Medicus Pharma Ltd.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(EXPRESSED IN UNITED STATES DOLLARS EXCEPT NUMBER OF SHARES)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(EXPRESSED IN UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' (DEFICIT) EQUITY

(EXPRESSED IN UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(EXPRESSED IN UNITED STATES DOLLARS)

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN UNITED STATES DOLLARS, EXCEPT SHARE AMOUNTS)

1. Description of business

Medicus Pharma Ltd. (the "Company"), formerly Interactive Capital Partners Corporation, is a clinical stage, multi-strategy, life sciences, biotech company focused on investing in and accelerating clinical development programs of novel and potentially disruptive therapeutic assets.

The Company is a public limited company originally incorporated pursuant to the provisions of theBusiness Corporations Act (Ontario) on April 30, 2008, as a private company named Interactive Capital Partners Corporation, with nominal assets and liabilities. The Company's registered office is located at 100 King Street West, Suite 3400, One First Canadian Place, Toronto, Ontario, Canada, and its head office is located at 300 Conshohocken State Rd., Suite 200, W. Conshohocken, PA.

2. Summary of significant accounting policies

Basis of presentation and consolidation

The accompanying unaudited condensed consolidated financial statements included herein have been prepared in conformity with generally accepted accounting principles in the United States ("GAAP") and under the rules and regulations of the United States Securities and Exchange Commission ("SEC") for interim reporting. The accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, that are necessary to present fairly the Company's financial position, results of operations, and cash flows. The condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosures of the Company normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted under the SEC's rules and regulations. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes thereto for the year ended December 31, 2025, included in the Company's Annual Report on Form 10-K, as amended, originally filed with the SEC on March 25, 2026 (the "2025 Annual Report"). These condensed consolidated financial statements include the financial statements of the Company and its subsidiaries, SkinJect, Inc. (“SkinJect”), Medicus Pharma Inc., Antev Limited ("Antev") and MDCX Holdings, LLC. All intercompany balances and transactions have been eliminated on consolidation. Non-controlling interest in the consolidated financial statements represents the portion of Antev not 100% owned by the Company. The functional currency of the Company and its three wholly-owned subsidiaries, SkinJect, Inc., Medicus Pharma Inc. and MDCX Holdings, LLC is the United States dollar (USD). The functional currency of the Company's other subsidiary, Antev is Pound Sterling (GBP).

Foreign operations remeasurement and translation

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates, are generally recognized in the condensed consolidated statements of operations and comprehensive loss. The results and financial position of foreign operation which has functional currency different from presentation currency are translated into the presentation currency as follows: assets and liabilities are translated at the closing rate at the date of that statement of financial position, income and expenses are translated at average exchange rates, and all resulting translated exchange differences are recognized in a separate component of other comprehensive loss within the condensed consolidated statement of changes in shareholders equity.

Use of estimates

The preparation of these condensed consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, and the reported amounts of income and expenses during the reporting period. Such estimates include the valuation of stock-based awards, the incremental borrowing rate used to discount the Company's operating lease liabilities, fair value of the Company's debentures and secured promissory notes and warrants, and valuation allowance on deferred tax assets, all of which are management's best estimates. Estimates are based on historical experience, where applicable, and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in estimates in future years could be significant. Management believes that the estimates utilized in preparing the financial statements are reasonable, however, actual results could differ from those estimates.

Operating segments

Operating segments are identified as components of an entity about which separate discrete financial information is available for evaluation by the chief operating decision-maker ("CODM") in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business inone operating segment.

Recently issued accounting pronouncements

In November 2024, the FASB issued ASU 2024-03 "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures" to provide greater transparency about the components of specific expense categories in the income statements. The effective dates of ASU 2024-03 were subsequently clarified by ASU 2025-01. ASU 2025-01 is effective for our annual period beginning January 1, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting the amendment on the Company's financial statements.

There were no other significant updates to the recently issued accounting standards which may be applicable to the Company. Although there are several other new accounting pronouncements issued or proposed by the FASB, the Company does not believe any of those accounting pronouncements have had or will have a material impact on its financial position or operating results.

3. Balance sheet components

Prepaid expenses and other current assets include the following:

Accrued expenses and other current liabilities include the following:

4. Leases

As of September 30, 2026, the Company had one operating lease for its corporate office that commenced in 2024, for which the Company recorded a right-of-use asset and lease liability as of the commencement date. The Company's lease does not contain a purchase option. Where the Company's lease contains an option to extend the lease term, the extended lease term is only included in the measurement of the lease when it is reasonably certain to remain in the lease beyond the non-cancellable term. The Company's lease also contains variable lease costs, which pertain to common area maintenance and other operating charges, that are expensed as incurred.

Balance sheet information related to the Company's lease is presented below:

Other information related to leases is presented below:

As of September 30, 2026, the annual future minimum lease payments of the Company's operating lease liabilities were as follows:

5. Share capital

Authorized

The Company has authorized an unlimited number of common shares participating, voting and without nominal or par value. Each holder of common shares is entitled to one vote for each share owned on all matters voted upon by shareholders.

Share Consolidation

At the Company's 2026 Annual General meeting and Special Meeting held on June 3, 2026, the Company's shareholders approved a proposal authorizing the Company's board of directors to effect a consolidation of the common shares at a ratio of up to 50-to-1. Subsequently, the Company's board of directors approved a share consolidation of the Company's common shares on a 50-to-1 basis, which became effective on October 12, 2026.

As a result of the share consolidation, every 50 pre-split common shares issued and outstanding were automatically combined into one new common share. No fractional common shares were issued in connection with the consolidation. Shareholders who otherwise were entitled to receive a fractional share because they held a number of shares not evenly divisible by the share consolidation ratio were rounded down to the next whole share with cash paid in lieu of such fractional shares.

Pursuant to the anti-dilution provisions of the Company's option and warrant agreements, the 50-to-1 share consolidation proportionally adjusted the terms of all outstanding options and warrants, so that 50 options or warrants are now required to purchase one common share. Accordingly, the number of options and warrants outstanding remain unchanged under the original agreements. However, the number of common shares that the options and warrants can be exercised for were adjusted to reflect the share consolidation.

All share, option, warrant and per share amounts in the accompanying unaudited condensed consolidated financial statements and related notes have been retroactively adjusted to reflect the share consolidation for all periods presented.

Regulation A Offering

On March 10, 2025, the Company closed a Tier II Regulation A offering for gross proceeds of $4,172,000. The Company issued 29,800 units at a price of $140 per unit. Each unit consisted of one common share of the Company and one warrant to purchase one common share of the Company (each a "Regulation A Warrant"). The Regulation A Warrants have an exercise price of $140 per share and will expire 5 years from the date of issuance on March 10, 2030. The Company incurred total issuance costs of $483,020, including legal fees and placement fees directly related to the issuance. The issuance costs incurred were recognized as a reduction in equity and allocated based on the relative fair values of the Regulation A Warrants and common shares on a standalone basis. The fair value of the common shares was based on the Company's share price on the day of issuance of $170 and the fair value of the Regulation A Warrants was $131.50 per warrant. The Regulation A Warrants were recognized in additional paid-in capital as they met the criteria for equity classification.

The Company's Regulation A Warrants are not actively traded and are therefore classified as Level 3 within the fair value hierarchy. The fair value of these warrants is estimated using a Black-Scholes option pricing model. The valuation incorporates significant unobservable inputs and management judgment.

As of September 30, 2026,29,476 of the 29,800 Regulation A Warrants have been exercised for cash for proceeds to the Company of $4,126,639. No Regulation A Warrants were exercised during the nine months ended September 30, 2026.

The fair value of the Regulation A Warrants were estimated using the Black-Scholes model with the following assumptions:

Warrant activity as below:

The number of warrants outstanding as at the nine months ended September 30, 2026:

Standby Equity Purchase Agreement and At the market program

On February 10, 2025, the Company also announced that it had entered into a standby equity purchase agreement (the "SEPA") with YA II PN, Ltd. ("Yorkville"). Pursuant to the SEPA and subject to the satisfaction of certain conditions, Yorkville was committed to purchase the Company's common shares in increments up to an aggregate gross sales price of $15,000,000 during the 36 months following the date of the SEPA (such shares, the "Shares"). The Shares were to be sold at the Company's option pursuant to the SEPA at 97% of the Market Price (as defined pursuant to the SEPA) and purchases were subject to certain limitations set forth in the SEPA. For the nine months ended September 30, 2026, the Company issued 106,735 common shares pursuant to the SEPA at market prices for gross proceeds of $4,229,823 and net proceeds of $4,102,740. During the nine months ended September 30, 2026, $3,223,980 of the gross proceeds received under the SEPA were held back to partially repay the Company's Yorkville debenture and related interest obligations. The Company and YA II PN, LTD mutually agreed to terminate the SEPA, effective September 11, 2026.

On December 29, 2025, the Company entered into an equity distribution agreement (the "ATM Agreement") with Maxim Group LLC and Yorkville Securities LLC ("Yorkville Securities" and together with Maxim Group LLC, the "Agents") to create an at-the-market equity program (the "ATM"). Under the ATM Agreement, the Company may offer and sell its common shares from time to time through the Agents. The Company agreed to pay the Agents a commission equal to 3% of the gross sales from the sales of the shares pursuant to the ATM Agreement. For the nine months ended September 30, 2026, the Company has issued 1,035,449 common shares as part of the program. The gross proceeds from the issuance were $17,770,248.

6. Stock-based compensation

At September 30, 2026, the Company had in place a stock option plan for employee, non-employee directors, and consultants of the Company (the "Plan"). The Plan provides both for the direct award or sale of shares and for the grant of options to purchase shares. Under the plan, the total number of shares available for options cannot exceed 10% of the Company's issued and outstanding common shares at the time of any grant. The Company is authorized to issue options to employees, non-employee directors and consultants under the plan.

On March 30, 2026, the Company issued 19,500 stock options to directors, officers, and employees of the Company. The options are exercisable at $25 per share, expire five years from the grant date, and vest quarterly over aone-year period. On June 3, 2026, the Company issued an additional 41,500 stock options to directors, officers, and employees of the Company. The options are exercisable at $18 per share, expire five years from the grant date, and vest quarterly over aone-year period. On September 4, 2026, the Company issued 29,000 options to directors, officers and employees of the Company. The options are exercisable at $8.53 per share, expire five years from the grant date, and vest quarterly over aone year period. On September 27, 2026, the Company issued 1,000 options to a consultant of the Company. The options are exercisable at $7.50 per share, expire five years from the grant date, and vest quarterly over aone year period. During the three months ended June 30, 2026, the Company accelerated the vesting of all outstanding options, other than 41,500 options that were granted during the second quarter of 2026. This resulted in additional share-based compensation of $699,834.

The following table summarizes option transactions for the Plan:

As of September 30, 2026, there were $542,574 of unrecognized stock-based compensation cost related to share options outstanding, which is expected to be recognized over a weighted-average period of 0.80 years.

The weighted average grant date fair value of awards for options granted during the nine months ended September 30, 2026, was $10.74. The fair value of options granted was estimated using the Black-Scholes option pricing model, resulting in the following weighted average assumptions for the options granted:

For the three and nine months ended September 30, 2026, stock-based compensation expense was $131,775 and $2,136,908. For the three and nine months ended September 30, 2025, stock-based compensation expense was $852,757 and $1,082,482. Stock-based compensation expense has been reported in the Company's condensed consolidated statements of operations and comprehensive loss within the line items 'general and administrative' expenses.

7. Related party transactions

On October 18, 2023, the Company signed an agreement with RBx Capital, LP (“RBx”), a family office controlled by the Company’s Executive Chairman and CEO, that provides for certain managerial positions to be filled from within RBx. RBx is responsible for the payment and provision of all wages, bonuses, and benefits for these positions. In January 2026, reimbursable salaries paid to RBx pursuant to this agreement were increased to $125,000 per month from $100,000 per month. Reimbursable salaries paid to RBx were $375,000 and $300,000 during the three months ended September 30, 2026, and 2025, respectively. Reimbursable salaries paid to RBx were $1,125,000 and $900,000 during the nine months ended September 30, 2026, and 2025, respectively. Additional expenses of $132,205 and $128,879 were incurred by RBx on behalf of the Company during the three months ended September 30, 2026, and 2025, respectively. Additional expenses of $281,310 and $233,790 were incurred by RBx on behalf of the Company during the nine months ended September 30, 2026, and 2025, respectively. The total amount of accounts payable to RBx was $162,649 and $194,152 as of September 30, 2026, and December 31, 2025, respectively. The reimbursable salaries and additional expenses incurred by RBx on behalf of the Company are included in general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss.

8. Fair value measurements

The accounting guidance for fair value establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, or which require the reporting entity to develop its own assumptions.

The Company's cash and cash equivalents and restricted cash are classified as Level 1. The fair value of the Company's cash and cash equivalents is determined based on market pricing that is both objective and publicly available. As of September 30, 2026 and December 31, 2025, the fair value of the Company's cash and cash equivalents and restricted cash were $13,094,830 and $8,705,218, respectively. As of September 30, 2026 and December 31, 2025, the Company's cash equivalents are invested in money market funds.

The Company did not reclassify any investments between levels in the fair value hierarchy during the periods presented.

The carrying value of the Company's secured promissory notes described in Note 12 below approximates the fair value since the financial instrument is short-term with a maturity date of November 27, 2027. As of September 30, 2026 and December 31, 2025, the carrying amounts of the Company's other financial instruments, which include cash and cash equivalents and restricted cash, accounts payable and accrued expenses approximate fair values because of their short-term maturities.

9. Commitments and contingencies

Commitments

As part of the acquisition of Antev, the Company may be required to make future payments contingent on the achievement of specified milestones. These potential payments represent a commitment and may result in future cash outflows. As these milestones conditions are not considered probable, the Company has not recognized liability related to the contingent consideration.

Pursuant to the terms of the Antev Acquisition, the Company acquired 98.60% of ownership in Antev including all the assets and its In-Process Research and Development (IPR&D) - Teverelix. There was additional contingent consideration based on the following development milestones of the IPR&D:

As described in Note 10, the Company entered into a Co-Development and License Agreement with Pfizer Inc. ("Pfizer"). Under the agreement the pharmaceutical company is eligible to receive development and regulatory milestone payments upon the achievement of specified clinical and regulatory events across multiple indications, as well as sales-based milestone payments upon the achievement of specified annual and cumulative net sales threshold. Pfizer is eligible to receive tiered royalties on annual net sales of products on a product-by-product and country-by-country basis during the royalty term. The aggregate potential, regulatory and sales milestone payments under Co-Development and License Agreement exceed $1.0 billion, assuming achievement of all applicable milestones across multiple indications and commercial thresholds.

As of September 30, 2026, the Company had no other long-term commitments.

Contingencies

In the ordinary course of business, from time to time, the Company may be involved in various claims related to operations, rights, commercial, employment or other claims. Although such matters cannot be predicted with certainty, management does not consider the Company's exposure to such claims to be material to these consolidated financial statements.

10. Acquisition of In-process research and development asset ("IPR&D")

On September 2, 2026, the Company entered into a co-development and license agreement (the "Agreement") with Pfizer (the "Licensor") relating to CD228V, an investigational antibody-drug conjugate currently under clinical development. Under the Agreement, the Company acquired certain rights to develop, manufacture and commercialize CD228V and related products, together with certain regulatory, clinical and development-related materials. The acquired materials primarily consist of materials to support ongoing clinical and development activities. No material amount of inventory was acquired as part of the transaction.

The Company determined that the transaction represents an asset acquisition and that the acquired CD228V rights constitute in-process research and development ("IPR&D") with no alternative future use. Accordingly, the acquisition cost attributable to the acquired IPR&D was recognized in expense in the unaudited condensed consolidated statement of operations and comprehensive loss.

Under the Agreement, the Company was required to make a one-time, non-refundable and non-creditable upfront payment of $12.0 million on September 2, 2026. The Company recognized the applicable acquisition cost as acquired IPR&D expense during the three and nine months ended September 30, 2026.

In connection with the Agreement, the Licensor paid the Company a one-time, non-refundable and non-creditable $2.0 million development funding payment, which is required to be used to fund development activities for CD228V under the development plan. As of September 30, 2026, the Company had incurred qualifying costs in excess of the development funding received. Accordingly, the Company recognized the $2.0 million payment as a reduction of the related acquired IPR&D expense. As a result, the Company recognized net acquired IPR&D expense of $10.0 million in the unaudited condensed consolidated statement of operations and comprehensive loss during the three and nine months ended September 30, 2026.

The Agreement provides for an additional payment of $15.0 million to be made on the first anniversary of the effective date of the agreement September 2, 2027, unless the Company exercises its right to terminate the Agreement by providing written notice of termination by June 4, 2027, provided the first patient has not yet been dosed in the Phase 1 clinical trial. If the first patient is dosed before June 4, 2027, the Company would instead be required to provide at least 90 days' notice before such dosing occurs to terminate the Agreement. If the Company exercises its termination right, the rights and obligations under the Agreement cease. As the Company's ability to terminate the Agreement is within the Company's control, no liability for the $15.0 million payment was recognized as of September 30, 2026.

The Agreement also provides for additional payments upon the achievement of certain development, regulatory and sales milestones and royalties on future sales of licensed products. As of September 30, 2026, the applicable events triggering the development milestone payments had not occurred and no related liability was recognized as noted in Note 9, Commitments.

11. Segment reporting

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the chief operating decision maker ("CODM") in deciding how to allocate resources to an individual segment and in assessing performance. The Company manages the business activities on a consolidated basis and operates asone reportable segment that constitutes all of the consolidated entity, which is the business of advancing the clinical development program of the Company's product, while opportunistically identifying, evaluating, and acquiring accretive assets, properties or businesses. The Company's CODM is its Chief Executive Officer. The accounting policies of the segment are the same as those described in the summary of significant accounting policies. The CODM uses consolidated net loss to measure segment loss, allocate resources and assess performance. Additionally, the CODM reviews cash forecast models to determine where the Company will invest in planned research and development activities. As the Company's operations are comprised of a single reporting segment, the segment assets are reflected on the accompanying condensed consolidated balance sheet as Total Assets. Segment asset information is not used by the CODM to allocate resources.

The following table is representative of the significant expense categories regularly provided to the CODM when managing the Company's single reporting segment. A reconciliation to consolidated operating expenses as the Company's single segment operating loss for the three and nine months ended September 30, 2026 and 2025 is included in the table below:

12. Debentures and Secured Promissory Notes

On September 17, 2025, the Company entered into a securities purchase agreement with Yorkville to issue a debenture with the principal amount of $8,000,000 issued at a discount of $633,707 for proceeds of approximately $7,366,293. Interest accrued on the outstanding principal amount of the debenture at an annual rate of 8%, subject to a potential increase to 18% per annum upon the occurrence of certain events of default. The debenture had a maturity date of September 17, 2026, and was to be repaid using proceeds from the SEPA; however, on May 27, 2026, the Company used part of the proceeds from the issuance of the Secured Promissory Notes (as defined herein) to repay and extinguish the outstanding balance and accrued interest owing on the debenture.

The debenture was initially recorded at fair value, based on the discounted proceeds. Subsequently, the Company accounted for the debenture at amortized cost using the effective interest rate method, resulting in accretion expense of $374,712 for the nine months ended September 30, 2026. The effective interest rate calculated was 32.75% as of the repayment date. On May 27, 2026, the Company repaid the outstanding principal balance of $2,343,778 related to the Yorkville debenture, together with accrued interest of $135,664, using proceeds received from the issuance of the Secured Promissory Notes.

On May 27, 2026, the Company entered into a Note Purchase Agreement with Streeterville Capital, LLC ("Streeterville"), pursuant to which the Company issued two secured promissory notes with aggregate principal amounts of $22,864,225. The first promissory note ("Note A") was issued with a face value of $12,864,225 and a purchase price of $12,000,000, resulting in an issue discount of $864,225. The second promissory note ("Note B") was issued with a principal amount of $10,000,000. Note A bears interest at 8.75% per annum compounded daily and Note B bears interest at 5.0% per annum compounded daily. Both promissory notes mature on November 27, 2027.

The Secured Promissory Notes are secured by a first-ranking security interest over substantially all assets of the Company. Guarantees are provided by the Company's subsidiaries.

The Company evaluated the transaction under ASC 470-50, Debt Modifications and Extinguishments, and determined that the issuance of the Streeterville promissory notes and repayment of the Yorkville debenture should be accounted for as an extinguishment of debt. Accordingly, the carrying amount of the Yorkville debenture was derecognized upon settlement, and the newly issued promissory notes were recognized as new debt instruments.

The Company initially recorded the Note A and Note B ("promissory notes") at fair value based on the proceeds received, net of directly attributable debt issuance costs. Subsequently, the Company accounts for the promissory notes at amortized cost using the effective interest method. Debt issuance costs are amortized over the contractual life of the respective promissory notes. The Company incurred $615,000 in debt issuance cost related to the promissory notes.

The Note A permits the lender to require monthly redemptions beginning on the seventh month following the issuance, subject to the terms of the agreement. Beginning on the seventh month following the issuance date, the lender has the right to require monthly redemptions of up to $500,000 per month plus make-whole interest calculated as if the redeemed amount had remained outstanding until maturity. If the Company fails to satisfy a redemption notice within the required period, the outstanding balance is increased by 20% of the applicable redemption amount. In addition, beginning on the sixth month following the issuance date, both Note A and Note B permit the lender to require limited redemptions of up to 5% of the cumulative daily dollar trading volume during specified redemption windows when the Company's common shares trade at least 15% above the defined Minimum Price per the agreement. Such limited redemptions are payable at 110% of the applicable redemption amount.

Both Note A and Note B contain customary trigger event and event of default provisions, including payment defaults, insolvency events, delisting determinations and specified corporate transactions. Upon the occurrence of trigger events, the lender may increase the outstanding balance by 5% for certain minor trigger events or 15% for certain major trigger events, subject to contractual limitations. Following an event of default, the lender may accelerate repayment and default interest may accrue at a rate of up to 18% per annum, subject to applicable law.

In connection with Note B, $10,000,000 of the proceeds were deposited into a restricted deposit account maintained pursuant to a Deposit Account Control Agreement. The lender has control rights over the account upon the occurrence of specified trigger events and may direct the disposition of funds in the account. Under certain circumstances, amounts outstanding under Note B may be exchanged into additional Note A borrowings. Specifically, for each $2.0 million of Note A principal repaid, up to $1.0 million of the outstanding Note B balance may be exchanged into a new Note A advance, subject to the conditions set out in the financing agreements.

The Company entered into a Note exchange agreement with the lender on September 1, 2026. The Company exchanged $2,000,000 of Note B borrowings to a separate Note A-2 borrowing. Upon execution of the exchange the Note A-2 was issued at a face value of $2,139,037 and a purchase price of $2,000,000, resulting in an issuance discount of $139,037. Note A-2 bears interest of 8.75% per annum compounded daily and matures at the same time as Note A and B above on November 27, 2027. Upon the exchange, the $2,000,000 related to Note A-2 was no longer subject to the restrictions applicable to Note B.

In connection with the exchange agreement, a side letter was signed that required the Company to make a mandatory prepayment upon receipt of proceeds from certain equity fundraising or other financing transactions. The required prepayment is equal to the lesser of 25% of the gross proceeds from the applicable financing transaction and the aggregate outstanding balance of the A Notes and is payable within two trading days of receipt of the proceeds. The lender may determine the outstanding A Note against which the mandatory prepayment is applied. As at September 30, 2026 the Company has repaid $860,680 of the Note A principal based on the financing proceeds received.

The Company evaluated the exchange transaction under ASC 470-50, Debt Modification and Extinguishment and determined that the exchange of Note B to Note A-2 should be accounted for as a debt modification. Accordingly, the carrying amount of the modified portion of Note A and Note B was carried forward and adjusted for the effects of the modification. The Company incurred $7,411 in debt issuance cost related to the promissory notes exchange which was expensed during the nine months ended September 30, 2026.

The Note A-2 permits the lender to require monthly redemptions beginning December 27, 2026, subject to the terms of the agreement. The lender has the right to require monthly redemptions of up to $100,000 per month plus make-whole interest calculated as if the redeemed amount had remained outstanding until maturity. If the Company fails to satisfy a redemption notice within the required period, the outstanding balance is increased by 20% of the applicable redemption amount. In addition, beginning on November 27, 2026 Note A-2 permits the lender to require limited redemptions of up to 5% of the cumulative daily dollar trading volume during specified redemption windows when the Company's common shares trade at least 15% above the defined Minimum Price per the agreement. Such limited redemptions are payable at 110% of the applicable redemption amount.

Similar to Note A and Note B, Note A-2 contains customary trigger event and event of default provisions, including payment defaults, insolvency events, delisting determinations and specified corporate transactions. Upon the occurrence of trigger events, the lender may increase the outstanding balance by 5% for certain minor trigger events or 15% for certain major trigger events, subject to contractual limitations. Following an event of default, the lender may accelerate repayment, and default interest may accrue at a rate of up to 18% per annum, subject to applicable law.

As at September 30, 2026, the Company was in compliance with the terms and covenants of all the notes.

The Company evaluated the embedded features contained within the promissory notes, and concluded that certain features would require bifurcation under ASC 815; however, the fair value of such features was determined to be de minimis. Accordingly, no embedded derivative liability was recorded as of September 30, 2026.

As of September 30, 2026, total accrued interest related to the promissory notes was $573,596. The interest is payable at maturity or upon redemption of the principal. Of the total accrued interest, $289,710 was included in the current portion of interest payable on secured promissory notes and $283,886 was included in the non-current portion of interest payable on secured promissory notes on the condensed consolidated balance sheet, with the corresponding amounts recognized in interest expense in the condensed consolidated statement of operations and comprehensive loss.

13. Restricted Cash

As of September 30, 2026, cash of $8.08 million was held in a restricted deposit account maintained by a subsidiary of the Company pursuant to the Deposit Account Control Agreement entered into in connection with the Note B financing. The funds are subject to a first-ranking security interest in favour of the lender and are not available for general corporate purposes except in accordance with the financing arrangements. Accordingly, the balance has been presented as restricted cash in the condensed interim consolidated balance sheet.

14. Liquidity and Going Concern

The Company expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. In addition to the ATM and Secured Promissory Notes (as defined herein), management believes that the Company has access to additional capital resources through public and/or private equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, it is possible that the Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into strategic alliances or other arrangements on favorable terms, or at all. Further, the terms of any financing may adversely affect the holdings or the rights of the Company’s shareholders. If the Company is unable to secure additional capital, it may be required to take additional measures to reduce costs in order to conserve its cash in amounts sufficient to sustain operations and meet its obligations. These measures could cause significant delays or entirely prevent the Company’s continued efforts to progress its research and development program, pursue product portfolio expansion or commercialize its current or future products, each of which is critical to the realization of the Company’s business plan and its future operations. The Company has reprioritized certain development programs and reduced the pace of planned expenditures while it evaluates potential strategic partnerships and other funding opportunities to support the continued advancement of these programs. This uncertainty, together with the Company’s continued losses and outstanding debt obligations, indicates that substantial doubt exists about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.

The Company is subject to risks associated with any specialty biotechnology company that has substantial expenditures for research and development. There can be no assurance that the Company's research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable.

15. Loss per share

Basic and diluted net loss per share attributable to common shareholders was calculated as follows:

The Company's potentially dilutive securities as of September 30, 2026 and 2025, include stock options and warrants. The Company excluded the potential common shares outstanding at each period end from the computation of diluted net loss per share attributable to common shareholders for the period ended September 30, 2026 and 2025 because including them would have had an anti-dilutive effect.

The following potentially dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding as they would be anti-dilutive:

16. Subsequent events

Share Consolidation:

At the Company's 2026 Annual General meeting and Special Meeting held on June 3, 2026, the Company's shareholders approved a proposal authorizing the Company's board of directors to effect a consolidation of the common shares at a ratio of up to 50 to 1. Subsequently, the Company's board of directors approved a share consolidation of the Company's common shares on a 50 to 1 basis, which became effective on October 12, 2026.

All share and per share amounts in the accompanying unaudited condensed consolidated financial statements and related notes have been retroactively adjusted to reflect the share consolidation for all periods presented.

ATM Financing:

Subsequent to the period ended September 30, 2026, the Company completed sales under its ATM pursuant to which it issued 41,200 common shares for gross proceeds of approximately $240,013 or approximately $232,812 after incurring commissions payable to the Agents.

Proposed SkinJect Business Combination:

On November 4, 2026, the Company announced that SkinJect entered into a non-binding letter of intent with an undisclosed special purpose acquisition company for a proposed business combination involving SkinJect (the “Business Combination”) and concurrent equity financing. There can be no assurance that definitive agreements relating to the Business Combination will be signed, that the equity financing will be secured or that the transaction will be completed.