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Item 9A. Controls and Procedures

2024-12-13 compared with 2023-12-15 · 288 added, 281 removed, 1220 unchanged (32% of the section changed)

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OTHER INFORMATION.

Not applicable.

None of the Company's directors and officers adopted, modified, or terminated a Rule 10b-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company's fiscal quarter ended September 30, 2024 (each as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended).

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

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Chypyha earned her Bachelor’s Degree from the University of Toronto and a Master’s Degree in Business Administration from Queen's University.

Chypyha’s qualifications to serve on our board of directors include her extensive operational experience in founding, managing and building companies, previous board experience and her extensive experience in the dermatology industry.

Chypyha’s qualifications to serve on our Board include her extensive operational experience in founding, managing and building companies, previous board experience and her extensive experience in the dermatology industry.

Sean MacDonald has been a member of our Board since June 2019, and served as Chairman of the Board from June 2019 until May 2023.

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In his career, he has led and closed multiple licensing transactions, financings, acquisitions and divestments, and led corporate strategy for several pharmaceutical and biotechnology companies.

MacDonald is currently an advisor to investors and biotechnology companies, including Domain Therapeutics Inc.

and Raya Therapeutic Inc., a role he has held since April 2022.

Since April 2024, Mr.

MacDonald has served as the Chief Executive Officer of Domain Therapeutics Inc., a biotechnology company and from January to March 2024, Mr.

MacDonald served as their Chief Business Officer.

From April 2022 to February 2024, he served as an advisor to investors and biotechnology companies, including Raya Therapeutic Inc.

From August 2021 to April 2022, he was the Chief Business Officer of iOnctura SA, a Swiss clinical-stage oncology company.

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He received his BSc in Molecular Biology and MBA from the University of Ottawa.

MacDonald's qualifications to serve on our board of directors include his extensive operational experience and background in the pharmaceutical/biotechnology industry.

MacDonald's qualifications to serve on our Board include his extensive operational experience and background in the pharmaceutical/biotechnology industry.

Patrick Marshall has more than 20 years of experience raising capital, building and launching new products and services, developing strategy and completing mergers and acquisitions to support growth in private and public companies.

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in 2015, and Thomas International Ltd., a global provider of psychometric and aptitude tests acquired by Palamon Capital Partners in 2018.

Marshall currently serves as President and board member of Adrem Brands Inc., a privately held Canadian company focused on the over-the-counter and nutritional supplements markets, a position he has held since January 2016.

Marshall is a cofounder and current board member of Crawford Bowman Ltd, a privately held Canadian company focused on over-the-counter and nutritional supplements markets.

He is an advisor to Jouleia Inc, a start-up focused on accelerating the transition to low-carbon homes.

He is a current board member and past President (January 2016 -December 2023) of Adrem Brands Inc., a privately held Canadian company focused on the over-the-counter and nutritional supplements markets.

Prior to 2000, he held fundraising, business development and strategy roles for various international enterprises and non-governmental organizations.

Marshall is a cofounder and board member of Together Project (since 2016) and a trustee of Lakefield College School (since 2012).

Marshall is a cofounder, advisor and former board member of Together Project (2016-2023) and a trustee of Lakefield College School (since 2012).

He received his Bachelor of Arts in Sociology from Queen's University and Master of Business Administration from the University of Exeter.

Marshall’s qualifications to serve on our board of directors include his experience managing and building companies, strategic transactions, raising capital and prior board experience.

Pardeep Nijhawan, MD, FRCPC, AGAF has served as our Chief Executive Officer, Corporate Secretary and a member of our board of directors since June 2019, having previously founded and led our principal operating subsidiary, Edesa Biotech Research, since January 2015.

Marshall’s qualifications to serve on our Board include his experience managing and building companies, strategic transactions, raising capital and prior board experience.

Pardeep Nijhawan, MD, FRCPC, AGAF has served as our Chief Executive Officer, Corporate Secretary and a member of our Board since June 2019, having previously founded and led our principal operating subsidiary, Edesa Biotech Research, since January 2015.

Nijhawan is a seasoned pharmaceutical entrepreneur with more than 20 years of experience in cross- functional leadership roles in finance, marketing, corporate strategy and business development.

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He continues to serve on the Board of Digestive Health Clinic.

Since January 2021, he has served on the advisory board of Private Debt Partners, a Canadian alternative asset management firm.

From January 2021 until June 2024, he served on the advisory board of Private Debt Partners, a Canadian alternative asset management firm.

Nijhawan received his MD from the University of Ottawa and completed his internship at Yale University, and his internal medicine residency and fellowship at the Mayo Clinic.

Nijhawan’s qualifications to serve on our board of directors include his extensive executive leadership and experience in the life sciences industry and his knowledge of our business as its chief executive.

Nijhawan’s qualifications to serve on our Board include his extensive executive leadership and experience in the life sciences industry and his knowledge of our business as its chief executive.

Frank Oakes has more than 40 years of executive leadership experience.

He has been a member of our board of directors since April 2010 and served as the Chairman of the Board until June 2019.

He has been a member of our Board since April 2010 and served as the Chairman of the Board until June 2019.

From 1999 to 2019, he also served as the President and Chief Executive Officer of our legacy operating subsidiary, which he founded.

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He received his BS degree from California State Polytechnic University, San Luis Obispo and is a graduate of the Los Angeles Regional Technology Alliance University’s management program.

Oakes qualifications to serve on our board of directors include his extensive operational experience building companies and management teams and leading a U.S.

Oakes qualifications to serve on our Board include his extensive operational experience building companies and management teams and leading a U.S.

and Canadian publicly listed life science company.

Charles Olson, DSc is a CMC consultant with more than 40 years of biotech experience.

Since April 2024 he has been the Senior Vice President of CMC at NervGen, responsible for the process development and manufacture of their peptide product in clinical development for nerve regeneration as a result of spinal cord injury.

From September 2021 to April 2023 he was Chief Operating Officer at Dendreon Corporation, where he was responsible for the commercial manufacturing of Provenge, a commercial cell-based product for prostate cancer, overseeing multiple sites and several hundred employees.

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From December 2016 to June 2019, Dr.

Olson served on the board of directors of Edesa Biotech, Inc.

Olson served on the Board of Edesa Biotech, Inc.

(then operating as Stellar Biotechnologies, Inc.), having previously served on Stellar’s scientific advisory board.

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in biochemistry.

Olson qualifications to serve on our board of directors include his extensive scientific, manufacturing operations, process development and senior management and board experience in the biopharmaceutical industry.

Olson qualifications to serve on our Board include his extensive scientific, manufacturing operations, process development and senior management and board experience in the biopharmaceutical industry.

Carlo Sistilli, CPA, CMA has more than 35 years of financial experience and has held a variety of executive positions in accounting and finance during his career.

He has been a member of our board of directors since June 2019, having previously served as a board observer of our principal operating subsidiary, Edesa Biotech Research, since September 2017.

He has been a member of our Board since June 2019, having previously served as a board observer of our principal operating subsidiary, Edesa Biotech Research, since September 2017.

Sistilli has served as the Chief Financial Officer of Arista Homes since March 2003 to present.

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Sistilli helped sell to Manulife Financial.

Since January 2021, he has served on the board of directors and audit committee of Aleafia Health Inc.

From January 2021 to February 2024, he served on the Board and audit committee of Aleafia Health Inc.

In addition to his professional career, Mr.

Sistilli is an officer and a member of the board of directors of Mother of Mercy Centre.

Sistilli is an officer and a member of the Board of Mother of Mercy Centre.

Sistilli holds a Bachelor of Arts from York University, with a major in economics, Certified Management Accountant Designation and a Chartered Professional Accountant Designation.

Sistilli’s qualifications to serve on our board of directors include his knowledge of Edesa’s business and his background in accounting and finance.

Sistilli’s qualifications to serve on our Board include his knowledge of Edesa’s business and his background in accounting and finance.

Executive Officers

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Copies of our Code of Ethics and Business Conduct may be obtained, free of charge, by writing to our Corporate Secretary, Edesa Biotech, Inc., 100 Spy Court, Markham, ON Canada L3R 5H6.

Insider Trading Policy

The Company has an insider trading policy governing the purchase, sale and other dispositions of the Company’s securities that applies to all Company personnel, including directors, officers, and employees.

The Company believes that its insider trading policy is reasonably designed to promote compliance with insider trading laws, rules and regulations, and listing standards applicable to the Company.

A copy of the Company’s insider trading policy is filed as Exhibit 19.1 to this Form 10-K.

Information about our Board Committees

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Our Compensation Committee is composed of Joan Chypyha (chair), Frank Oakes and Charles Olson.

The purpose of the Compensation Committee is to assist the Board’s oversight relating to compensation of our Chief Executive Officer and our other Named Executive Officers.

The purpose of the Compensation Committee is to assist the Board’s oversight relating to the compensation of our Chief Executive Officer and our other Named Executive Officers.

It has responsibility for evaluating and recommending to the independent members of the Board for approval, our compensation plans, policies and programs as such plans, policies and programs affect executive officers.

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and oversee any related matters required by the federal securities laws.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our directors, executive officers and persons who beneficially own more than 10% of our outstanding common shares to file reports with the SEC regarding their share ownership and changes in their ownership of our common shares.

Based on our records and representations from our directors and executive officers, we believe that all Section 16(a) filing requirements applicable to our directors and executive officers were complied with during the fiscal year ended September 30, 2024, except for the following:

due to administrative error, Pardeep Nijhawan filed a late Form 4 on January 12, 2024 to report a grant of restricted share units, which vested in full upon grant, pursuant to the 2019 Plan (as defined below) on January 8, 2024.

EXECUTIVE COMPENSATION.

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Stephen Lemieux, CPA, Chief Financial Officer;

Michael Brooks, PhD, President and Kathi Niffenegger, CPA, Former Chief Financial Officer.

and Michael Brooks, PhD, President.

Summary Compensation Table

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Michael Brooks, PhD

Kathi Niffenegger, CPA (8)

Former Chief Financial Officer

The amounts shown in these columns represent the aggregate grant date fair value of the restricted share units and share option awards computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification 718, not the actual amounts paid to or realized by the named executive officers during the covered fiscal year.

The assumptions used in determining grant date fair value of these awards are set forth in Note 8 to our audited consolidated financial statements for the year ended September 30, 2024 included in this Annual Report.

Includes 30,159 restricted share units with an aggregate grant date fair value of $144,454 issued as partial payment of salary.

Includes 14,186 restricted share units with an aggregate grant date fair value of $79,440 issued as partial payment of the bonus with the balance paid in cash.

Represents (i) $32,412 in car allowance and (ii) $2,186 in health insurance in 2024.

Represents (i) $32,415 in car allowance, (ii) $2,186 in health insurance and (iii) $28,517 in vacation payout in 2022.

Represents (i) $32,415 in car allowance and (ii) $2,186 in health insurance in 2023.

All compensation to Dr.

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Lemieux’s appointment as Chief Financial Officer.

Represents $24,000 in car allowance in 2024.

Represents (i) $5,000 in car allowance and (ii) $8,126 in consulting fees for services prior to Mr.

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Represents (i) $24,000 in car allowance and (ii) $1,741 in health insurance in 2024.

Represents (i) $24,000 in car allowance (ii) $2,788 in health insurance and (iii) $15,120 in vacation payout in 2022.

Represents (i) $24,000 in car allowance and (ii) $2,060 in health insurance in 2023.

All compensation to Dr.

Brooks was paid in Canadian dollars and was converted from US dollars using the average foreign exchange rate for each bi-weekly pay period of the year from oanda.com.

Niffenegger served as Chief Financial Officer through July 15, 2023.

Includes 10,943 restricted share units with an aggregate grant date fair value of $61,280 as partial payment of the bonus with the balance paid in cash.

Represents (i) $21,273 in health insurance, (ii) $8,167 in 401(k) Company contributions and (iii) $18,974 in non-executive salary following Ms.

Niffenegger’s tenure as Chief Financial Officer in 2023.

Represents (i) $19,751 in health insurance, (ii) $9,150 in 401(k) Company contributions and (iii) $21,645 in vacation pay out in 2022.

Narrative Disclosure to Summary Compensation Table Employment Agreements

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Nijhawan’s base salary is subject to annual review by the Board of Directors.

Nijhawan and the Board may agree that Dr.

Nijhawan may receive a portion of his base salary in equity-based awards pursuant to the Company’s Equity Incentive Compensation Plan, in amounts and on the terms determined by the Board.

Nijhawan is also entitled to an automobile allowance of $2,701.50 per month and is eligible to participate in the Company’s group insured benefits program, as may be in effect from time-to-time for employees generally, and executive employees specifically.

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Brooks was prohibited from soliciting customers or prospective customers for any purpose competitive with our business, encouraging any customer to cease doing business with us and soliciting the employment or engagement of certain of our employees.

Prior Employment Agreement with Kathi Niffenegger effective as of December 1, 2020 and amended March 19, 2021 and April 12, 2022, which terminated July 15, 2023

Prior to the Non-Executive Employment Agreement (as defined below), on December 1, 2020, we entered into an employment agreement with Ms.

Niffenegger (as amended, the Niffenegger Employment Agreement) that superseded prior employment agreements.

Pursuant to the Niffenegger Employment Agreement, Ms.

Niffenegger had agreed to continue to serve as our Chief Financial Officer.

Niffenegger and we had the right to terminate the employment relationship at any time, with or without cause.

As compensation for her services to us, Ms.

Niffenegger received a base salary of $290,000 per year effective for the period January 1, 2021 to March 23, 2022 and a base salary of $300,150 per year effective for the period March 24, 2022 to July 15, 2023 when Ms.

Niffenegger ended her tenure as Chief Financial Officer.

She was eligible to receive a discretionary bonus in an amount up to 40% of her base salary based on her performance and the Company’s performance and such other employee benefits as are generally provided to similarly situated employees of the Company.

Niffenegger was eligible for future share and/or option grants in accordance with our executive compensation policy as in effect from time to time as determined by the independent members of our Board of Directors subject to availability of shares and/or options for grant under our Equity Incentive Compensation Plan.

Niffenegger’s employment with us was terminated for “Cause” (as defined in the Niffenegger Employment Agreement) or if Ms.

Niffenegger resigned from her employment at any time, our only obligation would have been to provide Ms.

Niffenegger with:

(i) her accrued salary and accrued unused vacation pay through and including her last day of employment (the Separation Date);

(ii) reimbursement of any reimbursable expenses properly incurred through and including the Separation Date;

and (iii) any benefit required under applicable law.

Niffenegger was terminated by us without “Cause”, our obligations would have been (a) to provide Ms.

Niffenegger with the same payments and benefits as would be provided if we had terminated her employment for Cause;

and (b) subject to Ms.

Niffenegger’s execution of a release in our favor, Ms.

Niffenegger would have also been paid, as severance (the Prior Severance Payment), (i) a lump sum payment equal to twelve months of Ms.

Niffenegger’s then current base salary, plus one additional month of base salary for every completed year of service since June 7, 2019, not to exceed an aggregate of twenty-four months, (ii) a lump sum payment of any discretionary bonus for the prior calendar year already determined by our Board of Directors, if such bonus had not yet been paid;

and (iii) a lump sum payment equal to Ms.

Niffenegger’s potential discretionary bonus for the calendar year in which the Separation Date occurred, prorated over Ms.

Niffenegger’s length of service in the calendar year in which her employment was terminated, calculated in accordance with the terms of the Niffenegger Employment Agreement.

Niffenegger’s employment was terminated or “constructively terminated” (as such term is defined in the Niffenegger Employment Agreement) by us without “Cause” upon or within a twelve month period following a Change of Control (as such term is defined in the Niffenegger Employment Agreement), Ms.

Niffenegger would have been entitled to the Prior Severance Payment described above, except that the portion of the Prior Severance Payment established by (b)(i) would be equal to twenty four months of Ms.

Niffenegger’s base salary.

The Niffenegger Employment Agreement provided that during the term of Ms.

Niffenegger’s employment with us and for a period of one year thereafter, Ms.

Niffenegger was prohibited from soliciting for employment certain of our employees.

The Agreement also provided that both during and after Ms.

Niffenegger’s employment with us, she was prohibited from (i) making use of our trade secrets to solicit on behalf of Ms.

Niffenegger or any other person business from any of our customers and (ii) inducing or attempting to induce any person to sever any existing contractual relationship they have with us.

Non-executive Employment Agreement with Kathi Niffenegger effective as of July 15, 2023

On July 16, 2023 following Ms.

Niffenegger’s tenure as Chief Financial Officer, Edesa Biotech USA, Inc.

entered into a non-executive employment agreement with Ms.

Niffenegger (the Non-Executive Employment Agreement) that superseded the Niffenegger Employment Agreement described above.

Pursuant to the Non-Executive Employment Agreement, both Ms.

Niffenegger and we have the right to terminate the employment relationship at any time, with or without cause.

As compensation for her services to us.

Niffenegger received a base salary of $100,000 per year effective July 16, 2023 and a one-time retention bonus of $10,000.

She is eligible to receive a discretionary bonus in an amount up to 40% of her prorated base salary under the current and prior employment agreements based on her performance and the Company’s performance and such other employee benefits as are generally provided to similarly situated employees of the Company.

Niffenegger is eligible for future share and/or option grants commensurate with her current position in accordance with our non-executive compensation policy as in effect from time to time as determined by the independent members of our Board of Directors subject to availability of shares and/or options for grant under our Equity Incentive Compensation Plan.

The Non-Executive Employment Agreement provides that during the term of Ms.

Niffenegger’s employment with us and for a period of one year thereafter, Ms.

Niffenegger is prohibited from soliciting for employment certain of our employees.

The Non-Executive Employment Agreement also provides that both during and after Ms.

Niffenegger’s employment with us, she is prohibited from (i) making use of our trade secrets to solicit on behalf of Ms.

Niffenegger or any other person business from any of our customers and (ii) inducing or attempting to induce any person to sever any existing contractual relationship they have with us.

Outstanding Equity Awards at September 30, 2024

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Number of securities underlying unexercised options (#) unexercisable (1)

Option exercise prices

Option exercise

Option expiration date

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Michael Brooks, PhD

Kathi Niffenegger, CPA (3)

Former Chief Financial Officer

Our options vesting policy is described in the Outstanding Equity Awards Narrative Disclosure section.

The option will vest over a period of three years, with monthly vesting on a pro-rata basis beginning on the date of grant.

Niffenegger served as Chief Financial Officer through July 15, 2023.

Outstanding Equity Awards Narrative Disclosure

Equity Incentive Compensation Plan

We adopted an Equity Incentive Compensation Plan in 2019 (the 2019 Plan) which amended and restated prior plans.

We adopted an Equity Incentive Compensation Plan in 2019 (as amended, the 2019 Plan) which amended and restated prior plans.

Under the 2019 Plan, we are authorized to grant options, restricted shares and restricted share units (RSUs) to any of our officers, directors, employees, and consultants and those of our subsidiaries and other designated affiliates.

The number of shares available for issuance under the 2019 Plan is 575,737, including shares available for the exercise of outstanding options and RSUs under the 2019 Plan and prior plans.

The number of shares available for issuance under the 2019 Plan is 642,737, including (i) 164,736 shares initially authorized and reserved for issuance under the 2019 Plan (including the shares available for the exercise of outstanding options and RSUs under the Company’s prior plans, as of the effective date of the 2019 Plan), (ii) 213,858 shares authorized and reserved for issuance pursuant to Amendment No.

1 to the 2019 Plan, (iii) 197,143 shares authorized and reserved for issuance pursuant to Amendment No.

2 to the 2019 Plan and (iv) 67,000 shares authorized and reserved for issuance pursuant to Amendment No.

3 to the 2019.

The purpose of the 2019 Plan is to advance the interests of the Company by encouraging equity participation through the acquisition of common shares of the Company.

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RSUs eligible for conversion to 44,345 common shares are outstanding at September 30, 2024.

Options granted during the year ended September 30, 2023 to directors, officers and employees under the 2019 Plan totaled 118,579 options to purchase common shares at exercise prices ranging from $5.79 to $10.01.

Options granted during the year ended September 30, 2024 to employees under the 2019 Plan totaled 500 options to purchase common shares at an exercise price of $4.10.

There were 46,602 RSUs granted during the year ended September 30, 2024.

These RSUs were immediately vested and were for payment of bonuses or consulting fees to the current CFO.

There were no RSUs granted during the year ended September 30, 2022.

There were 46,602 RSUs granted during the year ended September 30, 2023.

All RSUs were immediately vested and were for payment of salary, bonuses or consulting fees to the certain members of the executive team.

Options Vesting Policy

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Options granted by the Company during the year ended September 30, 2024 and 2023 generally had monthly vesting for directors in equal proportions over 12 months beginning on the grant date, monthly vesting for officers and current employees in equal proportions over 36 months beginning on the grant date and monthly vesting for new employees in equal proportions over 36 months beginning on the monthly anniversary of the grant date following 90 days of employment.

Policies and Practices Related to Grants of Share Options or Similar Awards

We did not granted options, share appreciation rights, or other similar option-like instruments in the fiscal year ended September 30, 2024;

however, it is our policy not to time any grants of equity awards in relation to the release of material non-public information.

Retirement Benefits

Executive officers and employees of our California subsidiary are eligible to receive the Company’s non-elective contribution of 3% of eligible compensation under a 401(k) plan to provide retirement benefits.

Any Company contributions we made to the plan for our named executive officers are reflected in the “All Other Compensation” column of the Summary Compensation Table above.

Other than the funds contributed under our 401(k) plan, no other funds were set aside or accrued by us during the years ended September 30, 2023 and 2022 to provide pension, retirement or similar benefits for our named executive officers.

Other than the funds contributed under our 401(k) plan to our U.S.

employees, no other funds were set aside or accrued by us during the years ended September 30, 2024 and 2023 to provide pension, retirement or similar benefits for our named executive officers.

Director Compensation

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Carlo Sistilli, CPA, CMA

The amounts shown in this column represent the aggregate grant date fair value of the share option awards computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification 718, not the actual amounts paid to or realized by the directors during the covered fiscal year.

There were no share options grants in the year ended September 30, 2024.

As of September 30, 2024, (i) Ms.

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Michael Brooks, PhD

Kathi Niffenegger, CPA

All directors and named executive officers as a group (9 persons)

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Consists of (A)(i) 84,973 common shares, (ii) 48,776 common shares issuable upon exercise of options exercisable within sixty days of December 11, 2024 and (iii) 47,645 common shares issuable upon the conversion of restricted share units held by Pardeep Nijhawan;

(B)(i) 336,702 common shares and (ii) 32,610 common shares issuable upon exercise of warrants exercisable within sixty days of December 13, 2023 held by Pardeep Nijhawan Medicine Professional Corporation for which Pardeep Nijhawan has sole voting and dispositive power over all such shares;

(B)(i) 341,702 common shares (ii) 16,305 common shares issuable upon exercise of warrants exercisable within sixty days of December 11, 2024 and (iii) 56,925 common shares issuable upon conversion of preferred shares within sixty days of December 11, 2024 held by Pardeep Nijhawan Medicine Professional Corporation for which Pardeep Nijhawan has sole voting and dispositive power over all such shares;

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for which Pardeep Nijhawan has sole voting and dispositive power over all such shares and (E)(i) 32,609 common shares and (ii) 16,305 common shares issuable upon exercise of warrants exercisable within sixty days of December 11, 2024 held by The New Nijhawan Family Trust 2015 for which each of Pardeep Nijhawan and Nidhi Nijhawan, as trustees, have voting and dispositive power over all such shares.

Excludes (i) 326,560 common shares underlying warrants held by Pardeep Nijhawan Medicine Professional Corporation which are subject to a 19.99% beneficial ownership blocker, (ii) 378,489 common shares underlying Preferred Shares held by Pardeep Nijhawan Medicine Professional Corporation which are subject to a 19.99% beneficial ownership blocker and (iii) 11,050 common shares underlying restricted share units held by Pardeep Nijhawan which are subject to a 19.99% beneficial ownership blocker.

Consists of 11,909 common shares issuable upon exercise of options exercisable within sixty days of December 11, 2024.

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Consists of (i) 4,354 common shares, (ii) 63,858 common shares issuable upon exercise of options exercisable within sixty days of December 11, 2024, (iii) 303 common shares issuable upon exercise of warrants exercisable within sixty days of December 11, 2024 and (iv) 13,315 common shares issuable upon conversion of restricted share units.

Consists of (A)(i) 10,943 common shares and (ii) 37,117 common shares issuable upon exercise of options exercisable within sixty days of December 13, 2023 held by Kathi Niffenegger and (B)(i) 1,531 common shares and (ii) 1,270 common shares issuable upon exercise of warrants exercisable within sixty days of December 13, 2023 held by the Kathi Niffenegger Trust for which Kathi Niffenegger, as trustee, has sole voting and dispositive power over all such shares.

Consists of (i) 559,298 common shares, (ii) 173,181 common shares issuable upon exercise of options exercisable within sixty days of December 13, 2023, (iii) 67,096 common shares issuable upon exercise of warrants exercisable within sixty days of December 13, 2023 and (iv) 29,987 common shares issuable upon conversion of restricted share units.

Consists of (i) 551,824 common shares, (ii) 162,325 common shares issuable upon exercise of options exercisable within sixty days of December 11, 2024, (iii) 32,913 common shares issuable upon exercise of warrants exercisable within sixty days of December 11, 2024, (iv) 63,446 common shares issuable upon conversion of restricted share units and (v) 56,925 common shares issuable upon conversion of Preferred Shares within sixty days of December 11, 2024.

Shareholders Known by Us to Own 5% or More of Our Common Shares

Name and Address of Beneficial Owner

Number of Shares Beneficially Owned

Number of Shares Beneficially

Percentage of Shares Beneficially Owned

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and Lumira Capital II (International), L.P.

Velan Capital Partners LP (2)

Consists of (i) 214,913 common shares held by Lumira Capital II, L.P.

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We relied in part on the SEC Schedule 13D/A filed with the SEC on January 13, 2023 for this information.

Consists of (i) 190,476 common shares and (ii) 63,492 common shares issuable upon exercise of warrants exercisable within sixty days of December 13, 2023 held by Velan Capital Partners LP and beneficially owned by its affiliates.

The address is 1055b Powers Place, Alpharetta, GA 30009.

We relied in part on the SEC Schedule 13G filed with the SEC on January 6, 2023 for this information.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

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Credit Agreement

On October 20, 2023, the Company entered into the Credit Agreement with Pardeep Nijhawan Medicine Professional Corporation, an entity controlled by Dr.

On October 20, 2023, the Company entered into the Credit Agreement with PN MPC, an entity controlled by Dr.

Nijhawan, our Chief Executive Officer, providing for the Line of Credit in the principal amount of up to $10 million, with the Credit Limit of $3.5 million, which was available immediately upon the execution of the Credit Agreement.

Subject to the terms of the Credit Agreement, the Credit Limit may be increased by the lender upon request from the Company in an amount not to exceed $10 million.

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.

The Company has the right at any time, and from time to time, to prepay all or any portion of each advance without premium or penalty.

The Line of Credit bore 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.

The Company had the right at any time, and from time to time, to prepay all or any portion of each advance without premium or penalty.

Additionally, the Company agreed to pay a monthly standby fee for the term of the Credit Agreement, calculated as of the last business day of each month, on the difference between the Credit Limit at such time and the principal amount of outstanding advances, based on an annual interest rate of 1.5%.

As of December 13, 2023, the entire $3.5 million Credit Limit was available on the Line of Credit and the Company accrued $0.01 million in monthly standby fees.

Prior to termination, $51,000 of standby fees had accrued.

The Credit Agreement was terminated in October 2024.

Prior to the termination of the Credit Agreement, we had not borrowed any funds thereunder.

We incurred no termination penalties in connection with the termination of the Credit Agreement.

Preferred Shares

In October 2024, we entered into a Securities Purchase Agreement with PN MPC, an entity controlled by Pardeep Nijhawan, the Company’s Chief Executive Officer, Secretary and member of the board of directors of the Company, pursuant to which the Company agreed to issue and sell to PN MPC in a private placement, up to $5.0 million of Preferred Shares, each of which is initially convertible into approximately 2,903 Conversion Shares, at a conversion price of $3.445 per Conversion Share, and Warrants to purchase Warrant Shares at an exercise price of $3.445 per Warrant Share.

The Preferred Shares and the Warrants were sold together in a fixed combination of one Preferred Share and a Warrant to purchase a number of common shares equal to 75% of the underlying Conversion Shares at a combined purchase price of $10,272.13 per Preferred Share and related Warrants.

Under the Purchase Agreement, PN MPC has purchased 150 Preferred Shares initially convertible into an aggregate of 435,414 Conversion Shares and Warrants to purchase up to an aggregate of 326,560 Warrant Shares for an aggregate purchase price of $1,540,819.

The Warrants expire five years from the issuance date.

We have the right to require PN MPC to purchase additional Preferred Shares and Warrants (up to an aggregate investment of $5.0 million);

provided however, no more than an aggregate of $2.0 million of Preferred Shares and Warrants may be issued and sold pursuant to the Purchase Agreement without shareholder approval in accordance with applicable Canadian securities laws.

Director Independence

40 unchanged sentences

Amended and Restated Articles of Edesa Biotech, Inc.

(included as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 23, 2020, and incorporated herein by reference).

(included as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 31, 2024).

Notice of Articles of Edesa Biotech, Inc.

(included as Exhibit 3.7 to the Company’s Registration Statement on Form S-1 filed on April 11, 2022, and incorporated herein by reference).

(filed herewith).

Specimen of common share certificate (included as Exhibit 4.1 to the Company’ s Registration Statement on Form S-3 filed on August 30, 2019, and incorporated herein by reference).

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Wainwright & Co., Inc.

designees on June 7, 2019 (filed herewith).

designees on June 7, 2019 (included as Exhibit 4.12 to the Company’ s Annual Report on Form 10-K filed on December 15, 2023, and incorporated herein by reference).

Form of Common Share Purchase Warrant issued to Pardeep Nijhawan Medicine Professional Corporation or its assigns on October 30, 2024 (included as Exhibit 4.1 to the Company’ s Current Report on Form 8-K filed on October 30, 2024, and incorporated herein by reference).

Advance Notice Policy, adopted October 31, 2013 (included as Exhibit 10.14 to the Company's Annual Report on Form 10-K filed on November 14, 2014, and incorporated herein by reference).

49 unchanged sentences

Amended and Restated Employment Agreement, by and between the Company and Michael Brooks, dated August 4, 2023 (included as Exhibit 10.4 to the Company’ s Quarterly Report on Form 10-Q filed on August 9, 2023, and incorporated herein by reference).

Strategic Innovation Fund Agreement, dated October 12, 2023, by and among Edesa Biotech Research, Inc., Edesa Biotech, Inc., and his Majesty the King in right of Canada as represented by the Minister of Industry (included as Exhibit 10.33 to the Company’ s Annual Report on Form 10-K filed on December 15, 2023, and incorporated herein by reference).

Credit Agreement, effective as of October 20, 2023, by and between the Company and Pardeep Nijhawan Medicine Professional Corporation (included as Exhibit 10.1 to the Company’ s Current Report on Form 8-K filed on October 23, 2023, and incorporated herein by reference).

First Amendment to Exclusive License Agreement, dated as of September 21, 2023, by and between Edesa Biotech Research, Inc.

Saul Yedgar (filed herewith).

First Amendment to Amended and Restated Employment Agreement, by and between the Company and Pardeep Nijhawan, dated December 7, 2023 (filed herewith).

Saul Yedgar (included as Exhibit 10.35 to the Company’ s Annual Report on Form 10-K filed on December 15, 2023, and incorporated herein by reference).

First Amendment to Amended and Restated Employment Agreement, by and between the Company and Pardeep Nijhawan, dated December 7, 2023 (included as Exhibit 10.36 to the Company’ s Annual Report on Form 10-K filed on December 15, 2023, and incorporated herein by reference).

Amendment No.

3 to Edesa Biotech, Inc.

2019 Equity Incentive Compensation Plan (included as Exhibit 10.1 to the Company’ s Current Report on Form 8-K filed on May 30, 2024, and incorporated herein by reference).

At The Market Offering Agreement, dated October 4, 2024, by and between Edesa Biotech, Inc.

Wainwright & Co., LLC (included as Exhibit 1.1 to the Company’ s Current Report on Form 8-K filed on October 4, 2024, and incorporated herein by reference).

Securities Purchase Agreement, dated October 30, 2024, by and between Edesa Biotech, Inc.

and Pardeep Nijhawan Medicine Professional Corporation (included as Exhibit 10.1 to the Company ’ s Current Report on Form 8-K filed on October 31, 2024, and incorporated herein by reference).

Insider Trading Policy (filed herewith).

Subsidiaries of Edesa Biotech, Inc.

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1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Incentive Compensation Repayment (Clawback) Policy (filed herewith).

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Label Linkbase Document

XBRL Taxonomy Presentation Linkbase Document

Incentive Compensation Repayment (Clawback) Policy (included as Exhibit 97.1 to the Company’ s Annual Report on Form 10-K filed on December 15, 2023, and incorporated herein by reference) .

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Label Linkbase Document

Inline XBRL Taxonomy Presentation Linkbase Document

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

* All schedules and exhibits to the Share Exchange Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K.

A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request.

** The information in this exhibit is furnished and deemed not filed with the SEC for purposes of section 18 of the Exchange Act, and is not to be incorporated by reference into any filing of Edesa Biotech, Inc.

under the Securities Act, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission upon request.

** The information in this exhibit is furnished and deemed not filed with the Securities and Exchange Commission for purposes of section 18 of the Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of Edesa Biotech, Inc.

under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

@ Management contract or compensatory plan or arrangement.

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INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm – PCAOB ID 1930

Report of Independent Registered Public Accounting Firm – MNP LLP, Toronto Canada, PCAOB ID 1930

Consolidated Balance Sheets at September 30, 2024 and 2023

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Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Edesa Biotech, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Edesa Biotech, Inc.

(the “Company") as of September 30, 2024, and 2023, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended September 30, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of September 30, 2024 and 2023, and the results of its consolidated operations and its consolidated cash flows for each of the years in the two-year period ended September 30, 2024, in conformity with accounting principles generally accepted in the United States of America.

Material Uncertainty Related to Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 of the consolidated financial statements, the Company has incurred a net comprehensive loss, negative cash flows from operations and has a net working capital deficiency which raises substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Going Concern

Critical Audit Matter Description

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As described in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net working capital deficiency as at September 30, 2024 that raise substantial doubt about its ability to continue as a going concern.

The ability of the Company to continue as a going concern is ultimately dependent on its product candidates receiving approval from the Food and Drug Administration, Health Canada and the regulatory authorities of other countries in which its products are proposed to be sold and whether it is able to successfully market the approved products.

Management intends to continue to fund its business by way of equity financing.

However, the Company has not concluded that these plans alleviate the substantial doubt related to its ability to continue as a going concern.

This matter is also described in the “Material Uncertainty Related to Going Concern” section of our report.

We identified the Company’s ability to continue as a going concern as a critical audit matter because auditing the Company’s going concern assessment is complex and involves a high degree of auditor judgment to assess the reasonableness of the cash flow forecasts.

Audit Response

We responded to this matter by performing procedures over management’s assessment of the Company’s ability to continue as a going concern.

Our audit work in relation to this included, but was not restricted to, the following:

We evaluated management’s process for preparing the business plan with forecasted cash flows included in the going concern assessment;

We assessed the completeness, accuracy, and relevance of underlying data used in management’s forecast;

We evaluated the reasonableness of the underlying assumptions included in the forecasted cash flows used by management in their business plan considering the Company’s current and past performance, the consistency with external market and industry data, and whether these assumptions were consistent with evidence obtained in other areas of the audit;

We assessed the adequacy of the going concern disclosures included in Note 1 of the consolidated financial statements and considered if these are appropriate to reflect the assessments that management has performed.

Chartered Professional Accountants

Licensed Public Accountants

We have served as the Company’s auditor since 2019.

Toronto, Canada

December 13, 2024

EDESA BIOTECH, INC.

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Non-current liabilities:

Long-term payables

Long-term right-of-use lease liabilities

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Accumulated deficit

( 52,418,968 )

( 44,044,553 )

Total shareholders' equity

8 unchanged sentences

Loss from operations

( 9,222,758 )

( 18,370,790 )

Other income (loss):

1 unchanged sentence

Interest income

Misc other income

Foreign exchange loss

Loss before income taxes

( 8,373,615 )

( 17,548,124 )

Income tax expense

( 8,374,415 )

( 17,548,924 )

Exchange differences on translation

Net comprehensive loss

$ ( 8,375,461 )

$ ( 17,557,264 )

Weighted average number of common shares

6 unchanged sentences

Cash flows from operating activities:

$ ( 8,374,415 )

$ ( 17,548,924 )

Adjustments for:

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Share-based compensation

Gain on payable forgiveness

Changes in working capital items:

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Net cash used in operating activities

( 6,636,483 )

( 12,279,302 )

Cash flows from investing activities:

Purchase of property and equipment

Net cash used in investing activities

Cash flows from financing activities:

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Payments for issuance costs of common shares and warrants

Repayment of debt

Net cash provided by financing activities

1 unchanged sentence

Net change in cash and cash equivalents

( 1,729,522 )

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

Supplemental Disclosure of Noncash Financing Activities:

Issuance costs withheld from gross proceeds from issuance of common shares and warrants

Fair value of placement agent warrants

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

1 unchanged sentence

Consolidated Statements of Changes in Shareholders ’ Equity

Comprehensive

Shareholders'

Common Shares

Additional Paid-in Capital

Accumulated Other Comprehensive Loss

Accumulated Deficit

Total Shareholders' Equity

Balance - September 30, 2022

$ ( 205,262 )

$ ( 26,495,629 )

Issuance of common shares and warrants in equity offering

Issuance costs including fair value of placement agent warrants

( 1,311,966 )

Issuance of common shares upon exercise of pre-funded warrants, net of costs

( 2,209,304 )

Issuance of common shares upon exercise of warrants

Issuance of common shares upon exercise of restricted share units

Issuance costs

Share-based compensation

Net loss and comprehensive loss

( 17,548,924 )

( 17,557,264 )

Balance - September 30, 2023

$ ( 213,602 )

$ ( 44,044,553 )

Issuance of common shares and warrants in equity offering

Issuance of common shares upon exercise of warrants

Issuance of common shares upon exercise of restricted share units

Issuance of common shares

Issuance costs

1 unchanged sentence

Net loss and comprehensive loss

( 8,374,415 )

( 8,375,461 )

Balance - September 30, 2024

$ ( 214,648 )

$ ( 52,418,968 )

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

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The Company’s common shares trade on The Nasdaq Capital Market in the United States under the symbol “EDSA”.

Going Concern

These consolidated financial statements have been prepared on a going concern basis which presumes the realization of assets and the discharge of liabilities in the normal course of operations for at least the next twelve months.

For the year ended September 30, 2024, the Company incurred a comprehensive loss of $ 6.2 million resulting in an accumulated deficit of $ 58.6 million.

For the year ended September 30, 2024, the Company had a net cash outflow from operating activities of $ 4.9 million and ended the year with $ 1.0 million in cash and cash equivalents and a net working capital deficit of $ 0.2 million.

Subsequent to the year end, the Company received proceeds of $ 1.5 million from the sale of Preferred Shares to the Pardeep Nijhawan Medicine Professional Corporation (PN MPC).

The Company’s ability to continue as a going concern is dependent on obtaining additional funding through financings, other strategic activities as well as via grants, to fund the development of its drug candidates.

There can be no assurance that the Company will be successful in raising the necessary financing.

These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern.

These consolidated financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and, therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying consolidated financial statements.

These adjustments could be material.

The Company’s 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.

At September 30, 2023, the Company had an accumulated deficit of $ 52.4 million and working capital of $ 4.6 million, including $ 5.4 million in cash and cash equivalents.

In August 2022 the Company filed a $150.0 million shelf registration statement, under which the Company entered into an equity distribution agreement with Canaccord for $20.0 million in gross proceeds, subject to certain offering limitations that currently allows the Company to offer and sell common shares having an aggregate gross sales price of up to $8.4 million (Canaccord ATM).

There was approximately $7.1 million of available capacity on the Canaccord ATM as of September 30, 2023.

The Company’s primary use of cash and cash equivalents is to fund our operating expenses, which consist of research and development (R&D) and general and administrative (G&A) expenditures.

In August 2022 the Company filed a $ 150.0 million shelf registration statement, under which the Company entered into an equity distribution agreement with Canaccord for $ 20.0 million in gross proceeds, subject to certain offering limitations that allowed the Company to offer and sell common shares having an aggregate gross sales price of up to $ 8.4 million (Canaccord ATM).

The Canaccord ATM was terminated in October 2024.

In October 2024, the Company entered into an At The Market Offering Agreement with H.C.

Wainwright & Co., LLC as a sales agent (HCW ATM) pursuant to which the Company may offer and sell, from time to time, common shares through an at-the-market equity offering program for up to $ 3.87 million in gross proceeds.

The Company’s primary use of cash and cash equivalents is to fund operating expenses, which consist of research and development (R&D) and general and administrative (G&A) expenditures.

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

1 unchanged sentence

The Company incurred net losses of $ 6.2 million and $ 8.4 million for the years ended September 30, 2024 and 2023.

Subsequent to the year end, in October 2023, the Company entered into a multi-year contribution agreement (2023 SIF Agreement) with the Canadian Government’s Strategic Innovation Fund (SIF).

In October 2024, the Company entered into a Securities Purchase Agreement with PN MPC, an entity controlled by Pardeep Nijhawan, the Company’s Chief Executive Officer, Secretary and member of the board of directors of the Company, pursuant to which the Company agreed to issue and sell to PN MPC in a private placement, up to $ 5 million of shares (Preferred Shares) of the Company’s newly designated Series A-1 Convertible Preferred Shares, stated value $ 10,000 per share, each of which is initially convertible into approximately 2,903 common shares (Conversion Shares), without par value, of the Company (Common Shares) at a conversion price of $ 3.445 per Conversion Share, and warrants (Warrants) to purchase Common Shares (Warrant Shares) at an exercise price of $ 3.445 per Warrant Share.

The Preferred Shares and the Warrants are being sold together in a fixed combination of one Preferred Share and a Warrant to purchase a number of Common Shares equal to 75 % of the underlying Conversion Shares at a combined purchase price of $ 10,272.13 per Preferred Share and related Warrants.

The Warrants expire five years from the issuance date.

In October 2023, the Company entered into a multi-year contribution agreement (2023 SIF Agreement) with the Canadian Government’s Strategic Innovation Fund (SIF).

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

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The remaining C$ 17.2 million is conditionally repayable starting in 2029 only if and when the Company earns gross revenue.

In February 2021, the Company signed a contribution agreement with the Canadian government’s SIF (2021 SIF Agreement), the Company was 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.

In February 2021, the Company signed a contribution agreement with the Canadian government’s SIF (2021 SIF Agreement), the Company was eligible to receive cash reimbursements up to C$ 14.1 million in the aggregate for certain R&D expenses related to the EB05 clinical development program.

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

For the years ended September 30, 2023 and 2022, the Company recorded grant income of $0.6 million and $0.8 million respectively related to both the 2023 SIF Agreement and the 2021 SIF Agreement.

Subsequent to the year end, in October 2023, the Company entered into $10.0 million revolving credit agreement with Pardeep Nijhawan Medicine Professional Corporation (Credit Agreement), providing an unsecured revolving credit facility, with a credit limit of $ 3.5 million (Credit Limit) which is available immediately.

For the years ended September 30, 2024 and 2023, the Company recorded grant income of $ 0.7 million and $ 0.6 million respectively related to the 2023 SIF Agreement.

In October 2023, the Company entered into a $ 10.0 million revolving credit agreement with Pardeep Nijhawan Medicine Professional Corporation (Credit Agreement), providing an unsecured revolving credit facility, with a credit limit of $ 3.5 million (Credit Limit) which is 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.

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No amounts have been drawn upon from the Credit Agreement.

The Credit Agreement was terminated in October 2024.

EDESA BIOTECH, INC.

5 unchanged sentences

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

In March 2022, the Company completed a registered direct offering of 220,000 common shares, no par value, and pre-funded warrants to purchase up to an aggregate of 171,390 common shares.

In a concurrent private placement, the Company issued common share purchase warrants to purchase an aggregate of up to 391,390 common shares.

Net proceeds to the Company were approximately $ 9 .0 million.

During the year ended September 30, 2022, the Company sold a total of 89,558 common shares for net proceeds of $ 2.6 million, under an at-the-market equity offering program.

The Company plans to finance operations for at least the next twelve months with cash and cash equivalents on hand, utilization of the Canaccord ATM, drawing upon the Credit Agreement and reimbursements of eligible R&D expenses under the Company’s 2023 SIF Agreement.

Basis of preparation

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The carrying amount of cash and cash equivalents approximates its fair value due to its short-term nature.

Accounts and other receivable

The Company assesses the collectability of its accounts receivable through a review of its current aging and payment terms, as well as an analysis of its historical collection rate, general economic conditions and credit status of the government agencies.

Accounts and other receivable include reimbursement grant income for the Company’s federal grant with the Canadian government’s SIF and Harmonized Sales Tax (HST) refunds receivable.

As of September 30, 2023, all outstanding accounts, grants and HST refunds receivable were deemed to be fully collectible, and therefore, no allowance for doubtful accounts was recorded.

Accounts and other receivables

The Company assesses the collectability of its accounts receivables through a review of its current aging and payment terms, as well as an analysis of its historical collection rate, general economic conditions and credit status of the government agencies.

Accounts and other receivables include reimbursement grant income for the Company’s federal grant with the Canadian government’s SIF and Harmonized Sales Tax (HST) refunds receivables.

As of September 30, 2024, all outstanding accounts, grants and HST refunds receivables were deemed to be fully collectible, and therefore, no allowance for doubtful accounts was recorded.

EDESA BIOTECH, INC.

7 unchanged sentences

The estimated useful lives, residual values and depreciation methods are reviewed at the end of each year, with the effect of any changes in estimate accounted for on a prospective basis.

The Company capitalizes expenditures greater than $ 5,000 .

The Company changed its depreciation policy to straight line depreciation.

The depreciation policy for the principal asset categories are calculated as follows:

Computer equipment 30 % declining balance method or straight line 3 years

Furniture and equipment 20 % declining balance method

Furniture and equipment 20 % declining balance method or straight line for 4 years

Intangible assets

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Subsequently, the license agreement will automatically renew for five -year periods unless either party terminates the agreement in accordance with its terms.

Intangible assets are stated at their historical cost, amortized on a straight-line basis over their expected useful lives, which is 25 years, and subject to impairment review at the end of each reporting period.

Impairment of long-lived assets

1 unchanged sentence

When a significant change in the expected timing or amount of the future cash flows of the financial asset is identified, the carrying amount of the financial asset is reduced and the amount of the write-down is recognized as a loss.

A previously recognized impairment loss may be reversed to the extent of the improvement, provided it is not greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously, and the amount of the reversal is recognized in net income (loss).

Right-of-Use assets and liabilities

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The Company uses the fair value measurement framework for valuing financial assets and liabilities.

Revenue recognition

Reimbursement Grant Income

Reimbursement grant income is recognized based on the reimbursement rate included in the government contribution agreement when allowable expenses have been incurred.

7 unchanged sentences

The Company has equity incentive plans under which various types of equity-based awards including share options, restricted shares and restricted share unit awards may be granted to employees, non-employee directors and non-employee consultants and warrants that may be granted as compensation to non-employees.

The Company measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted since the fair value of the goods or services received by the Company cannot be reliably estimated.

The Company measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted.

The Company recognizes compensation expense for all share-based awards based on the estimated grant-date fair values.

25 unchanged sentences

and the state of California.

Earnings (loss) per share

Basic earnings (loss) per share is calculated by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the year.

EDESA BIOTECH, INC.

1 unchanged sentence

For the Years Ended September 30, 2024 and 2023

Earnings (loss) per share

Basic earnings (loss) per share is calculated by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the year.

The computation of diluted earnings (loss) per share assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on earnings (loss) per share.

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The Company is currently evaluating the impact of the guidance on the consolidated financial statements and disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis.

This guidance is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027.

Early adoption is permitted.

The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which is intended to provide enhancements to annual income tax disclosures.

The standard will require more detailed information in the rate reconciliation table and for income taxes paid, among other enhancements.

The standard is effective for years beginning after December 15, 2024 and early adoption is permitted.

The Company is currently evaluating the impact of the guidance on the consolidated financial statements and disclosures.

Property and equipment

5 unchanged sentences

accumulated depreciation

Depreciable assets, net

Assets not in service

Total property and equipment, net

Depreciation expense amounted to $ 8,702 and $ 4,328 for the years ended September 30, 2024 and 2023, respectively.

EDESA BIOTECH, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2023 and 2022

Intangible assets

3 unchanged sentences

Subsequently, the license agreement will automatically renew for five -year periods unless either party terminates the agreement in accordance with its terms.

EDESA BIOTECH, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2024 and 2023

Under the license agreement, the Company is exclusively responsible, at its expense, for the research, development manufacture, marketing, distribution and commercialization of the Constructs and licensed products and to obtain all necessary licenses and rights.

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The original lease expired in December 2022 and the Company executed a two -year term extension through December 31, 2024.

EDESA BIOTECH, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2023 and 2022

The components of lease cost were as follows:

2 unchanged sentences

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

EDESA BIOTECH, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2024 and 2023

Lease terms and discount rates were as follows:

5 unchanged sentences

September 30, 2025

Total lease payments

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In connection with this license agreement and pursuant to a purchase agreement entered into in April 2020, the Company acquired drug substance of one of the Constructs for an aggregate purchase price of $ 5.0 million.

The Company recorded an expense of $2.5 million for the second installment payment during the year ended September 30, 2022.

No expense was recorded during the year ended September 30, 2023 .

No expense was recorded during the years ended September 30, 2024 and September 30, 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.

1 unchanged sentence

No intangible assets have been recognized under the license agreement with the third party.

Under the license agreement, the Company is committed to payments of various amounts to the third party upon meeting certain milestones outlined in the license agreement, up to an aggregate amount of $ 18.4 .

Upon divestiture of substantially all of the assets of the Company, the Company shall pay the third party a percentage of the valuation of the licensed technology sold as determined by an external objective expert.

6 unchanged sentences

Retirement savings plan 401(k) contributions

Executive officers and employees of our California subsidiary are eligible to receive the Company’s non-elective safe harbor employer contribution of 3% of eligible compensation under a 401(k) plan to provide retirement benefits.

Executive officers and employees of the California subsidiary are eligible to receive the Company’s non-elective safe harbor employer contribution of 3 % of eligible compensation under a 401(k) plan to provide retirement benefits.

Employees are 100 % vested in employer contributions and in any voluntary employee contributions.

Contributions to the 401(k) plan were $ 17,870 and $ 16,872 during the years ended September 30, 2024 and 2023, respectively.

EDESA BIOTECH, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2024 and 2023

Capital shares

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The Class A warrants have an exercise price of $ 10.50 per share and will expire on December 23, 2025 .

The Class B warrants have an exercise price of $ 7.00 per share and will expire on December 23, 2023.

The warrants are considered contracts on the Company’s own shares and are classified as equity.

EDESA BIOTECH, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2023 and 2022

On March 24, 2022, the Company completed a registered direct offering of 220,000 common shares, no par value, and pre-funded warrants to purchase up to an aggregate of 171,390 common shares.

In a concurrent private placement, the Company issued common share purchase warrants to purchase an aggregate of up to 391,390 common shares.

Net proceeds from the offering were $ 9.0 million.

The common share purchase warrants were immediately exercisable at an exercise price of $ 24.64 per share and will expire on September 24, 2027 .

The pre-funded warrants were immediately exercisable at an exercise price of $ 0.0007 per share and do not expire.

The Class B warrants have an exercise price of $ 7.00 per share and expired on December 23, 2023 .

The warrants are considered contracts on the Company’s own shares and are classified as equity.

The Company allocated gross proceeds with $ 5.9 million as the value of common shares and pre-funded warrants and $ 4.1 million as the value of common share purchase warrants under additional paid-in capital on a relative fair value basis.

In connection with the offering, the Company issued warrants to purchase an aggregate of 27,397 common shares to certain affiliated designees of the placement agent as part of the placement agent’s compensation.

The placement agent warrants are exercisable on or after March 24, 2022, at an exercise price of $ 31.9375 per share and will expire on March 21, 2027 with a fair value of $ 0.4 million.

Equity distribution agreements

Equity distribution agreement

On March 27, 2023, the Company entered into the Canaccord ATM, pursuant to which the Company may offer and sell, from time to time, common shares through an at-the-market equity offering program for up to $ 20.0 million in gross proceeds, subject to certain offering limitations that currently allow the Company to offer and sell common shares having an aggregate gross sales price of up to $ 8.4 million.

1 unchanged sentence

During the year ended September 30, 2024, the Company sold a total of 171,916 common shares pursuant to the agreement for gross proceeds of approximately $ 0.7 million.

From November 22, 2021 until terminated on March 21, 2022, the Company had an equity distribution agreement for an at-the-market equity offering program with another sales agent.

During the year ended September 30, 2022, the Company sold a total of 89,558 common shares pursuant to the agreement for net proceeds of $ 2.6 million.

During the year ended September 30, 2023, the Company sold a total of 196,401 common shares pursuant to the agreement for gross proceeds of approximately $ 1.3 million.

The Canaccord ATM was terminated on October 3, 2024.

At The Market Offering Agreement

On October 4, 2024, the Company entered into an At The Market Offering Agreement with H.C.

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.

Subsequent to the year ended September 30, 2024, the Company sold a total of 220,269 common shares pursuant to the agreement for net proceeds of approximately $ 0.6 million after deducting sales agent commissions.

Black-Scholes option valuation model

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

Number of Warrant Shares (#)

Weighted Average Exercise Price

Balance - September 30, 2022

September 30, 2022

September 30, 2023

Balance - September 30, 2023

Balance - September 30, 2024

EDESA BIOTECH, INC.

6 unchanged sentences

December 2025

February 2026

September 2027

The fair value of warrants issued during the years ended September 30, 2023 and 2022 was estimated using the Black-Scholes option valuation model using the following assumptions:

Year Ended September 30, 2023

There were no warrants issued during the year ended September 30, 2024.

The fair value of warrants issued during the year ended September 30, 2023 were estimated using the Black-Scholes option valuation model using the following assumptions:

Year Ended September 30,2023

Placement Agent Warrants

Class A Warrants

Class B Warrants

Risk free interest rate

Expected life

Expected life (years)

Expected share price volatility

Expected dividend yield

Pre-funded Warrants

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

Balance - September 30, 2021

Balance - September 30, 2022

EDESA BIOTECH, INC.

9 unchanged sentences

Options have been granted under the 2019 Plan allowing the holders to purchase common shares of the Company as follows:

Number of Options (#)

Weighted Average Exercise Price

Weighted Average Grant Date Fair Value

Balance - September 30, 2022

1 unchanged sentence

Balance - September 30, 2024

There were no options exercised during the years ended September 30, 2023 or September 30, 2022 and there was no intrinsic value of options outstanding at September 30, 2023.

There were no options exercised during the years ended September 30, 2024 or September 30, 2023.

The intrinsic value of options outstanding at September 30, 2024 was $ 200.00 .

The weighted average contractual life remaining on the outstanding options at September 30, 2024 is 80 months.

EDESA BIOTECH, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2023 and 2022

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

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September 30, 2024 (#)

Exercise Prices

$ 246.96 - 596.82

Dec 2023 - Mar 2025

May 2024 - Dec 2028

May 2024 - Feb 2030

$ 52.08 - 56.49

May 2024 - Oct 2030

$ 36.75 - 40.18

Apr 2024 - Sep 2031

Range of Exercise Prices

August 2027 - Dec 2028

52.08 - 56.49

Apr 2024 - Feb 2032

September 2030 - Oct 2030

36.75 - 40.18

Apr 2024 - Jul 2033

The options exercisable at September 30, 2023 had a weighted average exercise price of $ 31.03 , no intrinsic value and a weighted average remaining life of 74 months.

There were 130,960 options at September 30, 2023 that had not vested with a weighted average exercise price of $ 13.61 no intrinsic value and a weighted average remaining life of 111 months.

March 2025 - Sep 2031

March 2025 - Feb 2032

March 2025 - Oct 2033

The options exercisable at September 30, 2024 had a weighted average exercise price of $ 27.55 and an intrinsic value of $ 66.00 and a weighted average remaining life of 76 months.

There were 54,652 options at September 30, 2024 that had not vested with a weighted average exercise price of $ 9.24 and an intrinsic value of $ 134.00 and a weighted average remaining life of 102 months.

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

3 unchanged sentences

3.62 % - 4.18

1.71 % - 2.54 %

Expected life

Expected life (years)

Expected share price volatility

95.3 % - 97.34

85.91 % - 86.59 %

Expected dividend yield

EDESA BIOTECH, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2024 and 2023

The Company recorded $ 0.5 million and $ 1.2 million of share-based compensation expenses for the years ended September 30, 2024 and 2023, respectively.

7 unchanged sentences

Weighted Average Grant Date Fair Value

Balance - September 30, 2021 and 2022

Balance - September 30, 2022

Converted to common shares

Balance - September 30, 2023

Balance - September 30, 2024

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

1 unchanged sentence

Fully-vested RSUs

August 4, 2033

The RSUs that were granted in the current year were in lieu of cash bonuses for certain employees and in lieu of payments on consulting invoices for services prior to the appointment of the new Chief Financial Officer.

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

August 2033 - September 2034

The RSUs that were granted in the current year was for compensation to the Company’s Chief Executive Officer who is receiving 50% of his salary in RSUs.

In the comparative period, RSUs were granted in lieu of cash bonuses for certain employees and in lieu of payments on consulting invoices for services prior to the appointment of the new Chief Financial Officer.

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

The outstanding RSUs can be converted to common shares by the holder at any time prior to the expiry date.

There is no future unrecorded compensation expense for the RSUs.

Government Contributions

Reimbursement grant income for the Company’s federal grant with the Canadian government’s SIF is recorded based on the claim period of eligible costs.

EDESA BIOTECH, INC.

1 unchanged sentence

For the Years Ended September 30, 2024 and 2023

Government Contributions

Reimbursement grant income for the Company’s federal grant with the Canadian government’s SIF is recorded based on the claim period of eligible costs.

In February 2021, the Company entered into the 2021 SIF Agreement with the Canadian Government.

Under the 2021 SIF Agreement, the Government of Canada committed up to C$ 14.1 million in nonrepayable funding which was intended to support research and development related to our EB05 clinical program.

Under the February 2021 SIF Agreement the Company recorded grant income of $ 0.8 million for the year ended September 30, 2022.

No grant income was recorded under the 2021 SIF Agreement during the year ended September 30, 2023.

No further funding will be received from the 2021 SIF Agreement.

In October 2023, the Company entered into the 2023 SIF Agreement with the Canadian Government.

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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 October 2023 SIF Agreement the Company recorded grant income of $ 0.6 million for the year ended September 30, 2023.

No grant income was recorded under the 2023 SIF Agreement during the year ended September 30, 2022.

Under the October 2023 SIF Agreement the Company recorded grant income of $ 0.7 million and $ 0.6 million for the years ended September 30, 2024 and September 30, 2023, respectively.

Canada Emergency Business Account

During year ended September 30, 2024, the Company recognized a $ 20,000 Canadian dollar gain from loan forgiveness related to its Canada Emergency Business Account (CEBA) loan.

This forgiveness was granted upon successful repayment of $ 40,000 Canadian dollar of the loan balance, in accordance with CEBA program terms.

The forgiven amount is recorded as other income in the consolidated statements of operations.

The CEBA loan has been fully repaid and closed with CIBC.

The reconciliation of the combined Canadian federal and provincial statutory income tax rate to the approximate effective tax rate is as follows:

2 unchanged sentences

Net loss before recovery of income taxes

$ ( 8,374,000 )

$ ( 17,548,000 )

Canadian federal and provincial statutory income tax rate

Expected income tax recovery

$ ( 2,219,000 )

$ ( 4,650,000 )

Effect of foreign currency and foreign tax rate differences

19 unchanged sentences

valuation allowance

( 16,466,000 )

( 15,093,000 )

Total net deferred tax assets

4 unchanged sentences

Total deferred tax liabilities

$ ( 233,000 )

Net deferred taxes

5 unchanged sentences

It is unlikely that tax losses totaling $ 32.7 million and credits totaling $ 0.6 million will be utilized to offset potential future taxable income before expiration and they are excluded from deferred tax assets above.

The approximate Canadian non-capital losses carried forward at September 30, 2023 expire as follows:

C$ 70,975,000

EDESA BIOTECH, INC.

1 unchanged sentence

For the Years Ended September 30, 2024 and 2023

The approximate Canadian non-capital losses carried forward at September 30, 2024 expire as follows:

Share issuance and financing costs will be fully amortized in 2027.

9 unchanged sentences

Unobservable inputs are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

EDESA BIOTECH, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2024 and 2023

There are three levels of inputs that may be used to measure fair value:

7 unchanged sentences

The Company does not believe that the results of operations or cash flows would be affected to any significant degree by a significant change in market interest rates, relative to interest rates on cash and cash equivalents due to the short-term nature of these balances.

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 is also exposed to credit risk at year 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 Canadian Chartered Banks, U.S.

2 unchanged sentences

The Company’s cash is not subject to any external restrictions.

The Company assesses the collectability of accounts receivable through a review of the current aging and terms, as well as an analysis of historical collection rates, general economic conditions and credit status of government agencies.

The Company assesses the collectability of accounts and receivables through a review of the current aging and terms, as well as an analysis of historical collection rates, general economic conditions and credit status of government agencies.

Credit risk for the reimbursement grant and HST refunds receivable are not considered significant since amounts are due from the Canadian government’s SIF and the Canada Revenue Agency.

EDESA BIOTECH, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2023 and 2022

12 unchanged sentences

In meeting its liquidity requirements, the Company closely monitors its forecasted cash requirements with expected cash drawdown.

Loss per Share

The Company had securities outstanding which could potentially dilute basic earnings per share in the future but were excluded from the computation of diluted loss per share in the periods presented, as their effect would have been anti-dilutive.

Related party transactions

3 unchanged sentences

Rents of approximately $ 30,000 and $ 15,000 were payable at September 30, 2024, and September 30, 2023, respectively.

The Company agreed to pay a monthly standby fee for the term of the Credit Agreement, which amounted to $51,000 in September 2024 and nil in September 2023.

Subsequent events

Subsequent to the year end, equity sales under the Company’s at-the-market offering program have resulted in the issuance of 89,241 common shares and receipt of net cash proceeds of $ 0.3 million after deducting sales agent commissions.

In October 2023, the Company entered into $ 10.0 million revolving credit agreement with a company controlled by the Company's CEO, providing an unsecured revolving credit facility, with a credit limit of $ 3.5 million.

No amounts have been drawn on the credit agreement subsequent to the year end.

On October 4, 2024, the Company entered into an At The Market Offering Agreement with H.C.

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.

The Warrants expire five years from the issuance date.

As a result of the foregoing transactions and as of the date of this filing, the Company believes it has shareholders’ equity of at least $2.5 million and therefore satisfies the minimum Nasdaq listing requirement set forth in Nasdaq Listing Rule 5550(b)(1).

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 9A. Controls and Procedures