Edesa Biotech (EDSA) 10-Q 14 Feb 22 2022 Q1 Quarterly report Financial data

Cover

Cover - shares	3 Months Ended
	Dec. 31, 2021	Feb. 11, 2022
Cover [Abstract]
Entity Registrant Name	EDESA BIOTECH, INC.
Entity Central Index Key	0001540159
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Document Period End Date	Dec. 31, 2021
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2022
Entity Common Stock Shares Outstanding		13,775,254
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-37619
Entity Incorporation State Country Code	Z4
Entity Address Address Line 1	100 Spy Court
Entity Address Address Line 2	Markham
Entity Address City Or Town	ON
Entity Address Country	CA
Entity Address Postal Zip Code	L3R 5H6
City Area Code	289
Local Phone Number	800-9600
Security 12b Title	Common Shares, without par value
Trading Symbol	EDSA
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes

Condensed Interim Consolidated

Condensed Interim Consolidated Balance Sheets - USD ($)	Dec. 31, 2021	Sep. 30, 2021
Current assets:
Cash and cash equivalents	$ 5,880,749	$ 7,839,259
Accounts and other receivable	2,876,269	3,302,827
Prepaid expenses and other current assets	1,134,774	948,645
Total current assets	9,891,792	12,090,731
Non-current assets:
Property and equipment, net	16,529	14,989
Intangible asset, net	2,357,071	2,382,364
Operating lease right-of-use assets	77,964	96,571
Total assets	12,343,356	14,584,655
Current liabilities:
Accounts payable and accrued liabilities	1,666,700	1,379,842
Short-term operating lease liabilities	80,167	78,808
Total current liabilities	1,746,867	1,458,650
Non-current liabilities:
Long-term payables	47,244	47,202
Long-term operating lease liabilities	0	20,512
Total liabilities	1,794,111	1,526,364
Shareholders' equity:
Capital shares Authorized unlimited common and preferred shares without par value Issued and outstanding: 12,518,799 common shares (September 30, 2021-13,295,403)	36,116,225	34,887,721
Additional paid-in capital	5,480,739	4,871,461
Accumulated other comprehensive loss	(173,413)	(205,262)
Accumulated deficit	(30,874,306)	(26,495,629)
Total shareholders' equity	10,549,245	13,058,291
Total liabilities and shareholders' equity	$ 12,343,356	$ 14,584,655

Condensed Interim Consolidate_2

Condensed Interim Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2021	Sep. 30, 2021
Condensed Interim Consolidated Balance Sheets
Capital shares, par value	$ 0	$ 0
Capital shares, issued	13,518,799	13,295,403
Capital shares, outstanding	13,518,799	13,295,403

Condensed Interim Consolidate_3

Condensed Interim Consolidated Statements of Operations - USD ($)	3 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Expenses:
Research and development	$ 3,951,046	$ 1,379,654
General and administrative	1,210,677	1,234,148
Loss from Operations	(5,161,723)	(2,613,802)
Other Income (Loss):
Reimbursement grant income	780,257	0
Interest income	6,120	922
Foreign exchange loss	(3,331)	(24,732)
Total Other income (Loss)	783,046	(23,810)
Net Loss	(4,378,677)	(2,637,612)
Exchange differences on translation	31,849	103,427
Net Comprehensive Loss	$ (4,346,828)	$ 0
Weighted average number of common shares	13,351,547	10,277,750
Loss per common share - basic and diluted	$ (0.33)	$ (0.26)

Condensed Interim Consolidate_4

Condensed Interim Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Cash Flows from Operating Activities:
Net loss	$ (4,378,677)	$ (2,637,612)
Adjustments for:
Depreciation and amortization	29,752	28,843
Share-based compensation	609,278	722,909
Changes in working capital items:
Accounts and other receivable	432,792	(75,127)
Prepaid expenses and other current assets	(186,584)	(377,308)
Accounts payable and accrued liabilities	285,825	(672,234)
Net cash used in operating activities	(3,207,614)	(3,010,529)
Cash Flows from Investing Activities:
Purchase of property and equipment	(3,140)	(1,135)
Net cash used in investing activities	(3,140)	(1,135)
Cash Flows from Financing Activities:
Proceeds from issuance of common shares and warrants	1,287,167	1,026,528
Proceeds from exercise of warrants	0	995,038
Payments for issuance costs of common shares	(58,663)	(41,940)
Proceeds from borrowings	0	15,346
Net cash provided by financing activities	1,228,504	1,994,972
Effect of exchange rate changes on cash and cash equivalents	23,740	108,290
Net change in cash and cash equivalents	(1,958,510)	(908,402)
Cash and cash equivalents, beginning of period	7,839,259	7,213,695
Cash and cash equivalents, end of period	5,880,749	6,305,293
Supplemental Disclosure of Noncash Financing Activities:
Preferred shares converted from temporary equity to common shares	$ 0	$ 1,118,353

Condensed Interim Consolidate_5

Condensed Interim Consolidated Statements of Changes in Shareholders Equity - USD ($)	Total	Common Stock	Additional Paid-In Capital	Accumulated other comprehensive loss	Retained Earnings (Accumulated Deficit)
Balance, shares at Sep. 30, 2020		9,615,119
Balance, amount at Sep. 30, 2020	$ 6,631,175	$ 18,500,853	$ 1,550,480	$ (287,204)	$ (13,132,954)
Issuance of common shares in equity offerings, shares		169,753
Issuance of common shares in equity offerings, amount	1,026,528	$ 1,026,528	0	0	0
Issuance costs, amount	(60,983)	$ (60,983)	0	0	0
Issuance of common shares upon exercise of warrants, shares		243,369
Issuance of common shares upon exercise of warrants, amount	995,038	$ 1,111,708	(116,670)	0	0
Conversion of convertible preferred shares, shares		494,846
Conversion of convertible preferred shares, amount	1,118,353	$ 1,118,353	0	0	0
Preferred return on convertible preferred shares	(13,611)	$ 0	0	0	(13,611)
Share-based compensation	0
Net loss and comprehensive loss	0
Balance, shares at Dec. 31, 2020		10,523,087
Balance, amount at Dec. 31, 2020	21,696,459
Balance, shares at Sep. 30, 2021		13,295,403
Balance, amount at Sep. 30, 2021	13,058,291	$ 34,887,721	4,871,461	(205,262)	(26,495,629)
Issuance of common shares in equity offerings, shares		223,396
Issuance of common shares in equity offerings, amount	1,287,167	$ 1,287,167	0	0	0
Issuance costs, amount	(58,663)	(58,663)	0	0	0
Share-based compensation	609,278	0	609,278	0	0
Net loss and comprehensive loss	(4,346,828)	$ 0	0	31,849	(4,378,677)
Balance, shares at Dec. 31, 2021		13,518,799
Balance, amount at Dec. 31, 2021	$ 10,549,245	$ 36,116,225	$ 5,480,739	$ (173,413)	$ (30,874,306)

Nature of operations

Nature of operations	3 Months Ended
	Dec. 31, 2021
Nature of operations
1. Nature of operations	1. Nature of Operations Edesa Biotech, Inc. (the “Company” or “Edesa”) is a biopharmaceutical company focused on acquiring, developing and commercializing clinical-stage drugs for inflammatory and immune-related diseases with clear unmet medical needs. The Company is organized under the laws of British Columbia, Canada and is headquartered in Markham, Ontario, Canada. The Company’s common shares trade on The Nasdaq Capital Market in the United States under the symbol “EDSA”. Impact of COVID-19 The ongoing COVID-19 pandemic has severely impacted global economic activity and has caused material disruptions to almost every industry directly or indirectly. The full impact of the pandemic remains uncertain and ongoing developments related to the pandemic may cause material impacts to the Company’s future operations, clinical study timelines and financial results. While the full impact of the COVID-19 pandemic to business and operating results presents additional uncertainty, the Company’s management continues to use reasonably available information to assess impacts to the Company’s business plans and financial condition.

Basis of preparation

Basis of preparation	3 Months Ended
	Dec. 31, 2021
Nature of operations
2. Basis of preparation	2. Basis of Preparation The accompanying unaudited condensed interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q. They do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with U.S. GAAP for complete financial statements. These condensed interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended September 30, 2021, which was filed with the Securities and Exchange Commission (SEC) on December 28, 2021. The accompanying condensed interim consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Edesa Biotech Research, Inc., an Ontario corporation, and Edesa Biotech USA, Inc., a California corporation in the U.S. All intercompany balances and transactions have been eliminated in consolidation. All adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the results of operations for the periods presented have been included in the interim periods. Operating results for the three months ended December 31, 2021 are not necessarily indicative of the results that may be expected for other interim periods or the fiscal year ending September 30, 2022. Use of estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period or year. Actual results could differ from those estimates. Areas where significant judgment is involved in making estimates are valuation of accounts and other receivable; valuation and useful lives of property and equipment; intangible assets; operating lease right-of-use assets; deferred income taxes; classification of convertible preferred shares as liability or equity; the determination of fair value of share-based compensation; the determination of fair value of warrants in order to allocate proceeds from equity issuances; and forecasting future cash flows for assessing the going concern assumption. Functional and reporting currencies The consolidated financial statements of the Company are presented in U.S. dollars, unless otherwise stated, which is the functional currency of the Company and its U.S. subsidiary. The functional currency of the Company’s Canadian subsidiary, as determined by management, is Canadian dollars.

Intangible assets

Intangible assets	3 Months Ended
	Dec. 31, 2021
Intangible assets
3. Intangible assets	3. Intangible Assets Acquired License In April 2020, the Company entered into a license agreement with a pharmaceutical development company to obtain exclusive world-wide rights to know-how, patents and data relating to certain monoclonal antibodies (“the Constructs”), including sublicensing rights. Unless earlier terminated, the term of the license agreement will remain in effect for 25 years from the date of first commercial sale of licensed products containing the Constructs. Subsequently, the license agreement will automatically renew for five-year periods unless either party terminates the agreement in accordance with its terms. Under the license agreement, the Company is exclusively responsible, at its expense, for the research, development, manufacture, marketing, distribution and commercialization of the Constructs and licensed products and to obtain all necessary licenses and rights. The Company is required to use commercially reasonable efforts to develop and commercialize the Constructs in accordance with the terms of a development plan established by the parties. The Company has determined that the license has multiple alternative future uses in research and development projects and sublicensing in other countries or for other disease indications. The value of the acquired license is recorded as an intangible asset with amortization over the estimated useful life of 25 years and evaluation for impairment at the end of each reporting period. The required upfront license payment of $2.5 million was paid by issuance of Series A-1 Convertible Preferred Shares which were subsequently converted to common shares. The value of the license includes acquisition legal costs. See Note 5 for license commitments. Intangible assets, net consisted of the following: December 31, 2021 September 30, 2021 The Constructs $ 2,529,483 $ 2,529,483 Less: accumulated amortization (172,412 ) (147,119 ) Total intangible assets, net $ 2,357,071 $ 2,382,364 Amortization expense amounted to $0.03 million for each of the three months ended December 31, 2021, and 2020. Total estimated future amortization of intangible assets for each fiscal year is as follows: Year Ending September 30, 2022 $ 75,879 September 30, 2023 101,172 September 30, 2024 101,172 September 30, 2025 101,172 September 30, 2026 101,172 Thereafter 1,876,504 $ 2,357,071

Related Party Operating Lease

Related Party Operating Lease	3 Months Ended
	Dec. 31, 2021
Related Party Operating Lease
4. Related Party Operating Lease	4. Related Party Operating Lease The Company leases facilities used for executive offices from a company controlled by the Company’s CEO for a six-year term through December 2022, with options to renew for another two-year term. The option period is not included in the operating lease right-of-use assets and liabilities. The components of lease cost were as follows: Three Months Ended December 31, 2021 December 31, 2020 Operating lease cost, included in general and administrative on the Statements of Operations $ 20,353 $ 19,688 Lease terms and discount rates were as follows: December 31, 2021 September 30, 2021 Remaining lease term (months): 12 15 Estimated incremental borrowing rate: 6.5 % 6.5 % The approximate future minimum lease payments under operating leases at December 31, 2021 were as follows: Year Ending September 30, 2022 $ 62,263 September 30, 2023 20,754 Total lease payment 83,017 Less imputed interest 2,850 Present value of lease liabilities, short-term $ 80,167 Cash flow information was as follows: Three Months Ended December 31, 2021 December 31, 2020 Cash paid for amounts included in the measurement of lease liabilities, included in accounts payable and accrued liabilities on the Statements of Cash Flows $ 20,354 $ 19,688

Commitments

Commitments	3 Months Ended
	Dec. 31, 2021
Commitments
5. Commitments	5. Commitments Research and other commitments The Company has commitments for contracted research organizations that perform clinical trials for the Company’s ongoing clinical studies, other service providers and the drug substance acquired in connection with a license agreement. Aggregate future contractual payments at December 31, 2021 are as follows: Year Ending September 30, 2022 $ 3,889,000 September 30, 2023 228,000 September 30, 2024 75,000 September 30, 2025 12,000 $ 4,204,000 License and royalty commitments In April 2020, through its Ontario subsidiary, the Company entered into a license agreement with a third party to obtain exclusive world-wide rights to certain know-how, patents and data relating to certain monoclonal antibodies (“the Constructs”), including sublicensing rights. An intangible asset for the acquired license has been recognized. See Note 3 for intangible assets. Under the license agreement, the Company recorded an expense of $3.5 million as a result of meeting a milestone during the year ended September 30, 2021 and is committed to remaining payments of up to an aggregate amount of $352.5 million contingent upon meeting certain milestones outlined in the license agreement, primarily relating to future potential commercial approval and sales milestones. The Company also has a commitment to pay royalties based on any net sales of products containing the Constructs in the countries where the Company directly commercializes the products containing the Constructs and a percentage of any sublicensing revenue received by the Company and its affiliates in the countries where it does not directly commercialize the products containing the Constructs. No royalty or sublicensing payments were made to the third party during the three months ended December 31, 2021 and 2020. In connection with this license agreement and pursuant to a purchase agreement entered into in April 2020, the Company acquired drug substance of one of the Constructs for an aggregate purchase price of $5.0 million, payable in two future installments based on the earlier of certain clinical trial progress or fixed dates. A payment of $2.5 million was made for the drug substance during the year September 30, 2021. The remaining purchase commitment is included in the table above for the year ending September 30, 2022. In 2016, through its Ontario subsidiary, the Company entered into a license agreement with a third party to obtain exclusive rights to certain know-how, patents and data relating to a pharmaceutical product. The Company will use the exclusive rights to develop the product for therapeutic, prophylactic and diagnostic uses in topical dermal applications and anorectal applications. No intangible assets have been recognized under the license agreement with the third party. Under the license agreement, the Company is committed to payments of various amounts to the third party upon meeting certain milestones outlined in the license agreement, up to an aggregate amount of $18.6 million. Upon divestiture of substantially all of the assets of the Company, the Company shall pay the third party a percentage of the valuation of the licensed technology sold as determined by an external objective expert. The Company also has a commitment to pay the third party a royalty based on net sales of the product in countries where the Company, or an affiliate, directly commercializes the product and a percentage of sublicensing revenue received by the Company and its affiliates in the countries where it does not directly commercialize the product. No milestone, license or royalty payments were made to the third party during the three months ended December 31, 2021 and 2020. In March 2021, through its Ontario subsidiary, the Company entered into a license agreement with the inventor of the same pharmaceutical product to acquire global rights for all fields of use beyond those named under the 2016 license agreement. For the three months ended December 31, 2021, the Company recorded an expense of $0.03 million as a result of meeting milestones outlined in the 2021 license agreement. The Company is committed to remaining payments of up to an aggregate amount of $68.9 million, primarily relating to future potential commercial approval and sales milestones. In addition, if the Company fails to file an investigational new drug application or foreign equivalent (“IND”) for the product within a certain period of time following the date of the agreement, the Company is required to remit to the inventor a fixed license fee annually as long as the requirement to file an IND remains unfulfilled.

Capital shares

Capital shares	3 Months Ended
	Dec. 31, 2021
Capital shares
6. Capital shares	6. Capital Shares Equity offerings On March 2, 2021, the Company closed an underwritten offering of 1,562,500 common shares, no par value, at a price to the public of $6.40 per share less underwriting discounts and commissions. Gross proceeds from the offering amounted to $10.0 million. The Company granted to the underwriters a 30-day option to purchase up to an additional 234,375 common shares, which expired with no further shares issued. On the closing date the Company issued underwriter warrants to purchase an aggregate of up to 109,375 common shares at an exercise price of $8.00 per share, expiring on February 26, 2026. The direct costs related to the issuance of the common shares were $1.11 million. These direct costs were recorded as an offset against gross proceeds. The Company also recorded the fair value of underwriter warrants in the amount of $0.41 million as share-based compensation to non-employees under additional paid-in capital and an offset against gross proceeds. Equity distribution agreements On November 22, 2021, the Company entered into an equity distribution agreement with RBC Capital Markets, LLC (RBCCM), as sales agent. On December 28, 2021, the Company reset the size of the at-the-market equity offering program with RBCCM, such that the Company may offer and sell, from time to time, common shares having an aggregate offering price of up to $10.7 million in gross cash proceeds. RBCCM will use commercially reasonable efforts to sell the common shares from time to time, based upon the Company’s instructions. The Company has no obligation to sell any of the shares, and may at any time suspend sales under the distribution agreement or terminate the agreement in accordance with its terms. The total amount of cash that may be generated under this distribution agreement is uncertain and depends on a variety of factors, including market conditions and the trading price of the Company’s common shares. During the three months ended December 31, 2021, 223,396 common shares were sold under the distribution agreement, resulting in $1.29 million in gross proceeds. The commissions and direct costs of the offering program totaled approximately $0.06 million and were recorded as an offset against gross proceeds. Black-Scholes option valuation model The Company uses the Black-Scholes option valuation model to determine the fair value of share-based compensation for share options and compensation warrants granted and the fair value of warrants issued. Option valuation models require the input of highly subjective assumptions including the expected price volatility. The Company calculates expected volatility based on historical volatility of the Company’s share price. When there is insufficient data available, the Company uses a peer group that is publicly traded to calculate expected volatility. The Company adopted interest-free rates by reference to the U.S. treasury yield rates. The Company calculated the fair value of share options granted based on the expected life of 5 years, considering expected forfeitures during the option term of 10 years. Expected life of warrants is based on warrant terms. The Company did not and is not expected to declare any dividends. Changes in the subjective input assumptions can materially affect the fair value estimates, and therefore the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s warrants and share options. Warrants A summary of the Company’s warrants activity is as follows: Number of Warrant Shares (#) Weighted Average Exercise Price Balance – September 30, 2020 992,721 $ 4.92 Issued 109,375 8.00 Exercised (381,650 ) 4.35 Balance – December 31, 2021 and September 30, 2021 720,446 $ 5.69 The weighted average contractual life remaining on the outstanding warrants at December 31, 2021 is 22 months. The following table summarizes information about the warrants outstanding at December 31, 2021: Number of Warrants (#) Exercise Prices Expiry Dates 28,124 $ 15.90 May 2023 563,685 $ 4.80 July 2023 7,484 $ 4.81 June 2024 11,778 $ 3.20 January 2025 109,375 $ 8.00 February 2025 720,446 There were no warrants issued during the three months ended December 31, 2021 and 2020. Share Options The Company adopted an Equity Incentive Compensation Plan in 2019 (the “2019 Plan”) administered by the independent members of the Board of Directors, which amended and restated the 2017 Incentive Compensation Plan (the “2017 Plan”). Options, restricted shares and restricted share units are eligible for grant under the 2019 Plan. The number of shares available for issuance under the 2019 Plan is 849,946 including shares available for the exercise of outstanding options under the 2017 Plan. The Company's 2019 Plan allows options to be granted to directors, officers, employees and certain external consultants and advisers. Under the 2019 Plan, the option term is not to exceed 10 years and the exercise price of each option is determined by the independent members of the Board of Directors. Options have been granted under the 2019 Plan allowing the holders to purchase common shares of the Company as follows: Number of Options (#) Weighted Average Exercise Price Weighted Average Grant Date Fair Value Balance – September 30, 2020 675,437 $ 3.30 $ 2.56 Granted 1,145,000 6.21 4.65 Exercised (19,746 ) 2.10 1.35 Forfeited (22,566 ) 6.02 4.02 Expired (1,906 ) 102.49 101.12 Balance – September 30, 2021 1,776,219 $ 5.06 $ 3.79 Expired (214 ) 502.68 477.65 Balance – December 31, 2021 1,776,005 $ 5.00 $ 3.73 During the year ended September 30, 2021, the independent members of the Board of Directors granted a total of 112,000 options to new employees of the Company pursuant to the 2019 Plan. The options have a term of 10 years with vesting in equal proportions over 36 months beginning on the monthly anniversary of the grant date following 90 days of employment, and an exercise price equal to the Nasdaq closing price on the grant dates. In October 2020 and April 2021, the independent directors of the Board of Directors granted a total of 430,000 and 603,000 options, respectively, to directors, officers and employees of the Company pursuant to the 2019 Plan. The options have a term of 10 years and an exercise price equal to the Nasdaq closing price on the grant dates. Options for directors have monthly vesting in equal proportions over 12 months beginning on the grant date and options for officers and current employees have monthly vesting in equal proportions over 36 months beginning on the grant date. The weighted average contractual life remaining on the outstanding options at December 31, 2021 is 100 months. The following table summarizes information about the options under the 2019 Plan outstanding and exercisable at December 31, 2021: Number of Options (#) Exercisable at Range of Exercise Prices Expiry Dates 238 238 $ 304.08 Dec 2022 3,499 3,499 $ 35.28 - 93.24 Sep 2023-Mar 2025 296,403 296,403 C$ 2.16 Aug 2027-Dec 2028 335,365 247,971 $ 3.16 Feb 2030 429,000 178,412 $ 7.44 - 8.07 Sep 2030-Oct 2030 711,500 230,177 $ 5.25 - 5.65 Jan 2031-Sep 2031 1,776,005 956,700 The fair value of options granted during the three months ended December 31, 2020 was estimated using the Black-Scholes option valuation model using the following assumptions: Three Months Ended December 31, 2020 Risk free interest rate 0.31 % Expected life 5 years Expected share price volatility 97.28 % Expected dividend yield 0.00 % There were no options granted during the three months ended December 31, 2021. The Company recorded $0.61 million and $0.72 million of share-based compensation expenses for the three months ended December 31, 2021 and 2020, respectively. As of December 31, 2021, the Company had approximately $1.57 million of unrecognized share-based compensation expense, which is expected to be recognized over a period of 35 months.

Reimbursement Grant Income and

Reimbursement Grant Income and Receivable	3 Months Ended
	Dec. 31, 2021
Reimbursement Grant Income and Receivable
7. Reimbursement Grant Income and Receivable	7. Reimbursement Grant Income and Receivable Reimbursement grant income for the Company’s federal grant with the Canadian government’s Strategic Innovation Fund (SIF) is recorded based on the claim period of eligible costs. At December 31, 2021, grant reimbursements receivable of $2,629,060 were included in accounts and other receivable.

Financial instruments

Financial instruments	3 Months Ended
	Dec. 31, 2021
Financial instruments
8. Financial instruments	8. Financial Instruments (a) Fair values The Company uses the fair value measurement framework for valuing financial assets and liabilities measured on a recurring basis in situations where other accounting pronouncements either permit or require fair value measurements. Fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company follows the fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are inputs that reflect assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. There are three levels of inputs that may be used to measure fair value: · Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. · Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets and liabilities in markets that are not active. · Level 3 - Unobservable inputs for the asset or liability that are supported by little or no market activity. The carrying value of certain financial instruments such as cash and cash equivalents, accounts and other receivable, accounts payable and accrued liabilities approximates fair value due to the short-term nature of such instruments. (b) Interest rate and credit risk Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in interest rates. The Company does not believe that the results of operations or cash flows would be affected to any significant degree by a significant change in market interest rates, relative to interest rates on cash and cash equivalents due to the short-term nature of these balances. The Company is also exposed to credit risk at period end from the carrying value of its cash and cash equivalents and accounts and other receivable. The Company manages this risk by maintaining bank accounts with Canadian Chartered Banks, U.S. banks believed to be credit worthy and money market mutual funds of U.S. government securities. The Company’s cash is not subject to any external restrictions. The Company assesses the collectability of accounts receivable through a review of the current aging, as well as an analysis of historical collection rates, general economic conditions and credit status of customers. Credit risk for reimbursement grant and HST refunds receivable are not considered significant since amounts are due from the Canadian government’s Strategic Innovation Fund (SIF) and the Canada Revenue Agency. (c) Foreign exchange risk The Company and its subsidiary have balances in Canadian dollars that give rise to exposure to foreign exchange (“FX”) risk relating to the impact of translating certain non-U.S. dollar balance sheet accounts as these statements are presented in U.S. dollars. A strengthening U.S. dollar will lead to a FX loss while a weakening U.S. dollar will lead to a FX gain. The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks. At December 31, 2021, the Company and its Canadian subsidiary had assets denominated in Canadian dollars of approximately C$7.3 million and the U.S. dollar exchange rate as at this date was equal to 1.27 Canadian dollars. Based on the exposure at December 31, 2021, a 10% annual change in the Canadian/U.S. exchange rate would impact the Company’s loss and other comprehensive loss by approximately $575,000. (d) Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty raising liquid funds to meet commitments as they fall due. In meeting its liquidity requirements, the Company closely monitors its forecasted cash requirements with expected cash drawdown.

Loss per share

Loss per share	3 Months Ended
	Dec. 31, 2021
Loss per share
9. Loss per share	9. Loss per Share The Company had securities outstanding which could potentially dilute basic EPS in the future but were excluded from the computation of diluted loss per share in the periods presented, as their effect would have been anti-dilutive.

Related party transactions

Related party transactions	3 Months Ended
	Dec. 31, 2021
Related party transactions
10. Related party transactions	10. Related Party Transactions During the three months ended December 31, 2021 and 2020, the Company incurred rent expense of $0.2 million each period from a company controlled by the Company’s CEO. These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by both parties.

Subsequent events

Subsequent events	3 Months Ended
	Dec. 31, 2021
Reimbursement Grant Income and Receivable
11. Subsequent events	11. Subsequent Events Subsequent to December 31, 2021 and through January 28, 2021, 256,455 common shares were sold under the equity distribution agreement with RBCCM, resulting in $1.19 million in gross proceeds.

Basis of preparation (Policies)

Basis of preparation (Policies)	3 Months Ended
	Dec. 31, 2021
Basis of preparation (Policies)
Use of estimates	The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period or year. Actual results could differ from those estimates. Areas where significant judgment is involved in making estimates are valuation of accounts and other receivable; valuation and useful lives of property and equipment; intangible assets; operating lease right-of-use assets; deferred income taxes; classification of convertible preferred shares as liability or equity; the determination of fair value of share-based compensation; the determination of fair value of warrants in order to allocate proceeds from equity issuances; and forecasting future cash flows for assessing the going concern assumption.
Functional and reporting currencies	The consolidated financial statements of the Company are presented in U.S. dollars, unless otherwise stated, which is the functional currency of the Company and its U.S. subsidiary. The functional currency of the Company’s Canadian subsidiary, as determined by management, is Canadian dollars.

Intagible Assets (Tables)

Intagible Assets (Tables)	3 Months Ended
	Dec. 31, 2021
Intangible assets
Intangible assets	December 31, 2021 September 30, 2021 The Constructs $ 2,529,483 $ 2,529,483 Less: accumulated amortization (172,412 ) (147,119 ) Total intangible assets, net $ 2,357,071 $ 2,382,364
Estimated future amortization of intagible assets	Year Ending September 30, 2022 $ 75,879 September 30, 2023 101,172 September 30, 2024 101,172 September 30, 2025 101,172 September 30, 2026 101,172 Thereafter 1,876,504 $ 2,357,071

Related Party Operating Lease (

Related Party Operating Lease (Tables)	3 Months Ended
	Dec. 31, 2021
Related Party Operating Lease
Lease cost components	Three Months Ended December 31, 2021 December 31, 2020 Operating lease cost, included in general and administrative on the Statements of Operations $ 20,353 $ 19,688
Lease terms and discount rates	December 31, 2021 September 30, 2021 Remaining lease term (months): 12 15 Estimated incremental borrowing rate: 6.5 % 6.5 %
Future minimum lease payments	Year Ending September 30, 2022 $ 62,263 September 30, 2023 20,754 Total lease payment 83,017 Less imputed interest 2,850 Present value of lease liabilities, short-term $ 80,167
Cash paid-lease liabilities	Three Months Ended December 31, 2021 December 31, 2020 Cash paid for amounts included in the measurement of lease liabilities, included in accounts payable and accrued liabilities on the Statements of Cash Flows $ 20,354 $ 19,688

Commitments (Tables)

Commitments (Tables)	3 Months Ended
	Dec. 31, 2021
Commitments
Future contractual payments	Year Ending September 30, 2022 $ 3,889,000 September 30, 2023 228,000 September 30, 2024 75,000 September 30, 2025 12,000 $ 4,204,000

Capital Shares (Tables)

Capital Shares (Tables)	3 Months Ended
	Dec. 31, 2021
Capital shares
Warrant activity	Number of Warrant Shares (#) Weighted Average Exercise Price Balance – September 30, 2020 992,721 $ 4.92 Issued 109,375 8.00 Exercised (381,650 ) 4.35 Balance – December 31, 2021 and September 30, 2021 720,446 $ 5.69
Warrants outstanding	Number of Warrants (#) Exercise Prices Expiry Dates 28,124 $ 15.90 May 2023 563,685 $ 4.80 July 2023 7,484 $ 4.81 June 2024 11,778 $ 3.20 January 2025 109,375 $ 8.00 February 2025 720,446
Stock option activity	Number of Options (#) Weighted Average Exercise Price Weighted Average Grant Date Fair Value Balance – September 30, 2020 675,437 $ 3.30 $ 2.56 Granted 1,145,000 6.21 4.65 Exercised (19,746 ) 2.10 1.35 Forfeited (22,566 ) 6.02 4.02 Expired (1,906 ) 102.49 101.12 Balance – September 30, 2021 1,776,219 $ 5.06 $ 3.79 Expired (214 ) 502.68 477.65 Balance – December 31, 2021 1,776,005 $ 5.00 $ 3.73
Stock options outstanding	Number of Options (#) Exercisable at Range of Exercise Prices Expiry Dates 238 238 $ 304.08 Dec 2022 3,499 3,499 $ 35.28 - 93.24 Sep 2023-Mar 2025 296,403 296,403 C$ 2.16 Aug 2027-Dec 2028 335,365 247,971 $ 3.16 Feb 2030 429,000 178,412 $ 7.44 - 8.07 Sep 2030-Oct 2030 711,500 230,177 $ 5.25 - 5.65 Jan 2031-Sep 2031 1,776,005 956,700
Fair value of options granted assumptions	Three Months Ended December 31, 2020 Risk free interest rate 0.31 % Expected life 5 years Expected share price volatility 97.28 % Expected dividend yield 0.00 %

Intangible Assets (Details)

Intangible Assets (Details) - USD ($)	Dec. 31, 2021	Sep. 30, 2021
Intangible assets
The Constructs	$ 2,529,483,000,000	$ 2,529,483,000,000
Less: accumulated amortization	172,412,000,000	147,119,000,000
Intangible assets, net	$ 2,357,071	$ 2,382,364

Intagible Assets (Details 1)

Intagible Assets (Details 1)	Dec. 31, 2021USD ($)
Intangible assets
September 30, 2022	$ 75,879
September 30, 2023	101,172
September 30, 2024	101,172
September30, 2026	101,172
September 30, 2025	101,172
Thereafter	1,876,504
Total	$ 2,357,071

Intagible Assets (Details Narra

Intagible Assets (Details Narrative) - USD ($)	3 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Intangible assets
Amortization expense	$ 30,000	$ 30,000
Description of licence agreement	The required upfront license payment of $2.5 million was paid by issuance of Series A-1 Convertible Preferred Shares

Related Party Operating Lease_2

Related Party Operating Lease (Details) - USD ($)	3 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
General and Administrative Expense
Operating lease cost, included in general and administrative on the Statements of Operations	$ 20,353,000,000	$ 81,407,000,000

Related Party Operating Lease_3

Related Party Operating Lease (Details 1)	3 Months Ended	12 Months Ended
	Dec. 31, 2021	Sep. 30, 2021
Related Party Operating Lease
Remaining lease term (months)	12 years	15 years
Estimated incremental borrowing rate	6.50%	6.50%

Related Party Operating Lease_4

Related Party Operating Lease (Details 2)	Dec. 31, 2021USD ($)
Year Ending
September 30, 2022	$ 62,263
September 30, 2023	20,754
Total	83,017
Less imputed interest	2,850
Present value of lease liabilities	$ 80,167

Related Party Operating Lease_5

Related Party Operating Lease (Details 3) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Related Party Operating Lease
Cash paid for amounts included in the measurement of lease liabilities, included in accounts payable and accrued liabilities on the Statements of Cash Flows	$ 20,354	$ 19,688

Commitments (Details)

Commitments (Details) $ in Millions	Dec. 31, 2021USD ($)
Year Ending
September 30, 2022	$ 3,889,000
September 30, 2023	228,000
September 30, 2024	75,000
September 30, 2025	12,000
Total	$ 4,204,000

Commitments (Details Narrative)

Commitments (Details Narrative) $ in Thousands	3 Months Ended
	Dec. 31, 2021USD ($)
April 2020 [Member] | License Commitments [Member]
Remaining payments of contingent	$ 352,500
Expenses	$ 3,500
Description of acquired drugs	the Company acquired drug substance of one of the Constructs for an aggregate purchase price of $5.0 million, payable in two future installments based on the earlier of certain clinical trial progress or fixed dates. A payment of $2.5 million was made for the drug substance during the year September 30, 2021.
2021 [Member] | License Commitments Agreement [Member]
Payments to investors	$ 68,900
License expenses	30
2016 [Member] | License Commitments [Member]
Payments to third party	$ 18,600

Capital Shares (Details)

Capital Shares (Details)	12 Months Ended
	Sep. 30, 2021$ / sharesshares
Capital shares
Number of warrants, beginning balance | shares	992,721
Issued | shares	109,375
Exercised | shares	(381,650)
Number of warrants, ending balance | shares	720,446
Weighted average exercise price, beginning balance | $ / shares	$ 4.92
Issued | $ / shares	8
Exercised | $ / shares	4.35
Weighted average exercise price, ending balance | $ / shares	$ 5.69

Capital Shares (Details 1)

Capital Shares (Details 1) - $ / shares	15 Months Ended
	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2020	Sep. 30, 2019
Number of warrants, beginning balance	720,446	720,446	760,290	760,290	992,721	48,914
Weighted average exercise price, beginning balance	$ 5.65	$ 5.69	$ 5.65		$ 4.92	$ 11.19
Warrant 1
Number of warrants, beginning balance	28,124
Weighted average exercise price, beginning balance	$ 15.90
Expiry date	May 2023
Warrant 2
Number of warrants, beginning balance	563,685
Weighted average exercise price, beginning balance	$ 4.80
Expiry date	July 2023
Warrant 3
Number of warrants, beginning balance	7,484
Weighted average exercise price, beginning balance	$ 4.81
Expiry date	June 2024
Warrant 4
Number of warrants, beginning balance	11,778
Weighted average exercise price, beginning balance	$ 3.20
Expiry date	January 2025
Warrant 5
Number of warrants, beginning balance	109,375
Weighted average exercise price, beginning balance	$ 8
Expiry date	February 2025

Capital Shares (Details 2)

Capital Shares (Details 2) - USD ($)	3 Months Ended	12 Months Ended
	Dec. 31, 2021	Sep. 30, 2021
Capital shares
Number of options, beginning balance	1,776,219	675,437
Number of options granted		1,145,000
Number of options, exercised	(214)	(19,746)
Number of options, forfeited		(22,566)
Number of options expired	(214)	(1,906)
Number of options, ending balance	1,776,005	1,776,219
Weighted average exercise price, beginning balance	$ 5.06	$ 3.30
Weighted average exercise price granted		6.21
Weighted average exercise price exercised	502.68	2.10
Weighted average exercise price forfeited		6.02
Weighted average exercise price expired	502.68	102.49
Weighted average exercise price, ending balance	$ 5	$ 5.06
Weighted average grant date fair value, beginning balance	$ 3,790,000	$ 2,560,000
Weighted average grant date fair value, granted		4,650,000
Weighted average grant date fair value, exercised	477,650,000	1,350,000
Weighted average grant date fair value, forfeited		4,020,000
Weighted average grant date fair value, expired	4,776,500	101,120,000
Weighted average grant date fair value, ending balance	$ 3,730,000	$ 3,790,000

Capital Shares (Details 3)

Capital Shares (Details 3) - USD ($)	3 Months Ended	12 Months Ended
	Dec. 31, 2021	Sep. 30, 2021
Capital shares
Number of options, beginning balance	1,776,219	675,437
Number of options granted		1,145,000
Number of options, exercised	(214)	(19,746)
Number of options, forfeited		(22,566)
Number of options expired	(214)	(1,906)
Number of options, ending balance	1,776,005	1,776,219
Weighted average exercise price, beginning balance	$ 5.06	$ 3.30
Weighted average exercise price granted		6.21
Weighted average exercise price exercised	502.68	2.10
Weighted average exercise price forfeited		6.02
Weighted average exercise price expired	502.68	102.49
Weighted average exercise price, ending balance	$ 5	$ 5.06
Weighted average grant date fair value, beginning balance	$ 3,790,000	$ 2,560,000
Weighted average grant date fair value, granted		4,650,000
Weighted average grant date fair value, exercised	477,650,000	1,350,000
Weighted average grant date fair value, forfeited		4,020,000
Weighted average grant date fair value, expired	4,776,500	101,120,000
Weighted average grant date fair value, ending balance	$ 3,730,000	$ 3,790,000

Capital Shares (Details 4)

Capital Shares (Details 4) - $ / shares	3 Months Ended
	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2020	Sep. 30, 2019
Number of options, beginning balance	1,776,005	1,776,219	1,772,719	1,772,719	675,437	319,645
Options exercisable	956,700
Weighted average exercise price, beginning balance	$ 5	$ 5.06	$ 5.07		$ 3.30	$ 3.39
Stock Option 1
Number of options, beginning balance	238
Options exercisable	238
Weighted average exercise price, beginning balance	$ 304.08
Expiry dates	Dec 2022
Stock Option 2
Number of options, beginning balance	3,499
Options exercisable	3,499
Stock Option 2 | Minumum
Weighted average exercise price, beginning balance	$ 35.28
Expiry dates	Sep 2023
Stock Option 2 | Maximum
Weighted average exercise price, beginning balance	$ 93.24
Expiry dates	Mar 2025
Stock Option 3
Number of options, beginning balance	296,403
Options exercisable	296,403
Weighted average exercise price, beginning balance	$ 2.16
Stock Option 3 | Minumum
Expiry dates	Aug 2027
Stock Option 3 | Maximum
Expiry dates	Dec 2028
Stock Option 4
Number of options, beginning balance	335,365
Options exercisable	247,971
Weighted average exercise price, beginning balance	$ 3.16
Expiry dates	Feb 2030
Stock Option 5
Number of options, beginning balance	429,000
Options exercisable	178,412
Stock Option 5 | Minumum
Weighted average exercise price, beginning balance	$ 7.44
Expiry dates	Sep 2030
Stock Option 5 | Maximum
Weighted average exercise price, beginning balance	$ 8.07
Expiry dates	Oct 2030
Stock Option 6
Number of options, beginning balance	711,500
Options exercisable	230,177
Stock Option 6 | Minumum
Weighted average exercise price, beginning balance	$ 5.25
Expiry dates	Jan 2031
Stock Option 6 | Maximum
Weighted average exercise price, beginning balance	$ 5.65
Expiry dates	Sep 2031

Capital Shares (Details 5)

Capital Shares (Details 5)	3 Months Ended
	Dec. 31, 2021
Capital shares
Risk free interest rate	0.31%
Expected life (years)	5 years
Expected share price volatility	97.28%
Expected dividend yield	0.00%

Capital Shares (Details Narrati

Capital Shares (Details Narrative) - USD ($)	Dec. 28, 2021	Dec. 31, 2021	Dec. 31, 2020	Sep. 30, 2021
Weighted average contractual life remaining on outstanding options		100 years
Share-based compensation		$ 610,000	$ 720,000
Unrecognized share-based compensation		$ 1,570,000
Granted option shares				112,000
Unrecognized share-based compensation recognition period		35 years		36 years
Expected term		10 years		10 years
Proceeds from issuance of common shares		$ 1,110,000
Share-based compensation		609,278	$ 722,909
Non Employees [Member]
Share-based compensation		410,000
Equity Distribution Agreement [Member]
Proceeds from public offering	$ 10,700,000
Gross proceeds		1,290,000
Direct costs		$ 60,000
Common shares		223,396
October 2020 [Member]
Granted option shares		430,000
Expected term		10 years
Grant date		36 years
April 2021 [Member]
Granted option shares		603,000
Expected term		10 years
Grant date		36 years
Black Scholes Option [Member]
Weighted average contractual life remaining on outstanding options		1 year 1 month 6 days
Expected term		10 years
Grant date		5 years
March 2, 2021 [Member]
Gross proceeds		$ 10,000,000
Common shares in public offerings price per share		$ 6.40
Common shares in public offerings, shares		$ 1,562,500
Additional of common share		234,375
Warrants to purchase common shares		109,375
Warrant expiry date		Feb. 26, 2026
November 2021 [Member]
Gross proceeds		$ 10,700,000

Reimbursement Grant Income an_2

Reimbursement Grant Income and Receivable (Details Narrative)	Dec. 31, 2021USD ($)
Reimbursement Grant Income and Receivable (Details Narrative)
Grant reimbursements receivable	$ 2,629,060

Financial Instruments (Details

Financial Instruments (Details Narrative) $ / shares in Units, $ in Millions	3 Months Ended
	Dec. 31, 2021USD ($)$ / shares	Dec. 31, 2021CAD ($)	Sep. 30, 2021USD ($)
Assets	$ 12,343,356		$ 14,584,655
Ontario Subsidary [Member]
Assets		$ 7.3
Currency exchange rate description	Based on the exposure at December 31, 2021, a 10% annual change in the Canadian/U.S. exchange rate would impact the Company’s loss and other comprehensive loss by approximately $575,000.
USD to CAD [Member]
Currency exchange rate | $ / shares	$ 1.27

Related Party Transactions (Det

Related Party Transactions (Details Narrative) - USD ($)	3 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Related party transactions
Rent expense	$ 200,000	$ 200,000

Subsequent events (Details Narr

Subsequent events (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended
	Jan. 28, 2021	Dec. 31, 2021	Dec. 31, 2020
Reimbursement Grant Income and Receivable
Common shares sold	256,455
Gross proceeds	$ 1,190,000	$ 1,287,167	$ 1,026,528