EDSA 10-K & 10-Q changes, risk factors and insider trading

Certain factors may have a material adverse effect on our business, prospects, financial condition and results of operations. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this Annual Report on Form 10-K, including our financial statements and the related notes, before deciding to invest in our securities. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and cause the market price of our securities to decline. In addition, many of the following risk factors could be exacerbated by any worsening of the global business and economic environment or the resurgence of Covid-19 or other public health threats. If any of the following risks actually occurs, our business, financial condition, results of operations and future prospects could be materially and adversely affected. In addition, we cannot assure investors that our assumptions and expectations will prove to be correct. Important factors could cause our actual results to differ materially from those indicated or implied by forward-lookingforward- looking statements. See “Forward-Looking Statements And Other Matters” for a discussion of some of the forward-looking statements that are qualified by these risk factors.

We have recognized recurring losses, and at September 30, 2024,2025, we had an accumulated deficit of $58.6$65.9 million. We anticipate operating losses to continue for the foreseeable future due to, among other things expenses related to ongoing activities to research, develop and commercialize our product candidates. We expect that our cash and cash equivalents at September 30, 2024, together with the proceeds from the sale of Preferred Shares (as defined below) to PN MPC (as defined below),2025, net proceeds from the HCW ATM (as defined below) and reimbursementreimbursements of eligibilityeligible R&D expenses under the 2023 SIF Agreement,Agreement willmay not be sufficient to fund our operating andexpenses capitalfor requirementsone atyear leastafter 12the monthsdate fromof the filing of this Form 10-K.10-K, unless we delay spending on our EB-06 program or raise additional capital. Our forecast of the period of time through which our current financial resources will be adequate to support our operations and the costs to support our general and administrative and research and development activities are forward-lookingforward- looking statements and involve risks and uncertainties. The financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. The source, timing and availability of any future financing will depend principally upon market conditions, and, more specifically, on the progress of our clinical development programs. Funding may not be available when needed, at all, or on terms acceptable to us. Lack of necessary funds may require us, among other things, to delay, scale back or eliminate some or all of our planned clinical trials. These factors among others create a substantial doubt about our ability to continue as a going concern.

To continue to grow our business over the longer term, we plan to commit substantial resources to research and development, clinical trials of our product candidates, and other operations and potential product acquisitions and in-licensing. We have evaluated and expect to continue to evaluate a wide array of strategic transactions as part of our plan to acquire or in licensein-license and develop additional products and product candidates to augment our internal development pipeline. Strategic transaction opportunities that we may pursue could materially affect our liquidity and capital resources and may require us to incur additional indebtedness, seek equity capital or both. In addition, we may pursue development, acquisition or in-licensing of approved or development products in new or existing therapeutic areas or continue the expansion of our existing operations. Accordingly, we expect to continue to opportunistically seek access to additional capital to license or acquire additional products, product candidates or companies to expand our operations, or for general corporate purposes. Strategic transactions may require us to raise additional capital through one or more public or private debt or equity financings or could be structured as a collaboration or partnering arrangement. We have no arrangements, agreements, or understandings in place at the present time to enter into any acquisition, in-licensing or similar strategic business transaction.

Our operations are subject to anti-corruption laws, including the U.S. Foreign Corrupt Practices Act (FCPA), and other anti-corruption laws that apply in countries where we do business and may do business in the future. We are also subject to other laws and regulations governing our international operations, including regulations administered by the government of the U.S. and authorities in the EU, including applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations. There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws. If we are not in compliance, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity. Similarly, compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and our failure to comply with data protection laws and regulations could lead to government enforcement actions, which would cause our business and reputation to suffer.

We are highly dependent on Dr. Pardeep Nijhawan, our CEO and Secretary;Secretary, and Michael Brooks, our President;President, as well as other principal members of our management and scientific teams. Although we have employment agreements with each of our executives, these agreements do not prevent our executives from terminating their employment at any time. The unplanned loss of the services of any of these persons could materially impact the achievement of our research, development, financial and commercialization objectives. If we lose the services of any of these individuals, we might not be able to find suitable replacements on a timely basis or at all, and our business could be harmed as a result.

If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA, Health Canada (“HC”) or the European Medicines Agency (“EMA”), or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization our product candidates.

It is critical to our ability to grow and become profitable that we successfully identify patients with vitiligo, chronic ACDACD, ARDS or pulmonary fibrosis. Our estimates of the number of people who have these conditions as well as the subset who have the potential to benefit from treatment with EB06, EB01, EB05 or EB07, are based on a variety of sources, including third-party estimates and analyses in the scientific literature, and may prove to be incorrect. Further, new information may emerge that changes our estimate of the prevalence of these diseases or the number of patient candidates for these drug candidates. The effort to identify patients for our other potential target indications is at an early stage, and we cannot accurately predict the number of patients for whom treatment might be possible. Additionally, the potentially addressable patient population for our drug candidates may be limited or may not be amenable to treatment with our drug candidates, and new patients may become increasingly difficult to identify or access. If the commercial opportunity for these conditions is smaller than we anticipate, our future financial performance may be adversely impacted.

The development and commercialization of new drug products is highly competitive. We face competition with respect to our current product candidates and any products we may seek to develop or commercialize in the future from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. Competitors may also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. Many of our competitors have significantly greater financial resources and expertise than we do. Our commercial opportunities could be reduced or eliminated if our competitors develop and commercialize products that are more effective, safer, have fewer or less severe side effects, are approved for broader indications or patient populations, or are more convenient or less expensive than any products that we develop and commercialize. Our competitors may also obtain marketing approval for their products more rapidly than we may obtain approval for our products, which could result in our competitors establishing a strong market position before we are able to enter the market. If approved, our product candidates will compete for a share of the existing market with numerous other products being used to treat ACD, ARDS, vitiligo, SScpulmonary diseases or any other indications for which we may receive government approval.

Our directors anddirectors, executive officers and certain other holders of our securities have control over us and could delay or prevent a change of corporate control.

As of December 11,12, 2024,2025, Dr. Nijhawan, our Chief Executive Officer, beneficially owns 19.99% of our outstanding common shares and all of our executive officers and directors, including Dr. Nijhawan, beneficially own 23.9%23.6% of our common shares. As a result,result of the foregoing, such individuals will have the ability, acting together, to significantly influence the election of our directors and the outcome of corporate actions requiring shareholder approval, such as: (i) a merger or a sale of our company, (ii) a sale of all or substantially all of our assets, and (iii) amendments to our Articles. This concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to our other shareholders and be disadvantageous to our shareholders with interests different from those individuals.

See “Security Ownership of Certain Beneficial Owners and Management” below for more information regarding the ownership of our outstanding common shares by our executive officers, directors and holders of more than 5% of our common stock,shares, together with their affiliates.

As previously approved by our shareholders, our board of directors (“Board”) has the authority to authorize up to an unlimited number of a new series of our preferred shares and to fix and determine the special rights and restrictions of that series without further shareholder approval, subject to the terms set out in the Articles and unless otherwise required by the Business Corporations Act (British Columbia). As a result, our board of directorsBoard could authorize the creation of a series of our preferred shares that would grant to holders of the preferred shares a right to our assets upon liquidation before a distribution to the holders of our common shares. In addition, our board of directorsBoard could authorize the creation of a new series of our preferred shares that is convertible into our common shares, which could result in dilution to existing shareholders.

On October 30, 2024, we filed Amended Articles to amend the rights, preferences, restrictions and other matters pertaining to our newly designated Series A-1 Convertible Preferred Shares (the “Series A-1 Preferred Shares”). The Series A-1 Preferred Shares have no par value and a stated value of $10,000 per share and rank, with respect to redemption payments, rights upon liquidation, dissolution or winding-up of the Company, or otherwise, senior in preference and priority to our common shares.

Our common shares rank junior to theour preferred shares in the event of a liquidation, dissolution or winding-up of the Company.

In the event of any liquidation, dissolution or winding-up of the Company, (i) a holder of the Series A-1 Preferred Shares will be entitled to receive, before any distribution or payment may be made with respect to the holders of our common shares, an amount equal to 100% of the stated value, plus a return equal to 10% of the stated value per Preferred Share per annum, calculated daily.daily and (ii) a holder of the Series B-1 Preferred Shares will be entitled to receive, before any distribution or payment may be made with respect to common shares, an amount equal to 100% of the stated value.

Any issuance of our common shares upon conversion of theour Preferredpreferred Sharesshares will cause dilution to our then existing stockholders and may depress the market price of our common shares.

The Series A-1 Preferred Shares accrue an annual return equal to 10% of the stated value per Preferred Share payable by the issuance of our common shares at the conversion price upon a buy-back by the Company, liquidation or on conversion at the conversion price (calculated daily). Each Series A-1 Preferred Share is convertible into a number of our common shares calculated by dividing (i) the sum of the stated value of such Series A-1 Preferred Share plus a return equal to 10% of the stated value per Series A-1 Preferred Share per annum, calculated daily, by (ii) a fixed conversion price of $3.445.

The issuance of our common shares upon conversion of theour Preferredpreferred Sharesshares will result in immediate and substantial dilution to the interests of holders of our common shares, and such dilution will increase over time in connection with the accrual of the annual return on the Series A-1 Preferred Shares.

We may incur future indebtedness that will rank senior to theour Preferredpreferred Sharesshares or issue additional series of preferred shares that rank on a parity with, or senior to, the Preferredpreferred Sharesshares as to dividend payments and liquidation preference.

We may incur substantial amounts of additional debt and other obligations that will rank senior to the Preferredpreferred Shares,shares, and the terms of the Preferredpreferred Sharesshares do not limit the amount of such debt or other obligations that we may incur. The terms of the Preferredpreferred Sharesshares will not prohibit us from issuing additional series of preferred shares that would rank on parity with the Preferredpreferred Shares.shares. The Articles allow for our board of directorsBoard to create new series of preferred shares without further approval by our shareholders, which could adversely affect the rights of the holders of the Preferredpreferred Sharesshares and our common shares. The issuances of other series of preferred shares could have the effect of reducing the amounts available to the Preferredpreferred Sharesshares in the event of liquidation. If we issue preferred shares with voting rights that dilute the voting power of our common shares, the market price of our common shares could decrease, adversely affecting the value of the Preferredpreferred Shares.shares. Additional issuances and sales of preferred shares, or the perception that such issuances and sales could occur, may cause prevailing market prices for our common shares to decline and may adversely affect our ability to raise additional capital in the financial markets at times and prices favorable to it.

A special set of U.S. federal income tax rules applies to a foreign corporation that is deemed a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. Based on our audited financial statements, income tax returns, and relevant market and shareholder data, we believe that we likely will not be classified as a PFIC in the September 30, 20242025 taxable year. There can be no assurance, however, that we will not be considered to be a PFIC for any particular year in the future because PFIC status is factual in nature, depends upon factors not wholly within our control, generally cannot be determined until the close of the taxable year in question, and is determined annually. If we are deemed to be a PFIC during the current or a future taxable year, U.S. shareholders would be subject to special taxation rules related to gain on sale or disposition of our shares and excess distributions unless they make a timely election to treat our shares as a qualified electing fund (“QEF election”). A QEF election cannot be made unless we provide U.S. shareholders the information and computations needed to report income and gains pursuant to a QEF election. Without a QEF election, U.S. shareholders may not be able to use capital gains tax treatment and may be subject to potentially adverse tax consequences. Given the complexities of the PFIC and QEF election rules, U.S. shareholders may need to incur the time and expense of consulting a tax adviser about these rules.

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 medicalMedical dermatologyDermatology 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.

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. EB05In 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. Paridiprubart is currentlyalso being evaluated in aan ongoing U.S. government-funded platform study investigating three novel threat-agnostic HDTs in hospitalized adult patients with Acute Respiratory Distress Syndrome (ARDS), a life-threatening form of respiratory failure.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. In addition to EB05, weWe are also preparingpursuing anadditional investigationaluses newfor drug application (IND)paridiprubart in thechronic United States to conduct a future Phase 2 study for EB07 (paridiprubart) in patients with pulmonary fibrosis.diseases.

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and our wholly owned subsidiaries, Edesa Biotech Research, Inc. and Edesa Biotech USA, Inc.

Our operations have been funded primarily through issuances of common shares and preferred shares, exercises of common share purchase warrants, convertible preferred shares, convertible loans, government grants and tax incentives. We have devoted substantially all of our efforts to research and development, including clinical trials, and have not completed the development of any of our drug candidates. We expect that our cash and cash equivalents,equivalents at September 30, 2024,2025, togetherwhich with theinclude proceeds from theour sale2025 ofequity Preferredfinancings, Sharestogether to PN MPC,with net proceeds from the HCW ATM (as defined below) and reimbursements of eligible R&D expenses under the 2023 SIF Agreement willmay not be sufficient to fund our operating expenses for one year after the date of this filingfiling, andunless thereforethe Company raises additional capital or delays its current EB06 development program. Accordingly, management has concluded that substantial doubt exists about our ability to continue as a going concern. We will need to raise additional capital and/or reduce our operating expenses to support the Company’s operations for at least the next 12 months.

Our total operating expenses decreasedincreased by $2.2$0.9 million to $7.0$7.9 million for the year ended September 30, 20242025 compared to $9.2$7.0 million for the prior year:year.

Total other income wasdecreased unchangedby at$0.1 million to $0.7 million for the year ended September 30, 2025 compared to $0.8 million for the yearsprior ended September 30, 2024 and September 30, 2023year, and was composed of the following:

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 $4.9$7.3 million and $6.6$4.9 million for the years ended September 30, 20242025 and 2023,2024, respectively. We incurred net losses of $6.2$7.2 million and $8.4$6.2 million for those same years. We ended fiscal 2025 with $10.8 million in cash and cash equivalents and working capital of $10.4 million, compared to $1.0 million in cash and cash equivalents and a working capital deficit of approximately $0.2 million as of September 30, 2024.

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$4.0 million in gross proceeds. SubsequentFor tothe year ended September 30, 2024,2025, wethe Company sold a394,057 totalCommon of 220,269 common sharesShares pursuant to the agreementHCW ATM for net proceeds of $0.6approximately $1.0 million after deducting sales agent commissions. Subsequent to September 30, 2025, we sold an additional 1,177,568 common shares under the HCW ATM for net proceeds of approximately $3.4 million after deducting sales agent commissions.

In October 2024, we entered into a Securities Purchase Agreement (the “Series A-1 Purchase Agreement”) with Pardeep Nijhawan Medicine Professional Corporation (PNthe MPC“Series A-1 Purchaser”), an entity controlled by Pardeep Nijhawan, the Company’sour Chief Executive Officer, Secretary and member of theour board of directors of the Company,Board, pursuant to which the Companywe agreed to issue and sell to PNthe MPCSeries A-1 Purchaser in a private placement, up to $5 million of shares (Preferred Shares) of the Company’s newly designated Series A-1 Convertible Preferred Shares, stated value $10,000 per share, 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, PNthe MPCSeries 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 PNthe MPCSeries 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.

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 20292032 only if and when we earn gross revenue. In February 2021, we entered into the 2021 SIF Agreement, pursuant to which we were eligible to receive cash reimbursements up to C$14.1 million in the aggregate for certain R&D expenses related to our EB05 clinical development program. All potential funding available under the 2021 SIF Agreement has been received. For the years ended September 30, 20242025 and 2023,2024, we recorded grant income of $0.7$0.8 million and $0.6$0.7 millionmillion, respectivelyrespectively, related to the 2023 SIF Agreement. On September 30, 2025, the 2023 SIF 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.

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 of directorsBoard (“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.

In August 2022, we filed a $150.0 million shelf registration statement.statement that expired in August 2025. In March 2023, we entered into an equity distribution agreement with Canaccord, as sales agent, 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 $20 million in gross proceeds, subject to certain offering limitations that currently allow us to offer and sell common shares having an aggregate gross sales price of up to $8.4 million (“Canaccord ATM”). For the fiscal year ended September 30, 2024, we sold a total of 171,916 common shares pursuant to the agreement for net proceeds of $0.6 million after deducting commissions and costs of $0.1 million. The Canaccord ATM was terminated in October 2024.

At September 30, 2024,2025, we had an accumulated deficit of $58.6$65.9 million and negative working capital of $0.2$10.4 million, including $1.0$10.8 million in cash and cash equivalents. Subsequent to the September 30, 2024,2025, we received net proceeds of $1.5$3.4 million from the sale of Preferredcommon Sharesshares tounder the PNHCW MPC.ATM. We expect that our cash and cash equivalents at September 30, 2024,2025, togetherfuture with the proceeds from the salesales of Preferredcommon Sharesshares pursuant to the PN MPC, net proceeds from the HCW ATM and reimbursements of eligible R&D expenses under the 2023 SIF Agreement will not be sufficient to fund our operating expenses for one year afterincluding the dateadvancement of thisthe filingvitiligo andprogram thereforethrough managementthe hasend concludedof thatfiscal substantial doubt exists about our ability to continue as a going concern.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.

We expect to continue to incur substantial additional operating losses for at least the next several years as we continue to develop our product candidates and seek marketing approval and, subject to obtaining such approval, the eventual commercialization of our product candidates. If we obtain marketing approval for our product candidates, we will incur significant sales, marketing and outsourced manufacturing expenses. In addition, we expect to incur additional expenses to add operational, financial and information systems and personnel, including personnel to support our planned product commercialization efforts. We also expect to incur significant costs to comply with corporate governance, internal controls and similar requirements applicable to us as a public company. To continue to grow our business over the longer term, we plan to commit substantial resources to research and development, clinical trials of our product candidates, and other operations and potential product acquisitions and in licensing. We have evaluated and expect to continue to evaluate a wide array of strategic transactions as part of our plan to acquire or in licensein-license and develop additional products and product candidates to augment our internal development pipeline. Strategic transaction opportunities that we may pursue could materially affect our liquidity and capital resources and may require us to incur additional indebtedness, seek equity capital or both. In addition, we may pursue development, acquisition or in licensing of approved or development products in new or existing therapeutic areas or continue the expansion of our existing operations. Accordingly, we expect to continue to opportunistically seek access to additional capital to license or acquire additional products, product candidates or companies to expand our operations, or for general corporate purposes. Strategic transactions may require us to raise additional capital through one or more public or private debt or equity financings or could be structured as a collaboration or partnering arrangement. We have no arrangements, agreements, or understandings in place at the present time to enter into any acquisition, in licensing or similar strategic business transaction.

Net cash used in operating activities was $7.3 million for the year ended September 30, 2025 compared to $4.9 million for the year ended September 30, 2024 compared to $6.6 million for the year ended September 30, 2023 primarily due to aan decreaseincrease in R&D and G&A expenses.

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 $2.9$3.7 million and $4.8$2.9 million for the years ended September 30, 20242025 and 2023,2024, respectively. The decrease was dueincrease primarily toreflects 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 externalspend researchon expensesother relateddiscovery to our ongoing clinical studies.programs.

Our exposure to foreign exchange risk is primarily related to fluctuations between the Canadian dollar and the U.S. dollar. We have balances in Canadian dollars whichthat are subject to foreign currency fluctuations relatingwhen to the impact of translatingtranslated to U.S. dollars for financial statementsstatement presentation. We also periodically exchange U.S. dollars for Canadian dollars since most operating expenses are incurred in Canadian dollars. The fluctuation of the U.S. dollar in relation to the Canadian dollar will have an impact uponimpacts our profitability and may also affect the value of our assets and the amount of shareholders’ equity. We have not entered into any agreements or purchased any instruments to hedge possible currency risks. At September 30, 2024,2025, we had assets denominated in Canadian dollars of approximately C$0.04C$3.0 million and the U.S. dollar exchange rate as atof this date was equal to 1.35171.3918 Canadian dollars. Based on thethis exposure at September 30, 2024,2025, a 10% annual change in the Canadian/U.S. exchange rate would have a nominal impact on our net loss and other comprehensive loss.loss by approximately $0.2 million.

We are potentially subject to financial instrument concentration of credit risk through our cash and cash equivalents,equivalents and accounts and other receivable.receivables. We place our cash and cash equivalents in money market mutual funds of U.S. government securities or with financial institutions believed to be credit worthycreditworthy and perform periodic evaluations of their relative credit standing.

Accounts and other receivablereceivables primarily include Harmonized Sales Tax (“HST”) refunds receivable from the Canada Revenue Agency andAgency, reimbursements receivable from the Canadian government’s SIF.SIF and other miscellaneous receivables. We assess the collectability of our accounts receivableand other receivables through a review of our current aging and payment terms, as well as an analysis of our historical collection rate, general economic conditions and the credit status of the governmentrelevant agencies.counterparties. As of September 30, 20242025 and 2023,2024, all outstanding accounts and other receivablereceivables were deemed to be fully collectible, and therefore, no allowance for doubtful accounts was recorded.

Intangible assets represent the exclusive world-wide rights to know-how, patents and data relating to certain monoclonal antibodies (the “Constructs”), including sublicensing rights, acquired by entering into the NovImmune License Agreement. Unless earlier terminated, the term of the NovImmune License Agreement will remain in effect for 25 years from the date of first commercial sale of licensed products containing the Constructs. Subsequently, the NovImmune License Agreement will automatically renew for 5-year periods unless either party terminates the agreement in accordance with its terms. We recognize intangible assets at their historical cost, amortized on a straight-line basis over their expected useful lives, which is 25 years, and subject to impairment review at the end of each reporting period.

We recognize operating lease right-of-use (“ROU”) assets and operating lease liabilities on the balance sheet for operating leases with terms longer than 12 months. We follow the ongoing practical expedient not to recognize operating lease right-of-useright- of-use assets and operating lease liabilities for short-term leases. The ROU assets are initially measured at cost and amortized using the straight-line method through the end of the lease term. The lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using our incremental borrowing rate.

We recognize compensation expense for all share-based awards based on the estimated grant-date fair values. For restricted share unit awards to employees, the fair value is based on the 5-day volume weighted average price (VWAP) of our common shares up to the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period.

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 MarchJune 31,30, 2026 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.

The discussion and analysis of our financial condition and results of operations are based on our unaudited condensed interim consolidated financial statements as of MarchJune 31,30, 2026 and September 30, 2025 and for the three and sixnine months ended MarchJune 31,30, 2026 and 2025 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.

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 vitiligovitiligo. and weWe are in discussionsthe withprocess of providing chemistry, manufacturing and controls-related information to the U.S. Food and Drug Administration (“FDA”) in connection with our Investigational New Drug ("IND") application for the same study.study Subjectbased on our discussions with the FDA. The Phase 2 study protocol is designed to enroll approximately 80 subjects. We expect recruitment to begin in the coming weeks in Canada, with additional jurisdictions to follow, subject to regulatory approval, we anticipate initiating siteactivationapproval and patientadministrative enrollment by midyear 2026.filings. 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.

Our most advanced Respiratory drug candidate is 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 subsequently reported positive additional data from the same study. These results represent a broader, 278-patient population, which includes both previously reported 104 patients requiring invasive mechanical ventilation (“IMV”) as well as 174 non-IMV patients. Across this full population, paridiprubart demonstrated a statistically significant reduction in 28-day mortality. Treatment benefits were consistent across severity groups and in patients with serious comorbidities. Because TLR4-mediated inflammation plays a central role in both lung and kidney injury, we conducted additional exploratory analyses to evaluate paridiprubart’s effect in ARDS patients with concurrent acute kidney injury (“AKI”). In a population of 101 ARDS patients from our Phase 2 and 3 studies who presented with AKI at baseline, paridiprubart plus standard of care treatments was associated with significant mortality reductions supported by concordant improvements in the kidney-specific MAKE30 composite endpoint. 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. The company has initiated manufacturing readiness activities, including process development and scale-up planning, in preparation for future drug production. Certain development expenses, including manufacturing scale-up, for our EB05paridiprubart 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.

Comparison of the Three Months Ended MarchJune 31,30, 2026 and 2025

Total operating expenses increased by $2.7$3.6 million to $4.3$5.5 million for the three months ended MarchJune 31,30, 2026 compared to $1.6$1.9 million for the same period last year.

Total other income increaseddecreased by approximately $30,000$42,000 to $79,000$112,000 for the three months ended MarchJune 31,30, 2026 compared to $49,000$154,000 for the same period last year and was composed of the following:

For the three months ended MarchJune 31,30, 2026, our net loss was $4.2$5.4 million, or $0.49$0.60 per common share, compared to a net loss of $1.6$1.7 million, or $0.30$0.25 per common share for the three months ended MarchJune 31,30, 2025.

Comparison of the SixNine Months Ended MarchJune 31,30, 2026 and 2025

Total operating expenses increased by $3.1$6.8 million to $6.6$12.2 million for the sixnine months ended MarchJune 31,30, 2026 compared to $3.5$5.4 million for the same period last year.

Total other income decreased by approximately $158,000$200,000 to $173,000$285,000 for the sixnine months ended MarchJune 31,30, 2026 compared to $331,000$485,000 for the same period last year and was composed of the following:

For the sixnine months ended MarchJune 31,30, 2026, our net loss was $6.5$11.9 million, or $0.78$1.40 per common share, compared to a net loss of $3.2$5.0 million, or $0.74$0.95 per common share for the sixnine months ended MarchJune 31,30, 2025.

Our capital expenditures primarily consist of computer and office equipment. There were no significant capital expenditures for the three and sixnine months ended MarchJune 31,30, 2026 and 2025.

As a clinical-stage companycompany, we have not generated significant revenue, and we expect to incur operating losses as we continue our efforts to acquire, develop, seek regulatory approval for and commercialize product candidates and execute on our strategic initiatives. Our operations have historically been funded through issuances of common shares, exercises of common share purchase warrants, convertible preferred shares, convertible loans, government grants and tax incentives.

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 $4.1$7.2 million for the sixnine months ended MarchJune 31,30, 2026, compared to $3.9$5.6 million for the same period in 2025. We incurred net losses of $6.5$11.9 million for the sixnine months ended MarchJune 31,30, 2026, compared to $3.2$5.0 million for the same period in 2025. We ended the period with $10.0$10.3 million in cash and cash equivalents and working capital of $8.2$6.9 million, compared to $10.8 million in cash and cash equivalents and working capital of approximately $10.4 million as of September 30, 2025.

In October 2024, we entered into a Securities Purchase Agreement (the “Series A-1 Purchase Agreement”) with Pardeep Nijhawan Medicine Professional Corporation (“PN MPC” or 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.

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 and sixnine months ended MarchJune 31,30, 2026 and 2025, we recorded grant income of $0.1 million and $0.1$0.2 million, and $0.2$0.3 million and $0.4$0.5 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.

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 hashad 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.

At MarchJune 31,30, 2026, we had an accumulated deficit of $72.5$77.9 million and working capital of $8.2$6.9 million, including $10.0$10.3 million in cash and cash equivalents. We expect that our cash and cash equivalents at MarchJune 31,30, 2026, 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.

Net cash used in operating activities was $4.1$7.2 million for the sixnine months ended MarchJune 31,30, 2026 compared to $3.9$5.6 million for the sixnine months ended MarchJune 31,30, 2025, primarily due to a higher net loss, partially offset by higher noncash share-based compensation and favorable net changes in working capital. Favorable net changes in working capital were driven primarily by a $0.4 million decrease in accounts and other receivable and a $1.1$2.9 million increase in accounts payable and accrued liabilities, mainly related to manufacturing activities for the planned Phase 2 clinical study of EB06, partially offset by a $0.1 million increase in prepaid expenses and other current assets.

There was no cash used in investing activities for the sixnine months ended MarchJune 31,30, 2026 and 2025, respectively.

Net cash provided by financing activities was approximately $3.3$6.8 million for the sixnine months ended MarchJune 31,30, 2026 compared to $16.8 million for the sixnine months ended MarchJune 31,30, 2025, primarily due to lower proceeds from financing activities during the current period. During the sixnine months ended MarchJune 31,30, 2026, financing cash flows primarily related to net proceeds from issuances of common shares under the HCW ATM,ATM and the June 2026 private placement, net of issuance costs. During the sixnine months ended MarchJune 31,30, 2025, financing cash flows primarily related to proceeds from issuances of common shares and the Series A-1 and Series B-1 preferred share financings, net of issuance costs.

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 $2.8$4.0 million and $0.5$0.9 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $3.9$7.8 million and $1.5$2.4 million for the sixnine months ended MarchJune 31,30, 2026 and 2025, respectively. For the three months ended MarchJune 31,30, 2026, the increase was primarily due to increased expenses for manufacturing-related activities and other preparations for the planned Phase 2 clinical study of EB06 in vitiligo patients; increased expenses related to regulatory and manufacturing readiness for paridiprubart; and increased unallocated research costs. For the sixnine months ended MarchJune 31,30, 2026, the increase was primarily due to increased expenses for manufacturing-related activities and other preparations for the planned Phase 2 clinical study of EB06 in vitiligo patients, as well as increased unallocated research costs, which were partially offset by decreased expenses related to the completion of the Phase 3 study of paridiprubart.