Edesa Biotech, Inc.

Previous wording

The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed interim consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q as of June 30, 2025 and our audited consolidated financial statements for the year ended September 30, 2024 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or the SEC, on December 13, 2024, as amended.

Current wording

The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed interim consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q as of December 31, 2025 and our audited consolidated financial statements for the year ended September 30, 2025 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or the SEC, on December 12, 2025.

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, 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.*

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, 2025, 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 June 30, 2025 and September 30, 2024 and for the three and nine months ended June 30, 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.

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 December 31, 2025 and September 30, 2025 and for the three months ended December 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 condensed interim 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 condensed interim 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

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. You should refer to the“Risk Factors”* section of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, filed with the SEC, on December 13, 2024, as amended, for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. We operate in an evolving environment and new risk factors and uncertainties may emerge from time to time. It is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. You should review the factors and risks and other information we describe in the reports we will file from time to time with the SEC.*

Current wording

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. You should refer to the“Risk Factors”* section of our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, filed with the SEC on December 12, 2025 for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. We operate in an evolving environment and new risk factors and uncertainties may emerge from time to time. It is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. You should review the factors and risks and other information we describe in the reports we will file from time to time with the SEC.*

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 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 by the end of calendar 2025 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.

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. Subject to regulatory approval, we anticipate initiating enrollment by midyear 2026. 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

Our most advanced Respiratory drug candidate is EB05 (paridiprubart). Paridiprubart represents a new class of emerging therapies called Host-Directed Therapeutics (HDTs) that are designed to modulate the body’s own immune response when confronted with infectious diseases or even chemical agents. EB05 is currently being evaluated in the U.S. government-funded “Just Breathe” study investigating three novel threat-agnostic HDTs in hospitalized adult patients with Acute Respiratory Distress Syndrome (ARDS), a life-threatening form of respiratory failure. During the third fiscal quarter, the U.S. government announced that the first randomizations of EB05 and other host directed therapeutics were completed. Certain development expenses, including manufacturing scale-up, for our EB05 program are also eligible for reimbursement from the Government of Canada under a 2023 grant and funding award. We are also pursuing additional uses for paridiprubart in chronic diseases, such as pulmonary fibrosis (EB07 program). In light of our other development priorities, we are evaluating the timing for the next steps in our EB07 program.

Current wording

Our most advanced Respiratory drug candidate is EB05 (“paridiprubart”). Paridiprubart represents a new class of emerging therapies called Host-Directed Therapeutics (“HDTs”) that are designed to modulate the body’s own immune response when confronted with infectious diseases or even chemical agents. In October 2025, we reported that paridiprubart met primary and secondary endpoints with statistical significance, providing clinically meaningful improvement in survival and recovery, in a truncated Phase 3 clinical study of hospitalized patients with Acute Respiratory Distress Syndrome (“ARDS”), a life-threatening form of respiratory failure. We are currently evaluating subgroup data for additional efficacy signals among subjects with certain comorbidities. Paridiprubart is also being evaluated in an ongoing U.S. government-funded platform study investigating three novel threat-agnostic HDTs in hospitalized patients with ARDS. Certain development expenses, including manufacturing scale-up, for our EB05 program are also eligible for reimbursement from the Government of Canada under a 2023 grant and funding award. We are also pursuing additional uses for paridiprubart in chronic diseases.

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 nine months ended June 30, 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 June 30, 2025.

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. 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, 2025, we sold 1,177,568 common shares pursuant to the HCW ATM under the prospectus supplement filed on September 9, 2025 for net proceeds of approximately $3.4 million, after deducting sales agent commissions. On December 12, 2025, we filed a prospectus supplement with the SEC authorizing the offer and sale of up to approximately $2.26 million of common shares pursuant to the HCW ATM. We did not sell any common shares under the December 12, 2025 prospectus supplement.

Previous wording

Total other income decreased by $0.3 million to $0.5 million for the nine months ended June 30, 2025 compared to $0.8 million for the same period last year and was composed of the following:

Current wording

Total other income decreased by approximately $0.2 million to $0.1 million for the three months ended December 31, 2025 compared to $0.3 million for the same period last year and was composed of the following:

Previous wording

For the three months ended June 30, 2025, our net loss was $1.7 million, or $0.25 per common share, compared to a net loss of $1.7 million, or $0.52 per common share for the three months ended June 30, 2024.

Current wording

For the three months ended December 31, 2025, our net loss was $2.2 million, or $0.28 per common share, compared to a net loss of $1.6 million, or $0.48 per common share for the three months ended December 31, 2024.

Previous wording

Our capital expenditures primarily consist of computer and office equipment. There were no significant capital expenditures for the three and nine months ended June 30, 2025 and 2024.

Current wording

Our capital expenditures primarily consist of computer and office equipment. There were no significant capital expenditures for the three months ended December 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 $5.6 million and $3.9 million for the nine months ended June 30, 2025 and 2024, respectively. We incurred net losses of $5.0 million and $5.2 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 $2.1 million for the three months ended December 31, 2025, compared to $1.5 million for the same period in 2024. We incurred net losses of $2.2 million for the three months ended December 31, 2025, compared to $1.6 million for the same period in 2024. We ended the quarter with $12.1 million in cash and cash equivalents and working capital of $12.0 million, compared to $10.8 million in cash and cash equivalents and working capital of approximately $10.4 million as of September 30, 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 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%.

Current wording

On February 12, 2025, we entered into a Securities Purchase Agreement (the “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 Series B-1 Preferred Shares, each of which is initially convertible into approximately 5,208 common shares (the “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 June 30, 2025 there were no common shares sold pursuant to the agreement. For the nine months ended June 30, 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 June 30, 2025.

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 the three months ended December 31, 2025, we sold a total of 1,177,568 common shares pursuant to the HCW ATM agreement for net proceeds of approximately $3.4 million. For the three months ended December 31, 2024, we sold 220,269 common shares for net proceeds of approximately $0.6 million pursuant to the HCW ATM . We have not sold any common shares pursuant to the HCW ATM subsequent to December 31, 2025.

Previous wording

In October 2024, we entered into the Series A-1 Purchase Agreement with the Series A-1 Purchaser, an entity controlled by our Chief Executive Officer, Secretary and member of our board of directors, pursuant to which we agreed to issue and sell to the Series A-1 Purchaser in a private placement, up to $5 million of Series A-1 Preferred Shares, each of which is initially convertible into approximately 2,903 Series A-1 Conversion Shares, at a conversion price of $3.445 per Series A-1 Conversion Share, and Warrants to purchase the Warrant Shares at an exercise price of $3.445 per Warrant Share. The Series A-1 Preferred Shares and the Warrants were 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 Warrants expire five years from the issuance date. We have 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.

Current wording

In October 2024, we entered into a Securities Purchase Agreement (the “Series A-1 Purchase Agreement”) with Pardeep Nijhawan Medicine Professional Corporation (the “Series A-1 Purchaser”), an entity controlled by Pardeep Nijhawan, our Chief Executive Officer, Secretary and member of our Board, pursuant to which we agreed to issue and sell to the Series A-1 Purchaser in a private placement, up to $5 million of Series A-1 Preferred Shares, each of which is initially convertible into approximately 2,903 common shares (the “Series A-1 Conversion Shares”), at a conversion price of $3.445 per Series A-1 Conversion Share, and warrants (the “Warrants”) to purchase common shares (the “Warrant Shares”) at an exercise price of $3.445 per Warrant Share. The Series A-1 Preferred Shares and the Warrants were 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 Warrants expire five years from the issuance date. We have 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.

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 June 30, 2025 and 2024, we recorded grant income of $0.2 million and $0.2 million, respectively, related to the 2023 SIF Agreement. For the nine months ended June 30, 2025 and 2024, we recorded grant income of $0.5 million and $0.6 million, respectively, related to the 2023 SIF Agreement.

Current wording

In October 2023, we entered into the 2023 SRF Agreement with the Canadian Government’s SRF. Under the 2023 SRF Agreement, the Government of Canada committed up to C$23 million in partially repayable funding. Of the C$23 million committed by SRF, up to C$5.8 million is not repayable by us. The remaining C$17.2 million is conditionally repayable starting in 2032 only if and when we earn gross revenue. For the three months ended December 31, 2025 and 2024, we recorded grant income of $0.1 million and $0.3 million, respectively, related to the 2023 SRF Agreement. On September 30, 2025, the 2023 SRF Agreement was amended to, among other things, extend the program period to December 31, 2028 from December 31, 2025 and defer the start of the conditional repayment period from 2029 to 2032.

Previous wording

In October 2023, we entered into $10.0 million revolving credit agreement with an entity controlled by the Company’s Chief Executive Officer and Secretary and member of our 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 were 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 could the aggregate principal amount of all advances outstanding have exceeded the lesser of (i) the Credit Limit and (ii) an amount equal to 85% of the Borrowing Base. The Credit Agreement was terminated in October 2024. Prior to the termination of the Credit Agreement, we had not borrowed any funds thereunder. We incurred no termination penalties in connection with the termination of the Credit Agreement.

Current wording

In October 2023, we entered into a $10.0 million revolving credit agreement with PN MPC, an entity controlled by Pardeep Nijhawan, our Chief Executive Officer and Secretary and member of our Board (“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 were tied to a borrowing base (“Borrowing Base”) consisting of eligible grant receivables from SRF, future potential license fee receivables and any other accounts receivable. At no time could the aggregate principal amount of all advances outstanding have exceeded the lesser of (i) the Credit Limit and (ii) an amount equal to 85% of the Borrowing Base. The Credit Agreement was terminated in October 2024. Prior to the termination of the Credit Agreement, we had not borrowed any funds thereunder. We incurred no termination penalties in connection with the termination of the Credit Agreement.

Previous wording

At June 30, 2025, we had an accumulated deficit of $63.6 million and working capital of $12.1 million, including $12.4 million in cash and cash equivalents. In the nine months ended, June 30, 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 June 30, 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.

Current wording

At December 31, 2025, we had an accumulated deficit of $68.2 million and working capital of $12.0 million, including $12.1 million in cash and cash equivalents. We expect that our cash and cash equivalents at December 31, 2025, future sales of common shares pursuant to the HCW ATM and reimbursements of eligible R&D expenses under the 2023 SRF Agreement will not be sufficient 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 $5.6 million for the nine months ended June 30, 2025 compared to $3.9 million for the nine months ended June 30, 2024, primarily due to an improvement in net loss offset by an investment in working capital of $1.1 million, compared to a recovery of working capital $0.7 million in the comparable period.

Current wording

Net cash used in operating activities was $2.1 million for the three months ended December 31, 2025 compared to $1.5 million for the three months ended December 31, 2024, primarily due to a higher net loss and an increase in our investment in working capital of $0.3 million.

Previous wording

There was no cash used in investing activities for the nine months ended June 30, 2025 and 2024, respectively.

Current wording

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

Previous wording

Net cash provided by financing activities was $16.8 million for the nine months ended June 30, 2025, as compared to $0.6 million for the nine months ended June 30, 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 $0.7 million in net proceeds from the Canaccord ATM.

Current wording

Net cash provided by financing activities was $3.4 million for the three months ended December 31, 2025 compared to $2.1 million for the three months ended December 31, 2024. In the current period, we received approximately $3.5 million of net proceeds from sales under the HCW ATM, partially offset by approximately $0.1 million of offering costs. In the comparable period, we received approximately $0.6 million of net proceeds from sales under the HCW ATM and $1.5 million from the sale of the Series A-1 Preferred Shares, partially offset by approximately $0.1 million of offering costs.

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 $0.9 million and $2.4 million for the three and nine months ended June 30, 2025, compared to $0.9 million and $2.8 million for the same period last year. The decrease was primarily related to lower clinical expenses related to EB05, partially offset by an increase in costs related to EB06 as we prepare for the Phase 2 clinical study.

Current wording

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 $ 1.1 million and $1.0 million for the three months ended December 31, 2025 and 2024, respectively. The increase primarily reflects manufacturing-related activities and other preparations for the planned Phase 2 study of EB06 (vitiligo) and manufacturing support and wind-down activities for paridiprubart (“EB05”), including BARDA-related work, partially offset by lower spend on other discovery programs.