XORTX Therapeutics (XRTX) - 2025 Q1 - Quarterly Report

Condensed Interim Consolidated Financial Statements This section presents XORTX Therapeutics Inc.'s interim financial statements, covering financial position, loss, equity, cash flows, and detailed notes Condensed Interim Consolidated Statements of Financial Position XORTX Therapeutics Inc.'s financial position as of March 31, 2025, shows decreased total assets and equity, stable liabilities, and a significant cash reduction Consolidated Statements of Financial Position Summary | Metric | March 31, 2025 ($) | December 31, 2024 ($) | Change ($) | Change (%) | | :--------------------------------- | :------------------- | :-------------------- | :--------- | :--------- | | Assets | | | | | | Cash | 1,895,238 | 2,473,649 | (578,411) | -23.38% | | Total Current Assets | 2,103,439 | 2,676,698 | (573,259) | -21.42% | | Total Assets | 3,498,668 | 4,094,527 | (595,859) | -14.55% | | Liabilities | | | | | | Accounts payable & accrued liabilities | 415,688 | 147,205 | 268,483 | 182.39% | | Derivative warrant liability | 326,000 | 572,000 | (246,000) | -43.01% | | Total Liabilities | 757,350 | 757,990 | (640) | -0.08% | | Shareholders' Equity | | | | | | Total Shareholders' Equity | 2,741,318 | 3,336,537 | (595,219) | -17.84% | Condensed Interim Consolidated Statements of Loss and Comprehensive Loss For Q1 2025, XORTX Therapeutics Inc. reported a significantly reduced net loss, driven by a favorable fair value adjustment on derivative warrant liability Consolidated Statements of Loss and Comprehensive Loss Summary | Metric | Three months ended March 31, 2025 ($) | Three months ended March 31, 2024 ($) | Change ($) | Change (%) | | :-------------------------------------- | :------------------------------------ | :------------------------------------ | :--------- | :--------- | | Research and development | 276,309 | 73,643 | 202,666 | 275.20% | | Consulting, wages and benefits | 283,915 | 224,721 | 59,194 | 26.34% | | Investor relations | 150,043 | 439,405 | (289,362) | -65.85% | | Loss before other items | (963,456) | (1,088,616) | 125,160 | -11.50% | | Fair value adjustment on derivative warrant liability | 246,000 | (1,724,792) | 1,970,792 | -114.26% | | Net loss and comprehensive loss for the period | (698,673) | (3,018,936) | 2,320,263 | -76.86% | | Basic and diluted loss per common share | (0.19) | (1.24) | 1.05 | -84.68% | | Weighted average number of common shares outstanding | 3,737,101 | 2,429,268 | 1,307,833 | 53.84% | Condensed Interim Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity decreased from $3.34 million to $2.74 million, influenced by share issuances, costs, and comprehensive loss Consolidated Statements of Changes in Shareholders' Equity Summary | Metric | Balance, December 31, 2024 ($) | Shares issued pursuant to at-the-market offering ($) | Share issuance costs ($) | Pre-funded warrants exercised ($) | Share-based payments ($) | Comprehensive loss for the period ($) | Balance, March 31, 2025 ($) | | :--------------------------------- | :----------------------------- | :--------------------------------------------------- | :----------------------- | :-------------------------------- | :----------------------- | :------------------------------------ | :-------------------------- | | Share capital | 18,493,571 | 113,547 | (19,064) | 324,645 | - | - | 18,912,699 | | Reserves | 6,039,078 | - | - | (324,643) | 8,969 | - | 5,723,404 | | Accumulated deficit | (21,168,253) | - | - | - | - | (698,673) | (21,866,926) | | Total | 3,336,537 | 113,547 | (19,064) | 2 | 8,969 | (698,673) | 2,741,318 | Condensed Interim Consolidated Statements of Cash Flows For Q1 2025, XORTX Therapeutics Inc. reported a net cash decrease of $578,411, primarily due to operating activities, contrasting with a prior year increase Consolidated Statements of Cash Flows Summary | Cash Flow Activity | Three months ended March 31, 2025 ($) | Three months ended March 31, 2024 ($) | Change ($) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :--------- | | Operating activities | (643,730) | (1,303,852) | 660,122 | | Investing activities | (3,385) | (2,623) | (762) | | Financing activities | 67,577 | 1,703,567 | (1,635,990) | | Effect of foreign exchange on cash | 1,127 | (9,317) | 10,444 | | (Decrease) Increase in cash | (578,411) | 387,775 | (966,186) | | Cash, beginning of period | 2,473,649 | 3,447,665 | (974,016) | | Cash, end of period | 1,895,238 | 3,835,440 | (1,940,202) | Notes to the Condensed Interim Consolidated Financial Statements These notes provide detailed information on operations, accounting policies, critical judgments, and financial instruments, highlighting going concern uncertainty 1. Nature of operations and going concern XORTX Therapeutics Inc. is a late-stage clinical pharmaceutical company developing gout and kidney disease therapies, facing significant going concern uncertainty - XORTX is a late-stage clinical pharmaceutical company focused on developing innovative therapies to treat gout and progressive kidney disease modulated by aberrant purine and uric acid metabolism[9] - The Company's current focus is on developing products to slow and/or reverse the progression of these diseases[9] - There is a material uncertainty that casts significant doubt about the Company's ability to continue as a going concern, contingent on raising necessary capital and generating revenues[10] 2. Basis of preparation These interim financial statements are prepared under IAS 34, based on historical cost, and consolidate the Company and its subsidiary - The financial statements are prepared in accordance with International Accounting Standard 34 (IAS 34), Interim Financial Reporting[11] - They are prepared using the historical cost convention, except for financial instruments measured at fair value, and incorporate the financial statements of the Company and its 100% owned subsidiary[12][13] 3. Material Accounting policies These interim financial statements adhere to the material accounting policies disclosed in the annual financial statements for December 31, 2024 - These condensed interim consolidated financial statements have been prepared on a basis consistent with the material accounting policies disclosed in the annual financial statements for the year ended December 31, 2024[15] 4. Critical accounting judgments and estimates Financial statement preparation involves significant management judgments and estimates, impacting reported amounts across various accounting areas - Management makes judgments and estimates that affect the amounts reported in the financial statements, which are subject to change and could be material[16] - Critical judgments include: Share-based payment transactions and warrant liabilities, classification of contract payments, impairment of intangible assets, determination of functional currency, treatment of research and development costs, leases, classification of pre-funded warrants, and current and deferred taxes[17][18][19][20][21][22][23][24] 5. Cash The Company's cash balance decreased to $1.90 million as of March 31, 2025, with interest-bearing deposits earning 4.15% annually Cash Breakdown | Category | March 31, 2025 ($) | December 31, 2024 ($) | | :---------------------- | :------------------- | :-------------------- | | Cash | 117,605 | 53,686 | | Interest-bearing deposits | 1,777,633 | 2,419,963 | | Total Cash | 1,895,238 | 2,473,649 | - The current annual interest rate earned on interest-bearing deposits is 4.15% (December 31, 2024 – 3.62%)[25] 6. Prepaid expenses Total prepaid expenses slightly increased to $190,949, driven by higher investor relations and administrative services, offset by lower prepaid insurance Prepaid Expenses Breakdown | Category | March 31, 2025 ($) | December 31, 2024 ($) | | :-------------------------------- | :------------------- | :-------------------- | | Research and development | - | 1,167 | | Insurance | 105,037 | 158,007 | | Investor relations conferences and services | 70,268 | 19,490 | | Administrative services and other | 15,644 | 6,748 | | Total | 190,949 | 185,412 | 7. Contract payments The Company holds a $1.2 million non-current asset for contract payments, designated for future regulatory and clinical trial programs - The Company paid $1,200,000 through the issuance of units in a private placement to Prevail InfoWorks Inc. in 2020, to be applied to future regulatory and clinical trial programs[28] 8. Intangible assets Intangible assets, primarily licensed intellectual property, decreased slightly to $179,972 due to amortization, with no royalties accrued or paid Intangible Assets Carrying Values | Metric | March 31, 2025 ($) | December 31, 2024 ($) | | :---------------------- | :------------------- | :-------------------- | | Cost | 379,112 | 375,727 | | Accumulated amortization | 199,140 | 192,619 | | Carrying values | 179,972 | 183,108 | - The Company has licensed intellectual property from third parties, including patents relating to allopurinol for hypertension, uric acid lowering agents for metabolic syndrome, and a patent for treating insulin resistance[30][32] - As of March 31, 2025, no royalties have been accrued or paid on any of the licensed intellectual property agreements[30][32] 9. Property and equipment Property and equipment carrying value decreased to $15,257 due to amortization, following a 2024 office lease extension that added $96,998 to right-of-use assets Property and Equipment Carrying Values | Metric | March 31, 2025 ($) | December 31, 2024 ($) | | :---------------------- | :------------------- | :-------------------- | | Cost | 234,930 | 234,930 | | Accumulated amortization | 219,673 | 200,209 | | Carrying values | 15,257 | 34,721 | - During the year ended December 31, 2024, the Company extended its office lease, recognizing a $96,998 right-of-use asset addition and a corresponding increase to the lease liability[33] 10. Accounts payable and accrued liabilities Accounts payable and accrued liabilities significantly increased to $415,688, primarily due to a substantial rise in trade payables Accounts Payable and Accrued Liabilities Breakdown | Category | March 31, 2025 ($) | December 31, 2024 ($) | | :---------------------- | :------------------- | :-------------------- | | Trade payables | 354,037 | 84,020 | | Accrued liabilities | 61,651 | 63,185 | | Total | 415,688 | 147,205 | 11. Lease obligation The office lease obligation decreased to $15,662 due to payments, with an imputed interest rate of 8% per annum Lease Obligation Summary | Metric | March 31, 2025 ($) | December 31, 2024 ($) | | :------------------------------------ | :------------------- | :-------------------- | | Balance, beginning of period | 38,785 | 11,510 | | Additions | - | 96,998 | | Lease payments | (23,123) | (69,723) | | Balance, end of period | 15,662 | 38,785 | - The Company's office lease expires in 2025 and has an imputed interest rate of 8% per annum[35] 12. Share capital and reserves This section details changes in share capital and reserves, including common share issuances, warrant activities, stock options, and derivative warrant liability revaluation a) Authorized and issued%20Authorized%20and%20issued) The Company has unlimited authorized common shares, with 3,788,246 shares issued as of March 31, 2025 - The Company has unlimited common shares authorized, with 3,788,246 shares issued at March 31, 2025 (December 31, 2024 – 3,481,375)[37] b) Issuances%20Issuances) In Q1 2025, the Company issued 73,871 common shares for $113,547 via an at-the-market offering and 233,000 from pre-funded warrant exercises - Three months ended March 31, 2025: * Issued 73,871 common shares in an at-the-market offering for gross proceeds of $113,547[38] * Issued 233,000 common shares for the exercise of pre-funded warrants for $2[39] - Three months ended March 31, 2024: * Closed a non-brokered offering of 899,717 common share units for aggregate gross proceeds of $2,000,549[40] * Issued 5,000 common shares for the exercise of warrants for $16,570[43] c) Diluted Weighted Average Number of Common Shares Outstanding%20Diluted%20Weighted%20Average%20Number%20of%20Common%20Shares%20Outstanding) Basic and diluted weighted average common shares outstanding for Q1 2025 were 3,737,101, with potential conversions excluded due to net loss Weighted Average Common Shares Outstanding | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Basic weighted average common shares outstanding | 3,737,101 | 2,429,268 | | Diluted weighted average common shares outstanding | 3,737,101 | 2,429,268 | - Due to a net loss, the diluted loss per share calculation excludes any potential conversion of options and warrants that would decrease loss per share[44] d) Common Share Purchase Warrants%20Common%20Share%20Purchase%20Warrants) Common share purchase warrants outstanding remained at 2,830,737 with a $3.60 weighted average exercise price and 2.34 years remaining life Common Share Purchase Warrants Activity | Metric | Number of Warrants | Weighted Average Exercise price ($) | | :------------------------------------ | :----------------- | :-------------------------------- | | Balance, December 31, 2023 | 1,125,210 | 22.31 | | Granted – February 9, 2024 | 824,767 | 3.13 | | Granted – February 23, 2024 | 74,950 | 3.13 | | Granted – October 18, 2024 | 810,810 | 2.18 | | Exercised | (5,000) | 3.13 | | Balance, March 31, 2025 and December 31, 2024 | 2,830,737 | 3.60 | - The weighted average contractual remaining life of unexercised warrants was 2.34 years at March 31, 2025 (December 31, 2024 – 2.58 years)[47] - During 2024, the Company amended the exercise price of 1,125,210 common share purchase warrants, introducing an acceleration expiry provision if the share price exceeds $6.50 for 10 consecutive trading days[46] e) Pre-Funded Warrants%20Pre-Funded%20Warrants) All pre-funded warrants were exercised during Q1 2025 at an exercise price of $0.00001 per share, resulting in a zero balance Pre-Funded Warrants Activity | Metric | Number of Warrants | Weighted Average Exercise price ($) | | :------------------------------------ | :----------------- | :-------------------------------- | | Balance, December 31, 2023 | - | - | | Granted – October 18, 2024 | 490,810 | 0.00001 | | Exercised | (257,810) | 0.00001 | | Balance, December 31, 2024 | 233,000 | 0.00001 | | Exercised | (233,000) | 0.00001 | | Balance, March 31, 2025 | - | - | f) Finders' and Underwriters Warrants%20Finders'%20and%20Underwriters%20Warrants) Finders' and underwriters' warrants outstanding remained at 50,298 with a $23.57 weighted average exercise price and 2.00 years remaining life Finders' and Underwriters Warrants Activity | Metric | Number of Warrants | Weighted Average Exercise price ($) | | :------------------------------------ | :----------------- | :-------------------------------- | | Balance, March 31, 2025 and December 31, 2024 | 50,298 | 23.57 | - The weighted average contractual remaining life of unexercised finders' and underwriters' warrants was 2.00 years at March 31, 2025 (December 31, 2024 – 2.24 years)[50] g) Stock Options%20Stock%20Options) The Stock Option Plan allows options up to 10% of outstanding shares, with 147,763 options outstanding and $8,969 in share-based payments for Q1 2025 - The Company's Stock Option Plan allows for the issuance of stock options up to 10% of the then issued and outstanding common shares[52] Stock Option Activity | Metric | Number of Options | Weighted Average Exercise price (CAD) | | :------------------------------------ | :---------------- | :------------------------------------ | | Balance, December 31, 2023 | 103,922 | 16.60 | | Granted – March 4, 2024 | 39,483 | 4.50 | | Granted – April 8, 2024 | 8,000 | 5.00 | | Granted – December 18, 2024 | 13,000 | 1.75 | | Expired | (16,642) | 22.22 | | Balance, March 31, 2025 and December 31, 2024 | 147,763 | 10.80 | | Vested and exercisable, March 31, 2025 | 113,764 | 12.83 | - During the three months ended March 31, 2025, the Company recorded share-based payments of $8,969 (2024 - $53,134)[54] h) Derivative Warrant Liability%20Derivative%20Warrant%20Liability) Derivative warrant liability decreased to $326,000 due to a favorable fair value adjustment, classified as financial liabilities due to currency or cashless settlement terms - Warrants are recorded as derivative financial liabilities if the exercise price is denominated in a currency other than the functional currency or if they can be settled on a cashless basis[58] - Effective January 1, 2023, CAD denominated warrants were reclassified to derivative financial liabilities due to the change in the Company's functional currency to USD[60] Derivative Warrant Liability Activity | Metric | Amount ($) | | :------------------------------------ | :--------- | | Balance at December 31, 2023 | 531,000 | | Warrants issued February 9, 2024 | 865,000 | | Warrants issued February 23, 2024 | 103,000 | | Warrants exercised | (5,244) | | Fair value adjustment | 1,724,792 | | Balance at March 31, 2024 | 3,218,548 | | Reclassified to reserves | (123,651) | | Fair value and other adjustments | (2,522,897) | | Balance at December 31, 2024 | 572,000 | | Fair value adjustment | (246,000) | | Balance at March 31, 2025 | 326,000 | 13. Related party transactions Related party transactions, primarily compensation to directors and officers, totaled $235,371 for Q1 2025, a decrease mainly from lower share-based payments - Transactions with related parties include wages, benefits, professional fees, and directors' fees paid or accrued to the CEO, CFO, CMO, CBO, and other directors[64] Related Party Compensation | Category | Three months ended March 31, 2025 ($) | Three months ended March 31, 2024 ($) | | :---------------------- | :------------------------------------ | :------------------------------------ | | Management Compensation | 184,589 | 191,464 | | Directors' fees | 45,833 | 41,821 | | Share-based payments | 4,949 | 38,103 | | Total | 235,371 | 271,388 | 14. Financial instruments and risk management The Company's financial instruments include cash, receivables, payables, lease obligations, and derivative warrant liability, exposing it to various financial risks - The Company's financial instruments consist of cash, accounts receivable, accounts payable and accrued liabilities, lease obligation, and derivative warrant liability[66] - Derivative warrant liability is carried at fair value and is classified within Level 3 of the fair value hierarchy[66] - The Company is exposed to foreign currency risk, interest rate risk, market risk, credit risk, and liquidity risk, with no changes in risk management policies since December 31, 2024[67] 15. Capital management Capital, defined as shareholders' equity, is managed to ensure liquidity for R&D and operations, aiming for going concern and optimal shareholder returns - The Company defines capital as shareholders' equity and manages it to support research and development and sustain future business development[68] - The objective is to ensure the entity continues as a going concern and maintain optimal returns to shareholders, with no changes in capital management during the period[68][69] 16. Commitments The Company has long-term commitments including $321,000 annually for officer employment and $227,122 for clinical trial and business activities Long-Term Commitments | Commitment Type | March 31, 2025 ($) | December 31, 2024 ($) | | :------------------------------------ | :------------------- | :-------------------- | | Management services – officers | 321,000 | 321,000 | - The Company has committed to payments totaling $227,122 (December 31, 2024 - $323,000) related to its clinical trial, manufacturing, and other regular business activities, expected over the next two years[71] 17. Segmented information XORTX Therapeutics Inc. operates as a single segment focused on hyperuricemia-related therapies, with all long-term assets located in Canada - The Company operates in one reportable operating segment: the development and commercialization of therapies to treat hyperuricemia related diseases[72] - All long-term assets of the Company are located in Canada[72]