create new series of preferred shares without further approval by the shareholders, which could adversely affect the rights of the holders of our common shares.

As previously approved by our shareholders, our board of directors has the authority to authorize up to an unlimited number of a new series of our preferred shares and to fix and determine the special rights and restrictions of that series without further shareholder approval, subject to the terms set out in the Articles and unless otherwise required by the Business Corporations Act (British Columbia).

As previously approved by our shareholders, our board of directors (“Board”) has the authority to authorize up to an unlimited number of a new series of our preferred shares and to fix and determine the special rights and restrictions of that series without further shareholder approval, subject to the terms set out in the Articles and unless otherwise required by the Business Corporations Act (British Columbia).

As a result, our board of directors could authorize the creation of a series of our preferred shares that would grant to holders of the preferred shares a right to our assets upon liquidation before a distribution to the holders of our common shares.

In addition, our board of directors could authorize the creation of a new series of our preferred shares that is convertible into our common shares, which could result in dilution to existing shareholders.

On October 30, 2024, we filed Amended Articles to amend the rights, preferences, restrictions and other matters pertaining to our newly designated Series A-1 Convertible Preferred Shares (the “Preferred Shares”).

The Preferred Shares have no par value and a stated value of $10,000 per share and rank, with respect to redemption payments, rights upon liquidation, dissolution or winding-up of the Company, or otherwise, senior in preference and priority to our common shares.

Our common shares rank junior to the preferred shares in the event of a liquidation, dissolution or winding-up of the Company.

In the event of any liquidation, dissolution or winding-up of the Company, a holder of the Preferred Shares will be entitled to receive, before any distribution or payment may be made with respect to the holders of our common shares, an amount equal to 100% of the stated value, plus a return equal to 10% of the stated value per Preferred Share per annum, calculated daily.

Any issuance of our common shares upon conversion of the Preferred Shares will cause dilution to our then existing stockholders and may depress the market price of our common shares.

The Preferred Shares accrue an annual return equal to 10% of the stated value per Preferred Share payable by the issuance of our common shares at the conversion price upon a buy-back by the Company, liquidation or on conversion at the conversion price (calculated daily).

Each Preferred Share is convertible into a number of our common shares calculated by dividing (i) the sum of the stated value of such Preferred Share plus a return equal to 10% of the stated value per Preferred Share per annum, calculated daily, by (ii) a fixed conversion price of $3.445.

The issuance of our common shares upon conversion of the Preferred Shares will result in immediate and substantial dilution to the interests of holders of our common shares, and such dilution will increase over time in connection with the accrual of the annual return on the Preferred Shares.

We may incur future indebtedness that will rank senior to the Preferred Shares or issue additional series of preferred shares that rank on a parity with, or senior to, the Preferred Shares as to dividend payments and liquidation preference.

We may incur substantial amounts of additional debt and other obligations that will rank senior to the Preferred Shares, and the terms of the Preferred Shares do not limit the amount of such debt or other obligations that we may incur.

The terms of the Preferred Shares will not prohibit us from issuing additional series of preferred shares that would rank on parity with the Preferred Shares.

The Articles allow for our board of directors to create new series of preferred shares without further approval by our shareholders, which could adversely affect the rights of the holders of the Preferred Shares and our common shares.

The issuances of other series of preferred shares could have the effect of reducing the amounts available to the Preferred Shares in the event of liquidation.

If we issue preferred shares with voting rights that dilute the voting power of our common shares, the market price of our common shares could decrease, adversely affecting the value of the Preferred Shares.

Additional issuances and sales of preferred shares, or the perception that such issuances and sales could occur, may cause prevailing market prices for our common shares to decline and may adversely affect our ability to raise additional capital in the financial markets at times and prices favorable to it.

Failure to maintain effective internal control over financial reporting could have a material adverse effect on our share price.

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shareholders may need to incur the time and expense of consulting a tax adviser about these rules.

UNRESOLVED STAFF COMMENTS.

CYBERSECURITY.

Not applicable.

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-K

Item 1A. Risk Factors