Medicus Pharma Ltd(MDCX) - 2025 Q2 - Quarterly Report

Cover Page & Filer Information This section provides essential identification details for the quarterly report, including the company's filer status and outstanding common shares - The document is a Quarterly Report on Form 10-Q for MEDICUS PHARMA LTD. for the quarterly period ended June 30, 2025[2] - The company's securities (Common shares and Warrants) are registered on The Nasdaq Capital Market under symbols MDCX and MDCXW, respectively[3] Filer Status | Filer Status | Status | | :---------------------- | :---------- | | Large accelerated filer | ☐ | | Accelerated filer | ☐ | | Non-accelerated filer | ☒ | | Smaller reporting company | ☒ | | Emerging growth company | ☒ | - As of August 11, 2025, there were 17,816,266 common shares, no par value, issued and outstanding[6] Cautionary Note Regarding Forward-Looking Statements This section warns that the report contains forward-looking statements subject to substantial risks and uncertainties, which may cause actual results to differ materially - This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties, which may cause actual results, performance, or achievements to be materially different from those expressed or implied[9] - Forward-looking statements include those related to financial results, R&D progress, market acceptance, financing needs, market risks, intellectual property protection, product quality issues, product liability claims, and regulatory/legal risks[11] - The company undertakes no obligation to update or revise any forward-looking statements, except as required under applicable securities laws[10] Part I. Financial Information This section presents the unaudited condensed consolidated financial information of Medicus Pharma Ltd. for the reported periods Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements of Medicus Pharma Ltd. for the quarter ended June 30, 2025, including balance sheets, statements of operations and comprehensive loss, statements of changes in shareholders' equity, statements of cash flows, and accompanying notes detailing significant accounting policies, financial instrument fair values, share capital activities, and liquidity Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and shareholders' equity at specific reporting dates Condensed Consolidated Balance Sheet Highlights (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 | December 31, 2024 | Change (Absolute) | | :-------------------------- | :------------ | :---------------- | :---------------- | | Cash and cash equivalents | $9,669,546 | $4,164,323 | +$5,505,223 | | Total current assets | $10,996,731 | $5,378,307 | +$5,618,424 | | Total assets | $11,934,628 | $5,646,878 | +$6,287,750 | | Total current liabilities | $8,544,165 | $2,306,229 | +$6,237,936 | | Debentures | $4,700,000 | $- | +$4,700,000 | | Total liabilities | $8,685,918 | $2,512,174 | +$6,173,744 | | Total shareholders' equity | $3,248,710 | $3,134,704 | +$114,006 | Condensed Consolidated Statements of Operations and Comprehensive Loss This section outlines the company's financial performance, reporting operating expenses, net loss, and comprehensive loss over specified periods Statements of Operations Highlights (Three Months Ended June 30) | Metric | 2025 | 2024 | Change (Absolute) | | :---------------------------------------- | :------------ | :------------ | :---------------- | | Total operating expenses | $6,016,088 | $3,553,834 | +$2,462,254 | | Loss from operations | $(6,016,088) | $(3,553,834) | $(2,462,254) | | Net loss and comprehensive loss | $(6,176,084) | $(3,632,859) | $(2,543,225) | | Net loss per share (basic and diluted) | $(0.43) | $(0.44) | +$0.01 | | Weighted average common shares outstanding| 14,284,261 | 8,167,993 | +6,116,268 | Statements of Operations Highlights (Six Months Ended June 30) | Metric | 2025 | 2024 | Change (Absolute) | | :---------------------------------------- | :------------- | :------------ | :---------------- | | Total operating expenses | $11,142,362 | $5,261,192 | +$5,881,170 | | Loss from operations | $(11,142,362) | $(5,261,192) | $(5,881,170) |\ | Net loss and comprehensive loss | $(11,278,492) | $(5,340,217) | $(5,938,275) | | Net loss per share (basic and diluted) | $(0.81) | $(0.66) | $(0.15) | | Weighted average common shares outstanding| 13,853,305 | 8,122,333 | +5,730,972 | Condensed Consolidated Statements of Changes in Shareholders' Equity This section details the changes in the company's shareholders' equity, including share issuances, stock-based compensation, and net loss Shareholders' Equity Changes (Six Months Ended June 30, 2025) | Item | Shares | Common Shares Amount | Additional Paid-in Capital | Accumulated Deficit | Total Equity |\ | :---------------------------------------------------------------- | :----------- | :------------------- | :------------------------- | :------------------ | :----------- |\ | Balance as of December 31, 2024 | 11,816,721 | $30,518,195 | $1,520,412 | $(28,903,903) | $3,134,704 |\ | Issuance of common shares and warrants (Regulation A) | 1,490,000 | $2,076,507 | $1,612,474 | $- | $3,688,981 |\ | Issuance of common shares (SEPA offering costs) | 105,840 | $300,000 | $- | $- | $300,000 |\ | Issuance of common shares (warrant exercise) | 5,000 | $14,000 | $- | $- | $14,000 |\ | Stock-based compensation | - | $- | $112,277 | $- | $112,277 |\ | Net loss and comprehensive loss (Q1 2025) | - | $- | $- | $(5,102,408) | $(5,102,408) |\ | Issuance of common shares (equity financing, June 2025 Public Offering) | 2,260,000 | $3,961,899 | $2,234,495 | $- | $6,196,394 |\ | Issuance of common shares (warrant exercise) | 258,705 | $963,398 | $- | $- | $963,398 |\ | Stock-based compensation | - | $- | $117,448 | $- | $117,448 |\ | Net loss and comprehensive loss (Q2 2025) | - | $- | $- | $(6,176,084) | $(6,176,084) |\ | Balance as of June 30, 2025 | 15,936,266 | $37,833,999 | $5,597,106 | $(40,182,395) | $3,248,710 | Shareholders' Equity Changes (Six Months Ended June 30, 2024) | Item | Shares | Common Shares Amount | Additional Paid-in Capital | Accumulated Deficit | Total Equity |\ | :-------------------------------------- | :----------- | :------------------- | :------------------------- | :------------------ | :----------- |\ | Balance as of December 31, 2023 | 8,076,673 | $18,761,250 | $98,585 | $(17,748,387) | $1,111,448 |\ | Stock-based compensation | - | $- | $35,953 | $- | $35,953 |\ | Net loss and comprehensive loss (Q1 2024) | - | $- | $- | $(1,707,358) | $(1,707,358) |\ | Conversion of debt | 1,307,798 | $5,210,962 | $- | $- | $5,210,962 |\ | Issuance of common shares | 1,461,250 | $5,470,000 | $- | $- | $5,470,000 |\ | Stock-based compensation | - | $- | $585,442 | $- | $585,442 |\ | Net loss and comprehensive loss (Q2 2024) | - | $- | $- | $(3,632,859) | $(3,632,859) |\ | Balance as of June 30, 2024 | 10,846,721 | $29,442,212 | $719,980 | $(23,088,604) | $7,073,588 | Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities for the reporting periods Cash Flow Highlights (Six Months Ended June 30) | Cash Flow Activity | 2025 | 2024 | Change (Absolute) | | :---------------------------------- | :------------- | :------------ | :---------------- |\ | Net cash used in operating activities | $(9,409,825) | $(3,953,639) | $(5,456,186) |\ | Net cash provided by financing activities | $14,915,048 | $10,642,500 | +$4,272,548 |\ | Net increase in cash and cash equivalents | $5,505,223 | $6,688,861 | $(1,183,638) |\ | Cash and cash equivalents, end of period | $9,669,546 | $8,408,199 | +$1,261,347 | - Operating cash outflows significantly increased in 2025 due to higher R&D spending for the SKNJCT-003 study and increased general and administrative expenses related to IPO and U.S. reporting obligations[139] - Financing activities in 2025 were primarily driven by proceeds from common share and warrant issuances ($9.79M), Debenture issuance ($4.5M), and warrant exercises ($0.98M)[140] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Description of business This note describes Medicus Pharma Ltd.'s core business as a clinical-stage biotech company and its corporate structure - Medicus Pharma Ltd. is a clinical stage, multi-strategy life sciences, biotech company focused on investing in and accelerating clinical development programs of novel therapeutic assets[23] - The company was incorporated on April 30, 2008, in Ontario, Canada, and its head office is in W. Conshohocken, PA[24] - A 1-for-2 reverse share split was completed on October 28, 2024, reducing outstanding common shares from 21,693,560 to 10,846,721, in preparation for a U.S. national securities exchange listing[25][26] Note 2. Summary of significant accounting policies This note outlines the key accounting principles and estimates used in preparing the financial statements, including R&D expensing - The financial statements are prepared in conformity with US GAAP and SEC interim reporting rules, including normal recurring adjustments[27] - Key estimates include valuation of stock-based awards, incremental borrowing rates for operating lease liabilities, fair value of Debentures and Warrants, and valuation allowance for deferred tax assets[28] - All research and development costs are expensed as incurred, including salaries, benefits, and costs for preclinical studies and clinical trials[30] - The company operates as one reportable segment, focusing on advancing clinical development programs and opportunistically acquiring accretive assets[40][75] Note 3. Balance sheet components This note provides a detailed breakdown of specific balance sheet accounts, such as prepaid expenses and accrued liabilities Prepaid Expenses and Other Current Assets | Category | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Insurance | $244,105 | $583,561 | | Contract research organizations | $375,810 | $455,810 | | Professional services | $659,387 | $144,643 | | Prepaid services | $47,883 | $29,970 | | Total | $1,327,185| $1,213,984 | Accrued Expenses and Other Current Liabilities | Category | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Accrued legal fees | $1,040,620 | $495,016 | | Accrued compensation and benefits | $421,294 | $140,989 | | Accrued other | $366,398 | $126,830 | | Total | $1,828,312| $762,835 | Note 4. Leases This note details the company's operating lease arrangements, including right-of-use assets and lease liabilities - As of June 30, 2025, the Company had one operating lease for its corporate office, with a right-of-use asset of $220,999 and total lease liabilities of $266,155[47][48][49] Lease Information (Six Months Ended June 30, 2025) | Metric | Value | | :-------------------------- | :---------- | | Operating lease cost | $61,889 | | Operating cash flows used | $70,080 | | Remaining lease term (years)| 1.92 | | Discount rate | 10% | Note 5. Share capital This note describes the company's authorized and issued share capital, including details on various equity offerings and outstanding warrants - The Company has an unlimited number of authorized common shares with no par value, each entitled to one vote[50] - On June 28, 2024, all convertible notes (principal $5,172,500 plus accrued interest) were converted into 1,308,798 common shares[54] - A Tier II Regulation A offering closed on March 10, 2025, issuing 1,490,000 units (common shares + warrants) for gross proceeds of $4,172,000. Warrants have an exercise price of $2.80 and expire March 10, 2030[56] - A public offering closed on June 2, 2025, issuing 2,260,000 units (common shares + warrants) for gross proceeds of $7,006,000. Warrants have an exercise price of $3.10 and expire June 3, 2030[57] - The IPO completed on November 14, 2024, involved the sale of 970,000 units (common shares + warrants) at $4.125 per unit, generating $4,002,705 in gross proceeds. Public Warrants have an exercise price of $4.64 and expire November 15, 2029[59][60] Warrants Outstanding as of June 30, 2025 | Expiry Date | Exercise Price | Number Outstanding | | :---------------- | :------------- | :----------------- | | November 15, 2029 | $4.64 | 985,595 | | March 10, 2030 | $2.80 | 1,351,200 | | June 2, 2030 | $3.10 | 2,260,000 | - On February 10, 2025, the Company entered into a Standby Equity Purchase Agreement (SEPA) with YA II PN, Ltd. (Yorkville) to sell up to $15,000,000 of common shares over 36 months at 97% of market price. No sales were made under SEPA as of June 30, 2025[63] Note 6. Stock-based compensation This note explains the accounting for stock-based compensation, including the valuation methodology and expense recognition - The Company expenses stock-based compensation over the requisite service period based on the estimated grant-date fair value of awards, using the Black-Scholes option pricing model[32][148] Stock Option Transactions (as of June 30, 2025) | Metric | Value | | :------------------------------------ | :---------- | | Outstanding at December 31, 2024 | 1,185,000 | | Granted | 100,000 | | Outstanding at June 30, 2025 | 1,285,000 | | Exercisable at June 30, 2025 | 980,000 | | Unvested at June 30, 2025 | 305,000 | | Unrecognized compensation cost | $541,867 | | Weighted-average recognition period | 3.25 years | Stock-based Compensation Expense | Period | 2025 | 2024 | | :------------------------------------ | :---------- | :---------- | | Three months ended June 30 | $117,448 | $585,442 | | Six months ended June 30 | $229,725 | $621,395 | Note 7. Net loss per share This note presents the basic and diluted net loss per share, along with the treatment of potentially dilutive securities Net Loss Per Share (Basic and Diluted) | Period | 2025 | 2024 | | :---------------------------------------- | :------------ | :------------ | | Three months ended June 30 | $(0.43) | $(0.44) | | Six months ended June 30 | $(0.81) | $(0.66) | - Potentially dilutive securities (stock options, warrants, notes payable) were excluded from diluted net loss per share calculation as their inclusion would have been anti-dilutive[67] Note 8. Related party transactions This note discloses transactions and agreements with related parties, including compensation arrangements with key management - The Company has an agreement with RBx Capital, LP, a family office controlled by the Executive Chairman and CEO, for managerial positions[68] Related Party Transactions with RBx Capital, LP | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 |\ | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- |\ | Reimbursable salaries paid to RBx | $300,000 | $375,000 | $600,000 | $675,000 |\ | Additional expenses incurred by RBx | $64,046 | $38,770 | $104,911 | $124,178 |\ | Accounts payable to RBx (period end) | $121,273 (June 30, 2025) | N/A | N/A | $142,459 (Dec 31, 2024) | Note 9. Fair value measurements This note describes the company's fair value measurement hierarchy and the valuation of financial instruments like money market funds and debentures - Fair value is defined as an exit price in an orderly transaction between market participants, categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[70] Fair Value Measurements (June 30, 2025) | Category | Level 1 | Level 2 | Level 3 | Total | | :------------------------ | :------------ | :------ | :------------ | :------------ | | Money market funds | $8,273,495 | $- | $- | $8,273,495 | | Debentures | $- | $- | $4,700,000 | $4,700,000 | | Total measured at fair value | $8,273,495| $- | $4,700,000| $12,973,495| Fair Value Measurements (December 31, 2024) | Category | Level 1 | Level 2 | Level 3 | Total | | :------------------------ | :------------ | :------ | :------ | :------------ | | Money market funds | $4,164,323 | $- | $- | $4,164,323 | | Total measured at fair value | $4,164,323| $- | $- | $4,164,323| Note 10. Commitment and contingencies This note addresses the company's long-term commitments and potential contingent liabilities from legal claims - As of June 30, 2025, the Company had no long-term commitments[73] - Management does not consider the Company's exposure to various claims in the ordinary course of business to be material to the consolidated financial statements[74] Note 11. Segment reporting This note clarifies that the company operates as a single reportable segment, with the CEO as the chief operating decision-maker - The Company manages its business activities on a consolidated basis and operates as one reportable segment, focused on advancing clinical development and opportunistically acquiring assets[75] - The Chief Executive Officer serves as the chief operating decision-maker (CODM) and uses consolidated net loss to measure segment loss and allocate resources[75] Note 12. Debentures This note details the issuance and terms of the company's debentures, including interest rates and fair value accounting - On May 2, 2025, the Company issued three debentures totaling $5,000,000 in principal amount to Yorkville, at a discounted price of 90% for proceeds of $4,500,000[76] - The debentures accrue interest at an annual rate of 8% (potentially 18% upon default), mature on February 2, 2026, and are to be repaid using proceeds from the SEPA[76] - The Company elected the fair value option for the Debentures, initially recording them at fair value. A change in fair value of $200,000 was recognized as an expense in the statements of operations for the three and six months ended June 30, 2025[77] Note 13. Antev Agreement This note describes the definitive agreement to acquire Antev Limited, including the consideration and contingent payments - On June 29, 2025, the Company entered into a definitive agreement to acquire Antev Limited, a clinical stage biotech company, in exchange for 2,666,600 (approximately 17%) of the Company's common shares[78] - Antev is developing Teverelix, a next-generation GnRH antagonist, for cardiovascular high-risk prostate cancer patients and those with acute urinary retention due to enlarged prostate[78] - Antev shareholders are entitled to receive up to approximately $65,000,000 in additional contingent consideration upon achievement of certain FDA Phase 2 and New Drug Administration approvals[78] Note 14. Liquidity This note discusses the company's liquidity position, history of operating losses, and ongoing need for additional capital to fund operations - The Company has incurred operating losses and negative cash flows since inception, with an accumulated deficit of $40,182,395 as of June 30, 2025[79] - Substantial doubt exists about the Company's ability to continue as a going concern due to its history of losses and need for additional capital[85] - The Company has funded operations primarily through equity and debt financings, including a $15M Standby Equity Purchase Agreement (SEPA) with Yorkville, a $4.17M Regulation A offering, $4.5M from Debentures, and a $7.0M public offering in June 2025[79][80][81][82][83] - Subsequent to June 30, 2025, the Company sold 490,000 common shares under the SEPA for approximately $1.52M and received $3.752M from the exercise of 1,340,000 Regulation A Warrants[80][84] Note 15. Subsequent Events This note reports significant events that occurred after the balance sheet date, impacting the company's financial position and operations - On July 9 and July 14, 2025, the Company sold 155,000 and 335,000 common shares to Yorkville under the SEPA, generating approximately $509,000 and $1,012,000 in proceeds, respectively[87] - On July 14, 2025, an inducement agreement led to the exercise of 1,340,000 Regulation A Warrants, providing $3,752,000 to the Company and issuing new unregistered warrants to purchase up to 2,680,000 common shares[88] - Subsequent to June 30, 2025, the Company paid down a total of $1,802,468 on the Debentures[89] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Medicus Pharma Ltd.'s financial condition and results of operations for the three and six months ended June 30, 2025, compared to the prior year. It covers the company's business overview, recent financing activities, detailed analysis of operating expenses, and a discussion of liquidity and capital resources, highlighting the company's clinical stage status and ongoing need for financing Company Overview This section provides an overview of Medicus Pharma Ltd.'s business, clinical development programs, and strategic acquisitions - Medicus Pharma Ltd. is a clinical stage, multi-strategy life sciences, biotech company focused on accelerating clinical development of novel therapeutic assets and expanding its pipeline through acquisitions and partnerships[91] - The Company's wholly-owned subsidiary, SkinJect, Inc., is developing doxorubicin-containing dissolvable microneedle arrays (D-MNAs) for skin cancers, with the SKNJCT-003 Phase 2 clinical study for Basal Cell Carcinoma (BCC) currently underway in the US and expanding to Europe[93][97] - In May 2025, the Company received approval to commence clinical study (SKNJCT-004) in the UAE for non-invasive treatment of BCC, randomizing 36 patients across four clinical sites[98] - In June 2025, the Company submitted a product development plan to the FDA to treat external Squamous Cell Carcinoma (SCC) in horses, having received a Minor Use in Major Species (MUMS) designation[99] - In June 2025, the Company agreed to acquire Antev Limited, a UK-based clinical biotech company developing Teverelix for cardiovascular high-risk prostate cancer patients[100] The Share Consolidation This section explains the 1-for-2 reverse share split completed in October 2024 in preparation for a U.S. listing - On October 28, 2024, the Company completed a 1-for-2 reverse share split, reducing outstanding common shares from 21,693,560 to 10,846,721, in preparation for a U.S. listing[102][103] Initial Public Offering This section details the company's IPO in November 2024, including gross proceeds and issuance costs - The Company completed its IPO on November 14, 2024, selling 970,000 units (common share + warrant) at $4.125 per unit, generating $4.0 million in gross proceeds[104][105] - Total issuance costs for the IPO were $2.1 million, including underwriter and professional fees[105] Regulation A Offering This section describes the Tier II Regulation A offering completed in March 2025, including units issued and proceeds - On March 10, 2025, the Company completed a Tier II Regulation A offering, issuing 1,490,000 units at $2.80 per unit for gross proceeds of $4.2 million[106] - Each unit consisted of one common share and one warrant (exercise price $2.80, expiry March 10, 2030). As of June 30, 2025, 133,800 Regulation A Warrants were exercised for $374,640[106] Debentures This section outlines the issuance and terms of the $5,000,000 debentures issued in May 2025 - On May 2, 2025, the Company issued three debentures totaling $5,000,000 in principal amount at a discounted price of 90%, yielding $4,500,000 in proceeds[107] - The debentures accrue 8% annual interest (up to 18% upon default), mature on February 2, 2026, and are to be repaid using proceeds from the SEPA[107] June 2025 Public Offering This section details the public offering closed in June 2025, including gross proceeds and units issued - On June 2, 2025, the Company closed a public offering with gross proceeds of $7.0 million, issuing 2,260,000 units at $3.10 per unit[108] - Each unit included one common share and one warrant (exercise price $3.10, expiry June 2, 2030). No warrants from this offering were exercised as of June 30, 2025[108] Results of Operations This section analyzes the company's financial performance, focusing on changes in operating expenses and other income/expense General and administrative This section analyzes the changes in general and administrative expenses, including professional fees, salaries, and business development costs General and Administrative Expenses (Three Months Ended June 30) | Category | 2025 | 2024 | Change (Absolute) | | :-------------------------------------- | :------------ | :------------ | :---------------- | | Professional fees | $1,944,559 | $621,040 | +$1,323,519 | | Consulting fees | $383,270 | $483,380 | $(100,110) | | Salaries, benefits, and compensation | $908,599 | $303,390 | +$605,209 | | General office, insurance, administrative | $724,800 | $716,422 | +$8,378 | | Business development, investor relations| $615,296 | $152,444 | +$462,852 | | Total | $4,576,524| $2,276,676| +$2,299,848 | General and Administrative Expenses (Six Months Ended June 30) | Category | 2025 | 2024 | Change (Absolute) | | :-------------------------------------- | :------------ | :------------ | :---------------- | | Professional fees | $3,305,037 | $1,059,342 | +$2,245,695 | | Consulting fees | $668,216 | $939,194 | $(270,978) | | Salaries, benefits, and compensation | $1,378,393 | $540,359 | +$838,034 | | General office, insurance, administrative | $1,264,698 | $894,232 | +$370,466 | | Business development, investor relations| $1,080,240 | $229,530 | +$850,710 | | Total | $7,696,584| $3,662,657| +$4,033,927 | - Professional fees increased significantly due to increased legal and accounting fees related to regulatory requirements, U.S. domestic issuer status, multiple financing transactions, and the Antev acquisition[112] - Consulting fees decreased due to reduced business activity compared to the prior year's focus on the IPO[113] - Salaries, wages, and benefits increased due to an increase in headcount[114] - Business development and investor relations expenses rose due to increased marketing efforts as a Nasdaq-listed public entity[116] Research and development This section discusses the trends and drivers behind the company's research and development expenses Research and Development Expenses | Period | 2025 | 2024 | Change (Absolute) | | :-------------------------- | :------------ | :------------ | :---------------- | | Three months ended June 30 | $1,439,564 | $1,277,158 | +$162,406 | | Six months ended June 30 | $3,445,778 | $1,598,535 | +$1,847,243 | - R&D expenses increased primarily due to heightened clinical trial activity for the SKNJCT-003 study[120] - The Company expects R&D expenses to increase substantially as the SKNJCT-003 study and other trials continue[120] Other income (expense) This section details the components of other income and expense, including interest and changes in fair value of debentures Other Income (Expense) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 |\ | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- |\ | Interest income (expense) | $40,004 | $(79,025) | $63,870 | $(79,025) |\ | Change in fair value of Debentures| $(200,000) | $- | $(200,000) | $- |\ | Total other income (expense) | $(159,996) | $(79,025) | $(136,130) | $(79,025) | - Interest income in 2025 resulted from short-term money market investments, while 2024 interest expense was related to convertible note payables[122] - A $200,000 change in the fair value of Debentures was recognized as an expense for both the three and six months ended June 30, 2025, due to remeasurement at the reporting date[123] Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations, highlighting funding sources and going concern risks - The Company is a clinical stage development company with no current revenues from preclinical programs, relying on equity and debt financings for operations[124] - The Company expects to continue incurring significant operating losses, leading to substantial doubt about its ability to continue as a going concern within one year[127] - As of June 30, 2025, cash and cash equivalents were $9,669,546, up from $4,164,323 at December 31, 2024, with a working capital surplus of $2,452,566[129] - Financing activities during the six months ended June 30, 2025, included $9.79M from common shares and warrants, $4.5M from Debentures, and $0.98M from warrant exercises[129] Standby Equity Purchase Agreement This section describes the agreement with Yorkville for selling up to $15,000,000 of common shares over 36 months - The Company entered into a Standby Equity Purchase Agreement (SEPA) with YA II PN, Ltd. (Yorkville) on February 10, 2025, allowing the Company to sell up to $15,000,000 of common shares over 36 months[134] - Shares under the SEPA will be priced at 97% of the market price during a specified three-day pricing period, subject to certain conditions including SEC registration statement effectiveness and beneficial ownership limitations[135][136][137] Cash flows This section provides a summary and analysis of the company's cash flows from operating, investing, and financing activities Cash Flow Summary (Six Months Ended June 30) | Activity | 2025 | 2024 | Change (Absolute) | | :-------------------------------- | :------------- | :------------ | :---------------- |\ | Cash used in operating activities | $(9,409,825) | $(3,953,639) | $(5,456,186) |\ | Cash provided by financing activities | $14,915,048 | $10,642,500 | +$4,272,548 |\ | Net change in cash | $5,505,223 | $6,688,861 | $(1,183,638) |\ | Cash, end of period | $9,669,546 | $8,408,199 | +$1,261,347 | - Increased cash used in operating activities in 2025 was primarily due to higher R&D spending for SKNJCT-003 and increased general and administrative expenses related to IPO and U.S. reporting obligations[139] - Cash provided by financing activities in 2025 was driven by $9.79M from common shares/warrants, $4.5M from Debentures, and $0.98M from warrant exercises[140] Contractual Obligations This section identifies any significant contractual arrangements the company is committed to - The Company has no significant contractual arrangements other than those noted in its financial statements[141] Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements as of the reporting date - As of June 30, 2025, the Company has not entered into any off-balance sheet arrangements[142] Critical Accounting Policies This section outlines the accounting policies that require significant judgment and estimates from management Significant accounting judgments and estimates This section details the key judgments and estimates made by management, including going concern assessment and stock-based compensation valuation - Management's assessment of the Company's ability to continue as a going concern involves significant judgment about future outcomes and events[144] - Other important estimates include assumptions used in determining the valuation of stock-based compensation[145] Research and development This section reiterates the accounting policy for research and development costs, expensing them as incurred - All research and development costs are expensed as incurred, including salaries, employee benefits, and costs for preclinical studies and clinical trials[146] - Accruals for estimated R&D costs are recorded for work performed by third-party contractors, laboratories, and clinical trial sites, expensing upfront costs immediately[147] Stock-based compensation This section describes the accounting treatment for stock-based compensation, including valuation and expense recognition - Stock-based compensation is expensed over the requisite service period based on the estimated grant-date fair value of awards, using the Black-Scholes option pricing model[148] - The Company accounts for forfeitures as they occur, and all stock-based compensation costs are recorded in the statements of operations and comprehensive loss[148] Fair Value Measurements This section explains the company's approach to fair value measurements for financial instruments - Recurring fair value measurements primarily include cash and cash equivalents and Debentures, for which the fair value option was elected[149] - The fair value of Debentures is determined using a discounted cash flow approach and subsequently remeasured at each reporting period, with gains or losses recognized in the statements of operations[150] Updated share information This section provides the latest figures for issued and outstanding common shares, stock options, and warrants - As of June 30, 2025, the Company had 15,936,266 common shares issued and outstanding[152] - Additionally, there were 1,285,000 common shares issuable upon the exercise of outstanding stock options and 4,596,795 common shares issuable upon the exercise of three outstanding classes of warrants[152] Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk As a smaller reporting company, Medicus Pharma Ltd. is not required to provide detailed quantitative and qualitative disclosures regarding market risk in this Quarterly Report on Form 10-Q - The Company is not required to provide information on market risk disclosures as it is a smaller reporting company[153] Item 4. Controls and Procedures This section details the evaluation of Medicus Pharma Ltd.'s disclosure controls and procedures, identifying material weaknesses in internal control over financial reporting as of June 30, 2025. It also outlines management's commitment to remediation efforts and reports on changes in internal control during the quarter Evaluation of Disclosure Controls and Procedures This section details the assessment of the company's disclosure controls and procedures, noting identified material weaknesses - As of June 30, 2025, the Company's disclosure controls and procedures were deemed not effective due to identified material weaknesses in internal control over financial reporting[154] - Material weaknesses include a lack of precision in reviewing materials for US GAAP transaction recording and a lack of formalized policies for the overall IT system environment (security, patches, user access)[156] - Management is committed to remediating these weaknesses by improving review procedures for financial reporting and implementing IT system environment policies[157] Changes in Internal Control over Financial Reporting This section reports on measures implemented to enhance internal control over financial reporting and their ongoing evaluation - During the quarter ended June 30, 2025, the Company implemented measures to enhance internal control over financial reporting, but their operating effectiveness is still being evaluated[158] - The material weaknesses cannot be considered fully remediated until these enhancements have operated for a sufficient period to confirm their effectiveness[158] Part II. Other Information This section provides additional disclosures not covered in the financial statements, including legal proceedings, risk factors, and equity sales Item 1. Legal Proceedings This section confirms that Medicus Pharma Ltd. is not currently involved in any material litigation, arbitration, or governmental proceedings, nor have its management team members been subject to such proceedings in their capacity as such during the preceding 12 months - There is no material litigation, arbitration, or governmental proceeding currently pending against the Company or its management team[160] Item 1A. Risk Factors This section refers to the risk factors detailed in the Company's 2024 Annual Report on Form 10-K, stating that these factors could significantly impact the business, financial condition, and results of operations. It also notes that no material changes to these risk factors have occurred as of the date of this Quarterly Report - Risk factors described in the Company's 2024 Annual Report on Form 10-K could materially affect the business, financial condition, and results of operations[161] - As of the date of this Quarterly Report, there have been no material changes to the disclosed risk factors[161] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on the unregistered sales of equity securities, specifically the issuance of common shares upon the exercise of Regulation A Warrants, and confirms no material change in the use of proceeds from the Regulation A offering - The Company issued 128,800 common shares upon the exercise of 128,800 Regulation A Warrants during the period covered by this Form 10-Q[162] - There has been no material change in the use of proceeds described in the final offering circular for the Regulation A offering[162] Item 3. Defaults Upon Senior Securities This section states that there have been no defaults upon senior securities during the reporting period - There are no defaults upon senior securities to report[164] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to Medicus Pharma Ltd.'s operations - Mine safety disclosures are not applicable to the Company[165] Item 5. Other Information This section confirms that there is no other information to report under this item - There is no other information to report under this item[166] Item 6. Exhibits This section lists the exhibits filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q, including various agreements, bylaws, certifications, and XBRL documents - Exhibits include the Share Exchange Agreement with Antev Limited, Bylaws, Articles of Amendment, various forms of Debentures and Warrants, Securities Purchase Agreement with YA II PN, Ltd., Employment Agreement, and certifications from executive officers[168] - The report also includes Inline XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, Presentation Linkbase, and Cover Page Interactive Data File[168] Part III. Signatures This section contains the required signatures from the company's principal executive and financial officers, certifying the report's accuracy - The report is signed by Dr. Raza Bokhari, Executive Chairman and Chief Executive Officer (Principal Executive Officer), and James Quinlan, Chief Financial Officer (Principal Financial and Accounting Officer), on August 11, 2025[172]