Quarterly Report for Quarter Ending July 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following management's discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited condensed interim financial statements and the related notes contained therein which have been prepared in accordance with US GAAP. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections titled "Risk Factors" and "Statements Regarding Forward-Looking Information" appearing elsewhere in this Quarterly Report. All figures are in US dollars unless otherwise noted. Unless the context otherwise requires, for the purposes of this section, "Conexeu", "we", "us", "our", or the "Company" refers to Conexeu Sciences Inc.

Overview

Conexeu Sciences Inc. (the "Company," "we," "us," or "our") is an early-stage regenerative medicine company focused on the development of biomaterial-based technologies for tissue restoration in wound care and aesthetics applications.

Since inception, our activities have primarily consisted of research and development, advancing our device candidate, capital raises, organizational development, and activities required to prepare for operation as a publicly traded company. We have not generated any revenues to date and expect to continue to incur operating losses for the foreseeable future.

On May 21, 2026, during the third quarter of fiscal 2026, our common stock commenced trading on the Nasdaq Capital Market ("Nasdaq") under the symbol "CNXU," completing our transition from a private, development-stage company to a publicly traded issuer via a direct listing.

Our current operations are focused on advancing product development activities, including preparation for a planned 510(k) submission to the U.S. Food and Drug Administration.

On September 4, 2026, the Company raised gross proceeds of $1,753,998 through the exercise of warrants by four holders at an exercise price of $2.30 per share. In connection with the exercises, the Company issued an aggregate of 762,608 shares of common stock. The proceeds will be used to support ongoing operations. The shares issued upon exercise are "restricted securities" as defined in Rule 144(a)(3) under the Securities Act of 1933, as amended.

Results of Operations

Three Months Ended July 31, 2026, compared to July 31, 2025

		Three months ended July 31
		2026			2025			Change
Advertising and promotion	$	105,956		$	21,288		$	84,668
Depreciation and amortization		5,435			6,640			(1,205	)
Bank charges		3,714			1,474			2,240
Business development		1,227,253			52,166			1,175,087
Consulting		3,784,642			465,361			3,319,281
Filing and listing fees		100,430			9,363			91,067
Insurance		164,457			4,148			160,309
Investor relations		26,360			-			26,360
Management and directors' salaries and fees		1,512,974			457,231			1,055,743
Office general and administrative		34,647			1,282			33,365
Professional fees		216,588			114,872			101,716
Regulatory fees		235,505			29,134			206,371
Research and development		270,412			134,662			135,750
Loss from operations	$	(7,688,373	)	$	(1,297,621	)		(6,390,752	)
Other income (expenses), net		(37,278	)		(949	)		(36,329	)
Loss before taxes	$	(7,725,651	)	$	(1,298,570	)
Income tax benefit (expense)		-			-
Net loss	$	(7,725,651	)	$	(1,298,570	)		6,427,081

We did not generate any revenue during the three months ended July 31, 2026 or 2025.

We incurred a net loss of $7,725,651 for the three months ended July 31, 2026, compared to a net loss of $1,298,570 for the same period in 2025, an increase of $6,427,081. The three months ended July 31, 2025, reflected our early-stage operations shortly after the Company completed the assignment of its extracellular matrix ("ECM") patent and began to plan a strategy for developing the underlying intellectual property, funded principally by modest private placement activity. By comparison, the three months ended July 31, 2026, reflect the operations of a substantially larger, Nasdaq-listed public company that completed its direct listing on May 21, 2026, raised significant additional capital, and incurred the compensation, governance, regulatory, and market-visibility costs that accompany that transition.

The increase in net loss was primarily attributable to higher operating expenses associated with the expansion of our operations and activities required to support our transition to a publicly traded company.

Operating expenses increased primarily due to:

• Business Development - an increase of $1,175,087, reflecting expanded marketing, investor relations, and business development initiatives undertaken following our Nasdaq listing to build and maintain trading visibility, liquidity, and investor awareness for our newly public stock, and to support our ongoing capital-raising efforts. Business development costs also include travel-related expenses (airfare, accommodations, and ground transportation) associated with investor and business development meetings, which increased materially following our Nasdaq listing and are discussed further below.

• Consulting - an increase of $3,319,281, driven substantially by non-cash, stock-based compensation issued to marketing, investor relations, and corporate advisory vendors, valued at then-current Nasdaq trading prices, together with increased engagement of third-party advisors supporting regulatory activities and capital markets initiatives.

• Management and Personnel Costs - expansion of the executive and scientific team and full-time employment arrangements, including the appointment of a Chief Commercial Officer effective June 15, 2026, and stock-based compensation associated with milestone warrants that vested upon our Nasdaq listing and subsequent stock-price milestones (see Notes 10 and 11 to the unaudited condensed interim financial statements).

• Regulatory Fees- an increase of $206,371 reflecting the Company's expanding efforts and continued preparations of Company's 510K for submission to the FDA.

• Insurance - an increase of $160,309, primarily driven by the directors' and officers' liability insurance obtained ahead of our listing.

• Professional Fees - an increase of $101,716 in legal, accounting, and advisory costs associated with the direct listing and operating as a publicly listed company.

• Research and Development Expenses - Research and development expenses increased by $135,750 to $270,412, reflecting a lease commitment for Company operated laboratory facilities (see Note 9 to the unaudited condensed interim financial statements), engagement of scientific consultants, and procurement of materials used in development and testing. Our current activities are primarily focused on the development and validation of our existing proprietary platform and the evaluation of potential applications across multiple verticals. We expect research and development activities to expand over time as we advance our product pipeline and explore additional applications of our technology.

Nine Months Ended July 31, 2026, compared to July 31, 2025

		Nine months ended July 31
		2026			2025			Change
Advertising and promotion	$	126,665		$	48,503			78,162
Depreciation and amortization		23,296			10,604			12,692
Bank charges		9,390			3,132			6,258
Business development		1,410,010			146,386			1,263,624
Consulting		5,446,548			661,957			4,784,591
Filing and listing fees		125,689			9,513			116,176
Insurance		172,857			4,148			168,709
Investor relations		33,042			-			33,042
Management and directors' salaries and fees		2,848,679			750,033			2,098,646
Office general and administrative		58,490			7,632			50,858
Professional fees		809,307			216,219			593,088
Regulatory fees		328,149			29,134			299,015
Research and development		399,578			200,795			198,783
Loss from operations	$	(11,791,700	)	$	(2,088,056	)		(9,703,644	)
Other income (expenses), net		42,943			41,372			1,571
Loss before taxes	$	(11,748,757	)	$	(2,046,684	)
Income tax benefit (expense)		-			-
Net loss	$	(11,748,757	)	$	(2,046,684	)		9,702,073

We did not generate any revenue during the nine months ended July 31, 2026, or 2025.

We incurred a net loss of $11,748,757 for the nine months ended July 31, 2026, compared to a net loss of $2,046,684 for the same period in 2025, an increase of $9,702,073. The nine months ended July 31, 2025, the Company was in the early stages of investigating the commercial potential of its ECM intellectual property, which had only recently been fully assigned to the Company, and had achieved modest success with private placement financings. By comparison, during the nine months ended July 31, 2026, the Company completed a direct listing on the Nasdaq Capital Market on May 21, 2026, raised approximately $7.7 million in net financing proceeds during the period (see "Liquidity Outlook" below), and made the investments in personnel, governance, regulatory compliance, and market visibility that are necessary to operate and maintain relevance as a Nasdaq-listed company.

In particular, following the direct listing, the Company allocated significant resources to marketing and business development initiatives, given the importance of building and sustaining trading visibility and investor awareness both generally and in support of the Company's ongoing need to raise additional capital.

The increase in net loss was primarily attributable to:

• Business Development - Increased business development, marketing, and investor relations activities following our Nasdaq listing, including approximately $357,000 of travel-related costs (airfare, accommodations, and ground transportation) associated with the direct listing on May 21, 2026, investor and business development meetings, representing approximately 25% of the $1,410,010 of business development expense for the nine months ended July 31, 2026.

• Consulting - Consulting costs increased to $5.4 million, however, a substantial portion of this expense is non-cash, stock-based compensation of approximately $3.7 million ($3,667,836) issued to marketing and advisory vendors.

• Management and Personnel Costs - Increased management and personnel-related expenses, including stock-based compensation of approximately $1.3 million ($1,270,543).

• Regulatory Fees - an increase of $299,015 reflecting the Company's expanding efforts and continued preparations of the Company's 510K for submission to the FDA.

• Insurance - an increase of $168,709, primarily driven by the directors' and officers' liability insurance obtained ahead of our listing.

• Professional Fees - an increase of $593,088 due to higher professional fees including legal, accounting, and advisory costs associated with the direct listing and operating as a publicly listed company.

• Research and Development Expenses - Research and development expenses increased to $399,578, reflecting a lease commitment for Company operated laboratory facilities (see Note 9 to the unaudited condensed interim financial statements), engagement of scientific consultants, and procurement of materials used in development and testing. Ongoing work in support of the 510K submission. Current activities continue to investigate the application of our existing proprietary platform across multiple verticals. We expect research and development activities to expand over time as we advance our product pipeline and explore additional applications of our technology.

Liquidity, Capital Resources and Going Concern

Cash Position and Going Concern

As of July 31, 2026, we had cash and cash equivalents of approximately $2.0 million ($1,971,408), together with restricted cash of approximately $0.2 million ($238,208) related to funds received from exercised warrant held in trust (see Note 3 to the unaudited condensed interim financial statements), and working capital of approximately $5.5 million ($5,487,587). Our cash and cash equivalents declined by approximately $2.6 million from $4.8 million at October 31, 2025, reflecting the higher level of operating expenditures described above, including marketing, business development, and compensation costs. The collection of a $2.0 million private placement subscription receivable at October 31, 2025, and net proceeds from warrant exercises under our Warrant Exercise Incentive Program help to offset the overall increased expenses during the nine months ending July 31, 2026.

We have incurred recurring losses since inception and had an accumulated deficit of approximately $16.3 million ($16,270,277) as of July 31, 2026, compared to $4.5 million as of October 31, 2025.

These factors raise substantial doubt about our ability to continue as a going concern within one year after the issuance of the financial statements (see Note 1 to the unaudited condensed interim financial statements).

Prepaid Expenses

Prepaid expenses increased from approximately $0.5 million ($549,930) as of October 31, 2025, to approximately $4.5 million ($4,544,274) as of July 31, 2026, an increase of approximately $4.0 million ($3,994,344). Approximately $3.7 million, or 81%, of the increase relates to two business development and marketing service agreements entered into following our Nasdaq listing, consisting of a $3.5 million contract for services to be rendered over a twelve-month period from June 2026 through May 2027 and a second for $0.6 million for services to delivered prior to October 31, 2026.

As of July 31, 2026, of this total $4.1 million, $0.2 million was recorded in accounts payable and paid in cash in August. Amounts paid or payable under these agreements are capitalized as a prepaid expense and will be recognized as business development expenses over the twelve-month service period; approximately $0.6 million had been recognized as expense as of July 31, 2026, leaving a prepaid balance of approximately $3.5 million, all of which is expected to be recognized as expense within the next twelve months. The cash paid under this agreement is a significant driver of the increase in cash used in operating activities for the three months ended July 31, 2026, discussed under "Liquidity, Capital Resources, and Going Concern" below. The remaining approximately $0.8 million of the July 31, 2026, balance relates to prepaid insurance, regulatory, professional, and other operating costs also paid in cash in advance in the normal course of business, including the annual premium for our directors' and officers' liability insurance policy paid in connection with our Nasdaq listing.

Liquidity Outlook

		Nine months ended July 31, 2026
		2026			2025			Change
Net cash used in operating activities		($10,099,279	)		($1,238,410	)		($8,860,869	)
Net cash used in investing activities		($76,231	)		($59,054	)		($17,177	)
Net cash provided by financing activities		$7,548,009			$1,820,391			$5,727,618

Cash Used in Operating Activities

Net cash used in operating activities for the nine months ended July 31, 2026, totaled $10,099,279 as compared to $1,238,410 for the same period in 2025. The net loss increased by $9,702,073 when compared to the comparable period in 2025. This overall change in operational costs is reflective of the advancement of the business in building out an infrastructure to support a publicly listed company, the significant marketing and business development spending undertaken to establish and maintain visibility in the public markets following our Nasdaq listing, and additional headcount to advance the Company's research and development, regulatory, and pre-commercialization activities. Prepaid expenses represent $3.5 million of cash used during the period, and as noted previously, this includes, but is not limited to, cash advances for marketing and business development expenses, insurance premiums and regulatory services. Within the net loss is the use of non-cash stock-based compensation during the nine months ended July 31, 2026, of approximately $4.6 million (options issued for services of $1,493,977 and shares issued for services of $3,081,289), substantially all of which relates to executive, director, and marketing/advisory arrangements. (2025 - approximately $0.48 million).

Cash Used in Investing Activities

Net cash used in investing activities during the nine months ended July 31, 2026, was $76,231, compared to $59,054 for the same period in 2025, representing principally purchases of fixed assets for the Company's lab and general office space.

Cash Provided by Financing Activities

Net cash provided by financing activities during the nine months ended July 31, 2026, was $7,548,009 (2025 - $1,820,391). The increase was driven by the collection of a $2.0 million cash for a private placement subscription receivable that had been outstanding at October 31, 2025 in connection with a private placement that closed on October 28, 2025, together with net proceeds of $2,943,351 (2025 - $2,018,413) from non-brokered private placements closed during the six months ended April 30, 2026, and proceeds of approximately $2.7 million received under the Company's Warrant Exercise Incentive Program during the nine months ended July 31, 2026, as warrant holders exercised outstanding warrants and subscribed for new warrants at a $2.30 exercise price. No new private placement tranches were closed during the three months ended July 31, 2026; financing activity during the quarter was driven primarily by warrant inducement exercises. There were two reductions offsetting the incoming funds, offering costs that were paid out during the period of $30,992 and that have subsequently been written off due to the direct listing and total cash paid out of $92,187 for the financed insurance premiums, including the initial down payment.

Our average monthly cash used in operating activities was approximately $1.1 million for the nine months ended July 31, 2026, compared to approximately $0.56 million for the six months ended April 30, 2026. The increase was concentrated in the three months ended July 31, 2026, during which average monthly cash used in operating activities was approximately $2.3 million, reflecting the one-time costs related to the direct listing on the Nasdaq (approx. $0.35 million), marketing, business development, and compensation costs described above. Noteworthy is that in the current quarter ending July 31, 2026, a significant amount of the cash used in operating activities was used to prepay for expenses, approximately $3.3 million, that will have future benefits in the months to come.

Excluding these one-time items and prepaid expenses, we estimate that our recurring average monthly cash burn rate during the three months ended July 31, 2026, was approximately $0.87 million, compared to approximately $0.56 million for the six months ended April 30, 2026, reflecting a sustained increase in the costs of operating as a Nasdaq-listed company, including insurance, listing and regulatory fees, professional fees, travel, and compensation costs, as described above.

We expect our monthly cash burn to remain elevated in the near term as we continue to incur costs associated with operating as a publicly traded company, including general and administrative expenses, investor relations and market awareness initiatives, and the expansion of laboratory and development activities, although we intend to evaluate opportunities to moderate discretionary marketing spend as circumstances warrant.

Based on our cash and cash equivalents of $1,971,408 as of July 31, 2026, and our average monthly cash burn rate during the three months then ended of approximately $0.87 million as noted above, our existing cash resources are not sufficient to fund operations for the next twelve months and, absent additional financing, are expected to fund operations for a substantially shorter period than the 9 to 11 months estimated as of April 30, 2026. This estimate excludes the one-time business development and direct listing costs described above, which have already been paid or accrued as of July 31, 2026, and are reflected in our cash balance, and does not reflect any future one-time or discretionary expenditures we may elect to undertake, including further business development or marketing initiatives. Management is actively pursuing additional debt and/or equity financing; however, there can be no assurance that such financing will be obtained on acceptable terms, or at all. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date these financial statements are issued (see Note 2 to the unaudited condensed interim financial statements).

Subsequent to July 31, 2026, between August 31, 2026, and September 3, 2026, four warrant holders exercised 762,608 warrants at an exercise price of $2.30 per share for gross proceeds of $1,753,998, which the Company intends to use for operations.

While these funds will provide additional near-term liquidity, it is not sufficient, on its own, to resolve the substantial doubt about our ability to continue as a going concern discussed above. Management continues to evaluate expected cash inflows and expenditures and to pursue additional financing alternatives. Actual cash runway may differ based on the timing of any financing activities and changes in operating expenditures.

We will require additional financing to continue operations beyond this period and to advance our development activities. We expect to seek additional capital through equity financings, debt financings, or other capital sources; however, there can be no assurance that such financing will be available on acceptable terms, or at all.

Plan of Operations

Our near-term operational objectives include:

• Continued product development and validation activities

• Advancement toward a planned 510(k) submission to the FDA, currently anticipated in the first quarter of calendar 2027

• Continued operation of our leased laboratory and office space under the 24-month lease that commenced May 1, 2026 (see Note 9 to the unaudited condensed interim financial statements)

• Continued development of Board and committee governance structures following the expansion of our Board to nine (9) members and the appointment of a Chief Commercial Officer, each effective June 15, 2026

• Continue to evaluate compensation structure for executives, employees, and directors

• Prudent management of discretionary marketing, investor relations, and business development spending to balance market visibility with capital preservation, in light of the liquidity position discussed above

• Continued engagement of consultants and advisors

Beginning in May 2026, the Company undertook a significant investor relations and marketing campaign intended to build trading visibility and market awareness for our newly listed common stock. This campaign was a substantial driver of consulting and business development expenses during the three and nine months ended July 31, 2026, as described above. Because we completed our Nasdaq listing through a direct listing rather than a traditional underwritten initial public offering, without the marketing support and book-building process typically associated with an underwritten offering, management believed this level of investment was important to establishing market awareness and liquidity in our shares and in supporting our ongoing capital-raising efforts. In light of our current cash position and the going concern considerations discussed above, we are evaluating the appropriate ongoing level of such discretionary spending.

We do not expect to generate revenue in the near term.

Subsequent Events

On August 21, 2026, 160,338 warrants expired unexercised.

On August 24, 2026, the Company issued 6,500 common shares to two vendors as part of their service agreements. The fair value of these shares was determined based on the Nasdaq closing price on August 21, 2026, of $8.89 per share.

On August 24, 2026, the Company issued a total of 5,259 common shares to a director in settlement of liabilities owed for advisory and director fees. The fair value of these shares was determined based on the either a historical value of $2.30 per share for 3,658 shares and a volume weighted average price between May 21, 2026, and June 15, 2026, of $13.96 per share for 1,601 shares.

On August 27, 2026, the Board of Directors agreed to amend and restate a service agreement previously approved on July 12, 2026, wherein a vendor will be issued common shares in the Company as part of a compensation package including cash and equity, the originally agreed aggregate amount of 50,000 shares shall be increased to an aggregate amount of 67,000 shares. The value of the original 50,000 common shares will be based on the closing trading price of the Company's shares on the previously agreed schedule of August 31^st and September 30^th. The additional new shares that will be issued along with the issuances on August 31^st and September 30^th, in equal amounts of 8,500 shares per issuance with a reserved price based on the market closing price on August 26, 2026, of $6.98 per share.

On September 1, 2026, the Company issued 35,167 common shares to two vendors as part of their service agreements. The fair value of these shares was determined based on the Nasdaq closing price on August 28, 2026, of $7.07 per share for 1,667 common shares and on August 31, 2026, of $7.18 per share for 33,500 common shares.

On September 4, 2026, the Company raised gross proceeds of $1,753,998 through the exercise of warrants by four holders at an exercise price of $2.30 per share. In connection with the exercises, the Company issued an aggregate of 762,608 shares of common stock. The proceeds will be used to support ongoing operations. The shares issued upon exercise are restricted securities and are subject to a six-month Rule 144 holding period.

Critical Accounting Policies

There have been no material changes to our critical accounting policies from those disclosed in our audited financial statements for the year ended October 31, 2025.

Our summary of significant accounting policies is described in more detail in the notes to our unaudited condensed interim financial statements. Please refer to Note 3.

Off-Balance Sheet Arrangements

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