Edesa Biotech, Inc. 10-K

Item 9A. CONTROLS AND PROCEDURES. Disclosure Controls and Procedures Our management is responsible for establishing and maintaining disclosure controls and procedures to provide reasonable assurance that material information related to our Company, including our consolidated subsidiaries, is made known to senior management, including our Chief Executive Officer and the Chief Financial Officer, by others within those entities on a timely basis so that appropriate decisions can be made regarding public disclosure. 49 Table of Contents We carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and our Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2023. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures as of September 30, 2023, were effective. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for designing, establishing and maintaining a system of internal controls over financial reporting (as defined in Exchange Act Rule 13a-15(f)) to provide reasonable assurance that the financial information prepared by us for external purposes is reliable and has been recorded, processed and reported in an accurate and timely manner in accordance with accounting principles generally accepted in the United States. Our board of directors is responsible for ensuring that management fulfills its responsibilities. The audit committee of our board of directors fulfills its role of ensuring the integrity of the reported information through its review of the interim and annual financial statements. Management reviewed the results of their assessment with our audit committee. Management has used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control - Integrated Framework (2013)” to evaluate the effectiveness of our internal control over financial reporting. Management has assessed the effectiveness of our internal control over financial reporting and concluded that such internal control over financial reporting was effective as of September 30, 2023. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Attestation Report of Our Registered Public Accounting Firm Because we are a non-accelerated filer, this Annual Report does not include an attestation report from our independent registered public accounting firm. We are not required to provide an attestation report on our internal control over financial reporting until such time as we are an accelerated filer or large accelerated filer. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting that occurred during the year ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. OTHER INFORMATION. Not applicable. Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. 50 Table of Contents PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Directors Our directors and their ages as of the date of this filing are set forth below. Each director is elected annually to serve until the next annual meeting of shareholders, or until his or her successor is duly elected. Name Age Position(s) Held Director Since Joan Chypyha (1) (2) 57 Director May 23, 2023 Sean MacDonald 47 Director June 7, 2019 Patrick Marshall (1) (3) 52 Director May 23, 2023 Pardeep Nijhawan, MD 53 Director, Chief Executive Officer and Corporate Secretary June 7, 2019 Frank Oakes (2) (3) 73 Director April 9, 2010 Charles Olson, DSc (2) (3) 66 Director May 23, 2023 Carlo Sistilli, CPA, CMA (1) 67 Board Chair June 7, 2019 (1) Member of Audit Committee. (2) Member of Compensation Committee. (3) Member of Nominating and Corporate Governance Committee. There are no family relationships between any of our directors or executive officers. Biographies and Qualifications 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: Joan Chypyha has more than 30 years of experience in the pharmaceutical industry including executive and operational positions in business development, sales and marketing, and general management. She is the President of Alto Pharmaceuticals, Ltd., a specialty pharmaceutical company focused on dermatology, women's health and elder care, which she founded in 2009. Alto is also a major shareholder in Pepper and Pink Inc., a manufacturer of brand and private label personal care products for major retailers in Canada. From July 2015 to June 2017, she was the President of Cipher Pharmaceuticals, Inc., having previously served as Vice President of Marketing and Sales. Ms. Chypyha’s professional career also includes executive positions at Rhei Pharmaceuticals Ltd. and Barrier Therapeutics Canada, Inc., following sixteen years at Hoffman-La Roche, where she held progressively senior positions. Since February 2018, she has served as a director and a member of the audit committee of Ovation Science Inc., a research and development company that develops topical and transdermal consumer products. She is a past advisory board member of Up Cannabis Inc (from August 2017 to January 2019). Ms. Chypyha currently served as the President of the Canadian Dermatology Industry Association, from 2015 to 2023, and is a Co-Chair of DiTiDE (Dermatology Industry Taskforce on Inclusiveness, Diversity & Equity), a group she co-founded in 2020. She has also previously served on boards of other non-profits and business organizations, including the Canadian Healthcare Licensing Association. Ms. Chypyha earned her Bachelor’s Degree from the University of Toronto and a Master’s Degree in Business Administration from Queen's University. Ms. Chypyha’s qualifications to serve on our board of directors include her extensive operational experience in founding, managing and building companies, previous board experience and her extensive experience in the dermatology industry. Sean MacDonald has been a member of our Board since June 2019, and served as Chairman of the Board from June 2019 until May 2023. He previously served on the board of our principal operating subsidiary, Edesa Biotech Research, from September 2017 to June 2019. In his career, he has led and closed multiple licensing transactions, financings, acquisitions and divestments, and led corporate strategy for several pharmaceutical and biotechnology companies. Mr. MacDonald is currently an advisor to investors and biotechnology companies, including Domain Therapeutics Inc. and Raya Therapeutic Inc., a role he has held since April 2022. 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; and from October 2018 to August 2021 he was the chief executive of Corbin Therapeutics, a Montreal-based biotech company focused on treating neuroinflammation. Mr. MacDonald held various operational and executive leadership roles from October 2012 to October 2018 at Pharmascience Inc., one of Canada's largest pharmaceutical companies, including Vice President of Business Development and Corporate Development. He received his BSc in Molecular Biology and MBA from the University of Ottawa. Mr. MacDonald's qualifications to serve on our board of directors include his extensive operational experience and background in the pharmaceutical/biotechnology industry. 51 Table of Contents Patrick Marshall has more than 20 years of experience raising capital, building and launching new products and services, developing strategy and completing mergers and acquisitions to support growth in private and public companies. Since 2010 he has been a managing director at VRG Capital, having previously held various executive roles in several of the firm’s portfolio companies since 2000, including Wheels Group Inc., a North American third-party logistics company acquired by Radiant Logistics, Inc. in 2015, and Thomas International Ltd., a global provider of psychometric and aptitude tests acquired by Palamon Capital Partners in 2018. Mr. Marshall currently serves as President and board member of Adrem Brands Inc., a privately held Canadian company focused on the over-the-counter and nutritional supplements markets, a position he has held since January 2016. Prior to 2000, he held fundraising, business development and strategy roles for various international enterprises and non-governmental organizations. Mr. Marshall is a cofounder and board member of Together Project (since 2016) and a trustee of Lakefield College School (since 2012). He received his Bachelor of Arts in Sociology from Queen's University and Master of Business Administration from the University of Exeter. Mr. Marshall’s qualifications to serve on our board of directors include his experience managing and building companies, strategic transactions, raising capital and prior board experience. Pardeep Nijhawan, MD, FRCPC, AGAF has served as our Chief Executive Officer, Corporate Secretary and a member of our board of directors since June 2019, having previously founded and led our principal operating subsidiary, Edesa Biotech Research, since January 2015. 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. In 2002 Dr. Nijhawan founded Medical Futures Inc., and served as its CEO. He sold Medical Futures to Tribute Pharmaceuticals in 2015. In 2014, he founded Exzell Pharma, a specialty Canadian-based pharmaceutical organization that markets and commercializes approved products. He sold Exzell Pharma to BioLab Pharma in 2022. Dr. 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. Dr. 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. Dr. Nijhawan’s qualifications to serve on our board of directors include his extensive executive leadership and experience in the life sciences industry and his knowledge of our business as its chief executive. Frank Oakes has more than 40 years of executive leadership experience. He has been a member of our board of directors since April 2010 and served as the Chairman of the Board until June 2019. From 1999 to 2019, he also served as the President and Chief Executive Officer of our legacy operating subsidiary, which he founded. Prior to founding Stellar Biotechnologies, Inc., he was the Chief Executive Officer of The Abalone Farm, Inc., where he led the company through the research and development, capitalization, and commercialization phases of development to become the largest abalone producer in the United States at the time. Mr. Oakes has consulted and lectured around the world. He received his BS degree from California State Polytechnic University, San Luis Obispo and is a graduate of the Los Angeles Regional Technology Alliance University’s management program. Mr. Oakes qualifications to serve on our board of directors include his extensive operational experience building companies and management teams and leading a U.S. and Canadian publicly listed life science company. Charles Olson, DSc is a CMC consultant with more than 40 years of biotech experience. From September 2021 to April 2023 he was Chief Operating Officer at Dendreon Corporation, where he was responsible for the commercial manufacturing of Provenge, a commercial cell-based product for prostate cancer, overseeing multiple sites and several hundred employees. From September 2017 to August 2021, he was a senior Vice President of Operations at Applied Molecular Transport. From April 2010 to August 2017, Dr. Olson held various leadership roles at Anthera Pharmaceuticals Inc., including Chief Technology Officer. He has also been a Principal Biotechnology Consultant for Compass Biotechnology LLC since 2006. Dr. Olson previously held senior and executive management positions at NGM Biopharmaceuticals Inc., Coherus BioSciences Inc., Nexbio Inc., Cell Genesys, Inc., Biomarin Pharmaceuticals, Inc, and Onyx Pharmaceuticals, Inc. From December 2016 to June 2019, Dr. Olson served on the board of directors of Edesa Biotech, Inc. (then operating as Stellar Biotechnologies, Inc.), having previously served on Stellar’s scientific advisory board. After graduate school, Dr. Olson was a Research Scientist at Kaiser Hospitals, followed by Scientist and Senior Scientist positions at Genentech and Bayer, respectively. He holds a B.A. in biology and chemistry from Westmont College, an M.A. in chemistry from the University of California at Santa Barbara and a D.Sc. in biochemistry. Dr. Olson qualifications to serve on our board of directors include his extensive scientific, manufacturing operations, process development and senior management and board experience in the biopharmaceutical industry. 52 Table of Contents Carlo Sistilli, CPA, CMA has more than 35 years of financial experience and has held a variety of executive positions in accounting and finance during his career. He has been a member of our board of directors since June 2019, having previously served as a board observer of our principal operating subsidiary, Edesa Biotech Research, since September 2017. Mr. Sistilli has served as the Chief Financial Officer of Arista Homes since March 2003 to present. Prior to Arista, Mr. Sistilli was a founder and served as CFO and a board member of an Internet start-up company in the automotive sector, and played a key role in taking the company public on the Alberta Ventures Exchange. Earlier in his career, Mr. Sistilli was the Controller and a member of the senior management team of a major regional trust company, which Mr. Sistilli helped sell to Manulife Financial. 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. Sistilli is an officer and a member of the board of directors of Mother of Mercy Centre. Mr. Sistilli holds a Bachelor of Arts from York University, with a major in economics, Certified Management Accountant Designation and a Chartered Professional Accountant Designation. Mr. Sistilli’s qualifications to serve on our board of directors include his knowledge of Edesa’s business and his background in accounting and finance. Executive Officers 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. Name Age Position(s) Held Date of Appointment Pardeep Nijhawan, MD 53 Director, Chief Executive Officer and Corporate Secretary June 7, 2019 Stephen Lemieux, CPA 48 Chief Financial Officer July 15, 2023 Michael Brooks, PhD 45 President June 7, 2019 Stephen Lemieux, CPA was appointed Chief Financial Officer in July 2023. He is a veteran of the healthcare and biopharmaceutical sectors, with more than 20 years of experience in financial planning and analysis, licensing and mergers & acquisitions. Prior to joining the Company, Mr. Lemieux held senior financial leadership positions at healthcare and biopharmaceutical biotechnology companies, where he guided financial strategies, optimized capital structures and supported significant corporate transactions and sales growth. From July 2021 until June 2023, Mr. Lemieux served as CFO of Titan Medical Inc., and from April 2019 to July 2021 as CFO and Secretary of NeuPath Health. Previously, he was the CFO and Secretary of Cipher Pharmaceuticals (TSX: CPH) from September 2016 to March 2019 and during his tenure served as Interim-CEO from November 2016 to April 2017. Prior to Cipher, he was CFO at Nuvo Pharmaceuticals and Crescita Therapeutics. Mr. Lemieux is a Chartered Professional Accountant and holds a Master of Management & Professional Accounting degree from the University of Toronto. Michael Brooks, PhD was appointed President of Edesa in June 2019, having served as Vice President of Corporate Development and Strategy for our principal operating subsidiary, Edesa Biotech Research, since January 2015. 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 Director of Business Development. Prior to joining Cipher, Dr. Brooks was a Postdoctoral fellow at the University of Toronto. Dr. Brooks holds a Hons B.Sc. degree in Microbiology and a PhD in Molecular Genetics from the University of Toronto. Dr. Brooks received his MBA degree from the Rotman School of Management where he was a Canadian Institute for Health Research (CIHR) Science-to- Business Scholar. 53 Table of Contents Code of Ethics We have adopted a Code of Ethics and Business Conduct that applies to all of our directors, officers, and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of our Code of Ethics and Business Conduct is available on the Investor Relations section of our website at edesabiotech.com/investors/governance, in the Corporate Governance section, under the Governance Documents section. We intend to satisfy the SEC’s disclosure requirements regarding amendments to, or waivers of, our Code of Ethics and Business Conduct that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions by posting such information on our website identified above. Copies of our Code of Ethics and Business Conduct may be obtained, free of charge, by writing to our Corporate Secretary, Edesa Biotech, Inc., 100 Spy Court, Markham, ON Canada L3R 5H6. Information about our Board Committees Our Board of Directors has appointed an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. The Board of Directors has determined that each director who serves on these committees is “independent,” as that term is defined by the listing rules of Nasdaq and rules of the SEC. 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 www.edesabiotech.com/investors/governance. Audit Committee Our Audit Committee is composed of Joan Chypyha, Patrick Marshall 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. In that regard, the Audit Committee assists the Board in monitoring: (a) the integrity of our financial statements; (b) our independent auditor’s qualifications, independence, and performance; (c) the performance of our system of internal controls, financial reporting, and disclosure controls; and (d) our compliance with legal and regulatory requirements. To fulfill this obligation and perform its duties, the Audit Committee maintains effective working relationships with the Board, management, and our independent auditor. Carlo Sistilli is the Chair of our Audit Committee and has extensive financial experience. He holds a Bachelor of Arts from York University, with a major in economics, Certified Management Accountant Designation and a Chartered Professional Accountant Designation. He has held a variety of executive positions in accounting and finance during the past 35 years. The Board has determined that Mr. Sistilli is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K. Compensation Committee Our Compensation Committee is composed of Joan Chypyha (chair), Frank Oakes and Charles Olson. The purpose of the Compensation Committee is to assist the Board’s oversight relating to compensation of our Chief Executive Officer and our other Named Executive Officers. 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 Patrick Marshall, Frank Oakes (chair) and Charles Olson. The purpose of the Nominating and Corporate Governance Committee is to identify individuals qualified to become Board members; recommend to the Board individuals to serve as directors; 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; and oversee any related matters required by the federal securities laws. 54 Table of Contents Item 11. EXECUTIVE COMPENSATION. Executive Compensation Our named executive officers for the year ended September 30, 2023 were Pardeep Nijhawan, MD, Director, Chief Executive Officer and Corporate Secretary; Stephen Lemieux, CPA, Chief Financial Officer; Michael Brooks, PhD, President and Kathi Niffenegger, CPA, Former Chief Financial Officer. Summary Compensation Table The following table sets forth information regarding the compensation awarded to, earned by or paid to the named executive officers for the years ended September 30, 2023 and September 30, 2022. Name and Principal Position Fiscal Year Salary ($) Bonus ($) Stock Awards ($) (1) Options Awards ($) (1) All Other Compensation ($) Total ($) Pardeep Nijhawan, MD 2023 $ 341,391 $ 99,340 (2) $ - $ 74,229 $ 34,601 (3) $ 549,561 Director, Chief Executive Officer and Corporate Secretary 2022 325,861 89,600 - 123,152 63,118 (3) 601,731 Stephen Lemieux, CPA 2023 82,500 - 13,922 (4) 46,396 13,126 (5) 155,944 Chief Financial Officer 2022 - - - - - - Michael Brooks, PhD 2023 320,054 93,160 (6) - 49,488 26,060 (7) 488,762 President 2022 305,495 96,000 - 109,329 41,908 (7) 552,731 Kathi Niffenegger, CPA (8) 2023 253,391 102,080 (9) - 49,488 48,414 (10) 453,373 Former Chief Financial Officer 2022 295,075 87,000 - 109,329 50,546 (10) 541,950 (1) The amounts shown in these columns represent the aggregate grant date fair value of the restricted share units and share option awards computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification 718, not the actual amounts paid to or realized by the named executive officers during the covered fiscal year. The assumptions used in determining grant date fair value of these awards are set forth in Note 8 to our audited consolidated financial statements for the year ended September 30, 2023 included in this Annual Report. (2) Includes 14,186 restricted share units with an aggregate grant date fair value of $79,440 issued as partial payment of the bonus with the balance paid in cash. (3) Represents (i) $32,415 in car allowance and (ii) $2,186 in health insurance in 2023. Represents (i) $32,415 in car allowance, (ii) $2,186 in health insurance and (iii) $28,517 in vacation payout in 2022. All compensation to Dr. Nijhawan was paid in Canadian dollars and was converted from US dollars using the average foreign exchange rate for each bi-weekly pay period of the year from oanada.com. (4) Represents the aggregate grant date fair value of 2,486 restricted share units issued as partial payment on consulting invoices for services prior to Mr. Lemieux’s appointment as Chief Financial Officer. (5) Represents (i) $5,000 in car allowance and (ii) $8,126 in consulting fees for services prior to Mr. Lemieux’s appointment as Chief Financial Officer in 2023. All compensation to Mr. Lemieux was paid in Canadian dollars and was converted from US dollars using the average foreign exchange rate for the year from oanda.com. (6) Includes 13,315 restricted share units with an aggregate grant date fair value of $74,560 as partial payment of the bonus with the balance paid in cash. (7) Represents (i) $24,000 in car allowance and (ii) $2,060 in health insurance in 2023. Represents (i) $24,000 in car allowance (ii) $2,788 in health insurance and (iii) $15,120 in vacation payout in 2022. All compensation to Dr. Brooks was paid in Canadian dollars and was converted from US dollars using the average foreign exchange rate for each bi-weekly pay period of the year from oanda.com. (8) Ms. Niffenegger served as Chief Financial Officer through July 15, 2023. (9) Includes 10,943 restricted share units with an aggregate grant date fair value of $61,280 as partial payment of the bonus with the balance paid in cash. (10) Represents (i) $21,273 in health insurance, (ii) $8,167 in 401(k) Company contributions and (iii) $18,974 in non-executive salary following Ms. Niffenegger’s tenure as Chief Financial Officer in 2023. Represents (i) $19,751 in health insurance, (ii) $9,150 in 401(k) Company contributions and (iii) $21,645 in vacation pay out in 2022. 55 Table of Contents Narrative Disclosure to Summary Compensation Table Employment Agreements Amended and Restated Employment Agreement with Pardeep Nijhawan effective as of August 4, 2023, as amended December 7, 2023 On August 4, 2023, the Company entered into an amended and restated employment agreement with Pardeep Nijhawan, the Company’s Chief Executive Officer that superseded prior employment agreements (as amended, the Nijhawan Employment Agreement). Pursuant to the Nijhawan Employment Agreement, Dr. Nijhawan serves as the Company’s Chief Executive Officer as well as Chief Executive Officer of each of the Company’s subsidiaries, Edesa Biotech Research and Edesa Biotech USA, Inc. and a director of Edesa Biotech Research. Dr. Nijhawan’s employment will continue for an indefinite term until terminated in accordance with the Nijhawan Employment Agreement. Pursuant to the Nijhawan Employment Agreement, Dr. Nijhawan is entitled to a base salary of $357,700 per year effective May 13, 2023 and is eligible to receive a target annual bonus of 40% of his base salary, subject to the achievement of corporate and personal targets as determined by the Company and the Board of Directors. Dr. Nijhawan’s base salary is subject to annual review by the Board of Directors. Dr. Nijhawan is also entitled to an automobile allowance of $2,701.50 per month and is eligible to participate in the Company’s group insured benefits program, as may be in effect from time-to-time for employees generally, and executive employees specifically. Dr. Nijhawan is eligible for equity-based awards pursuant to the Company’s Equity Incentive Compensation Plan, as determined by the Board of Directors or Compensation Committee, commensurate with Dr. Nijhawan’s position and any business milestones that may be established by the Company. If Dr. Nijhawan’s employment is terminated for “Cause” (as such term is defined in the Nijhawan Employment Agreement), subject to applicable law, Dr. Nijhawan is entitled to his base salary and vacation pay earned through the date of termination, and all of Dr. Nijhawan’s non-vested equity-based awards will be automatically extinguished. All vested equity-based awards shall be subject to the terms of the Company’s Equity Incentive Compensation Plan. If Dr. Nijhawan is terminated without “Cause”, subject to Dr. Nijhawan signing a general release of claims, Dr. Nijhawan is entitled to: (i) a lump sum payment equal to Dr. Nijhawan’s then current base salary for 12 months plus one additional month for every completed year of service since August 1, 2017 (the Nijhawan Severance Period) which shall not exceed 24 months, inclusive of, and not in addition to, his notice and severance entitlements, if any, pursuant to applicable law, (ii) a lump sum payment of the annual bonus to which Dr. Nijhawan is entitled for the calendar year immediately preceding the date of termination, if such bonus has not already been paid, (iii) a lump sum payment equal to Dr. Nijhawan’s annual bonus entitlement, prorated over Dr. Nijhawan’s length of service in the calendar year in which his employment is terminated, calculated in accordance with the terms of the Nijhawan Employment Agreement, (iv) payment of Dr. Nijhawan’s annual bonus entitlement during the full Nijhawan Severance Period, calculated in accordance with the terms of the Nijhawan Employment Agreement, (v) continuation of Dr. Nijhawan’s benefits and car allowance and any other benefit required to be maintained by law in accordance with the terms of the Nijhawan Employment Agreement, and (vi) subject to applicable law, all vested equity-based awards granted to Dr. Nijhawan shall be exercisable in accordance with the terms of the applicable Equity Incentive Compensation Plan. In the event that Dr. Nijhawan is terminated or constructively terminated, which includes a material change in Dr. Nijhawan’s title, responsibilities, authority or status or a material reduction of his compensation, without “Cause” upon or within a 12-month period following a “Change of Control” (as such term is defined in the Nijhawan Employment Agreement), Dr. Nijhawan is entitled to (i) a change of control payment equal to 24 months of the value of Dr. Nijhawan’s then current base salary as of the date of termination, (ii) a lump sum payment of the annual bonus to which Dr. Nijhawan is entitled for the calendar year immediately preceding the date of termination, if such bonus has not already been paid, (iii) a lump sum payment equal to Dr. Nijhawan’s annual bonus entitlement, prorated over Dr. Nijhawan’s length of service in the calendar year in which his employment is terminated, calculated in accordance with the terms of the Nijhawan Employment Agreement, (iv) payment of Dr. Nijhawan’s annual bonus entitlement during the full Nijhawan Severance Period, calculated in accordance with the terms of the Nijhawan Employment Agreement, (v) continuation of Dr. Nijhawan’s benefits and car allowance and any other benefit required to be maintained by law in accordance with the terms of the Nijhawan Employment Agreement, and (vi) subject to applicable law, all vested equity-based awards granted to Dr. Nijhawan shall be exercisable in accordance with the terms of the applicable Equity Incentive Compensation Plan. 56 Table of Contents Dr. Nijhawan may resign from his employment at any time by providing the Company with a minimum of 60 days advance notice, in writing. Dr. Nijhawan’s notice may be waived by the Company, subject only to providing Dr. Nijhawan with payment of his base salary and continuation of benefits until the end of the notice period. If Dr. Nijhawan resigns from his employment, subject to applicable law, (i) all non-vested equity based awards held by Dr. Nijhawan shall be automatically extinguished and (ii) Dr. Nijhawan shall not be entitled to any bonus or pro rata bonus payment not already awarded on or before the date of termination. All vested equity-based awards shall be subject to the terms of the applicable Equity Incentive Compensation Plan. During the term of Dr. Nijhawan’s employment and for 12 months following the cessation of Dr. Nijhawan’s employment, Dr. Nijhawan is prohibited from competing with the business of the Company in North America. In addition, for 24 months following the cessation of Dr. Nijhawan’s employment, Dr. Nijhawan is prohibited from soliciting customers or prospective customers for any purpose competitive with the business of the Company, encouraging any customer to cease doing business with the Company and soliciting the employment or engagement of certain of Company’s employees. Prior Employment Agreement with Pardeep Nijhawan effective as of June 7, 2019 and amended March 19, 2021 and April 12, 2022 Prior to the Nijhawan Employment Agreement, on June 14, 2019 but effective as of June 7, 2019, we entered into an employment agreement with Pardeep Nijhawan (as amended, the Nijhawan Prior Employment Agreement). Pursuant to the Nijhawan Prior Employment Agreement, Dr. Nijhawan agreed to serve as our Chief Executive Officer for an indefinite term until Dr. Nijhawan’s employment was terminated in accordance with the agreement. As compensation for his services to us, Dr. Nijhawan received a base salary of $320,000 per year effective for the period January 1, 2021 to March 23, 2022 and a base salary of $331,200 per year effective for the period March 24, 2022 to May 12, 2023 and was 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. Dr. Nijhawan also received an automobile allowance of approximately $2,700 per month and was 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. Dr. Nijhawan was eligible for future share and/or option grants, as may have been determined by our Compensation Committee, commensurate with Dr. Nijhawan’s position and any business milestones which may have been established by the Compensation Committee and subject to availability of shares and/or options for grant under our Equity Incentive Compensation Plan. Under the Nijhawan Prior Employment Agreement, if Dr. Nijhawan’s employment with us was terminated for “Cause” (as such term is defined in the Nijhawan Prior Employment Agreement), subject to applicable law, our only obligation would have been to provide Dr. Nijhawan with his base salary and vacation pay earned through the date of termination and all of Dr. Nijhawan’s vested or non-vested share options which had not been exercised by Dr. Nijhawan as of the date of termination would have been automatically extinguished. If Dr. Nijhawan was terminated by us without “Cause”, our obligation would have been to provide Dr. Nijhawan with (i) a lump sum payment equal to Dr. Nijhawan’s then current base salary for twenty-four months (the Nijhawan Prior Severance Period), (ii) a lump sum payment of the annual bonus to which Dr. Nijhawan would have been entitled for the fiscal year immediately preceding the date of termination, if such bonus had not already been paid, (iii) a lump sum payment equal to Dr. Nijhawan’s annual bonus entitlement, prorated over Dr. Nijhawan’s length of service in the fiscal year in which his employment was terminated, calculated in accordance with the terms of the Nijhawan Prior Employment Agreement, (iv) payment of Dr. Nijhawan’s annual bonus entitlement during the full Nijhawan Prior Severance Period, calculated in accordance with the terms of the Nijhawan Prior Employment Agreement, (v) continuation of Dr. Nijhawan’s benefits and car allowance and any other benefit required to be maintained by law in accordance with the terms of the Nijhawan Prior Employment Agreement and (vi) subject to applicable law, all share options granted to Dr. Nijhawan would have been exercisable in accordance with the terms of the applicable share option plan. Dr. Nijhawan could have resigned from his employment at any time by providing us with a minimum of sixty days advance notice, in writing. Dr. Nijhawan’s notice could have been waived by us, subject only to providing Dr. Nijhawan with payment of his base salary and continuation of benefits until the end of the notice period. If Dr. Nijhawan had resigned from his employment, subject to applicable law, (i) all non-vested share options and all vested share options held by Dr. Nijhawan which had not been exercised by Dr. Nijhawan as of the date of termination would have been automatically extinguished and (ii) Dr. Nijhawan would not have been entitled to any bonus or pro rata bonus payment not already paid on or before the date of termination. During the term of Dr. Nijhawan’s employment with us and for twelve months following the cessation of Dr. Nijhawan’s employment with us, Dr. Nijhawan was prohibited from competing with our business in North America. In addition, for twenty-four months following the cessation of Dr. Nijhawan’s employment with us, Dr. Nijhawan was prohibited from soliciting customers or prospective customers for any purpose competitive with our business, encouraging any customer to cease doing business with us and soliciting the employment or engagement of certain of our employees. 57 Table of Contents Employment Agreement with Stephen Lemieux effective as of July 15, 2023 On June 26, 2023 but effective as of July 15, 2023, we entered into an employment agreement with Stephen Lemieux (the Lemieux Employment Agreement). Pursuant to the Lemieux Employment Agreement, Mr. Lemieux will serve as our Chief Financial Officer for an indefinite term until Mr. Lemieux’s employment is terminated in accordance with the agreement. As compensation for his services to us, Mr. Lemieux will receive a base salary of $330,000 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. Mr. Lemieux 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. Mr. Lemieux is eligible for future equity-based awards, as determined by our Compensation Committee, commensurate with Mr. Lemieux’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. If Mr. Lemieux’s employment with the Company is terminated for “Cause” (as such term is defined in the Lemieux Employment Agreement), subject to applicable law, the Company’s only obligation shall be to provide Mr. Lemieux with his base salary and vacation pay earned through the date of termination and all of Mr. Lemieux’s non-vested equity-based awards as of the date of termination will be automatically extinguished. All vested equity-based awards will be subject to the terms of the applicable equity incentive compensation plan. If Mr. Lemieux is terminated by the Company without “Cause”, subject to Mr. Lemieux executing a general release of claims in a form reasonably required by the Company, the Company’s obligation shall be to provide Mr. Lemieux with (i) a lump sum payment equal to Mr. Lemieux’s then current base salary for twelve months plus one additional month for every completed year of service since July 15, 2023, not to exceed an aggregate of twenty- four months (the Lemieux Severance Period), (ii) a lump sum payment of the annual bonus to which Mr. Lemieux is entitled for the calendar year immediately preceding the date of termination, if such bonus has not already been paid, (iii) a lump sum payment equal to Mr. Lemieux’s annual bonus entitlement, prorated over Mr. Lemieux’s length of service in the calendar year in which his employment is terminated, calculated in accordance with the terms of the Lemieux Employment Agreement, (iv) payment of Mr. Lemieux’s annual bonus entitlement during the full Lemieux Severance Period, calculated in accordance with the terms of the Lemieux Employment Agreement, (v) continuation of Mr. Lemieux’s benefits and car allowance and any other benefit required to be maintained by law in accordance with the terms of the Lemieux Employment Agreement and (vi) subject to applicable law, any and all vested equity-based awards shall be exercisable in accordance with the terms of the applicable equity incentive compensation plan. If Mr. Lemieux’s employment is terminated or “constructively terminated” (as such term is defined in the Lemieux Employment Agreement) by the Company without “Cause” upon or within a twelve month period following a Change of Control (as such term is defined in the Lemieux Employment Agreement), Mr. Lemieux shall be entitled to the payments and benefits provided as described in clauses (ii) to (v) above, plus a change of control payment equal to twenty-four months of his then current base salary. Mr. Lemieux may resign from his employment at any time by providing the Company with a minimum of sixty days advance notice, in writing. Mr. Lemieux’s notice may be waived by the Company, subject only to providing Mr. Lemieux with payment of his base salary and continuation of benefits until the end of the notice period. If Mr. Lemieux resigns from his employment, subject to applicable law, (i) all non-vested equity-based awards held by Mr. Lemieux as of the date of termination shall be automatically extinguished and all vested equity-based awards will be subject to the terms of the applicable equity incentive compensation plan and (ii) Mr. Lemieux shall not be entitled to any bonus or pro rata bonus payment not already awarded on or before the date of termination. During the term of Mr. Lemieux’s employment with us and for twelve months following the cessation of Mr. Lemieux’s employment with us, Mr. Lemieux is prohibited from competing with our business in North America. In addition, for twenty-four months following the cessation of Mr. Lemieux’s employment with us, Mr. Lemieux 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. Prior Consulting Agreement with Stephen Lemieux effective December 22, 2022, terminated July 15, 2023 Prior to the Lemieux Employment Agreement, on December 21, 2022, the Company entered into a consulting agreement with Stephen Lemieux to provide, as an independent contractor, advice and services related to finance, accounting, financial reporting, financial planning and analysis and similar services as requested by the Company from time to time at a rate of C$135 per hour. The agreement contained customary confidentiality, nondisclosure and proprietary information provisions. The consulting agreement was terminated upon Mr. Lemieux’s appointment as Chief Financial Officer. 58 Table of Contents Amended and Restated Employment Agreement with Michael Brooks effective as of August 4, 2023 On August 4, 2023, the Company entered into an amended and restated employment agreement with Michael Brooks, the Company’s President, that superseded prior employment agreements (the Brooks Employment Agreement). Pursuant to the Brooks Employment Agreement, Dr. Brooks serves as the Company’s President as well as President and a director of the Company’s subsidiary, Edesa Biotech Research. Dr. Brooks’ employment will continue for an indefinite term until terminated in accordance with the Brooks Employment Agreement. Pursuant to the Brooks Employment Agreement, Dr. Brooks is entitled to a base salary of $335,340 per year effective May 13, 2023 and is eligible to receive a target annual bonus of 40% of his base salary, subject to the achievement of corporate and personal targets as determined by the Company and the Board of Directors. Dr. Brooks’ base salary is subject to annual review by the Board of Directors. Dr. Brooks is also entitled to an automobile allowance of $2,000 per month and is eligible to participate in the Company’s group insured benefits program, as may be in effect from time-to-time for employees generally, and executive employees specifically. Dr. Brooks is eligible for equity-based awards pursuant to the Company’s Equity Incentive Compensation Plan, as determined by the Board of Directors or Compensation Committee, commensurate with Dr. Brooks’ position and any business milestones that may be established by the Company. If Dr. Brooks’ employment is terminated for “Cause” (as such term is defined in the Brooks Employment Agreement), subject to applicable law, Dr. Brooks is entitled to his base salary and vacation pay earned through the date of termination, and all of Dr. Brooks’ non-vested equity-based awards will be automatically extinguished. All vested equity-based awards shall be subject to the terms of the Company’s Equity Incentive Compensation Plan. If Dr. Brooks is terminated without “Cause”, subject to Dr. Brooks signing a general release of claims, Dr. Brooks is entitled to: (i) a lump sum payment equal to Dr. Brooks’ then current base salary for 12 months plus one additional month for every completed year of service since September 1, 2015 (the Brooks Severance Period) which shall not exceed 24 months, inclusive of, and not in addition to, his notice and severance entitlements, if any, pursuant to applicable law, (ii) a lump sum payment of the annual bonus to which Dr. Brooks is entitled for the calendar year immediately preceding the date of termination, if such bonus has not already been paid, (iii) a lump sum payment equal to Dr. Brooks’ annual bonus entitlement, prorated over Dr. Brooks’ length of service in the calendar year in which his employment is terminated, calculated in accordance with the terms of the Brooks Employment Agreement, (iv) payment of Dr. Brooks’ annual bonus entitlement during the full Brooks Severance Period, calculated in accordance with the terms of the Brooks Employment Agreement, (v) continuation of Dr. Brooks’ benefits and car allowance and any other benefit required to be maintained by law in accordance with the terms of the Brooks Employment Agreement, and (vi) subject to applicable law, all vested equity-based awards granted to Dr. Brooks shall be exercisable in accordance with the terms of the applicable Equity Incentive Compensation Plan. In the event that Dr. Brooks is terminated or constructively terminated, which includes a material change in Dr. Brooks’ title, responsibilities, authority or status or a material reduction of the Employee’s compensation, without cause upon or within a 12-month period following a “Change of Control” (as such term is defined in the Brooks Employment Agreement), Dr. Brooks is entitled to (i) a change of control payment equal to 24 months of the value of Dr. Brooks’ then current base salary as of the date of termination, (ii) a lump sum payment of the annual bonus to which Dr. Brooks is entitled for the calendar year immediately preceding the date of termination, if such bonus has not already been paid, (iii) a lump sum payment equal to Dr. Brooks’ annual bonus entitlement, prorated over Dr. Brooks’ length of service in the calendar year in which his employment is terminated, calculated in accordance with the terms of the Brooks Employment Agreement, (iv) payment of Dr. Brooks’ annual bonus entitlement during the full Brooks Severance Period, calculated in accordance with the terms of the Brooks Employment Agreement, (v) continuation of Dr. Brooks’ benefits and car allowance and any other benefit required to be maintained by law in accordance with the terms of the Brooks Employment Agreement, and (vi) subject to applicable law, all vested equity-based awards granted to Dr. Brooks shall be exercisable in accordance with the terms of the applicable Equity Incentive Compensation Plan. Dr. Brooks may resign from his employment at any time by providing the Company with a minimum of 60 days advance notice, in writing. Dr. Brooks’ notice may be waived by the Company, subject only to providing Dr. Brooks with payment of his base salary and continuation of benefits until the end of the notice period. If Dr. Brooks resigns from his employment, subject to applicable law, (i) all non-vested equity based awards held by Dr. Brooks shall be automatically extinguished and (ii) Dr. Brooks shall not be entitled to any bonus or pro rata bonus payment not already awarded on or before the date of termination. All vested equity-based awards shall be subject to the terms of the applicable Equity Incentive Compensation Plan. 59 Table of Contents During the term of Dr. Brooks’ employment and for 12 months following the cessation of Dr. Brooks’ employment, Dr. Brooks is prohibited from competing with the business of the Company in North America. In addition, for 24 months following the cessation of Dr. Brooks’ employment, Dr. Brooks is prohibited from soliciting customers or prospective customers for any purpose competitive with the business of the Company, encouraging any customer to cease doing business with the Company and soliciting the employment or engagement of certain of Company’s employees. Prior Employment Agreement with Michael Brooks effective as of June 7, 2019 and amended March 19, 2021 and April 12, 2022 Prior to the Brooks Employment Agreement, on June 14, 2019 but effective as of June 7, 2019, we entered into an employment agreement with Michael Brooks, PhD (as amended, the Brooks Prior Employment Agreement). Pursuant to the Brooks Prior Employment Agreement, Dr. Brooks agreed to serve as our President for an indefinite term until Dr. Brooks’ employment was terminated in accordance with the agreement. As compensation for his services to us, Dr. Brooks received a base salary of $300,000 per year effective for the period January 1, 2021 to March 23, 2022 and a base salary of $310,500 per year effective for the period March 24, 2022 to May 12, 2023 and was 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. Dr. Brooks also received an automobile allowance of $2,000 per month and was 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. Dr. Brooks was eligible for future share and/or option grants, as may have been determined by our Compensation Committee, commensurate with Dr. Brooks’ position and any business milestones which may have been established by the Compensation Committee and subject to availability of shares and/or options for grant under our Equity Incentive Compensation Plan. If Dr. Brooks’ employment with us was terminated for “Cause” (as such term is defined in the Brooks Prior Employment Agreement), subject to applicable law, our only obligation would have been to provide Dr. Brooks with his base salary and vacation pay earned through the date of termination and all of Dr. Brooks’ vested or non-vested share options which had not been exercised by Dr. Brooks as of the date of termination would have been automatically extinguished. If Dr. Brooks was terminated by us without “Cause”, our obligation would have been to provide Dr. Brooks with (i) a lump sum payment equal to Dr. Brooks’ then current base salary for months plus one additional month for every completed year of service since September 2015, not to exceed an aggregate of twenty-four months (the Brooks Prior Severance Period), (ii) a lump sum payment of the annual bonus to which Dr. Brooks was entitled for the fiscal year immediately preceding the date of termination, if such bonus had not already been paid, (iii) a lump sum payment equal to Dr. Brooks’ annual bonus entitlement, prorated over Dr. Brooks’ length of service in the fiscal year in which his employment was terminated, calculated in accordance with the terms of the Brooks Prior Employment Agreement, (iv) payment of Dr. Brooks’ annual bonus entitlement during the full Brooks Prior Severance Period, calculated in accordance with the terms of the Brooks Prior Employment Agreement, (v) continuation of Dr. Brooks’ benefits and car allowance and any other benefit required to be maintained by law in accordance with the terms of the Brooks Prior Employment Agreement and (vi) subject to applicable law, all share options granted to Dr. Brooks would have been exercisable in accordance with the terms of the applicable share option plan. If Dr. Brooks’ employment was terminated or “constructively terminated” (as such term is defined in the Brooks Prior Employment Agreement) by us without “Cause” upon or within a twelve month period following a Change of Control (as such term is defined in the Brooks Prior Employment Agreement), Dr. Brooks would have been entitled to the payments and benefits provided as described in clauses (ii) to (v) above, plus a change of control payment equal to twenty-four months of the his then current base salary. Dr. Brooks could have resigned from his employment at any time by providing us with a minimum of sixty days advance notice, in writing. Dr. Brooks’ notice could have been waived by us, subject only to providing Dr. Brooks with payment of his base salary and continuation of benefits until the end of the notice period. If Dr. Brooks had resigned from his employment, subject to applicable law, (i) all non-vested share options and all vested share options held by Dr. Brooks which had not been exercised by Dr. Brooks as of the date of termination would have been automatically extinguished and (ii) Dr. Brooks would not have been entitled to any bonus or pro rata bonus payment not already paid on or before the date of termination. During the term of Dr. Brooks’ employment with us and for twelve months following the cessation of Dr. Brooks' employment with us, Dr. Brooks was prohibited from competing with our business in North America. In addition, for twenty-four months following the cessation of Dr. Brooks' employment with us, Dr. Brooks was prohibited from soliciting customers or prospective customers for any purpose competitive with our business, encouraging any customer to cease doing business with us and soliciting the employment or engagement of certain of our employees. 60 Table of Contents Prior Employment Agreement with Kathi Niffenegger effective as of December 1, 2020 and amended March 19, 2021 and April 12, 2022, which terminated July 15, 2023 Prior to the Non-Executive Employment Agreement (as defined below), on December 1, 2020, we entered into an employment agreement with Ms. Niffenegger (as amended, the Niffenegger Employment Agreement) that superseded prior employment agreements. Pursuant to the Niffenegger Employment Agreement, Ms. Niffenegger had agreed to continue to serve as our Chief Financial Officer. Both Ms. Niffenegger and we had the right to terminate the employment relationship at any time, with or without cause. As compensation for her services to us, Ms. Niffenegger received a base salary of $290,000 per year effective for the period January 1, 2021 to March 23, 2022 and a base salary of $300,150 per year effective for the period March 24, 2022 to July 15, 2023 when Ms. Niffenegger ended her tenure as Chief Financial Officer. She was eligible to receive a discretionary bonus in an amount up to 40% of her base salary based on her performance and the Company’s performance and such other employee benefits as are generally provided to similarly situated employees of the Company. Ms. Niffenegger was eligible for future share and/or option grants in accordance with our executive compensation policy as in effect from time to time as determined by the independent members of our Board of Directors subject to availability of shares and/or options for grant under our Equity Incentive Compensation Plan. If Ms. Niffenegger’s employment with us was terminated for “Cause” (as defined in the Niffenegger Employment Agreement) or if Ms. Niffenegger resigned from her employment at any time, our only obligation would have been to provide Ms. Niffenegger with: (i) her accrued salary and accrued unused vacation pay through and including her last day of employment (the Separation Date); (ii) reimbursement of any reimbursable expenses properly incurred through and including the Separation Date; and (iii) any benefit required under applicable law. If Ms. Niffenegger was terminated by us without “Cause”, our obligations would have been (a) to provide Ms. Niffenegger with the same payments and benefits as would be provided if we had terminated her employment for Cause; and (b) subject to Ms. Niffenegger’s execution of a release in our favor, Ms. Niffenegger would have also been paid, as severance (the Prior Severance Payment), (i) a lump sum payment equal to twelve months of Ms. Niffenegger’s then current base salary, plus one additional month of base salary for every completed year of service since June 7, 2019, not to exceed an aggregate of twenty-four months, (ii) a lump sum payment of any discretionary bonus for the prior calendar year already determined by our Board of Directors, if such bonus had not yet been paid; and (iii) a lump sum payment equal to Ms. Niffenegger’s potential discretionary bonus for the calendar year in which the Separation Date occurred, prorated over Ms. Niffenegger’s length of service in the calendar year in which her employment was terminated, calculated in accordance with the terms of the Niffenegger Employment Agreement. If Ms. Niffenegger’s employment was terminated or “constructively terminated” (as such term is defined in the Niffenegger Employment Agreement) by us without “Cause” upon or within a twelve month period following a Change of Control (as such term is defined in the Niffenegger Employment Agreement), Ms. Niffenegger would have been entitled to the Prior Severance Payment described above, except that the portion of the Prior Severance Payment established by (b)(i) would be equal to twenty four months of Ms. Niffenegger’s base salary. The Niffenegger Employment Agreement provided that during the term of Ms. Niffenegger’s employment with us and for a period of one year thereafter, Ms. Niffenegger was prohibited from soliciting for employment certain of our employees. The Agreement also provided that both during and after Ms. Niffenegger’s employment with us, she was prohibited from (i) making use of our trade secrets to solicit on behalf of Ms. Niffenegger or any other person business from any of our customers and (ii) inducing or attempting to induce any person to sever any existing contractual relationship they have with us. Non-executive Employment Agreement with Kathi Niffenegger effective as of July 15, 2023 On July 16, 2023 following Ms. Niffenegger’s tenure as Chief Financial Officer, Edesa Biotech USA, Inc. entered into a non-executive employment agreement with Ms. Niffenegger (the Non-Executive Employment Agreement) that superseded the Niffenegger Employment Agreement described above. Pursuant to the Non-Executive Employment Agreement, both Ms. Niffenegger and we have the right to terminate the employment relationship at any time, with or without cause. As compensation for her services to us. Ms. Niffenegger received a base salary of $100,000 per year effective July 16, 2023 and a one-time retention bonus of $10,000. She is eligible to receive a discretionary bonus in an amount up to 40% of her prorated base salary under the current and prior employment agreements based on her performance and the Company’s performance and such other employee benefits as are generally provided to similarly situated employees of the Company. Ms. Niffenegger is eligible for future share and/or option grants commensurate with her current position in accordance with our non-executive compensation policy as in effect from time to time as determined by the independent members of our Board of Directors subject to availability of shares and/or options for grant under our Equity Incentive Compensation Plan. 61 Table of Contents The Non-Executive Employment Agreement provides that during the term of Ms. Niffenegger’s employment with us and for a period of one year thereafter, Ms. Niffenegger is prohibited from soliciting for employment certain of our employees. The Non-Executive Employment Agreement also provides that both during and after Ms. Niffenegger’s employment with us, she is prohibited from (i) making use of our trade secrets to solicit on behalf of Ms. Niffenegger or any other person business from any of our customers and (ii) inducing or attempting to induce any person to sever any existing contractual relationship they have with us. Outstanding Equity Awards at September 30, 2023 Option Awards Name Award grant date Number of securities underlying unexercised options (#) exercisable Number of securities underlying unexercised options (#) unexercisable (1) Option exercise prices Option expiration date Pardeep Nijhawan, MD 9/26/17 6,785 - C$ 15.12 9/26/27 12/28/18 232 - C$ 15.12 12/28/28 10/13/20 8,572 - $ 52.08 10/13/30 4/22/21 14,287 2,856 (2) $ 38.15 4/22/31 2/28/22 3,896 3,104 (2) $ 25.97 2/28/32 7/20/23 1,435 15,708 (2) $ 5.79 7/20/33 Stephen Lemieux, CPA 7/20/23 881 9,837 (2) $ 5.79 7/20/33 Michael Brooks, PhD 8/28/17 19,488 - C$ 15.12 8/28/27 9/26/17 3,472 - C$ 15.12 9/26/27 12/28/18 232 - C$ 15.12 12/28/28 2/12/20 9,856 - $ 22.12 2/12/30 10/13/20 7,143 - $ 52.08 10/13/30 4/22/21 9,527 1,902 (2) $ 38.18 4/22/31 2/28/22 3,447 2,768 (2) $ 25.97 2/28/32 7/20/23 968 10,461 (2) $ 5.79 7/20/33 Kathi Niffenegger, CPA (3) 12/20/16 34 - $ 596.82 12/20/23 Former Chief Financial Officer 3/12/18 119 - $ 246.93 3/12/25 2/12/20 12,672 - $ 22.12 2/12/30 10/13/20 7,143 - $ 52.08 10/13/30 4/22/21 9,527 1,902 (2) $ 38.18 4/22/31 2/28/22 3,447 2,768 (2) $ 25.97 2/28/32 7/20/23 968 10,461 (2) $ 5.79 7/20/33 1) Our options vesting policy is described in the Outstanding Equity Awards Narrative Disclosure section. 2) The option will vest over a period of three years, with monthly vesting on a pro-rata basis beginning on the date of grant. 3) Ms. Niffenegger served as Chief Financial Officer through July 15, 2023. 62 Table of Contents Outstanding Equity Awards Narrative Disclosure Equity Incentive Compensation Plan We adopted an Equity Incentive Compensation Plan in 2019 (the 2019 Plan) which amended and restated prior plans. Under the 2019 Plan, we are authorized to grant options, restricted shares and restricted share units (RSUs) to any of our officers, directors, employees, and consultants and those of our subsidiaries and other designated affiliates. The number of shares available for issuance under the 2019 Plan is 575,737, including shares available for the exercise of outstanding options and RSUs under the 2019 Plan and prior plans. The purpose of the 2019 Plan is to advance the interests of the Company by encouraging equity participation through the acquisition of common shares of the Company. The 2019 Plan is to be administered by the Compensation Committee of our Board of Directors, except to the extent (and subject to the limitations set forth in the 2019 Plan) the Board elects to administer the 2019 Plan, in which case the 2019 Plan shall be administered by only those members of the Board who are “independent” members of the Board. The administrator of the 2019 Plan has the power to, among other things: · allot common shares for issuance in connection with the exercise of options; · grant options, restricted shares or restricted share units; · amend, suspend, terminate or discontinue the plan; and · delegate all or a portion of its administrative powers as it may determine to one or more committees. Options to purchase 420,615 common shares at prices ranging from C$15.12 and $5.79 to $596.82 are outstanding at September 30, 2023. RSUs eligible for conversion to 33,045 common shares are outstanding at September 30, 2023. Options granted during the year ended September 30, 2023 to directors, officers and employees under the 2019 Plan totaled 118,579 options to purchase common shares at exercise prices ranging from $5.79 to $10.01. Options granted during the year ended September 30, 2022 to directors, officers and employees under the 2019 Plan totaled 71,451 options to purchase common shares at exercise prices ranging from $20.58 to $25.97. There were 46,602 RSUs granted during the year ended September 30, 2023. These RSUs were immediately vested and were for payment of bonuses or consulting fees to the current CFO. There were no RSUs granted during the year ended September 30, 2022. Options Vesting Policy Vesting requirements for option awards are determined by the independent members of the Board of Directors. Options granted by the Company during the year ended September 30, 2023 and 2022 generally had monthly vesting for directors in equal proportions over 12 months beginning on the grant date, monthly vesting for officers and current employees in equal proportions over 36 months beginning on the grant date and monthly vesting for new employees in equal proportions over 36 months beginning on the monthly anniversary of the grant date following 90 days of employment. Retirement Benefits Executive officers and employees of our California subsidiary are eligible to receive the Company’s non-elective contribution of 3% of eligible compensation under a 401(k) plan to provide retirement benefits. Any Company contributions we made to the plan for our named executive officers are reflected in the “All Other Compensation” column of the Summary Compensation Table above. Other than the funds contributed under our 401(k) plan, no other funds were set aside or accrued by us during the years ended September 30, 2023 and 2022 to provide pension, retirement or similar benefits for our named executive officers. 63 Table of Contents Director Compensation The following table sets forth information regarding the compensation of our non-employee directors for the year ended September 30, 2023. Name Fees Earned or Paid in Cash ($) Option Awards ($) (1) Total ($) Joan Chypyha $ 18,437 (2) $ 12,375 $ 30,812 Sean MacDonald 55,632 (2) 12,375 68,007 Patrick Marshall 16,826 (2) 12,375 29,201 Frank Oakes 43,990 12,375 56,365 Charles Olson, DSc 15,752 12,375 28,127 Carlo Sistilli, CPA, CMA 55,450 (2) 12,375 67,825 1) 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. The assumptions used in determining grant date fair value of these awards are set forth in Note 8 to our audited consolidated financial statements for the year ended September 30, 2023 included in this Annual Report. As of September 30, 2023, (i) Ms. Chypyha, Mr. Marshall and Dr. Olson each held 2,858 share options, (ii) Mr. MacDonald and Mr. Sistilli each held 11,773 share options and Mr. Oakes held 11,909 share options. 2) The compensation was paid in Canadian dollars and was converted from US dollars using the average foreign exchange rate for each month of the year from oanda.com. Narrative to Director Compensation Table Non-Employee Director Compensation Policy 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. From March 24, 2022 through September 30, 2023, each non-executive director received annual base remuneration of $35,000 and the Board Chair 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. 64 Table of Contents Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. Equity Compensation Plan Information The following table provides certain information as of September 30, 2023 about our common shares that may be issued under our equity compensation plans, which consists of our 2019 Equity Incentive Compensation Plan in effect at September 30, 2023: Plan Category Number of securities to be issued upon exercise of outstanding options and rights Weighted-average exercise price of outstanding options and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by security holders 453,660 (1) $ 25.60 (2) 81,765 Equity compensation plans not approved by security holders N/A N/A N/A Total 453,660 $ 25.60 81,765 (1) Includes 422,615 common shares issuable upon the exercise of outstanding options and 33,045 common shares issuable upon the conversion of outstanding RSUs. (2) The weighted-average exercise price does not consider shares issuable upon the conversion of outstanding RSUs, which have no exercise price. Warrants and other equity held by directors, officers and employees outside of the compensation plans are not included in the table above. Security Ownership of Certain Beneficial Owners and Management The following tables sets forth certain information as of December 13, 2023, with respect to the beneficial ownership of our common shares by: (1) all of our directors; (2) our named executive officers listed in the Summary Compensation Table; (3) all of directors and executive officers as a group; and (4) each person known by us to beneficially own more than 5% of our outstanding common shares. We have determined beneficial ownership in accordance with the rules of the SEC, based on a review of filings with the SEC and information known to us. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all common shares that they beneficially own, subject to applicable community property laws. Common shares subject to options, warrants or restricted share units currently exercisable or exercisable within 60 days of December 13, 2023 are deemed outstanding for computing the share ownership and percentage of the person holding such options, warrants and restricted share units, but are not deemed outstanding for computing the percentage of any other person. The percentage ownership of our common shares of each person or entity named in the following table is based on 3,164,722 common shares outstanding as of December 13, 2023. Directors and Officers Name and Address of Beneficial Owner (1) Number of Shares Beneficially Owned Percentage of Shares Beneficially Owned Joan Chypyha 1,695 (2) * Sean MacDonald 12,634 (3) * Patrick Marshall 2,131 (4) * Pardeep Nijhawan, MD 658,568 (5) 20.1 % Frank Oakes 10,717 (6) * Charles Olson, DSc 1,666 (7) * Carlo Sistilli, CPA, CMA 11,103 (8) * Stephen Lemieux, CPA 4,572 (9) * Michael Brooks, PhD 75,615 (10) 2.3 % Kathi Niffenegger, CPA 50,861 (11) 1.6 % All directors and named executive officers as a group (10 persons) 829,562 (12) 25.4 % * Percentage of shares beneficially owned does not exceed one percent. 65 Table of Contents 1) Unless otherwise indicated, the address of each beneficial owner is c/o Edesa Biotech, Inc., 100 Spy Court, Markham, ON Canada L3R 5H6. 2) Consists of (i) 29 common shares and (ii) 1,666 common shares issuable upon exercise of options exercisable within sixty days of December 13, 2023. 3) Consists of (i) 2,053 common shares and (ii) 10,581 common shares issuable upon exercise of options exercisable within sixty days December 13, 2023. 4) Consists of (i) 1,666 common shares issuable upon exercise of options exercisable within sixty days December 13, 2023 held by Patrick Marshall and.(ii) 465 common shares held by Quidnet Inc. for which Patrick Marshall has sole voting and dispositive power over all such shares. 5) Consists of (A)(i) 84,973 common shares, (ii) 39,761 common shares issuable upon exercise of options exercisable within sixty days of December 13, 2023 and (iii) 14,186 common shares issuable upon the conversion of restricted share units held by Pardeep Nijhawan; (B)(i) 336,702 common shares and (ii) 32,610 common shares issuable upon exercise of warrants exercisable within sixty days of December 13, 2023 held by Pardeep Nijhawan Medicine Professional Corporation for which Pardeep Nijhawan has sole voting and dispositive power over all such shares; (C) 32,013 common shares held by The Digestive Health Clinic Inc. for which Pardeep Nijhawan has sole voting and dispositive power over all such shares; (D) 53,104 common shares held by 1968160 Ontario Inc. for which Pardeep Nijhawan has sole voting and dispositive power over all such shares and (E)(i) 32,609 common shares and (ii) 32,610 common shares issuable upon exercise of warrants exercisable within sixty days of December 13, 2023 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. 6) Consists of 10,717 common shares issuable upon exercise of options exercisable within sixty days of December 13, 2023. 7) Consists of 1,666 common shares issuable upon exercise of options exercisable within sixty days of December 13, 2023. 8) Consists of (i) 10,581 common shares issuable upon exercise of options exercisable within sixty days of December 13, 2023 held by Carlo Sistilli and (ii) 522 Common Shares held by York-Cav Enterprises Inc. for which Carlo Sistilli, as President and Director, has sole voting and dispositive power over all such shares. 9) Consists of (i) 2,086 common shares issuable upon exercise of options exercisable within sixty days of December 13, 2023 and (ii) 2,486 common shares issuable upon the conversion of restricted share units. 10) Consists of (i) 4,354 common shares, (ii) 57,340 common shares issuable upon exercise of options exercisable within sixty days of December 13, 2023, (iii) 606 common shares issuable upon exercise of warrants exercisable within sixty days of December 13, 2023 and (iv) 13,315 common shares issuable upon conversion of restricted share units. 11) Consists of (A)(i) 10,943 common shares and (ii) 37,117 common shares issuable upon exercise of options exercisable within sixty days of December 13, 2023 held by Kathi Niffenegger and (B)(i) 1,531 common shares and (ii) 1,270 common shares issuable upon exercise of warrants exercisable within sixty days of December 13, 2023 held by the Kathi Niffenegger Trust for which Kathi Niffenegger, as trustee, has sole voting and dispositive power over all such shares. 12) Consists of (i) 559,298 common shares, (ii) 173,181 common shares issuable upon exercise of options exercisable within sixty days of December 13, 2023, (iii) 67,096 common shares issuable upon exercise of warrants exercisable within sixty days of December 13, 2023 and (iv) 29,987 common shares issuable upon conversion of restricted share units. Shareholders Known by Us to Own 5% or More of Our Common Shares Name and Address of Beneficial Owner Number of Shares Beneficially Owned Percentage of Shares Beneficially Owned Lumira Capital II, L.P. and Lumira Capital II (International), L.P. (1) 234,786 (1) 7.5 % Velan Capital Partners LP (2) 253,968 (2) 7.9 % 1) Consists of (i) 214,913 common shares held by Lumira Capital II, L.P. and (ii) 19,873 common shares held by Lumira Capital II (International), L.P. and beneficially owned by affiliates of Lumira Capital II, L.P. and Lumira Capital II (International), L.P. The address of both entities is 141 Adelaide Street West, Suite 770, Toronto, Ontario, Canada M5H 3L5. We relied in part on the SEC Schedule 13D/A filed with the SEC on January 13, 2023 for this information. 2) Consists of (i) 190,476 common shares and (ii) 63,492 common shares issuable upon exercise of warrants exercisable within sixty days of December 13, 2023 held by Velan Capital Partners LP and beneficially owned by its affiliates. The address is 1055b Powers Place, Alpharetta, GA 30009. We relied in part on the SEC Schedule 13G filed with the SEC on January 6, 2023 for this information. 66 Table of Contents Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. Related Party Transactions The following is a description of transactions since October 1, 2021 to which we have been a participant in which the amount involved exceeded or will exceed the lesser of (i) $120,000 and (ii) one percent of the average of our total assets at year end for the last two completed fiscal years in which any of our directors, executive officers or holders of more than 5% of our voting securities, or any members of their immediate family, had or will have a direct or indirect material interest, other than compensation arrangements. Right-of-Use Lease Agreement In January 2017, Edesa Biotech Research entered into a right-of-use lease agreement with 1968160 Ontario Inc., a company related to Dr. Nijhawan, our Chief Executive Officer, for office space that serves as our principal executive office. The original lease expired on December 31, 2022 and we executed a two-year term extension through December 31, 2024. Monthly rents during the term ranged from C$8,320 to C$9,020 plus HST. Rents of approximately $82,000 and $81,000 were incurred during the years ended September 30, 2023 and 2022, respectively. Rents of approximately $15,000 and $22,000 were payable at September 30, 2023 and September 30, 2022, respectively. Credit Agreement On October 20, 2023, the Company entered into the Credit Agreement with Pardeep Nijhawan Medicine Professional Corporation, an entity controlled by Dr. Nijhawan, our Chief Executive Officer, providing for the Line of Credit in the principal amount of up to $10 million, with the Credit Limit of $3.5 million, which was available immediately upon the execution of the Credit Agreement. Subject to the terms of the Credit Agreement, the Credit Limit may be increased by the lender upon request from the Company in an amount not to exceed $10 million. The Line of Credit bears interest at the Canadian Imperial Bank of Commerce US Base-Interest Rate plus 3% per annum and has a maturity date of March 31, 2026, unless terminated earlier by either party with 90 days’ notice. The Company has the right at any time, and from time to time, to prepay all or any portion of each advance without premium or penalty. Additionally, the Company agreed to pay a monthly standby fee for the term of the Credit Agreement, calculated as of the last business day of each month, on the difference between the Credit Limit at such time and the principal amount of outstanding advances, based on an annual interest rate of 1.5%. As of December 13, 2023, the entire $3.5 million Credit Limit was available on the Line of Credit and the Company accrued $0.01 million in monthly standby fees. 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 Exchange Act and the Nasdaq Listing Rules. Using this standard, the Board of Directors has determined that Joan Chypyha, Sean MacDonald, Patrick Marshall, Frank Oakes, Charles Olson and Carlo Sistilli are “independent directors.” Accordingly, our Board of Directors is composed of a majority of independent directors as required by the rules of Nasdaq. Pardeep Nijhawan is not an independent director due to his position as our Chief Executive Officer. We have established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, each of which are composed of independent directors. 67 Table of Contents Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. The following table shows the aggregate fees billed for audit and other services provided for the years ended September 30, 2023 and 2022 rendered by MNP LLP. Principal Accountant Fees and Services Type of Service Year Ended 2023 Year Ended 2022 Audit Fees $ 129,318 $ 139,189 Audit-related Fees 108,294 73,382 Tax Fees 10,076 14,771 Total $ 247,688 $ 227,342 Audit Fees Audit fees consisted of fees incurred for professional services rendered for audits and interim reviews of the years ended September 30, 2023 and 2022. Audit-related fees include assurance and related services that were incurred for procedures related to registrations and offerings. Tax Fees Tax fees consisted of fees incurred for professional services rendered for tax compliance related to tax returns during the years ended September 30, 2023 and 2022. Pre-Approval Policies and Procedures The Audit Committee is directly responsible for the appointment, compensation and oversight of our auditors. It has established procedures for the receipt, retention, and treatment of complaints received by us regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters. The Audit Committee also has the authority and the funding to engage independent counsel and other outside advisors. The Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is generally subject to an amount or range of estimated fees. All proposed engagements of the auditor for audit and permitted non-audit services are submitted to the Audit Committee for approval prior to the beginning of any such services. Our auditors are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with the pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis. The Audit Committee pre-approved 100% of the audit and non-audit services performed by our independent registered public accounting firm for the years ended September 30, 2023 and 2022. 68 Table of Contents PART IV Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. (a) The following documents are filed as a part of this Annual Report: (1) Financial Statements The list of consolidated financial statements and notes required by this Item 15 (a) (1) is set forth in the “Index to Financial Statements” on page F-1 of this Annual Report. (2) Financial Statement Schedules All schedules have been omitted because the required information is included in the financial statements or notes thereto. (3) Exhibits The exhibits listed on the Exhibit Index below are filed as part of this Annual Report. 69 Table of Contents EXHIBIT INDEX Exhibit No. Description 2.1* Share Exchange Agreement, dated as of March 7, 2019, by and between Stellar Biotechnologies Inc., Edesa Biotech Inc. and the Edesa Shareholders (included as Exhibit 2.1 to the Company's Current Report on Form 8-K filed on March 8, 2019, and incorporated herein by reference). 3.1 Certificate of Incorporation of the Company, dated June 12, 2007 (included as Exhibit 1(a) to the Company's Registration Statement on Form 20-F filed on February 3, 2012, and incorporated herein by reference). 3.2 Certificate of Amendment of the Company, dated April 15, 2008 (included as Exhibit 1(b) to the Company's Registration Statement on Form 20-F filed on February 3, 2012, and incorporated herein by reference). 3.3 Certificate of Continuation of the Company, dated November 25, 2009 (included as Exhibit 1(c) to the Company's Registration Statement on Form 20-F filed on February 3, 2012, and incorporated herein by reference). 3.4 Certificate of Change of Name of the Company, dated April 7, 2010 (included as Exhibit 1(f) to the Company’s Registration Statement on Form 20-F filed on February 3, 2012, and incorporated herein by reference). 3.5 Certificate of Change of Name of the Company, dated June 7, 2019 (included as Exhibit 3.6 to the Company's Annual Report on Form 10-K filed on December 12, 2019, and incorporated herein by reference). 3.6 Amended and Restated Articles of Edesa Biotech, Inc. (included as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 23, 2020, and incorporated herein by reference). 3.7 Notice of Articles of Edesa Biotech, Inc. (included as Exhibit 3.7 to the Company’s Registration Statement on Form S-1 filed on April 11, 2022, and incorporated herein by reference). 4.1 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). 4.2 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). 4.3 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). 4.4 Form of Warrant (included as Exhibit 4.2 to the Company's Registration Statement on Form S-1 filed on May 8, 2018, and incorporated herein by reference). 70 Table of Contents 4.5 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). 4.6 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). 4.7 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). 4.8 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). 4.9 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). 4.10 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). 4.11 Description of Securities (filed herewith). 4.12 Form of Common Share Purchase Warrant issued to H.C. Wainwright & Co., Inc. designees on June 7, 2019 (filed herewith). 10.1 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). 10.2@ 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). 10.3@ Employment Agreement by and between the Company and Michael Brooks, dated June 14, 2019 (included as Exhibit 10.3 to the Company's Current Report on Form 8-K/A filed on June 20, 2019, and incorporated herein by reference). 10.4@ 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). 71 Table of Contents 10.5@ 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). 10.6@ 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). 10.7 Lease, dated as of January 1, 2017, by and between the Registrant and 1968160 Ontario Inc. (included as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 30, 2019, and incorporated herein by reference). 10.8+ Exclusive License Agreement, dated as of June 29, 2016, by and between the Registrant and Yissum Research Development Company (included as Exhibit 10.2 to the Company's Current Report on Form 8-K filed on August 30, 2019, and incorporated herein by reference). 10.9 First Amendment to Exclusive License Agreement, dated April 3, 2017, by and between the Registrant and Yissum Research Development Company (included as Exhibit 10.3 to the Company's Current Report on Form 8-K filed on August 30, 2019, and incorporated herein by reference). 10.10 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). 10.11+ Third Amendment to Exclusive License Agreement, dated October 26, 2022, by and between the Registrant and Yissum Research Development Company (included as Exhibit 10.11 to the Company’s Annual Report on Form 10-K filed on December 16, 2022 and incorporated herein by reference). 10.12+ 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). 10.13+ License Agreement by and between Edesa Biotech Research, Inc. and NovImmune SA dated April 17, 2020 (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 23, 2020, and incorporated herein by reference). 10.14+ Purchase Agreement by and between Edesa Biotech Research, Inc. 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). 10.15@ 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). 10.16+ Strategic Innovation Fund Agreement among Edesa Biotech Research, Inc., Edesa Biotech, Inc., and her Majesty the Queen in right of Canada as represented by the Minister of Industry, dated February 2, 2021 (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 3, 2021, and incorporated herein by reference). 72 Table of Contents 10.17+ Exclusive License Agreement, dated as of March 16, 2021, by and between Edesa Biotech Research, Inc. and Dr. 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). 10.18@ Amendment to Employment Agreement, entered into on March 19, 2021, by and between Par Nijhawan and Edesa Biotech, Inc. (included as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on May 14, 2021, and incorporated herein by reference). 10.19@ Amendment to Employment Agreement, entered into on March 19, 2021, by and between Kathi Niffenegger and Edesa Biotech USA, Inc. (included as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on May 14, 2021, and incorporated herein by reference). 10.20@ Amendment to Employment Agreement, entered into on March 19, 2021, by and between Michael Brooks and Edesa Biotech, Inc. (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). 10.21 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). 10.22@ 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). 10.23@ 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). 10.24@ 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). 10.25 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). 10.26 Form of U.S. 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). 73 Table of Contents 10.27 Lease Extending and Amending Agreement dated as of December 31, 2022 by and between Edesa Biotech Research, Inc. and 1968160 Ontario, Inc. (included as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on February 10, 2023 and incorporated herein by reference). 10.28 Equity Distribution Agreement, dated as of March 27, 2023, by and between Edesa Biotech, Inc. and Canaccord Genuity LLC (included as Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on March 27, 2023, and incorporated herein by reference). 10.29@ Amendment No. 2 to Edesa Biotech, Inc. 2019 Equity Incentive Compensation Plan (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 24, 2023, and incorporated herein by reference). 10.30@ Employment Agreement by and between the Company and Stephen Lemieux, dated June 26, 2023 (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 27, 2023, and incorporated herein by reference). 10.31@ Amended and Restated Employment Agreement, by and between the Company and Pardeep Nijhawan, dated August 4, 2023 (included as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on August 9, 2023, and incorporated herein by reference). 10.32@ Amended and Restated Employment Agreement, by and between the Company and Michael Brooks, dated August 4, 2023 (included as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on August 9, 2023, and incorporated herein by reference). 10.33+ Strategic Innovation Fund Agreement, dated October 12, 2023, by and among Edesa Biotech Research, Inc., Edesa Biotech, Inc., and his Majesty the King in right of Canada as represented by the Minister of Industry (filed herewith). 10.34 Credit Agreement, effective as of October 20, 2023, by and between the Company and Pardeep Nijhawan Medicine Professional Corporation (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 23, 2023, and incorporated herein by reference). 10.35+ First Amendment to Exclusive License Agreement, dated as of September 21, 2023, by and between Edesa Biotech Research, Inc. and Dr. Saul Yedgar (filed herewith). 10.36@ First Amendment to Amended and Restated Employment Agreement, by and between the Company and Pardeep Nijhawan, dated December 7, 2023 (filed herewith). 21 Subsidiaries of Edesa Biotech, Inc. (included as Exhibit 21 to the Company’s Annual Report on Form 10-K filed on December 7, 2020, and incorporated herein by reference). 23.1 Consent of MNP LLP (filed herewith). 24.1 Power of Attorney (included on signature page). 31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 32.1** Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 74 Table of Contents 32.2** Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97.1 Incentive Compensation Repayment (Clawback) Policy (filed herewith). 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Label Linkbase Document 101.PRE XBRL Taxonomy Presentation Linkbase Document * All schedules and exhibits to the Share Exchange Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request. ** The information in this exhibit is furnished and deemed not filed with the SEC for purposes of section 18 of the Exchange Act, and is not to be incorporated by reference into any filing of Edesa Biotech, Inc. under the Securities Act, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing. @ Management contract or compensatory plan or arrangement. + Portions of this exhibit have been omitted pursuant to Rule 601(b)(10)(iv) of Regulation S-K. Item 16. FORM 10-K SUMMARY None. 75 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EDESA BIOTECH, INC. Date: December 15, 2023 /s/ Pardeep Nijhawan Pardeep Nijhawan, MD Director, Chief Executive Officer and Corporate Secretary (Principal Executive Officer) Date: December 15, 2023 /s/ Stephen Lemieux Stephen Lemieux Chief Financial Officer (Principal Financial Officer) POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Pardeep Nijhawan and Stephen Lemieux, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution for him or her, and in his or her name in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and any of them or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Pardeep Nijhawan Director, Chief Executive Officer, and December 15, 2023 Pardeep Nijhawan Corporate Secretary (Principal Executive Officer) /s/ Stephen Lemieux Chief Financial Officer December 15, 2023 Stephen Lemieux (Principal Financial and Accounting Officer) /s/ Joan Chypyha Director December 15, 2023 Joan Chypyha /s/ Sean MacDonald Director December 15, 2023 Sean MacDonald /s/ Patrick Marshall Director December 15, 2023 Patrick Marshall /s/ Frank Oakes Director December 15, 2023 Frank Oakes /s/ Charles Olson Director December 15, 2023 Charles Olson /s/ Carlo Sistilli Chairman of the Board of Directors December 15, 2023 Carlo Sistilli 76 Table of Contents EDESA BIOTECH, INC. INDEX TO FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm – PCAOB ID 1930 F-2 Consolidated Balance Sheets at September 30, 2023 and 2022 F-3 Consolidated Statements of Operations and Comprehensive Loss for the years ended September 30, 2023 and 2022 F-4 Consolidated Statements of Cash Flows for the years ended September 30, 2023 and 2022 F-5 Consolidated Statements of Changes in Shareholders’ Equity for the years ended September 30, 2023 and 2022 F-6 Notes to Consolidated Financial Statements F-7 F-1 Table of Contents F-2 Table of Contents EDESA BIOTECH, INC. Consolidated Balance Sheets September 30, 2023 September 30, 2022 Assets: Current assets: Cash and cash equivalents $ 5,361,397 $ 7,090,919 Accounts and other receivable 626,543 1,255,451 Prepaid expenses and other current assets 448,912 745,543 Total current assets 6,436,852 9,091,913 Non-current assets: Property and equipment, net 8,702 12,694 Long-term deposits 173,490 171,464 Intangible asset, net 2,180,020 2,281,192 Right-of-use assets 91,373 18,465 Total assets $ 8,890,437 $ 11,575,728 Liabilities and shareholders' equity: Current liabilities: Accounts payable and accrued liabilities $ 1,747,150 $ 2,121,802 Short-term right-of-use lease liabilities 74,714 18,975 Total current liabilities 1,821,864 2,140,777 Non-current liabilities: Long-term payables - 43,662 Long-term right-of-use lease liabilities 19,773 - Total liabilities 1,841,637 2,184,439 Commitments (Note 7) Shareholders' equity: Capital shares Authorized unlimited common and preferred shares without par value Issued and outstanding: 3,075,473 common shares (September 30, 2022 - 2,380,280 ) 46,643,151 42,473,099 Additional paid-in capital 13,039,265 11,176,345 Accumulated other comprehensive loss ( 214,648 ) ( 213,602 ) Accumulated deficit ( 52,418,968 ) ( 44,044,553 ) Total shareholders' equity 7,048,800 9,391,289 Total liabilities and shareholders' equity $ 8,890,437 $ 11,575,728 The accompanying notes are an integral part of these consolidated financial statements. F-3 Table of Contents EDESA BIOTECH, INC. Consolidated Statements of Operations and Comprehensive Loss Years Ended September 30, 2023 September 30, 2022 Expenses: Research and development $ 4,794,549 $ 13,335,334 General and administrative 4,428,209 5,035,456 Loss from operations ( 9,222,758 ) ( 18,370,790 ) Other income (loss): Reimbursement grant income 581,039 780,257 Interest income 289,846 63,523 Foreign exchange loss ( 21,742 ) ( 21,114 ) 849,143 822,666 Loss before income taxes ( 8,373,615 ) ( 17,548,124 ) Income tax expense 800 800 Net loss ( 8,374,415 ) ( 17,548,924 ) Exchange differences on translation ( 1,046 ) ( 8,340 ) Net comprehensive loss $ ( 8,375,461 ) $ ( 17,557,264 ) Weighted average number of common shares 2,858,929 2,096,446 Loss per common share - basic and diluted $ ( 2.93 ) $ ( 8.37 ) The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents EDESA BIOTECH, INC. Consolidated Statements of Cash Flows Years Ended September 30, 2023 September 30, 2022 Cash flows from operating activities: Net loss $ ( 8,374,415 ) $ ( 17,548,924 ) Adjustments for: Depreciation and amortization 183,471 118,188 Share-based compensation 1,246,457 2,260,634 Changes in working capital items: Accounts and other receivable 562,770 2,027,454 Prepaid expenses and other current assets 301,504 ( 19,497 ) Accounts payable and accrued liabilities ( 556,270 ) 882,843 Net cash used in operating activities ( 6,636,483 ) ( 12,279,302 ) Cash flows from investing activities: Purchase of property and equipment - ( 5,656 ) Net cash used in investing activities - ( 5,656 ) Cash flows from financing activities: Proceeds from issuance of common shares and warrants 4,345,017 11,957,687 Proceeds from exercise of warrants 770,532 - Payments for issuance costs of common shares and warrants ( 285,438 ) ( 328,059 ) Net cash provided by financing activities 4,830,111 11,629,628 Effect of exchange rate changes on cash and cash equivalents 76,850 ( 93,010 ) Net change in cash and cash equivalents ( 1,729,522 ) ( 748,340 ) Cash and cash equivalents, beginning of year 7,090,919 7,839,259 Cash and cash equivalents, end of year $ 5,361,397 $ 7,090,919 Supplemental Disclosure of Noncash Financing Activities: Issuance costs withheld from gross proceeds from issuance of common shares and warrants $ - $ 393,461 Fair value of placement agent warrants - 408,059 The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents EDESA BIOTECH, INC. Consolidated Statements of Changes in Shareholders’ Equity Shares # Common Shares Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Shareholders' Equity Balance - September 30, 2021 1,899,333 $ 34,887,721 $ 4,871,461 $ ( 205,262 ) $ ( 26,495,629 ) $ 13,058,291 Issuance of common shares and warrants in equity offering 309,558 6,239,181 6,702,293 - - 12,941,474 Issuance costs including fair value of placement agent warrants - ( 863,227 ) ( 448,739 ) - - ( 1,311,966 ) Issuance of common shares upon exercise of pre-funded warrants, net of costs 171,389 2,209,424 ( 2,209,304 ) - - 120 Share-based compensation - - 2,260,634 - - 2,260,634 Net loss and comprehensive loss - - - ( 8,340 ) ( 17,548,924 ) ( 17,557,264 ) Balance - September 30, 2022 2,380,280 $ 42,473,099 $ 11,176,345 $ ( 213,602 ) $ ( 44,044,553 ) $ 9,391,289 Issuance of common shares and warrants in equity offering 580,876 3,400,191 944,828 - - 4,345,019 Issuance of common shares upon exercise of warrants 100,760 994,618 ( 224,087 ) - - 770,531 Issuance of common shares upon exercise of restricted share units 13,557 75,920 ( 75,920 ) - - - Issuance costs - ( 300,677 ) ( 28,358 ) - - ( 329,035 ) Share-based compensation - - 1,246,457 - - 1,246,457 Net loss and comprehensive loss - - - ( 1,046 ) ( 8,374,415 ) ( 8,375,461 ) Balance - September 30, 2023 3,075,473 $ 46,643,151 $ 13,039,265 $ ( 214,648 ) $ ( 52,418,968 ) $ 7,048,800 The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contents EDESA BIOTECH, INC. Notes to Consolidated Financial Statements For the Years Ended September 30, 2023 and 2022 1. Nature of operations Edesa Biotech, Inc. (the Company or Edesa) is a biopharmaceutical company focused on acquiring, developing and commercializing clinical stage drugs for inflammatory and immune-related diseases with clear unmet medical needs. 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., a California, USA corporation. The Company’s common shares trade on The Nasdaq Capital Market in the United States under the symbol “EDSA”. Liquidity The Company’s operations have historically been funded through issuances of common shares, exercises of common share purchase warrants, convertible preferred shares, convertible loans, government grants and tax incentives. At September 30, 2023, the Company had an accumulated deficit of $ 52.4 million and working capital of $ 4.6 million, including $ 5.4 million in cash and cash equivalents. In August 2022 the Company filed a $150.0 million shelf registration statement, under which the Company entered into an equity distribution agreement with Canaccord for $20.0 million in gross proceeds, subject to certain offering limitations that currently allows the Company to offer and sell common shares having an aggregate gross sales price of up to $8.4 million (Canaccord ATM). There was approximately $7.1 million of available capacity on the Canaccord ATM as of September 30, 2023. The Company’s primary use of cash and cash equivalents is to fund our operating expenses, which consist of research and development (R&D) and general and administrative (G&A) expenditures. Cash used to fund operating expenses is impacted by the timing of when the Company pays these expenses, as reflected in the change in accounts payable and accrued expenses. Net cash used in operating activities was $ 6.6 million and $ 12.3 million for the years ended September 30, 2023 and 2022, respectively. The Company incurred net losses of $ 8.4 million and $ 17.6 million for the years ended September 30, 2023 and 2022. Subsequent to the year end, in October 2023, the Company entered into a multi-year contribution agreement (2023 SIF Agreement) with the Canadian Government’s Strategic Innovation Fund (SIF). Under the 2023 SIF Agreement, the Government of Canada committed up to C$23 million in partially repayable funding. Of the C$23 million committed by SIF, up to C$5.8 million is not repayable by the Company. The remaining C$17.2 million is conditionally repayable starting in 2029 only if and when the Company earns gross revenue. See Note 9. In February 2021, the Company signed a contribution agreement with the Canadian government’s SIF (2021 SIF Agreement), the Company was eligible to receive cash reimbursements up to C$14.1 million in the aggregate for certain R&D expenses related to our EB05 clinical development program. All potential funding available under the 2021 SIF Agreement has been received. For the years ended September 30, 2023 and 2022, the Company recorded grant income of $0.6 million and $0.8 million respectively related to both the 2023 SIF Agreement and the 2021 SIF Agreement. Subsequent to the year end, in October 2023, the Company entered into $10.0 million revolving credit agreement with Pardeep Nijhawan Medicine Professional Corporation (Credit Agreement), providing an unsecured revolving credit facility, with a credit limit of $ 3.5 million (Credit Limit) which is available immediately. The line of credit bears interest at the Canadian Imperial Bank of Commerce US Base-Interest Rate plus 3% per annum and has a maturity date of March 31, 2026, unless terminated earlier by either party with 90 days’ notice. Advances under the line of credit are tied to a borrowing base (Borrowing Base) consisting of eligible grant receivables from SIF, future potential license fee receivables and any other accounts receivable. At no time shall the aggregate principal amount of all advances outstanding exceed the lesser of (i) the Credit Limit and (ii) an amount equal to 85% of the Borrowing Base. No amounts have been drawn upon from the Credit Agreement. F-7 Table of Contents EDESA BIOTECH, INC. Notes to Consolidated Financial Statements For the Years Ended September 30, 2023 and 2022 In March 2023, the Company entered into an equity distribution agreement with Canaccord, 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 $ 20 million in gross proceeds, subject to certain offering limitations that currently allows the Company to offer and sell common shares having an aggregate gross sales price of up to $ 8.4 million. At September 30, 2023, the Company sold a total of 196,401 common shares pursuant to the agreement for gross proceeds of approximately $ 1.3 million. In November 2022, the Company completed a private placement of units consisting of 384,475 common shares, 12-month warrants to purchase up to an aggregate of 192,248 common shares and 3-year warrants to purchase up to an aggregate of 192,248 common shares. The gross proceeds from this offering are approximately $ 3 .0 million, before offering expenses. In March 2022, the Company completed a registered direct offering of 220,000 common shares, no par value, and pre-funded warrants to purchase up to an aggregate of 171,390 common shares. In a concurrent private placement, the Company issued common share purchase warrants to purchase an aggregate of up to 391,390 common shares. Net proceeds to the Company were approximately $ 9 .0 million. During the year ended September 30, 2022, the Company sold a total of 89,558 common shares for net proceeds of $ 2.6 million, under an at-the-market equity offering program. The Company plans to finance operations for at least the next twelve months with cash and cash equivalents on hand, utilization of the Canaccord ATM, drawing upon the Credit Agreement and reimbursements of eligible R&D expenses under the Company’s 2023 SIF Agreement. 1. Basis of preparation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and include the accounts of the Company and its wholly owned subsidiaries, Edesa Biotech Research, Inc. and Edesa Biotech USA, Inc. All intercompany balances and transactions have been eliminated upon consolidation. 2. Significant accounting policies Use of estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period or year. Actual results could differ from those estimates. Areas where significant judgment is involved in making estimates are valuation of accounts and other receivable; valuation and useful lives of property and equipment; intangible assets; right-of-use assets; deferred income taxes; the determination of fair value of share-based compensation; the determination of fair value of warrants in order to allocate proceeds from equity issuances; and forecasting future cash flows for assessing the going concern assumption. Functional and reporting currencies The consolidated financial statements of the Company are presented in U.S. dollars, unless otherwise stated, which is the Company’s and its wholly owned subsidiary’s, Edesa Biotech USA, Inc., functional currency. The functional currency of the Company’s wholly owned subsidiary, Edesa Biotech Research, Inc., as determined by management, is Canadian dollars. Cash and cash equivalents 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. Accounts and other receivable The Company assesses the collectability of its accounts receivable through a review of its current aging and payment terms, as well as an analysis of its historical collection rate, general economic conditions and credit status of the government agencies. Accounts and other receivable include reimbursement grant income for the Company’s federal grant with the Canadian government’s SIF and Harmonized Sales Tax (HST) refunds receivable. As of September 30, 2023, all outstanding accounts, grants and HST refunds receivable were deemed to be fully collectible, and therefore, no allowance for doubtful accounts was recorded. F-8 Table of Contents EDESA BIOTECH, INC. Notes to Consolidated Financial Statements For the Years Ended September 30, 2023 and 2022 Property and equipment Property and equipment are recorded at historical cost less accumulated depreciation and any accumulated impairment losses. 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. Maintenance and repair expenditures that do not improve or extend the life are expensed in the period incurred. Any gain or loss arising on the disposal or retirement of an item of property and equipment is recognized as the difference between the sales proceeds and the carrying amount of the asset. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each year, with the effect of any changes in estimate accounted for on a prospective basis. The depreciation policy for the principal asset categories are calculated as follows: · Computer equipment 30 % declining balance method or straight line 3 years · Furniture and equipment 20 % declining balance method Intangible assets Intangible assets represent the exclusive world-wide rights to know-how, patents and data relating to certain monoclonal antibodies (the Constructs), including sublicensing rights, acquired by entering into a license agreement with a pharmaceutical development company. Unless earlier terminated, the term of the license agreement will remain in effect for 25 years from the date of first commercial sale of licensed products containing the Constructs. Subsequently, the license agreement will automatically renew for five-year periods unless either party terminates the agreement in accordance with its terms. Intangible assets are stated at their historical cost, amortized on a straight-line basis over their expected useful lives, which is 25 years, and subject to impairment review at the end of each reporting period. Impairment of long-lived assets Long-lived assets are tested for impairment when indicators of impairment exist. When a significant change in the expected timing or amount of the future cash flows of the financial asset is identified, the carrying amount of the financial asset is reduced and the amount of the write-down is recognized as a loss. A previously recognized impairment loss may be reversed to the extent of the improvement, provided it is not greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously, and the amount of the reversal is recognized in net income (loss). Right-of-Use assets and liabilities The Company recognizes right-of-use (ROU) assets and liabilities on the balance sheet for operating leases with terms longer than 12 months. The Company follows the ongoing practical expedient not to recognize ROU assets and 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 ROU liabilities are initially 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. Fair value measurement The Company uses the fair value measurement framework for valuing financial assets and liabilities. See Note 11. Revenue recognition Reimbursement grant income is recognized based on the reimbursement rate included in the government contribution agreement when allowable expenses have been incurred. Research and development Research and development expenses principally consist of (i) contract research organizations for clinical trial management services, (ii) contract manufacturing organizations for manufacturing the drug compound(s) for use in clinical trials and (iii) salaries of employees directly involved in research and development efforts. Research and development costs are expensed as incurred. F-9 Table of Contents EDESA BIOTECH, INC. Notes to Consolidated Financial Statements For the Years Ended September 30, 2023 and 2022 Share-based compensation The Company has equity incentive plans under which various types of equity-based awards including share options, restricted shares and restricted share unit awards may be granted to employees, non-employee directors and non-employee consultants and warrants that may be granted as compensation to non-employees. The Company measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted since the fair value of the goods or services received by the Company cannot be reliably estimated. The Company recognizes compensation expense for all share-based awards based on the estimated grant-date fair values. For restricted share unit awards to employees, the fair value is based on the 5-day volume weighted average price (VWAP) of the Company’s common shares up to the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period. The fair value of share options is determined using the Black-Scholes option pricing model. The Company utilizes a dividend yield of zero based on the fact that the Company has never paid cash dividends and has no current intention of paying cash dividends. The Company elected an accounting policy to record forfeitures as they occur. See Note 8 for a discussion of the assumptions used by the Company in determining the grant date fair value of options granted under the Black-Scholes option pricing model, as well as a summary of the share option activity under the Company’s share-based compensation plan for all years presented. The provisions of the Company’s share-based compensation plans do not require the Company to settle any options or restricted share units by transferring cash or other assets, and therefore the Company classifies the awards as equity. Translation of foreign currency transactions The Company’s reporting currency is the U.S. dollar. The financial statements of the wholly owned Canadian subsidiary is measured using the Canadian dollar as the functional currency. Assets and liabilities of the Canadian operation have been translated at year-end exchange rates and related revenue and expenses have been translated at average exchange rates for the year. Accumulated gains and losses resulting from the translation of the financial statements of the Canadian operation are included as part of accumulated other comprehensive loss, a separate component of shareholders’ equity. For other transactions denominated in currencies other than the Company’s functional currency, the monetary assets and liabilities are translated at the year-end rates. Revenue and expenses are translated at rates of exchange prevailing on the transaction dates. Non-monetary balance sheet and related income statement accounts are remeasured into U.S. dollar using historical exchange rates. All of the exchange gains or losses resulting from these other transactions are recognized in the statements of operations and comprehensive loss. Income taxes Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the tax bases of assets and liabilities and their financial statement reported amounts using enacted tax rates and laws in effect in the year in which the differences are expected to reverse. A valuation allowance is provided against deferred tax assets when it is determined to be more likely than not that the deferred tax asset will not be realized. The Company assesses the likelihood of the financial statement effect of a tax position that should be recognized when it is more likely than not that the position will be sustained upon examination by a taxing authority based on the technical merits of the tax position, circumstances, and information available as of the reporting date. The Company is subject to examination by taxing authorities in Canada and the U.S. Management does not believe that there are any uncertain tax positions that would result in an asset or liability for taxes being recognized in the accompanying financial statements. The Company recognizes tax-related interest and penalties, if any, as a component of income tax expense. The Company accounts for income taxes on a tax jurisdictional basis. The Company files income tax returns in Canada, the provinces of British Columbia and Ontario, the U.S. and the state of California. Earnings (loss) per share Basic earnings (loss) per share is calculated by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the year. F-10 Table of Contents EDESA BIOTECH, INC. Notes to Consolidated Financial Statements For the Years Ended September 30, 2023 and 2022 The computation of diluted earnings (loss) per share assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on earnings (loss) per share. The dilutive effect of convertible securities would be reflected in diluted earnings per share by application of the “if converted” method. The dilutive effect of outstanding share options and warrants and their equivalents would be reflected in diluted earnings per share by application of the treasury stock method. However, conversion of outstanding share options and warrants would have an antidilutive effect on loss per share for the years ended September 30, 2023 and 2022 and are therefore excluded from the computation of diluted loss per share. See Note 8 for share options and warrants at September 30, 2023 and 2022. Segmented Information The Company’s operations comprise a single reportable segment engaged in the research and development, manufacturing and commercialization of innovative pharmaceutical products. As the operations comprise a single reportable segment, amounts disclosed in the consolidated financial statements for net loss, comprehensive loss, depreciation and total assets also represent segmented amounts. Adoption of Recent Accounting Pronouncements On October 1, 2022, the Company adopted Accounting Standards Update 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 Company expanded its disclosures related to government assistance. Future accounting pronouncements In November 2023, the FASB issued Accounting Standards Update ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an interim and annual basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal periods beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact of the guidance on the consolidated financial statements and disclosures. 4. Property and equipment Property and equipment, net consisted of the following: September 30, 2023 September 30, 2022 Computer equipment $ 46,945 $ 46,674 Furniture and equipment 5,603 5,538 52,548 52,212 Less: accumulated depreciation ( 43,846 ) ( 39,518 ) Total property and equipment, net $ 8,702 $ 12,694 Depreciation expense amounted to $ 4,328 and $ 6,991 for the years ended September 30, 2023 and 2022, respectively. F-11 Table of Contents EDESA BIOTECH, INC. Notes to Consolidated Financial Statements For the Years Ended September 30, 2023 and 2022 5. Intangible assets Acquired License In April 2020, the Company entered into a license agreement with a pharmaceutical development company to obtain exclusive world-wide rights to know-how, patents and data relating to certain monoclonal antibodies (the Constructs), including sublicensing rights. Unless earlier terminated, the term of the license agreement will remain in effect for 25 years from the date of first commercial sale of licensed products containing the Constructs. Subsequently, the license agreement will automatically renew for five-year periods unless either party terminates the agreement in accordance with its terms. Under the license agreement, the Company is exclusively responsible, at its expense, for the research, development manufacture, marketing, distribution and commercialization of the Constructs and licensed products and to obtain all necessary licenses and rights. The Company is required to use commercially reasonable efforts to develop and commercialize the Constructs in accordance with the terms of a development plan established by the parties. The Company has determined that the license has multiple alternative future uses in research and development projects and sublicensing in other countries or for other disease indications. 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 , which have been fully converted to common shares. The value of the license includes acquisition legal costs. See Note 7 for license commitments. Intangible assets, net consisted of the following: September 30, 2023 September 30, 2022 The Constructs $ 2,529,483 $ 2,529,483 Less: accumulated amortization ( 349,463 ) ( 248,291 ) Total intangible assets, net $ 2,180,020 $ 2,281,192 Amortization expense amounted to $ 101,172 for each of the years ended September 30, 2023, and 2022, respectively. Total estimated future amortization of intangible assets for each fiscal year is as follows: Year Ending September 30, 2024 101,172 September 30, 2025 101,172 September 30, 2026 101,172 September 30, 2027 101,172 September 30, 2028 101,172 Thereafter 1,674,160 $ 2,180,020 6. Right-of-Use Asset and Liabilities Related party ROU asset and liability The Company leases a facility used for executive offices from a related company. The original lease expired in December 2022 and the Company executed a two-year term extension through December 31, 2024. F-12 Table of Contents EDESA BIOTECH, INC. Notes to Consolidated Financial Statements For the Years Ended September 30, 2023 and 2022 The components of lease cost were as follows: September 30, 2023 September 30, 2022 Right-of-use lease cost, included in general and administrative on the Statements of Operations $ 82,358 $ 18,465 Lease terms and discount rates were as follows: September 30, 2023 September 30, 2022 Remaining lease term (months): 15 3 Estimated incremental borrowing rate: 9.2 % 6.5 % The approximate future minimum lease payments under operating leases at September 30, 2023 were as follows: Year Ending September 30, 2024 $ 79,697 September 30, 2025 19,924 Total lease payments 99,621 Less imputed interest 5,134 Present value of right-of-use lease liabilities 94,487 Present value included in current liabilities 74,714 Present value included in long-term liabilities $ 19,773 Cash flow information was as follows: Years Ended September 30, 2023 September 30, 2022 Cash paid for amounts included in the measurement of right-of-use lease liabilities, included in accounts payable and accrued liabilities on the Statements of Cash Flow. $ 79,222 $ 80,377 7. Commitments Research and other commitments 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, 2023 are as follows: Year Ending September 30, 2024 1,798,000 September 30, 2025 49,000 September 30, 2026 36,000 September 30, 2027 41,000 September 30, 2028 - $ 1,924,000 F-13 Table of Contents EDESA BIOTECH, INC. Notes to Consolidated Financial Statements For the Years Ended September 30, 2023 and 2022 License and royalty commitments In April 2020, through its Ontario subsidiary, the Company entered into a license agreement with a third party to obtain exclusive world-wide rights to certain know-how, patents and data relating to certain monoclonal antibodies (the Constructs), including sublicensing rights. An intangible asset for the acquired license has been recognized. See Note 5 for intangible assets. Under the license agreement, the Company is committed to payments of up to an aggregate amount of $ 356 million contingent upon meeting certain milestones outlined in the license agreement, primarily relating to future potential commercial approval and sales milestones. The Company also has a commitment to pay royalties based on any net sales of products containing the Constructs in the countries where the Company directly commercializes the products containing the Constructs and a percentage of any sublicensing revenue received by the Company and its affiliates in the countries where it does not directly commercialize the products containing the Constructs. No milestone, royalty or sublicensing payments were made to the third party during the years ended September 30, 2023 and 2022. In connection with this license agreement and pursuant to a purchase agreement entered into in April 2020, the Company acquired drug substance of one of the Constructs for an aggregate purchase price of $5.0 million. The Company recorded an expense of $2.5 million for the second installment payment during the year ended September 30, 2022. No expense was recorded during the year ended September 30, 2023 . 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. The Company will use the exclusive rights to develop the product for therapeutic, prophylactic and diagnostic uses in topical dermal applications and anorectal applications. No intangible assets have been recognized under the license agreement with the third party. Under the license agreement, the Company is committed to payments of various amounts to the third party upon meeting certain milestones outlined in the license agreement, up to an aggregate amount of $ 18.4 . Upon divestiture of substantially all of the assets of the Company, the Company shall pay the third party a percentage of the valuation of the licensed technology sold as determined by an external objective expert. The Company also has a commitment to pay the third party a royalty based on net sales of the product in countries where the Company, or an affiliate, directly commercializes the product and a percentage of sublicensing revenue received by the Company and its affiliates in the countries where it does not directly commercialize the product. No license or royalty payments were made to the third party during the years ended September 30, 2023 and 2022, respectively. 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 years ended September 30, 2023 and 2022, the Company recorded expenses of $ 50,000 and $ 25,693 , 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 $ 68.9 million, primarily relating to future potential commercial approval and sales milestones. In addition, if the Company fails to file an investigational new drug application or foreign equivalent (IND) for the product within a certain period of time following the date of the agreement, the Company is required to remit to the inventor a fixed license fee quarterly as long as the requirement to file an IND remains unfulfilled. Retirement savings plan 401(k) contributions Executive officers and employees of our California subsidiary are eligible to receive the Company’s non-elective safe harbor employer contribution of 3% of eligible compensation under a 401(k) plan to provide retirement benefits. Employees are 100 % vested in employer contributions and in any voluntary employee contributions. Contributions to the 401(k) plan were $ 16,872 and $ 19,740 during the years ended September 30, 2023 and 2022, respectively. 8. Capital shares Equity offerings On November 2, 2022, the Company completed a private placement of units consisting of 384,475 common shares, Class A warrants to purchase up to an aggregate of 192,248 common shares and Class B warrants to purchase up to an aggregate of 192,248 common shares. Net proceeds from the offering were $ 2.9 million, which were allocated between the relative fair values of the common shares (using a fair value of $2.7 million) and the common share purchase warrants (using a total fair value of $1.2 million). The warrants became exercisable December 23, 2022 . The Class A warrants have an exercise price of $ 10.50 per share and will expire on December 23, 2025 . The Class B warrants have an exercise price of $ 7.00 per share and will expire on December 23, 2023. The warrants are considered contracts on the Company’s own shares and are classified as equity. F-14 Table of Contents EDESA BIOTECH, INC. Notes to Consolidated Financial Statements For the Years Ended September 30, 2023 and 2022 On March 24, 2022, the Company completed a registered direct offering of 220,000 common shares, no par value, and pre-funded warrants to purchase up to an aggregate of 171,390 common shares. In a concurrent private placement, the Company issued common share purchase warrants to purchase an aggregate of up to 391,390 common shares. Net proceeds from the offering were $ 9.0 million. The common share purchase warrants were immediately exercisable at an exercise price of $ 24.64 per share and will expire on September 24, 2027 . The pre-funded warrants were immediately exercisable at an exercise price of $ 0.0007 per share and do not expire. The warrants are considered contracts on the Company’s own shares and are classified as equity. The Company allocated gross proceeds with $ 5.9 million as the value of common shares and pre-funded warrants and $ 4.1 million as the value of common share purchase warrants under additional paid-in capital on a relative fair value basis. In connection with the offering, the Company issued warrants to purchase an aggregate of 27,397 common shares to certain affiliated designees of the placement agent as part of the placement agent’s compensation. The placement agent warrants are exercisable on or after March 24, 2022, at an exercise price of $ 31.9375 per share and will expire on March 21, 2027 with a fair value of $ 0.4 million. Equity distribution agreements On March 27, 2023, the Company entered into the Canaccord ATM, pursuant to which the Company may offer and sell, from time to time, common shares through an at-the-market equity offering program for up to $ 20 million in gross proceeds, subject to certain offering limitations that currently allow the Company to offer and sell common shares having an aggregate gross sales price of up to $ 8.4 million. The Company has no obligation to sell any of the common shares and may at any time suspend sales or terminate the equity distribution agreement in accordance with its terms. During the year ended September 30, 2023, the Company sold a total of 196,401 common shares pursuant to the agreement for gross proceeds of approximately $ 1.3 million. From November 22, 2021 until terminated on March 21, 2022, the Company had an equity distribution agreement for an at-the-market equity offering program with another sales agent. During the year ended September 30, 2022, the Company sold a total of 89,558 common shares pursuant to the agreement for net proceeds of $ 2.6 million. Black-Scholes option valuation model The Company uses the Black-Scholes option valuation model to determine the fair value of share-based compensation for share options and compensation warrants granted and the fair value of warrants issued. Option valuation models require the input of highly subjective assumptions including the expected price volatility. The Company calculates expected volatility based on historical volatility of the Company’s share price. When there is insufficient data available, the Company uses a peer group that is publicly traded to calculate expected volatility. The Company adopted interest-free rates by reference to the U.S. treasury yield rates. The Company calculated the fair value of share options granted based on the expected life of 5 years considering expected forfeitures during the option term of 10 years. Expected life of warrants is based on warrant terms. The Company did not and is not expected to declare any dividends. 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. Warrants A summary of the Company’s warrants activity is as follows: Number of Warrant Shares (#) Weighted Average Exercise Price Balance - September 30, 2021 102,929 $ 39.83 Issued 418,789 25.13 September 30, 2022 521,718 $ 28.00 Issued 384,496 8.75 Exercised ( 100,760 ) 7.65 Expired ( 84,545 ) 37.29 September 30, 2023 720,909 $ 19.51 F-15 Table of Contents EDESA BIOTECH, INC. Notes to Consolidated Financial Statements For the Years Ended September 30, 2023 and 2022 The weighted average contractual life remaining on the outstanding warrants at September 30, 2023 is 35 months. The following table summarizes information about the warrants outstanding at September 30, 2023: Number of Warrants (#) Exercise Prices Expiry Dates 110,122 $ 7.00 December 2023 1,070 $ 33.67 June 2024 1,687 $ 22.40 January 2025 173,614 $ 10.50 December 2025 15,627 $ 56.00 February 2026 27,399 $ 31.94 March 2027 391,390 $ 24.64 September 2027 720,909 The fair value of warrants issued during the years ended September 30, 2023 and 2022 was estimated using the Black-Scholes option valuation model using the following assumptions: Year Ended September 30, 2023 Year Ended September 30, 2022 Class A Warrants Class B Warrants Common Warrants Placement Agent Warrants Risk free interest rate 4.54 % 4.76 % 2.37 % 2.37 % Expected life 3.14 years 1.14 years 5.5 years 5 years Expected share price volatility 90.73 % 89.70 % 87.09 % 87.09 % Expected dividend yield 0.00 % 0.00 % 0.00 % 0.00 % 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 - Issued 171,389 Exercised ( 171,389 ) Balance - September 30, 2022 - F-16 Table of Contents EDESA BIOTECH, INC. Notes to Consolidated Financial Statements For the Years Ended September 30, 2023 and 2022 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, which amended and restated prior plans. Options, restricted shares and restricted share units are eligible for grant under the 2019 Plan. The total number of shares available for issuance under the terms of the 2019 Plan is 575,737 . The remaining number of shares available to grant at September 30, 2023 is 81,765 . The Company’s 2019 Plan allows options to be granted to directors, officers, employees and certain external consultants and advisers. Under the 2019 Plan, the option term is not to exceed 10 years and the exercise price of each option is determined by the independent members of the Board of Directors. Options have been granted under the 2019 Plan allowing the holders to purchase common shares of the Company as follows: Number of Options (#) Weighted Average Exercise Price Weighted Average Grant Date Fair Value Balance - September 30, 2021 253,777 $ 35.42 $ 26.53 Granted 71,451 25.62 17.36 Forfeited ( 3,851 ) 45.92 34.79 Expired ( 6,524 ) 56.35 45.36 Balance - September 30, 2022 314,853 $ 32.62 $ 23.94 Granted 118,579 7.47 5.23 Forfeited ( 12,779 ) 22.76 16.23 Expired ( 38 ) 1,973.20 1,973.20 Balance - September 30, 2023 420,615 $ 25.60 $ 18.84 There were no options exercised during the years ended September 30, 2023 or September 30, 2022 and there was no intrinsic value of options outstanding at September 30, 2023. The weighted average contractual life remaining on the outstanding options at September 30, 2022 is 85 months. F-17 Table of Contents EDESA BIOTECH, INC. Notes to Consolidated Financial Statements For the Years Ended September 30, 2023 and 2022 The following table summarizes information about the options under the 2019 Plan outstanding and exercisable at September 30, 2023: Number of Options (#) Exercisable at September 30, 2023 (#) Range of Exercise Prices Expiry Dates 497 497 $ 246.96 - 596.82 Dec 2023 - Mar 2025 42,348 42,348 C$ 15.12 May 2024 - Dec 2028 46,285 46,285 $ 22.12 May 2024 - Feb 2030 56,722 56,702 $ 52.08 - 56.49 May 2024 - Oct 2030 93,344 81,048 $ 36.75 - 40.18 Apr 2024 - Sep 2031 68,777 44,441 $ 20.58 - 25.97 Apr 2024 - Feb 2032 112,642 18,334 $ 5.79 - 10.01 Apr 2024 - Jul 2033 420,615 289,655 The options exercisable at September 30, 2023 had a weighted average exercise price of $ 31.03 , no intrinsic value and a weighted average remaining life of 74 months. There were 130,960 options at September 30, 2023 that had not vested with a weighted average exercise price of $ 13.61 no intrinsic value and a weighted average remaining life of 111 months. The fair value of options granted during the years ended September 30, 2023 and 2022 was estimated using the Black-Scholes option valuation model using the following assumptions: Years Ended September 30, 2023 September 30, 2022 Risk free interest rate 3.62 % - 4.18 % 1.71 % - 2.54 % Expected life 5 years 5 years Expected share price volatility 95.3 % - 97.34 % 85.91 % - 86.59 % Expected dividend yield 0.00 % 0.00 % The Company recorded $ 1.2 million and $ 2.3 million of share-based compensation expenses for the years ended September 30, 2023 and 2022, respectively. As of September 30, 2023, the Company had approximately $ 0.5 million of unrecognized share-based compensation expense, which is expected to be recognized over a period of 31 months. Restricted Share Units The Company's 2019 Plan allows restricted share units (RSUs) to be granted to directors, officers, employees and certain external consultants and advisers. Under the 2019 Plan, the RSU term is not to exceed 10 years. The fair value is based on the 5-day VWAP of the Company's common shares up to the date of grant. The following is a summary of changes in the status of RSUs from October 1, 2021 through September 30, 2023: Number of RSU (#) Weighted Average Grant Date Fair Value Balance - September 30, 2021 and 2022 - $ - Granted 46,602 5.60 Converted to common shares ( 13,557 ) 5.60 Balance - September 30, 2023 33,045 $ 5.60 The following table summarizes information about the RSUs under the 2019 Plan outstanding and exercisable at September 30, 2023: Number of RSU(#) Expiry Date Fully-vested RSUs 33,045 August 4, 2033 The RSUs that were granted in the current year were in lieu of cash bonuses for certain employees and in lieu of payments on consulting invoices for services prior to the appointment of the new Chief Financial Officer. All RSUs that were granted in the current year vested immediately upon the grant date. The outstanding RSUs can be converted to common shares by the holder at any time prior to the expiry date. There is no future unrecorded compensation expense for the RSUs. F-18 Table of Contents EDESA BIOTECH, INC. Notes to Consolidated Financial Statements For the Years Ended September 30, 2023 and 2022 9. Government Contributions Reimbursement grant income for the Company’s federal grant with the Canadian government’s SIF is recorded based on the claim period of eligible costs. In February 2021, the Company entered into the 2021 SIF Agreement with the Canadian Government. Under the 2021 SIF Agreement, the Government of Canada committed up to C$ 14.1 million in nonrepayable funding which was intended to support research and development related to our EB05 clinical program. Under the February 2021 SIF Agreement the Company recorded grant income of $ 0.8 million for the year ended September 30, 2022. No grant income was recorded under the 2021 SIF Agreement during the year ended September 30, 2023. No further funding will be received from the 2021 SIF Agreement. In October 2023, the Company entered into the 2023 SIF Agreement with the Canadian Government. Under the 2023 SIF Agreement, the Government of Canada committed up to C$23 million in partially repayable funding toward (i) conducting and completing the Company’s Phase 3 clinical study of its experimental drug EB05 in critical-care patients with Acute Respiratory Distress Syndrome (ARDS) caused by COVID-19 or other infectious agents, (ii) submitting EB05 for governmental approvals and manufacturing scale-up, following, and subject to, completing the Phase 3 study and (iii) conducting two non-clinical safety studies to assess the potential long-term impact of EB05 exposure (the Project). Of the C$23 million committed by SIF, up to C$5.8 million is not repayable by the Company. The remaining C$17.2 million is conditionally repayable starting in 2029 only if and when the Company earns gross revenue . The repayable portion would be payable over fifteen ( 15 ) years based on a percentage rate of the Company’s annual revenue growth. The maximum amount repayable under the Agreement is 1.4 times the original repayable amount. In addition, the Company is entitled to partial reimbursement of certain eligible expenses under the Agreement. Under the Agreement, the Company agreed to certain financial and non-financial covenants and other obligations in relation to the Project. Pursuant to the Agreement, certain customary events of default, such as the Company’s or Edesa Biotech Research’s breach of their covenants and obligations under the Agreement, their insolvency, winding up or dissolution, and other similar events, may permit the Government of Canada to declare an event of default under the Agreement. Upon an event of default, subject to applicable cure, the Government of Canada may exercise a number of remedies, including suspending or terminating funding under the Agreement, demanding repayment of funding previously received and/or terminating the Agreement. The funding and any associated conditional repayments are not secured by any assets of Edesa Biotech Research or the Company. The Agreement will expire on the later of December 31, 2042 or the date of the last repayment, unless earlier terminated, subject to certain provisions that extend three (3) years beyond the term or early termination of the Agreement . Under the October 2023 SIF Agreement the Company recorded grant income of $ 0.6 million for the year ended September 30, 2023. No grant income was recorded under the 2023 SIF Agreement during the year ended September 30, 2022. 10. Income Tax The reconciliation of the combined Canadian federal and provincial statutory income tax rate to the approximate effective tax rate is as follows: Years Ended September 30, 2023 September 30, 2022 Net loss before recovery of income taxes $ ( 8,374,000 ) $ ( 17,548,000 ) Canadian federal and provincial statutory income tax rate 26.5 % 26.5 % Expected income tax recovery $ ( 2,219,000 ) $ ( 4,650,000 ) Effect of foreign currency and foreign tax rate differences ( 207,200 ) 976,800 Permanent differences 339,000 650,000 Share issuance cost booked through equity or capitalization ( 89,000 ) ( 449,000 ) Non-capital losses limitation - U.S. 899,000 - Other ( 94,000 ) - Change in valuation allowance 1,372,000 3,473,000 Income tax (recovery) expense $ 800 $ 800 F-19 Table of Contents EDESA BIOTECH, INC. Notes to Consolidated Financial Statements For the Years Ended September 30, 2023 and 2022 Components of the net deferred tax asset or liability Deferred taxes are provided as a result of temporary differences that arise due to the difference between the income tax values and the carrying amount of assets and liabilities. Approximate deferred tax assets and liabilities are as follows: September 30, 2023 September 30, 2022 Non-capital losses carried forward - Canada $ 13,943,000 $ 11,740,000 Non-capital losses carried forward - U.S. 731,000 1,631,000 Research and development tax credits 1,371,000 1,052,000 Share issuance and financing costs 585,000 686,000 Right-of-use lease liabilities 25,000 5,000 Other temporary differences 43,000 15,000 Subtotal $ 16,699,000 $ 15,129,000 Less: valuation allowance ( 16,466,000 ) ( 15,093,000 ) Total net deferred tax assets $ 233,000 $ 36,000 Property and equipment $ ( 3,000 ) $ ( 15,000 ) Right-of-use assets ( 24,000 ) ( 5,000 ) Grant Income receivable ( 153,000 ) - Deferred share issuance costs ( 53,000 ) ( 16,000 ) Total deferred tax liabilities $ ( 233,000 ) $ ( 36,000 ) Net deferred taxes $ - $ - Realization of the deferred tax assets is dependent upon the generation of future taxable income, the amount and timing of which are uncertain. It is more likely than not that a tax benefit will not be realized. Accordingly, net deferred tax assets have been fully offset by a valuation allowance. Non-capital losses, capital losses, and research and development credits generated by Edesa Biotech USA, Inc. prior to changes in share ownership that occurred as a result of the reverse acquisition are substantially limited. It is unlikely that tax losses totaling $ 29.6 million and credits totaling $ 0.6 million will be utilized to offset potential future taxable income before expiration and they are excluded from deferred tax assets above. The approximate Canadian non-capital losses carried forward at September 30, 2023 expire as follows: 2025 C$ 21,000 2026 56,000 2027 114,000 2028 233,000 2029 688,000 2030 860,000 2031 685,000 2032 673,000 2033 107,000 2034 1,941,000 2035 2,207,000 2036 2,216,000 2037 2,123,000 2038 3,500,000 2039 1,732,000 2040 7,992,000 2041 12,675,000 2042 22,387,000 2043 10,765,000 Total C$ 70,975,000 F-20 Table of Contents EDESA BIOTECH, INC. Notes to Consolidated Financial Statements For the Years Ended September 30, 2023 and 2022 Share issuance and financing costs will be fully amortized in 2026. The U.S. non-capital losses carried forward at September 30, 2023 totaled approximately $ 3.4 million, which do not expire for federal taxes. The U.S. state research and development tax credits carried forward at September 30, 2023 totaled approximately $ 0.6 million, which do not expire for state taxes. The approximate U.S. state non-capital losses carried forward at September 30, 2023 expire as follows: 2039 $ 70,000 2040 150,000 2041 68,000 2042 6,000 Total $ 294,000 11. Financial instruments (a) Fair values The Company uses the fair value measurement framework for valuing financial assets and liabilities measured on a recurring basis in situations where other accounting pronouncements either permit or require fair value measurements. The Company follows the fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are inputs that reflect assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. There are three levels of inputs that may be used to measure fair value: · Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. · Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets and liabilities in markets that are not active. · Level 3 - Unobservable inputs for the asset or liability that are supported by little or no market activity. 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. (b) Interest rate and credit risk Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in interest rates. The Company does not believe that the results of operations or cash flows would be affected to any significant degree by a significant change in market interest rates, relative to interest rates on cash and cash equivalents due to the short-term nature of these balances. The Company is also exposed to credit risk at period end from the carrying value of its cash and cash equivalents and accounts and other receivable. The Company manages this risk by maintaining bank accounts with Canadian Chartered Banks, 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 and terms, as well as an analysis of historical collection rates, general economic conditions and credit status of government agencies. Credit risk for the reimbursement grant and HST refunds receivable are not considered significant since amounts are due from the Canadian government’s SIF and the Canada Revenue Agency. F-21 Table of Contents EDESA BIOTECH, INC. Notes to Consolidated Financial Statements For the Years Ended September 30, 2023 and 2022 (c) Foreign exchange risk The Company and its subsidiary have balances in Canadian dollars that give rise to exposure to foreign exchange (FX) risk relating to the impact of translating certain non-U.S. dollar balance sheet accounts as these statements are presented in U.S. dollars. A strengthening U.S. dollar will lead to a FX loss while a weakening U.S. dollar will lead to a FX gain. The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks. At September 30, 2023, the Company and its Canadian subsidiary had assets denominated in Canadian dollars of approximately C$ 3.0 million and the U.S. dollar exchange rate at this date was equal to 1.3581 Canadian dollars. Based on the exposure at September 30, 2023, a 10% annual change in the Canadian/U.S. exchange rate would impact the Company’s loss and other comprehensive loss by approximately $0.2 million . (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. 12. Loss per Share The Company had securities outstanding which could potentially dilute basic earnings per share in the future but were excluded from the computation of diluted loss per share in the periods presented, as their effect would have been anti-dilutive. 13. Related party transactions During each of the years ended September 30, 2023 and 2022, the Company paid cash of $ 82,000 and $ 81,000 , respectively, for a ROU lease from a company controlled by the Company's CEO. These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by both parties. On December 31, 2022, the Company executed a two-year lease extension through December 31, 2024 in accordance with the terms of the original lease agreement. Rents of approximately $ 15,000 and $ 22,000 were payable at September 30, 2023 and September 30, 2022, respectively. 14. Subsequent events Subsequent to the year end, equity sales under the Company’s at-the-market offering program have resulted in the issuance of 89,241 common shares and receipt of net cash proceeds of $ 0.3 million after deducting sales agent commissions. In October 2023, the Company entered into $ 10.0 million revolving credit agreement with a company controlled by the Company's CEO, providing an unsecured revolving credit facility, with a credit limit of $ 3.5 million. No amounts have been drawn on the credit agreement subsequent to the year end. F-22