ProMIS Neurosciences Inc.

Previous wording

All references in this management’s discussion and analysis of financial condition and results of operations, or MD&A, to the “Company”, “ProMIS”, “we”, “us”, or “our” refer to ProMIS Neurosciences Inc., unless otherwise indicated or the context requires otherwise. The following MD&A is prepared as of April 1, 2024 for the years ended December 31, 2023 and 2022 and should be read in conjunction with the audited consolidated financial statements for the years ended December 31, 2023 and 2022 (collectively, the “Financial Statements”), which have been prepared by management in accordance with United States generally accepted accounting principles (“U.S. GAAP”) as issued by the Financial Accounting Standards Board (“FASB”). All dollar amounts refer to United States dollars, except as stated otherwise. Unless otherwise stated herein, all share and per share numbers relating to the Company’s Common Shares prior to the effectiveness of the Reverse Share Split have been adjusted to give effect to the Reverse Share Split.

Current wording

All references in this management’s discussion and analysis of financial condition and results of operations, or MD&A, to the “Company”, “ProMIS”, “we”, “us”, or “our” refer to ProMIS Neurosciences Inc., unless otherwise indicated or the context requires otherwise. The following MD&A is prepared as of March 31, 2025 for the years ended December 31, 2024 and 2023 and should be read in conjunction with the audited consolidated financial statements for the years ended December 31, 2024 and 2023 (collectively, the “Financial Statements”), which have been prepared by management in accordance with United States generally accepted accounting principles (“U.S. GAAP”) as issued by the Financial Accounting Standards Board (“FASB”). All dollar amounts refer to United States dollars, except as stated otherwise.

Previous wording

We have incurred significant operating losses since inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of our product candidates and any future product candidates. Our net losses were $13.2 million and $18.1 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $93.5 million. We expect to continue to incur net losses for the foreseeable future and, if able to raise additional funding, would expect our research and development expenses, general and administrative expenses and capital expenditures to increase. In particular, if we are able to raise additional funding we expect our expenses to increase as we continue our development of, and seek regulatory approvals for, our product candidates, as well as continue and initiate new clinical trials, hire additional personnel, and pay fees to outside consultants, lawyers and accountants. In addition, if we obtain marketing approval for any product candidates, we may incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. We may also incur expenses in connection with the in-licensing or acquisition of additional product candidates.

Current wording

We have incurred significant operating losses since inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of our product candidates and any future product candidates. We had an operating loss of $16.8 million and $14.3 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $90.7 million. We expect to continue to incur losses for the foreseeable future and, if able to raise additional funding, would expect our research and development expenses, general and administrative expenses and capital expenditures to increase. In particular, if we are able to raise additional funding we expect our expenses to increase as we continue our development of, and seek regulatory approvals for, our product candidates, as well as continue and initiate new clinical trials, hire additional personnel, and pay fees to outside consultants, lawyers and accountants. In addition, if we obtain marketing approval for any product candidates, we may incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. We may also incur expenses in connection with the in-licensing or acquisition of additional product candidates.

Previous wording

We expect that our cash of $12.6 million as of December 31, 2023 will not be sufficient to fund the Company’s operating expenses for at least 12 months from the date these Financial Statements were issued. Refer to additional discussion related to going concern considerations in “Liquidity and Capital Resources.”

Current wording

We expect that our cash of $13.3 million as of December 31, 2024 will not be sufficient to fund the Company’s operating expenses for at least 12 months from the date these Financial Statements were issued. Refer to additional discussion related to going concern considerations in “Liquidity and Capital Resources.”

Previous wording

General and administrative expenses consist primarily of personnel costs including salary, bonus, employee-benefits and share-based compensation, costs incurred in development and protection of intellectual property, professional service fees, and other general overhead and facility costs, (including rent) depreciation and amortization. We expect our general and administrative expenses to increase substantially for the foreseeable future as we increase our administrative function to support the growth of the business and its continued research and development activities.

Current wording

General and administrative expenses consist primarily of personnel costs including salary, bonus, employee-benefits and share-based compensation, costs incurred in development and protection of intellectual property, professional service fees, and other general overhead and facility costs, depreciation, and amortization. We expect our general and administrative expenses to increase substantially for the foreseeable future as we increase our administrative function to support the growth of the business and its continued clinical development activities.

Previous wording

Other income (expense) consists primarily of interest expense on our 2022 Debentures, 2023 interest expense on certain deferred accounts payable and changes in the fair value of our financial instruments, the 2022 gain on extinguishment of our convertible debt and derivative liability, and interest income earned on our cash balances.

Current wording

Other expenses consist primarily of interest expense on certain deferred accounts payable and the loss on issuance of common shares, warrants and pre-funded warrants in the July 2024 Private Placement. Other income consists of changes in the fair value of our warrant liabilities and interest income earned on our cash balances.

Previous wording

Research and development expenses decreased by $8.2 million, or 51%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. This decrease is primarily attributable to a $6.9 million decrease in direct research and development expenses related to a $5.7 million decrease in spending on our lead program, PMN310, largely attributable to 2022 expenditures of $10.5 million on drug substance manufacturing costs and preclinical research costs in preparation of our IND filing, which was submitted in early 2023, and we initiated our Phase 1a clinical trial of PMN310 in the fourth quarter of the year ended December 31, 2023. Additionally, expenses on external research costs on ALS portfolio projects decreased by $0.8 million and expenses on our platform technology and other projects decreased by $0.3 million as we focused our available resources on the development and progression of PMN310. The $1.2 million decrease in consulting expense relates to various consultants advising on the content and preparation of the IND and design of preclinical and clinical trials, much of which was completed during 2022 in preparation of the 2023 IND submission. Share-based compensation costs decreased by $0.2 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022 while salaries and benefits increased by $0.1 million.

Current wording

Research and development expenses increased by $2.8 million, or 35%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. This increase is primarily attributable to a $3.5 million increase in spending on our lead program, PMN310, as we completed our Phase 1a clinical trial of PMN310 and initiated the Phase 1b clinical trial of PMN310 during the year ended December 31, 2024. Employee salaries and benefits also increased by $0.1 million as we hired additional personnel in the second half of 2024 to support the Phase 1b study. Consulting expenses decreased by $0.8 million during the year ended December 31, 2024, following the conclusion of various consultants advising on the content and preparation of the IND and design of preclinical and clinical trials, much of which was completed during 2023 in preparation of the 2023 IND submission. Other operating costs decreased slightly by $0.1 million during the year ended December 31, 2024 compared to the year ended December 31, 2023.

Previous wording

General and administrative expenses decreased by $0.9 million, or 13%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. Employee salaries and benefits and share-based compensation increased by $0.3 million, primarily due to accrued employee termination costs of $0.5 million. The $0.9 million decrease in professional and consulting costs for the year ended December 31, 2023 included one-time costs of $0.8 million related to expensing previously deferred financing costs after abandoning planned offerings while professional and consulting fees for the year ended December 31, 2022 included $1.3 million of one-time costs related to our Nasdaq listing in July 2022. The remaining $0.4 million decrease in professional and consulting fees was attributable to a decrease in investor relations and shareholder expenses of $0.7 million and in recruiting expenses of $0.2 million, offset by an increase in insurance costs of $0.2 million and an increase in other consulting and business development of $0.3 million. Patent fees decreased by $0.3 million.

Current wording

General and administrative expenses decreased by $0.2 million, or 3%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. Employee salaries and benefits decreased by $0.4 million, primarily due to accrued employee termination costs of $0.5 million in 2023 paid out during the year ended December 31, 2024. The $0.4 million decrease in professional and consulting costs included a $0.8 million decrease in one-time fees related to expensing previously deferred financing costs after abandoning planned offerings during the year ended December 31, 2023, and a $0.4 million decrease in other consulting and business development costs, and a decrease of $0.2 million in investor relations and Board of Director fees. The decrease in professional and consulting costs was offset by an increase of $0.8 million in legal fees and an increase of $0.2 million in audit, tax, and recruiting fees. Share-based compensation costs increased by $0.6 million and patent fees increased by $0.1 million.

Previous wording

In March 2021, we completed a $7.0 million private placement of convertible unsecured debentures (the Debentures). The Debentures were initially convertible into Common Shares at the option of the holder at a conversion price of $6.00 following the Reverse Share Split and accrued interest at 1% per annum, which is payable annually. The Debentures were amended and converted into 70,000,000 Series 1 Convertible Preferred Shares in June 2022. The Series 1 Convertible

Current wording

In March 2021, we completed a $7.0 million private placement of convertible unsecured debentures (the Debentures). The Debentures were initially convertible into Common Shares at the option of the holder at a conversion price of $6.00 and accrued interest at 1% per annum, which was payable annually. The Debentures were amended and converted into

Previous wording

Preferred Shares are non-voting and non-interest bearing and are convertible at a 60:1 ratio into Common Shares at the option of the holder. In December 2023, the Series 1 Convertible Preferred Shares were converted into 1,166,667 Series 2 Convertible Preferred Shares, which are convertible at a 1:1 ratio into Common Shares at the option of the holder, or upon raising a single round of equity financing in excess of $14 million.

Current wording

70,000,000 Series 1 Convertible Preferred Shares in June 2022. The Series 1 Convertible Preferred Shares were non-voting and non-interest bearing and were convertible at a 60:1 ratio into Common Shares at the option of the holder. In December 2023, the Series 1 Convertible Preferred Shares were converted into 1,166,667 Series 2 Convertible Preferred Shares, which were convertible at a 1:1 ratio into Common Shares at the option of the holder, or upon raising a single round of equity financing in excess of $14 million.

Previous wording

In May 2023, we entered into an agreement with a vendor which gives the option to defer payment on approximately $5.7 million of current accounts payable until March 31, 2024. The outstanding balance of invoices due to the vendor will accrue interest at an annual rate of 5.5%, which is paid monthly. We may repay the outstanding balance at any time.

Current wording

In May 2023, we entered into an agreement with a vendor which gave the option to defer payment on approximately $5.7 million of current accounts payable until March 31, 2024. The outstanding balance of invoices due to the vendor accrued interest at an annual rate of 5.5%, paid monthly. We repaid the outstanding balance of $5.9 million, including unpaid interest, in March 2024.

Previous wording

In August 2023, we completed a private placement of 9,945,969 Common Shares and, in lieu of Common Shares, 954,725 pre-funded warrants, each attached to a Common Share warrant exercisable at a price of $1.75 for gross proceeds of $20.4 million before deducting issuance costs of $2.7 million. Proceeds from the private placement are expected to be used to advance the clinical development of PMN310, ProMIS’ lead therapeutic candidate, as well as for working capital and other general corporate expenses. 360,000 pre-funded warrants were exercised for an equivalent number of Common Shares in October 2023.

Current wording

In August 2023, we completed a private placement of 9,945,969 Common Shares and, in lieu of Common Shares, 954,725 pre-funded warrants, each attached to a Common Share warrant exercisable at a price of $1.75 for gross proceeds of $20.4 million before deducting issuance costs of $2.7 million. Proceeds from the private placement were used to advance the clinical development of PMN310, ProMIS’ lead therapeutic candidate, as well as for working capital and other general corporate expenses. 360,000 pre-funded warrants were exercised for an equivalent number of Common Shares in October 2023.

Previous wording

On September 22, 2023, we filed a registration statement on Form S-3 (File No. 333-274658) with the SEC, which was declared effective on September 29, 2023 (Shelf Registration Statement), in relation to the registration of Common Shares, preferred shares, subscription receipts, debt securities, warrants and/or units of any combination thereof for the purposes of selling, from time to time, our Common Shares, debt securities or other equity securities in one or more offerings. On January 5, 2024, we entered into an At The Market Offering Agreement with BTIG, LLC to provide for the offering, issuance and sale of up to an aggregate amount of $25.0 million of our Common Shares from time to time in “at-the-market” offerings under the Shelf Registration Statement and subject to the limitations thereof.

Current wording

On September 22, 2023, we filed a registration statement on Form S-3 (File No. 333-274658) with the SEC, which was declared effective on September 29, 2023 (Shelf Registration Statement), in relation to the registration of Common Shares, preferred shares, subscription receipts, debt securities, warrants and/or units of any combination thereof for the purposes of selling, from time to time, our Common Shares, debt securities or other equity securities in one or more offerings. On January 5, 2024, we entered into an At The Market Offering Agreement with BTIG, LLC to provide for the offering, issuance and sale of up to an aggregate amount of $25.0 million of our Common Shares from time to time in “at-the-market” offerings under the Shelf Registration Statement and subject to the limitations thereof, including limitations related to the amount we are able to sell pursuant to such ATM Program based on our public float as of a measuring date preceding the filing of our Annual Report. During the year ended December 31, 2024 we sold 75,862 shares for net proceeds of approximately $0.2 million.

Previous wording

We incurred a net loss of $13.2 million for the year ended December 31, 2023, and reported an accumulated deficit of $93.5 million. Management believes that these conditions raise substantial doubt as to the Company’s ability to continue as a going concern within 12 months of the date the Financial Statements are issued. Additional funding will be necessary to fund future clinical activities. We will seek additional funding through public and private financings, debt financings, collaboration agreements, strategic alliances and licensing agreements. Although we have been successful in raising capital in the past, there is no assurance of success in obtaining such additional financing on terms acceptable to us, if at all, and there is no assurance that we will be able to enter into collaborations or other arrangements. If we are unable to obtain funding, it could force us to delay, reduce or eliminate research and development programs and product portfolio expansion or commercialization efforts. These potential delays, reductions and eliminations could adversely affect future business prospects, and the ability to continue operations.

Current wording

We incurred an operating loss of $16.8 million for the year ended December 31, 2024, and reported an accumulated deficit of $90.7 million. Management believes that these conditions raise substantial doubt as to the Company’s ability to continue as a going concern within 12 months of the date the Financial Statements are issued. Additional funding will be necessary to fund future clinical activities. We will seek additional funding through public and private financings, debt financings, collaboration agreements, strategic alliances and licensing agreements. Although we have been successful in raising capital in the past, there is no assurance of success in obtaining such additional financing on terms acceptable to us, if at all, and there is no assurance that we will be able to enter into collaborations or other arrangements. If we are unable to obtain funding, it could force us to delay, reduce or eliminate research and development programs and product portfolio expansion or commercialization efforts. These potential delays, reductions and eliminations could adversely affect future business prospects, and the ability to continue operations.

Previous wording

Cash used in operating activities was $17.0 million for the year ended December 31, 2022, which consisted of a net loss of $18.1 million and $4.3 million in non-cash charges, offset by a net change of $5.4 million in our net operating assets and liabilities. The additive non-cash activities primarily consisted of a gain on the change in fair value of financial instruments of $4.1 million and a gain of $1.3 million on the extinguishment of the convertible debt and derivative liability, offset by non-cash charges for share-based compensation of $0.5 million, for amortization of debt discount of $0.2 million and foreign exchange losses of $0.3 million. Changes in cash flows related to operating assets and liabilities primarily consisted of an increase of $5.7 million of accounts payable and accrued liabilities offset by a $0.3 million increase in prepaid expenses and other current assets.

Current wording

Cash used in operating activities was $27.2 million for the year ended December 31, 2024, which consisted of net income of $2.8 million offset by $18.2 million in non-cash charges and a net change of $11.7 million in our net operating assets and liabilities. The additive non-cash activities primarily consisted of a gain on the change in fair value of financial instruments of $22.6 million, offset by non-cash charges for share-based compensation of $0.8 million and a $3.5 million loss on the issuance of common shares, warrants, and pre-funded warrants in the July 2024 Private Placement. Changes in cash flows related to operating assets and liabilities primarily consisted of a decrease of $6.1 million of accounts payable, a decrease of $1.0 million in accrued liabilities and a $4.6 million increase in prepaid expenses and other current assets, primarily related to the PMN310 Phase 1b clinical trial.

Previous wording

Our MD&A is based on our Financial Statements, which have been prepared in accordance with U.S. GAAP and on a basis consistent with those accounting principles followed by us and disclosed in Note 2 to our audited consolidated financial statements for the year ended December 31, 2023. The preparation of these Financial Statements in conformity with U.S. GAAP requires our management to make certain judgments and estimates 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 expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgement about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant estimates and judgments include, but are not limited to, accruals for research and development expenses and the valuation of warrant liabilities and embedded derivative liabilities. Accordingly, actual results may differ from these judgments and estimates under different assumptions or conditions and any such difference may be material.

Current wording

Our MD&A is based on our Financial Statements, which have been prepared in accordance with U.S. GAAP and on a basis consistent with those accounting principles followed by us and disclosed in Note 2 to our audited consolidated financial statements for the year ended December 31, 2024. The preparation of these Financial Statements in conformity with U.S. GAAP requires our management to make certain judgments and estimates 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 expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgement about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant estimates and judgments include, but are not limited to, accruals for research and development expenses. Accordingly, actual results may differ from these judgments and estimates under different assumptions or conditions and any such difference may be material.

Previous wording

The percentage of work completed is inherently subject to estimation uncertainty, and the Company uses third party invoices, contract terms, and support provided directly from third parties, when available, to establish the percentage of completion at each measurement date. As an example, a difference in estimated percentage of work completed compared to actual percentage of work completed of 10% for a $1.0 million contract at the measurement date could have a $0.1 million impact on accrued liabilities and research and development expenses. The Company had $0.7 million of accrued research and development costs at December 31, 2023, which is from multiple contracts.

Current wording

The percentage of work completed is inherently subject to estimation uncertainty, and the Company uses third-party invoices, contract terms, and support provided directly from third parties, when available, to establish the percentage of completion at each measurement date. A hypothetical difference in estimated percentage of work completed compared to actual percentage of work completed of 10% for a $1.0 million contract at the measurement date could have a $0.1 million impact on accrued liabilities and research and development expenses. The Company had $0.2 million of accrued research and development costs and $5.1 million of prepaid upfront research payments which had not yet been recognized at December 31, 2024, which is from multiple contracts.