What changed in this filing

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Item 9A. Controls and Procedures

2022-12-16 compared with 2021-12-28 · 312 added, 345 removed, 1001 unchanged (40% of the section changed)

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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Our directors and their ages as of December 27, 2021 are set forth below.

Position(s) Held

Director Since

Our directors and their ages as of the date of this filing are set forth below.

Position(s) Held Director Since

Jennifer Chao (1)(2)(3) 52

Director March 28, 2022

Lorin Johnson, PhD (2) 70

Director June 7, 2019

Sean MacDonald (1)(3) 46

Chairman of Board of Directors

Chairman of the Board of Directors June 7, 2019

Pardeep Nijhawan, MD 52

Director, Chief Executive Officer and Corporate Secretary

April 9, 2010

Director, Chief Executive Officer and Corporate Secretary June 7, 2019

Frank Oakes (3) 72

Director April 9, 2010

Paul Pay (2) 68

Director June 7, 2019

Carlo Sistilli, CPA, CMA (1) 66

Peter van der Velden (3)

Director June 7, 2019

(1) Member of Audit Committee.

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The biographies of our directors and certain information regarding each director’s experience, attributes, skills and/or qualifications that led to the conclusion that the director should be serving as a director of our Company are as follows:

Chao has over 25 years of experience in the biotech and life sciences industries focused primarily on finance and corporate strategy.

She is Managing Partner of CoreStrategies Management, LLC, a company she founded in 2008.

She currently serves on the Board of Directors of Endo International plc.

ENDP) and is a member of Endo’s Audit Committee and Compliance Committee.

Prior to joining Endo, Ms.

Chao served as a Director (since 2015) and as Board Chair (since October 2019) of BioSpecifics Technologies Corp.

until its acquisition by Endo in December 2020.

She also served as Chair of BioSpecifics’ Compensation Committee and as a member of its Audit Committee, Strategy Committee, Intellectual Property Committee, and Nominating and Corporate Governance Committee.

In addition, since March 2022, she has been a Board Director of Cardiol Therapeutics Inc.

CRDL) and serves as Chair of Cardiol’s Corporate Governance and Compensation Committee.

Additionally, from 2004 to 2008, Ms.

Chao was Managing Director and Senior Lead Biotechnology Securities Analyst at Deutsche Bank.

Prior to that, Ms.

Chao served as Managing Director and Senior Lead Biotechnology Analyst at RBC Capital Markets and Vice President, Senior Biotechnology Analyst at Leerink Swann & Co.

Chao was a research fellow at Massachusetts General Hospital/Harvard Medical School, as a recipient of the BioMedical Research Career Award, and received her B.A.

in Politics and Greek Classics from New York University.

Chao’s qualifications to serve on the board of directors include her extensive experience in the life science industry, corporate strategy and U.S.

capital markets.

Lorin Johnson, PhD is a seasoned pharmaceutical entrepreneur and innovator with more than 30 years of experience in building companies.

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(formerly California Biotechnology, Inc).

In addition to Edesa, he currently serves on the boards of 9Meters Biopharma, Inc.

NMTR), Glycyx MOR, Inc., Intact Therapeutics, Inc., Kinisi Therapeutics, Ltd.

In addition to Edesa, he currently serves on the board of 9Meters Biopharma, Inc.

NMTR), and is a member of 9Meters’ Audit Committee, Compensation Committee (chair) and Nominating and Governance Committee.

He also serves on the boards of Glycyx MOR, Inc., Intact Therapeutics, Inc., Kinisi Therapeutics, Ltd.

and NeVAP, Inc.

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

MacDonald is currently Chief Business Officer of iOnctura SA, a Swiss clinical-stage oncology company, a position he has held since August 2021.

MacDonald is currently an advisor to venture capital groups and biotechnology companies, including Finchley Healthcare Ventures and Dark Canyon Laboratories, a position he has held since April 2022.

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

From April 2019 to August 2021, he was the Head of Business Development for Cosmo Pharmaceuticals NV, a European gastroenterology focused pharmaceutical company;

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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 the company’s principal operating subsidiary, Edesa Biotech Research, Inc., since January 2015.

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

Prior to Edesa, in 2002 Dr.

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.

Nijhawan founded Medical Futures Inc., and served as its CEO.

He sold Medical Futures to Tribute Pharmaceuticals in 2015.

Nijhawan also founded Digestive Health Clinic in 2000 and led it to become Canada’s largest provider of private endoscopy services.

In 2014, he founded Exzell Pharma, a specialty Canadian-based pharmaceutical organization that markets and commercializes approved products.

He continues to serve on the Boards of Exzell Pharma and Digestive Health Clinic.

He sold Exzell Pharma to BioLab Pharma in 2022.

Nijhawan also founded Digestive Health Clinic in 2000 and led it to become one of Canada’s largest provider of private endoscopy services.

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.

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.

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From November 2002 to May 2021, he led all business development activity at Norgine.

He is currently Senior Advisor, Corporate & Business Development at Norgine reporting to the CEO.

He is currently Senior Advisor, Corporate & Business Development at Norgine reporting to the Chairman.

Prior to joining Norgine, Mr.

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His commercial roles have included sales, marketing, market research, licensing, business development, public relations, intellectual property and product development.

In addition to Edesa, Mr.

Pay is currently a director of Exzell Pharma, a specialty pharmaceutical company.

He is a past director at Arc Medical Design, a medical device development company and a portfolio company of Norgine; Norgine Ltd., an affiliate of Norgine;

and Merus Labs Inc., a Norgine wholly owned subsidiary.

He is a past Director of Exzell Pharma, a specialty pharmaceutical company;

of Arc Medical Design, a medical device development company and of Norgine Ltd., an affiliate of Norgine and of Merus Labs International, a Norgine wholly owned subsidiary.

Pay received a BSC (Hons) from the University of Leeds.

Pay’s qualifications to serve on the board of directors include his extensive experience in the pharmaceutical/biotechnology industry and his knowledge of Edesa’s business.

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.

Carlo Sistilli, CPA, CMA Mr.

Sistilli 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 the company’s principal operating subsidiary, Edesa Biotech Research, Inc., since September 2017.

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Sistilli helped sell to Manulife Financial.

He currently serves on the board of directors and audit committee of Aleafia Health Inc.

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

In addition to his professional career, Mr.

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

Peter van der Velden is an investor and business executive with more than 28 years of experience in building growth companies.

He has been a member of our board of directors since June 2019, having previously served as a director of the company’s principal operating subsidiary, Edesa Biotech Research, Inc., since September 2017.

From 2007 to present, Mr.

van der Velden has been the Managing General Partner of Lumira Ventures, one of Canada’s largest dedicated life sciences venture capital investors.

van der Velden currently serves on the boards of Lava Medtech Acquisition Corp (Nasdaq:

LVACU), Exact Imaging, Medexus Pharmaceuticals (TSX:

MDP.TO) and AmacaThera.

His past corporate board roles include:

Milcom Ventures, Spinal Kinetics, Alveolus Inc., CML Healthcare, First Aid Shot Therapy, Life Sciences Ontario, Skinstore.com, and Vendorlink.ca.

van der Velden is a past President and Chairman of the Canadian Venture and Private Equity Association and currently serves on the board or as an advisor to a number of industry groups and non-profit organizations.

van der Velden holds an MBA in Finance and Policy from the Schulich School of Business, and a MSc in Pathology and BSc (honors) in Life Sciences from Queen’s University.

van der Velden’s qualifications to serve on the board of directors include his extensive operational experience building growth companies and his knowledge acquired from serving on the boards of other companies.

Executive Officers

Set forth below is certain information with respect to the names, ages, and positions of our executive officers as of December 27, 2021.

Set forth below is certain information with respect to the names, ages, and positions of our executive officers as of the date of this filing.

Biographical information pertaining to Dr.

Nijhawan, who is a director and an executive officer, may be found in the above section entitled “Directors.” The executive officers serve at the pleasure of our Board of Directors.

Position(s) Held

Date of Appointment

Position(s) Held Date of Appointment

Pardeep Nijhawan, MD 52

Director, Chief Executive Officer and Corporate Secretary

Director, Chief Executive Officer and Corporate Secretary June 7, 2019

Kathi Niffenegger, CPA 65

Chief Financial Officer

November 1, 2013

Chief Financial Officer November 1, 2013

Michael Brooks, PhD 44

President June 7, 2019

Kathi Niffenegger, CPA has served as our Chief Financial Officer since 2013.

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Prior to joining Edesa, Dr.

Brooks held positions of increasing responsibility at Cipher Pharmaceuticals Inc from 2010 to 2015 and served most recently as the company's as Director of Business Development.

Brooks held positions of increasing responsibility at Cipher Pharmaceuticals Inc from 2010 to 2015 and served most recently as the company’s Director of Business Development.

Prior to joining Cipher, Dr.

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Section 16(a) of the Exchange Act requires that our directors, executive officers, and beneficial owners of more than ten percent of our common shares file reports with the SEC on their initial beneficial ownership of our common shares and any subsequent changes.

To our knowledge, based solely on a review of copies of such reports filed electronically with the Securities and Exchange Commission during the Company’s year ended September 30, 2021, during such period, each of our directors, executive officers, and beneficial owners of more than ten percent of our common shares filed on a timely basis all reports required by Section 16(a) of the Exchange Act except for one report on Form 4 reporting one transaction that was inadvertently filed late by Mr.

To our knowledge, based solely on a review of copies of such reports filed electronically with the Securities and Exchange Commission during the Company’s year ended September 30, 2022, during such period, each of our directors, executive officers, and beneficial owners of more than ten percent of our common shares filed on a timely basis all reports required by Section 16(a) of the Exchange Act except for:

one report on Form 4 reporting one share option grant that was inadvertently filed late by each of Dr.

MacDonald, Dr.

Nijhawan, Mr.

Sistilli, Dr.

Brooks and Ms.

and one report on Form 4 reporting one transaction that was inadvertently filed late by Dr.

Code of Ethics

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The Board of Directors has adopted written charters for its Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee.

Copies of these charters are available on our website at edesabiotech.com/investors/governance.

Copies of these charters are available on our website at www.edesabiotech.com/investors/governance.

Audit Committee

Our Audit Committee is composed of Sean MacDonald, Paul Pay and Carlo Sistilli (chair).

Our Audit Committee is composed of Jennifer Chao, Sean MacDonald and Carlo Sistilli (chair).

The purpose of the Audit Committee is to oversee our accounting and financial reporting processes and the audits of our financial statements.

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Compensation Committee

Our Compensation Committee is composed of Lorin Johnson, Sean MacDonald and Paul Pay (chair).

The purpose of the Compensation Committee is to assist the Board’s oversight relating to compensation, including (i) the approval of compensation for our Chief Executive Officer and (ii) the review of compensation for our other named executive officers.

It has overall responsibility for evaluating, and approving or 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.

Our Compensation Committee is composed of Jennifer Chao, Lorin Johnson and Paul Pay (chair).

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.

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.

Nominating and Corporate Governance Committee

Our Nominating and Corporate Governance Committee is composed of Sean MacDonald, Carlo Sistilli and Peter van der Velden (chair).

Our Nominating and Corporate Governance Committee is composed of Jennifer Chao (chair), Frank Oakes and Sean MacDonald.

The purpose of the Nominating and Corporate Governance Committee is to identify individuals qualified to become Board members;

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advise the Board with respect to Board composition, procedures and committees;

lead the Board in its annual review of the Board and management’s performance;

develop, recommend to the Board and annually review a set of corporate governance principles applicable to the Company;

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Name and Principal Position

Option Awards

Options Awards ($) (1)

All Other Compensation ($)

Pardeep Nijhawan, MD

Director, Chief Executive Officer

and Corporate Secretary

$ 63,118 (2 )

Director, Chief Executive Officer and Corporate Secretary

Kathi Niffenegger, CPA

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Nijhawan was paid in Canadian dollars and was converted to US dollars using the average foreign exchange rate for the year from oanada.com.

Represents (i) $18,758 in health insurance and (ii) $12,150 in 401(k) company contributions in 2021 and (i) $17,650 in health insurance and (ii) $7,963 in 401(k) company contributions in 2020.

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 and (i) $18,758 in health insurance and (ii) $12,150 in 401(k) company contributions in 2021.

Represents (i) $24,000 in car allowance (ii) $2,788 in health insurance and (iii) $15,120 in vacation payout in 2022 and (i) $22,548 in car allowance (ii) $2,597 in health insurance and (iii) $17,194 in vacation payout in 2021.

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Narrative Disclosure to Summary Compensation Table Employment Agreements

Upon completion of our business combination transaction with Edesa Research, Dr.

Nijhawan, Dr.

Brooks and Kathi Niffenegger each entered into new employment agreements with us which are described below.

Kathi Niffenegger entered into a new employment agreement with us on December 1, 2020 as described below and the employment agreement she entered into upon completion of our business combination transaction with Edesa Research was superseded.

All three employment agreements were amended on March 19, 2021.

Employment Agreement with Pardeep Nijhawan effective as of June 7, 2019 and amended March 19, 2021

We have entered into employment agreements with each of our named executive officers.

The employment agreements provide for the annual base salary for each named executive officer, which amounts are subject to annual review by and at the sole discretion of our board of directors or its designee.

Each named executive officer is also eligible to earn an annual cash performance bonus, which is based on our attainment of financial or other operating criteria established by our board of directors or its designee, as determined by our board of directors or its designee.

Employment Agreement with Pardeep Nijhawan effective as of June 7, 2019 and amended March 19, 2021 and April 12, 2022

On June 14, 2019 but effective as of June 7, 2019, we entered into an employment agreement with Pardeep Nijhawan.

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As compensation for his services to us, Dr.

Nijhawan will receive a base salary of $300,000 per year and be eligible to receive a target annual bonus of 40% of his base salary, subject to achieving corporate and personal targets to be determined by us.

The base salary increased to $320,000 per year effective January 1, 2021.

Nijhawan will also receive an automobile allowance of $2,700 per month and be eligible to participate in our group insured benefits program, as may be in effect from time-to-time for our employees generally, and executive employees specifically.

Nijhawan is also eligible for future share and/or option grants, as determined by our Compensation Committee, commensurate with Dr.

Nijhawan received a base salary of $300,000 per year and is eligible to receive a target annual bonus of 40% of his base salary, subject to achieving corporate and personal targets to be determined by us.

The base salary increased to $320,000 per year effective January 1, 2021 and $331,200 effective March 24, 2022.

Nijhawan also receives an automobile allowance of $2,700 per month and is eligible to participate in our group insured benefits program, as may be in effect from time-to-time for our employees generally, and executive employees specifically.

Nijhawan is eligible for future share and/or option grants, as determined by our Compensation Committee, commensurate with Dr.

Nijhawan’s position and any business milestones which may be established by the Compensation Committee and subject to availability of shares and/or options for grant under our Equity Incentive Compensation Plan.

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Nijhawan is 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.

Employment Agreement with Michael Brooks effective as of June 7, 2019 and amended March 19, 2021

Employment Agreement with Michael Brooks effective as of June 7, 2019 and amended March 19, 2021 and April 12, 2022

On June 14, 2019 but effective as of June 7, 2019, we entered into an employment agreement with Michael Brooks, PhD.

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As compensation for his services to us, Dr.

Brooks will receive a base salary of $275,000 per year and be eligible to receive a target annual bonus of 40% of his base salary, subject to achieving corporate and personal targets to be determined by us.

The base salary increased to $300,000 per year effective January 1, 2021.

Brooks will also receive an automobile allowance of $2,000 per month and be eligible to participate in our group insured benefits program, as may be in effect from time-to-time for our employees generally, and executive employees specifically.

Brooks is also eligible for future share and/or option grants, as determined by our Compensation Committee, commensurate with Dr.

Brooks received a base salary of $275,000 per year and is eligible to receive a target annual bonus of 40% of his base salary, subject to achieving corporate and personal targets to be determined by us.

The base salary increased to $300,000 per year effective January 1, 2021 and $310,500 effective March 24, 2022.

Brooks also receives an automobile allowance of $2,000 per month and is eligible to participate in our group insured benefits program, as may be in effect from time-to-time for our employees generally, and executive employees specifically.

Brooks is eligible for future share and/or option grants, as determined by our Compensation Committee, commensurate with Dr.

Brooks’ position and any business milestones which may be established by the Compensation Committee and subject to availability of shares and/or options for grant under our Equity Incentive Compensation Plan.

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Brooks is 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.

Employment Agreement with Kathi Niffenegger effective as of June 7, 2019

On June 7, 2019, we entered into an employment agreement with Ms.

Niffenegger which has subsequently been superseded by the employment agreement with Ms.

Niffenegger described below.

Pursuant to the employment agreement, Ms.

Niffenegger served as our Chief Financial Officer with a base salary of $215,000 per year, a discretionary bonus in an amount up to 25% of her base salary based on her performance and the company’s performance, a one-time hiring and retention bonus of $53,750 and such other employee benefits as are generally provided to similarly situated employees of the company.

Employment Agreement with Kathi Niffenegger effective as of December 1, 2020 and amended March 19, 2021

Employment Agreement with Kathi Niffenegger effective as of December 1, 2020 and amended March 19, 2021 and April 12, 2022

On December 1, 2020, we entered into an employment agreement with Ms.

Niffenegger that superseded prior employment agreements.

Pursuant to the employment agreement, Ms.

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As compensation for her services to us, Ms.

Niffenegger will receive a base salary of $275,000 per year retroactive to June 1, 2020, 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.

The base salary increased to $290,000 per year effective January 1, 2021.

Niffenegger may be 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 received a base salary of $275,000 per year retroactive to June 1, 2020, is 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.

The base salary increased to $290,000 per year effective January 1, 2021 and $300,150 per year effective March 24, 2022.

Niffenegger is 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 is terminated for “Cause” (as defined in the employment agreement) or if Ms.

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Option Awards

unexercisable

Award grant date

Number of securities underlying unexercised options (#) exercisable

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

Option exercise prices

Option expiration date

Pardeep Nijhawan, MD 9/26/17

Kathi Niffenegger, CPA 12/22/15 238

2/12/20 80,452

10/13/20 33,336

4/22/21 39,996

2/28/22 9,664

Michael Brooks, PhD 8/28/17 136,416

9/26/17 24,299

12/28/18 1,620

2/12/20 62,570

10/13/20 33,336

4/22/21 39,996

2/28/22 9,664

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 one-third vesting on the first anniversary of the date of grant and the remainder vesting on a pro-rata basis monthly thereafter.

The option will vest over a period of three years, with one-third vesting on the date of grant and the remainder vesting on a pro-rata basis monthly thereafter.

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• delegate all or a portion of its administrative powers as it may determine to one or more committees.

Options to purchase 1,776,219 common shares at prices ranging from C$2.16 to C$638.40 and $3.16 to $304.08 are outstanding at September 30, 2021.

Options to purchase 2,203,699 common shares at prices ranging from C$2.16 and $3.16 to $304.08 are outstanding at September 30, 2022.

No restricted shares or restricted share units have been granted as of September 30, 2022.

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Vesting requirements for option awards are determined by the independent members of the Board of Directors.

Options granted by the Company during the year ended September 30, 2021 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.

Options granted by the Company during the year ended September 30, 2020 generally vested one-third upon the date of grant and monthly thereafter until the third anniversary of the date of grant.

Substitute options under the 2019 Plan generally vested one-third upon the first anniversary of the date of grant and monthly thereafter until the third anniversary of the date of grant.

Options granted by the Company during the year ended September 30, 2022 and 2021 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.

Retirement Benefits

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The following table sets forth information regarding the compensation of our non-employee directors for the year ended September 30, 2022.

All Other Compensation($)

Fees Earned of Paid in Cash ($)

Option Awards ($) (1)

All Other Compenstation ($)

Jennifer Chao

Lorin Johnson, PhD

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Carlo Sistilli, CPA, CMA

Peter van der Velden

37,500 (2)(3)

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.

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The compensation was paid in Canadian dollars or British pounds and was converted from US dollars using the average foreign exchange rate for each month of the year from oanda.com.

Fees of $34,326 and $3,174 were paid to Lumira Capital II, L.P.

and Lumira Capital II (International), L.P., respectively, as compensation for Mr.

van der Velden’s services on our board of directors.

Outstanding Equity Awards at September 30, 2022

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Outstanding Options (#)

Jennifer Chao

Lorin Johnson, PhD

1 unchanged sentence

Carlo Sistilli, CPA, CMA

Peter van der Velden

Narrative to Director Compensation Table

Non-Employee Director Compensation Policy

The board adopted a compensation policy effective upon completion of our business combination on June 7, 2019.

As compensation for their services on the board of directors, each non-executive board member will receive annual base remuneration of $30,000 and the Chairman of the Board will receive annual remuneration of $50,000, inclusive of compensation for his services on committees of the board of directors.

Each member of the Company’s Audit Committee will receive annual remuneration of $5,000, and the Chair of the Audit Committee will receive $10,000 annually for his services.

Each member of the Company’s Compensation Committee and Nominating and Corporate Governance Committee will receive annual remuneration of $3,500 for each committee on which they serve, and the Chairs of each of the Compensation Committee and Nominating and Corporate Governance Committee shall receive $7,500 annually for their services.

The Chief Executive Officer will not receive any additional compensation for his services on the board of directors.

The board adopted a compensation policy effective June 7, 2019 and amended it effective March 24 2022.

As compensation for their services on the board of directors, each non-executive board member received annual remuneration as noted below and prorated during the effective periods.

The Chief Executive Officer does not receive any additional compensation for his services on the board of directors.

Prorated during the period October 1, 2020 through March 23, 2022, each non-executive director received annual base remuneration of $30,000 and the Chairman of the Board received annual remuneration of $50,000, inclusive of compensation for his services on committees of the board of directors.

Each member of the Company’s Audit Committee received annual remuneration of $5,000, and the Chair of the Audit Committee received $10,000 annually for his services.

Each member of the Company’s Compensation Committee and Nominating and Corporate Governance Committee received annual remuneration of $3,500 for each committee on which they serve, and the Chairs of each of the Compensation Committee and Nominating and Corporate Governance Committee received $7,500 annually for their services.

Prorated during the period March 24, 2022 through September 30, 2022, each non-executive director received annual base remuneration of $35,000 and the Chairman of the Board received annual remuneration of $65,000, inclusive of compensation for his services on committees of the board of directors.

Each member of the Company’s Audit Committee received annual remuneration of $7,500, and the Chair of the Audit Committee received $15,000 annually for his services.

Each member of the Company’s Compensation Committee and Nominating and Corporate Governance Committee received annual remuneration of $4,500 for each committee on which they serve, and the Chairs of each of the Compensation Committee and Nominating and Corporate Governance Committee received $9,000 annually for their services.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

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Beneficial Ownership

Jennifer Chao

Lorin Johnson, PhD

3 unchanged sentences

Carlo Sistilli, CPA, CMA

Peter van der Velden

2,214,987 (8)

Michael Brooks, PhD

Kathi Niffenegger, CPA

212,797 (10 )

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

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Unless otherwise indicated, the address of each beneficial owner is c/o Edesa Biotech, Inc., 100 Spy Court, Markham, ON Canada L3R 5H6.

Consists of 27,500 Common Shares issuable upon exercise of options that are exercisable within sixty days of December 14, 2022.

Consists of (i) 12,786 Common Shares, (ii) 6,393 Common Shares issuable upon exercise of 2020 Class A Warrants and (iii) 57,957 Common Shares issuable upon exercise of options that are exercisable within sixty days of December 14, 2022.

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Consists of (A)(i) 594,812 Common Shares and (ii) 185,444 Common Shares issuable upon exercise of options exercisable within sixty days of December 14, 2022 held by Pardeep Nijhawan;

(B)(i) 2,128,652 Common Shares and (ii) 6,942 Common Shares issuable upon exercise of Class A Warrants held by Pardeep Nijhawan Medicine Professional Corporation for which Pardeep Nijhawan has sole voting and dispositive power over all such shares;

(B)(i) 2,356,914 Common Shares, (ii) 6,942 Common Shares issuable upon exercise of 2020 Class A Warrants, (iii) 114,131 Common Shares issuable upon exercise of Class A Warrants and (iv) 114,131 Common Shares issuable upon exercise of Class B Warrants held by Pardeep Nijhawan Medicine Professional Corporation for which Pardeep Nijhawan has sole voting and dispositive power over all such shares;

for which Pardeep Nijhawan has sole voting and dispositive power over all such shares and (D) 371,727 Common Shares held by 1968160 Ontario Inc.

for which Pardeep Nijhawan has sole voting and dispositive power over all such shares;

(D) 371,727 Common Shares held by 1968160 Ontario Inc.

for which Pardeep Nijhawan has sole voting and dispositive power over all such shares and (E)(i) 228,262 Common Shares, (ii) 114,131 Common Shares issuable upon exercise of Class A Warrants and (iii) 114,131 Common Shares issuable upon exercise of Class B Warrants 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.

Consists of (A)(i) 58,909 Common Shares issuable upon exercise of options that are exercisable within sixty days of December 14, 2022 held by Frank Oakes and (B)(i) 914 Common Shares issuable upon exercise of 2020 Class A Warrants held by Frank and Dorothy Oakes Family Trust for which each of Frank Oakes and Dorothy Oakes, as trustees, have voting and dispositive power over all such shares.

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for which Carlo Sistilli, as President and Director, has sole voting and dispositive power over all such shares.

Consists of (A) 36,635 Common Shares issuable upon exercise of options exercisable within sixty days of December 27, 2021 held by Peter van der Velden;

(B)(i) 1,897,425 Common Shares and (ii) 96,542 Common Shares issuable upon exercise of Class A Warrants held by Lumira Capital II, L.P.

and (C)(i) 175,454 Common Shares and (ii) 8,928 Common Shares issuable upon exercise of Class A Warrants held by Lumira Capital II (International), L.P., an affiliate of Lumira Capital II, L.P.

Lumira Capital GP, L.P., the general partners of which are Lumira GP Inc.

and Lumira GP Holdings Co., is the general partner of each of Lumira Capital II, L.P.

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

Each of Lumira Capital II, L.P.

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

is managed by Lumira Capital Investment Management Inc.

Each of Lumira Capital GP, L.P., Lumira GP Inc., Lumira GP Holdings Co.

and Lumira Capital Investment Management Inc.

may be deemed to beneficially own the shares held by Lumira Capital II, L.P.

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

and such entities control voting and investment power over such shares through an investment committee of the Lumira group.

Peter van der Velden is an executive officer of Lumira GP Inc., Lumira GP Holdings Co.

and Lumira Capital Investment Management Inc.

Consists of (i) 13,241 Common Shares, (ii) 1,371 Common Shares issuable upon exercise of Class A Warrants and (iii) 263,972 Common Shares issuable upon exercise of options exercisable within sixty days of December 27, 2021.

Consists of (A) 118,259 Common Shares issuable upon exercise of options that are exercisable within sixty days of December 27, 2021 held by Kathi Niffenegger and (B) (i) 1,827 Common Shares and (ii) 914 Common Shares issuable upon exercise of Class A Warrants 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) 5,394,198 Common Shares, (ii) 125,658 Common Shares issuable upon exercise of Class A Warrants and (iii) 749,504 Common Shares issuable upon exercise of options that are exercisable within sixty days of December 27, 2021.

Consists of (i) 30,480 Common Shares, (ii) 1,371 Common Shares issuable upon exercise of 2020 Class A Warrants, (iii) 2,119 Common Shares issuable upon exercise of Class A Warrants, (iv) 2,119 Common Shares issuable upon exercise of Class B Warrants and (v) 333,595 Common Shares issuable upon exercise of options exercisable within sixty days of December 14, 2022.

Consists of (A) 192,280 Common Shares issuable upon exercise of options that are exercisable within sixty days of December 14, 2022 held by Kathi Niffenegger and (B)(i) 10,715 Common Shares, (ii) 914 Common Shares issuable upon exercise of 2020 Class A Warrants, (iii) 4,444 Common Shares issuable upon exercise of Class A Warrants and (iv) 4,444 Common Shares issuable upon exercise of Class B Warrants 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) 3,851,467 Common Shares, (ii) 20,188 Common Shares issuable upon exercise of 2020 Class A Warrants, (iii) 234,825 Common Shares issuable upon exercise of Class A Warrants, (iv) 234,825 Common Shares issuable upon exercise of Class B Warrants and (v) 1,061,955 Common Shares issuable upon exercise of options that are exercisable within sixty days of December 14, 2022.

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

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Beneficial Ownership

Beneficially Owned

Lumira Capital II, L.P.

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

2,178,352 (1)

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The address of each entity listed in this note is 141 Adelaide Street West, Suite 770, Toronto, Ontario, Canada M5H 3L5.

We relied in part on the Schedule 13D/A filed with the SEC by Lumira Capital II, L.P.

on January 16, 2020 for this information.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

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Lease Agreement

In January 2017, Edesa Research entered into a lease agreement with a company related to Pardeep Nijhawan, our Chief Executive Officer, for executive office space which serves as our head office through December 2022, with the option to extend the lease for an additional two years.

Monthly rents during the term range from C$8,320 to C$9,020 plus HST.

Rents of approximately $81,000 and $76,000 were incurred in the years ended September 30, 2021 and 2020, respectively.

No rent was payable at September 30, 2021 or 2020.

In January 2017, Edesa Research entered into a lease agreement with a company related to Pardeep Nijhawan, our Chief Executive Officer, for office space that serves as our principal executive office.

The current lease has an original expiration date of December 2022 with the option to extend the lease for an additional two years.

We anticipate extending the lease through December 2024.

Monthly rents during the term ranged from C$8,320 to C$9,020 plus HST.

Rents of approximately $81,000 were incurred during each of the years ended September 30, 2022 and 2021.

Rents of approximately $22,000 were payable at September 30, 2022.

No rent was payable at September 30, 2021.

Director Independence

In evaluating the independence of our Board members and the composition of the committees of our Board of Directors, the Board of Directors utilizes the definition of “independence” as that term is defined by the Securities Exchange Act of 1934, and the Nasdaq Listing Rules.

Using this standard, the Board of Directors has determined that Lorin Johnson, Sean MacDonald, Paul Pay, Carlo Sistilli and Peter van der Velden are “independent directors.” This means that our Board of Directors is composed of a majority of independent directors as required by the rules of Nasdaq.

Using this standard, the Board of Directors has determined that Jennifer Chao, Lorin Johnson, Sean MacDonald, Frank Oakes, Paul Pay and Carlo Sistilli are “independent directors.” This means that our Board of Directors is composed of a majority of independent directors as required by the rules of Nasdaq.

PRINCIPAL ACCOUNTING FEES AND SERVICES.

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EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

The following documents are filed as a part of this Annual Report:

(a) The following documents are filed as a part of this Annual Report:

(1) Financial Statements

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Notice of Articles of Edesa Biotech, Inc.

(included as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed on May 15, 2020, and incorporated herein by reference)

(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)

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)

Form of Class A Purchase Warrant issued to investors (included as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 6, 2020 and incorporated herein by reference)

Form of Class B Purchase Warrant issued to investors (included as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on January 6, 2020 and incorporated herein by reference)

Form of Warrant issued to Brookline Capital Markets, a division of Arcadia Securities, LLC (included as Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on January 6, 2020 and incorporated herein by reference)

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Form of Underwriter Warrant (included as Exhibit 4.1 to the Company’s Current Report on Form 8-K/A filed on February 26, 2021 and incorporated herein by reference).

Form of Pre-Funded Warrant (included as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 23, 2022 and incorporated herein by reference).

Form of Private Placement Warrant (included as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on March 23, 2022 and incorporated herein by reference)

Form of Placement Agent Warrant (included as Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on March 23, 2022 and incorporated herein by reference).

Form of Class A Warrant (included as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 3, 2022 and incorporated herein by reference).

Form of Class B Warrant (included as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on November 3, 2022 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).

Employment Agreement by and between the Company and Kathi Niffenegger, dated June 7, 2019 (included as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 10, 2019, and incorporated herein by reference).

Employment Agreement by and between the Company and Pardeep Nijhawan, dated June 14, 2019 (included as Exhibit 10.2 to the Company's Current Report on Form 8-K/A filed on June 20, 2019, and incorporated herein by reference).

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Form of Indemnification Agreement, by and between the Company and each of its directors and executive officers (included as Exhibit 10.4 to the Company's Current Report on Form 8-K/A filed on June 20, 2019, and incorporated herein by reference).

Fixed Share Option Plan dated December 18, 2013 (included as Exhibit 10.11 to the Company’s Annual Report on Form 10-K filed on November 14, 2014, and incorporated herein by reference).

2017 Incentive Compensation Plan (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 29, 2017, and incorporated herein by reference).

2019 Equity Incentive Compensation Plan (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 25, 2019, and incorporated herein by reference).

Amendment No.

1 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 April 23, 2021, and incorporated herein by reference).

Lease, dated as of January 1, 2017, by and between the Registrant and 1968160 Ontario Inc.

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Second Amendment to Exclusive License Agreement, dated May 7, 2017, by and between the Registrant and Yissum Research Development Company (included as Exhibit 10.4 to the Company's Current Report on Form 8-K filed on August 30, 2019, and incorporated herein by reference).

Third Amendment to Exclusive License Agreement, dated October 26, 2022, by and between the Registrant and Yissum Research Development Company (filed herewith).

License and Development Agreement, dated as of August 27, 2017, by and between the Registrant and Pendopharm, a division of Pharmascience Inc.

(included as Exhibit 10.6 to the Company's Current Report on Form 8-K filed on August 30, 2019, and incorporated herein by reference).

Form of Securities Purchase Agreement between Edesa Biotech, Inc.

and certain investors (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 6, 2020 and incorporated herein by reference)

Form of Subscription Agreement between Edesa Biotech, Inc.

and certain investors (included as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 6, 2020 and incorporated herein by reference)

License Agreement by and between Edesa Biotech Research, Inc.

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and NovImmune SA dated April 17, 2020 (included as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 23, 2020, and incorporated herein by reference).

Securities Purchase Agreement by and between Edesa Biotech, Inc.

and NovImmune SA dated April 17, 2020 (included as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on April 23, 2020, and incorporated herein by reference).

Employment Agreement by and between the Company and Kathi Niffenegger, dated December 1, 2020 (included as Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed on December 7, 2020, and incorporated herein by reference).

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Saul Yedgar (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 22, 2021, and incorporated herein by reference).

Amendment No.

1 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 April 23, 2021, and incorporated herein by reference).

Amendment to Employment Agreement, entered into on March 19, 2021, by and between Par Nijhawan and Edesa Biotech, Inc.

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(included as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on May 14, 2021, and incorporated herein by reference).

Form of Securities Purchase Agreement, dated March 21, 2022, by and between the Company and the Purchaser (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 23, 2022 and incorporated herein by reference).

Amendment to Employment Agreement, entered into on April 12, 2022, by and between Par Nijhawan and Edesa Biotech, Inc.

(included as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 13, 2022, and incorporated herein by reference).

Amendment to Employment Agreement, entered into on April 12, 2022, by and between Kathi Niffenegger and Edesa Biotech USA, Inc.

(included as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 13, 2022, and incorporated herein by reference).

Amendment to Employment Agreement, entered into on April 12, 2022, by and between Michael Brooks and Edesa Biotech USA, Inc.

(included as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on May 13, 2022, and incorporated herein by reference).

Form of Non-U.S.

Subscription Agreement (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 3, 2022 and incorporated herein by reference).

Subscription Agreement (included as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 3, 2022 and incorporated herein by reference).

Code of Ethics and Business Conduct (included as Exhibit 14.1 to the Company's Annual Report on Form 10-K filed on December 12, 2019, and incorporated herein by reference).

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(Principal Financial and Accounting Officer)

/s/ Jennifer Chao

December 16, 2022

Jennifer Chao

/s/ Lorin Johnson

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Carlo Sistilli

/s/ Peter van der Velden

December 28, 2021

Peter van der Velden

EDESA BIOTECH, INC.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm – PCAOB ID 1930

Consolidated Balance Sheets at September 30, 2022 and 2021

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Property and equipment, net

Long term deposits

Intangible asset, net

Operating lease right-of-use assets

Right-of-use assets

Liabilities, shareholders' equity and temporary equity:

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Accounts payable and accrued liabilities

Short-term operating lease liabilities

Short-term right-of-use lease liabilities

Total current liabilities

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Long-term payables

Long-term operating lease liabilities

Long-term right-of-use lease liabilities

Total liabilities

Commitments (Note 7)

Temporary equity:

Convertible preferred shares

Shareholders' equity:

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Total shareholders' equity

Total liabilities, shareholders' equity and temporary equity

Total liabilities and shareholders' equity

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

EDESA BIOTECH, INC.

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September 30, 2021

Product sales

Cost of sales

Research and development

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( 17,548,924 )

( 13,343,150 )

Exchange differences on translation

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Loss per common share - basic and diluted

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

EDESA BIOTECH, INC.

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Cash Flows from Investing Activities:

Proceeds on sales of property and equipment

Purchase of property and equipment

Purchase of intangible assets

Purchase of short-term investments

Proceeds from maturities of short-term investments

Net cash provided by (used in) investing activities

Net cash used in investing activities

Cash Flows from Financing Activities:

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Payments for issuance costs of common shares

Payments for issuance costs of convertible preferred shares

Proceeds from borrowings

Net cash provided by financing activities

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Cash and cash equivalents, end of year

Supplemental Disclosure of Non-cash Financing Activities:

Supplemental Disclosure of Noncash Financing Activities:

Preferred shares converted from temporary equity to common shares

Issuance costs withheld from gross proceeds from issuance of common shares

Fair value of compensation warrants to underwriter

Issuance of convertible preferred shares to acquire license

Fair value of placement agent warrants

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

Fair value of placement agent/underwriter warrants

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

EDESA BIOTECH, INC.

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Common Shares

Additional Paid-in

Additional Paid-in Capital

Accumulated Other Comprehensive Loss

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$ ( 13,132,954 )

Issuance of common shares in equity offerings

Issuance of common shares and warrants in equity offering

Issuance costs including fair value of underwriter warrants

( 1,841,413 )

( 1,434,391 )

Issuance of common shares upon exercise of warrants

Issuance of common shares upon exercise of share options

Conversion of convertible preferred shares

Preferred return on convertible preferred shares

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$ ( 26,495,629 )

Issuance of common shares in equity offerings

Issuance costs including fair value of underwriter warrants

Issuance of common shares and warrants in equity offering

Issuance costs including fair value of placement agent warrants

( 1,311,965 )

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 share options

Conversion of convertible preferred shares

Preferred return on convertible preferred shares

Share-based compensation

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$ ( 213,602 )

$ ( 44,044,553 )

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

EDESA BIOTECH, INC.

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The Company is organized under the laws of British Columbia, Canada and is headquartered in Markham, Ontario.

It operates under its wholly owned subsidiaries, Edesa Biotech Research, Inc., an Ontario, Canada corporation, and Edesa Biotech USA, Inc.

(formerly known as Stellar Biotechnologies, Inc.

prior to November 2020), a California, USA corporation.

It operates under its wholly owned subsidiaries, Edesa Biotech Research, Inc., an Ontario, Canada corporation, and Edesa Biotech USA, Inc., a California, USA corporation.

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

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Under the Company’s contribution agreement with the Canadian government’s Strategic Innovation Fund (SIF), the Company is eligible to receive cash reimbursements up to C$ 14.05 million ($ 11 million USD) in the aggregate for certain research and development expenses related to the Company’s EB05 clinical development program.

For the year ended September 30, 2021, the Company recorded $ 10.34 million in grant income.

On March 2, 2021, the Company completed a registered public offering of an aggregate of 1,562,500 common shares, no par value, of the Company at an offering prices of $ 6.40 per share for net proceeds of $ 8.89 million, after deducting underwriter fees and related offering expenses.

For year ended September 30, 2021, the exercise of warrants and options as well as sales under the Company’s equity distribution agreement with RBC Capital Markets, LLC resulted in the issuance of 987,859 common shares and net cash proceeds to the Company of $ 5.12 million.

For the years ended September 30, 2022 and 2021, the Company recorded $ 0.78 million and $ 10.34 million in grant income, respectively.

In March 2022, the Company completed a registered direct offering of 1,540,000 common shares, no par value, and pre-funded warrants to purchase up to an aggregate of 1,199,727 common shares.

In a concurrent private placement, the Company issued common share purchase warrants to purchase an aggregate of up to 2,739,727 common shares.

Net proceeds to the Company were approximately $ 9.01 million.

In March 2021, the Company completed a registered public offering of an aggregate of 1,562,500 common shares, no par value, for net proceeds of $ 8.89 million, after deducting underwriter fees and related offering expenses.

During the years ended September 30, 2022 and 2021, the Company sold a total of 626,884 common shares for net proceeds of $ 2.62 million and 586,463 common shares for net proceeds of $ 3.42 million, respectively, under an at-the-market equity offering program.

For year ended September 30, 2021, the exercise of warrants and options resulted in the issuance of 401,396 common shares and net cash proceeds to the Company of $ 1.7 million.

At September 30, 2022, the Company had cash and cash equivalents of $ 7.09 million, working capital of $ 6.95 million, shareholders’ equity of $ 9.39 million and an accumulated deficit of $ 44.04 million.

The Company plans to finance operations for at least the next twelve months with cash and cash equivalents on hand, equity sales under the at-the-market offering program and reimbursements of eligible research and development expenses under the Company’s agreement with the Canadian government’s SIF.

Impact of COVID-19

The ongoing COVID-19 pandemic has severely impacted global economic activity and has caused material disruptions to almost every industry directly or indirectly.

The full impact of the pandemic remains uncertain and ongoing developments related to the pandemic may cause material impacts to the Company’s future operations, clinical study timelines and financial results.

While the full impact of the COVID-19 pandemic to business and operating results presents additional uncertainty, the Company’s management continues to use reasonably available information to assess impacts to the Company’s business plans and financial condition.

Subsequent to September 30, 2022, in November 2022, the Company completed a private placement of units consisting of 2,691,337 common shares, twelve-month warrants to purchase up to an aggregate of 1,345,665 common shares and three-year warrants to purchase up to an aggregate of 1,345,665 common shares.

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

The Company plans to finance operations for at least the next twelve months with cash and cash equivalents on hand, including net proceeds of the November 2022 equity offering, and reimbursements of eligible research and development expenses under the Company’s agreement with the Canadian government’s SIF.

Basis of preparation

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The accompanying consolidated financial statements include the years ended September 30, 2022 and 2021.

EDESA BIOTECH, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2022 and 2021

Significant accounting policies

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deferred income taxes;

classification of convertible preferred shares as liability or equity;

the determination of fair value of share-based compensation;

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and forecasting future cash flows for assessing the going concern assumption.

EDESA BIOTECH, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2021 and 2020

Functional and reporting currencies

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Cash and cash equivalents

Cash and cash equivalents consist of demand deposits with financial institutions and highly liquid investments which are readily convertible into cash with maturities of three months or less when purchased.

Cash and cash equivalents consist of demand deposits with financial institutions held in checking, savings and money market mutual funds and highly liquid investments which are readily convertible into cash with maturities of three months or less when purchased.

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

There were no investments during the year ended September 30, 2021.

Investments during the year ended September 30, 2020 consisted of U.S.

Treasury bills with original maturities between 13 and 52 weeks.

They were reported at amortized cost, which approximated fair value.

The Company regularly reviewed these investments to determine whether any decline in fair value below the amortized cost basis occurred that was other than temporary.

If a decline in fair value occurred that was determined to be other than temporary, the cost basis of the investment would be written down to fair value.

There were no investments outstanding at September 30, 2021 and 2020.

Accounts and other receivable

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

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 Strategic Innovation Fund (SIF) and Harmonized Sales Tax (HST) refunds receivable.

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Depreciation is recorded to write off the cost of assets less their residual values over their useful lives, using the declining balance and straight-line methods.

Assets not in use and on consignment for sale are carried at the expected net proceeds value.

Maintenance and repair expenditures that do not improve or extend the life are expensed in the period incurred.

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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

The Company recognizes lease right-of-use (ROU) assets and lease liabilities on the balance sheet for leases with terms longer than 12 months.

The Company follows the ongoing practical expedient not to recognize lease right-of-use assets and lease liabilities for short-term leases.

The ROU assets are initially measured at cost and amortized using the straight-line method through the end of the lease term.

The lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using our incremental borrowing rate.

Fair value measurement

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Revenue recognition

The Company recognizes revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.

The Company recognizes revenue following the five-step model prescribed under ASC Topic 606:

(1) identify contract(s) with a customer;

(2) identify the performance obligations in the contract;

(3) determine the transaction price;

(4) allocate the transaction price to the performance obligations in the contract;

and (5) recognize revenues when (or as) the Company satisfies the performance obligation(s).

Revenues consist of sales of product inventory obtained in the reverse acquisition completed in June 2019, which are recognized upon shipment when the customer obtains control of the product and the Company has no further performance obligations.

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

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The Company grants options to buy common shares of the Company to its directors, officers, employees and consultants, and grants other equity- based instruments such as warrants to non-employees.

The fair value of share-based compensation is measured on the date of grant, using the Black- Scholes option valuation model and is recognized over the vesting period net of estimated forfeitures for employees or the service period for non-employees.

The fair value of share-based compensation is measured on the date of grant, using the Black-Scholes option valuation model and is recognized over the vesting period for employees or the service period for non-employees, net of forfeitures as they occur.

The provisions of the Company’s share-based compensation plans do not require the Company to settle any options by transferring cash or other assets, and therefore the Company classifies the awards as equity.

The Black-Scholes option valuation model requires the input of subjective assumptions, including price volatility of the underlying stock, risk-free interest rate, dividend yield, and expected life of the option.

The Black-Scholes option valuation model requires the input of subjective assumptions, including price volatility of the underlying common shares, risk-free interest rate, dividend yield, and expected life of the option.

Translation of foreign currency transactions

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However, conversion of outstanding convertible preferred shares, options and warrants would have an antidilutive effect on loss per share for the years ended September 30, 2022 and 2021 and are therefore excluded from the computation of diluted loss per share.

See Notes 8 and 9 for outstanding convertible preferred shares, options and warrants at September 30, 2021 and 2020.

See Note 14 for subsequent issuance of common shares.

See Note 8 for options and warrants at September 30, 2022 and 2021.

See Note 13 for subsequent issuance of common shares and warrants.

Segmented Information

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Adoption of Recent Accounting Pronouncements

On October 1, 2019, the Company adopted Accounting Standards Codification (ASC) Topic 842 Leases using the modified retrospective transition method, applying the new standard to all leases existing at the date of initial application.

In addition, the Company elected the package of practical expedients in transition, which permitted the Company not to reassess prior conclusions about lease identification, lease classification and initial direct costs on leases that commenced prior to adoption of the new standard.

The Company also elected the ongoing practical expedient not to recognize operating lease right-of-use assets and operating lease liabilities for short-term leases.

As a result of adopting the new standard, the Company recognized operating lease right-of-use (ROU) assets of approximately $234,000 and operating lease liabilities of approximately $234,000 on the balance sheet for one operating lease with a term longer than 12 months at adoption.

There was no impact to opening accumulated deficit.

The Company had three short-term operating leases upon adoption that did not follow the ROU model.

The ROU assets are initially measured at cost and amortized using the straight-line method through the end of the lease term.

The lease liabilities are measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Company’s incremental borrowing rate.

On October 1, 2020, the Company adopted ASC Topic 326 Measurement of Credit Losses on Financial Instruments, which includes provisions that require financial assets measured at amortized cost basis to be presented at the net amount expected to be collected and credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses, which requires recognition of an estimate of all current expected credit losses.

The Company did not record any credit losses as a result of adoption and there was no impact to opening accumulated deficit.

Future accounting pronouncements

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, modifying ASC Topic 740, Income Taxes.

The amendments in ASU 2019-12, among other things, remove certain exceptions to the general principles in ASC 740 and seek more consistent application by clarifying and amending the existing guidance.

The guidance is effective for public entities for fiscal years beginning after December 15, 2020, including interim periods within those years, with early adoption permitted for periods for which financial statements have not yet been issued.

These standards are effective for the Company during the fiscal year ending September 30, 2022.

Management expects that ASU 2019-12, will not have a significant impact on the Company’s consolidated financial statements.

On October 1, 2021, the Company adopted Accounting Standards Update ("ASU") 2019-12, Simplifying the Accounting for Income Taxes, which modified ASC Topic 740, Income Taxes to among other things, remove certain exceptions to the general principles in ASC 740 and seek more consistent application by clarifying and amending the existing guidance.

The Company did not adjust deferred income taxes as a result of adoption and there was no impact to opening accumulated deficit.

EDESA BIOTECH, INC.

1 unchanged sentence

For the Years Ended September 30, 2022 and 2021

Future accounting pronouncements

In December 2021, the FASB issued ASU 2021-10, Disclosure by Business Entities About Government Assistance, modifying ASC Topic 832, Government Assistance.

The amendments in ASU 2021-10 require disclosure of information about certain types of government assistance received.

The guidance is effective for public entities for fiscal years beginning after December 15, 2021, including interim periods within those years, with early adoption permitted.

These standards are effective for the Company during the fiscal year ending September 30, 2023.

Management expects that ASU 2021-10 will result in expanded disclosures about the Company’s government assistance received.

Property and equipment

16 unchanged sentences

The value of the acquired license is recorded as an intangible asset with amortization over the estimated useful life of 25 years and evaluation for impairment at the end of each reporting period.

The required upfront license payment of $2.5 million was paid by issuance of Series A-1 Convertible Preferred Shares .

The required upfront license payment of $2.5 million was paid by issuance of Series A-1 Convertible Preferred Shares , which have been fully converted to common shares.

The value of the license includes acquisition legal costs.

See Note 7 for license commitments and Note 8 for temporary equity.

See Note 7 for license commitments.

Intangible assets, net consisted of the following:

7 unchanged sentences

For the Years Ended September 30, 2022 and 2021

Amortization expense amounted to $ 101,172 and $ 45,947 for the years ended September 30, 2021, and 2020, respectively.

Amortization expense amounted to $ 101,172 for each of the years ended September 30, 2022, and 2021, respectively.

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

4 unchanged sentences

September 30, 2027

Related party operating lease

Related party right-of-use lease

The Company leases facilities used for executive offices from a related company for a six-year term through December 2022, with options to renew for another two-year term.

The option period is not included in the operating lease right-of-use assets and liabilities.

The gross amounts of assets and liabilities related to operating leases were as follows:

The option period is not included in the right-of-use assets and lease liabilities.

The gross amounts of assets and liabilities related to the right-of-use lease were as follows:

September 30, 2022

September 30, 2021

Operating lease right-of-use assets

Short-term operating lease liabilities

Long-term operating lease liabilities

Total lease liabilities

The components of lease cost were as follows:

Right-of-use assets

Short-term right-of-use lease liabilities

Long-term right-of-use lease liabilities

Total right-of-use lease liabilities

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

September 30, 2022

September 30, 2021

Operating lease cost, included in general and administrative on the Statements of Operations

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

EDESA BIOTECH, INC.

6 unchanged sentences

Estimated incremental borrowing rate:

The approximate future minimum lease payments under operating leases at September 30, 2021 were as follows:

September 30, 2022

The approximate future minimum lease payments under right-of-use leases at September 30, 2022 were as follows:

September 30, 2023

1 unchanged sentence

Less imputed interest

Present value of lease liabilities

Less current installments

Long-term lease liabilities excluding current installments

Present value of right-of-use lease liabilities included in current liabilities

Cash flow information was as follows:

1 unchanged sentence

September 30, 2021

Cash paid for amounts included in the measurement of lease liabilities, included in accounts payable and accrued liabilities on the Statements of Cash Flows

Other operating leases

The Company also leased facilities through its California subsidiary under two operating leases that expired in September 2020.

The total rent under these leases included in general and administrative expenses was $ 201,421 for the year ended September 30, 2020.

There was no rent under these leases during the year ended September 30, 2021.

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 Flows

Research and other commitments

The Company has commitments for contracted research organizations who perform clinical trials for the Company’s ongoing clinical studies, other service providers and the drug substance acquired in connection with a license agreement.

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

Aggregate future contractual payments at September 30, 2022 are as follows:

3 unchanged sentences

September 30, 2026

September 30, 2027

EDESA BIOTECH, INC.

7 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 royalty or sublicensing payments were made to the third party during the year ended September 30, 2021.

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, payable in two future installments, the first when the Company is ready to initiate a Phase 2 trial and the second when the Company is ready to initiate a Phase 3 trial.

A payment of $2.5 million was made for the drug substance during the year ended September 30, 2021 .

The remaining purchase commitment is included in the table above for the year ending September 30, 2022.

No royalty or sublicensing payments were made to the third party during the years ended September 30, 2022 and 2021.

Payments of $2.5 million were made for the drug substance during each of the years ended September 30, 2022 and 2021 and included in research and development expenses .

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 million after deducting $0.2 million that is included in the commitments table above for the year ending September 30, 2023.

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.

2 unchanged sentences

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.

For the year ended September 30, 2021, the Company recorded an expense of $ 212,000 as a result of meeting milestones outlined in the 2021 license agreement.

For the years ended September 30, 2022 and 2021, the Company recorded expenses of $ 25,693 and $ 212,000 , respectively, as a result of meeting milestones outlined in the 2021 license agreement.

The Company is committed to remaining payments of up to an aggregate amount of $ 69.1 million, primarily relating to future potential commercial approval and sales milestones.

4 unchanged sentences

Contributions to the 401(k) plan were $ 19,740 and $ 23,786 during the years ended September 30, 2022 and 2021, respectively.

EDESA BIOTECH, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2021 and 2020

Temporary Equity

Series A-1 Convertible Preferred Shares

As described in Note 5, in April 2020, the Company issued 250 convertible preferred shares valued at $ 2.5 million designated as Series A-1 Convertible Preferred Shares (the “Series A-1 Shares”) to acquire a license.

The Series A-1 Shares had no par value, a stated value of $ 10,000 per share and ranked, with respect to redemption payments, rights upon liquidation, dissolution or winding-up of the Company, or otherwise, senior in preference and priority to the Company’s common shares.

Subject to certain exceptions and adjustments for share splits, each Series A-1 Share was convertible six months after its date of issuance into a number of the Company’s common shares calculated by dividing (i) the sum of the stated value of such Series A-1 Share plus a return equal to 3% of the stated value of such Series A-1 Share per annum (collectively, the “Preferred Amount”) by (ii) a fixed conversion price of $2.26 .

Because the convertible preferred shares were redeemable outside the control of the Company, they were presented as temporary equity rather than permanent shareholders’ equity until they were converted or redeemed.

At September 30, 2021 all 250 Series A-1 Shares have been converted to common shares.

Issued and outstanding Series A-1 Convertible Preferred Shares:

Series A-1 Convertible Preferred Shares (#)

Series A-1 Convertible Preferred Shares

Balance - September 30, 2019

Issuance of convertible preferred shares

Convertible preferred share issuance costs

Preferred return on convertible preferred shares

Balance - September 30, 2020

Preferred return on convertible preferred shares

Conversion to common shares

( 2,496,480 )

Balance - September 30, 2021

Capital shares

Equity offerings

On March 24, 2022, the Company completed a registered direct offering of 1,540,000 common shares, no par value, and pre-funded warrants to purchase up to an aggregate of 1,199,727 common shares.

In a concurrent private placement, the Company issued common share purchase warrants to purchase an aggregate of up to 2,739,727 common shares.

Net proceeds from the offering were $ 9.01 million, which were allocated between the relative fair values of the common shares and pre-funded warrants issued (using a total fair value of $ 5.87 million) and the common share purchase warrants issued (using a total fair value of 4.13 million).

The common share purchase warrants were immediately exercisable at an exercise price of $ 3.52 per share and will expire on September 24, 2027 .

The pre-funded warrants were immediately exercisable at an exercise price of $ 0.0001 per share and do not expire.

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

EDESA BIOTECH, INC.

1 unchanged sentence

For the Years Ended September 30, 2022 and 2021

Capital shares

Equity offerings

In connection with the offering, the Company issued warrants to purchase an aggregate of 191,780 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 $ 4.5625 per share, and will expire on March 21, 2027 with a fair value of $ 0.41 million.

On March 2, 2021, the Company closed an underwritten offering of 1,562,500 common shares, no par value, at a price to the public of $ 6.40 per share less underwriting discounts and commissions.

Gross proceeds from the offering amounted to $ 10,000,000 .

The Company granted to the underwriters a 30-day option to purchase up to an additional 234,375 common shares, which expired with no further shares issued.

On the closing date the Company issued Underwriter Warrants to purchase an aggregate of up to 109,375 common shares at an exercise price of $ 8.00 per share, expiring on February 26, 2026 .

The direct costs related to the issuance of the common shares were $ 1,106,625 .

These direct costs were recorded as an offset against gross proceeds.

The Company also recorded the fair value of underwriter warrants in the amount of $ 407,022 as share-based compensation to non-employees under additional paid-in capital and an offset against gross proceeds.

On January 8, 2020, the Company closed a registered direct offering of 1,354,691 common shares, no par value and a concurrent private placement of Class A Purchase Warrants to purchase an aggregate of up to 1,016,036 common shares and Class B Purchase Warrants to purchase an aggregate of up to 677,358 common shares.

Gross proceeds from the offering amounted to $ 4,360,500 .

The Class A Purchase Warrants were exercisable on or after July 8, 2020, at an exercise price of $ 4.80 per share and will expire on July 8, 2023.

The Class B Purchase Warrants were exercisable on or after July 8, 2020, at an exercise price of $ 4.00 per share and expired on November 8, 2020.

In connection with the offering, the Company also issued warrants to purchase an aggregate of 12,364 common shares to certain affiliated designees of the placement agent as part of the placement agent’s compensation.

The placement agent warrants were exercisable on or after July 6, 2020, at an exercise price of $ 3.20 per share, and will expire on January 6, 2025.

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

The Company allocated gross proceeds with $ 3,070,358 as the value of common shares and $ 1,008,743 as the value of Class A Purchase Warrants and $ 281,399 as the value of Class B Purchase Warrants under additional paid-in capital in the consolidated statements of changes in shareholders’ equity on a relative fair value basis.

The direct costs related to the issuance of the common shares and warrants were $ 468,699 .

These direct costs were recorded as an offset against gross proceeds with $ 330,025 being recorded under common shares and $ 138,674 being recorded under additional paid-in capital on a relative fair value basis.

The Company also recorded the fair value of placement agent warrants in the amount of $ 18,051 as share based compensation to nonemployees under additional paid-in capital and an offset against gross proceeds with $ 12,710 being recorded under common shares and $ 5,341 being recorded under additional paid-in capital on a relative fair value basis.

Net proceeds from the offering were $ 8.89 million.

In connection with the offering, the Company issued underwriter warrants to purchase an aggregate of up to 109,375 common shares at an exercise price of $ 8.00 per share, expiring on February 26, 2026 with a fair value of $ 0.41 million.

Equity distribution agreements

On September 28, 2020, the Company entered into an equity distribution agreement with RBC Capital Markets, LLC (RBCCM), as sales agent, pursuant to which the Company could offer and sell, from time to time, common shares through an at-the-market equity offering program for up to $ 9.2 million in gross cash proceeds.

On November 22, 2021, the Company entered into an equity distribution agreement with RBC Capital Markets, LLC (RBCCM), as sales agent.

Pursuant to the terms of the agreement, as amended March 4, 2022, the Company could offer and sell common shares through an at-the-market equity offering program having an aggregate offering price of up to $ 15.4 million.

During the year ended September 30, 2022, the Company sold a total of 626,884 common shares pursuant to the agreement for net proceeds of $ 2.62 million.

The distribution agreement was terminated effective March 21, 2022.

On September 28, 2020, the Company entered into an equity distribution agreement with RBCCM, as sales agent, pursuant to which the Company could offer and sell, from time to time, common shares through an at-the-market equity offering program for up to $ 9.2 million in gross cash proceeds.

The distribution agreement was terminated on February 25, 2021.

During the year ended September 30, 2021, 586,463 shares were sold under the distribution agreement, resulting in $ 3,749,542 in gross proceeds.

The commissions and direct costs of the offering program totaled $ 325,199 and were recorded as an offset against gross proceeds.

No shares were sold during the year ended September 30, 2020.

Subsequent to September 30, 2021, the Company entered into a new Equity Distribution Agreement with RBCCM, as sales agent, 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 $ 15 million in gross cash proceeds.

RBCCM will use commercially reasonable efforts to sell the common shares from time to time, based upon the Company’s instructions.

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

The total amount of cash that may be generated under this distribution agreement is uncertain and depends on a variety of factors, including market conditions and the trading price of the Company’s common shares.

During the year ended September 30, 2021, 586,463 shares were sold under the distribution agreement, resulting in net proceeds of $ 3.42 million.

Black-Scholes option valuation model

9 unchanged sentences

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

EDESA BIOTECH, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2021 and 2020

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

4 unchanged sentences

Balance – September 30, 2022

EDESA BIOTECH, INC.

Notes to Consolidated Financial Statements

For the Years Ended September 30, 2022 and 2021

The weighted average contractual life remaining on the outstanding warrants at September 30, 2022 is 50 months.

3 unchanged sentences

February 2025

September 2027

The fair value of warrants issued during the years ended September 30, 2022 and 2021 was estimated using the Black-Scholes option valuation model using the following assumptions:

1 unchanged sentence

Year Ended September 30, 2021

Common Warrants

Placement Agent Warrants

Underwriter Warrants

Risk free interest rate

2 unchanged sentences

Expected dividend yield

Pre-funded Warrants

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

Number of Pre-funded Warrant Shares (#)

Balance - September 30, 2021

( 1,199,727 )

Balance - September 30,2022

EDESA BIOTECH, INC.

2 unchanged sentences

Share Options

The Company adopted an Equity Incentive Compensation Plan in 2019 (the 2019 Plan) administered by the independent members of the Board of Directors.

The Company adopted an Equity Incentive Compensation Plan in 2019 (the 2019 Plan) administered by the independent members of the Board of Directors, which amended and restated prior plans.

Options, restricted shares and restricted share units are eligible for grant under the 2019 Plan.

The number of shares available for issuance under the 2019 Plan at September 30, 2021 is 2,625,951 including shares available for the exercise of outstanding options.

The total number of shares available for issuance is 2,625,951 including shares available for the exercise of outstanding options under the 2019 Plan.

The remaining number of options available for grant at September 30, 2022 is 422,252 .

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

1 unchanged sentence

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

of Options (#)

Number of Options (#)

Weighted Average Exercise Price

Weighted Average

Weighted Average Grant Date Fair Value

Balance – September 30, 2020

1 unchanged sentence

Balance – September 30, 2022

On February 28, 2022, the independent members of the Board of Directors granted a total of 415,083 options to employees of the Company pursuant to the 2019 Plan.

The options have a term of 10 years with vesting in equal proportions over 36 months beginning on the grant date, and an exercise price equal to the Nasdaq closing price on the grant dates.

On February 28,2022 and March 28, 2022, the independent directors of the Board of Directors granted a total of 55,000 and 30,000 options, respectively, to existing and new directors of the Company pursuant to the 2019 Plan.

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

Options for directors have monthly vesting in equal proportions over 12 months beginning on the grant date.

In October 2020 and April 2021, the independent members of the Board of Directors granted a total of 430,000 and 603,000 options, respectively, to directors, officers and employees of the Company pursuant to the 2019 Plan.

2 unchanged sentences

Options granted for directors in October 2020 and all options for officers and current employees have monthly vesting in equal proportions over 36 months beginning on the grant date.

During the year ended September 30, 2021, the independent members of the Board of Directors granted a total of 112,000 options to new employees of the Company pursuant to the 2019 Plan.

The options have a term of 10 years with vesting in equal proportions over 36 months beginning on the monthly anniversary of the grant date following 90 days of employment, and an exercise price equal to the Nasdaq closing price on the grant dates.

In February 2020, the independent members of the Board of Directors granted a total of 352,365 options to directors, officers and employees of the Company pursuant to the 2019 Plan.

The options have a term of 10 years with 33% vesting on the grant date, with a pro rata amount of the balance vesting monthly for the next 36 months and an exercise price equal to the Nasdaq closing price on the grant date.

In September 2020, the independent members of the Board of Directors granted a total of 14,000 options to new employees of the Company pursuant to the 2019 Plan.

The aggregate intrinsic values of options outstanding at September 30, 2021 and 2020 were $ 4.46 million and $ 3.71 million, respectively.

The aggregate intrinsic value of options exercised during the years ended September 30, 2021 and 2020 were $ 0.09 million and $ 0.01 million, respectively.

The weighted average contractual life remaining on the outstanding options at September 30, 2021 is 103 months.

EDESA BIOTECH, INC.

1 unchanged sentence

For the Years Ended September 30, 2022 and 2021

During the year ended September 30, 2021, the independent members of the Board of Directors granted a total of 112,000 options to new employees of the Company pursuant to the 2019 Plan.

The aggregate intrinsic value of options outstanding at September 30, 2021 was $ 4.46 million.

The aggregate intrinsic value of options exercised during the year ended September 30, 2021 was $ 0.09 million.

There were no options exercised during the year ended September 30, 2022 and no intrinsic value of options outstanding at September 30, 2022.

The weighted average contractual life remaining on the outstanding options at September 30, 2022 is 96 months.

The following table summarizes information about the options under the 2019 Plan outstanding and exercisable at September 30, 2022:

Number of Options (#)

Exercisable at

September 30, 2021 (#)

Exercisable at September 30, 2022 (#)

Range of Exercise Prices

6 unchanged sentences

Jan 2031 - Sep 2031

The options exercisable at September 30, 2021 had a weighted average exercise price of $4.21, an intrinsic value of $2.93 million and a weighted average remaining life of 94 months.

There were 954,513 options at September 30, 2021 that had not vested with a weighted average exercise price of $5.80 an intrinsic value of $1.53 million and a weighted average remaining life of 111 months.

$ 2.94 - 3.71

Feb 2032 - Mar 2032

The options exercisable at September 30, 2022 had a weighted average exercise price of $ 4.51 , no intrinsic value and a weighted average remaining life of 90 months.

There were 815,265 options at September 30, 2022 that had not vested with a weighted average exercise price of $ 4.93 no intrinsic value and a weighted average remaining life of 105 months.

The fair value of options granted during the years ended September 30, 2022 and 2021 was estimated using the Black-Scholes option valuation model using the following assumptions:

3 unchanged sentences

1.71 % - 2.54

0.28 % - 1.45

Expected life

5 unchanged sentences

As of September 30, 2022, the Company had approximately $ 1.04 million of unrecognized share-based compensation expense, which is expected to be recognized over a period of 28 months.

Reimbursement Grant Income and Receivable

Reimbursement grant income for the Company’s federal grant with the Canadian government’s Strategic Innovation Fund (SIF) is recorded based on the claim period.

Claims during the year ended September 30, 2021 included reimbursement of eligible costs from the eligibility date in the SIF contribution agreement through September 30, 2021.

At September 30, 2021, grant reimbursements receivable of $ 3,030,005 were included in accounts and other receivable.

EDESA BIOTECH, INC.

1 unchanged sentence

For the Years Ended September 30, 2022 and 2021

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

Reimbursement Grant Income and Receivable

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

At September 30,2022, grant reimbursements receivable of $ 1.1 million were included in accounts and other receivable.

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

September 30, 2022

7 unchanged sentences

$ ( 3,536,000 )

Permanent differences

Permanent differences and other adjustments

Effect of foreign currency and foreign tax rate differences

1 unchanged sentence

Change in valuation allowance

Income tax (recovery) expense

Income tax expense

Components of the net deferred tax asset or liability

7 unchanged sentences

Share issuance and financing costs

Operating lease liabilities

Right-of-use lease liabilities

Other temporary differences

4 unchanged sentences

Property and equipment

Operating lease right-of-use assets

Right-of-use assets

Deferred share issuance costs

Total deferred tax liabilities

$ ( 102,000 )

Net deferred taxes

9 unchanged sentences

The approximate Canadian non-capital losses carried forward at September 30, 2022 expire as follows:

C$ 38,388,000

Share issuance and financing costs will be fully amortized in 2026.

19 unchanged sentences

The carrying value of certain financial instruments such as cash and cash equivalents, accounts and other receivable, accounts payable and accrued liabilities approximates fair value due to the short-term nature of such instruments.

Short-term investments in U.S.

Treasury Bills are recorded at amortized cost, which approximates fair value using level 1 inputs.

(b) Interest rate and credit risk

3 unchanged sentences

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

banks believed to be credit worthy, U.S.

Treasury Bills and money market mutual funds of U.S.

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

government securities.

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, as well as an analysis of historical collection rates, general economic conditions and credit status of customers.

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.

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

7 unchanged sentences

At September 30, 2022, the Company and its Canadian subsidiary had assets denominated in Canadian dollars of approximately C$ 6.9 million and the U.S.

dollar exchange rate as at this date was equal to 1.2711 Canadian dollars.

dollar exchange rate at this date was equal to 1.3742 Canadian dollars.

Based on the exposure at September 30, 2022, a 10% annual change in the Canadian/U.S.

exchange rate would impact the Company’s loss and other comprehensive loss by approximately $501,000 .

(d) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty raising liquid funds to meet commitments as they fall due.

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

EDESA BIOTECH, INC.

1 unchanged sentence

For the Years Ended September 30, 2022 and 2021

(d) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty raising liquid funds to meet commitments as they fall due.

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

Related party transactions

During the years presented, the Company incurred the following related party transactions:

During the years ended September 30, 2021 and 2020, the Company incurred rent expense of $ 81,000 and $ 76,000 from a company controlled by the Company's CEO, respectively.

During each of the years ended September 30, 2022 and 2021, the Company paid cash for right-of-use lease of $ 81,000 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.

Rents of approximately $ 22,000 were payable at September 30, 2022.

No rent was payable at September 30, 2021.

Subsequent events

On November 22, 2021, the Company entered into a new Equity Distribution Agreement with RBC Capital Markets, LLC (RBCCM), as sales agent, 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 $ 15 million in gross cash proceeds.

Subsequently, 223,396 common shares were sold under the distribution agreement with RBCCM for gross proceeds of approximately $ 1.29 million.

On November 2, 2022, the Company completed a private placement of units consisting of 2,691,337 common shares, twelve-month warrants to purchase up to an aggregate of 1,345,665 common shares and three-year warrants to purchase up to an aggregate of 1,345,665 common shares.

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

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