Edesa Biotech, Inc.

(Unaudited)

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”.

Going Concern

These unaudited condensed consolidated financial statements have been prepared on a going concern basis which presumes the realization of assets and the discharge of liabilities in the normal course of operations for at least the next twelve months.

For the six months ended March 31, 2025, the Company incurred a comprehensive loss of $3.3 million resulting in an accumulated deficit of $61.9 million. For the six months ended March 31, 2025, the Company had a net cash outflow from operating activities of $3.9 million and ended the period with $13.9 million in cash and cash equivalents and a working capital of $13.5 million. During the six month period ended March 31, 2025, the Company received gross proceeds of $15.0 million from the sale of preferred shares and common shares in a private placement and $1.5 million from the sale of preferred shares to an entity controlled by the Company’s CEO, as described below. The Company’s ability to continue as a going concern is dependent on obtaining additional funding through financings, other strategic activities as well as via grants, to fund the development of its drug candidates. There can be no assurance that the Company will be successful in raising the necessary financing. These conditions indicate the existence of a material uncertainty that may cast substantial doubt about the Company’s ability to continue as a going concern.

These unaudited condensed consolidated financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and, therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying consolidated financial statements. These adjustments could be material.

2. Basis of Presentation

The accompanying unaudited condensed interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q. They do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with U.S. GAAP for complete financial statements. These unaudited condensed interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended September 30, 2024, which was filed with the Securities and Exchange Commission (SEC) on December 13, 2024.

The accompanying unaudited condensed interim consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated on consolidation. All adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the results of operations for the periods presented have been included in the interim periods. Operating results for the three and six months ended March 31, 2025 are not necessarily indicative of the results that may be expected for other interim periods or the fiscal year ending September 30, 2025.

Use of estimates

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; 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.

3. 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 forfive-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 5 for license commitments.

Intangible assets, net consisted of the following:

Amortization expense amounted to $0.03 million for each of the three months ended March 31, 2025 and March 31, 2024 and $0.05 million for each of the six months ended March 31, 2025 and March 31, 2024.

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

4. Right-of-Use Lease with Related Party

The Company leases a facility used for executive offices from a related company. The original lease expired in December 2022 and the Company executed atwo-year extension through December 2024. The Company extended the lease until November 30, 2025, and upon expiry, the arrangement will be month to month and either party will have the right to terminate on 30 days’ notice.

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

Lease terms and discount rates were as follows:

Cash flow information was as follows:

5. 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. Approximate aggregate future contractual payments at March 31, 2025 are as follows:

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 the Constructs, including sublicensing rights. An intangible asset for the acquired license has been recognized. See Note 3 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 three and six months ended March 31, 2025 and 2024.

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 million. 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.

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. 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. For the three and six months ended March 31, 2025, the Company recorded an expense of $25,000 and $50,000 as a result of meeting milestones outlined in the 2021 license agreement. There were no milestones achieved in the three and six months ended March 31, 2025 and no additional expenses were incurred.

In June 2024, the Company’s drug candidate, EB05, was selected by the Biomedical Advanced Research and Development Authority (BARDA), part of the Administration for Strategic Preparedness and Response within the U.S. Department of Health and Human Services, for evaluation in a U.S. government-funded clinical study. The Phase 2 platform trial will be a randomized, double-blinded, placebo-controlled, multi-center U.S. clinical trial to investigate novel threat-agnostic host-directed therapeutics, including EB05, in hospitalized adult patients with ARDS due to a variety of causes. For the EB05 cohort of the study, patients will be randomized one-to-one to either EB05 plus Standard of Care (SOC) or to a placebo plus SOC control arm. Edesa plans to provide drug product for the study as well as technical support. The Company is responsible for providing drug product and placebo for the Phase 2 platform trial.

6. Capital Shares

Series B-1 Preferred Shares Offering

On February 12, 2025, the Company entered into a Securities Purchase Agreement (Series B-1 Purchase Agreement) with certain investors, including members of the Company’s board of directors and executive officers (the Series B-1 Investors), pursuant to which the Company issued and sold to the Series B-1 Investors in a private placement (the Private Placement), an aggregate of (i)834 shares (the Series B-1 Preferred Shares) of the Company’s newly designated Series B-1 Convertible Preferred Shares, stated value $10,000 per share, each of which is initially convertible into approximately 5,208 common shares (the Series B-1 Conversion Shares), without par value, of the Company (the Common 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 to the Company were approximately $15.0 million, prior to deducting offering expenses payable by the Company which were allocated between the Series B-1 Preferred Shares and Common Shares based on the market price of the Company’s Common Shares on the issuance date. A Series B-1 Investor 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%, 9.99% or 19.99% of the number of Common Shares outstanding immediately after giving effect to such conversion.

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

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

The Series B-1 Preferred Shares did not exist in the comparative period; therefore, no prior-period disclosure is presented.

Issues and Outstanding Series B-1 Preferred Shares

Series A-1 Preferred Shares Offering

On October 30, 2024, the Company entered into a Securities Purchase Agreement (Series A-1 Purchase Agreement) with an entity controlled by the Company’s Chief Executive Officer, Secretary and member of the board of directors of the Company (Series A-1 Purchaser), pursuant to which the Company agreed to issue and sell to the Series A-1 Purchaser in a private placement, up to $5,000,000 of shares of the Company’s newly designated Series A-1 Convertible Preferred Shares, stated value $10,000 per share (the Series A-1 Preferred Shares), each of which is initially convertible into approximately 2,903 Common Shares (Series A-1 Conversion Shares), at a conversion price of $3.445 per Series A-1 Conversion Share, and warrants (Warrants) to purchase Common Shares (Series A-1 Warrant Shares) at an exercise price of $3.445 per Series A-1 Warrant Share. The Series A-1 Preferred Shares and the Warrants are being sold together in a fixed combination of one Series A-1 Preferred Share and a Warrant to purchase a number of Common Shares equal to 75% of the underlying Series A-1 Conversion Shares at a combined purchase price of $10,272.13 per Series A-1 Preferred Share and related Warrants. Under the Series A-1 Purchase Agreement, the Series A-1 Purchaser has purchased 150 Series A-1 Preferred Shares initially convertible into an aggregate of 435,414 Series A-1 Conversion Shares and Warrants to purchase up to an aggregate of 326,560 Warrant Shares for an aggregate purchase price of $1,540,819. The offering of the Series A-1 Preferred Shares and Warrants was structured as an at-market offering under the rules of The Nasdaq Stock Market. The Series A-1 Purchaser will not have the right to convert any portion of its Series A-1 Preferred Shares if, together with its affiliates, it would beneficially own in excess of 19.99% of the number of Common Shares outstanding immediately after giving effect to such conversion.

The Warrants expire five years from the issuance date. The Warrants may only be exercised on a cashless basis if there is no registration statement registering, or the prospectus contained therein is not available for, the issuance or resale of the Common Shares issuable upon exercise of the Warrants to or by the holders thereof. The exercise price of the Warrants is subject to customary antidilution adjustments in the event of share splits, reclassifications, recapitalizations and similar events. The Series A-1 Purchaser will not have the right to exercise any portion of its Warrants if, together with its affiliates, it would beneficially own in excess of 19.99% of the number of Common Shares outstanding immediately after giving effect to such exercise.

The Company has the right to require the Series A-1 Purchaser to purchase additional Series A-1 Preferred Shares and Warrants (up to an aggregate investment of $5.0 million); provided however, no more than an aggregate of $2.0 million of Series A-1 Preferred Shares and Warrants may be issued and sold pursuant to the Series A-1 Purchase Agreement without shareholder approval in accordance with applicable Canadian securities laws.

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

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

The Series A-1 Preferred Shares are presented as permanent shareholders’ equity. The total proceeds were allocated between the Series A-1 Preferred Shares and warrants using relative fair value. The fair value of the Series A-1 Preferred Shares was determined as a reference to the fair value of Common Shares on the issuance date and the fair value of the warrants was determined using Black-Scholes option pricing model as detailed below.

The Series A-1 Convertible Preferred Shares did not exist in the comparative period; therefore, no prior-period disclosure is presented.

Issued and Outstanding Series A-1 Convertible Preferred Shares

Equity distribution agreements

In October 2024, the Company entered into an At The Market Offering Agreement with H.C. Wainwright & Co., LLC as a sales agent (HCW ATM) pursuant to which the Company may offer and sell, from time to time, Common Shares through an at-the-market equity offering program for up to $3.87 million in gross proceeds. The Company has no obligation to sell any of the Common Shares and may at any time suspend sales or terminate the equity distribution agreement in accordance with its terms. For the six months ended March 31, 2025, the Company 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. The Company hasnot sold any Common Shares pursuant to the HCW ATM subsequent to March 31, 2025.

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 warrant activity is as follows:

The weighted average contractual life remaining on the outstanding warrants at March 31, 2025 is 34 months.

The following table summarizes information about the warrants outstanding at March 31, 2025:

The fair value of warrants granted during the six months ended March 31, 2025 was estimated using the Black-Scholes option valuation model using the following assumptions:

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 642,737. The remaining number of shares available to grant at March 31, 2025 is 85,329.

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:

During the three and six months ended March 31, 2025, there wereno employee or director options granted. During the three and six months ended March 31, 2024, there were 500 employee options granted andno director options granted. The options have a term of 10 years and an exercise price equal to the Nasdaq closing price on the grant date.

The weighted average contractual life remaining on the outstanding options at March 31, 2025 is 74 months.

The following table summarizes information about the options under the 2019 Plan outstanding and exercisable at March 31, 2025:

The options exercisable at March 31, 2025 had a weighted average exercise price of $24.66, no intrinsic value and a weighted average remaining life of 72 months. There were 33,354 options at March 31, 2025 that had not vested with a weighted average exercise price of $7.12, no intrinsic value and a weighted average remaining life of 98 months.

The fair value of options granted during the six months ended March 31, 2025 and 2024 was estimated using the Black-Scholes option valuation model using the following assumptions:

The Company recorded $0.1 million and $0.1 million of share-based compensation expenses for the three months ended March 31, 2025 and 2024, respectively and $0.1 million and $0.3 million for the six months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, the Company had approximately $0.1 million of unrecognized share-based compensation expense, which is expected to be recognized over a period of 18 months.

Restricted share units (RSU)

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, 2024 through March 31, 2025:

The following table summarizes information about the RSUs under the 2019 Plan outstanding and exercisable at March 31, 2025:

All RSUs that were granted 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 isno future unrecorded compensation expense for the RSUs.

7. 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 October 2023, the Company entered into a multi-year contribution agreement (the 2023 SIF Agreement) with the Canadian Government’s Strategic Innovation Fund. 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 2023 SIF Agreement is 1.4 times the original repayable amount. In addition, the Company is entitled to partial reimbursement of certain eligible expenses under the 2023 SIF Agreement.

Under the 2023 SIF Agreement, the Company agreed to certain financial and non-financial covenants and other obligations in relation to the Project. Pursuant to the 2023 SIF Agreement, certain customary events of default, such as the Company’s or Edesa Biotech Research’s breach of their covenants and obligations under the 2023 SIF Agreement, their insolvency, winding up or dissolution, and other similar events, may permit the Government of Canada to declare an event of default under the 2023 SIF Agreement. Upon an event of default, subject to applicable cure, the Government of Canada may exercise a number of remedies, including suspending or terminating funding under the 2023 SIF Agreement, demanding repayment of funding previously received and/or terminating the 2023 SIF Agreement.

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

The Agreement will expire on the later of December 31, 2042 or the date of the last repayment, unless earlier terminated, subject to certain provisions that extend three (3) years beyond the term or early termination of the 2023 SIF Agreement.

Under the October 2023 SIF Agreement the Company recorded grant income of $0.1 million and $0.3 million for the three months ended March 31, 2025 and March 31, 2024, respectively, and $0.4 million for each of the six months ended March 31, 2025 and March 31, 2024 bringing the total recorded under the agreement to $1.1 million.

8. 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:

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 a Canadian Chartered Bank and a U.S. bank 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.

(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 March 31, 2025, the Company and its Canadian subsidiary had assets denominated in Canadian dollars of approximately C$5.7 million and the U.S. dollar exchange rate at this date was equal to 1.4355 Canadian dollars. Based on the exposure at March 31, 2025, a 10% annual change in the Canadian/U.S. exchange rate would impact the Company’s loss and other comprehensive loss by approximately $0.4 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.

9. 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.

10. Related Party Transactions

On February 12, 2025 (the “Closing Date”), the Company entered into the Series B-1 Purchase Agreement with the Series B-1 Investors. Pursuant to the Series B-1 Purchase Agreement, the Company 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 Company’s Chief Executive Officer, Secretary, and a member of the board of directors purchased 100 Series B-1 Preferred Shares for an aggregate purchase price of $1.0 million. A director purchased 41,666 Common Shares for an aggregate purchase price of approximately $80,000. Another director purchased 10,416 Common Shares for an aggregate purchase price of approximately $20,000. Entities affiliated with significant beneficial owners purchased, in aggregate,2,687,500 Common Shares and 734 Series B-1 Preferred Shares for aggregate gross proceeds of approximately $12.5 million. A holder of Series B-1 Preferred Shares will not have the right to convert any portion of its Series B-1 Preferred Shares, if, together with its affiliates, it would beneficially own in excess of 4.99% (or, at the option of the holder,9.99%) of the number of Common Shares outstanding immediately after giving effect to such conversion, provided, however, that a holder may increase or decrease the beneficial ownership limitation by giving 61 days’ notice to the Company, but not to any percentage in excess of 19.99%.

In connection with the Series B-1 Purchase Agreement, on February 12, 2025, the Company also entered into an Investor Rights Agreement (IRA) with the Series B-1 Investors, whereby the Company agreed to provide the Series B-1 Investors with certain registration and other rights. The IRA provides that the board of directors, following the Company’s annual meeting to be held on May 28, 2025, shall consist of seven members, one of whom shall be a director nominated by the lead investor (the “Lead Investor Nominee”), who shall serve on the board effective as of the Closing Date, until the earlier of such time as (i) the lead investor no longer holds at least 51% of the Common Shares (calculated on an as-converted-to-Common Shares basis), subject to appropriate adjustment in the event of any stock dividend, stock split, combination, or other similar recapitalization with respect to the Common Shares issued in the private placement, or (ii) the lead investor beneficially owns less than 5% of the outstanding Common Shares as a result of a disposition of shares (such period, the “Lead Investor Rights Period”). The Company also agreed to use its reasonable best efforts to solicit shareholder approval of the Lead Investor Nominee at each general or special meeting of shareholders of the Company at which an election of directors is held during the Lead Investor Rights Period.

Additionally, the IRA includes certain protective provisions that restrict the Company’s ability to, among other things, (i) amend, modify, alter or repeal any provision of the Company’s governing documents in a manner adverse to the holders of Series B-1 Preferred Shares, (ii) alter or change the special rights and restrictions of the Series B-1 Preferred Shares and (iii) increase or decrease the authorized number of Series B-1 Preferred Shares, in each case, without the written consent of the lead investor.

Pursuant to the IRA, during the Lead Investor Rights Period, the lead investor is entitled to designate one (1) non-voting observer to the Board to attend all meetings of the Board and committees and subcommittees thereof, subject to the terms of the IRA.

On October 30, 2024, the Company entered into the Series A-1 Purchase Agreement with the Series A-1 Purchaser, an entity controlled by the Company’s Chief Executive Officer, Secretary and member of the board of directors of the Company, pursuant to which the Company agreed to issue and sell to the Series A-1 Purchaser in a private placement, up to $5,000,000 of the Series A-1 Preferred Shares, each of which is initially convertible into the Series A-1 Conversion Shares, at a conversion price of $3.445 per Series A-1 Conversion Share, and Warrants to purchase Common Shares at an exercise price of $3.445. Under the Series A-1 Purchase Agreement, the Series A-1 Purchaser has purchased 150 Series A-1 Preferred Shares initially convertible into an aggregate of 435,414 Series A-1 Conversion Shares and Warrants to purchase up to an aggregate of 326,560 Warrant Shares for an aggregate purchase price of $1,540,819. The offering of the Series A-1 Preferred Shares and Warrants was structured as an at-market offering under the rules of The Nasdaq Stock Market. The Series A-1 Purchaser will not have the right to convert any portion of its Series A-1 Preferred Shares, or exercise any portion of the Warrants, if, together with its affiliates, it would beneficially own in excess of 19.99% of the number of Common Shares outstanding immediately after giving effect to such conversion or exercise. See Note 6 – Series A-1 Convertible Preferred Shares offering.

During the three and six months ended March 31, 2025 and 2024, the Company paid cash of $0 and $18,000 in 2025, and $20,000 and $40,000 in 2024, 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. The Company extended the lease beyond its December 31, 2024 expiration to November 30, 2025 and upon expiry will be month to month and either party will have the right to terminate on 30 days’ notice.

In October 2023, the Company entered into $10.0 million revolving credit agreement with an entity controlled by the Company’s Chief Executive Officer and Secretary and member of the Company’s board of directors (Credit Agreement), providing an unsecured revolving credit facility, with a credit limit of $3.5 million (Credit Limit) which was available immediately. The line of credit bore interest at the Canadian Imperial Bank of Commerce US Base-Interest Rate plus 3% per annum and has a maturity date of March 31, 2026, unless terminated earlier by either party with 90 days’ notice. Advances under the line of credit are tied to a borrowing base (Borrowing Base) consisting of eligible grant receivables from SIF, future potential license fee receivables and any other accounts receivable. At no time shall the aggregate principal amount of all advances outstanding exceed the lesser of (i) the Credit Limit and (ii) an amount equal to 85% of the Borrowing Base. During the three and six months ended March 31, 2025 and 2024, the Company incurred standby charges of $0 and $13,000 in 2025 and $4,000 and $25,000 in 2024, respectively. The Credit Agreement was terminated in October 2024. Prior to the termination of the Credit Agreement, the Company had not borrowed any funds thereunder. The Company incurred no termination penalties in connection with the termination of the Credit Agreement.

Item 2. Management’**s Discussion and Analysis of Financial Condition and Results of Operations.