Edesa Biotech, Inc.

Previous wording

This Quarterly Report on Form 10-Q contains forward-looking statements. When used in this report, the words“expects,”* “anticipates,” “suggests,” “believes,” “intends,” “estimates,” “plans,” “projects,” “continue,” “ongoing,” “potential,” “expect,” “predict,” “believe,” “intend,” “may,” “will,” “should,” “could,” “would” and similar expressions are intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in our Annual Report on Form 10-K for the year ended September 30, 2024 and other reports we file with the Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made. We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.*

Current wording

This Quarterly Report on Form 10-Q contains forward-looking statements. When used in this report, the words“expects,”* “anticipates,” “suggests,” “believes,” “intends,” “estimates,” “plans,” “projects,” “continue,” “ongoing,” “potential,” “expect,” “predict,” “believe,” “intend,” “may,” “will,” “should,” “could,” “would” and similar expressions are intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in our Annual Report on Form 10-K for the year ended September 30, 2024, as amended, and other reports we file with the Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made. We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.*

Previous wording

The discussion and analysis of our financial condition and results of operations are based on our unaudited condensed interim consolidated financial statements as of December 31, 2024 and September 30, 2024, as amended and for the three months ended December 31, 2024 and 2023 included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which we have prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Current wording

The discussion and analysis of our financial condition and results of operations are based on our unaudited condensed interim consolidated financial statements as of March 31, 2025 and September 30, 2024 and for the three and six months ended March 31, 2025 and 2024 included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which we have prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Previous wording

In Medical Dermatology we are developing EB06, an anti-CXCL10 monoclonal antibody candidate, as a therapy for vitiligo, a common autoimmune disorder that causes skin to lose its color in patches. CXCL10 has been shown to play a key role in the disease, and neutralization of CXCL10 has been demonstrated to both prevent and reverse depigmentation in animal models. To date, EB06 has demonstrated a favorable safety and tolerability profile. We have received regulatory approval from Health Canada to conduct a Phase 2 proof of concept study of EB06 in patients with moderate-to-severe nonsegmental vitiligo and we are in discussions with the U.S. Food and Drug Administration (FDA) for the same study. Preparation for the manufacturing campaign is underway, with data anticipated to be submitted to the FDA during the middle of 2025. Our medical dermatology assets also include EB01 (1.0% daniluromer cream), a Phase 3-ready asset developed for use as a potential therapy for moderate-to-severe chronic Allergic Contact Dermatitis (ACD), a common occupational skin condition. This asset is at the partnering stage.

Current wording

In Medical Dermatology we are developing EB06, an anti-CXCL10 monoclonal antibody candidate, as a therapy for vitiligo, a common autoimmune disorder that causes skin to lose its color in patches. CXCL10 has been shown to play a key role in the disease, and neutralization of CXCL10 has been demonstrated to both prevent and reverse depigmentation in animal models. To date, EB06 has demonstrated a favorable safety and tolerability profile. We have received regulatory approval from Health Canada to conduct a Phase 2 proof of concept study of EB06 in patients with moderate-to-severe nonsegmental vitiligo and we are in discussions with the U.S. Food and Drug Administration (FDA) for the same study. Preparation for the manufacturing campaign began in our fiscal second quarter, and we have evaluated multiple development and manufacturing pathways to produce our drug. We anticipate data to be submitted to the FDA during the second half of calendar 2025, from previous guidance of middle of the 2025 calendar year, based on the current availability of manufacturing slots at third party service providers. Our medical dermatology assets also include EB01 (1.0% daniluromer cream), a Phase 3-ready asset developed for use as a potential therapy for moderate-to-severe chronic Allergic Contact Dermatitis (ACD), a common occupational skin condition. This asset is at the partnering stage.

Previous wording

In October 2024, we entered into an At The Market Offering Agreement with H.C. Wainwright & Co., LLC as a sales agent (HCW ATM) pursuant to which we may offer and sell, from time to time, common shares through an at-the-market equity offering program for up to $3.87 million in gross proceeds. We have no obligation to sell any of the common shares and may at any time suspend sales or terminate the equity distribution agreement in accordance with its terms. For the three months ended December 31, 2024, we sold a total of 220,269 common shares pursuant to the agreement for net proceeds of $0.6 million after deducting sales agent commissions of $19,000. We have not sold any common shares pursuant to the HCW ATM subsequent to December 31, 2024.

Current wording

In October 2024, we entered into an At The Market Offering Agreement with H.C. Wainwright & Co., LLC as a sales agent (HCW ATM) pursuant to which we may offer and sell, from time to time, common shares through an at-the-market equity offering program for up to $3.87 million in gross proceeds. We have no obligation to sell any of the common shares and may at any time suspend sales or terminate the equity distribution agreement in accordance with its terms. For the six months ended March 31, 2025, we sold a total of 304,057 common shares pursuant to the agreement for net proceeds of $0.8 million after deducting sales agent commissions of $25,000. We have not sold any common shares pursuant to the HCW ATM subsequent to March 31, 2025.

Previous wording

On February 12, 2025, we entered into a Securities Purchase Agreement (Series B-1 Purchase Agreement) with a lead investor and several additional investors signatory thereto (the Investors), pursuant to which we sold to the Investors in a private placement, an aggregate of (i) 834 Series B-1 Preferred Shares, each of which is initially convertible into approximately 5,208 common shares (Series B-1 Conversion Shares) at a conversion price of $1.92 per Series B-1 Conversion Share, and (ii) 3,468,746 common shares. The purchase price per Series B-1 Preferred Share was $10,000 and the purchase price per common share was $1.92. The gross proceeds were approximately $15.0 million, prior to deducting offering expenses payable by us. A holder of Series B-1 Preferred Shares will not have the right to convert any portion of its Series B-1 Preferred Shares, if, together with its affiliates, it would beneficially own in excess of 4.99% (or, at the option of the holder, 9.99%) of the number of common shares outstanding immediately after giving effect to such conversion, provided, however, that a holder may increase or decrease the beneficial ownership limitation by giving 61 days’ notice to the Company, but not to any percentage in excess of 19.99%.

Current wording

On February 12, 2025, we entered into a Securities Purchase Agreement (Series B-1 Purchase Agreement) with a lead investor and several additional investors signatory thereto (the Series B-1 Investors), pursuant to which we sold to the Series B-1 Investors in a private placement, an aggregate of (i) 834 shares (Series B-1 Preferred Shares) of the Company’s newly designated Series B-1 Convertible Preferred Shares, stated value $10,000 per share, each of which is initially convertible into approximately 5,208 common shares (Series B-1 Conversion Shares) at a conversion price of $1.92 per Series B-1 Conversion Share, and (ii) 3,468,746 common shares. The purchase price per Series B-1 Preferred Share was $10,000 and the purchase price per common share was $1.92. The gross proceeds were approximately $15.0 million, prior to deducting offering expenses payable by us. A holder of Series B-1 Preferred Shares will not have the right to convert any portion of its Series B-1 Preferred Shares, if, together with its affiliates, it would beneficially own in excess of 4.99% (or, at the option of the holder, 9.99%) of the number of common shares outstanding immediately after giving effect to such conversion, provided, however, that a holder may increase or decrease the beneficial ownership limitation by giving 61 days’ notice to the Company, but not to any percentage in excess of 19.99%.

Previous wording

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

Current wording

Total other income decreased by $311,000 to $49,000 for the three months ended March 31, 2025 compared to $360,000 for the same period last year and was composed of the following:

Previous wording

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

Current wording

For the three months ended March 31, 2025, our net loss was $1.6 million, or $0.30 per common share, compared to a net loss of $1.9 million, or $0.58 per common share for the three months ended March 31, 2024.

Previous wording

Our capital expenditures primarily consist of computer and office equipment. There were no significant capital expenditures for the three months ended December 31, 2024 and 2023.

Current wording

Our capital expenditures primarily consist of computer and office equipment. There were no significant capital expenditures for the three and six months ended March 31, 2025 and 2024.

Previous wording

Our primary use of cash is to fund our operating expenses, which consist of R&D and G&A expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in accounts payable and accrued expenses. Net cash used in operating activities was $1.5 million and $1.4 million for the three months ended December 31, 2024 and 2023, respectively. We incurred net losses of $1.6 million and $1.7 million, respectively, for those same periods.

Current wording

Our primary use of cash is to fund our operating expenses, which consist of R&D and G&A expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in accounts payable and accrued expenses. Net cash used in operating activities was $3.9 million and $3.1 million for the six months ended March 31, 2025 and 2024, respectively. We incurred net losses of $3.2 million and $3.5 million, respectively, for those same periods.

Previous wording

On February 12, 2025, we entered into the Series B-1 Purchase Agreement the Investors, pursuant to which we sold to the Investors in a private placement, an aggregate of (i) 834 Series B-1 Preferred Shares, each of which is initially convertible into approximately 5,208 common shares (Series B-1 Conversion Shares) at a conversion price of $1.92 per Series B-1 Conversion Share, and (ii) 3,468,746 common shares. The purchase price per Series B-1 Preferred Share was $10,000 and the purchase price per common share was $1.92. The gross proceeds were approximately $15.0 million, prior to deducting offering expenses payable by us. A holder of Series B-1 Preferred Shares will not have the right to convert any portion of its Series B-1 Preferred Shares if, together with its affiliates, it would beneficially own in excess of 4.99% (or, at the option of the holder, 9.99%) of the number of common shares outstanding immediately after giving effect to such conversion, provided, however, that a holder may increase or decrease the beneficial ownership limitation by giving 61 days’ notice to the Company, but not to any percentage in excess of 19.99%.

Current wording

On February 12, 2025, we entered into the Series B-1 Purchase Agreement with the Series B-1 Investors, pursuant to which we sold to the Series B-1 Investors in a private placement, an aggregate of (i) 834 Series B-1 Preferred Shares, each of which is initially convertible into approximately 5,208 Series B-1 Conversion Shares at a conversion price of $1.92 per Series B-1 Conversion Share, and (ii) 3,468,746 common shares. The purchase price per Series B-1 Preferred Share was $10,000 and the purchase price per common share was $1.92. The gross proceeds were approximately $15.0 million, prior to deducting offering expenses payable by us. A holder of Series B-1 Preferred Shares will not have the right to convert any portion of its Series B-1 Preferred Shares if, together with its affiliates, it would beneficially own in excess of 4.99% (or, at the option of the holder, 9.99%) of the number of common shares outstanding immediately after giving effect to such conversion, provided, however, that a holder may increase or decrease the beneficial ownership limitation by giving 61 days’ notice to the Company, but not to any percentage in excess of 19.99%.

Previous wording

In October 2024, we entered into the HCW ATM pursuant to which we may offer and sell, from time to time, common shares through an at-the-market equity offering program for up to $3.87 million in gross proceeds. For the three months ended December 31, 2024, we sold a total of 220,269 common shares pursuant to the agreement for net proceeds of $0.6 million after deducting sales agent commissions of $19,000. We have not sold any common shares pursuant to the HCW ATM subsequent to December 31, 2024.

Current wording

In October 2024, we entered into the HCW ATM pursuant to which we may offer and sell, from time to time, common shares through an at-the-market equity offering program for up to $3.87 million in gross proceeds. For the three months ended March 31, 2025, we sold a total of 83,788 common shares pursuant to the agreement for net proceeds of $$0.2 million after deducting sales agent commissions of $6,000. For the six months ended March 31, 2025, we sold a total of 304,057 common shares pursuant to the agreement for net proceeds of $0.8 million after deducting sales agent commissions of $25,000. We have not sold any common shares pursuant to the HCW ATM subsequent to March 31, 2025.

Previous wording

In October 2023, we entered into the 2023 SIF Agreement with the Canadian Government’s 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 us. The remaining C$17.2 million is conditionally repayable starting in 2029 only if and when we earn gross revenue. For the three months ended December 31, 2024 and 2023, we recorded grant income of $0.3 million and $0.1 million, respectively, related to the 2023 SIF Agreement.

Current wording

In October 2023, we entered into the 2023 SIF Agreement with the Canadian Government’s 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 us. The remaining C$17.2 million is conditionally repayable starting in 2029 only if and when we earn gross revenue. For the three months ended March 31, 2025and 2024, we recorded grant income of $0.1 million and $$0.3 million, respectively, related to the 2023 SIF Agreement. For the six months ended March 31, 2025 and 2024, we recorded grant income of $0.4 million and $0.4 million, respectively, related to the 2023 SIF Agreement.

Previous wording

At December 31, 2024, we had an accumulated deficit of $60.2 million and working capital of $0.2 million, including $1.6 million in cash and cash equivalents. In the three months ended, December 31, 2024, we received proceeds of $1.5 million from the initial sale of Series A-1 Preferred Shares to the Series A-1 Purchaser. Subsequent to the quarter, we received gross proceeds of $15.0 million from the sale of common shares and Series B-1 Preferred Shares in a private placement. We expect that our cash and cash equivalents at December 31, 2024, including the net proceeds from the Series A-1 Purchase Agreement, the $15.0 million in gross proceeds from the sale of common shares and Series B-1 Preferred Shares, HCW ATM and reimbursements of eligible R&D expenses under the 2023 SIF Agreement, will be used to fund our operating expenses including the advancement of the Vitiligo program through the end of fiscal 2026. Management has flexibility to adjust this timeline by making changes to planned expenditures related to, among other factors, the size and timing of clinical trial expenditures and manufacturing campaigns, staffing levels, and the acquisition or in-licensing of new product candidates. To help fund our operations and meet our obligations in the future, we plan to seek additional financing through the sale of equity, government grants, debt financings or other capital sources, including potential future licensing, collaboration or similar arrangements with third parties or other strategic transactions. If we raise additional funds by issuing equity securities, our shareholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences that are not favorable to us or our existing shareholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development of our product candidates.

Current wording

At March 31, 2025, we had an accumulated deficit of $61.9 million and working capital of $13.5 million, including $13.9 million in cash and cash equivalents. In the six months ended, March 31, 2025, we received proceeds of $1.5 million from the initial sale of Series A-1 Preferred Shares to the Series A-1 Purchaser and gross proceeds of $15.0 million from the sale of common shares and Series B-1 Preferred Shares in a private placement. We expect that our cash and cash equivalents at March 31, 2025, including the net proceeds from the Series A-1 Purchase Agreement, the $15.0 million in gross proceeds from the sale of common shares and Series B-1 Preferred Shares, HCW ATM and reimbursements of eligible R&D expenses under the 2023 SIF Agreement will be used to fund our operating expenses including the advancement of the Vitiligo program through the end of fiscal 2026. Management has flexibility to adjust this timeline by making changes to planned expenditures related to, among other factors, the size and timing of clinical trial expenditures and manufacturing campaigns, staffing levels, and the acquisition or in-licensing of new product candidates. To help fund our operations and meet our obligations in the future, we plan to seek additional financing through the sale of equity, government grants, debt financings or other capital sources, including potential future licensing, collaboration or similar arrangements with third parties or other strategic transactions. If we raise additional funds by issuing equity securities, our shareholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences that are not favorable to us or our existing shareholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development of our product candidates.

Previous wording

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

Current wording

Net cash used in operating activities was $3.9 million for the six months ended March 31, 2025 compared to $3.1 million for the six months ended March 31, 2024, primarily due to an improvement in net loss offset by an investment in working capital of $0.9 million, compared to a recovery of working capital $63,000 in the comparable period.

Previous wording

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

Current wording

There was no cash used in investing activities for the six months ended March 31, 2025 and 2024, respectively.

Previous wording

Net cash provided by financing activities was $2.1 million for the three months ended December 31, 2024, as compared to $0.3 million for the three months ended December 31, 2023. In the current period, we received $1.5 million in proceeds from the sale of the Series A-1 Preferred Shares, in addition to proceeds of $0.6 million from the HCW ATM, partially offset by issuance costs of $96,000. In the comparative period, we received $0.3 million in net proceeds from the Canaccord ATM.

Current wording

Net cash provided by financing activities was $16.8 million for the six months ended March 31, 2025, as compared to $0.5 million for the six months ended March 31, 2024. In the current period, we received $15.0 million in proceeds from the sale of common shares and the sale of Series B-1 Preferred Shares, $1.5 million in proceeds from the sale of the Series A-1 Preferred Shares and proceeds of $0.8 million from the HCW ATM, partially offset by issuance costs of $0.5 million. In the comparative period, we received $0.6 million in net proceeds from the Canaccord ATM.

Previous wording

Our primary business is the development of innovative therapeutics for inflammatory and immune-related diseases with clear unmet medical needs. We focus our resources on R&D activities, including the conduct of clinical studies and product development, and expense such costs as they are incurred. R&D expenses, which have historically varied based on the level of activity in our clinical programs, are significantly influenced by study initiation expenses and patient recruitment rates, and as a result are expected to continue to fluctuate, sometimes substantially. Our R&D expenses were $1.0 million for the three months ended December 31, 2024, compared to $0.7 million for the three months ended December 31, 2023. The increase was due primarily to manufacturing expenses related to paridiprubart.

Current wording

Our primary business is the development of innovative therapeutics for inflammatory and immune-related diseases with clear unmet medical needs. We focus our resources on R&D activities, including the conduct of clinical studies and product development, and expense such costs as they are incurred. R&D expenses, which have historically varied based on the level of activity in our clinical programs, are significantly influenced by study initiation expenses and patient recruitment rates, and as a result are expected to continue to fluctuate, sometimes substantially. Our R&D expenses were $0.5 million and $1.5 million for the three and six months ended March 31, 2025, compared to $1.2 million and $1.9 million for the three and six months ended March 31, 2024. The decrease was primarily related to lower clinical expenses related to EB05 (paridiprubart), partially offset by an increase in costs related to EB06 as we prepare for the Phase 2 clinical study.