What changed in this filing

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Item 1. Financial Statements

2025-02-14 compared with 2024-08-09 · 237 added, 237 removed, 380 unchanged (56% of the section changed)

2 unchanged sentences

Condensed Interim Consolidated Balance Sheets

June 30, 2024

December 31, 2024

September 30, 2024

5 unchanged sentences

Non-current assets:

Property and equipment, net

Long-term deposits

6 unchanged sentences

Total current liabilities

Non-current liabilities:

Long-term right-of-use lease liabilities

Total liabilities

Commitments (Note 5)

Shareholders' equity:

3 unchanged sentences

3,467,658 common shares (September 30, 2024 - 3,247,389 )

150 Series A-1 preferred shares (September 30, 2024 - 0 )

Additional paid-in capital

7 unchanged sentences

Three Months Ended

Nine Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

December 31, 2024

December 31,2023

Research and development

4 unchanged sentences

Interest income

Misc other income

Foreign exchange loss

Loss before income taxes

Income tax expense

Exchange differences on translation

5 unchanged sentences

Condensed Interim Consolidated Statements of Cash Flows

Nine Months Ended

June 30, 2024

June 30, 2023

Three Months Ended

December 31, 2024

December 31,2023

Cash flows from operating activities:

2 unchanged sentences

Share-based compensation

Gain on payable forgiveness

Changes in working capital items:

4 unchanged sentences

Cash flows from financing activities:

Proceeds from issuance of common shares and warrants

Proceeds from exercise of warrants

Proceeds from issuance of common shares

Proceeds from issuance of Series A-1 preferred shares and warrants

Payments for issuance costs of common shares and warrants

Repayment of debt

Net cash provided by financing activities

7 unchanged sentences

Common Shares

Series A-1 Preferred Shares

Additional Paid-in Capital

2 unchanged sentences

Total Shareholders' Equity

Three Months Ended June 30, 2024

Balance - March 31, 2024

Issuance of common shares

Issuance costs

Share-based compensation

Net loss and comprehensive loss

Balance - June 30, 2024

Three Months Ended June 30, 2023

Balance - March 31, 2023

Issuance of common shares upon exercise of warrants

Issuance costs

Share-based compensation

Net loss and comprehensive loss

Balance - June 30, 2023

Nine Months Ended June 30, 2024

Three Months Ended December 31, 2024

Balance - September 30, 2024

Issuance of common shares

Issuance of Series A-1 preferred shares and warrants

Issuance costs

Preferred return on Series A-1 preferred shares

Share-based compensation

Net loss and comprehensive loss

Balance - June 30, 2024

Nine Months Ended June 30, 2023

Balance - December 31, 2024

Three Months Ended December 31, 2023

Balance - September 30, 2023

Issuance of common shares and warrants in equity offering

Issuance of common shares upon exercise of warrants

Issuance of common shares

Issuance costs

1 unchanged sentence

Net loss and comprehensive loss

Balance - June 30, 2023

Balance - December 31, 2023

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

7 unchanged sentences

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

Going Concern

These unaudited condensed 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 three months ended December 31, 2024, the Company incurred a comprehensive loss of $ 1.6 million resulting in an accumulated deficit of $ 60.2 million.

For the three months ended December 31, 2024, the Company had a net cash outflow from operating activities of $ 1.5 million and ended the quarter with $ 1.6 million in cash and cash equivalents and a working capital of $ 0.2 million.

During the three month period ended December 31, 2024, the Company received proceeds of $ 1.5 million from the sale of preferred shares to an entity controlled by the Company’s CEO, as described below.

Subsequent to the quarter, the Company received gross proceeds of $ 15.0 million from the sale of common shares and preferred shares in a private placement (see Note 11).

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 substantial doubt about the Company’s ability to continue as a going concern.

These unaudited condensed 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.

Basis of Presentation

7 unchanged sentences

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

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

Operating results for the three months ended December 31, 2024 are not necessarily indicative of the results that may be expected for other interim periods or the fiscal year ending September 30, 2025.

Use of estimates

3 unchanged sentences

Areas where significant judgment is involved in making estimates are valuation of accounts and other receivable;

valuation and useful lives of property and equipment;

intangible assets;

21 unchanged sentences

Intangible assets, net consisted of the following:

June 30, 2024

December 31, 2024

September 30, 2024

2 unchanged sentences

Total intangible assets, net

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

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

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

7 unchanged sentences

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

The Company extended the lease until November 30, 2025, and upon expiry, the arrangement will be month to month and either party will have the right to terminate on 30 days’ notice.

The components of right-of-use lease cost were as follows:

Three Months Ended

Nine Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

December 31, 2024

December 31, 2023

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

Lease terms and discount rates were as follows:

June 30, 2024

December 31, 2024

September 30, 2024

1 unchanged sentence

Estimated incremental borrowing rate:

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

September 30, 2024

September 30, 2025

Total lease payments

Less imputed interest

Present value of right-of-use lease liabilities

Present value included in current liabilities

Present value included in long-term liabilities

Cash flow information was as follows:

Nine Months Ended

June 30, 2024

June 30, 2023

Three Months Ended

December 31, 2024

December 31,2023

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

1 unchanged sentence

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

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

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

September 30, 2025

9 unchanged sentences

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

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

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

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

4 unchanged sentences

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

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

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

1 unchanged sentence

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

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

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

For each of the three months ended December 31, 2024, and December 31, 2023, the Company recorded an expense of $ 25,000 as a result of meeting milestones outlined in the 2021 license agreement.

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

4 unchanged sentences

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

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

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

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

Capital Shares

Equity offerings

On November 2, 2022, the Company completed a private placement of units consisting of 384,475 common shares, Class A warrants to purchase up to an aggregate of 192,248 common shares and Class B warrants to purchase up to an aggregate of 192,248 common shares.

Net proceeds from the offering were $ 2.9 million, which were allocated between the relative fair values of the common shares (using a fair value of $ 2.7 million) and the common share purchase warrants (using a total fair value of $ 1.2 million).

The warrants became exercisable December 23, 2022.

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 expired on December 23, 2023 .

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

Equity distribution agreement

On March 27, 2023, the Company entered into an equity distribution agreement with Canaccord, 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 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.

Series A-1 Preferred Shares Offering

On October 30, 2024, the Company entered into a Securities Purchase Agreement (Series A-1Purchase Agreement) with an entity controlled by the Company’s Chief Executive Officer, Secretary and member of the board of directors of the Company (Series A-1 Purchaser), pursuant to which the Company agreed to issue and sell to the Series A-1 Purchaser in a private placement, up to $ 5,000,000 of shares of the Company’s newly designated Series A-1 Convertible Preferred Shares, stated value $ 10,000 per share (the Series A-1 Preferred Shares), each of which is initially convertible into approximately 2,903 common shares (Series A-1 Conversion Shares), at a conversion price of $ 3.445 per Series A-1 Conversion Share, and warrants (Warrants) to purchase common shares (Series A-1 Warrant Shares) at an exercise price of $ 3.445 per Series A-1 Warrant Share.

The Series A-1 Preferred Shares and the Warrants are being sold together in a fixed combination of one Series A-1 Preferred Share and a Warrant to purchase a number of common shares equal to 75 % of the underlying Series A-1 Conversion Shares at a combined purchase price of $ 10,272.13 per Series A-1 Preferred Share and related Warrants.

Under the Purchase Agreement, the Purchaser has purchased 150 Series A-1 Preferred Shares initially convertible into an aggregate of 435,414 Series A-1 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 offering of the Series A-1 Preferred Shares and Warrants was structured as an at-market offering under the rules of The Nasdaq Stock Market.

The Series A-1 Purchaser will not have the right to convert any portion of its Series A-1 Preferred Shares if, together with its affiliates, it would beneficially own in excess of 19.99 % of the number of common shares outstanding immediately after giving effect to such conversion.

The Warrants expire five years from the issuance date.

The Warrants may only be exercised on a cashless basis if there is no registration statement registering, or the prospectus contained therein is not available for, the issuance or resale of the common shares issuable upon exercise of the Warrants to or by the holders thereof.

The exercise price of the Warrants is subject to customary antidilution adjustments in the event of share splits, reclassifications, recapitalizations and similar events.

The Series A-1 Purchaser will not have the right to exercise any portion of its Warrants if, together with its affiliates, it would beneficially own in excess of 19.99 % of the number of common shares outstanding immediately after giving effect to such exercise.

The Company has the right to require the Series A-1 Purchaser to purchase additional Series A-1 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 Series A-1 Preferred Shares and Warrants may be issued and sold pursuant to the Series A-1 Purchase Agreement without shareholder approval in accordance with applicable Canadian securities laws.

The Series A-1 Purchase Agreement contains customary representations and warranties and agreements of the Company and the Purchaser and customary indemnification rights and obligations of the parties.

The Company has the option to redeem the Series A-1 Preferred Shares, and upon conversion or liquidation, holders are entitled to receive the stated value plus a 10 % annual return on capital, payable in common shares at the conversion price, calculated daily until the three-year anniversary of issuance.

The Series A-1 Preferred Shares are presented as permanent shareholders’ equity.

The total proceeds were allocated between the Series A-1 Preferred Shares and warrants using relatively fair value.

The fair value of the Series A-1 Preferred Shares was determined as a reference to the fair value of common shares on the issuance date and the fair value of the warrants was determined using Black-Scholes option pricing model as detailed below.

The Series A-1 Convertible Preferred Shares did not exist in the comparative period;

therefore, no prior-period disclosure is presented.

Issued and Outstanding Series A-1 Preferred Shares

Preferred Shares (#)

Preferred Shares

Three Months Ended December 31, 2024

Balance - September 30, 2024

Issuance of Series A-1 Preferred Shares

Series A-1 Preferred Shares issuance costs

Preferred return on Series A-1 Preferred Shares

Balance - December 31, 2024

Equity distribution agreements

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

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

For the three months ended December 31, 2024, the Company sold a total of 220,269 common shares pursuant to the agreement for net proceeds of $ 0.6 million after deducting sales agent commissions of $ 19,000 .

The Company has not sold any common shares pursuant to the HCW ATM subsequent to December 31, 2024.

On March 27, 2023, the Company entered into an equity distribution agreement with Canaccord Genuity LLC (Canaccord), pursuant to which the Company was able to offer and sell, from time to time, common shares through an at-the-market equity offering program for up to $ 20 million in gross proceeds, subject to certain offering limitations that currently allow the Company to offer and sell common shares having an aggregate gross sales price of up to $ 8.4 million (Canaccord ATM).

During the three months ended December 31, 2024, there were no sales of common shares pursuant to the agreement.

During the three months ended December 31, 2023, the Company sold a total of 89,249 common shares pursuant to the agreement for gross proceeds of approximately $ 0.3 million after deducting sales agent commissions of $ 9,000 .

The Canaccord ATM was terminated on October 3, 2024.

Black-Scholes option valuation model

12 unchanged sentences

Weighted Average Exercise Price

Nine Months Ended June 30, 2024

Three Months Ended December 31, 2024

Balance - September 30, 2024

Balance - June 30, 2024

Nine Months Ended June 30, 2023

Balance - December 31, 2024

Three Months Ended December 31, 2023

Balance - September 30, 2023

Balance - June 30, 2023

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

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

Balance - December 31, 2023

The weighted average contractual life remaining on the outstanding warrants at December 31, 2024 is 37 months.

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

Number of Warrants (#)

3 unchanged sentences

September 2027

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

Nine Months Ended

June 30, 2023

Class A Warrants

Class B Warrants

The fair value of warrants granted during the three months ended December 31, 2024 was estimated using the Black-Scholes option valuation model using the following assumptions:

Three Months Ended

December 31, 2024

Class A Pref Share

Risk free interest rate

Expected life (years)

Expected life

Expected share price volatility

4 unchanged sentences

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

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

The remaining number of shares available to grant at December 31, 2024 is 119,574 .

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

4 unchanged sentences

Weighted Average Grant Date Fair Value

Nine Months Ended June 30, 2024

Three Months Ended December 31, 2024

Balance - September 30, 2024

Balance - June 30, 2024

Nine Months Ended June 30, 2023

Balance - December 31, 2024

Three Months Ended December 31, 2023

Balance - September 30, 2023

Balance - June 30, 2023

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

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

Balance - December 31, 2023

During the three months ended December 31 2024, there were no employee or director options granted.

During the three months ended December 31, 2023, there were 500 employee options granted and no director options granted.

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

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

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

The weighted average contractual life remaining on the outstanding options at December 31, 2024 is 77 months.

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

Number of Options (#)

Exercisable at

June 30, 2024 (#)

December 31, 2024 (#)

Range of Exercise Prices

246.96 - 596.82

June 2024 - Mar 2025

May 2024 - Dec 2028

May 2024 - Feb 2030

August 2027 - Dec 2028

52.08 - 56.49

May 2024 - Oct 2030

September 2030 - Oct 2030

36.75 - 40.18

Apr 2024 - Sep 2031

Apr 2024 - Feb 2032

Apr 2024 - Oct 2033

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

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

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

Nine Months Ended

June 30, 2024

Nine Months Ended

June 30, 2023

March 2025 - Sep 2031

March 2025 - Feb 2032

March 2025 - Oct 2033

The options exercisable at December 31, 2024 had a weighted average exercise price of $ 27.01 and no intrinsic value and a weighted average remaining life of 74 months.

There were 42,540 options at December 31, 2024 that had not vested with a weighted average exercise price of $ 7.83 and no intrinsic value and a weighted average remaining life of 101 months.

The fair value of options granted during the three months ended December 31 2023 was estimated using the Black-Scholes option valuation model using the following assumptions:

Three Month Ended

December 31,2023

Risk free interest rate

3.62 % - 4.18

Expected life (years)

Expected life

Expected share price volatility

95.3 % - 97.34

Expected dividend yield

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

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

The Company recorded $ 0.1 million and $ 0.2 million of share-based compensation expenses for the three months ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, the Company had approximately $ 0.1 million of unrecognized share-based compensation expense, which is expected to be recognized over a period of 21 months.

Restricted share units (RSU)

2 unchanged sentences

The fair value is based on the 5-day VWAP of the Company’s common shares up to the date of grant.

The initial grant of RSUs was in August 2023.

There were no RSUs granted in the comparative period.

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

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

Number of RSU (#)

Weighted Average Grant Date Fair Value

Nine Months Ended June 30, 2024

Three Months Ended December 31, 2024

Balance - September 30, 2024

Balance - June 30, 2024

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

Balance - December 31, 2024

Three Months Ended December 31, 2023

Balance - September 30, 2023

Balance - December 31, 2023

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

Number of RSU (#)

Fully-vested RSUs

August 2033 - June 2034

August 2033 - December 2034

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

3 unchanged sentences

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 a multi-year contribution agreement (the 2021 SIF Agreement) with the Canadian Government’s Strategic Innovation Fund.

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.

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

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

3 unchanged sentences

The repayable portion would be payable over fifteen ( 15 ) years based on a percentage rate of the Company’s annual revenue growth.

The maximum amount repayable under the Agreement is 1.4 times the original repayable amount.

In addition, the Company is entitled to partial reimbursement of certain eligible expenses under the Agreement.

Under the Agreement, the Company agreed to certain financial and non-financial covenants and other obligations in relation to the Project.

Pursuant to the Agreement, certain customary events of default, such as the Company’s or Edesa Biotech Research’s breach of their covenants and obligations under the Agreement, their insolvency, winding up or dissolution, and other similar events, may permit the Government of Canada to declare an event of default under the Agreement.

Upon an event of default, subject to applicable cure, the Government of Canada may exercise a number of remedies, including suspending or terminating funding under the Agreement, demanding repayment of funding previously received and/or terminating the Agreement.

The maximum amount repayable under the 2023 SIF Agreement is 1.4 times the original repayable amount.

In addition, the Company is entitled to partial reimbursement of certain eligible expenses under the 2023 SIF Agreement.

Under the 2023 SIF Agreement, the Company agreed to certain financial and non-financial covenants and other obligations in relation to the Project.

Pursuant to the 2023 SIF Agreement, certain customary events of default, such as the Company’s or Edesa Biotech Research’s breach of their covenants and obligations under the 2023 SIF Agreement, their insolvency, winding up or dissolution, and other similar events, may permit the Government of Canada to declare an event of default under the 2023 SIF Agreement.

Upon an event of default, subject to applicable cure, the Government of Canada may exercise a number of remedies, including suspending or terminating funding under the 2023 SIF Agreement, demanding repayment of funding previously received and/or terminating the 2023 SIF Agreement.

The funding and any associated conditional repayments are not secured by any assets of Edesa Biotech Research or the Company.

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

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

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

Under the October 2023 SIF Agreement the Company recorded grant income of $ 0.3 million and $ 0.1 million for the quarters ended December 31, 2024 and December 31, 2023, respectively, bringing the total recorded under the agreement to $ 1.0 million.

Financial Instruments

14 unchanged sentences

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

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

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

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

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

government securities.

9 unchanged sentences

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

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

At December 31, 2024, the Company and its Canadian subsidiary had assets denominated in Canadian dollars of approximately C$ 1.1 million and the U.S.

dollar exchange rate at this date was equal to 1.4374 Canadian dollars.

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

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

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

5 unchanged sentences

Related Party Transactions

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

On October 30, 2024, the Company entered into the Series A-1 Purchase Agreement with the Series A-1 Purchaser, an entity controlled by 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 the Series A-1 Purchaser in a private placement, up to $ 5,000,000 of the Series A-1 Preferred Shares, each of which is initially convertible into the Series A-1 Conversion Shares, at a conversion price of $ 3.445 per Series A-1 Conversion Share, and Warrants to purchase common shares at an exercise price of $ 3.445 .

Under the Series A-1 Purchase Agreement, the Series A-1 Purchaser has purchased 150 Series A-1 Preferred Shares initially convertible into an aggregate of 435,414 Series A-1 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 offering of the Series A-1 Preferred Shares and Warrants was structured as an at-market offering under the rules of The Nasdaq Stock Market.

The Purchaser will not have the right to convert any portion of its Series A-1 Preferred Shares, or exercise any portion of the Warrants, if, together with its affiliates, it would beneficially own in excess of 19.99 % of the number of common shares outstanding immediately after giving effect to such conversion or exercise.

See Note 6 – Series A-1 Convertible Preferred Shares offering.

During the three months ended December 31, 2024 and 2023, the Company paid cash of $ 18,000 and $ 20,000 , respectively, for a ROU lease from a company controlled by the Company’s CEO.

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

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

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

There was no rent payable at June 30, 2023.

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

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

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

Rent of approximately $ 7,000 and $ 15,000 were payable at December 31, 2024 and 2023, respectively.

In October 2023, the Company entered into $ 10.0 million revolving credit agreement with, an entity controlled by the Company’s Chief Executive Officer and Secretary and member of the Company’s board of directors (Credit Agreement), providing an unsecured revolving credit facility, with a credit limit of $ 3.5 million (Credit Limit) which was available immediately.

The line of credit 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.

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

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

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

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

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

During the three months ended December 31, 2024 and 2023, the Company incurred a standby charges of $ 4,000 and $ 12,000 , respectively.

The Credit Agreement was terminated in October 2024.

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

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

Subsequent Events

Series B-1 Preferred Shares Offering

On February 12, 2025, the Com pany entered into a Securities Purchase Agreement (the Series B-1 Purchase Agreement) with a lead investor and several additional investors signatory thereto (the Investors), pursuant to which the Company sold to the Investors in a private placement, an aggregate of (i) 834 shares (the “Series B-1 Preferred Shares”) of the Company’s newly designated Series B-1 Convertible Preferred Shares, stated value $ 10,000 per share, each of which is initially convertible into approximately 5,208 common shares (the “Series B-1 Conversion Shares”) at a conversion price of $ 1.92 per Series B-1 Conversion Share, and (ii) 3,468,746 common shares.

The purchase price per Series B-1 Preferred Share was $ 10,000 and the purchase price per common share was $ 1.92 .

The g ross proceeds to the Company were approximately $ 15.0 million, prior to deducting offering expenses payable by the Company.

As a result of the foregoing transaction 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).

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

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

The following management ’ s discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed interim consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q as of December 31, 2024 and our audited consolidated financial statements for the year ended September 30, 2024 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or the SEC, on December 13, 2024, as amended .

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

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

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

The discussion and analysis of our financial condition and results of operations are based on our unaudited condensed interim consolidated financial statements as of December 31, 2024 and September 30, 2024, as amended and for the three months ended December 31, 2024 and 2023 included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which we have prepared in accordance with U.S.

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

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

our ability to comply with the continued listing requirements of Nasdaq;

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

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general changes in economic or business conditions;

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

other risks and uncertainties, including those listed under the caption “ Risk Factors ” in our Annual Report on Form 10-K for the year ended September 30, 2024, as amended

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

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

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

You should refer to the “ Risk Factors ” section of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, filed with the SEC, on December 13, 2024, as amended, for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements.

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

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

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

Our most advanced drug candidate is EB05 (paridiprubart).

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

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

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

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

Recruitment in a Phase 3 study is ongoing.

EB05 has also been included in a U.S.

government funded platform study of HDTs.

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

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

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

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

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

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

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

Our clinical pipeline is focused on two therapeutic areas:

Medical Dermatology and Respiratory.

In Medical Dermatology we are developing EB06, an anti-CXCL10 monoclonal antibody candidate, as a therapy for vitiligo, a common autoimmune disorder that causes skin to lose its color in patches.

CXCL10 has been shown to play a key role in the disease, and neutralization of CXCL10 has been demonstrated to both prevent and reverse depigmentation in animal models.

To date, EB06 has demonstrated a favorable safety and tolerability profile.

We have received regulatory approval from Health Canada to conduct a Phase 2 proof of concept study of EB06 in patients with moderate-to-severe nonsegmental vitiligo and we are in discussions with the U.S.

Food and Drug Administration (FDA) for the same study.

Preparation for the manufacturing campaign is underway, with data anticipated to be submitted to the FDA during the middle of 2025.

Our medical dermatology assets also include EB01 (1.0% daniluromer cream), a Phase 3-ready asset developed for use as a potential therapy for moderate-to-severe chronic Allergic Contact Dermatitis (ACD), a common occupational skin condition.

This asset is at the partnering stage.

Our most advanced Respiratory drug candidate is EB05 (paridiprubart).

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

EB05 is currently being evaluated in a U.S.

government-funded platform study investigating three novel threat-agnostic HDTs in hospitalized adult patients with Acute Respiratory Distress Syndrome (ARDS), a life-threatening form of respiratory failure.

Certain development expenses, including manufacturing scale-up, for our EB05 program are also eligible for reimbursement from the Government of Canada under a 2023 grant and funding award.

In addition to EB05, we are also preparing an investigational new drug application (IND) in the United States to conduct a future Phase 2 study for EB07 (paridiprubart) in patients with pulmonary fibrosis.

Recent Developments

Government-Funded Platform Study in General ARDS

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

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

government-funded clinical study.

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

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

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

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

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

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

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

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

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

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

For the three months ended December 31, 2024, we sold a total of 220,269 common shares pursuant to the agreement for net proceeds of $0.6 million after deducting sales agent commissions of $19,000.

We have not sold any common shares pursuant to the HCW ATM subsequent to December 31, 2024.

Amended Articles

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 (Series A-1 Preferred Shares).

The Series A-1 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.

On February 12, 2025, we filed Amended Articles to create the rights, preferences, restrictions and other matters pertaining to our newly designated Series B-1 Convertible Preferred Shares (Series B-1 Preferred Shares).

The Series B-1 Preferred Shares have no par value and a stated value of $10,000 per share and rank, with respect to rights upon liquidation, dissolution or winding-up of the Company, or otherwise, senior in preference and priority to our common shares and each other class or series of shares that rank junior to the Series B-1 Preferred Shares.

Series A-1 Preferred Shares Offering

On October 30, 2024, we entered into a Securities Purchase Agreement (Series A-1 Purchase Agreement) with Pardeep Nijhawan Medicine Professional Corporation (Series A-1 Purchaser), an entity controlled by Pardeep Nijhawan, our Chief Executive Officer, Secretary and member of our board of directors, pursuant to which we agreed to issue and sell to the Series A-1 Purchaser in a private placement, up to $5,000,000 of the Series A-1 Preferred Shares, each of which is initially convertible into approximately 2,903 common shares at a conversion price of $3.445 per Series A-1 Conversion Share, and warrants (Warrants) to purchase common shares (Warrant Shares) at an exercise price of $3.445 per Warrant Share.

The Series A-1 Preferred Shares and the Warrants are being sold together in a fixed combination of one Series A-1 Preferred Share and a Warrant to purchase a number of common shares equal to 75% of the underlying Series A-1 Conversion Shares at a combined purchase price of $10,272.13 per Series A-1 Preferred Share and related Warrants.

The offering of the Series A-1 Preferred Shares and Warrants was structured as an at-market offering under the rules of The Nasdaq Stock Market.

The Series A-1 Purchaser will not have the right to convert any portion of its Series A-1 Preferred Shares, or exercise any portion of the Warrants, if, together with its affiliates, it would beneficially own in excess of 19.99% of the number of common shares outstanding immediately after giving effect to such conversion or exercise.

Series B-1 Preferred Shares Offering

On February 12, 2025, we entered into a Securities Purchase Agreement (Series B-1 Purchase Agreement) with a lead investor and several additional investors signatory thereto (the Investors), pursuant to which we sold to the Investors in a private placement, an aggregate of (i) 834 Series B-1 Preferred Shares, each of which is initially convertible into approximately 5,208 common shares (Series B-1 Conversion Shares) at a conversion price of $1.92 per Series B-1 Conversion Share, and (ii) 3,468,746 common shares.

The purchase price per Series B-1 Preferred Share was $10,000 and the purchase price per common share was $1.92.

The gross proceeds were approximately $15.0 million, prior to deducting offering expenses payable by us.

A holder of Series B-1 Preferred Shares will not have the right to convert any portion of its Series B-1 Preferred Shares, if, together with its affiliates, it would beneficially own in excess of 4.99% (or, at the option of the holder, 9.99%) of the number of common shares outstanding immediately after giving effect to such conversion, provided, however, that a holder may increase or decrease the beneficial ownership limitation by giving 61 days’ notice to the Company, but not to any percentage in excess of 19.99%.

Significant Accounting Policies and Estimates

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Results of Operations

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

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

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

Comparison of the Three Months Ended December 31, 2024 and 2023

Total operating expenses were unchanged at $1.9 million for each of the three months ended December 31, 2024 and December 31, 2023:

Research and development (R&D) expenses increased by $0.3 million to $1.0 million for the three months ended December 31, 2024 compared to $0.7 million for the same period last year primarily due to increased external research expenses related to manufacturing paridiprubart.

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

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

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

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

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

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

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

There was no grant income in the comparative period.

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

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

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

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

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

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

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

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

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

General and administrative (G&A) expenses decreased by $0.3 million to $0.9 million for the three months ended December 31, 2024 compared to $1.2 million for the same period last year primarily due to a decrease in salaries and related costs, noncash share-based compensation and professional service fees.

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

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

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

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

There was no grant income in the comparative period.

Total other income increased by $102,000 to $281,000 for the three months ended December 31, 2024 compared to $179,000 for the same period last year and was composed of the following:

Grant income increased by $0.2 million to $0.3 million for the three months ended December 31, 2024 compared to $0.1 million for the three months ended December 31, 2023.

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

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

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

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

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

Interest income decreased by $59,000 to $2,000 for the three months ended December 31, 2024 compared to $61,000 for the same period last year primarily due to lower cash balances.

Foreign exchange gain was $21,000 for the three months ended December 31, 2024 compared to a gain of $2,800 for the three months ended December 31, 2023.

For the three months ended December 31, 2024, our net loss was $1.6 million, or $0.48 per common share, compared to a net loss of $1.7 million, or $0.54 per common share for the three months ended December 31, 2023.

Capital Expenditures

Our capital expenditures primarily consist of computer and office equipment.

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

There were no significant capital expenditures for the three months ended December 31, 2024 and 2023.

Liquidity and Capital Resources

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

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

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

Net cash used in operating activities was $1.5 million and $1.4 million for the three months ended December 31, 2024 and 2023, respectively.

We incurred net losses of $1.6 million and $1.7 million, respectively, for those same periods.

On February 12, 2025, we entered into the Series B-1 Purchase Agreement the Investors, pursuant to which we sold to the Investors in a private placement, an aggregate of (i) 834 Series B-1 Preferred Shares, each of which is initially convertible into approximately 5,208 common shares (Series B-1 Conversion Shares) at a conversion price of $1.92 per Series B-1 Conversion Share, and (ii) 3,468,746 common shares.

The purchase price per Series B-1 Preferred Share was $10,000 and the purchase price per common share was $1.92.

The gross proceeds were approximately $15.0 million, prior to deducting offering expenses payable by us.

A holder of Series B-1 Preferred Shares will not have the right to convert any portion of its Series B-1 Preferred Shares if, together with its affiliates, it would beneficially own in excess of 4.99% (or, at the option of the holder, 9.99%) of the number of common shares outstanding immediately after giving effect to such conversion, provided, however, that a holder may increase or decrease the beneficial ownership limitation by giving 61 days’ notice to the Company, but not to any percentage in excess of 19.99%.

In October 2024, we entered into the HCW ATM pursuant to which we may offer and sell, from time to time, common shares through an at-the-market equity offering program for up to $3.87 million in gross proceeds.

For the three months ended December 31, 2024, we sold a total of 220,269 common shares pursuant to the agreement for net proceeds of $0.6 million after deducting sales agent commissions of $19,000.

We have not sold any common shares pursuant to the HCW ATM subsequent to December 31, 2024.

In October 2024, we entered into the Series A-1 Purchase Agreement with the Series A-1 Purchaser, an entity controlled by our Chief Executive Officer, Secretary and member of our board of directors, pursuant to which we agreed to issue and sell to the Series A-1 Purchaser in a private placement, up to $5 million of Series A-1 Preferred Shares, each of which is initially convertible into approximately 2,903 Series A-1 Conversion Shares, at a conversion price of $3.445 per Series A-1 Conversion Share, and Warrants to purchase the Warrant Shares at an exercise price of $3.445 per Warrant Share.

The Series A-1 Preferred Shares and the Warrants were being sold together in a fixed combination of one Series A-1 Preferred Share and a Warrant to purchase a number of common shares equal to 75% of the underlying Series A-1 Conversion Shares at a combined purchase price of $10,272.13 per Series A-1 Preferred Share and related Warrants.

The Warrants expire five years from the issuance date.

We have the right to require the Series A-1 Purchaser to purchase additional Series A-1 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 Series A-1 Preferred Shares and Warrants may be issued and sold pursuant to the Series A-1 Purchase Agreement without shareholder approval in accordance with applicable Canadian securities laws.

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

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

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

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

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

There was no grant income recognized in the comparative periods.

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

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

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

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

We have not drawn any funds from the Credit Agreement.

For the three months ended December 31, 2024 and 2023, we recorded grant income of $0.3 million and $0.1 million, respectively, related to the 2023 SIF Agreement.

In October 2023, we entered into $10.0 million revolving credit agreement with an entity controlled by the Company’s Chief Executive Officer and Secretary and member of our board of directors (Credit Agreement), providing an unsecured revolving credit facility, with a credit limit of $3.5 million (Credit Limit) which was available immediately.

The line of credit 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.

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

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

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.

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

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

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

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

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

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

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

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

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

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

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

During the three months ended December 31, 2023, the Company sold a total of 89,249 common shares pursuant to the agreement for gross proceeds of approximately $0.3 million after deducting sales agent commissions of $9,000.

The Canaccord ATM was terminated in October 2024.

At December 31, 2024, we had an accumulated deficit of $60.2 million and working capital of $0.2 million, including $1.6 million in cash and cash equivalents.

In the three months ended, December 31, 2024, we received proceeds of $1.5 million from the initial sale of Series A-1 Preferred Shares to the Series A-1 Purchaser.

Subsequent to the quarter, we received gross proceeds of $15.0 million from the sale of common shares and Series B-1 Preferred Shares in a private placement.

We expect that our cash and cash equivalents at December 31, 2024, including the net proceeds from the Series A-1 Purchase Agreement, the $15.0 million in gross proceeds from the sale of common shares and Series B-1 Preferred Shares, HCW ATM and reimbursements of eligible R&D expenses under the 2023 SIF Agreement, will be used to fund our operating expenses including the advancement of the Vitiligo program through the end of fiscal 2026.

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

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Net cash used in operating activities

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

Net cash used in operating activities was $1.5 million for the three months ended December 31, 2024 compared to $1.4 million for the three months ended December 31, 2023 primarily due to a slight increase in operating expenses and an investment in working capital of $24,000, compared to a recovery of working capital $42,000 in the comparable period.

Net cash used in investing activities

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

There was no cash used in investing activities for the three months ended December 31, 2024 and 2023, respectively.

Net cash provided by financing activities

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

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

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

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

Net cash provided by financing activities was $2.1 million for the three months ended December 31, 2024, as compared to $0.3 million for the three months ended December 31, 2023.

In the current period, we received $1.5 million in proceeds from the sale of the Series A-1 Preferred Shares, in addition to proceeds of $0.6 million from the HCW ATM, partially offset by issuance costs of $96,000.

In the comparative period, we received $0.3 million in net proceeds from the Canaccord ATM.

Research and Development

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

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

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

Our R&D expenses were $1.0 million for the three months ended December 31, 2024, compared to $0.7 million for the three months ended December 31, 2023.

The increase was due primarily to manufacturing expenses related to paridiprubart.

Off-Balance Sheet Arrangements

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

What changed 10-Q

Item 1. Financial Statements