UNITED STATES

ONG>SECURITIES AND EXCHANGE ~~COMMISSION~~COMMISSIONONG>

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~QUARTERLY REPORT PURSUANTTO SECTION 13 OR 15(~~d~~) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the quarterly period ended ~~December~~March 31, ~~2017~~2022

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(~~d~~) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the transition period from to

Commission ~~File Number:~~file number: 001-37619

~~Stellar Biotechnologies, Inc.~~

~~(Exact name of registrant as specified in its charter)~~

EDESA BIOTECH, INC.

(Exact name of registrant as specified in its charter)

British Columbia, Canada		N/A
(State or other jurisdiction of	~~(I.R.S. Employer~~
incorporation or organization)		(I.R.S. Employer Identification No.)

~~332 E. Scott Street~~ 100 Spy Court, Markham, Ontario, Canada L3R 5H6		(289) 800-9600
~~Port Hueneme, California~~	~~93041~~
(Address of principal executive ~~offices)~~offices and zip code)		(~~Zip Code)~~Registrant’s telephone number, including area code)

~~Registrant’s telephone number, including area code:~~~~(805) 488-2800~~Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Shares, without par value		EDSA		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x☒ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer	¨ ☐	Accelerated filer	¨ ☐
Non-accelerated Filer	~~Non-accelerated filer~~ ☒	x	Smaller reporting company	¨ ☒
		Emerging growth company	x ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.x ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨☐ No x☒

As of ~~February 7, 2018,~~May 12, 2022, the registrant had ~~10,520,096~~15,462,287 common shares issued and outstanding.

~~Stellar Biotechnologies, Inc.~~EDESA BIOTECH, INC.

~~Quarterly Report on Form~~QUARTERLY REPORT ON FORM 10-Q

~~For the~~ Quarter Ended ~~December~~March 31, ~~2017~~2022

Table of Contents

~~PART I — FINANCIAL INFORMATION~~	3		Page
PART I	FINANCIAL STATEMENTS		3

Item 1.	Financial Statements (Unaudited).		3
	Condensed Interim Consolidated Balance Sheets – ~~December~~March 31, ~~2017~~2022 and September 30,~~2017~~ 2021		3
	Condensed Interim Consolidated Statements of Operations – Three and Six Months Ended ~~December~~March 31, ~~2017~~2022 and ~~2016~~2021		4
	Condensed Interim Consolidated Statements of Cash Flows –Six Months Ended March 31, 2022 and 2021		5
	Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity – Three and Six Months Ended ~~December~~March 31, ~~2017~~2022 and ~~2016~~2021	5	6
	Notes to Condensed Interim Consolidated Financial Statements	6	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations	14	16

Item 3.	Quantitative and Qualitative Disclosures About Market ~~Risk.~~Risk	17	19

Item 4.	Controls and ~~Procedures.~~Procedures	17	19

PART II —	OTHER INFORMATION	18	20
~~Item 1.~~ ~~Legal Proceedings.~~	18
Item ~~1A.~~ ~~Risk Factors.~~1.	18Legal Proceedings		20

Item 1A.	Risk Factors		20

Item 2.	Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~Proceeds	18	20

Item 3.	Defaults Upon Senior ~~Securities.~~Securities	18	20

Item 4.	Mine Safety ~~Disclosures.~~Disclosures	18	20
~~Item 5.~~ ~~Other Information.~~	18
Item 5.	Other Information		20

Item 6. ~~Exhibits.~~	18Exhibits		21

~~PART I — FINANCIAL INFORMATION~~

	~~Item 1.~~	~~Financial Statements.~~
2

Table of Contents

~~Stellar Biotechnologies,~~PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

Edesa Biotech, Inc.

Condensed Interim Consolidated Balance Sheets

(Unaudited)

December 31, September 30,
2017 2017

Assets:

Current assets:
Cash and cash equivalents $ 4,369,671 $ 4,570,951
Accounts receivable 10,977 1,287
Short-term investments 998,575 1,994,401
Inventory 118,540 68,114
Prepaid expenses 159,543 123,694

Total current assets 5,657,306 6,758,447

Noncurrent assets:

Equity investment in joint venture 66,695 66,695
Property, plant and equipment, net 854,053 879,523
Deposits 15,340 15,340

Total noncurrent assets 936,088 961,558

Total Assets $ 6,593,394 $ 7,720,005

Liabilities and Shareholders' Equity:

Current liabilities:
Accounts payable and accrued liabilities $ 574,376 $ 320,947

Total Current Liabilities 574,376 320,947

Commitments(Note 7)

Shareholders' equity:
Common shares, unlimited common shares authorized,
no par value, 10,520,096 issued and outstanding
at December 31, 2017 and September 30, 2017 48,351,701 48,351,701
Accumulated share-based compensation 4,460,106 4,439,400
Accumulated deficit (46,792,789 ) (45,392,043 )

Total Shareholders' Equity 6,019,018 7,399,058

Total Liabilities and Shareholders' Equity $ 6,593,394 $ 7,720,005

	March 31, 2022			September 30, 2021

Assets:

Current assets:
Cash and cash equivalents	$	15,887,199		$	7,839,259
Accounts and other receivable		1,249,371			3,302,827
Prepaid expenses and other current assets		863,319			948,645

Total current assets		17,999,889			12,090,731

Non-current assets:
Property and equipment, net		16,093			14,989
Intangible asset, net		2,331,778			2,382,364
Right-of-use assets		59,863			96,571

Total assets	$	20,407,623		$	14,584,655

Liabilities and shareholders' equity:

Current liabilities:
Accounts payable and accrued liabilities	$	3,273,699		$	1,379,842
Lease obligations on right-of-use assets		61,541			78,808

Total current liabilities		3,335,240			1,458,650

Non-current liabilities:

Long-term payables		47,970			47,202
Long-term lease obligations on right-of-use assets		0			20,512

Total liabilities		3,383,210			1,526,364

Commitments (Note 5)

Shareholders' equity:
Capital shares
Authorized unlimited common and preferred shares without par value
Issued and outstanding:
15,462,287 common shares (September 30, 2021 - 13,295,403)		40,264,080			34,887,721
Additional paid-in capital		12,364,302			4,871,461
Accumulated other comprehensive loss		(160,347	)		(205,262	)
Accumulated deficit		(35,443,622	)		(26,495,629	)

Total shareholders' equity		17,024,413			13,058,291

Total liabilities and shareholders' equity	$	20,407,623		$	14,584,655

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

~~Stellar Biotechnologies, Inc.~~

Table of Contents

Edesa Biotech, Inc.

Condensed Interim Consolidated Statements of Operations

(Unaudited)

Three Months Ended
December 31, December 31,
2017 2016

Revenues:
Product sales $ 20,487 $ 141,856
20,487 141,856

Expenses:
Cost of sales 2,801 78,565
Costs of aquaculture 98,050 84,835
Research and development 631,034 460,865
General and administrative 678,481 932,067
1,410,366 1,556,332

Loss from Operations (1,389,879 ) (1,414,476 )

Other Income (Loss)
Foreign exchange loss (17,929 ) (77,390 )
Investment income 7,862 6,994
(10,067 ) (70,396 )

Loss Before Income Tax (1,399,946 ) (1,484,872 )

Income tax expense 800 800

Net Loss $ (1,400,746 ) $ (1,485,672 )

Loss per common share:
Basic and diluted $ (0.13 ) $ (0.15 )
Weighted average number of common shares outstanding:
Basic and diluted 10,520,096 10,136,258

	Three Months Ended						Six Months Ended
	March 31, 2022			March 31, 2021			March 31, 2022			March 31, 2021

Expenses:
Research and development		3,042,815			7,975,304			6,993,861			9,354,958
General and administrative		1,532,416			1,535,127			2,743,093			2,769,275

		4,575,231			9,510,431			9,736,954		��	12,124,233

Loss from Operations		(4,575,231	)		(9,510,431	)		(9,736,954	)		(12,124,233	)

Other Income (Loss):
Reimbursement grant income		0			7,170,465			780,257			7,170,465
Interest income		3,748			747			9,868			1,669
Foreign exchange gain (loss)		2,967			80,032			(364	)		55,300

		6,715			7,251,244			789,761			7,227,434

Loss before income taxes		(4,568,516	)		(2,259,187	)		(8,947,193	)		(4,896,799	)

Income tax expense		800			800			800			800

Net Loss		(4,569,316	)		(2,259,987	)		(8,947,993	)		(4,897,599	)

Exchange differences on translation		13,066			(10,480	)		44,915			92,947

Net Comprehensive Loss	$	(4,556,250	)	$	(2,270,467	)	$	(8,903,078	)	$	(4,804,652	)

Weighted average number of common shares		13,867,345			11,641,201			13,610,164			10,894,441

Loss per common share - basic and diluted	$	(0.33	)	$	(0.19	)	$	(0.66	)	$	(0.45	)

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

~~Stellar Biotechnologies, Inc.~~

Table of Contents

Edesa Biotech, Inc.

Condensed Interim Consolidated Statements of Cash Flows

(Unaudited)

Three Months Ended
December 31, December 31,
2017 2016

Cash Flows Used In Operating Activities:
Net loss $ (1,400,746 ) $ (1,485,672 )

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 49,309 45,470
Share-based compensation 20,706 36,442
Foreign exchange loss 17,929 77,390
Transfer equipment to research and development 10,835 -

Changes in working capital items:
Accounts receivable (9,712 ) 72,666
Inventory (50,426 ) (80,153 )
Prepaid expenses (35,919 ) (9,885 )
Accounts payable and accrued liabilities 253,561 (21,292 )

Net cash used in operating activities (1,144,463 ) (1,365,034 )

Cash Flows From Investing Activities:
Acquisition of property, plant and equipment (34,767 ) (84,424 )
Purchase of short-term investments (4,174 ) (4,804 )
Proceeds on sales and maturities of short-term investments 1,000,000 -

Net cash provided by (used in) investing activities 961,059 (89,228 )

Effect of exchange rate changes on cash and cash equivalents (17,876 ) (77,233 )

Net change in cash and cash equivalents (201,280 ) (1,531,495 )

Cash and cash equivalents - beginning of period 4,570,951 7,416,904

Cash and cash equivalents - end of period $ 4,369,671 $ 5,885,409

Cash (demand deposits) $ 4,090,861 $ 4,549,089
Cash equivalents 278,810 1,336,320

Cash and cash equivalents $ 4,369,671 $ 5,885,409

Supplemental cash flow information:

Cash paid during the period for taxes $ 800 $ 800

	Six Months Ended
	March 31, 2022			March 31, 2021

Cash Flows from Operating Activities:
Net loss	$	(8,947,993	)	$	(4,897,599	)
Adjustments for:
Depreciation and amortization		59,633			58,647
Share-based compensation		1,239,286			1,190,347
Changes in working capital items:
Accounts and other receivable		2,068,473			(7,564,714	)
Prepaid expenses and other current assets		97,209			(1,928,522	)
Accounts payable and accrued liabilities		1,859,124			2,951,784

Net cash used in operating activities		(3,624,268	)		(10,190,057	)

Cash Flows from Investing Activities:
Purchase of property and equipment		(4,339	)		(4,098	)

Net cash used in investing activities		(4,339	)		(4,098	)

Cash Flows from Financing Activities:
Proceeds from issuance of common shares and warrants		11,957,567			12,793,591
Proceeds from exercise of warrants		0			1,467,536
Proceeds from exercise of share options		0			26,079
Payments for issuance costs of common shares and warrants		(327,653	)		(349,408	)

Net cash provided by financing activities		11,629,914			13,937,798

Effect of exchange rate changes on cash and cash equivalents		46,633			8,856

Net change in cash and cash equivalents		8,047,940			3,752,499
Cash and cash equivalents, beginning of period		7,839,259			7,213,695

Cash and cash equivalents, end of period	$	15,887,199		$	10,966,194

Supplemental Disclosure of Noncash Financing Activities:
Preferred shares converted from temporary equity to common shares	$	0		$	2,496,480
Issuance costs withheld from gross proceeds from issuance of common shares and warrants		393,461			955,950
Fair value of placement agent/underwriter warrants		408,059			407,023

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

~~Stellar Biotechnologies, Inc.~~

~~Notes to Condensed Interim Consolidated Financial Statements (Unaudited)~~5


1.	~~Nature~~Table of ~~Operations~~Contents

~~Stellar Biotechnologies,~~Edesa Biotech, Inc.

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

	Shares #		Common Shares			Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Shareholders' Equity
Three Months Ended March 31, 2022
Balance - December 31, 2021		13,518,799	$	36,116,225		$	5,480,739		$	(173,413	)	$	(30,874,306	)	$	10,549,245

Issuance of common shares and warrants in equity offering		1,943,488		4,952,013			6,702,293			0			0			11,654,306
Issuance costs including fair value of placement agent warrants		-		(804,158	)		(448,738	)		0			0			(1,252,896	)
Share-based compensation		-		0			630,008			0			0			630,008
Net loss and comprehensive loss		-		0			0			13,066			(4,569,316	)		(4,556,250	)

Balance - March 31, 2022		15,462,287	$	40,264,080		$	12,364,302		$	(160,347	)	$	(35,443,622	)	$	17,024,413

Three Months Ended March 31, 2021
Balance - December 31, 2020		10,523,087	$	21,696,459		$	2,156,719		$	(183,777	)	$	(15,784,177	)	$	7,885,224

Issuance of common shares and warrants in equity offering		1,979,210		12,723,013			0			0			0			12,723,013
Issuance costs including fair value of underwriter warrants		-		(1,810,237	)		407,023			0			0			(1,403,214	)
Issuance of common shares upon exercise of warrants		98,437		570,228			(97,731	)		0			0			472,497
Issuance of common shares upon exercise of share options		10,746		45,047			(18,968	)		0			0			26,079
Preferred return on convertible preferred shares		-		0			0			0			(5,914	)		(5,914	)
Conversion of convertible preferred shares		635,079		1,378,127			0			0			0			1,378,127
Share-based compensation		-		0			467,439			0			0			467,439
Net loss and comprehensive loss		-		0			0			(10,480	)		(2,259,987	)		(2,270,467	)

Balance - March 31, 2021		13,246,559	$	34,602,637		$	2,914,482		$	(194,257	)	$	(18,050,078	)	$	19,272,784

Six Months Ended March 31, 2022
Balance - September 30, 2021		13,295,403	$	34,887,721		$	4,871,461		$	(205,262	)	$	(26,495,629	)	$	13,058,291

Issuance of common shares and warrants in equity offering		2,166,884		6,239,180			6,702,293			0			0			12,941,473
Issuance costs including fair value of placement agent warrants		-		(862,821	)		(448,738	)		0			0			(1,311,559	)
Share-based compensation		-		0			1,239,286			0			0			1,239,286
Net loss and comprehensive loss		-		0			0			44,915			(8,947,993	)		(8,903,078	)

Balance - March 31, 2022		15,462,287	$	40,264,080		$	12,364,302		$	(160,347	)	$	(35,443,622	)	$	17,024,413

Six Months Ended March 31, 2021
Balance - September 30, 2020		9,615,119	$	18,500,853		$	1,550,480		$	(287,204	)	$	(13,132,954	)	$	6,631,175

Issuance of common shares and warrants in equity offering		2,148,963		13,749,541			0			0			0			13,749,541
Issuance costs including fair value of underwriter warrants		-		(1,871,220	)		407,023			0			0			(1,464,197	)
Issuance of common shares upon exercise of warrants		341,806		1,681,936			(214,400	)		0			0			1,467,536
Issuance of common shares upon exercise of share options		10,746		45,047			(18,968	)		0			0			26,079
Preferred return on convertible preferred shares		-		0			0			0			(19,525	)		(19,525	)
Conversion of convertible preferred shares		1,129,925		2,496,480			0			0			0			2,496,480
Share-based compensation		-		0			1,190,347			0			0			1,190,347
Net loss and comprehensive loss		-		0			0			92,947			(4,897,599	)		(4,804,652	)

Balance - March 31, 2021		13,246,559	$	34,602,637		$	2,914,482		$	(194,257	)	$	(18,050,078	)	$	19,272,784

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Table of Contents

Edesa Biotech, Inc.

Notes to Condensed Interim Consolidated Financial Statements

(Unaudited)

1. Nature of Operations

Edesa Biotech, Inc. (the ~~Company)~~“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. The Company’s business~~Canada and is the aquaculture, research and development, manufacture and commercialization of Keyhole Limpet Hemocyanin (KLH). The Company markets and distributes its KLH products to biotechnology and pharmaceutical companies, academic institutions, and clinical research organizations primarilyheadquartered in ~~Europe, Asia, and the United States.~~ Markham, Ontario, Canada.

The Company’s common shares ~~have been listed for trading~~trade on The Nasdaq Capital Market in the United States under the symbol ~~“SBOT” since November 5, 2015.~~“EDSA”.

Impact of COVID-19

~~In April 2010,~~

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 ~~Company changed its name from CAG Capital, Inc.~~pandemic remains uncertain and ongoing developments related to ~~Stellar Biotechnologies, Inc. and completed a reverse merger transaction with Stellar Biotechnologies, Inc., a California corporation, which was founded in September 1999, and remains~~the pandemic may cause material impacts to the Company’s ~~wholly-owned subsidiary~~future operations, clinical study timelines and ~~principal~~financial results. While the full impact of the COVID-19 pandemic to business and operating ~~entity. In January 2017,~~results presents additional uncertainty, the ~~California subsidiary~~Company’s management continues to use reasonably available information to assess impacts to the Company’s business plans and the Company established a wholly-owned Mexican subsidiary under the name BioEstelar, S.A. de C.V. in Ensenada, Baja California to perform aquaculture research and development activities in Mexico. The Company’s executive offices are located at 332 E. Scott Street, Port Hueneme, California, 93041, USA, and its registered and records office is Royal Centre, 1055 West Georgia Street, Suite 1500, Vancouver, BC, V6E 4N7, Canada.financial condition.

~~Management Plans~~

~~Company operations have historically been funded by the issuance~~2. Basis of common shares, exercise of warrants, grant revenues, contract services revenue and product sales. For the three months ended December 31, 2017 and 2016, the Company reported net losses of approximately $1.4 million and $1.5 million, respectively. As of December 31, 2017, the Company had an accumulated deficit of approximately $46.8 million and working capital of approximately $5.1 million. While the Company plans to finance company operations for the next twelve months with cash on hand and product sales, management expects to continue incurring losses for the foreseeable future and will need to raise additional capital to pursue our business plan beyond February 2019. Management is taking action to ensure the Company will continue as a going concern for at least one year beyond the date of the issuance of the Company’s financial statements. First, management has flexibility to adjust planned expenditures based on a number of factors including the size and timing of capital expenditures, staffing levels, inventory levels, and the status of customer clinical trials. Management also seeks to expand the customer base for existing marketed products, and intends to secure additional financing through debt and/or equity financings, including transactions with strategic customers and partners that may include debt and/or equity arrangements.Preparation

~~Basis of Presentation~~

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 unaudited 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 ~~fiscal~~ year ended September 30, ~~2017.~~2021, which was filed with the Securities and Exchange Commission (SEC) on December 28, 2021.

The accompanying unaudited condensed interim consolidated financial statements include the accounts of the Company and its ~~wholly-owned~~wholly owned subsidiaries, ~~Stellar Biotechnologies,~~Edesa Biotech Research, Inc., an Ontario corporation, and Edesa Biotech USA, Inc., a California corporation in the U.S. ~~and BioEstelar, S.A. de C.V. a Baja California corporation in Mexico.~~ All ~~significant~~ intercompany balances and transactions have been eliminated inon consolidation. ~~In the opinion of management, all~~All adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation of the results of operations for the ~~period~~periods presented have been included in the interim ~~period.~~periods. Operating results for the three and six months ended ~~December~~March 31, ~~2017~~2022 are not necessarily indicative of the results that may be expected for other interim periods or the fiscal year ending September 30, 2018. The condensed interim consolidated financial data at September 30, 2017 is derived from audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017, as filed on December 1, 2017 with the SEC.2022.

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP ~~for interim financial information~~ requires management to make estimates and assumptions that affect the reported amounts ~~reported in~~of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and ~~accompanying notes.~~the reported amounts of revenue and expenses during the period or year. Actual results could differ from ~~these~~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; right-of-use assets; deferred income taxes; 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 ~~Currency~~and reporting currencies

The ~~condensed interim~~ 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 ~~functional currency.~~Canadian subsidiary, as determined by management, is Canadian dollars.

~~Stellar Biotechnologies, Inc.~~

~~Notes to Condensed Interim Consolidated Financial Statements (Unaudited)~~

3. Intangible Assets

~~Significant Accounting Policies~~

~~Recent Accounting Pronouncements~~Acquired License

In ~~May 2014,~~April 2020, the ~~Financial Accounting Standards Board (FASB) issued guidance codified in Accounting Standards Codification (ASC) 606~~~~Revenue Recognition – Revenue from Contracts with Customers~~~~which amends the guidance in ASC 605,~~~~Revenue Recognition~~ ~~and adds~~Company entered into a ~~new Subtopic to the Codification, ASC 340-40,~~~~Other Assets and Deferred Costs: Contracts with Customers~~.The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: Step 1: Identify the contract(s)license agreement with a ~~customer; Step 2: Identify~~ pharmaceutical development company to obtain exclusive world-wide rights to know-how, patents and data relating to certain monoclonal antibodies (“the ~~performance obligations~~Constructs”), including sublicensing rights. Unless earlier terminated, the term of the license agreement will remain in ~~the contract;~~Step 3: Determine the transaction price; Step 4: Allocate the transaction price to the performance obligations in the contract; and Step 5: Recognize revenue when (or as) the entity satisfies a performance~~obligation. ASC 606 permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative~~ effect ~~of initially applying the guidance recognized at~~for 25 years from the date of ~~initial application (the modified retrospective method). In August 2015,~~first commercial sale of licensed products containing the ~~FASB issued an accounting update to defer the effective date by one year for public entities such that it is now~~ ~~effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periodswithin those years, with early application permitted by one year.~~Constructs. Subsequently, the FASB issued supplemental adoption guidance and clarification to ASC 606 related to principal vs. agent considerations, identifying performance obligations and licensing, technical corrections and improvements, which must be adoptedlicense agreement will automatically renew for five-year periods unless either party terminates the agreement in accordance with its terms.

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Under the license agreement, the Company is exclusively responsible, at ~~the same time as ASC 606. These standards are effective~~its expense, for the ~~Company during~~research, development, manufacture, marketing, distribution and commercialization of the ~~fiscal year ending September 30, 2019. Management is in the process of assessing the impact this guidance will have on the Company’s consolidated financial statements.We anticipate adoption of ASC 606 using the modified retrospective method with a cumulative catch-up adjustment~~Constructs and licensed products and to ~~the opening balance sheet of retained earnings at the effective date, during the first quarter of fiscal 2019.~~obtain all necessary licenses and rights. The Company ~~will continue~~is required to ~~review separate performance obligations, potential disclosures,~~use commercially reasonable efforts to develop and commercialize the ~~method~~Constructs in accordance with the terms of ~~adoption~~a development plan established by the parties.

The Company has determined that the license has multiple alternative future uses in ~~order to complete the evaluation~~research and development projects and sublicensing in other countries or for other disease indications. The value of the ~~impact on~~acquired license is recorded as an intangible asset with amortization over the ~~consolidated financial statements~~.

~~In January 2016, the FASB issued ASU 2016-01,~~~~Financial Instruments-Overall (Subtopic 825-10): Recognition~~estimated useful life of 25 years and ~~Measurement of Financial Assets and Financial Liabilities~~~~, whichprimarily affects the accounting~~evaluation for ~~equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition,ASU 2016-01clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities.~~The guidance is effective for public entities for fiscal years beginning after December 15, 2017, including interim periods within those years, with early adoption permitted. These standards are effective for the Company during the fiscal year ending September 30, 2019.~~Management is in the process of assessing the impact of ASU 2016-01 on the Company’s consolidated financial statements~~.

~~In February 2016, the FASB issued ASU 2016-02,~~~~Leases (Topic 842)~~, which establishes a new lease accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities on the balance sheet arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those years, with early adoption permitted. These standards are effective for the Company during the fiscal year ending September 30, 2020.~~Management is in the process of assessing the impact of ASU 2016-02 on the Company’s consolidated financial statements.We anticipate adoption of ASU 2016-02, will result in lease liabilities and right-of-use assets onthe Company’s consolidatedfinancial statements for several long-term operating leases.~~

~~In June 2016, the FASB issued ASU 2016-13,~~~~Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, which includes provisions that require financial assets measured at amortized cost basis to be presented at the net amount expected to be collected and credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses, which requires recognition of an estimate of all current expected credit losses. The guidance is effective for public entities for fiscal years beginning after December 15, 2019, including interim periods within those years, with early adoption permitted for fiscal years beginning after December 15, 2018. These standards are effective for the Company during the fiscal year ending September 30, 2021.~~Management is in the process of assessing the impact of ASU 2016-13 on the Company’s consolidated financial statements~~.

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Scope of Modification Accounting~~~~, which provides new guidance on changes to the terms or conditions of share-based payment awards that would be required to apply modification accounting under ASC 718,~~~~Compensation-Stock Compensation~~. The amendments are effective for annual reporting periods beginning after December 15, 2017 with early adoption permitted. These standards are effective for the Company during the fiscal year ending September 30, 2019. Management is in the process of assessing the impact of ASU 2017-09 on the Company's consolidated financial statements.

~~Investments~~

~~Short-term investments consisted of U.S. Treasury Bills at December 31, 2017 and September 30, 2017.~~

~~U.S. Treasury Bills are carried at amortized cost which approximates fair value and are classified as held-to-maturity investments.~~

~~Stellar Biotechnologies, Inc.~~

~~Notes to Condensed Interim Consolidated Financial Statements (Unaudited)~~

~~Inventory~~

Raw materials include inventory of manufacturing supplies. Work in process includes manufacturing supplies, direct and indirect labor, contracted manufacturing and testing, and allocated manufacturing overhead for inventory in processimpairment at the end of ~~the~~each reporting period. Finished goods include products that are complete and available for sale. At December 31, 2017 and September 30, 2017, the Company recorded work in process and finished goods inventory only for those products with recent sales levels to evaluate net realizable value.

~~Inventory consisted~~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 ~~following:~~license includes acquisition legal costs. See Note 5 for license commitments.

December 31, September 30,
2017 2017

Raw materials $ 30,628 $ 21,761
Work in process 51,933 -
Finished goods 35,979 46,353

$ 118,540 $ 68,114

~~Property, Plant and Equipment, net~~

~~Property, plant and equipment,~~Intangible assets, net consisted of the following:

December 31, September 30,
2017 2017

Aquaculture system $ 126,257 $ 126,257
Laboratory facilities 62,033 62,033
Computer and office equipment 117,840 117,840
Tools and equipment 1,035,604 982,439
Vehicles 77,994 77,994
Leasehold improvements 342,935 337,060
1,762,663 1,703,623
Less: accumulated depreciation (1,008,777 ) (969,418 )

Depreciable assets, net 753,886 734,205
Construction in progress 100,167 145,318

$ 854,053 $ 879,523

	March 31, 2022			September 30, 2021

The Constructs	$	2,529,483		$	2,529,483

Less: accumulated amortization		(197,705	)		(147,119	)

Total intangible assets, net	$	2,331,778		$	2,382,364

~~Depreciation and amortization~~Amortization expense amounted to ~~approximately $49,000 and $45,000~~$0.25 million for each of the three months ended ~~December~~March 31, ~~2017~~2022 and ~~2016, respectively.~~

~~Commitments~~

~~Operating leases~~2021 and $0.51 million for each of the six months ended March 31, 2022 and 2021.

~~The Company leases buildings and facilities used in its operations under two sublease agreements. In June 2015, the Company exercised its option to extend these sublease agreements~~Total estimated future amortization of intangible assets for ~~an additional five-year term beginning in October and November 2015. The Company negotiated an option to extend the leases for two additional five-year terms.~~each fiscal year is as follows:

Year Ending
September 30, 2022	$	50,586
September 30, 2023		101,172
September 30, 2024		101,172
September 30, 2025		101,172
September 30, 2026		101,172
Thereafter		1,876,504

	$	2,331,778

4. Lease with Related Party

The Company leases facilities used for executive offices ~~and laboratories and pays~~from a ~~portion of~~company controlled by the ~~common area maintenance. In July 2016, the Company extended this lease~~Company’s CEO for a ~~two-year~~six-year term through December 2022, with options to renew for ~~three successive~~another two-year ~~terms.~~

term. The Company leases undeveloped land in Baja California, Mexico to assess the potential development of an additional aquaculture locale and expansion of production. The lease term is three years from June 2015 with options to extend the lease for 30 years. The Company may terminate early with 30 days’ notice. The rent has been prepaid through June 2018, andoption period is not included in the right-of-use assets and related lease obligation.

The components of lease cost were as follows:

	Three Months Ended				Six Months Ended
	March 31, 2022		March 31, 2021		March 31, 2022		March 31, 2021
Operating lease cost, included in general and administrative on the Statements of Operations	$	20,255	$	20,253	$	40,608	$	39,941

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Lease terms and discount rates were as follows:

	March 31, 2022			September 30, 2021
Remaining lease term (months):		9			15
Estimated incremental borrowing rate:		6.5	%		6.5	%

The approximate future minimum lease payments below. The Company has a related agreement with the lessor to collaborate on the design, expansion and development of marine aquaculture resources and KLH production facilities on the leased property. Under that agreement, the Company was responsible for certain leasehold improvements including construction of structures and a power-generating facility, which are owned by the Company. The Company reimburses the lessor for local operational support. The collaboration agreement expires in June 2018, unless terminated earlier.

~~Stellar Biotechnologies, Inc.~~

~~Notes to Condensed Interim Consolidated Financial Statements (Unaudited)~~

~~Aggregate future minimum lease payments~~under operating leases at ~~December~~March 31, ~~2017 are~~2022 were as follows:

Year Ending
September 30, 2022	$	42,146
September 30, 2023		21,073

Total lease payment		63,219
Less imputed interest		1,679

Present value of lease liabilities, short-term	$	61,540

Nine Months Ending September 30, 2018 115,000
Year Ending September 30, 2019 106,000
Year Ending September 30, 2020 106,000
Year Ending September 30, 2021 6,000

$ 333,000

Cash flow information was as follows:

	Six Months Ended
	March 31, 2022		March 31, 2021
Cash paid for amounts included in the measurement of lease liabilities, included in accounts payable and accrued liabilities on the Statements of Cash Flows	$	40,610	$	39,942

5. Commitments

~~Rent expense on these lease agreements amounted to approximately $60,000~~Research and ~~$59,000 for the three months ended December 31, 2017 and 2016, respectively.~~

~~Purchase obligations~~other commitments

The Company has commitments ~~totaling approximately $133,000 at December 31, 2017~~ for ~~signed agreements with contract~~contracted research organizations ~~consultants, construction contractors~~that perform clinical trials for the Company’s ongoing clinical studies, other service providers and ~~equipment suppliers. All purchase obligations are expected to be fulfilled within~~ the ~~next 12 months.~~

~~Supply agreements~~

~~The Company has commitments under supply agreements with customers for fixed prices per gram of KLH~~drug substance acquired in connection with ~~clinical trials on~~ a ~~non-exclusive basis except within that customer’s field of use. The expiration dates of these supply agreements range from October 2019 to February~~license agreement. Aggregate future contractual payments at March 31, 2022 ~~and~~ are ~~generally renewable upon written request of the customer.~~as follows:

Year Ending
September 30, 2022	$	3,871,000
September 30, 2023		371,000
September 30, 2024		75,000
September 30, 2025		16,000

	$	4,333,000

~~Joint venture agreement~~

License and royalty commitments

In May 2016, the Company entered into a joint venture agreement with another party for the formation of a joint venture company to manufacture and sell conjugated therapeutic vaccines. The joint venture is organized as a French simplified corporation.

The Company holds a 30% equity interest in the joint venture in exchange for an initial capital contribution of €120,000. One-half of the initial contribution, approximately $67,000, was paid during the year ended September 30, 2016 with the balance due upon the occurrence of certain defined future events. The Company will also provide the joint venture additional financing as may be required, on a pro rata basis in line with our equity interest. According to the joint venture agreement, if certain milestones are not achieved by December 31, 2017, the joint venture will be dissolved, unless (i) the parties mutually agree to pursue the joint venture arrangement, or (ii) either party decides to purchase the equity interests of the other party. This deadline has passed and the parties have expressed their mutual desire to renew and amend the agreement to extend the timeline. Each of the parties is entitled, upon the occurrence of certain defined events, to acquire the interest of the other party. Except as described herein, the joint venture has an initial ten-year term, renewable for successive five-year terms. If either party provides notice at least six months prior to the expiration date of an applicable term that it does not wish to continue its participation in the joint venture, the other party will have a right to acquire all of such terminating party’s equity interests in the joint venture.

In connection with the formation of the joint venture and the execution of its strategy, the parties intend over time to enter into an exclusive supply agreement within a limited field of use for Stellar to supply KLH to the joint venture, a supply agreement designating the joint venture as the exclusive manufacturer and supplier of the other party’s vaccines, and services agreements for the provision of various knowledge and expertise by each of the parties.

~~Licensing agreement and technology transfer agreement~~

~~In July 2013, the Company acquired the exclusive, worldwide license to certain patented technology for the development of human immunotherapies against~~~~Clostridium difficile~~ infection (C. diff) under a written agreement (the License Agreement) with a University (the Licensor) which required payments of license fees, patent cost reimbursements and other contingent fees. In March 2017, (i) the Company entered into an agreement to terminate the License Agreement, (ii) the Company concurrently entered into a technology transfer and purchase agreement (the Transfer Agreement) with a vaccine biotechnology company (the Transferee), and (iii) the Licensor and Transferee entered into a direct licensing arrangement relating to the patented C. diff technology. Under the Transfer Agreement, the Company transferred to the Transferee its proprietary rights and know-how of immunogens and vaccine technology for C. diff, in exchange for an upfront payment and a percentage of future fees, milestone payments, sublicensing income and royalties, if any, paid by the Transferee or its assigns to the Licensor.

As a result of the termination of the License Agreement, there are no early termination penalties and no further annual licensing fees, contingent milestone payments, royalties, sub-licensing fees or other financial obligations payable by the Company to the Licensor.

~~Stellar Biotechnologies, Inc.~~

~~Notes to Condensed Interim Consolidated Financial Statements (Unaudited)~~

~~Retirement savings plan 401(k) contributions~~

The Company sponsors a 401(k) retirement savings plan that requires an annual non-elective safe harbor employer contribution of 3% of eligible employee wages. All employees over 21 years of age are eligible beginning the first payroll after 3 consecutive months of employment. Employees are 100% vested in employer contributions and in any voluntary employee contributions. Contributions to the 401(k) plan were approximately $19,000 and $18,000 for each of the three months ended December 31, 2017 and 2016, respectively.

~~Related party commitments~~

~~On August 14, 2002,~~April 2020, through its ~~California~~Ontario subsidiary, the Company entered into a ~~patent royalty~~license agreement with a ~~director~~third party to obtain exclusive world-wide rights to certain know-how, patents and ~~officer~~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 three and six months ended March 31, 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. No milestone payments were made to the third party during the three and six months ended March 31, 2022. 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 and six months ended March 31, 2022 and 2021.

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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 three and six months ended March 31, 2021. No payments for drug substance were made during the three and six months ended March 31, 2022.

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, ~~whereby he would receive~~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 ~~in exchange for assignment of his patent rights~~were made to the ~~Company.~~third party during the three and six months ended March 31, 2022 and 2021.

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. The ~~royalty is 5%~~Company recorded an expense of ~~gross receipts from products using this invention~~$0.11 million as a result of meeting milestones outlined in ~~excess of $500,000 annually. The Company’s current operations utilize this invention. There was no royalty expense incurred~~the 2021 license agreement for the three months ended March 31, 2021 and $0.03 and $0.11 for the six months ended March 31, 2022 and 2021, respectively. No milestones were met during the three months ended ~~December~~March 31, ~~2017~~2022. 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 ~~2016.~~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.

~~Share Capital~~

6. Capital Shares

Equity offerings

On March 24, 2022, the Company completed a registered direct offering of 1,540,000 common shares, no par value, and pre-funded warrants to purchase up to an aggregate of 1,199,727 common shares. In a concurrent private placement, the Company issued common share purchase warrants to purchase an aggregate of up to 2,739,727 common shares. Aggregate gross proceeds to the Company were approximately $10.0 million.

The common share purchase warrants were immediately exercisable at an exercise price of $3.52 per share and will expire on September 24, 2027. The pre-funded warrants were immediately exercisable at an exercise price of $0.0001 per share and do not expire. In connection with the offering, the Company ~~had~~also issued warrants to purchase an aggregate of 191,780 common shares to certain affiliated designees of the ~~following transactions in~~placement agent as part of the placement agent’s compensation. The placement agent warrants are exercisable on or after March 24, 2022, at an exercise price of $4.5625 per share, ~~capital:~~and will expire on March 21, 2027.

Three Months Ended
December 31, December 31,
2017 2016

Share-based compensation $ 20,706 $ 36,442

The direct costs related to the issuance of the common shares and warrants were $0.99 million. These direct costs were recorded as an offset against gross proceeds. The warrants are considered contracts on the Company’s own shares and are classified as equity. The Company allocated gross proceeds with $5.87 million as the value of common shares and pre-funded warrants and $4.13 million as the value of common share purchase warrants under additional paid-in capital in the unaudited condensed interim consolidated statements of changes in shareholders’ equity on a relative fair value basis. 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.

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 $0.99 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.

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Equity distribution agreements

On November 22, 2021, the Company entered into an equity distribution agreement with RBC Capital Markets, LLC (RBCCM), as sales agent. Pursuant to the terms of the agreement, as amended March 4, 2022, the Company could offer and sell common shares having an aggregate offering price of up to $15.4 million from time to time through RBCCM. For the six months ended March 21, 2022, the Company sold a total of 626,884 common shares pursuant to the agreement for gross proceeds of $2.94 million. The commissions and direct costs of the offering program totaled approximately $0.32 million and were recorded as an offset against gross proceeds. On March 21, 2022, the Company and RBCCM entered into an agreement terminating the agreement effective March 21, 2022.

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 ~~share options.~~the fair value of warrants issued. Option valuation models require the input of highly subjective assumptions including the expected price volatility. The Company ~~has used~~calculates expected volatility based on historical ~~volatility to estimate the~~ 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

~~There were 1,265,626 warrants outstanding at December 31, 2017 with an exercise price~~A summary of ~~$4.50 and expiry date of January 6, 2022. There were no warrants granted or exercised during~~ the ~~period from September 30, 2016 to December 31, 2017.~~Company’s warrant activity is as follows:

	Number of Warrant Shares (#)			Weighted Average Exercise Price
Six Months Ended March 31, 2022
Balance – September 30, 2021		720,446		$	5.69

Issued		2,931,507		$	3.59

Balance – March 31, 2022		3,651,953		$	4.00

Six Months Ended March 31, 2021
Balance – September 30, 2020		992,721		$	4.92

Issued		109,375			8.00
Exercised		(341,806	)		4.29

Balance – March 31, 2021		760,290		$	5.65

The weighted average contractual life remaining on the outstanding warrants at ~~December~~March 31, ~~2017~~2022 is 3356 months.

The following table summarizes information about the warrants outstanding at March 31, 2022:

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
	191,780	$	4.56	March 2027
	2,739,727	$	3.52	September 2027
	3,651,953

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The fair value of warrants granted during the three and six months ended March 31, 2022 and 2021 was estimated using the Black-Scholes option valuation model using the following assumptions:

Six Months Ended March 31, 2022

Six Months Ended March 31, 2021

Common Warrants

Placement Agent Warrants

Underwriter Warrants

Risk free interest rate

2.37 %

2.37 %

0.67 %
Expected life

5.5 years

5 years

5 years

Expected share price volatility

87.09 %

87.09 %

94.20 %
Expected dividend yield

0.00 %

0.00 %

0.00 %
Pre-funded Warrants
A summary of the Company’s pre-funded warrants activity is as follows:
Number of Pre-funded Warrant Shares (#)
Six Months Ended March 31, 2022
Balance – September 30, 2021
-
Issued
1,199,727
Balance – March 31, 2022
1,199,727
There were no pre-funded warrants during the six months ended March 31, 2021.
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Share Options

The Company ~~has~~adopted an ~~incentive compensation plan adopted~~Equity Incentive Compensation Plan in ~~2017~~2019 (the ~~Incentive Plan)~~“2019 Plan”) administered by the independent members of the Board of Directors, which amended and restated the ~~2013 fixed share option plan.~~2017 Incentive Compensation Plan (the “2017 Plan”). Options, restricted shares and restricted share units are eligible for ~~grants~~grant under the ~~Incentive~~2019 Plan. The remaining number of options available for grant is 364,617. The total number of shares available for issuance ~~under the Incentive Plan~~ is ~~1,597,000,~~2,625,951 including shares available for the exercise of outstanding options under the ~~2013 fixed share option plan. No restricted shares or restricted share units have been granted~~2019 and 2017 Plans as ~~of December 31, 2017.~~described below.

The ~~exercise price of an option is set at the closing price of the~~ Company’s ~~common shares on the date of grant. Share~~2019 Plan allows options to be granted to directors, officers, employees and certain ~~individual~~external consultants ~~for past service are subject~~and advisers. Under the 2019 Plan, the option term is not to exceed 10 years and the ~~following vesting schedule: (a) one-third shall vest immediately, (b) one-third shall vest at 12 months from~~exercise price of each option is determined by the ~~date~~independent members of ~~grant and (c) one-third shall vest at 18 months from~~ the ~~date~~Board of ~~grant.~~Directors.

Share options granted to directors, officers, employees and certain individual consultants for future service are subject to the following vesting schedule: (x) one-third shall vest at 12 months from the date of grant, (y) one-third shall vest at 24 months from the date of grant and (z) one-third shall vest at 36 months from the date of grant.

Share options granted to certain individual investor relations consultants are subject to the following vesting schedule: (aa) 25% shall vest at 3 months from the date of grant, (bb) 25% shall vest at 6 months from the date of grant, (cc) 25% shall vest at 12 months from the date of grant and (dd) 25% shall vest at 15 months from the date of grant.

~~Stellar Biotechnologies, Inc.~~

~~Notes to Condensed Interim Consolidated Financial Statements (Unaudited)~~

Options have been granted under the ~~Incentive~~2019 Plan allowing the holders to purchase common shares of the Company as follows:

	Number of Options			Weighted Average Exercise Price			Number of Options (#)			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value

Balance - September 30, 2016		539,103		$	5.29
Six Months Ended March 31, 2022
Balance – September 30, 2021								1,776,219		$	5.06	$	3.79

Granted		71,600			1.89			500,083			3.66		2.48
Expired		(28,233	)		11.14
Forfeited								(14,754	)		6.48		5.06
Expired		(171,500	)		2.90	CDN $		(214	)		502.68		477.65

Balance - September 30, 2017		410,970		$	5.74
Balance – March 31, 2022								2,261,334		$	4.70	$	3.45

Expired		(10,667	)		17.29
Six Months Ended March 31, 2021
Balance – September 30, 2020								675,437		$	3.30	$	2.56

Granted								450,000			7.35		5.84
Exercised								(10,746	)		2.44		1.67
Forfeited								(19,066	)		6.07		4.76
Expired		(35,250	)		4.57	CDN $		(238	)		768.60		715.60

Balance - December 31, 2017		365,053		$	5.58
Balance – March 31, 2021								1,095,387		$	4.79	$	3.96

During the quarter ended March 31, 2022, the independent members of the Board of Directors granted a total of 415,083 options to 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 for new employees), and an exercise price equal to the Nasdaq closing price on the grant dates.

During the quarter ended March 31, 2022, the independent directors of the Board of Directors granted a total of 85,000 options, respectively, to directors 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.

The weighted average contractual life remaining on the outstanding options at March 31, 2022 is 33102 months.

The following table summarizes information about the options under the ~~Incentive~~2019 Plan outstanding and exercisable at ~~December~~March 31, ~~2017:~~2022:

Number of
Options Exercisable at
December 31, 2017 Range of exercise prices Expiry Dates
94,360 94,360 CDN$0.01 - 5.00 Apr 2017-Dec 2019
69,233 32,533 $0.01 - 5.00 Sep 2023-Mar 2024
125,360 125,360 CDN$5.01 - 10.00 Oct 2017-Jun 2022
15,100 15,100 $5.01 - 10.00 Dec 2022
21,500 21,500 CDN$15.01 - 20.00 Nov 2018-Nov 2021
39,500 29,500 $15.01 - 20.00 Nov 2020
365,053 318,353

Number of Options (#)		Exercisable at March 31, 2022 (#)		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
	332,822		266,482	$	3.16	Feb 2030
	418,452		213,616	$	7.44 - 8.07	Sep 2030-Oct 2030
	709,837		307,789	$	5.25 - 5.65	Jan 2031-Sep 2031
	500,083		34,724	$	2.94 - 3.71	Feb 2032-Mar 2032
	2,261,334		1,122,751

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The ~~estimated~~ fair value of ~~the share~~ options granted during the three and six months ended ~~December~~March 31, ~~2016~~2022 and 2021 was ~~determined~~estimated using athe Black-Scholes option valuation model ~~with~~using the following ~~weighted average~~ assumptions:

	~~Three Months Ended~~
	~~December 31,~~
	~~2016~~
~~Risk free interest rate~~		~~1.49~~	%
~~Expected life (years)~~		~~7.00~~
~~Expected share price volatility~~		~~166~~	%
~~Expected dividend yield~~		0	%

	Six Months Ended March 31, 2022		Six Months Ended March 31, 2021

Risk free interest rate	1.71% - 2.54%		0.31% - 0.90%
Expected life	5 years		5 years
Expected share price volatility	85.91% - 86.59%		94.27% - 97.28%
Expected dividend yield		0.00%		0.00%

~~There were no share options granted during~~The Company recorded $0.63 million and $0.47 million of share-based compensation expenses for the three months ended ~~December~~March 31, ~~2017.~~

~~The weighted average fair value of share options granted during~~2022 and 2021, respectively and $1.24 million and $1.19 million for the ~~three~~six months ended ~~December~~March 31, ~~2016 was $1.98.~~2022 and 2021.

As of ~~December~~March 31, ~~2017,~~2022, the Company had approximately ~~$40,000~~$2.16 million of unrecognized share-based compensation expense, which is expected to be recognized over a period of 2734 months.

~~There were no options exercised during the three months ended December 31, 2017~~7. Reimbursement Grant Income and ~~2016. There was no intrinsic value of the vested options at December 31, 2017.~~

Receivable

~~Fair Value of Financial Instruments~~

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 March 31, 2022, grant reimbursements receivable of $1.1 million were included in accounts and other receivable.

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.

~~Stellar Biotechnologies, Inc.~~

~~Notes to Condensed Interim Consolidated Financial Statements (Unaudited)~~

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 carrying value of certain financial instruments such as accounts receivable, accounts payable, accrued liabilities, and deferred revenue approximates fair value due to the short-term nature of such instruments. Short-term investments in U.S. Treasury Bills are recorded at amortized cost, which approximates fair value.

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.

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There are three levels of inputs that may be used to measure fair value:

·	Level 1:1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
~~Quoted~~
·	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, ~~for identical~~ or ~~similar assets and liabilities.~~
~~Level 2:~~	~~Quoted~~quoted prices for identical or similar assets and liabilities in markets that are not ~~active or observable inputs other than quoted prices in active markets for identical or similar assets and liabilities.~~ active.

·	Level 3:	3 - Unobservable inputs for the asset or liability that are supported by little or no market ~~activity and that are significant to the fair value of the assets or liabilities.~~ 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. The fair value of lease obligations on right-of-use assets approximates carrying value due to a fixed lease rate, which represents market rate.

(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 ~~reports its short-term investments in U.S. Treasury Bills at fair value using Level 1 inputs in the fair value hierarchy.~~

~~The following table summarizes fair values for those assets and liabilities with fair value measured on a recurring basis.~~

Fair Value Measurements Using
Quoted Prices in
Active Markets
for Identical
Instruments
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Total Fair Value
December 31, 2017
Assets
Short-term investments in U.S. Treasury Bills $ 998,575 $ - $ - $ 998,575

September 30, 2017
Assets
Short-term investments in U.S. Treasury Bills $ 1,994,401 $ - $ - $ 1,994,401

~~10.~~

~~Concentrations of Credit Risk~~

~~Credit risk~~ is ~~the risk of an unexpected loss if a customer or third party~~also exposed to ~~a financial instrument fails to meet its contractual obligations. Financial instruments that potentially subject the Company to a concentration of~~ credit risk ~~consist primarily~~at period end from the carrying value of its cash and cash equivalents ~~U.S Treasury Bills,~~ and accounts and other receivable. The Company ~~estimates its maximum credit~~manages this risk ~~at the amount recorded on the balance sheet.~~

~~Management’s assessment of the Company’s credit risk for cash and cash equivalents is low as they are held in major financial institutions~~by maintaining bank accounts with Canadian Chartered Banks, U.S. banks believed to be credit worthy orand money market mutual funds of U.S. ~~Treasury Bills with maturities of 90 days or less.~~government securities. The Company’s cash is not subject to any external restrictions. The Company ~~limits~~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 ~~credit~~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 ~~for short-term investments by holding~~while a weakening U.S. ~~Treasury Bills with maturities~~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 March 31, 2022, the Company and its Canadian subsidiary had assets denominated in Canadian dollars of ~~1 year or less.~~approximately C$5.3 million and the U.S. dollar exchange rate as at this date was equal to 1.2508 Canadian dollars. Based on ~~credit monitoring~~the exposure at March 31, 2022, a 10% annual change in the Canadian/U.S. exchange rate would impact the Company’s loss and ~~history,~~other comprehensive loss by approximately $425,000.

(d) Liquidity risk

Liquidity risk is the risk that the Company ~~considers~~will encounter difficulty raising liquid funds to meet commitments as they fall due. In meeting its liquidity requirements, the ~~risk of credit losses due to customer non-performance on accounts receivable to be low.~~Company closely monitors its forecasted cash requirements with expected cash drawdown.

9. Loss per Share

The Company had ~~the following concentrations of revenues by customers, each of~~securities outstanding which ~~accounted for more than 10% of revenues~~could potentially dilute basic EPS in the ~~applicable period:~~future but were excluded from the computation of diluted loss per share in the periods presented, as their effect would have been anti-dilutive.

Three Months Ended
December 31, December 31,
2017 2016

Product sales and contract services revenue 98% from
3 customers 92% from
1 customer

~~The Company had the following concentrations of revenues by geographic areas:~~

Three Months Ended
December 31, December 31,
2017 2016

Europe 73 % 94 %
North America 27 % 6 %

~~Stellar Biotechnologies, Inc.~~

~~Notes to Condensed Interim Consolidated Financial Statements (Unaudited)~~

10. Related Party Transactions

The Company ~~had the following concentrations~~incurred rent expense of ~~accounts receivable from its customers,~~$0.20 million during each of ~~which accounted~~the three months ended March 31, 2022 and 2021 and $0.41 million and $0.40 million for ~~more than 10%~~the six months ended March 31, 2022 and 2021, respectively from a company controlled by the Company’s CEO. These transactions are in the ~~applicable period:~~normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by both parties.

	~~December 31,~~
	~~2017~~		15

~~Accounts receivable~~		~~49% from~~ ~~1 customer~~	Table of Contents

~~There were no customer accounts receivable at September 30, 2017.~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed interim consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q as of ~~December~~March 31, ~~2017~~2022 and our audited consolidated financial statements for the year ended September 30, ~~2017~~2021 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on December ~~1, 2017.~~28, 2021.

This Quarterly Report on Form 10-Q contains forward-looking statements. When used in this report, the words “expects,” “anticipates,” “suggests,” “believes,” “intends,” “estimates,” “plans,” “projects,” “continue,” “ongoing,” “potential,” “expect,” “predict,” “believe,” “intend,” “may,” “will,” “should,” “could,” “would” and similar expressions are intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in our Annual Report on Form 10-K for the year ended September 30, ~~2017~~2021 and other reports we file with the Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made. We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.

The discussion and analysis of our financial condition and results of operations are based on our unaudited condensed interim consolidated financial statements as of ~~December~~March 31, ~~2017~~2022 and September 30, ~~2017,~~2021, and for the three and six months ended ~~December~~March 31, ~~2017~~2022 and ~~2016~~2021 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.~~principles for interim financial information and with the instructions to Form 10-Q. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

~~Overview~~

~~Stellar Biotechnologies, Inc.~~Overview

We are a biopharmaceutical company focused on acquiring, developing and commercializing clinical-stage drugs for inflammatory and immune-related diseases with clear unmet medical needs. Our two lead product candidates, EB05 and EB01, are in later stage clinical studies.

EB05 is a ~~biotechnology company engaged~~monoclonal antibody therapy that we are developing as a treatment for Acute Respiratory Distress Syndrome (ARDS) in COVID-19 patients. ARDS is a life-threatening form of respiratory failure, and the ~~aquaculture,~~leading cause of death among COVID-19 patients. ARDS can be also caused by bacterial pneumonia, sepsis, chest injury and other causes. Specifically, EB05 inhibits toll-like receptor 4 (TLR4), a key immune signaling protein and an important mediator of inflammation that has been shown to be activated by SARS-COV2 as well as other respiratory infections such as influenza. In multiple third-party studies, high serum levels of alarmins (damage signaling molecules) that bind to and activate TLR4 are associated with poor outcomes and disease progression in COVID-19 patients. Since EB05 has demonstrated the ability to block signaling irrespective of the presence or concentration of the various molecules that frequently bind with TLR4, we believe that EB05 could ameliorate TLR4-mediated inflammation cascades in ARDS patients, thereby reducing lung injury, ventilation rates and mortality. In September 2021, an independent data and safety monitoring board pre-emptively unblinded the Phase 2 part of a Phase 2/3 study of EB05 in hospitalized COVID-19 patients and identified “a clinically important” mortality benefit. The monitoring board further recommended continuation of the study into a Phase 3 confirmatory trial. The Phase 2 part of the study was funded primarily by a $11 million (C$14 million) reimbursement grant that was awarded by the Canadian government’s Strategic Innovation Fund (SIF) following a multi-disciplinary technical review of our drug technology and plans.

In addition to EB05, we are developing an sPLA2 inhibitor, designated as EB01, as a topical treatment for chronic allergic contact dermatitis (ACD), a common, potentially debilitating condition and occupational illness. EB01 employs a novel, non-steroidal mechanism of action and in two clinical studies has demonstrated statistically significant improvement of multiple symptoms in ACD patients. EB01 is currently being evaluated in a Phase 2b clinical study.

In addition to our current clinical programs, we intend to expand the utility of our technologies and clinical-stage assets across other indications.

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Recent Developments

Equity Offering

On March 24, 2022, we completed a registered direct offering of 1,540,000 common shares, no par value, and pre-funded warrants to purchase up to an aggregate of 1,199,727 common shares. In a concurrent private placement, the Company issued common share purchase warrants to purchase an aggregate of up to 2,739,727 common shares. We received net proceeds of $9.01 million, after deducting fees to the placement agent and other offering expenses. The common share purchase warrants were immediately exercisable at an exercise price of $3.52 per share and will expire on September 24, 2027. The pre-funded warrants were immediately exercisable at an exercise price of $0.0001 per share and do not expire. In connection with the offering, we also issued warrants to purchase an aggregate of 191,780 common shares to certain affiliated designees of the placement agent as part of the placement agent’s compensation. The placement agent warrants are exercisable on or after March 24, 2022, at an exercise price of $4.5625 per share, and will expire on March 21, 2027. The net proceeds will be used for working capital, including research and development ~~manufacture~~expenses, and ~~commercialization of Keyhole Limpet Hemocyanin (KLH). KLH is an immune-stimulating protein with an extensive history of safe~~held in temporary investments and effective use in immunological applications. Today, multiple companies and institutions are developing drugs that combine disease-targeting agents with KLH. These disease-targeting agents do not evoke a robust immune response by themselves and thus require a carrier molecule like KLH. The versatility of the KLH molecule and its use in multiple drug development pipelines provide numerous commercial opportunities for us. cash equivalents until expended.

~~We extract and manufacture KLH from the hemolymph~~Results of a scarce ocean mollusk, the Giant Keyhole Limpet. Based upon our specialized knowledge of aquaculture science and KLH, we have built unique land-based aquaculture, laboratory and production facilities in Port Hueneme, California, and developed production and manufacturing processes to produce medical-grade KLH using Current Good Manufacturing Practices (GMP).Operations

We market and sell our KLH products under the brand Stellar KLH. Our customers and partners include multinational biotechnology and pharmaceutical companies, academic institutions, clinical research organizations and research centers. We have multiple agreements to license and supply Stellar KLH and other technology in exchange for fees, revenues or royalties. Our customers manage and fund all product development and regulatory submissions for their respective drug products that utilize our KLH protein.

~~Recent Developments~~

~~Neostell Joint Venture~~

In May 2016, we entered into a joint venture agreement with Neovacs S.A, a Paris-based biotechnology company, for the formation of a joint venture company to manufacture and sell conjugated therapeutic vaccines. In July 2016, Neostell S.A.S., a French simplified stock corporation (Neostell), was formed to carry out the businessComparison of the joint venture. Neostell is expected to produce Neovacs’ product candidates that utilize Stellar KLH as a carrier molecule and may also manufacture and sell other KLH-based immunotherapy products for third-party customers. We hold a 30% equity interest in the joint venture in exchange for an initial capital contribution of €120,000. One-half of the initial contribution, approximately $67,000, was paid in June 2016 with the balance due upon the occurrence of certain defined future events. We will also provide additional financing to Neostell, as may be required, on a pro rata basis in line with our equity interest. According to the joint venture agreement, if certain milestones are not achieved by December 31, 2017, Neostell will be dissolved, unless the parties mutually agree to pursue the joint venture arrangement, or either party decides to purchase the equity interests of the other party. This deadline has passed and the parties have expressed their mutual desire to renew and amend the agreement to extend the timeline.

~~Significant Accounting Policies and Estimates~~

For a discussion of our significant accounting policies and estimates, refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017, as filed with the Securities and Exchange Commission (SEC) on December 1, 2017. There are no material changes in our significant accounting policies and estimates from the disclosure provided in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017.

~~Results of Operations~~

~~Comparison of~~ Three Months Ended ~~December~~March 31, ~~2017~~2022 and ~~2016~~2021

~~Our total revenues~~Total operating expenses decreased by ~~$.12~~$4.93 million to ~~$.02~~$4.58 million for the three months ended ~~December~~March 31, ~~2017~~2022 compared to $.14 million for the three months ended December 31, 2016 due to a decrease in our product sales. While our customer base has not changed significantly, product sales volumes are subject to variability associated with the rate of development and progression of clinical studies of third-party products that utilize Stellar KLH. The rate of progression toward later stage studies is expected to continue to affect the timing and volume of future product sales. During both periods, product mix was similar, consisting of various grades of KLH for clinical and pre-clinical studies and immune system assays.

~~Our total expenses decreased by $.15 million to $1.41 for the three months ended December 31, 2017 compared to $1.56~~$9.51 million for the same period last year:

~~Our cost of sales~~

Research and development expenses decreased by ~~$.08~~$4.94 million to ~~less than $.01~~$3.04 million for the three months ended ~~December~~March 31, ~~2017~~2022 compared to ~~$.08~~$7.98 million for the same period last year primarily due to decreased ~~product sales volume as well as reduced~~milestone and bulk drug substance payments, lower license fees and decreased external research expenses, which were partially offset by higher manufacturing expenses, and increased salary and related ~~to sales of KLH that was produced as a byproduct of our research and development activities.~~personnel expenses.


	·	~~Our research~~ General and ~~development~~administrative expenses ~~increased by $.17 million to $.63~~remained relatively unchanged at $1.53 million for the three months ended ~~December~~March 31, ~~2017~~2022 compared to ~~$.46~~$1.54 million for the same period last year. The increase was primarily due to research and development activities intended to increase the scalability and throughput capacity of existing manufacturing systems, including engineering lots of KLH produced under our optimization initiative. Additional research and development in aquaculture as well as process, analytical and product formulation development also contributed to the increase.

~~Our general and administrative expenses decreased by $.25 million to $.68 million for the three months ended December 31, 2017 compared to $.93 million for the same period last yearprimarily due to management’s continued actions to reduce corporate expenses, including salaries, professional fees and travel, as well as lower legal fees and public company expenses~~.

~~Our total~~Total other income (loss) decreased by ~~$.06~~$7.24 million to an overall ~~loss~~gain of ~~$.01~~$0.01 million for the three months ended ~~December~~March 31, ~~2017~~2022 compared to an overall ~~loss~~gain of ~~$.07 million for the same period last year. Foreign exchange loss was $.02 million for the three months ended December 31, 2017 compared to a loss of $.08~~$7.25 million for the same period last year primarily due to ~~fluctuations~~a decrease in ~~exchange rates and decreased amounts held in~~grant income associated with the completion of clinical study activities under our federal reimbursement grant with the Canadian ~~cash and cash equivalents.~~government’s Strategic Innovation Fund.

~~Our net loss for~~For the three months ended ~~December~~March 31, ~~2017~~2022, our net loss was ~~$1.40~~$4.57 million, or ~~$0.13~~$0.33 per ~~basic~~common share, compared to a net loss of ~~$1.49~~$2.26 million, or ~~$0.15~~$0.19 per ~~basic~~common share, for the three months ended ~~December~~March 31, ~~2016.~~2021.

Comparison of the Six Months Ended March 31, 2022 and 2021

Total operating expenses decreased by $2.38 million to $9.74 million for the six months ended March 31, 2022 compared to $12.12 million for the same period last year:

	·	Research and development expenses decreased by $2.36 million to $6.99 million for the six months ended March 31, 2022 compared to $9.35 million for the same period last year primarily due to decreased milestone and bulk drug substance payments and lower license fees, which were partially offset by higher external research expenses, higher manufacturing expenses and increased salary and related personnel expenses.

	·	General and administrative expenses decreased by $0.03 million to $2.74 million for the six months ended March 31, 2022 compared to $2.77 million for the same period last year primarily due to lower salary and related personnel expenses, which were partially offset by increased legal and other professional service fees.

Total other income (loss) decreased by $6.44 million to an overall gain of $0.79 million for the six months ended March 31, 2022 compared to an overall gain of $7.23 million for the same period last year primarily due to a decrease in grant income associated with the completion of clinical study activities under our federal reimbursement grant with the Canadian government’s Strategic Innovation Fund.

For the six months ended March 31, 2022, our net loss was $8.95 million, or $0.66 per common share, compared to a net loss of $4.90 million, or $0.45 per common share, for the six months ended March 31, 2021.

Capital Expenditures

Our capital expenditures ~~which~~ primarily consist of ~~scientific, manufacturing,~~computer and ~~aquaculture equipment, and facility leasehold improvements~~office equipment. There were ~~$34,767 and $84,424~~no significant capital expenditures for the ~~three~~six months ended ~~December~~March 31, ~~2017~~2022 and ~~2016, respectively.~~2021.

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Liquidity and Capital Resources

~~Company~~As a clinical-stage company 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 ~~by the issuance~~through issuances of common shares, ~~exercise~~exercises of common share purchase warrants, ~~grant revenues, contract services revenue~~convertible preferred shares, convertible loans, government grants and ~~product sales.~~tax incentives. For the ~~three months~~six-month periods ended ~~December~~March 31, ~~2017~~2022 and ~~2016, the Company~~2021, we reported net losses of ~~approximately $1.4~~$8.95 million and ~~$1.5~~$4.90 million, respectively. As

On March 24, 2022, we completed a registered direct offering of ~~December 31, 2017,~~1,540,000 common shares, no par value, and pre-funded warrants to purchase up to an aggregate of 1,199,727 common shares. In a concurrent private placement, we issued common share purchase warrants to purchase an aggregate of up to 2,739,727 common shares. After deducting the placement agent fees and offering expenses, net proceeds to the Company were approximately $9.01 million.

On November 22, 2021, we entered into an equity distribution agreement with RBC Capital Markets, LLC (RBCCM), as sales agent. Pursuant to the terms of the agreement, as amended March 4, 2022, the Company could offer and sell, from time to time, common shares through an at-the-market offering program for up to $15.4 million in gross cash proceeds. For the six months ended March 21, 2022, we sold a total of 626,884 common shares pursuant to the agreement. After deducting commissions and direct costs, net proceeds totaled approximately $2.62 million. On March 21, 2022, the Company and RBCCM entered into an agreement terminating the agreement effective March 21, 2022.

Under our contribution agreement with the Canadian government’s Strategic Innovation Fund (SIF), we are eligible to receive cash reimbursements up to C$14.05 million (approximately $11 million USD) in the aggregate for certain research and development expenses related to our EB05 clinical development program. For the year ended September 30, 2021, we recorded $10.34 million in grant income, and for the six months ended March 31, 2022, we recorded $0.78 million in grant income.

On March 2, 2021, we completed a registered public offering of an aggregate of 1,562,500 common shares, no par value, of the Company at an offering price of $6.40 per share for net proceeds of $8.89 million, after deducting underwriter fees and related offering expenses.

For the year ended September 30, 2021, the exercise of warrants and options as well as sales under an equity distribution agreement with RBCCM resulted in the issuance of 987,859 common shares and net cash proceeds to the Company of $5.12 million.

At March 31, 2022, we had cash and cash equivalents of $15.89 million, working capital of $14.66 million, shareholders’ equity of $17.02 million and an accumulated deficit of ~~approximately $46.8 million and working capital of approximately $5.1~~$35.44 million. ~~While the Company plans~~We plan to finance company operations ~~for~~over the course of the next twelve months with cash and cash equivalents on hand and ~~product sales, management expects to continue incurring losses for~~reimbursements of eligible research and development expenses under our contribution agreement with the ~~foreseeable future and will need to raise additional capital to pursue our business plan beyond February 2019.~~Canadian government. Management ~~is taking action to ensure the Company will continue as a going concern for at least one year beyond the date of the issuance of the Company’s financial statements. First, management~~ has flexibility to adjust this timeline by making changes to planned expenditures ~~based on a number of~~related to, among other factors, ~~including~~ the size and timing of ~~capital~~clinical trial expenditures, staffing levels, ~~inventory levels,~~ and the ~~status~~acquisition or in-licensing of ~~customer clinical trials. Management also seeks~~new product candidates. To help fund our operations and meet our obligations in the future, we are planning to ~~expand the customer base for existing marketed products, and is currently evaluating opportunities to secure~~seek additional financing through government grants, equity sales, debt ~~and/~~financings or ~~equity financings,~~other capital sources, including ~~transactions~~potential future licensing, collaboration or similar arrangements with third parties or other strategic ~~customers and partners that may include debt and/or equity arrangements. We have not secured any commitment for new financing at this time, nor can~~transactions. If we ~~provide any~~determine it is advisable to raise additional funds, there is no assurance that ~~new financing~~adequate funding will be available to us or, if available, that such funding will be available on ~~commercially acceptable~~ terms ~~if needed.~~that we or our shareholders view as favorable. Market volatility, inflation and concerns related to the COVID-19 pandemic may have a significant impact on the availability of funding sources and the terms at which any funding may be available.

We have filed with the Securities and Exchange Commission, and the Securities and Exchange Commission declared effective, a universal shelf registration statement of up to $100 million worth of registered equity securities, of which we utilized approximately $6.75 million in our July 2016 offering. Under this effective registration statement, we may issue registered securities, from time to time, in one or more separate offerings or other transactions with the size, price and terms to be determined at the time of issuance. Pursuant to General Instruction I.B.6 of Form S-3, in no event will we sell securities in a public primary offering with a value of more than one-third of the aggregate market value of our common shares held by non-affiliates in any twelve-month period, so long as the aggregate market value of our common shares held by non-affiliates remains below $75 million. Registered securities issued using our existing shelf may be used to raise additional capital to fund our working capital, R&D and other corporate needs.

~~Geographic Concentrations~~

We primarily market and distribute our products directly to biotechnology and pharmaceutical companies, academic institutions, clinical research organizations and research centers. Products are shipped to our customers from our facilities in Port Hueneme, California using a common carrier chosen by the customer. The geographic markets of our customers are principally Europe, Asia and North America. We had the following concentrations of revenues by geographic areas:

Three Months Ended
December 31, December 31,
2017 2016

Europe 73 % 94 %
North America 27 % 6 %

The geographic concentration of our product sales revenue fluctuates quarter over quarter, sometimes significantly, depending on the volume of sales from our customers in each of our principal geographic markets.

Research and Development

Our ~~core~~primary business is the development of innovative therapeutics for inflammatory and immune-related diseases with clear unmet medical needs. We focus our resources on research and development activities, including the conduct of clinical studies and product development, and expense such costs as they are incurred. Our research and development expenses have primarily consisted of employee-related expenses, including salaries, benefits, taxes, travel, and share-based compensation expense for personnel in research and development functions; expenses related to process development and production of product candidates paid to contract manufacturing organizations, including the cost of acquiring, developing, and ~~commercializing Keyhole Limpet Hemocyanin~~manufacturing research material; costs associated with clinical activities, including expenses for ~~use in immunotherapy~~contract research organizations; and ~~immunodiagnostic applications. Our internal research has included, among other~~clinical trials and activities ~~continual improvement of methods~~related to regulatory filings for the culture and growth of Giant Keyhole Limpet, innovations in aquaculture systems and infrastructure, biophysical and biochemical characterization of the KLH molecule, analytical processes to enhance performance of our ~~products, KLH manufacturing process improvements, new KLH formulations, and early development of potential new KLH-based immunotherapies.~~product candidates, including regulatory consultants.

Research and development ~~costs, including materials, KLH designated for internal research use only~~expenses, which have historically varied based on the level of activity in our clinical programs, are significantly influenced by study initiation expenses and ~~salaries of employees directly involved in research~~patient recruitment rates, and ~~development efforts, are expensed as incurred. From time to time, we produce saleable KLH~~ as a ~~byproduct of our research and development activities. The cost of this KLH is not assigned~~result are expected to ~~inventory.~~

continue to fluctuate, sometimes substantially. Our research and development costs were ~~$631,034~~$6.99 million and ~~$460,865~~$9.35 million for the ~~three~~six months ended ~~December~~March 31, ~~2017~~2022 and ~~2016,~~2021, respectively. The decrease was due primarily to decreased milestone and bulk drug substance payments and lower license fees, which were partially offset by higher external research expenses related to the ongoing Phase 2/Phase 3 clinical study of our EB05 drug candidate, higher manufacturing expenses and increased salary and related personnel expenses.

The increase from the comparable period was primarily due to research and development activities intended to increase the scalability and throughput capacity of existing manufacturing systems, including engineering lots of KLH produced under our optimization initiative.

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~~Disclosure of Contractual Obligations~~Off Balance Sheet Arrangements

We currently lease 4,300 square feet of executive office and laboratory space in Port Hueneme, California under a lease which was renewed in July 2016 for a two-year term, with options to renew for three successive two-year terms.

Our aquaculture and KLH manufacturing operations are located on approximately 37,000 square feet of oceanfront land in the Port Hueneme Aquaculture Business Park. Our facilities here include specialized aquaculture infrastructure, seawater supply and discharge systems, laboratories, manufacturing and administrative offices. Wedo not have ~~two sublease agreements which expire in September and October 2020, respectively, with options to extend the leases for two additional five-year terms.~~

We also currently lease undeveloped land in Baja California, Mexico under a lease agreement which we entered into in June 2015, with a three-year term, which lease agreement may be terminated at will at any time with 30 days prior notice by either party. We are utilizing the undeveloped land to conduct suitability studies for the potential development of an additional aquaculture locale and future expansion of production. We also have a short-term lease for office space in a business center located in Ensenada, Baja California. This office serves as the administrative headquarters of our BioEstelar subsidiary.

~~We have purchase commitments for contract research organizations, consultants, construction contractors and equipment suppliers.~~

There have been no material changes in our contractual obligations previously disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017, as filed with the SEC on December 1, 2017.

~~Off-Balance Sheet Arrangements~~

~~We have no off-balance~~off balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures About Market Risk.~~

We are exposed to financial market risks associated with foreign exchange rates, concentration of credit, and liquidity. In accordance with our policies, we manage our exposure to various market-based risks and where material, these risks are reviewed and monitored by our Board of Directors. For a discussion of our market risk exposure, refer to Item ~~7A, “Quantitative~~3. Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017, as filed with the SEC on December 1, 2017. There are no material changes in market risk from the disclosure provided in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017.Risk.

~~Item 4.~~

~~Controls and Procedures.~~

We are a smaller reporting company and are not required to provide disclosure under this item.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining disclosure controls and procedures to provide reasonable assurance that material information related to our Company, including our consolidated subsidiaries, is made known to senior management, including our Chief Executive Officer and Chief Financial Officer, by others within those entities on a timely basis so that appropriate decisions can be made regarding public disclosure.

We carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Securities and Exchange Act of 1934, as amended) as of ~~December~~March 31, ~~2017.~~2022. Our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures, as of ~~December~~March 31, ~~2017,~~2022, were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~December~~March 31, ~~2017~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings.~~

Item 1. Legal Proceedings.

From time to time, we may be involved in legal proceedings, claims and litigation arising in the ordinary course of business. We are not currently a party to any material legal proceedings or claims outside the ordinary course of business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

~~Item 1A.~~

~~Risk Factors.~~

~~If we cannot meet Nasdaq’s continuing listing requirements and Nasdaq rules, Nasdaq may delist our securities, which could negatively affect our Company and the price of our securities.~~Item 1A. Risk Factors.

~~On January 30, 2018,~~There have been no material changes to the ~~Company received a letter from The Nasdaq Stock Market LLC (Nasdaq) notifying the Company that, based~~risk factors discussed in Item 1A. Risk Factors in our Annual Report on ~~the Company’s closing bid price~~Form 10-K for the ~~last~~year ended September 30, ~~consecutive business days, the Company is not in compliance~~2021, filed with the minimum bid price requirement of $1.00 per share for continued listing, as set forth in Nasdaq Listing Rule 5550(a)(2). The Company has an initial period of 180 calendar days, or until July 30, 2018 to regain compliance with the minimum bid price requirement for continued listingSecurities and Exchange Commission on Nasdaq. Although the Nasdaq notification has no immediate impact on the listing of the Company’s common shares, which will continue to trade on the Nasdaq Capital Market under the symbol “SBOT”, we can make no assurances that the Company will regain compliance with the Nasdaq listing requirements.December 28, 2021.

~~We intend to continue to actively monitor the bid price~~Item 2. Unregistered Sales of ~~our common shares. If our common shares do not trade at a level that is likely to regain compliance with the Nasdaq listing requirements, our Board~~Equity Securities and Use of Directors will consider available options to resolve the deficiency and regain compliance. If at any time before July 30, 2018, the closing bid price of our common shares is at least $1.00 per share for at least ten consecutive business days, we will regain compliance with the minimum bid price requirement. If we cannot demonstrate compliance by July 30, 2018 or if we are not afforded an additional grace period beyond July 30, 2018 by which to demonstrate compliance with the Nasdaq listing requirements, our common shares may then be delisted from Nasdaq, which could make trading our common shares more difficult for investors, potentially leading to declines in our share price and liquidity. Without a Nasdaq listing, shareholders may have a difficult time getting a quote for the sale or purchase of our shares, the sale or purchase of our shares would likely be made more difficult, and the trading volume and liquidity of our shares could decline. Delisting from Nasdaq could also result in negative publicity and could make it more difficult for us to raise additional capital. If our common shares are delisted by Nasdaq, our common shares may be eligible to trade on an over-the-counter quotation system where an investor may find it more difficult to sell our shares or obtain accurate quotations as to the market value of our common shares. We cannot assure you that our common shares, if delisted from Nasdaq, will be listed on another national securities exchange or quoted on an over-the-counter quotation system.Proceeds.

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds.~~

None.

~~Item 3.~~

~~Defaults Upon Senior Securities.~~

Item 3. Defaults Upon Senior Securities.

None.

~~Item 4.~~

~~Mine Safety Disclosures.~~

Item 4. Mine Safety Disclosures.

Not applicable.

~~Item 5.~~

~~Other Information.~~

Item 5. Other Information.

None.

~~Item 6.~~	~~Exhibits.~~
20

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Item 6. Exhibits

EXHIBIT INDEX

Exhibit No.		Description

4.1.		Form of Pre-Funded Warrant (included as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 23, 2022 and incorporated herein by reference).

4.2		Form of Private Placement Warrant (included as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on March 23, 2022 and incorporated herein by reference).

4.3		Form of Placement Agent Warrant (included as Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on March 23, 2022 and incorporated herein by reference).

10.1*		Amendment to Employment Agreement, entered into on April 12, 2022, by and between Par Nijhawan and Edesa Biotech, Inc. (filed herewith).

10.2*		Amendment to Employment Agreement, entered into on April 12, 2022, by and between Kathi Niffenegger and Edesa Biotech USA, Inc. (filed herewith).

10.3*		Amendment to Employment Agreement, entered into on April 12, 2022, by and between Michael Brooks and Edesa Biotech USA, Inc. (filed herewith).

10.4		Form of Securities Purchase Agreement, dated March 21, 2022, by and between Edesa Biotech, Inc. and Purchaser (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 23, 2022 and incorporated herein by reference).

31.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1**		Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.2**		Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Label Linkbase Document

101.PRE		XBRL Taxonomy Presentation Linkbase Document

* Management contract or compensatory plan or arrangement.

** The ~~Exhibits listed~~information in ~~the Exhibit Index immediately preceding such Exhibits are~~this exhibit is furnished and deemed not filed with orthe Securities and Exchange Commission for purposes of section 18 of the Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of Edesa Biotech, Inc. under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language in ~~this Quarterly Report.~~such filing.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

~~Date: February 7, 2018~~	~~STELLAR BIOTECHNOLOGIES, INC.~~

EDESA BIOTECH, INC.	~~/s/ Kathi Niffenegger~~
	~~Kathi Niffenegger~~
	~~Chief Financial Officer~~
	~~(Principal Financial Officer and Duly Authorized Officer)~~

~~EXHIBIT INDEX~~

~~Exhibit~~ ~~Number~~		~~Description~~

~~31.1~~Date: May 13, 2022	/s/ Kathi Niffenegger
	Kathi Niffenegger Chief Financial Officer		~~Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
	(Principal Financial Officer and Duly Authorized Officer)


~~31.2~~		~~Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~22

~~32.1~~		~~Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (*)~~

~~32.2~~		~~Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (*)~~

~~101.INS~~		~~XBRL Instance Document~~

~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~		~~XBRL Taxonomy Calculation Linkbase Document~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~		~~XBRL Taxonomy Label Linkbase Document~~

~~101.PRE~~		~~XBRL Taxonomy Presentation Linkbase Document~~

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

	December 31,			September 30,
	2017			2017

Assets:

Current assets:
Cash and cash equivalents	$	4,369,671		$	4,570,951
Accounts receivable		10,977			1,287
Short-term investments		998,575			1,994,401
Inventory		118,540			68,114
Prepaid expenses		159,543			123,694

Total current assets		5,657,306			6,758,447

Noncurrent assets:

Equity investment in joint venture		66,695			66,695
Property, plant and equipment, net		854,053			879,523
Deposits		15,340			15,340

Total noncurrent assets		936,088			961,558

Total Assets	$	6,593,394		$	7,720,005

Liabilities and Shareholders' Equity:

Current liabilities:
Accounts payable and accrued liabilities	$	574,376		$	320,947

Total Current Liabilities		574,376			320,947

Commitments(Note 7)

Shareholders' equity:
Common shares, unlimited common shares authorized, no par value, 10,520,096 issued and outstanding at December 31, 2017 and September 30, 2017		48,351,701			48,351,701
Accumulated share-based compensation		4,460,106			4,439,400
Accumulated deficit		(46,792,789	)		(45,392,043	)

Total Shareholders' Equity		6,019,018			7,399,058

Total Liabilities and Shareholders' Equity	$	6,593,394		$	7,720,005

	Three Months Ended
	December 31,			December 31,
	2017			2016

Revenues:
Product sales	$	20,487		$	141,856
		20,487			141,856

Expenses:
Cost of sales		2,801			78,565
Costs of aquaculture		98,050			84,835
Research and development		631,034			460,865
General and administrative		678,481			932,067
		1,410,366			1,556,332

Loss from Operations		(1,389,879	)		(1,414,476	)

Other Income (Loss)
Foreign exchange loss		(17,929	)		(77,390	)
Investment income		7,862			6,994
		(10,067	)		(70,396	)

Loss Before Income Tax		(1,399,946	)		(1,484,872	)

Income tax expense		800			800

Net Loss	$	(1,400,746	)	$	(1,485,672	)

Loss per common share:
Basic and diluted	$	(0.13	)	$	(0.15	)
Weighted average number of common shares outstanding:
Basic and diluted		10,520,096			10,136,258

Nine Months Ending September 30, 2018		115,000
Year Ending September 30, 2019		106,000
Year Ending September 30, 2020		106,000
Year Ending September 30, 2021		6,000

	$	333,000

	Six Months Ended March 31, 2022						Six Months Ended March 31, 2021
	Common Warrants			Placement Agent Warrants			Underwriter Warrants

Risk free interest rate		2.37	%		2.37	%		0.67	%
Expected life	5.5 years			5 years			5 years
Expected share price volatility		87.09	%		87.09	%		94.20	%
Expected dividend yield		0.00	%		0.00	%		0.00	%

	Number of Pre-funded Warrant Shares (#)

Six Months Ended March 31, 2022
Balance – September 30, 2021		-

Issued		1,199,727

Balance – March 31, 2022		1,199,727

Number of Options		Exercisable at December 31, 2017		Range of exercise prices	Expiry Dates
	94,360		94,360	CDN$0.01 - 5.00	Apr 2017-Dec 2019
	69,233		32,533	$0.01 - 5.00	Sep 2023-Mar 2024
	125,360		125,360	CDN$5.01 - 10.00	Oct 2017-Jun 2022
	15,100		15,100	$5.01 - 10.00	Dec 2022
	21,500		21,500	CDN$15.01 - 20.00	Nov 2018-Nov 2021
	39,500		29,500	$15.01 - 20.00	Nov 2020
	365,053		318,353

	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
December 31, 2017
Assets
Short-term investments in U.S. Treasury Bills	$	998,575	$	-	$	-	$	998,575

September 30, 2017
Assets
Short-term investments in U.S. Treasury Bills	$	1,994,401	$	-	$	-	$	1,994,401