enGene Therapeutics Inc.: Form 10-Q for the period ended Jan 31, 2025

Throughout this section, unless otherwise noted, “we”, “our”, “us”, “enGene” and the “Company” refer to enGene Holdings Inc. and all of its subsidiaries.

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. See the sections titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K for the year ended October 31, 2024 and elsewhere in this Quarterly Report and other filings made with the SEC for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by these forward-looking statements.

Overview

Business Overview

We are a clinical-stage biotechnology company focused on developing genetic medicines to improve the lives of patients suffering from bladder cancer. We are developing non-viral genetic medicines based on our novel and proprietary dually derived chitosan, or “DDX”, gene delivery platform, which allows localized delivery of complex genetic cargos directly to mucosal tissues and other organs. Our lead product candidate, detalimogene voraplasmid, or detalimogene, formerly known as EG-70, is a therapy designed to generate a local immune reaction in proximity to tumors. We believe this enables the immune system to durably clear the tumor and develop memory to resist recurrence. Because this treatment is designed to work by delivering genetic cargo to the broader tumor tissue environment rather than tumor cells specifically, we believe it has the potential to be widely utilized across tumor types. Currently, we are developing detalimogene as a monotherapy to treat non-muscle invasive bladder cancer (“NMIBC”) with carcinoma in situ (“CIS”) in patients that have been unresponsive to treatment with Bacillus Calmette-Guérin, or “BCG,” or what is referred to as “BCG-unresponsive NMIBC with CIS.” We are also exploring the clinical application of detalimogene to other forms of NMIBC, namely, papillary-only BCG-unresponsive NMIBC (i.e., NMIBC without CIS), as well as BCG-naïve NMIBC patients with CIS and BCG-exposed NMIBC patients with CIS (i.e., patients who have been treated with some BCG but who do not qualify as BCG-unresponsive in accordance with FDA and urology practice guidelines).

Our detalimogene program is currently enrolling patients in a combined Phase 1/2 open-label study with a pivotal cohort, referred to as “LEGEND”. The Phase 2 portion of LEGEND is enrolling three cohorts: cohort 1 is a pivotal cohort enrolling BCG-unresponsive NMIBC patients with CIS; cohort 2 is enrolling BCG-naïve NMIBC patients with CIS (cohort 2a) and BCG-exposed NMIBC patients with CIS (cohort 2b); and cohort 3 is enrolling patients with BCG-unresponsive NMIBC who have papillary disease only (i.e., no CIS). In addition, our preclinical research is focused on expanding the cancer indications that can be treated with detalimogene as well as discovering new opportunities to apply our DDX technology platform to treat other indications with high unmet medical needs.

Since our inception, we have devoted substantially all of our efforts to organizing and staffing our Company, business planning, raising capital, establishing our intellectual property portfolio, acquiring or discovering product candidates, research and development activities for our primary program, detalimogene voraplasmid, or detalimogene. We do not have any products approved for sale and have not generated any revenue from product sales. We operate as a single operating segment focused on research, discovery, and clinical development of detalimogene. To date, the Company has not generated any revenues and has financed its liquidity needs primarily through PIPE financings, offering debt and convertible debentures, and issuance of redeemable convertible preferred shares and warrants.

We have never been profitable and have incurred net losses since inception. Our net loss was $24.6 million and $10.7 million for the three months ended January 31, 2025 and 2024, respectively. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future as we advance the ongoing LEGEND study of detalimogene, including the pivotal cohort of patients with BCG-unresponsive NMIBC, to completion; execute on our plan to file a Biologics License Application with the FDA in mid-2026; and pursue potential pipeline expansion via additional detalimogene development opportunities and other compounds. In addition, we expect to incur significant expenses as we establish medical affairs, sales, marketing and distribution infrastructure and capabilities to support the potential commercial launch of detalimogene and significant additional commercialization-related expenses, if and when detalimogene is approved. As a result, we expect to need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings and debt financings, or other capital sources, which could include potential collaboration agreements, strategic alliances, or licensing arrangements. We may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our product candidates.

As of January 31, 2025, we had $272.8 million in cash, cash equivalents and marketable securities. We believe that our existing cash and cash equivalents as of January 31, 2025 will be sufficient to fund our operating expenses, debt obligations, and capital expenditure requirements for at least the next 12 months from the issuance date of the condensed consolidated financial statements included within this Quarterly Report. While we have historically been successful in securing financing, raising additional funds is dependent on a number of factors outside of our control, and as such there is no assurance that we will be able to do so in the future. Refer to “Liquidity and Capital Resources” section below.

Components of Our Results of Operations

Revenue

We do not have any product candidates approved for sale, have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products or from other sources in the near future, if at all. We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for a product candidate, if ever. If our development efforts for our current lead product candidate, detalimogene or additional product candidates that we may develop in the future are successful and result in marketing approval or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from such collaboration or license agreements.

Operating Expenses

Research and Development

Research and development expenses account for a significant portion of our operating expenses and consist primarily of costs incurred for our research activities, including our drug discovery efforts and the development of our product candidates. We expense research and development costs as incurred, which include:

Direct Costs, offset by refundable tax credits:

• expenses incurred under agreements with CROs that are primarily engaged in the oversight and conduct of our clinical trials; CDMOs that are primarily engaged to provide drug substance and product for our clinical trials, research and development programs, as well as investigative sites and consultants that conduct our clinical trials, nonclinical studies and other scientific development services;
• the cost of acquiring and manufacturing nonclinical and clinical trial materials, including manufacturing registration and validation batches;
• costs of outside consultants, including their fees, share-based compensation, and related travel expenses;
• costs related to compliance with quality and regulatory requirements;
• payments made under third-party licensing agreements.

Indirect Costs:

• personnel-related expenses including, salaries, benefits, share-based compensation, and other related costs for individuals involved in research and development activities; and
• facilities and other expenses not directly tied to a program.

We expense research and development costs as incurred. We recognize direct development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors or our estimate of the level of service that has been performed at each reporting date. Payments for these development activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid expenses or accrued expenses.

A significant portion of our research and development costs to date have been third-party costs, which we track on an individual product candidate basis after a clinical product candidate has been identified. Currently, our main clinical product candidate is detalimogene. Our indirect research and development costs are primarily personnel-related costs, facilities, and other costs. Employees and infrastructure are not directly tied to any one program and are deployed across our programs. As such, we do not track these costs on a specific program basis. We utilize third party contractors for our research and development activities and CDMOs for our manufacturing activities and we do not have our own laboratory or manufacturing facilities.

Research and development activities are central to our business model. Currently, the Company’s sole laboratory facility is located in Montreal, Quebec, Canada, and as such, a portion of the Company’s research and development and other operating expenses are incurred in Canada and denominated in the Canadian dollar. We expect that our research and development expenses will continue to increase for the foreseeable future as we progress our ongoing Phase 1/2 clinical trial for detalimogene, continue to discover and develop additional product candidates, expand our headcount and maintain, expand and enforce our intellectual property portfolio. If detalimogene or any future product candidates enter into later stages of clinical development, they will generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. There are numerous factors associated with the successful development and commercialization of any product candidates we may develop in the future, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development program and plans.

The duration, costs, and timing of clinical studies and development of our product candidate will depend on a variety of factors, any of which could mean a significant change in the costs and timing associated with the development of our product candidate including:

• the scope, rate of progress, and expense of our ongoing as well as any additional clinical studies and other research and development activities we undertake;
• future clinical study results;
• uncertainties in clinical study enrollment rates;
• new manufacturing processes or protocols that we may choose to or be required to implement in the manufacture of our drug substance and drug product;
• regulatory feedback on requirements for regulatory approval, as well as changing standards for regulatory approval; and
• the timing and receipt of any regulatory approvals.

Any changes in the outcome of any of these variables with respect to the development of detalimogene or any future product candidates in nonclinical and clinical development could mean a significant change in the costs and timing associated with the development of these product candidates. For example, if the FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect, or if we experience significant delays in enrollment in any clinical trials following the applicable regulatory authority’s acceptance and clearance, we could be required to expend significant additional financial resources and time to complete clinical development than we currently expect. We may never obtain regulatory approval for any product candidates that we develop.

The successful development of detalimogene or any product candidates we may develop in the future is highly uncertain. Therefore, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development and commercialization of detalimogene and any other product candidates we may develop. We are also unable to predict when, if ever, material net cash inflows will commence from the sale of detalimogene or any future product candidate, if approved. This is due to the numerous risks and uncertainties associated with product development.

General and Administrative

General and administrative expenses consist primarily of personnel-related expenses, including salaries, benefits, and share-based compensation expenses for personnel in executive and other administrative functions. Other significant general and administrative expenses include professional services, including legal, accounting and audit services, and other consulting fees, as well as facility costs not otherwise included in research and development expenses, insurance, and other operating costs.

We expect that our general and administrative expenses will continue to increase in the foreseeable future as our business expands to support our continued research and development activities, including our clinical trials. These increases will likely include increased costs related to the hiring of additional personnel and fees for outside consultants, among other expenses. In addition, if we obtain regulatory approval for our current product candidate or any product candidates we may develop in the future and do not enter into a third-party commercialization collaboration, we expect to incur significant expenses related to building a sales and marketing team to support product sales, marketing, and distribution activities.

Other (Income) Expense, Net

Interest Expense

Interest expense is made of interest paid on our term loans, as well as non-cash interest expense for amortization of our debt discounts.

Interest Income

Interest income is associated with our interest-bearing cash, cash equivalents, and marketable securities.

Other expense, net

Other expense, net primarily consists of foreign exchange gains and losses.

Income Taxes

Since our inception, we have not recorded any income tax benefits for the net losses we have incurred in each period or for deductible temporary differences, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized. As of January 31, 2025 and October 31, 2024, we have recorded a full valuation allowance against our deferred tax assets.

Critical Accounting Estimates

This management’s discussion and analysis is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, and expenses, as well as related disclosures during the reported periods. We base our estimates on historical experience, known trends and events, and various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in estimates, if any, will be reflected in the financial statements prospectively from the date of change in estimates. Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended October 31, 2024. There were no material changes to our critical accounting policies through January 31, 2025 from those disclosed in our Annual Report on Form 10-K for the year ended October 31, 2024.

Results of Operations

Comparison of the three months ended January 31, 2025 and 2024

The following table summarizes our results of operations for each of the periods presented (in thousands):

25

Research and Development expenses

The following table summarizes our research and development expenses for each of the periods presented (in thousands):

Research and development expenses increased by $14.3 million from $5.6 million for the three months ended January 31, 2024 to $20.0 million for the three months ended January 31, 2025. This increase was attributable to the following:

• a $12.8 million increase in detalimogene direct expense as a result of our increasing clinical and manufacturing activities to advance our LEGEND study of detalimogene, as well as in preparation for our planned Biologics License Application submission; and
• a $1.6 million increase in personnel-related costs as the Company hired a number of key personnel to ramp up its clinical operations, quality, medical affairs and manufacturing functions to support our LEGEND study of detalimogene.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for each of the periods presented (in thousands):

General and administrative expenses increased by $1.5 million from $5.1 million for the three months ended January 31, 2024 to $6.6 million for the three months ended January 31, 2025. This increase was primarily attributable to the following:

• a $2.8 million increase in personnel-related expenses driven by the hires of key general and administrative personnel necessary to support the operation of a public company, former CEO transition fees, as well as a $1.1 million increase in stock-based compensation expense; and
• a $0.2 million increase in other expenses driven by rent expense; offset by
• a $0.9 million decrease in patent maintenance and legal fees due to legal review of the debt agreement and S-1 in 2024; and
• a $0.6 million decrease in professional fees driven by the transition of work to internal resources and higher costs in 2024 due to accounting and finance fees to support the first year operating as a public company.

Other (Income) Expense, Net

Other income increased by approximately $2.0 million from income of $32 thousand for the three months ended January 31, 2024 to income of $2.0 million for the three months ended January 31, 2025, primarily due to a $1.7 million increase in interest income earned in the current period from larger cash and marketable securities balances. Increases were offset by a $0.2 million increase in interest expense and $0.4 million loss on extinguishment of debt.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have incurred significant losses in each period and on an aggregate basis. We have not yet commercialized any product candidates, and we do not expect to generate revenu1e from sales of any product candidates or from other sources for several years, if at all. As of January 31, 2025, we had cash, cash equivalents and marketable securities of approximately $272.8 million, and we had an accumulated deficit of $279.3 million. To date, the Company has not generated any revenues and has financed its liquidity needs primarily through PIPE financings, offering debt and convertible debentures, and issuance of redeemable convertible preferred shares and warrants.

Based on our current operating plans, we expect our cash, cash equivalents and marketable securities as of January 31, 2025 will be sufficient to fund the Company’s operating expenses and debt obligations requirements for at least the next 12 months from the issuance date of the condensed consolidated financial statements included within this Quarterly Report, without giving effect to $27.5 million we may be eligible to drawdown further under our debt facility with Hercules and the $100.0 million limit under our Open Market Sale Agreement with Jefferies LLC, which was entered into on December 20, 2024. Our current operating plan is based on various assumptions. If we use our capital resources sooner than expected, we will evaluate reductions in expense or obtaining additional financing. This may include pursuing a combination of public or private equity offerings, debt financings, collaborations, strategic alliances or licensing arrangements with third parties. There can be no assurance that such financing will be available in sufficient amounts or on acceptable terms, if at all, and some could be dilutive to existing stockholders. If we are unable to obtain additional funding on a timely basis, we may be forced to significantly curtail, delay, or discontinue one or more of our planned research or development programs or be unable to expand our operations.

Funding Requirements

Our primary uses of capital are, and we expect will continue to be, research and development activities, compensation and related expenses and general overhead costs. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase significantly in connection with our ongoing activities. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy.

Because of the numerous risks and uncertainties associated with research, development, and commercialization of product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on, and could increase significantly as a result of many factors, including:

• the initiation, timing, costs, progress and results of our planned clinical trials of detalimogene and any other product candidates we develop;
• the scope, progress, results, and costs of our earlier-stage research programs, including the progress of preclinical development and possible clinical trials;
• the scope, progress, results and costs of our research programs and preclinical development of any future product candidates we may pursue;
• the cost of regulatory submissions and timing of regulatory approvals;
• the progress of the development efforts of parties with whom we may in the future enter into collaborations and/or research and development agreements;
• the timing and amount of milestone and other payments we are obligated to make under our Nature Technology Corporation Agreement or any future license agreements;
• the cash requirements of any future acquisitions or discovery of product candidates;
• our ability to establish and maintain collaborations, strategic partnerships or marketing, distribution, licensing or other strategic arrangements with third parties on favorable terms, if at all;
• the costs to acquire or in-license any products, product candidates or technologies;
• the costs associated with maintaining, expanding and protecting our intellectual property portfolio, including costs involved in prosecuting and enforcing patent and other intellectual property claims;
• the costs of manufacturing detalimogene and any other product candidates we develop by third parties;
• the cost of establishing commercial launch capabilities in anticipation of a potential regulatory approval of detalimogene or any other product candidates we develop;
• the cost of commercialization activities if detalimogene or any future product candidates we develop are approved for sale, including marketing, sales and distribution costs;
• our efforts to add operational, financial and management information systems, enhance existing operational, financial and management information systems and hire additional personnel, including personnel to support development of our product candidates, commercial launch preparation and commercialization efforts and our other operations as a public company; and
• the costs of operating as a public company.

A change in the outcome of any of these or other variables with respect to the development of our lead candidates or any product or development candidate we may develop in the future could significantly change the costs and timing associated with our development plans. Further, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings or other capital sources, which could include collaborations, strategic alliances or licensing arrangements. Adequate additional financing, if available, may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our existing shareholders may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect the rights of such shareholders. Debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research program or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to and volatility in the credit and financial markets in the United States and worldwide. Because of the numerous risks and uncertainties associated with product development, there is no assurance that we will ever be profitable or generate positive cash flow from operating activities.

Cash Flows

Comparison of the three months ended January 31, 2025 and 2024

The following table provides information regarding our cash flows for each of the periods presented (in thousands):

Net Cash Used in Operating Activities

Net cash used in operating activities for the three months ended January 31, 2025 was $25.7 million and was primarily due to our net loss of $24.6 million, partially offset by adjustments for non-cash charges totaling $1.5 million. Further changes were driven by a $2.6 million decrease in net working capital adjustments.

Net cash used in operating activities for the three months ended January 31, 2024 was $7.4 million and was primarily due to our net loss of $10.7 million, partially offset by adjustments for non-cash charges totaling $0.7 million. Further changes were driven by working capital adjustments of $2.4 million.

Net Cash Used in Investing Activities

Net cash used in investing activities for each of the three months ended January 31, 2025 and 2024 was $84.9 million and $0.5 million, respectively, consisting of purchases of marketable securities and property and equipment.

Net Cash Provided by Financing Activities

There was no net cash provided by financing activities during the three months ended January 31, 2025. Net cash provided by financing activities for the three months ended January 31, 2024 was $12.0 million, resulting from proceeds of $22.5 million received from the Term Loan, which was offset by $9.4 million in principal repayments of the Prior Term Loan, $0.4 million in debt issuance costs paid as part of the Term Loan, and $0.6 million of SPAC transaction costs paid during the three months ended January 31, 2024.

Contractual Obligations and Other Commitments

Notes Payable

The Company has entered into a debt facility with Hercules, under which we have drawn $22.5 million and may be able to draw an additional $27.5 million, subject to the terms and conditions of the Hercules Term Loan. Refer to disclosures in Note 8 to our condensed consolidated financial statements included elsewhere in this Quarterly Report for the terms and conditions of the Hercules debt facility, as well as the estimated cashflow payment requirements needed to satisfy the Company’s debt obligations as of January 31, 2025.

License Agreement with Nature Technology Corporation

On April 10, 2020, we entered into the License Agreement with NTC pursuant to which NTC granted us a worldwide non-exclusive, royalty-bearing and sublicensable license to certain patents and know-how relating to the Nanoplasmid™ vector backbone that is used in detalimogene voraplasmid to research, develop, make, use, import, sell and offer and sell, any gene and cell therapy products incorporating the Nanoplasmid™ vector backbone (excluding any such products in the field of dermatology). Unless terminated earlier, the License Agreement will continue until no valid claim of any licensed patent exists in any country. We can voluntarily terminate the License Agreement with prior notice to NTC. During the three months ended January 31, 2025 and 2024, the Company paid NTC $13 thousand under the terms of agreement.

For a more detailed description of this agreement, see Note 7 to our condensed consolidated financial statements included elsewhere in this Quarterly Report.

Lease Obligations

Our leases are comprised of all operating leases for Montreal, Canada and Waltham, MA USA office space and Montreal, Canada lab space. Please refer to Note 13 to our condensed consolidated financial statements included elsewhere in this Quarterly Report for expenses related to the lease obligations in three months ended January 31, 2025 and 2024, and the future payment requirements under the lease agreements.

Purchase and Other Obligations

We enter into contracts in the normal course of business with CROs, CDMOs and other third-party vendors for nonclinical research studies and testing, clinical trials and testing and manufacturing services. Most contracts do not contain minimum purchase commitments and are cancellable by us upon written notice. Payments due upon cancellation consist of payments for services provided or expenses incurred, including those incurred by subcontractors of our suppliers.

The Company does not have material capital expenditure commitments as of January 31, 2025.

Emerging Growth Company and Smaller Reporting Company Status

We are an “emerging growth company” as defined by the JOBS Act. Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply (that is, those that have not had a registration statement under the Securities Act declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected to opt out of such extended transition period. In addition, for so long as we are an emerging growth company, we are permitted and intend to take advantage of exemption from compliance with the auditor attestation requirement in the assessment of our internal control over financial reporting.

We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the initial public offering of Forbion European Acquisition Corporation, the special purpose acquisition company we merged with, which occurred on December 14, 2021, (b) in which we have total annual revenue of at least $1.23 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common shares held by non-affiliates exceeds $250 million as of the prior April 30, or (2) our annual revenues exceed $100 million during such completed fiscal year and the market value of our common shares held by non-affiliates exceeds $700 million as of the prior April 30. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial reporting with that of other public companies difficult or impossible. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations including regarding executive compensation.

Recent Accounting Pronouncements

We have reviewed all recently issued accounting pronouncements and have determined that, other than as disclosed in Note 2 to the interim financial statements of this Quarterly Report, such standards will not have a material impact on our financial statements or do not otherwise apply to our operations.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Outstanding Share Data

As of March 5, 2025, we had 50,977,560 Common Shares issued and outstanding, outstanding warrants to purchase an additional 8,449,555 Common Shares and outstanding stock options to purchase an additional 9,069,253 Common Shares. The warrants amount listed in the foregoing sentence excludes the Hercules Common Share Warrants described above under “Liquidity and Capital Resources—Cash Flows—Amended Loan and Security Agreement”.

We are a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item 3.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report, management, under the supervision of and with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer and principal accounting officer), carried out an evaluation 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 Exchange Act of 1934, as amended (the “Exchange Act”)).

As discussed in our Annual Report on Form 10-K for the year ended October 31, 2024, the Company previously concluded that material weaknesses, as defined under the Exchange Act, existed in our internal control over financial reporting for each of the fiscal years ended 2024, 2023 and 2022. Although certain of these material weaknesses were remediated as of October 31, 2024, three of these material weaknesses remain outstanding as of January 31, 2025.

Based on our assessment, our management, including our principal executive officer and our principal financial officer, concluded that, as of January 31, 2025, our disclosure controls and procedures were not effective due to the remaining unremediated material weaknesses in internal controls over financial reporting, as further described below.

Material Weakness in Internal Control Over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis. The following three material weaknesses in internal control over financial reporting remain unremediated as of January 31, 2025:

• lack of formal policies, procedures and controls related to the design of internal controls over financial reporting, including risk assessment process and control activities for certain key financial reporting processes;
• deficiency in design of general information technology controls, primarily related to program change management control and testing, user access control related to segregation of duties and access privileges, systems operations controls related to transfer, storage and recovery of data; and
• lack of appropriate segregation of duties in the preparation and review of account reconciliations and journal entries.

Remediation Efforts

In response to the remaining material weaknesses described above, the Company is undertaking ongoing remediation efforts that include:

• establishing adequate review and approval processes and procedures based on roles and responsibilities of each team member;
• implementing a risk assessment over financial reporting controls;
• designing and implementing policy, procedures and controls around key business and financial reporting process;
• implementing new software tools with adequate set up to ensure segregation of duties; and
• engaging a professional accounting services firm to help with the documentation and assessment of our internal controls for complying with the Sarbanes-Oxley Act.

While significant progress has been made to enhance our internal control over financial reporting, further time and testing is required before we can conclude remediation of the material weaknesses.

Inherent Limitations on Effectiveness of Controls and Procedures

Our disclosure controls and procedures were developed through a process in which our management applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding the control objectives. You should note that the design of any system of disclosure controls and procedures is based in part upon various assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Changes in Internal Control over Financial Reporting

Other than the items discussed above, there were no changes in our internal control over financial reporting (as defined in Rules 13a15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended January 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item 1A. For a detailed discussion of our risk factors, see the information disclosed in Part 1, Item 1A. of our Annual Report on Form 10-K for the year ended October 31, 2024.