Eupraxia Pharmaceuticals Inc(EPRX) - 2025 Q2 - Quarterly Report

Consolidated Financial Statements This section presents the company's financial position, performance, and cash flows through its balance sheets, statements of operations, shareholders' equity, and cash flows Consolidated Balance Sheets As of June 30, 2025, total assets and shareholders' equity decreased, driven by a significant reduction in cash, while liabilities also declined Consolidated Balance Sheets | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :-------------------------------- | :------------ | :---------------- | | ASSETS | | | | Cash | $19,765,644 | $33,101,294 | | Total current assets | $22,829,767 | $34,436,678 | | Property and equipment, net | $655,578 | $357,893 | | Total assets | $23,595,934 | $34,942,355 | | LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | | | | Total liabilities | $2,618,381 | $3,103,386 | | Total shareholders' equity | $20,977,553 | $31,838,969 | - The company's cash balance decreased by approximately $13.3 million from December 31, 2024, to June 30, 2025[3] - Property and equipment, net, increased by approximately $297.7 thousand, indicating capital expenditures[3] Consolidated Statements of Operations and Comprehensive Loss For the three and six months ended June 30, 2025, net losses increased due to higher general and administrative and R&D expenses, and a significant foreign exchange loss Consolidated Statements of Operations and Comprehensive Loss | Metric | Three months ended June 30, 2025 ($) | Three months ended June 30, 2024 ($) | Six months ended June 30, 2025 ($) | Six months ended June 30, 2024 ($) | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and administrative expenses | $3,067,484 | $2,583,126 | $6,341,878 | $5,101,149 | | Research and development expenses | $5,196,615 | $3,971,975 | $9,046,441 | $8,147,428 | | Total expenses | $8,264,099 | $6,555,101 | $15,388,319 | $13,248,577 | | Net loss for the period | $(8,747,683) | $(6,063,894) | $(15,514,958) | $(12,220,827) | | Loss per share – basic and diluted | $(0.26) | $(0.17) | $(0.47) | $(0.37) | - Foreign exchange loss significantly increased, from $(75,041) to $(733,961) for the three months ended June 30, 2025, and from $(218,769) to $(682,599) for the six months ended June 30, 2025[5] - Interest income decreased for both the three-month and six-month periods ended June 30, 2025, compared to 2024[5] Consolidated Statements of Shareholders' Equity (Deficit) Shareholders' equity decreased from $31.8 million to $21.0 million, primarily due to net loss, despite share issuances and share-based payments Consolidated Statements of Shareholders' Equity (Deficit) | Component | Balance, Dec 31, 2024 ($) | Share-based payments ($) | Redemption of warrants ($) | Redemption of options ($) | Net loss for the period ($) | Foreign currency translation adjustment ($) | Balance, Jun 30, 2025 ($) | | :-------------------------- | :-------------------- | :------------------- | :--------------------- | :-------------------- | :---------------------- | :-------------------------------------- | :-------------------- | | Preferred shares Amount | $31,705,219 | — | — | — | — | — | $31,705,219 | | Common shares Amount | $116,360,066 | — | $458,047 (Q1) / $239,200 (Q2) | $22,175 (Q1) / $37,294 (Q2) | — | — | $117,116,782 | | Additional paid-in capital | $20,503,904 | $1,493,407 (Q1) / $1,117,248 (Q2) | $(41,641) (Q1) / $(21,745) (Q2) | $(8,658) (Q1) / $(14,971) (Q2) | — | — | $23,027,544 | | Deficit | $(131,003,831) | — | — | — | $(6,762,608) (Q1) / $(8,740,916) (Q2) | — | $(146,507,355) | | Accumulated other comprehensive loss | $(4,160,555) | — | — | — | — | $38,164 (Q1) / $1,335,022 (Q2) | $(2,787,369) | | Total Shareholders' Equity | $31,838,969 | $1,493,407 (Q1) / $1,117,248 (Q2) | $416,406 (Q1) / $217,455 (Q2) | $13,517 (Q1) / $22,323 (Q2) | $(6,767,275) (Q1) / $(8,747,683) (Q2) | $38,164 (Q1) / $1,335,022 (Q2) | $20,977,553 | - The company's accumulated deficit increased significantly from $(131,003,831) at December 31, 2024, to $(146,507,355) at June 30, 2025, reflecting the net losses incurred[9] - Share-based payments contributed $2,610,655 to additional paid-in capital during the six months ended June 30, 2025[9] Consolidated Statements of Cash Flows Cash and cash equivalents significantly decreased due to increased operating cash outflow and higher equipment acquisition, with reduced financing inflows compared to the prior year Consolidated Statements of Cash Flows | Cash Flow Activity | Six months ended June 30, 2025 ($) | Six months ended June 30, 2024 ($) | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(15,514,958) | $(12,220,827) | | Cash used in operating activities | $(14,318,325) | $(13,832,552) | | Cash provided by (used in) investing activities | $(335,269) | $10,873 | | Cash provided by financing activities | $669,701 | $18,654,405 | | Increase (decrease) in cash and cash equivalents | $(13,983,893) | $4,832,726 | | Cash, end of period | $19,765,644 | $23,316,105 | - Operating cash outflow increased from $(13,832,552) in 2024 to $(14,318,325) in 2025[11] - Investing activities shifted from a cash inflow of $10,873 in 2024 to a cash outflow of $(335,269) in 2025, mainly due to higher equipment acquisition[11] Notes to the Consolidated Financial Statements 1. Nature of Business and Going Concern Eupraxia Pharmaceuticals Inc. is a clinical-stage biotechnology company with no revenue, significant losses, and an accumulated deficit, raising going concern doubts without additional funding - Eupraxia Pharmaceuticals Inc. is a clinical stage biotechnology company leveraging its proprietary Diffusphere™ technology to optimize drug delivery[16] - The company has not yet generated revenue from operations and incurred a net loss of $15,514,958 during the six months ended June 30, 2025, with an accumulated deficit of $146,507,355[17] - The company's continued operations are dependent on its ability to generate future cash flows or obtain additional funding, which may cast substantial doubt about its ability to continue as a going concern[19] 2. Basis of Presentation These unaudited interim consolidated financial statements are presented in U.S. dollars, prepared under U.S. GAAP and SEC rules, and should be read with the 2024 audited statements - The financial statements are presented in U.S. dollars and prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP")[21] - These unaudited interim consolidated financial statements do not include all the information and footnotes required for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2024[22] 3. Upcoming Accounting Standards and Interpretations The Company has reviewed recent accounting pronouncements and expects no material impact on its condensed consolidated financial statements - The Company concluded that recent accounting pronouncements are either not applicable or are not expected to have a material impact on its financial statements[24] 4. Amounts Receivable Amounts receivable decreased from $228,872 to $134,607, primarily due to the absence of other refundable tax credits in 2025 Amounts Receivable | Receivable Type | June 30, 2025 ($) | December 31, 2024 ($) | | :---------------------- | :------------ | :---------------- | | GST/HST recoverable | $134,607 | $82,097 | | Other refundable tax credits | — | $146,775 | | Total | $134,607 | $228,872 | - Other refundable tax credits, which represented tax incentives for R&D costs incurred by Eupraxia Australia, were $0 at June 30, 2025, down from $146,775 at December 31, 2024[25] 5. Property and Equipment The net book value of property and equipment significantly increased from $357,893 to $655,578, driven by substantial additions, particularly in lab equipment Property and Equipment | Category | Net Book Value (Dec 31, 2024) ($) | Net Book Value (Jun 30, 2025) ($) | | :------------------- | :---------------------------- | :---------------------------- | | Computers | $23,057 | $77,656 | | Office furniture and equipment | $14,109 | $13,436 | | Leasehold Improvements | $4,182 | $2,005 | | Lab Equipment | $316,545 | $562,481 | | Total | $357,893 | $655,578 | - Additions to property and equipment totaled $335,269 during the six months ended June 30, 2025, with lab equipment accounting for $271,143 of this amount[26] - Depreciation expense for the six months ended June 30, 2025, was $65,173, allocated between general and administrative ($5,189) and research and development ($59,984)[26] 6. Right-of-Use Asset The right-of-use asset decreased from $67,023 to $32,747 due to depreciation, partially offset by foreign exchange, with the office lease extended to November 2025 Right-of-Use Asset | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :---------------- | :------------ | :---------------- | | Balance, beginning | $67,023 | $46,660 | | Depreciation | $(36,745) | $(57,687) | | Lease extension | — | $78,580 | | Foreign exchange | $2,469 | $(530) | | Balance, ending | $32,747 | $67,023 | - Depreciation expense for the right-of-use asset for the six months ended June 30, 2025, was $36,745[28] - The lease for the office space was extended until November 30, 2025, with the extension increasing the right-of-use asset by $78,580 in 2024[28] 7. Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities decreased from $3.0 million to $2.6 million, primarily due to the absence of employee bonus payable, despite increased R&D payables Accounts Payable and Accrued Liabilities | Category | June 30, 2025 ($) | December 31, 2024 ($) | | :-------------------------- | :------------ | :---------------- | | Research and development | $1,479,856 | $573,465 | | General and administrative | $1,074,642 | $943,376 | | Wages and payroll remittances | $28,818 | $20,705 | | Employee bonus payable | — | $1,493,981 | | Total | $2,583,316 | $3,031,527 | - Research and development accounts payable and accrued liabilities increased by over $900,000 from December 31, 2024, to June 30, 2025[29] 8. Loans Payable The Company's loans payable balance was reduced to $0 as of June 30, 2025, indicating full repayment of the loan agreement Loans Payable | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :---------------------- | :------------ | :---------------- | | Balance, beginning | $— | $62,709 | | Loan repayment | — | $(62,651) | | Foreign exchange adjustment | — | $(58) | | Balance, ending | $— | $— | - The loan agreement, which accrued interest at 5.84% per annum, was fully repaid by December 31, 2024[31] 9. Lease Liability The lease liability decreased to $35,065 with a remaining term of 0.42 years, and subleasing generated income, reducing G&A expenses Lease Liability | Lease Metric | Three months ended June 30, 2025 ($) | Three months ended June 30, 2024 ($) | Six months ended June 30, 2025 ($) | Six months ended June 30, 2024 ($) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease expense | $21,120 | $16,023 | $41,488 | $32,291 | | Variable lease expense | $18,040 | $17,803 | $35,438 | $35,866 | | Weighted average remaining lease term (years) | 0.42 | 1.42 | 0.42 | 1.42 | | Weighted average discount rate | 9.02% | 9.02% | 9.02% | 9.02% | | Present value of lease liabilities (June 30, 2025) | $35,065 | N/A | $35,065 | N/A | - Subleased amounts reduced general and administrative expenses by $7,086 for the three months and $13,919 for the six months ended June 30, 2025[34] 10. Auritec License Agreement Eupraxia LLC holds an exclusive license from Auritec for its Plexis Platform technology, involving an upfront fee, milestone payments up to $25 million, and a 4% royalty on net sales - Eupraxia LLC has an exclusive license from Auritec for the Plexis Platform to deliver fluticasone in all medical fields except otolaryngology and eye-related conditions[35] - The agreement includes an upfront fee of $5,000,000 (already paid) and up to $30,000,000 in milestone payments, with $5,000,000 paid in 2024 upon successful completion of a Phase 2b study[36][38] Auritec License Agreement Milestone Payments | Milestone Event | Milestone Payment ($) | | :------------------------------------------------------------------------------------------------ | :---------------- | | First OA Regulatory Approval | $5,000,000 | | Second OA Regulatory Approval | $5,000,000 | | Non-OA Indication Regulatory Approval | $10,000,000 | | First calendar year in which aggregate Net Sales by Eupraxia USA, its affiliates and sublicenses exceed $500,000,000 | $5,000,000 | | Maximum amount payable | $25,000,000 | - Eupraxia LLC also agreed to pay Auritec 20% of sublicensing royalties and a percentage (10% to 30%) of Non-Royalty Monetization Revenue, up to a maximum of $100,000,000[39] 11. Convertible Debt The SVB convertible debt was fully repaid by September 2024, and a new CDN$12 million facility with Yabema Capital was terminated in October 2024 - The CDN$10,000,000 convertible debt agreement with Silicon Valley Bank (SVB) matured on June 21, 2024, and the remaining balance was fully paid by September 11, 2024, extinguishing the liability[40][42] - A new CDN$12 million convertible debt facility with Yabema Capital Limited was entered into on August 1, 2024, but was terminated and all security interests discharged on October 31, 2024, due to the closing of a Convertible Preferred Share Offering[43][45] 12. Share Capital and Other Components of Equity This section details changes in common and preferred shares, equity-based compensation, warrant and option exercises, and the impact of preferred shares on loss per share a) Authorized The Company is authorized to issue an unlimited number of Common shares and Preferred shares - The Company is authorized to issue an unlimited number of Common shares (no par value, one vote per share) and an unlimited number of Preferred shares (no par value, none issued to date)[47] b) Issued (Common Shares) During the six months ended June 30, 2025, common shares were issued from warrant and option exercises, following a significant public offering in 2024 - During the six months ended June 30, 2025, 300,000 common shares were issued from warrant exercises for gross proceeds of $633,861, and 17,965 common shares were issued from option exercises for gross proceeds of $35,840[47] - In 2024, the Company issued 8,260,435 common shares through an overnight marketed public offering for aggregate gross proceeds of $25,026,073[47] c) Issued (Preferred Shares) On October 31, 2024, the Company issued 8,905,638 convertible preferred shares in a private placement for $31.9 million, convertible into common shares under specific conditions - On October 31, 2024, the Company issued 8,905,638 convertible preferred shares in a non-brokered private placement for aggregate gross proceeds of $31,997,837[48] - Each Preferred Share is convertible into one common share at the holder's option and mandatorily convertible upon certain conditions, including the common shares trading at CDN$15.00 or 75% holder consent[49][50] - Preferred Shares will not initially be entitled to dividends but will receive quarterly dividends (1.5% in additional Preferred Shares or 2% cash) after the third anniversary of closing, subject to shareholder approval[52] d) Omnibus Incentive Plan The 2025 Omnibus Incentive Plan allows for equity awards up to 18.5% of outstanding shares, with certain options repriced in April 2025, resulting in additional share-based payment expense Omnibus Incentive Plan Metrics | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Options Outstanding | 5,873,155 | 5,307,870 | | Weighted average exercise price (CDN$) | $5.05 | $5.50 | | Share-based payments (six months ended) ($) | $2,610,655 | $1,688,050 | | Unrecognized stock-based compensation expense ($) | $2,274,225 | N/A | - The 2025 Omnibus Incentive Plan, ratified by shareholders on June 2, 2025, allows for various equity awards, with the number of Common Shares available for issuance being a rolling maximum of 18.5% of issued and outstanding shares[53] - On April 25, 2025, 258,450 options with exercise prices ranging from CDN$6.75 to CDN$8.00 were repriced to CDN$5.05, resulting in an additional share-based payment expense of $112,804[54] e) Warrants Warrants outstanding decreased to 8,507,977 as of June 30, 2025, with 300,000 warrants exercised during the six-month period Warrants Metrics | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Warrants Outstanding | 8,507,977 | 8,807,977 | | Weighted average exercise price (CDN$) | $5.56 | $5.48 | | Warrants exercised (six months ended) | 300,000 | 80,243 | | Warrants expired (six months ended) | — | 231,110 | - As of June 30, 2025, the majority of outstanding warrants have expiry dates in March and April 2026, with exercise prices of CDN$11.20, CDN$3.00, and CDN$2.05[60] f) Class B Non-Voting shares The Company issued 225 non-voting Class B shares to its Chief Scientific Officer, exchangeable into 562,500 common shares under specific conditions - The Company issued 225 non-voting Class B shares in Eupraxia Pharma Inc. to its Chief Scientific Officer, representing 5% of outstanding securities, in exchange for AMDM Holdings Inc[61] - Each Class B Share is exchangeable into 2,500 common shares of the Company (totaling 562,500 common shares), with exchangeable conditions including the Chief Scientific Officer's election or forced exchange by the Company under specific circumstances[62] g) Earnings (loss) per Share Due to preferred share classification, an implied dividend was calculated, leading to an adjusted loss attributable to common shareholders and increased loss per share Earnings (loss) per Share | Metric | Three months ended June 30, 2025 ($) | Three months ended June 30, 2024 ($) | Six months ended June 30, 2025 ($) | Six months ended June 30, 2024 ($) | | :-------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Loss attributable to the Owners of the Company | $(8,740,916) | $(6,007,216) | $(15,503,524) | $(12,050,254) | | Less: implied dividend on Preferred Shares | $643,424 | — | $1,263,940 | — | | Adjusted Loss attributable to the Owners of the Company | $(9,384,340) | $(6,007,216) | $(16,767,464) | $(12,050,254) | | Loss per Share - Basic and Diluted | $(0.26) | $(0.17) | $(0.47) | $(0.37) | - Due to the classification of Preferred Shares as increasing rate preferred stock with dividends not declared until the third anniversary, the Company calculated an implied dividend in determining loss attributable to common shareholders[63] 13. General and Administrative Expenses General and administrative expenses increased for both the three and six months ended June 30, 2025, driven by higher office expenses, travel, and salaries, despite reduced professional fees General and Administrative Expenses | Expense Category | Three months ended June 30, 2025 ($) | Three months ended June 30, 2024 ($) | Six months ended June 30, 2025 ($) | Six months ended June 30, 2024 ($) | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Office expenses | $208,805 | $94,670 | $448,921 | $205,979 | | Professional fees | $631,076 | $255,354 | $1,078,526 | $1,357,152 | | Salaries and benefits | $735,139 | $546,270 | $1,445,070 | $1,068,146 | | Share based payments | $741,510 | $913,317 | $1,868,543 | $1,067,944 | | Total expenses | $3,067,484 | $2,583,126 | $6,341,878 | $5,101,149 | - Share-based payments within G&A increased significantly for the six months ended June 30, 2025, to $1,868,543 from $1,067,944 in the prior year[64] - Professional fees decreased for the six-month period from $1,357,152 in 2024 to $1,078,526 in 2025[64] 14. Research and Development Expenses Research and development expenses increased for both periods in 2025, driven by higher preclinical and clinical costs and increased salaries, despite lower manufacturing and analytical costs Research and Development Expenses | Expense Category | Three months ended June 30, 2025 ($) | Three months ended June 30, 2024 ($) | Six months ended June 30, 2025 ($) | Six months ended June 30, 2024 ($) | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Preclinical | $1,103,078 | $704,653 | $1,334,355 | $966,289 | | Clinical | $1,195,516 | $334,399 | $1,899,601 | $1,367,359 | | Manufacturing & analytical | $1,109,711 | $1,204,094 | $2,422,356 | $2,950,838 | | Salaries and benefits | $972,471 | $910,407 | $1,921,747 | $1,778,087 | | Share based payments | $375,738 | $561,603 | $742,112 | $620,106 | | Total expenses | $5,196,615 | $3,971,975 | $9,046,441 | $8,147,428 | - Clinical R&D expenses saw a substantial increase, more than tripling for the three-month period and increasing by over $500,000 for the six-month period in 2025 compared to 2024[65] - Manufacturing & analytical costs decreased for both periods in 2025 compared to 2024[65] 15. Commitments and Contingencies The Company has potential future milestone, royalty, and R&D funding payments under license agreements, contingent on specific achievements and not yet accrued - The Company may be required to make milestone, royalty, and other R&D funding payments under agreements with third parties (e.g., Auritec License Agreement), contingent upon the achievement of specific development, regulatory, and/or commercial milestones[68] - The Company has not accrued these contingent payments as of June 30, 2025, due to the uncertainty of milestone achievement[68] - Service contracts with vendors may include cancellation fees ranging from 15% to 100% of the next service milestone if terminated[68] 16. Segmented Information The Company operates as a single reportable segment, with performance assessed through preclinical and clinical research goals, net loss, and cash flows, with most assets in Canada Segmented Information | Segment Expense Category | Six months ended June 30, 2025 ($) | Six months ended June 30, 2024 ($) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Direct external research and development costs: EP-104GI | $4,274,921 | $1,824,740 | | Salaries and benefits | $3,366,817 | $2,846,233 | | Share based payments | $2,610,655 | $1,688,049 | | Total segment expenses | $15,388,319 | $13,248,577 | | Net loss for the period | $(15,514,958) | $(12,220,827) | - The Company operates as a single reportable segment, managed by the Chief Executive Officer on a consolidated basis[69] - Performance is assessed through the achievement of pre-clinical and clinical research goals, net loss, and cash flows, as the Company does not currently generate revenue[70][71] 17. Financial Instruments The Company's financial instruments include cash, receivables, and payables, facing liquidity risk from cash usage and currency risk from US and Australian dollar transactions Financial Instruments | Financial Instrument | June 30, 2025 ($) | December 31, 2024 ($) | | :-------------------------------- | :------------ | :---------------- | | Cash | $19,765,644 | $33,101,294 | | Amounts receivable | $134,607 | $228,872 | | Accounts payable and accrued liabilities | $2,583,316 | $3,031,527 | - The Company's primary financial instruments are cash, amounts receivable, and accounts payable and accrued liabilities[72] - Liquidity risk is managed by ensuring sufficient cash to meet liabilities, but there is no assurance of future funding availability[73] - Currency risk arises from transactions in US dollars and Australian dollars; a 10% change in US dollar exchange rates would impact profit or loss by approximately $1,021,122 as of June 30, 2025[76][77] 18. Interest Expense The Company reported no interest expense for the three and six months ended June 30, 2025, reflecting the full repayment of the SVB debt facility Interest Expense | Expense Category | Three months ended June 30, 2025 ($) | Three months ended June 30, 2024 ($) | Six months ended June 30, 2025 ($) | Six months ended June 30, 2024 ($) | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest on SVB debt facility | $— | $281,319 | $— | $601,637 | | Other interest and accretion | $— | $526 | $— | $1,348 | | Total | $— | $281,845 | $— | $602,985 | - The absence of interest expense in 2025 is due to the full repayment of the Silicon Valley Bank debt facility by September 2024[42][81] 19. Supplemental Disclosure with Respect to Cash Flows The Company paid no interest during the three and six months ended June 30, 2025, a significant decrease from the prior year, and no non-cash transactions occurred Supplemental Disclosure with Respect to Cash Flows | Cash Flow Item | Three months ended June 30, 2025 ($) | Three months ended June 30, 2024 ($) | Six months ended June 30, 2025 ($) | Six months ended June 30, 2024 ($) | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Interest paid | $nil | $199,191 | $nil | $361,386 | | Interest received | $257,031 | $401,226 | $565,219 | $637,595 | - No non-cash transactions occurred for the three and six months ended June 30, 2025, and June 30, 2024[83] 20. Subsequent Event On July 15, 2025, the Company renewed its Victoria, BC facility lease for an additional twelve months, with an option for a further twelve-month renewal - On July 15, 2025, the Company renewed its lease for its Victoria, BC facility for an additional twelve months, commencing December 1, 2025, and ending November 30, 2026[84] - The Renewal Agreement also includes an option for the Company to renew the lease for a further twelve months, from December 1, 2026, to November 30, 2027[84]