Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

 

 

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

As at and for the three and six months ended June 30, 2024 and 2023

 

(Unaudited - expressed in U.S. Dollars)

 

 

 

 

 

 

 

 

 

 

 

XORTX THERAPEUTICS INC.

Condensed Interim Consolidated Statements of Financial Position

(Unaudited - expressed in U.S. Dollars)

 

   Note  June 30,
2024
   December 31,
2023
 
       $    $ 
Assets             
              
Current             
Cash  5   3,078,472    3,447,665 
Accounts receivable      22,807    60,711 
Prepaid expenses  6   207,290    236,966 
Deferred share issuance costs      48,104    323,441 
              
Total Current Assets      3,356,673    4,068,783 
Non-current             
Contract payments  7   1,200,000    1,200,000 
Intangible assets  8   168,911    175,254 
Property and equipment  9   73,794    23,927 
              
Total Assets      4,799,378    5,467,964 
              
Liabilities             
              
Current             
Accounts payable and accrued liabilities  10,13   437,938    283,428 
Derivative warrant liability  12(g)   1,573,000    531,000 
Lease obligation  11   83,706    11,510 
              
Total Liabilities      2,094,644    825,938 
              
Shareholders’ Equity             
              
Share capital  12   17,870,948    17,056,535 
Reserves  12   5,565,422    5,468,257 
Obligation to issue shares  8(c)   24,746    24,746 
Accumulated other comprehensive loss      (52,605)   (52,605)
Accumulated deficit      (20,703,777)   (17,854,907)
              
Total Shareholders’ Equity      2,704,734    4,642,026 
              
Total Liabilities and Shareholders’ Equity      4,799,378    5,467,964 

 

Nature of Operations (Note 1)

Commitments (Note 16)

 

 

/s/ “Allen Davidoff”   /s/ “Paul Van Damme”
Director   Director

 

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

 2 

 

XORTX THERAPEUTICS INC.

Condensed Interim Consolidated Statements of Comprehensive Loss

For the three and six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

 

 

      Three months ended
June 30
   Six months ended
June 30
 
   Note  2024   2023   2024   2023 
      $   $   $   $ 
Expenses                       
                        
Research and development  13   67,683    667,913    141,326    1,714,870 
Consulting, wages and benefits  13   360,617    343,606    585,338    527,918 
Directors’ fees  13   46,371    43,204    85,532    87,442 
Investor relations      502,265    223,334    941,670    403,622 
Professional fees  13   274,635    214,425    394,845    355,283 
General and administrative      92,258    90,299    167,178    191,798 
Public company costs      56,053    47,371    85,736    94,732 
Travel      16,728    68,765    18,335    124,149 
Amortization of property and equipment  9   26,885    18,328    47,131    36,434 
Amortization of intangible assets  8   6,164    13,692    18,050    62,433 
Share-based payments  12(f),13   44,031    30,769    97,165    70,319 
                        
Loss before other items      (1,493,690)   (1,761,706)   (2,582,306)   (3,669,000)
                        
Fair value adjustment on derivative warrant liability  12(g)   1,645,548    -    (79,244)   - 
Foreign exchange (loss)/gain      (17,744)   (3,494)   (30,388)   4,963 
Interest income      35,952    73,312    67,554    140,114 
Transaction costs on derivative warrant liability  12(b)   -    -    (224,486)   - 
                        
Net income (loss) and comprehensive income (loss) for the period      170,066    (1,691,888)   (2,848,870)   (3,523,923)
                        
Basic and diluted income (loss) per common share      0.06    (0.85)   (1.07)   (1.79)
                        
Weighted average number of common shares outstanding                       
Basic      2,903,565    1,998,848    2,666,417    1,964,341 
Diluted      2,903,565    1,998,848    2,666,417    1,964,341 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

 3 

 

XORTX THERAPEUTICS INC.

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited - expressed in U.S. Dollars)

 

 

   Number of common shares   Share
capital
   Reserves   Obligation to issue shares   Accumulated Deficit   Accumulated other comprehensive (loss) income   Total 
       $   $   $   $   $   $ 
                             
Balance, December 31, 2022   1,670,071    16,524,354    6,197,158    24,746    (15,696,842)   (52,605)   6,996,811 
                                    
Reclassification of derivative warrant liability   -    -    3,854,403    -    -    -    3,854,403 
Pre-funded warrants exercised   328,777    532,181    (531,885)   -    -    -    296 
Share-based payments   -    -    70,319    -    -    -    70,319 
Comprehensive loss for the period   -    -    -    -    (3,523,923)   -    (3,523,923)
                                    
Balance, June 30, 2023   1,998,848    17,056,535    9,589,995    24,746    (19,220,765)   (52,605)   7,397,906 
                                    
Reclassification of derivative warrant liability   -    -    (4,172,403)   -    -    -    (4,172,403)
Share-based payments   -    -    50,665    -    -    -    50,665 
Comprehensive income for the period   -    -    -    -    1,365,858    -    1,365,858 
                                    
Balance, December 31, 2023   1,998,848    17,056,535    5,468,257    24,746    (17,854,907)   (52,605)   4,642,026 
                                    
Shares issued pursuant to private placement   899,717    1,032,549    -    -    -    -    1,032,549 
Warrants exercised   5,000    21,814    -    -    -    -    21,814 
Share issuance costs   -    (239,950)   -    -    -    -    (239,950)
Share-based payments   -    -    97,165    -    -    -    97,165 
Comprehensive loss for the period   -    -    -    -    (2,848,870)   -    (2,848,870)
                                    
Balance, June 30, 2024   2,903,565    17,870,948    5,565,422    24,746    (20,703,777)   (52,605)   2,704,734 

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

 

 

 

 

 

 4 

 

XORTX THERAPEUTICS INC.

Condensed Interim Consolidated Statements of Cash Flows

For the six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

 

 

   Six months ended June 30 
   2024   2023 
   $   $ 
         
Cash provided by (used in):
          
           
Operating activities          
Net loss for the period   (2,848,870)   (3,523,923)
           
Items not affecting cash:          
Amortization of property and equipment   47,131    36,434 
Amortization of intangible assets   18,050    62,433 
Fair value adjustment on derivative warrant liability   79,244    - 
Share-based payments   97,165    70,319 
Transaction costs on derivative warrant liability   224,486    - 
Unrealized foreign exchange loss/(gain)   10,090    (18,939)
Changes in non-cash operating assets and liabilities:          
Accounts receivable   37,904    51,338 
Prepaid expenses   29,676    195,953 
Deferred share issue costs   108,508    - 
Accounts payable and accrued liabilities   156,227    (1,087,991)
    (2,040,389)   (4,214,376)
           
Investing activities          
Acquisition of intangible assets   (11,707)   (24,959)
Acquisition of equipment   -    (4,310)
    (11,707)   (29,269)
           
Financing activities          
Proceeds from issuance of equity instruments   2,000,549    - 
Pre-funded warrants and warrants exercised   16,570    296 
Share issuance costs   (297,607)   - 
Payment of lease obligation   (24,802)   (32,414)
    1,694,710    (32,118)
           
Effect of foreign exchange (gain) loss on cash   (11,807)   5,740 
           
Decrease in cash   (369,193)   (4,270,023)
           
Cash, beginning of period   3,447,665    10,434,196 
           
Cash, end of period   3,078,472    6,164,173 
           
Supplemental Cash Flow and Non-Cash Investing and Financing Activities Disclosure          
Derivative warrant liability reclassified to share capital on exercise of warrants   5,244    - 
Recognition of right-of-use asset   96,998    - 
Deferred financing costs reclassified to share capital and transaction costs on derivative warrant liability   166,344    - 

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

 5 

XORTX THERAPEUTICS INC.

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

 

1.Nature of operations

 

XORTX Therapeutics Inc. (the “Company” or “XORTX”) was incorporated under the laws of Alberta, Canada on August 24, 2012.

 

XORTX is a public company listed on the TSX Venture Exchange (the “TSXV”) and on the Nasdaq Stock Market (“Nasdaq”) under the symbol “XRTX”. The Company’s operations and mailing address is 3710 – 33rd Street NW, Calgary, Alberta, Canada T2L 2M1 and its registered address is located at 550 Burrard Street, Suite 2900, Vancouver, British Columbia, V6C 0A3.

 

XORTX is a late stage clinical pharmaceutical company focused on developing innovative therapies to treat progressive kidney disease modulated by aberrant purine and uric acid metabolism in orphan disease indications such as autosomal dominant polycystic kidney disease, as well as more prevalent type 2 diabetic nephropathy, and fatty liver disease. The Company’s current focus is on developing products to slow and/or reverse the progression of kidney disease in patients at risk of end stage kidney failure.

 

The Company is subject to a number of risks associated with the successful development of new products and their marketing and the conduct of its clinical studies and their results. The Company will have to finance its research and development activities and its clinical studies. To achieve the objectives in its business plan, the Company plans to raise the necessary capital and to generate revenues. Although there is no certainty, management is of the opinion that additional funding for future projects and operations can be raised as needed. The products developed by the Company will require approval from the U.S. Food and Drug Administration and equivalent organizations in other countries before their sale can be authorized. If the Company is unsuccessful in obtaining adequate financing in the future, research activities will be postponed until market conditions improve.

 

2.Basis of preparation

 

Statement of Compliance

 

These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34 (IAS 34), Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”) and interpretations of the IFRS Interpretations Committee (“IFRIC”). Accordingly, certain disclosures included in the annual financial statements prepared in accordance with IFRS Accounting Standards (“IFRS”) have been condensed or omitted. These unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2023.

 

Basis of Measurement and Presentation

 

These condensed interim consolidated financial statements have been prepared using the historical cost convention except for financial instruments which have been measured at fair value. These condensed interim consolidated financial statements were prepared on an accrual basis except for cash flow information.

 

These condensed interim consolidated financial statements incorporate the financial statements of the Company and its 100% owned subsidiary, XORTX Pharma Corp. The accounts of the Company’s subsidiary are prepared for the same reporting period as the parent company, using consistent accounting policies. Inter-company transactions, balances and unrealized gains or losses on transactions are eliminated.

 

These condensed interim consolidated financial statements were approved for issue by the Board of Directors on August 9, 2024.

 

 

 6 

XORTX THERAPEUTICS INC.

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

 

3.Material Accounting policies

 

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, 2023. Accordingly, they should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2023.

 

4.Critical accounting judgments and estimates

 

The preparation of condensed interim consolidated financial statements requires management to make judgments and estimates that affect the amounts reported in the condensed interim consolidated financial statements and notes. By their nature, these judgments and estimates are subject to change and the effect on the condensed interim consolidated financial statements of changes in such judgments and estimates in future periods could be material. These judgments and estimates are based on historical experience, current and future economic conditions, and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results could differ from these judgments and estimates.

 

Revisions to accounting estimates are recognized in the period in which the estimate is revised and may affect both the period of revision and future periods. Information about critical accounting judgments in applying accounting policies that have the most significant risk of causing material adjustment to the carrying amounts of assets and liabilities recognized in the condensed interim consolidated financial statements are discussed below:

 

Share-based payment transactions and warrant liabilities

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Warrant liabilities are accounted for as derivative liabilities as the proceeds from exercise are either not fixed, denominated in a currency other than the functional currency, or can be settled on a net basis, and therefore do not meet the fixed for fixed criteria. Estimating fair value for share-based transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the instrument. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option or warrant, volatility and dividend yield and making assumptions about them.

 

Classification of contract payments

In concluding that contract payments are a non-current asset, management considered when future regulatory and clinical trial programs are anticipated to be completed. Management assessed that the future regulatory and clinical trial programs would not be completed within 12 months from period end and therefore classified contract payments as a non-current asset.

 

Impairment of intangible assets

Patents (obtained and pending) and licenses are reviewed for impairment at each financial reporting date. If, in the judgment of management, future economic benefits will not flow to the Company, then the Company will assess the recoverable value of the asset. If the carrying value is greater than the recoverable value, the asset will be impaired to the recoverable value.

 

Determination of functional currency

In concluding that the U.S. dollar is the functional currency of the Company and its subsidiary, management considered the currency that mainly influences the cost of providing goods and services in the primary economic environment in which each entity operates and the currency in which funds from financing are generated, or if there has been a change in events or conditions that determined the primary economic environment.

 

 

 7 

XORTX THERAPEUTICS INC.

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

4.Critical accounting judgments and estimates (continued)

 

Treatment of research and development costs

Costs to develop products are capitalized to the extent that the criteria for recognition as intangible assets in IAS 38 Intangible Assets are met. Those criteria require that the product is technically and economically feasible, the Company has the intention and ability to use the asset, and how the asset will generate future benefits. Management assessed the capitalization of development costs based on the attributes of the development project, perceived user needs, industry trends and expected future economic conditions. Management considers these factors in aggregate and applies significant judgment to determine whether the product is feasible. The Company has not capitalized any development costs as at June 30, 2024.

 

Leases

Value of right-of-use assets and lease obligations require judgement in determining lease terms such as extension options, determining whether a lease contract contains an identified asset to which the Company has the right to use substantially all of the economic benefits from the use of that asset and the incremental borrowing rate applied. The Company estimates the incremental borrowing rate based on the lease term, collateral assumptions and the economic environment in which the lease is denominated. Renewal options are only included if management is reasonably certain that the option will be renewed.

 

5.Cash

 

The Company’s cash consists of cash held and interest-bearing deposits with the Company’s bank and brokerage accounts. The current annual interest rate earned on these deposits is 5.00% (December 31, 2023 – 5.15%).

 

   June 30,
2024
   December 31,
2023
 
   $   $ 
         
Cash   67,398    94,999 
Interest-bearing deposits   3,011,074    3,352,666 
    3,078,472    3,447,665 

 

6.Prepaid expenses

 

The Company’s prepaid expenses relate to the following:

 

   June 30,
2024
   December 31,
2023
 
   $   $ 
         
Insurance   70,515    204,302 
Investor relations conferences and services   124,069    25,309 
Administrative services and other   12,706    7,355 
    207,290    236,966 

 

7.Contract payments

 

During the year ended December 31, 2020, the Company entered into an agreement with Prevail InfoWorks Inc. As part of the agreement, the Company paid $1,200,000 through the issuance of units in the private placement that closed February 28, 2020, to be applied to future regulatory and clinical trial programs. The 108,590 units issued were measured by reference to their fair value on the issuance date, which is equal to CAD $14.76 per unit.

 

 8 

XORTX THERAPEUTICS INC.

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

 

8.Intangible assets

 

Cost  Total 
   $ 
Balance, December 31, 2022   294,751 
Additions   42,052 
Balance, December 31, 2023   336,803 
Additions   11,707 
Balance, June 30, 2024   348,510 

 

 

Accumulated amortization  Total 
   $ 
Balance, December 31, 2022   94,917 
Amortization   66,632 
Balance, December 31, 2023   161,549 
Amortization   18,050 
Balance, June 30, 2024   179,599 

 

Carrying values  Total 
   $ 
At December 31, 2023   175,254 
At June 30, 2024   168,911 

 

The Company has licensed intellectual property from various third parties. The intangible assets relate solely to licensed intellectual property and there are no other classes of intangible assets. The intangible assets are as described below:

 

a)The Company has licensed from a third party (the “Licensor”), under patent rights purchase agreement dated July 9, 2013 and amended April 15, 2014, certain patents relating to allopurinol for the treatment of hypertension. The Company paid a total of $40,000 to the Licensor per the terms of the agreement.

 

The Company will also pay the Licensor royalties on the cumulative net revenues from the sale or sublicense of the product covered under the patent license until the later of (i) the expiration of the last patent right covering the product; and (ii) the expiration of ten years from the date of the first commercial sales of a product. As of June 30, 2024, no royalties have been accrued or paid.

 

b)In December 2012, the Company entered into an agreement to license certain intellectual property relating to the use of all uric acid lowering agents to improve the treatment of metabolic syndrome. Under this patent rights purchase agreement, between the Company and Dr. Richard Johnson and Dr. Takahiko Nakagawa (the “Vendors”), the Company will pay the Vendors a royalty based on the cumulative net revenues from the sale or sublicense of the product covered under the licensed intellectual property until the later of (i) the expiration of the last patent right covering the product; and (ii) the expiration of 10 years from the date of the first commercial sales of a product. As of June 30, 2024, no royalties have been accrued or paid.

 

c)Pursuant to a license agreement dated October 9, 2012 as amended on June 23, 2014, between the Company and the University of Florida Research Foundation, Inc. (“UFRF”), the Company acquired the exclusive license to a patent that claims the use of any uric acid lowering agent to treat insulin resistance. The Company has paid or is obligated to pay UFRF the following:

 

 

 9 

XORTX THERAPEUTICS INC.

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

8.Intangible assets (continued)

 

i)An annual license fee of $1,000;
ii)Reimburse UFRF for United States and/or foreign costs associated with the maintenance of the licensed patents;
iii)The issuance to UFRF of 180,397 shares of common stock of the Company. 160,783 have been issued to UFRF as at June 30, 2024 and December 31, 2023. The remaining shares to be issued are included in obligation to issue shares ($24,746);
iv)Milestone payments of $500,000 upon receipt of FDA approval to market licensed product in the United States of America and $100,000 upon receipt of regulatory approval to market each licensed product in each of other jurisdictions;
v)Royalty payments of up to 1.5% of net sales of products covered by the license until the later of (i) the expiration of any patent claims; or (ii) 10 years from the date of the first commercial sale of any covered product in each country. Following commencement of commercial sales, the Company will be subject to certain annual minimum royalty payments that will increase annually to a maximum of $100,000 per year. As at June 30, 2024, no royalties have been accrued or paid; and
vi)UFRF is entitled to receive a royalty of 5% of amounts received from any sub-licensee that are not based directly on product sales, excluding payments received for research and development or purchases of the Company’s securities at not less than fair market value. As at June 30, 2024, no royalties have been accrued or paid.

 

UFRF may terminate the agreement if the Company fails to meet the above-specified milestones.

 

9.Property and equipment

 

Cost  Right-of-use asset   Equipment   Total 
   $   $   $ 
Balance, December 31, 2022   114,588    19,033    133,621 
Additions   -    4,311    4,311 
Balance, December 31, 2023   114,588    23,344    137,932 
Additions   96,998    -    96,998 
Balance, June 30, 2024   211,586    23,344    234,930 

 

Accumulated amortization  Right-of-use asset   Equipment   Total 
   $   $   $ 
Balance, December 31, 2022   38,195    2,748    40,943 
Amortization   65,480    7,582    73,062 
Balance, December 31, 2023   103,675    10,330    114,005 
Amortization   43,260    3,871    47,131 
Balance, June 30, 2024   146,935    14,201    161,136 

 

Carrying values  Right-of-use asset   Equipment   Total 
   $   $   $ 
At December 31, 2023   10,913    13,014    23,927 
At June 30, 2024   64,651    9,143    73,794 

 

The Company entered into an office lease during the year ended December 31, 2022 for which a right-of-use asset was recognized (Note 11). During six months ended June 30, 2024, the Company extended its office lease. A $96,998 right-of-use asset addition recognized with a corresponding $96,998 increase to the lease liability.

 

 10 

XORTX THERAPEUTICS INC.

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

 

10. Accounts payable and accrued liabilities

 

 

   June 30,
2024
   December 31,
2023
 
   $   $ 
Trade payables   269,978    195,814 
Accrued liabilities   167,960    87,614 
Total   437,938    283,428 

 

11. Lease obligation

 

The Company has entered into an office lease expiring in 2025, with an imputed interest rate of 8% per annum. A reconciliation of the outstanding lease obligation as at June 30, 2024 is as follows:

 

   $ 
Balance, December 31, 2022   77,599 
Lease payments   (66,089)
Balance, December 31, 2023   11,510 
Additions   96,998 
Lease payments   (24,802)
Balance, June 30, 2024   83,706 

 

The $96,998 right-of-use asset addition recognized in the six months ended June 30, 2024 relates to an extension of the office lease to May 31, 2025.

 

The following is a schedule of the Company’s future minimum lease payments related to the office lease obligation:

 

   June 30, 2024   December 31, 2023 
   $     
$2024   47,442    11,628 
2025   39,536    - 
Total minimum lease payments   86,978    11,628 
Less: imputed interest   (3,272)   (118)
Total present value of minimum lease payments   83,706    11,510 
Less: current portion   (83,706)   (11,510)
Non-current portion   -    - 

 

12. Share capital and reserves

 

a)Authorized and issued

Unlimited common shares – 2,903,565 issued at June 30, 2024 (December 31, 2023 – 1,998,848).

 

 

 11 

XORTX THERAPEUTICS INC.

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

 

12. Share capital and reserves (continued)

 

b)Issuances

 

Six months ended June 30, 2024:

 

On February 15 and March 4, 2024, the Company closed two tranches of a non-brokered offering of 899,717 common share units (“Common Share Units”) at a price of CAD $3 per Common Share Unit for aggregate gross proceeds of $2,000,549 (CAD $2,699,151). Each Common Share Unit consists of one common share and one warrant (“Warrant”) to purchase one common share at CAD $4.50 per common share for a period of two years. The Warrants will be immediately exercisable and may be exercised for two years from the date of issuance, provided, however that, if, the common shares on the TSXV trade at greater than CAD $6.00 for 10 or more consecutive trading days, the Warrants will be accelerated and the Warrants will expire on the 30th business day following the date of notice.

 

The proceeds were allocated $968,000 to the derivative warrant liability (Note 12(g)) and the residual $1,032,549 was allocated to common shares.

 

In connection with the offering, the Company paid finder’s fees of $97,241, representing a 5% finder’s fee on certain subscriptions to qualified finders. The Company incurred additional cash share issuance costs of $366,710. The costs were allocated between common shares and derivative warrant liability in proportion to their initial carrying amounts with $239,465 recorded as a reduction of equity and $224,486 recorded as transaction costs on derivative warrant liability.

 

On March 25, 2024, the Company issued 5,000 common shares for the exercise of warrants at CAD $4.50 per share in the amount of $16,570 (CAD $22,500). An amount of $5,244 was transferred from derivative warrant liability to share capital as a result.

 

Year ended December 31, 2023:

 

On January 19, 2023, the Company issued 328,777 common shares for the exercise of pre-funded warrants at $0.0009 per share in the amount of $296. An amount of $531,885 was transferred from reserves to share capital as a result.

 

c)Diluted Weighted Average Number of Shares Outstanding

 

   Three months ended   Six months ended 
   June 30,
2024
   June 30,
2023
   June 30,
2024
   June 30,
2023
 
Basic weighted average shares outstanding   2,903,565    1,998,848    2,666,417    1,964,341 
Effect of outstanding securities   -    -    -    - 
Diluted weighted average shares outstanding   2,903,565    1,998,848    2,666,417    1,964,341 

 

During the six months ended June 30, 2024 and 2023 and the three months ended June 30, 2023, the Company had a net loss, as such, the diluted loss per share calculation excludes any potential conversion of options and warrants that would decrease loss per share. During the three month period ended June 30, 2024, the Company had a net income, however, no instruments were in the money, as such, there was no effect on diluted weighted average number of shares outstanding.

 

 

 

 

 12 

XORTX THERAPEUTICS INC.

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

 

12. Share capital and reserves (continued)

 

d)Common Share Purchase Warrants

 

A summary of the changes in warrants for the six months ended June 30, 2024 and the year ended December 31, 2023 is presented below:

 

   Number of Warrants   Weighted Average Exercise price 
         
Balance, December 31, 2023 and 2022   1,125,210   $5.00 
Granted – February 15, 2024   824,767    3.29(1)
Granted – March 4, 2024   74,950    3.29(1)
Exercised   (5,000)   3.29(1)
Balance, June 30, 2024   2,019,927   $4.24 

(1) Exercise price of CAD $4.50.

 

During the six months ended June 30, 2024, the Company amended the exercise price of 1,125,210 common share purchase warrants that were issued pursuant to private placements that closed in February 2021, October 2021 and October 2022. Pursuant to the polices of the TSXV the terms of the warrants, as amended, will be subject to an acceleration expiry provision such that if for any 10 consecutive trading dates during the unexpired term of the warrants, the closing price of the Company's shares on the exchange exceeds $6.50, the exercise period of the warrants will be reduced to 30 days, starting seven days after the last premium trading day. The Company will announce any such accelerated expiry date by press release. All other terms of the warrants remain unchanged.

 

At June 30, 2024, the weighted average contractual remaining life of the unexercised warrants was 2.20 years (December 31, 2023 – 3.15 years).

 

The following table summarizes information on warrants outstanding at June 30, 2024:

 

Exercise Price  Number Outstanding  Expiry date  Remaining Contractual Life
$5.00  198,333  February 9, 2026  1.61 years
$5.00  270,211  October 15, 2026  2.29 years
$5.00  101,111  October 15, 2026  2.29 years
$5.00  555,555  October 7, 2027  3.27 years
CAD $4.50  819,767  February 15, 2026  1.88 years
CAD $4.50  74,950  March 4, 2026  1.93 years
Total  2,019,927     2.20 years

 

 

 

 13 

XORTX THERAPEUTICS INC.

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

 

12. Share capital and reserves (continued)

 

e)Finders’ and Underwriters Warrants

 

A summary of the changes in finders’ and underwriters warrants for the six months ended June 30, 2024 and the year ended December 31, 2023 is presented below:

 

   Number of Warrants   Weighted Average Exercise price 
           
Balance, June 30, 2024 and December 31, 2023   50,298   $23.76 

 

At June 30, 2024, the weighted average contractual remaining life of the unexercised finders’ and underwriters warrants was 2.75 years (December 31, 2023 – 3.25 years).

 

The following table summarizes information on finders’ and underwriters warrants outstanding at June 30, 2024:

 

Exercise Price  Number Outstanding  Expiry date  Remaining Contractual Life
CAD$42.30  6,377  February 9, 2026  1.61 years
$42.93  16,144  October 15, 2026  2.29 years
$10.98  27,777  October 7, 2027  3.27 years
Total  50,298     2.75 years

 

f)Stock Options

 

The Company has an incentive Stock Option Plan (the “Plan”) for directors, officers, employees, and consultants, under which the Company may issue stock options to purchase common shares of the Company provided that the amount of incentive stock options which may be granted and outstanding under the Plan at any time shall not exceed 10% of the then issued and outstanding common shares of the Company.

 

The weighted average grant fair value of stock options granted was estimated on the date of grant using the Black-Scholes option pricing model with the following data and assumptions:

 

   2024  2023
Dividend yield  Nil  Nil
Annualized volatility  100%  100%
Share price  CAD $4.43  CAD $2.90
Risk-free interest rate  3.59%  3.25%
Expected life  5 years  5 years

 

The risk-free interest rate is the yield on zero-coupon Canadian Treasury Bills of a term consistent with the assumed option life. The expected life of the option is the average expected period to exercise.

 

Volatility is based on available historical volatility of the Company’s share price, excluding specific time frames in which volatility was affected by specific transactions that are not considered to be indicative of the Company’s expected share price volatility. The Company has not declared dividends in the past.

 

During the three and six months ended June 30, 2024, the Company recorded share-based payments of $44,031 and $97,165 (2023 - $30,769 and $70,319), in respect of the vesting of newly granted options and options issued in prior years.

 

 14 

XORTX THERAPEUTICS INC.

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

12. Share capital and reserves (continued)

 

f)Stock Options (continued)

 

A summary of the changes in stock options for the six months ended June 30, 2024 and the year ended December 31, 2023 is presented below:

 

   Number of Options   Weighted Average
Exercise price (CAD)
 
Balance, December 31, 2022   128,240   $21.75 
Granted – December 31, 2023   8,000    2.90 
Expired   (32,318)   33.65 
Balance, December 31, 2023   103,922   $16.60 
Granted – March 4, 2024   39,483    4.50 
Granted – April 8, 2024   8,000    5.00 
Expired   (8,887)   22.61 
Balance, June 30, 2024   142,518   $12.22 
Vested and exercisable, June 30, 2024   106,433   $13.90 

 

The weighted average contractual remaining life of the unexercised options was 3.29 years (December 31, 2023 - 3.04 years).

 

The following table summarizes information on stock options outstanding at June 30, 2024:

 

Exercise Price (CAD)  Number Outstanding  Number
Exercisable
  Expiry Date  Remaining Contractual Life
$14.76  14,669  14,669  June 23, 2025  0.98 years
$29.61  3,312  3,312  January 11, 2026  1.53 years
$16.92  2,366  2,366  May 12, 2026  1.87 years
$21.69  4,732  4,600  July 14, 2026  2.04 years
$22.86  7,262  7,262  December 21, 2026  2.48 years
$22.86  11,940  9,618  January 12, 2027  2.54 years
$14.40  37,200  33,688  June 6, 2027  2.93 years
$12.42  5,554  2,931  November 25, 2027  3.41 years
$2.90  8,000  8,000  December 31, 2028  4.51 years
$4.50  39,483  11,987  March 4, 2029  4.68 years
$5.00  8,000  8,000  April 8, 2029  4.78 years
   142,518  106,433      

 

 

 15 

XORTX THERAPEUTICS INC.

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

 

12. Share capital and reserves (continued)

 

g)Derivative Warrant Liability

 

During the years ended December 31, 2022 and 2021, the Company issued warrants which were recorded as derivative financial liabilities as the exercise price was denominated in a currency other than the functional currency of the Company and in certain situations allow the holder to exercise the warrants on a cashless basis and therefore may be settled other than by the exchange of a fixed amount of cash. Under the cashless exercise option, the holders of these warrants may elect to settle the warrants on a cashless basis if the common shares are not subject to an effective registration statement at the time the holder wishes to exercise them. A contract that may be settled by a single net payment (generally referred to as net cash settled or net equity settled) is a financial liability and not an equity instrument.

 

These warrants are revalued at each reporting period and any gain or loss is recorded in profit or loss.

 

Effective January 1, 2023, with the change in functional currency of the Company to USD, the exercise price of warrants denominated in Canadian Dollars is now denominated in a currency different than the functional currency of the Company and therefore these warrants now meet the definition of a derivative financial liability. Accordingly, all Canadian Dollar denominated warrants recorded as equity instruments on January 1, 2023, were reclassified to derivative warrant liabilities at their estimated fair value as of that date.

 

The fair value of the warrants issued during the six months ended June 30, 2024 with an exercise price denominated in Canadian Dollars was estimated at $968,000 on the date of grant using the Black-Scholes option pricing model with the following data and assumptions:

 

   2024
Dividend yield  Nil
Annualized volatility  130-135%
Share price  CAD $3.10
Risk-free interest rate  4.17% – 4.36 %
Expected life  2 years

 

 

 16 

XORTX THERAPEUTICS INC.

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

 

12. Share capital and reserves (continued)

 

g)Derivative Warrant Liability (continued)

 

The balance of the derivative warrant liabilities (level 3) is as follows:

 

     
Balance at December 31, 2022  $3,854,403 
Reclassified from reserves   318,000 
Fair value adjustment   (3,641,403)
Balance at December 31, 2023  $531,000 
Warrants issued February 15, 2024   865,000 
Warrants issued March 4, 2024   103,000 
Warrants exercised   (5,244)
Fair value adjustment   79,244 
Balance at June 30, 2024  $1,573,000 

 

Significant assumptions used in determining the fair value of the derivative warrant liabilities at June 30, 2024 and December 31, 2023 are as follows:

 

   June 30,
2024
   December 31,
2023
 
Share price  $1.90   $2.31 
Risk-free interest rate   4.02%   3.25%-3.91%
Dividend yield   0%   0%
Expected volatility   100-135%   100%
Remaining term (in years)   1.6–3.3    2.1-3.8 

 

The fair value is classified as level 3 as expected volatility is determined using historical volatility and is therefore not an observable input.

 

Management has assessed the revised interpretive guidance in accordance with IAS 1 Presentation of Financial Statements Amendments effective for annual periods beginning on or after January 1, 2024 with respect to its derivative warrant liability and determined those instruments meet the requirement to be classified as a current liability. Accordingly, the Company has reclassified derivative warrant liabilities of $531,000 on the statement of financial position as at December 31, 2023 to conform to the current period’s presentation. The change in presentation had no impact on net and comprehensive loss, or cash flows, or loss per share for the year ended December 31, 2023. The change in presentation had no impact on total assets, total liabilities or shareholders equity as at December 31, 2023.

 

13. Related party transactions

 

All related party transactions were measured at fair value. All amounts due from/payable to related parties are unsecured, non-interest bearing and have no fixed terms of repayment.

 

During the three and six months ended June 30, 2024 and 2023, the Company incurred the following transactions with related parties:

 

a)Wages and benefits and professional fees were paid or accrued to Allen Davidoff, the Chief Executive Officer (“CEO”), in the amount of $128,264 and $212,711 (2023 - $80,250 and $164,332).

 

 17 

XORTX THERAPEUTICS INC.

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

 

13. Related party transactions (continued)

 

b)Fees were paid or accrued to 1282803 Ontario Inc., a company owned by James Fairbairn, the Chief Financial Officer (“CFO”) of the Company in the amount of $37,567 and $75,584 (2023 - $38,868 and $80,015 (paid or accrued to former CFO)).

 

c)Research and development fees were paid or accrued to Haworth Biopharmaceutical, a company owned by Stephen Haworth, the Chief Medical Officer (“CMO”) of the Company in the amount of $38,445 and $62,445 (2023 - $56,250 and $109,229).

 

d)Consulting fees were paid or accrued to Stacy Evans, the Chief Business Officer (“CBO”) of the Company in the amount of $37,500 and $82,500 (2023 - $75,000 and $150,000).

 

e)Directors’ fees were paid or accrued to the directors of the Company in the amount of $46,371 and $85,532 (2023 - $44,495 and $91,584). The amount includes director fees payment of $33,549 and $64,212 for the three and six months ended June 30, 2024 (2023 - $30,243 and $66,084) to Anthony Giovinazzo, Chairman of the Company.

 

f)As at June 30, 2024, $17,020 (December 31, 2023 - $6,805) was payable to directors of the Company, $48,150 (December 31, 2023 - $nil) was payable and accrued to the CEO of the Company for CEO services, $14,138 (December 31, 2023 - $14,631) was payable and accrued to the CFO of the Company for CFO services, $22,445 (December 31, 2023 - $8,000) was payable and accrued to the CMO of the Company for consulting services, and $25,000 (December 31, 2023 - $15,000) was payable and accrued to the CBO of the Company for consulting services. The balances are unsecured, non-interest bearing, and have no fixed terms of repayment.

 

g)Management and directors’ compensation transactions for the three and six months ended June 30, 2024 and 2023 are summarized as follows:

 

 

   Management Compensation   Directors’
fees
   Share-based payments   Total 
    $    $    $    $ 
Three months ended June 30, 2023                    
Directors and officers   250,368    44,495    19,292    314,155 
                     
Three months ended June 30, 2024                    
Directors and officers   241,776    46,371    33,323    321,470 

 

 

   Management Compensation   Directors’
fees
   Share-based payments   Total 
    $    $    $    $ 
Six months ended June 30, 2023                    
Directors and officers   503,576    91,584    43,946    639,106 
                     
Six months ended June 30, 2024                    
Directors and officers   433,240    85,532    71,426    590,198 

 

 

 

 18 

XORTX THERAPEUTICS INC.

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

 

14. Financial instruments and risk management

 

The Company’s financial instruments consist of cash, accounts payable and accrued liabilities, lease obligation and derivative warrant liability. Cash is classified as a financial asset at FVTPL, accounts payable and accrued liabilities and lease obligation are classified as financial liabilities at amortized cost and derivative warrant liability is classified as a financial liability at FVTPL (see note 12(g)).

 

The fair values of these financial instruments approximate their carrying values at June 30, 2024, due to their short-term nature.

 

The Company thoroughly examines the various financial instruments and risks to which it is exposed and assesses the impact and likelihood of those risks. These risks include foreign currency risk, interest rate risk, market risk, credit risk, and liquidity risk. Where material, these risks are reviewed and monitored by the Board of Directors

 

There have been no changes in any risk management policies since December 31, 2023.

 

15. Capital management

 

The Company defines capital that it manages as shareholders’ equity. The Company manages its capital structure in order to have funds available to support its research and development and sustain the future development of the business. When managing capital, the Company’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management adjusts the capital structure as necessary in order to support its activities.

 

Since inception, the Company’s objective in managing capital is to ensure sufficient liquidity to finance its research and development activities, general and administrative expenses, expenses associated with intellectual property protection, and its overall capital expenditures. There were no changes during the six months ended June 30, 2024. The Company is not exposed to external requirements by regulatory agencies regarding its capital.

 

16. Commitments

 

The Company has long-term arrangements with commitments that are not recognized as liabilities as at June 30, 2024 and December 31, 2023 are as follows:

 

a)Employment Agreements

 

   June 30,
2024
   December 31,
2023
 
   $   $ 
Management services – officers   321,000    321,000 

 

The President, CEO, and a director of the Company has a long-term employment agreement with the Company. The agreement has a termination clause whereby he is entitled to the equivalent of 12 times his then current monthly salary which, as of June 30, 2024 and December 31, 2023, equated to an annual salary of $321,000.

 

b)Payments

 

In the normal course of business, the Company has committed to payments totaling $261,490 (December 31, 2023 - $446,000) for activities related to its clinical trial, manufacturing, collaboration programs, and other regular business activities which are expected to occur over the next two years.

 

 19 

XORTX THERAPEUTICS INC.

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2024 and 2023

(Unaudited - expressed in U.S. Dollars)

 

17. Segmented information

 

The Company operates in one reportable operating segment, being the development and commercialization of therapies to treat progressive kidney disease. As the operations comprise a single reporting segment, amounts disclosed also represent segment amounts. All long-term assets of the Company are located in Canada.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20