Edesa Biotech(EDSA) - 2023 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited interim financials for March 31, 2023, show decreased assets and net losses, with financing as primary cash source Condensed Interim Consolidated Balance Sheets Total assets decreased to $10.67 million by March 31, 2023, from $11.58 million, impacting shareholders' equity Condensed Consolidated Balance Sheet Highlights (in USD) | Balance Sheet Item | March 31, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $7,471,252 | $7,090,919 | | Total current assets | $8,129,594 | $9,091,913 | | Total assets | $10,673,485 | $11,575,728 | | Total current liabilities | $1,564,786 | $2,140,777 | | Total liabilities | $1,673,548 | $2,184,439 | | Total shareholders' equity | $8,999,937 | $9,391,289 | Condensed Interim Consolidated Statements of Operations Operating expenses and net losses significantly decreased for the three and six months ended March 31, 2023, due to reduced R&D Statement of Operations Summary (in USD) | Metric | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | Six Months Ended Mar 31, 2023 | Six Months Ended Mar 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $1,458,190 | $3,042,815 | $2,815,528 | $6,993,861 | | General and administrative | $952,391 | $1,532,416 | $1,973,358 | $2,743,093 | | Loss from operations | ($2,410,581) | ($4,575,231) | ($4,788,886) | ($9,736,954) | | Net loss | ($2,334,349) | ($4,569,316) | ($4,669,166) | ($8,947,993) | | Loss per share (basic & diluted) | ($0.12) | ($0.33) | ($0.24) | ($0.66) | Condensed Interim Consolidated Statements of Cash Flows Net cash used in operations was $3.36 million, offset by $3.68 million from financing, increasing cash by $0.38 million Cash Flow Summary for Six Months Ended March 31 (in USD) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($3,363,240) | ($3,624,268) | | Net cash used in investing activities | $0 | ($4,339) | | Net cash provided by financing activities | $3,676,415 | $11,629,914 | | Net change in cash and cash equivalents | $380,333 | $8,047,940 | | Cash and cash equivalents, end of period | $7,471,252 | $15,887,199 | Condensed Interim Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity decreased to $9.00 million due to a $4.67 million net loss, partially offset by equity offerings - Total shareholders' equity decreased from $9,391,289 at the beginning of the six-month period to $8,999,937 at March 31, 2023[20] - Key changes included a net loss of $4.67 million, offset by $3.03 million from an equity offering and $0.77 million from warrant exercises[20] Notes to Condensed Interim Consolidated Financial Statements Notes detail biopharmaceutical operations, significant future commitments, and recent capital-raising activities including an ATM program - The company is a biopharmaceutical firm focused on developing and commercializing drugs for inflammatory and immune-related diseases[22] - The company has significant future commitments, including up to $356 million contingent on milestones for a 2020 license agreement and up to $18.4 million for a 2016 license agreement[40][41] - In November 2022, the company raised net proceeds of $2.91 million through a private placement of shares and warrants[45] - In March 2023, the company entered an 'at-the-market' (ATM) equity distribution agreement to sell up to $20 million in common shares[43] - Subsequent to March 31, 2023, the company issued 562,052 common shares under the ATM program, receiving net proceeds of $0.60 million[69] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes decreased operating expenses and net loss to lower research costs, advancing the Phase 3 EB05 study, with cash and ATM proceeds funding operations - The company's most advanced drug candidate is EB05 (paridiprubart) for Acute Respiratory Distress Syndrome (ARDS), currently in a Phase 3 study[76] - In March 2023, the company and the FDA agreed on the primary endpoint and population for the Phase 3 study of EB05 in hospitalized COVID-19 patients with ARDS, targeting 600 subjects[78] Comparison of Operating Expenses (in USD millions) | Expense Category | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | Six Months Ended Mar 31, 2023 | Six Months Ended Mar 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | Research & Development | $1.46 | $3.04 | $2.82 | $6.99 | | General & Administrative | $0.95 | $1.53 | $1.97 | $2.74 | - As of March 31, 2023, the company had $7.47 million in cash and cash equivalents and plans to finance operations over the next twelve months with cash on hand and equity sales from its at-the-market (ATM) program[94] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide disclosures under this item - As a smaller reporting company, Edesa Biotech is not required to provide disclosure under this item[98] Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2023, with no material changes in internal control - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2023[101] - No changes occurred in internal control over financial reporting during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, these controls[102] PART II - OTHER INFORMATION Legal Proceedings The company is not currently a party to any material legal proceedings or claims - The company is not currently a party to any material legal proceedings[104] Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K - There have been no material changes to the risk factors discussed in the company's Annual Report on Form 10-K for the year ended September 30, 2022[105] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period - None reported[106] Defaults Upon Senior Securities No defaults upon senior securities were reported - None reported[107] Mine Safety Disclosures This item is not applicable to the company - Not applicable[108] Other Information No other information was reported for this item - None reported[109] Exhibits Exhibits include CEO and CFO certifications required by Sarbanes-Oxley Act, and XBRL Interactive Data Files - The report includes certifications from the CEO and CFO pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002[112][113] - XBRL Instance Document and related taxonomy files are also included as exhibits[113]