What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-04-09 compared with 2024-01-12 · 140 added, 96 removed, 138 unchanged (63% of the section changed)

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The following discussion should be read in conjunction with our condensed financial statements and accompanying notes in this quarterly report on Form 10-Q, and our audited financial statements with notes in our annual report on Form 10-K for the year ended August 31, 2023.

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Company Overview

Lexaria’s DehydraTECH patented technology improves the delivery of bioactive compounds while promoting healthy ingestion methods, lowers overall dosing, and is highly effective in active molecule delivery available in a range of formats from oral ingestible to oral buccal/sublingual to topical products.

DehydraTECH substantially improves the rapidity and quantity of Active Pharmaceutical Ingredients (“API”) transport to the blood plasma and brain using the body’s natural process for distributing fatty acids via the oral route.

Lexaria’s DehydraTECH patented technology is a drug delivery platform technology that provides more predictable time of delivery of Active Pharmaceutical Ingredients (“API”) into the bloodstream and brain tissue.

Based on R&D studies completed in animals and humans, DehydraTECH has been shown to improve the delivery of bioactive compounds into the bloodstream, lowers overall dosing, and is highly effective in API delivery available in a range of formats from oral ingestible to oral buccal/sublingual to topical products.

DehydraTECH substantially improves the rapidity and quantity of API transport to the blood plasma and brain using the body’s natural process for distributing fatty acids via oral ingestion.

This technology extends across many categories beyond the primary pharmaceutical focus of the Company, from foods and beverages to cosmetic products and nutraceuticals.

Lexaria is advancing several R&D activities in both preclinical and planned future clinical programs.

During the quarter ended November 30, 2023, Lexaria completed a human pilot study to investigate whether DehydraTECH-enhanced Rybelsus™ could offer greater benefits than Rybelsus on its own.

As noted in our press releases issued on November 27 and 28, 2023, our initial findings found that DehydraTECH-enhanced Rybelsus:

Lexaria is advancing several R&D activities in preclinical as well as on-going and planned future clinical programs.

During the quarter ended February 29, 2024, Lexaria provided its final results from its human pilot study to investigate whether DehydraTECH-enhanced Rybelsus™ could offer greater benefits than Rybelsus on its own.

As announced on January 4, 2024, our final findings found even more pronounced results than in the first half of the study that DehydraTECH-enhanced Rybelsus confirming:

sustained higher levels of semaglutide in blood;

had faster achievement of peak drug delivery;

had reduced side effects;

faster achievement of peak drug delivery;

reduced side effects;

sustained lower levels of blood glucose and lowered blood-glucose spike after eating.

The Company continues to engage in small R&D projects and B2B formulation for third parties who are evaluating our technology for use in their products.

Our current patent portfolio includes patent family applications or grants pertaining to Lexaria’s method of improving bioavailability and taste, and the use of DehydraTECH as a delivery platform, orally or topically, for a wide variety of Active Pharmaceutical Ingredients (“APIs”) encompassing cannabinoids;

In January 2024, we announced a comprehensive planned applied research program to thoroughly evaluate DehydraTECH for the improved delivery of GLP-1 drugs, designed to support prospective commercial partnering with the global pharmaceutical companies.

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Further, during the six months ended February 29, 2024, Lexaria filed its Investigational New Drug (IND) application with the US Food and Drug Administration (the “FDA”) for its planned phase 1b hypertension clinical trial for its DehydraTECH-CBD drug product.

Upon responding to certain inquires of the FDA, Lexaria received a Study May Proceed letter from the FDA on February 29, 2024, enabling Lexaria to proceed with conducting A Phase 1b Randomized, Double-Blind, Placebo-Controlled Study of the Safety, Pharmacokinetics, and Pharmacodynamics of DehydraTECH-CBD in Subjects with Stage 1 or Stage 2 Hypertension , subject to raising sufficient funding, and satisfying certain other FDA-requested conditions.

The Company entered into Securities Purchase Agreements with investors whereby on February 16, 2024, the company issued 1,444,741 shares of common stock and 113,702 pre-funded warrants in a registered direct offering.

The Company also agreed to issue and sell to investors warrants to purchase up to 1,558,443 shares of common stock.

In addition, the Company also agreed to partially compensate the placement agent through the issuance of warrants to purchase up to 54,546 shares of common stock.

The net proceeds to the Company from the registered direct offering and concurrent private placement totaled $3.0 million, after deducting placement agent fees and other offering expenses paid by the Company.

During the six months ended February 29, 2024, the Company issued an aggregate 1,119,250 common shares pursuant to the exercise of warrants that were issued under our May 11, 2023, financing, at an exercise price of $0.95 per share for gross proceeds of $1,063,475.

fat soluble vitamins;

NSAIDs pain medications;

and nicotine and its analogs.

The pending and granted patents also cover the manufacturing and processing methods used to combine fatty acids with active pharmaceutical ingredients.

antiviral drugs;

nicotine and its analogs, and a host of other bioactive compounds.

The pending and granted patents also cover a range of therapeutic use methods for DehydraTECH formulations as well as the DehydraTECH manufacturing and processing methods used to combine fatty acids with active pharmaceutical ingredients.

This includes heating and drying methods and use of excipients and substrates.

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We continue to investigate national and international opportunities to investigate expansions and additions to our intellectual property portfolio.

Patents have been filed specifically for the use of DehydraTECH with cannabinoids for the treatment of heart disease and hypertension to support our anticipated Investigational New Drug (“IND”) application with the Food and Drug Administration (“FDA”), and for treatment of epilepsy.

Patents have been filed specifically for the use of DehydraTECH with cannabinoids for the treatment of heart disease and hypertension to support our anticipated IND application with the FDA, and for treatment of epilepsy.

Applications have also been filed and are pending but not yet published for the use of DehydraTECH with other bioactive ingredients of interest to Lexaria.

We will continue to seek beneficial acquisitions of intellectual property if and when we believe it is advisable to do so.

Due to the inherent unpredictability of scientific discovery, it is not possible to predict if or how often such new applications might be filed or patents issued.

Subsequent to the six months ended February 29, 2024, the Company was granted US Patent 11,931,369 and US Patent 11,944,635 both being in the Company’s patent family #24 for Compositions and Methods for Treating Epilepsy.

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36 unchanged sentences

US 11,666,543

US 11,931,369

#24 Compositions and Methods for Treating Epilepsy

US 11,944,635

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1 unchanged sentence

Lexaria is advancing several R&D activities in both preclinical and clinical programs.

Currently, our primary research programs are the investigation of cannabidiol (“CBD”) for the reduction of hypertension leading to an application under the FDA for an IND and the investigation of optimal formulations of DehydraTECH-enhanced glucagon-like peptide-1 (“GLP-1”) drugs.

Other programs include DehydraTECH formulation development and testing with nicotine for oral pouches and prospective nicotine replacement therapy, human hormones, CBD for diabetes, dementia, seizures and others.

Currently, our primary research programs are the investigation of optimal formulations of DehydraTECH-enhanced glucagon-like peptide-1 (“GLP-1”) and glucose-dependent insulinotropic polypeptide (“GIP”) drugs as well as the investigation of cannabidiol (“CBD”) for the reduction of hypertension leading to a recently cleared IND application by the U.S.

Other programs have included DehydraTECH formulation development and testing with nicotine for reduced-risk oral pouches and prospective nicotine replacement therapy, human hormones, CBD for diabetes, dementia, seizures and others.

From time to time the Company will engage in contract R&D for third parties who are interested in evaluating DehydraTECH in their products.

During the quarter ended November 30, 2023, Lexaria incurred $574,491 (November 2022 - $829,489) in R&D expenditures.

Specific R&D programs are in ongoing development and align to our financial ability to undertake each research phase for each API.

Due to our expanding patent portfolio coverage, we continually examine accelerated timetable options for testing, research, and development of each API.

Fiscal 2024 continues to highlight the direction of our research and development programs with confirmatory results from our ongoing programs.

Our R&D programs are focused on three core business segments:

pharmaceutical applications, reduced-risk non-combusted nicotine and CBD from hemp.

Of these three, we do not expect to make any significant expenditures during fiscal 2024 on non-combusted nicotine R&D.

Investigational New Drug

Hypertension Phase 1b IND Trial HYPER-H23-1

The FDA provided Lexaria with a positive written response on August 10, 2022, from our pre-IND meeting regarding DehydraTECH-CBD for the treatment of hypertension.

The FDA confirmed that it has agreed with Lexaria’s proposal to pursue a 505(b)(2) new drug application (“NDA”) regulatory pathway for our program.

We continue working toward our IND filing which is anticipated to be in early 2024.

We have selected InClin Inc.

as our contract research organization (“CRO”) to perform the IND study which will be a Phase 1(b) study that we are designating HYPER-H23-1.

We have completed manufacturing our IND drug product through our third-party contract manufacturer, in compliance with current Good Manufacturing Practice (“cGMP”) regulations as mandated by the FDA, which has completed its stability testing.

Along with our CRO, we have begun certain administrative study start-up tasks associated with preparation to perform study HYPER-H23-1 when ready to be initiated following IND effectiveness.

As noted in our press release of December 7, 2023, the necessary information required of our third party material supplier in order for Lexaria to submit its IND application with the FDA has now been provided and Lexaria anticipates submitting its IND application on or before January 31, 2024.

Provided that the FDA does not issue any objections within 30 days after the IND application is submitted, Lexaria will be able to commence its IND Clinical Trial, subject to any required financing.

GLP-1 Investigation

During the quarter ended November 30, 2023, Lexaria commenced its investigations to examine DehydraTECH-enhanced GLP-1 drugs.

The initial investigation was a pilot study with seven (7) healthy volunteers whereby four (4) volunteers were dosed with DehydraTECH-enhanced Rybelsus and three (3) volunteers were dosed with regular Rybelsus.

As noted in our press releases issued on November 27 and 28, 2023, our initial findings found that DehydraTECH-enhanced Rybelsus:

sustained higher levels of semaglutide in blood;

The FDA confirmed that it had agreed with Lexaria’s proposal to pursue a 505(b)(2) new drug application (“NDA”) regulatory pathway for our program.

On January 29, 2024, Lexaria submitted its IND application with the FDA and it received a Study May Proceed letter from the FDA on February 29, 2024.

Manufacturing IND drug product batches has been performed through our third-party contract manufacturer, in compliance with current Good Manufacturing Practice (“cGMP”) regulations as mandated by the FDA, including stability testing.

We will continue to manufacture additional drug product batches though our third-party contract manufacturer in the future as we perform additional clinical studies.

We have begun certain administrative study start-up tasks associated with preparation to perform study HYPER-H23-1 when ready to be initiated following the satisfaction of certain FDA conditions and raising sufficient funding.

Diabetes and Weight Loss Management Investigation

During the quarter ended February 29, 2024, Lexaria completed its initial investigational study to examine DehydraTECH-enhanced GLP-1 for prospective improvement in diabetes and weight loss management applications.

The initial investigation (Human Pilot Study #1) was an investigator-initiated pilot study of the GLP-1 drug semaglutide with seven (7) healthy volunteers comparing performance of a DehydraTECH-semaglutide oral capsule formulation to that of commercially available Rybelsus® tablets.

For purposes of this initial study, the DehydraTECH-semaglutide composition was compound formulated using Rybelsus tablets as the semaglutide source input.

As noted in our press releases issued on November 27 and 28, 2023, interim study findings showed that the DehydraTECH-semaglutide capsules sustained higher levels of semaglutide in blood;

had faster achievement of peak drug delivery;

had reduced side effects;

had reduced incidence of moderate to severe side effects;

sustained lower levels of blood glucose and lowered blood-glucose spike after eating.

In December 2023 the same volunteers returned for a second dose, but in the reverse order to effect a cross-over design.

The results from the second dosing are expected to be disclosed in the first calendar quarter of 2024.

On January 4, 2024, upon conclusion of the study and full dataset analysis, the final study findings built upon the previously released interim findings evidencing that DehydraTECH-semaglutide produced even more pronounced and sustained higher levels of semaglutide in blood and lower levels of blood glucose and lowered blood-glucose spike after eating, while continuing to demonstrate reduced incidence of moderate to severe side effects.

In January 2024, we announced a comprehensive planned applied animal and human clinical research and development program to thoroughly evaluate DehydraTECH for the improved delivery of GLP-1 and GIP drugs, designed to support prospective commercial partnering with global pharmaceutical companies.

The objective of the new planned studies is to help determine the commercial applicability of DehydraTECH to at least two GLP-1 drugs (semaglutide and liraglutide) and one dual action GLP-1/GIP drug (tirzepatide) which together produced billions of dollars of revenue to their owners, as reported in their most recent financial statements.

The new planned studies to be undertaken are as follows:

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Chronic Dosing Animal Study (WEIGHT-A24-1)

Targeted start of April 2024.

This will be an obese rat diabetic-conditioned study similar to a previous Lexaria study (DIAB-A22-1), with approximately 12 study arms and 6-10 animals per arm.

The study is expected to run for 12 weeks in each arm to allow time to study weight loss, PK, and blood sugar control over time, followed by full data analysis and reporting.

Varied DehydraTECH formulations of semaglutide and liraglutide, alone and together with DehydraTECH-CBD, will be evaluated, to be compared to commercially available Rybelsus®.

We also expect to be evaluating DehydraTECH-processed semaglutide with and without the salcaprozate sodium "SNAC" technology currently found within Rybelsus® tablets.

Human Pilot Study #2 (GLP-1-H24-2)

Targeted start of April/May 2024.

This human pilot study in up to 8 healthy volunteers, will study a single dose of oral ingested DehydraTECH-semaglutide capsules in a similar design but different formulation to Human Pilot Study #1, to be compared to commercially available Rybelsus®.

We also intend to study an oral dissolvable DehydraTECH-semaglutide tablet formulation (dissolvable into sublingual/buccal tissue) to determine whether GLP-1 drug absorption via this route is effective and well tolerated as an alternative to the conventional oral ingestible route which often presents with gastrointestinal side effect issues.

Tolerability, PK, and blood sugar control will all be evaluated.

The DehydraTECH compositions for this study will be compound-formulated using commercially available Rybelsus® tablets as the semaglutide input material.

Human Pilot Study #3 (GLP-1-H24-3)

Targeted start in May/June, 2024.

This human pilot study in up to 8 healthy human volunteers will study a single daily dose of oral ingested DehydraTECH-tirzepatide capsules (to be compound-formulated using Zepbound® by Eli Lilly) administered over a seven-day period compared to commercially available Zepbound® to evaluate tolerability, PK, and blood sugar.

Zepbound® is currently administered by injection only and will be used as the tirzepatide input material for production of the DehydraTECH-tirzepatide capsules to be studied.

Importantly, this study will evaluate DehydraTECH effectiveness in humans with a dual action GLP-1 + GIP drug while also doing so without the SNAC ingredient found in the Rybelsus® semaglutide composition from Human Pilot Studies #1 and #2.

Chronic Dosing Human Study (GLP-1-H24-4)

Targeted start Q3, 2024.

This chronic human study in 60 to 80 obese, pre-diabetic and/or type-2 diabetic human volunteers/patients will dose daily using oral DehydraTECH capsules for 12 weeks and will evaluate tolerability, PK, weight loss, blood sugar levels and more.

The primary goal of this study will be to compare DehydraTECH-processed semaglutide capsules to DehydraTECH-CBD capsules alone - and together in combination - relative to a placebo control over an extended period of time.

Inclusion of DehydraTECH-CBD in this study will be undertaken to determine if the improvements in glycemic control and weight loss witnessed in Lexaria's previous animal study DIAB-A22-1 are evidenced in humans.

Long Term Stability Testing

Lexaria plans to study the chemical and microbiological purity and stability of select DehydraTECH compositions that it prepares for the above planned upcoming animal and human studies over an extended duration of 6-12 months.

Along with improved tolerability, PK and efficacy performance, long term stability is crucial if oral variants of GLP-1 / GIP drugs are to be seriously considered as replacements for currently injectable versions of these drugs.

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Off-Balance Sheet Arrangements

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We believe that understanding the basis and nature of the estimates, judgments and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financials.

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For a discussion of our critical accounting estimates, please read Note 4, Estimates and Judgements, as found in the financial statements in our Annual Report on Form 10-K for the year ended August 31, 2023.

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Funding Requirements

We anticipate that our expenditures will increase in connection with our ongoing R&D program, specifically with respect to our animal and human clinical trials of our DehydraTECH formulations for the purposes of treating hypertension and our investigations with GLP-1 drugs.

As we move forward with our IND application with the FDA, we anticipate that our expenditures will further increase and accordingly, we expect to incur increased operating losses and negative cash flows for the foreseeable future.

Through November 30, 2023, we have funded our operations primarily through the proceeds from the sale of common stock.

The Company has consistently incurred recurring losses and negative cash flows from operations, including net losses of $1,185,038 and $1,769,306 for the three months ended November 30, 2023, and 2022, respectively.

We anticipate that our expenditures will increase in connection with our ongoing R&D program, specifically with respect to our animal and human clinical trials of our DehydraTECH formulations for the purposes of our investigations with GLP-1 drugs and treating hypertension.

As we move forward with our planned R&D studies in 2024, we anticipate that our expenditures will further increase and accordingly, we expect to incur increased operating losses and negative cash flows for the foreseeable future.

Through February 29, 2024, we have funded our operations primarily through the proceeds from the sale of common stock.

The Company has consistently incurred recurring losses and negative cash flows from operations, including net losses of $1,837,771 and $3,079,944 for the six months ended February 29, 2024, and February 28, 2023, respectively.

The continuation of Lexaria as a going concern depends on raising additional capital and/or attaining and maintaining profitable operations.

The accompanying financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our Company discontinue operations.

The recurring losses from operations and net capital deficiency raise substantial doubt about the Company’s ability to continue as a going concern within one year following the date that these consolidated financial statements are issued.

On September 28, 2023, the Company entered into a securities purchase agreement with a single healthcare-focused institutional investor to purchase, as at October 3, 2023, 889,272 shares of common stock and 729,058 pre-funded warrants in a registered direct offering.

In a concurrent private placement, the Company also sold to the investor, warrants to purchase up to 1,618,330 shares of common stock.

The recurring losses from operations and net capital deficiency may raise substantial doubt about the Company’s ability to continue as a going concern within one year following the date that these consolidated financial statements are issued.

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During the six months ended February 29, 2024, the Company has completed the following:

Entered into Securities Purchase Agreements whereby on February 16, 2024, the Company issued 1,444,741 shares of common stock and 113,702 pre-funded warrants in a registered direct offering.

The Company also sold to investors, warrants to purchase up to 1,558,443 shares of common stock.

The combined effective offering price for each share of common stock and accompanying warrant was $2.31.

The warrants will expire five years from the issuance date, and have an exercise price of $2.185 per share.

The Company also agreed to partially compensate the placement agent through the issuance of warrants to purchase up to 54,546 shares of common stock.

The warrants will expire five years from the issuance date, and have an exercise price of $2.8875 per share.

The net proceeds to the Company from the registered direct offering was $3.0 million, after deducting placement agent fees and other offering expenses paid by the Company.

Entered into a Securities Purchase Agreement whereby on October 3, 2023, the Company issued, to a single healthcare-focused institutional investor, 889,272 shares of common stock and 729,058 pre-funded warrants in a registered direct offering.

In a concurrent private placement, the Company also agreed to issue and sell sold to the investor, warrants to purchase up to 1,618,330 shares of common stock.

The combined effective offering price for each share of common stock (or pre-funded warrant in lieu thereof) and accompanying warrant was $0.97 (to note the pre-funded warrants were issued at a price of $0.9699 and have an exercise price of $0.0001).

The warrants will become exercisable six months from issuance, expire five and a half years from the issuance date, and have an exercise price of $0.97 per share.

The net proceeds to the Company from the registered direct offering and concurrent private placement totaled $1.25 million, after deducting placement agent fees and other estimated offering expenses payable by the Company.

To date all of the pre-funded warrants have been exercised, resulting in an issuance by the Company of an aggregate 729,058 common shares for gross proceeds of approx.

During the quarter ended November 30, 2023, the Company issued an aggregate 601,661 common shares pursuant to the exercise of warrants that were issued under our May 11, 2023, financing, at an exercise price of $0.95 per share for gross proceeds of $571,578 of which $33,250 was being held in Lexaria’s trust account with the warrant agent at November 30, 2023.

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The net proceeds to the Company from the registered direct offering and concurrent private placement totaled $1.25 million, after deducting placement agent fees and other offering expenses payable by the Company.

To date all of the pre-funded warrants have been exercised, resulting in an issuance by the Company of an aggregate 729,058 common shares.

Issued an aggregate of 1,119,250 in common shares pursuant to the exercise of warrants that were issued under our May 11, 2023, financing, at an exercise price of $0.95 per share for the gross proceeds of $1,063,475.

We have performed a review of our cash flow forecast and have concluded that funds on hand, combined with those expected from executed license agreements, will be sufficient to meet the Company's financial obligations for the twelve-month period following the filing of these consolidated financial statements on Form 10-Q.

Accordingly, based on this review, management believes that any substantial doubt in the Company’s ability to continue as a going concern has been alleviated.

Results of Operations for the Period Ended November 30, 2023, and 2022

Our net loss for the three months ended for the respective items are summarized as follows:

Results of Operations for the Period Ended February 29, 2024, and February 28, 2023

Our net loss for the six months ended for the respective items are summarized as follows:

Cost of goods sold

Research and development

Consulting fees & salaries

Consulting fees and salaries

Legal and professional

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$ (3,079,944 )

Fees from intellectual property licensing increased by $81,555 while B2B sales decreased by $23,712 with other sales lower by $4,300 year-over year.

Research and Development

Expenditures on R&D decreased by $254,998 year-over-year for the period ended November 30, 2023, as the company has completed the manufacturing of its DehydraTECH-CBD drug to treat hypertension and has completed other various studies in the areas of prospective nicotine replacement therapy, CBD for diabetes and seizures.

In addition, the Company encountered a delay with respect to its anticipated hypertension-relate IND application filing.

Lexaria continues with applied research and development programs in our pharmaceutical division with our primary focus being on FDA approval for a DehydraTECH-CBD drug to treat hypertension and optimization of DehydraTECH formulations of GLP-1 drugs.

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Fees from intellectual property licensing increased by $209,680 while B2B sales decreased by $24,912 with other sales lower by $6,250 year-over year due mainly to an increase in minimum fees earned within our licensee contract and reducing the emphasis on pursuit of B2B clients as we move toward pharmaceuticals.

Research and Development

Expenditures on R&D decreased by $705,397 year-over year for the period ended February 29, 2024, due mainly to the completion of the manufacturing of its DehydraTECH-CBD drug to treat hypertension and the completion of various R&D studies in the areas of prospective nicotine replacement therapy, CBD for diabetes and seizures.

Lexaria continues with applied development and programs in our pharmaceutical division with our primary focus being on optimization of DehydraTECH formulations of GLP-1 drugs as well as advancing our DehydraTECH-CBD drug to treat hypertension.

Consulting Fees and Salaries

In the three months ended November 30, 2023, consulting fees and salaries decreased by $95,453, primarily due to the negotiation of reduced fees and the cancellation of contracts with certain consultants, as well as the loss of two permanent full-time employees.

In the six months ended February 29, 2024, consulting fees and salaries decreased by $195,712, primarily due to the negotiation of reduced fees and the completion of work or cancellation of contracts with certain consultants, as well as the loss of two permanent full-time employees.

Legal and Professional Fees

Our legal and professional fees increased by $84,302 during the period compared to the same prior year period.

The current period expenditures are higher due to increased patent filings and the utilization of additional legal advisory services.

The increase also reflects increased accounting and legal fees related to financing activities in the quarter.

Our legal and professional fees increased by $163,755 during the period compared to the same prior year period due to increased patent filings and the utilization of additional legal advisory services.

The increase also reflects increased accounting and legal fees related to financing activities in the period.

General and Administrative

Our other general and administrative expenses decreased overall by $225,612 during the period ended November 30, 2023, over the same period last year.

Advertising and promotion were down by $223,026 in the current period as we scaled back our efforts to bring the results of the Company’s R&D programs to the attention of various industry sectors and to the scientific and investment communities.

That decrease was partially offset by the impact of an extensive fact sheet marketing campaign and travel expenses.

Our other general and administrative expenses decreased overall by $282,094 during the period ended February 29, 2024, over the same period last year.

Advertising and promotion decreased by $232,035 as we scaled back our efforts to bring the results of the Company’s R&D programs to the attention of various industry sectors and to the scientific and investment communities.

Liquidity and Financial Condition

Working Capital

November 30 ,

February 29 ,

Current assets

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Net Working Capital

November 30 ,

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Cash flows used in operating activities

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Cash flows used in financing activities

I ncrease ( Decrease ) in cash

Effect of exchange rate changes on cash

Net change in cash for the period

$ (2,541,116 )

Operating Activities

Net cash used in operating activities was approximately $1.18 million for the three months ended November 30, 2023, compared with $1.23 million during the same period in 2022.

The decrease relates primarily to a lower net loss ($584,268), largely offset by a lower unrealized loss on marketable securities ($24,413) and lower stock-based compensation expense ($14,823), as well as increases in working capital ($485,419).

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Net cash used in operating activities was approximately $1.8 million for the six months ended February 29, 2024, compared with $2.5 million during the same period in 2023.

The decrease relates primarily to a lower net loss of $1.2 million as we completed manufacturing of our DehydraTECH-CBD drug to treat hypertension and the completion of various R&D studies in the areas of prospective nicotine replacement therapy, CBD for diabetes and seizures, largely offset by as the net increase in working capital $521,972.

Investing Activities

Net cash used in investing activities during the three months ended November 30, 2023, compared to the three months ended November 30, 2022 increased by $5,184 over 2022 due to increased spending on acquisitions of intellectual property, partially offset by decreased equipment additions.

Net cash used in investing activities during the six months ended February 29, 2024, compared to the six months ended February 28, 2023, increased by $29,490 due to increased spending on prosecution of intellectual property.

Financing Activities

Net cash from financing activities during the three months ended November 30, 2023, totaled $1,819,370, compared to net cash flows from financing activities for the three months ended November 30, 2022 of zero.

The increase relates to proceeds from the sale of common share/warrant units ($1,247,719) and warrant exercises ($571,578).

Net cash from financing activities during the six months ended February 29, 2024, was $5,272,206.

The increase relates to net proceeds from the sale of common share and warrant of $4,208,731 and warrant exercises of $1,063,475.

Liquidity and Capital Resources

We have incurred net losses of approximately $6.7 million and $7.4 million respectively in the past two fiscal years.

We expect to continue to incur significant operational expenses and net losses in the upcoming 12 months and beyond.

Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the stage and complexity of our R&D studies and related expenditures, the receipt of additional payments related to the out-licensing of our technology, if any, and the receipt of payments under any current or future collaborations we may enter.

As the Company continues with our IND application process and progresses into the clinical development of our initial product candidate, the need for substantial capital resources increases.

Our existing cash will not be sufficient to complete the full development, testing and commercialization of an FDA approved product candidate.

Accordingly, we will be required to obtain significant further funding to achieve this business objective and/or delay or modify the program in accordance with the financial resources available.

In a concurrent private placement, the Company also sold to the investor, warrants to purchase up to 1,618,330 shares of common stock.

Since inception, the Company has incurred significant operating and net losses.

Net losses attributable to shareholders were $1.8 million and $3.1 million for the six months ended February 29, 2024, and February 28, 2023, respectively.

As of February 29, 2024, we had an accumulated deficit of $47.6 million.

We expect to continue to incur significant operational expenses and net losses in the upcoming 12 months.

Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the stage and complexity of our R&D studies and corporate expenditures, additional revenues received from the licensing of our technology, if any, and the receipt of payments under any current or future collaborations we may enter into.

The recurring losses and negative net cash flows raise substantial doubt as to the Company’s ability to continue as a going concern.