An anonymous director reports

THERALASE RELEASE'S 2Q2023 INTERIM FINANCIAL STATEMENTS

Theralase Technologies Inc. has released the company's second quarter 2023 unaudited condensed interim consolidated financial statements.

Financial highlights

Total revenue decreased 23 per cent year over year.

Cost of sales for the six-month period ended June 30, 2023, was $224,947 or 53 per cent of revenue resulting in a gross margin of $201,140 or 47 per cent of revenue. In comparison, the cost of sales for the same period in 2022 was $271,656 or 49 per cent of revenue, resulting in a gross margin of $280,786 or 51 per cent of revenue. Cost of sales is represented by the following costs: raw materials, subcontracting, direct and indirect labour, and the applicable share of manufacturing overhead.

The gross margin decrease, as a percentage of sales, year over year, is primarily attributed to an increase in material costs.

Selling expenses for the six-month period ended June 30, 2023, decreased to $147,304 from $167,139 for the same period in 2022, a 12-per-cent decrease. The decrease in selling expenses is a result of reduced commissions (22 per cent), advertising (14 per cent) and salaries (10 per cent).

Administrative expenses for the six-month period ended June 30, 2023, increased to $1,010,144 from $734,081 for the same period in 2022, a 37-per-cent increase. The increase in administrative expenses is primarily attributed to increased spending on general and administrative expenses (71 per cent) and advisory fees (73 per cent). Stock-based compensation expense increased 278 per cent in 2022 due to an increase in stock options granted.

Net research and development expenses for the six-month period ended June 30, 2023, decreased to $1,619,839 from $2,338,855 for the same period in 2022, a 31-per-cent decrease. The decrease in research and development expenses for the six-month period is primarily attributed to the costs related to the manufacture of the study 2 drug. Research and development expenses represented 73 per cent of the company's operating expenses, and represent investment into the research and development of the company's drug division anti-cancer therapy (ACT) technology.

The net loss for the six-month period ended June 30, 2023, was $2,564,187, which included $474,558 of net non-cash expenses (that is, amortization, stock-based compensation expense and foreign exchange gain/loss). This compared with a net loss for the same period in 2022 of $2,947,168, which included $254,616 of net non-cash expenses. The drug division represented $2,187,284 of this loss (85 per cent) for the six-month period ended June 30, 2023. The decrease in net loss is primarily attributed to decreased spending on research and development expenses in study 2.

Operational highlights

Leadership change

On May 24, 2023, Roger DuMoulin-White, BSc, PEng, pro dir, was appointed president and chief executive officer of the company.

Dr. Arkady Mandel, MD, PhD, DSc, tendered his resignation as interim CEO and continues to serve as chief scientific officer and as a member of Theralase's board.

Mr. DuMoulin-White is the founder of Theralase and its former president and CEO. He stepped down as president and CEO in 2018, and has since served in a non-executive business development role. Mr. DuMoulin-White was the subject of a voluntary settlement agreement with the Ontario Securities Commission dated Feb. 16, 2018, and an OSC order dated Feb. 26, 2018, which required, among other things, that he resign as a director and officer of Theralase and refrain from holding those positions for a period of five years. That period has expired, and Theralase has obtained the approval of the TSX Venture Exchange to appoint Mr. DuMoulin-White as president and CEO of the company and to nominate him for election to the company's board of directors at the company's annual meeting on June 29, 2023.

On June 6, 2023, Dr. Kaouthar Lbiati, MD, MSc, was appointed a director of the company. Dr. Lbiati is an internationally trained medical doctor, who utilizes her extensive clinical and business background to assist biopharmaceutical organizations to achieve their strategic objectives through: systematic achievement of their value inflection milestones, partnering of their promising drug candidates with large international pharmaceutical companies and ultimately increasing shareholder value.

On June 29, 2023, Mr. DuMoulin-White was appointed a director of the company.

TSX Venture 50

Theralase was named to the TSX-V 2023 Venture 50. The Venture 50 is an annual ranking of the top-performing companies from five industry sectors, specifically: clean technology and life sciences, diversified industries, energy, mining, and technology. Theralase was recognized in the clean technology and life science category. Theralase was previously named a 2015, 2019 and 2020 Venture 50 company, making this the fourth year Theralase has been recognized as a top performer in the clean technology and life science sector in the past eight years.

Non-brokered private placement

On June 30, 2023, the company completed a financing by way of a non-brokered private placement, where 4.8 million units were issued at a price of 25 cents per unit for gross proceeds of $1.2-million. Each unit consisted of one common share and one non-transferable common share purchase warrant. Each whole warrant entitles the holder thereof to acquire one common share at a price of 35 cents, expiring on June 30, 2025. An aggregate of 1.11 million units, representing gross proceeds of $277,500, were issued to certain insiders of the corporation.

Warrant extension

On Jan. 5, 2023, the company extended the expiry date of 4,095,157 share purchase warrants, all of which are exercisable at 50 cents per share. The share purchase warrants were issued on Jan. 9, 2019, pursuant to a private placement involving the issuance of 4,095,157 units of the company. The new expiry date of the warrants is Jan. 9, 2024.

Breakthrough designation update

In 2020, the Food and Drug Administration granted Theralase fast-track designation (FTD) for study 2. As a fast-track designee, Theralase has access to early and frequent communications with the FDA to discuss Theralase's development plans and ensure the timely collection of clinical data to support the approval process. The accelerated communication with the FDA potentially allows the study 2 treatment to be the first intravesical, patient-specific, light-activated, ruthenium-based PDC for the treatment of patients diagnosed with BCG-unresponsive NMIBC CIS (with or without recurrent/resected papillary Ta/T1 tumours). FTD can also lead to breakthrough designation (BTD), accelerated approval (AA) and/or priority review if certain criteria are met.

In 2021, Theralase completed its first significant milestone of study 2 by enrolling and treating (primary study treatment) 25 patients.

In 2022, Theralase completed its second significant milestone of study 2 by enrolling and treating (primary study treatment) 50 patients.

The company has submitted a prebreakthrough designation submission to the FDA, and based on the FDA's feedback, the company is currently working with the CSSs, a biostatistical organization and a regulatory organization to update the prebreakthrough designation with clinical data clarifications identified by the FDA. The company plans to resubmit the prebreakthrough designation submission to the FDA in late third quarter 2023/early fourth quarter 2023 for FDA review of these clarifications. Once the prebreakthrough designation submission has been accepted by the FDA, the company plans to compile a BTD submission for review by the FDA in support of the grant of a BTD approval in fourth quarter 2023.

About Theralase Technologies Inc.

Theralase is a clinical-stage pharmaceutical company dedicated to the research and development of light-activated compounds, their associated drug formulations and the light systems that activate them, with a primary objective of efficacy and a secondary objective of safety in the destruction of various cancers, bacteria and viruses.

We seek Safe Harbor.