ENGN 10-Q
enGene Therapeutics Inc. (ENGN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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:
(Exact Name of Registrant as Specified in its Charter)
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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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
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.
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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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of March 5, 2025, the registrant had
Table of Contents
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PART I. |
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Item 1. |
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Condensed Consolidated Balance Sheets as of January 31, 2025 and October 31, 2024 |
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Condensed Consolidated Statements of Cash Flows for the Three Months Ended January 31, 2025 and 2024 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q (this “Quarterly Report”) may constitute “forward-looking statements” within the meaning of U.S. securities laws and “forward-looking information” within the meaning of Canadian securities laws (collectively, “forward-looking statements”). Our forward-looking statements include, but are not limited to, statements regarding management teams’ expectations, hopes, beliefs, intentions, goals or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “appear,” “approximate,” “believe,” “continue,” “could,” “estimate,” “expect,” “foresee,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “would” and similar expressions (or the negative version of such words or expressions) may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Quarterly Report may include, for example, statements about:
All forward looking-statements, including, without limitation, our examination of historical operating trends, are based upon our current expectations and various assumptions. Certain assumptions made in preparing the forward-looking statements include:
2
You should not place undue reliance on these forward-looking statements which speak only as of the date hereof. The forward-looking statements contained in this Quarterly Report are based primarily on current expectations and projections about future events and trends that may affect our business, financial condition and operating results. The following uncertainties and factors, among other things (including those described in “Risk Factors” in our Annual Report on Form 10-K and elsewhere in this Quarterly Report and in our other filings with the Securities and Exchange Commission (“SEC”)), could affect future performance and actual results to differ materially and adversely from those expressed in, anticipated or implied by forward-looking statements:
In addition, statements that “we believe” and similar statements reflect beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.
3
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
ENGENE HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
(Unaudited)
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January 31, |
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October 31, 2024 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities - short term |
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Restricted investments |
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Investment tax credits receivable |
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Prepaid and other current assets |
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Total current assets |
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Marketable securities - long term |
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Property and equipment, net |
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Operating lease right of use asset |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and shareholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Operating lease liabilities, current |
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Current portion of note payable |
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Total current liabilities |
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Note payable, net of current portion |
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Operating lease liabilities, net of current portion |
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Total liabilities |
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Shareholders’ equity: |
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Common shares, |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
ENGENE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
(Unaudited)
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Three Months Ended January 31, |
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2025 |
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2024 |
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Operating expenses: |
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Research and development |
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$ |
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$ |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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Other (income) expense, net: |
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Interest income |
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Interest expense |
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Loss on extinguishment of debt |
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— |
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Other expense, net |
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Total other (income) expense, net |
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Net loss before income taxes |
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Provision for (recovery of) income taxes |
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Net loss |
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$ |
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$ |
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Other comprehensive loss: |
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Unrealized gain on available-for-sale investments |
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— |
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Total comprehensive loss |
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$ |
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$ |
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Net loss per share of common shares, basic and diluted |
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$ |
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$ |
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Weighted-average common shares outstanding, basic and diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
ENGENE HOLDINGS INC.
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
(Unaudited)
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Common Shares |
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Additional Paid in |
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Accumulated Other |
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Accumulated |
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Total Shareholders’ |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balance at October 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Issuance of warrants in connection with Amended Term Loan expense |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at January 31, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Common Shares |
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Additional Paid in |
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Accumulated Other |
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Accumulated |
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Total Shareholders’ |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balance at October 31, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Exercise of stock options |
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— |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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Balance at January 31, 2025 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
6
ENGENE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
(Unaudited)
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Three months ended January 31, |
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2025 |
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2024 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Non-cash interest expense |
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Loss on extinguishment of debt |
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— |
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Non-cash lease expense |
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Amortization of premium/discount on marketable securities |
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— |
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Unrealized foreign currency losses |
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Share-based compensation expense |
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Depreciation of property and equipment |
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Changes in operating assets and liabilities: |
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Investment tax credit receivable |
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Prepaid expenses and other assets |
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( |
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Accounts payable |
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Accrued expenses and other current liabilities |
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Lease liabilities |
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Net cash used in operating activities |
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Cash flows from investing activities |
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Purchases of property and equipment |
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( |
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( |
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Purchases of marketable securities |
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( |
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— |
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Proceeds from maturities of marketable securities |
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— |
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Net cash used in investing activities |
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( |
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Cash flows from financing activities |
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Payment of Reverse Recapitalization and PIPE Financing costs |
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— |
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Proceeds from exercise of stock options |
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— |
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Repayments of term loan principal |
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— |
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( |
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Proceeds from issuance of term loan |
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— |
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Payments of debt issuance costs associated with the term loan |
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— |
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( |
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Net cash provided by financing activities |
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Effect of exchange rate changes on cash |
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Net (decrease) increase in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental cash flow information: |
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Cash paid for interest |
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$ |
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$ |
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Supplemental disclosure of non-cash investing and financing activities |
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Term Loan issuance costs included in accrued expenses and accounts payable |
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$ |
- |
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$ |
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Warrant value issued as part of Amended Term Loan |
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— |
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Right of use assets obtained in exchange for lease liabilities |
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— |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
7
ENGENE HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
(Unaudited)
enGene Holdings Inc., together with its consolidated subsidiaries enGene Inc. and enGene USA, Inc. (“enGene” or the “Company”) is a clinical-stage biotechnology company focused on developing genetic medicines to improve the lives of patients, and its head office is located in Montreal, Quebec, Canada. The Company is developing non-viral genetic medicines based on its novel and proprietary dually derived chitosan, or “DDX”, gene delivery platform, which allows localized delivery of multiple gene cargos directly to mucosal tissues and other organs.
The Company lists its ordinary shares and warrants on the Nasdaq Global Market under the symbols “ENGN” and “ENGNW,” respectively.
Segment Information
Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company's Chief Executive Officer is its chief operating decision-maker and views operations and manages the Company's business as a single operating segment focused on research, discovery, and clinical development of human gene therapy products.
Liquidity and Going Concern
In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company has evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these consolidated financial statements are issued.
The Company’s interim condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which presumes the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the ordinary course of business.
As an emerging growth entity, the Company has devoted substantially all of its resources since inception to organizing and staffing the Company, raising capital, establishing its intellectual property portfolio, acquiring or discovering product candidates, research and development activities for developing non-viral genetic medicines and other compounds, establishing arrangements with third parties for the manufacture of its product candidates and component materials, and providing general and administrative support for these operations. As a result, the Company has incurred significant operating losses and negative cash flows from operations since its inception and anticipates such losses and negative cash flows will continue for the foreseeable future.
The Company has incurred a net loss of $
The Company’s ability to continue as a going concern depends on its ability to successfully develop and commercialize its products, achieve and maintain profitable operations, as well as the adherence to conditions of outstanding loans. The Company expects that its existing cash, cash equivalents and marketable securities as of January 31, 2025 will be sufficient to fund its operating expenses and debt obligations requirements for at least the next 12 months from the issuance date of these condensed consolidated financial statements.
The Company’s significant accounting policies are disclosed in the audited consolidated annual financial statements for the years ended October 31, 2024 and 2023 and notes thereto, as found in our Annual Report on Form 10-K for the year ended October 31, 2024. These interim condensed consolidated financial statements should be read in conjunction with the consolidated annual financial statements. Since the date of those annual financial statements, there have been no changes to the Company’s significant accounting policies.
8
ENGENE HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and judgments that may affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the related reporting of expense during the reporting period. Significant estimates of accounting reflected in these consolidated financial statements include, but are not limited to, accrued research and development expenses. Actual results could differ from those estimates.
Unaudited Interim Financial Information and Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with GAAP for interim financial reporting and accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements. The condensed consolidated balance sheet at October 31, 2024 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for annual financial statements. These interim financial statements include the accounts of the Company and its wholly owned subsidiaries, enGene, Inc. and enGene USA, Inc. All intercompany accounts and transactions have been eliminated in consolidation. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated annual financial statements as of October 31, 2024 and 2023 and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the Company’s condensed consolidated balance sheet as of January 31, 2025, the condensed consolidated statements of operations for the three months ended January 31, 2025 and 2024, the condensed consolidated statement of shareholders' equity (deficit) for the three months ended January 31, 2025 and 2024, and condensed consolidated statements of cash flows for the three months ended January 31, 2025 and 2024. The financial data and other information disclosed in these notes related to the three months ended January 31, 2025 and 2024 are unaudited. The results for the three months ended January 31, 2025 and 2024, are not necessarily indicative of results to be expected for the year ending October 31, 2025, any other interim periods, or any future year or period.
Foreign Currency
Transaction gains and losses from currency exchange rate fluctuations on transactions denominated in a currency other than the U.S. Dollar functional currency are recorded in Other income (expense), net in the Company's condensed consolidated statements of operations and comprehensive loss. Such transaction gain and losses may be realized or unrealized depending upon whether the transaction settled during the period or remains outstanding at the balance sheet date. The functional currency of the Company and its consolidated subsidiaries is the U.S. Dollar.
Recently Issued Accounting Pronouncements - Not yet adopted
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures, which requires incremental disclosure of segment information on an interim and annual basis. This ASU is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Retrospective application to all prior periods presented in the financial statements is required for public entities. The Company is currently evaluating the impact of the guidance on the financial statements disclosures and will provide relevant disclosure in the next Annual Report on Form 10-K.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, which improves transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. ASU No 2023-09 is effective for the Company's annual financial statements for the year ending October 31, 2025. The Company is currently evaluating the impact of the guidance on the financial statements disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income- Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, as further clarified by ASU 2025-01, Income Statement - Reporting Comprehensive Income- Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, issued in January, 2025, which requires entities to disclose additional information about specific expense categories in the notes to the financial statements. This ASU is effective for annual periods beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. ASU 2024-03 may be applied retrospectively or
9
ENGENE HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
prospectively. The Company is currently evaluating the effect of this updated standard on its consolidated financial statements and related disclosures.
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative, which amends GAAP to reflect updates and simplifications to certain disclosure and presentation requirements referred to FASB by the SEC. The targeted amendments incorporate 14 of the 27 disclosures referred by the SEC into codification. Each amendment in ASU 2023-06 is effective on the date on which the SEC's removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective but will not be effective if the SEC has not removed the applicable disclosure requirements by June 30, 2027. Early adoption is prohibited. The Company is currently evaluating the impact of the amendments on its financial statement disclosures.
The following table presents the Company's fair value hierarchy for financial assets measured at fair value as of January 31, 2025:
|
|
|
|
|
January 31, 2025 |
|
||||||||||
Description |
|
Total |
|
|
Quoted Prices in |
|
|
Significant Other |
|
|
Significant Other |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
U.S. government treasuries |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Short term marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government treasuries |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Government agency securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Long term marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government treasuries |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Government agency securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total financial assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
The following table presents the Company's fair value hierarchy for financial assets measured at fair value as of October 31, 2024:
|
|
|
|
|
October 31, 2024 |
|
||||||||||
Description |
|
Total |
|
|
Quoted Prices in |
|
|
Significant Other |
|
|
Significant Other |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
U.S. government treasuries |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Government agency securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Short term marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government treasuries |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Government agency securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Long term marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government treasuries |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Government agency securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total financial assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
10
ENGENE HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
As of January 31, 2025 and October 31, 2024, the Company classified its government agency marketable securities as Level 2 within the valuation hierarchy. The Company estimates the fair value of these marketable securities by taking into consideration valuations obtained from third-party pricing sources. These pricing sources utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly to estimate fair value. These inputs include market pricing based on real time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs.
During the three months ended January 31, 2025 and 2024, there were
The Company invests in U.S. Treasury and U.S. Agency debt securities; all marketable securities are classified as available-for-sale and carried at fair value, with unrealized changes in fair value reflected in the other comprehensive income (loss) in the condensed consolidated statements of shareholders' equity (deficit).
As of January 31, 2025, the marketable securities consisted of the following:
|
|
January 31, 2025 |
|
|||||||||||||
Description |
|
Amortized Cost |
|
|
Unrealized Holdings Gains |
|
|
Unrealized Holdings Losses |
|
|
Aggregate Fair Value |
|
||||
Cash equivalents and short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds, included in cash and cash equivalents |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
US treasury |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Government agency securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total cash equivalents and short-term investments |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Long-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
US treasury |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Government agency securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total long-term investments |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
11
ENGENE HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
As of January 31, 2025, all marketable securities held by the Company had remaining contractual maturities of one year or less, except for certain U.S. treasury and government agency securities that had maturities of one to two years.
As of January 31, 2025, the Company held
As of October 31, 2024, the marketable securities consisted of the following:
|
|
October 31, 2024 |
|
|||||||||||||
Description |
|
Amortized Cost |
|
|
Unrealized Holdings Gains |
|
|
Unrealized Holdings Losses |
|
|
Aggregate Fair Value |
|
||||
Cash equivalents and short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds, included in cash and cash equivalents |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
US treasury |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Government agency securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total cash equivalents and short-term investments |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Long-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
US treasury |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Government agency securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total long-term investments |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
As of October 31, 2024, all marketable securities held by the Company had remaining contractual maturities of one year or less, except for certain government agency securities that had maturities of one to two years.
As of October 31, 2024, the Company held
Accrued interest receivable on the Company's totaled $
There were
As of January 31, 2025, and October 31, 2024, property and equipment consisted of the following:
|
|
January 31, |
|
|
October 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Lab equipment |
|
$ |
|
|
$ |
|
||
Computer equipment |
|
|
|
|
|
|
||
Computer software |
|
|
|
|
|
|
||
Office furniture |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Property and equipment |
|
|
|
|
|
|
||
Less: Accumulated depreciation and amortization |
|
|
|
|
|
|
||
Property and equipment, net |
|
$ |
|
|
$ |
|
||
12
ENGENE HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
Depreciation and amortization expense related to property and equipment was $
As of January 31, 2025, and October 31, 2024, accrued expenses and other current liabilities consisted of the following:
|
|
January 31, |
|
|
October 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Employee compensation and related benefits |
|
$ |
|
|
$ |
|
||
Accrued research and development expenses |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Professional fees |
|
|
|
|
|
|
||
Accrued income taxes payable |
|
|
|
|
|
- |
|
|
Accrued financing costs |
|
|
- |
|
|
|
|
|
Total accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
License Agreement – Nature Technology Corporation
On April 10, 2020, the Company entered into a Non-Exclusive License Agreement (the “License Agreement”) with Nature Technology Corporation (“NTC”) whereby the Company licenses certain rights to NanoplasmidTM technology from NTC for commercialization. Under the terms of the License Agreement, NTC granted to the Company and its affiliates a world-wide, non-exclusive, royalty-bearing, sublicensable license to research, have researched, develop, have developed, make, have made, use, have used, import, have imported, sell, offer to sell, and have sold or offered for sale any product in the defined license field. Unless terminated earlier, the NTC license agreement will continue until no valid claim of any licensed patent exists in any country. The Company can voluntarily terminate the license agreement with prior notice to NTC.
The Company paid NTC an initial, upfront fee of $
The License Agreement provides for a one-time payment of $
In the event that the Company or any of its affiliates or sublicensees manufactures any Good Manufacturing Practice (“GMP”) lot of a product, then the Company or any such affiliate or sublicensee will be obligated to pay NTC an amount per manufactured gram of GMP (or its equivalent) lot of product, which varies based on the volume manufactured. The payment will expire on a product-by-product basis upon receipt of regulatory approval to market a product in any country in the licensed territory.
During each of the three months ended January 31, 2025 and 2024, the Company incurred $
13
ENGENE HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
Amended Loan and Security Agreement and the First Amendment
On December 30, 2021, the Company entered into a Loan and Security Agreement (the "Prior Loan Agreement") with Hercules Capital, Inc. ("Hercules") for the issuance of a term loan facility with an aggregate principal amount of up to $
The Company accounted for the Amended Loan Agreement as an extinguishment of the Prior Term Loan. As a result of the extinguishment, the Company recorded a loss of $
On December 18, 2024, the Company entered into a First Amendment to Amended and Restated Loan and Security Agreement (the "First Amendment") with the Lenders. The First Amendment modified the Amended Loan Agreement to reallocate the $
At the Company's option, the Company may elect to prepay all, but not less than all, of the outstanding Term Loan by paying the entire principal balance and all accrued and unpaid interest thereon plus a prepayment charge equal to the following percentage of the principal amount being prepaid: (i)
As of January 31, 2025, the Company had borrowed $
14
ENGENE HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
The Term Loan bears cash interest payable monthly at an annual rate equal to the greater of (a) the prime rate of interest as reported in the Wall Street Journal plus
In connection with the Amended Loan Agreement, as amended by the First Amendment, the Company granted Hercules a security interest senior to any current and future debts and to any security interest in all of the Company’s right, title, and interest in, to and under all of the Company’s property and other assets, subject to limited exceptions including the Company’s intellectual property.
The Amended Loan Agreement, as amended by the First Amendment, contains negative covenants that, among other things and subject to certain exceptions, could restrict the Company's ability to incur additional liens, incur additional indebtedness, make investments, including acquisitions, engage in fundamental changes, sell or dispose of assets that constitute collateral, including certain intellectual property, pay dividends or make any distribution or payment on or redeem, retire or purchase any equity interests, amend, modify or waive certain material agreements or organizational documents and make payments of certain subordinated indebtedness. The Amended Loan Agreement, as amended by the First Amendment, also contains certain events of default and representations, warranties and non-financial covenants of the Company. The Company is in compliance with the financial covenants at January 31, 2025.
Hercules Common Share Warrants
In connection with the Amended Loan Agreement, as amended by the First Amendment, the Company also agreed to issue to the Lenders in connection with each advance of Term Loans warrants to purchase that number of the Company’s common shares, as shall be equal to
Under the terms of the Amended Loan Agreement, as amended by the First Amendment, the maximum number of Hercules Common Share Warrants and underlying Common Shares of the Company that could be issued is
Subsequently issued Hercules Common Share Warrants shall be substantially in the form of the Closing Date Warrants.
As of January 31, 2025 and October 31, 2024, the carrying value of the term loans consisted of the following:
|
|
January 31, 2025 |
|
|
October 31, 2024 |
|
||
Note payable, including End of Term Charge |
|
$ |
|
|
$ |
|
||
Debt discount, net of accretion |
|
|
( |
) |
|
|
( |
) |
Accrued interest |
|
|
|
|
|
|
||
Note payable, net of discount |
|
$ |
|
|
$ |
|
||
As of January 31, 2025, the Company classified $
15
ENGENE HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
the Company classified $
Estimated future principal payments due under the Term Loan, including the contractual End of Term Charges and paid in kind interest are as follows as of January 31, 2025:
Year ending October 31: |
|
Note Principal |
|
|
2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Total principal payments, including End of Term Charge |
|
|
|
|
As of January 31, 2025, based on borrowing rates available to the Company for loans with similar terms and consideration of the Company’s credit risk, the carrying value of the Company’s variable interest rate debt, excluding unamortized debt issuance costs, approximates fair value.
The Company has an number of Common Shares authorized for issuance, with
The holders of the
On December 20, 2024, the Company entered into an Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC (“Jefferies”), as sales agent, pursuant to which the Company may offer and sell, from time to time, through Jefferies, up to $
Warrants to Purchase Common Shares
As of January 31, 2025 and October 31, 2024, the Company had
Of the warrants to purchase common shares outstanding as of January 31, 2025,
The common share warrants have been determined to be equity classified as they do not meet the definition of a liability under ASC 480 and are considered indexed to the Company’s common shares as prescribed by ASC 815.
The additional
16
ENGENE HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
Shares reserved for the exercise of Common Share warrants, share options, and remaining shares reserved for future issuance under and outside the Company's Amended and Restated enGene Holdings Inc. 2023 Incentive Equity Plan.
Amended and Restated enGene Holdings Inc. 2023 Incentive Equity Plan
The Company's Amended and Restated enGene Holdings Inc. 2023 Incentive Equity Plan (the "2023 Plan") was adopted on May 15, 2024 and superseded all prior plans. The 2023 Plan is administered by the Board or, at the discretion of the Board, by a committee of the Board, (the "Committee"). The exercise prices, vesting and other restrictions are determined at the discretion of the Board, or its committee if so delegated, except that the exercise price per share of stock options may not be less than
As of January 31, 2025, inclusive of i) the common shares subject to the outstanding grants under the prior plans, and ii)
Inducement Grants
The Company may grant inducement equity award consisting of a non-qualified stock option to purchase Common Shares to newly hired employees an inducement material to the employees entering into employment with the Company in accordance with NASDAQ Listing Rule 5635(c)(4) and was granted outside of the 2023 Plan. During the three months ended January 31, 2025 and 2024, the Company granted
As of January 31, 2025, and October 31, 2024, the Company has reserved the following Common Shares for the exercise of Common Share warrants, share options, and remaining shares reserved for future issuance under the 2023 Plan and options granted outside of the 2023 Plan as part of the inducement grants:
|
|
January 31, |
|
|
October 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Warrants to purchase common shares |
|
|
|
|
|
|
||
Incentive options to purchase common shares |
|
|
|
|
|
|
||
Inducement grant stock options |
|
|
|
|
|
|
||
Remaining shares reserved for future issuance under |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
17
ENGENE HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
Stock Options
The assumptions that the Company used to determine the grant-date fair value of stock options during the three months ended January 31, 2025 and 2024 are summarized below:
|
Three months ended January 31, |
|
||||||
|
2025 |
|
|
2024 |
|
|||
Expected term (in years) |
|
|
|
|
||||
Expected volatility |
|
|
|
|
||||
Risk-free interest rate |
|
|
|
|
||||
Expected dividend yield |
|
|
— |
|
|
|
— |
|
Fair value of common shares and exercise |
$ |
|
$ |
|
|
|||
The following table summarizes the Company’s stock option activity:
|
|
Number of |
|
|
Weighted- |
|
|
Weighted- |
|
|
Aggregate |
|
||||
Outstanding as of October 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Forfeited or expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding as of January 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options vested and exercisable as of January 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options unvested as of January 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The aggregate intrinsic value of share options is calculated as the difference between the exercise price of the share options and the fair value of the Company’s common share as of each reporting date.
The weighted-average grant-date fair value per share of share options granted during the three months ended January 31, 2025 and January 31, 2024 was $
18
ENGENE HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
Share-based Compensation Expense
Share-based compensation expense included in the Company’s consolidated statements of operations and comprehensive loss was as follows:
|
|
Three Months Ended January 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Research and development |
|
$ |
|
|
$ |
|
||
General and administrative |
|
|
|
|
|
|
||
Total share-based compensation expense |
|
$ |
|
|
$ |
|
||
As of January 31, 2025, there was $
The following table sets forth the computation of the Company’s basic and diluted net loss per share for the periods presented, retrospectively restated to reflect the exchange of shares upon the close of the reverse recapitalization:
|
|
Three Months Ended January 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Numerator: |
|
|
|
|
|
|
||
Net loss attributable to common shareholders, basic and |
|
$ |
|
|
$ |
|
||
Denominator: |
|
|
|
|
|
|
||
Weighted-average number of common shares used in net |
|
|
|
|
|
|
||
Net loss per common share, basic and diluted |
|
$ |
|
|
$ |
|
||
The Company excluded the following shares from the computation of diluted net loss per share attributable to common shareholders for the three months ended January 31, 2025 and 2024 because including them would have had an anti-dilutive effect:
|
|
Three Months Ended January 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Warrants to purchase common shares |
|
|
|
|
|
|
||
Options to purchase common shares |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
During the three months ended January 31, 2025, the Company recorded $
The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets, which primarily consist of net operating loss carryforwards. The Company has considered its history of cumulative net losses, estimated future taxable income and prudent and feasible tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its deferred tax assets. As a result, as of January 31, 2025, the Company has maintained a full valuation allowance against its remaining net deferred tax assets.
19
ENGENE HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
The Company’s leases are comprised of operating leases for office and lab space.
On December 29, 2022, the Company signed a lease for approximately
On January 1, 2024, the Company entered into a lease agreement, in which the Company is sub-leasing approximately
During the three months ended January 31, 2025 and 2024, the components of operating lease cost were as follows, and are reflected in general and administrative expenses and research and development expenses, as determined by the underlying activities:
|
|
Three Months Ended January 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Lease Cost: |
|
|
|
|
|
|
||
Operating lease cost |
|
$ |
|
|
$ |
|
||
Variable operating lease cost |
|
|
— |
|
|
|
|
|
Total operating lease cost |
|
$ |
|
|
$ |
|
||
Maturities of the Company's operating lease liabilities as of January 31, 2025 are as follows:
2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
|
|
|
Less: Interest |
|
|
( |
) |
Total lease liability |
|
$ |
|
Legal Proceedings
From time to time, in the ordinary course of business, the Company is subject to litigation and regulatory examinations as well as information gathering requests, inquiries and investigations. As of January 31, 2025, and October 31, 2024, there were no such matters which would have a material impact on the Company’s financial results.
Purchase and Other Obligations
The Company enters 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.
20
ENGENE HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS OF USD, EXCEPT FOR SHARE AND PER SHARE DATA)
The Company has evaluated subsequent events through the date these financial statements were issued. The Company concluded that no additional subsequent events have occurred that require disclosure.
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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
22
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:
Indirect Costs:
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
23
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:
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.
24
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):
|
|
Three Months Ended January 31, |
|
|
|
|
||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
$ |
19,974 |
|
|
$ |
5,638 |
|
|
$ |
14,336 |
|
General and administrative |
|
|
6,639 |
|
|
|
5,135 |
|
|
|
1,504 |
|
Total operating expenses |
|
|
26,613 |
|
|
|
10,773 |
|
|
|
15,840 |
|
Loss from operations |
|
|
26,613 |
|
|
|
10,773 |
|
|
|
15,840 |
|
Other (income) expense, net: |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
|
(2,730 |
) |
|
|
(1,025 |
) |
|
|
(1,705 |
) |
Interest expense |
|
|
752 |
|
|
|
563 |
|
|
|
189 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
366 |
|
|
|
(366 |
) |
Other expense, net |
|
|
(37 |
) |
|
|
64 |
|
|
|
(101 |
) |
Total other (income) expense, net |
|
|
(2,015 |
) |
|
|
(32 |
) |
|
|
(1,983 |
) |
Net loss before income tax |
|
|
24,598 |
|
|
|
10,741 |
|
|
|
13,857 |
|
Provision for (recovery of) income tax |
|
|
18 |
|
|
|
(30 |
) |
|
|
48 |
|
Net loss |
|
$ |
24,616 |
|
|
$ |
10,711 |
|
|
$ |
13,905 |
|
25
Research and Development expenses
The following table summarizes our research and development expenses for each of the periods presented (in thousands):
|
|
Three Months Ended January 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|||
Direct costs: |
|
|
|
|
|
|
|
|
|
|||
Detalimogene |
|
$ |
15,402 |
|
|
$ |
2,620 |
|
|
$ |
12,782 |
|
Preclinical programs |
|
|
99 |
|
|
|
158 |
|
|
|
(59 |
) |
Total direct research and development expenses |
|
|
15,501 |
|
|
|
2,778 |
|
|
|
12,723 |
|
Indirect costs: |
|
|
|
|
|
|
|
|
|
|||
General research and platform personnel related costs |
|
|
4,084 |
|
|
|
2,443 |
|
|
|
1,641 |
|
Unallocated laboratory, facility support and patent costs |
|
|
389 |
|
|
|
417 |
|
|
|
(28 |
) |
Total indirect research and development expenses |
|
|
4,473 |
|
|
|
2,860 |
|
|
|
1,613 |
|
Total research and development expenses |
|
|
19,974 |
|
|
|
5,638 |
|
|
|
14,336 |
|
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:
General and Administrative Expenses
The following table summarizes our general and administrative expenses for each of the periods presented (in thousands):
|
|
Three Months Ended January 31, |
|
|
|
|
||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|||
Personnel-related expenses |
|
$ |
3,774 |
|
|
$ |
996 |
|
|
$ |
2,778 |
|
Professional fees |
|
|
1,362 |
|
|
|
1,977 |
|
|
|
(615 |
) |
Patent maintenance and legal fees |
|
|
636 |
|
|
|
1,501 |
|
|
|
(865 |
) |
Other expenses |
|
|
867 |
|
|
|
661 |
|
|
|
206 |
|
Total general and administrative expenses |
|
$ |
6,639 |
|
|
$ |
5,135 |
|
|
$ |
1,504 |
|
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:
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.
26
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:
27
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):
|
|
Three Months Ended January 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Net cash used in operating activities |
|
$ |
(25,696 |
) |
|
$ |
(7,370 |
) |
Net cash used in investing activities |
|
|
(84,964 |
) |
|
|
(506 |
) |
Net cash provided by financing activities |
|
|
1 |
|
|
|
12,000 |
|
Effect of exchange rate changes on cash |
|
|
1 |
|
|
|
1 |
|
Net increase in cash and cash equivalents |
|
$ |
(110,658 |
) |
|
$ |
4,125 |
|
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.
28
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,
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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”.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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.
Item 4. Controls and Procedures.
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
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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:
Remediation Efforts
In response to the remaining material weaknesses described above, the Company is undertaking ongoing remediation efforts that include:
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.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be involved in legal proceedings that arise in the regular course of our business. Our management believes that we are not currently involved in any legal proceedings that are likely to have a significant negative effect on our business. However, legal proceedings can negatively affect our business, financial condition, results, and future prospects, regardless of the outcome, due to costs associated with defense and settlement, as well as the diversion of management resources, among other factors.
Item 1A. Risk Factors.
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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Cashless Warrant Exercises
The sales of the securities described above were exempt from the registration requirements of the Securities Act in reliance on the exemption afforded by Section 3(a)(9) of the Securities Act. No sales involved underwriters, underwriting discounts or commissions or public offerings of securities of the Registrant.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Insider Adoption or Termination of Trading Arrangements.
During the fiscal quarter ended January 31, 2025,
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Item 6. Exhibits.
Exhibit Number |
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Description |
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4.1 |
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10.1 |
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10.2 |
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31.1* |
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31.2* |
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32.1* |
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32.2* |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
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Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
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SIGNATURES
Pursuant to the requirements 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.
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enGene Holdings Inc. |
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Date: March 10, 2025 |
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By: |
/s/ Ronald H.W. Cooper |
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Name: Ronald H. W. Cooper |
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Title: Chief Executive Officer and President |
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Date: March 10, 2025 |
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By: |
/s/ Ryan Daws |
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Name: Ryan Daws |
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Title: Chief Financial Officer |
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