Lexaria Bioscience Corp. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Cautionary Note Regarding Forward-Looking Statements This quarterly report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact may be forward-looking statements. These statements relate to future events or our future financial performance. Any forward-looking statements are based on our present beliefs and assumptions as well as the information currently available to us. In some cases, forward-looking statements are identified by terminology such as “may”, “will”, “should”, “could”, “targets”, “goal”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” set forth in Item 1(A) in our annual report on Form 10-K, as filed with the Securities and Exchange Commission on November 20, 2023, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We caution you not to place undue reliance on any forward-looking statements as they speak only as of the date on which such statements were made, and we undertake no obligation to update any forward-looking statement or to reflect the occurrence of an unanticipated event. New factors may emerge and it is not possible to predict all factors that may affect our business and prospects. Further, management cannot assess the impact of each factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Our unaudited interim consolidated financial statements are stated in United States Dollars (“US$”) and are prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”). The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. In this quarterly report, unless otherwise specified, all dollar amounts are expressed in US dollars. All references to “common shares” and “shares” refer to the common shares in our capital stock, unless otherwise indicated. The terms “Lexaria” “we”, “us”, “our” and “Company” mean the Company and/or our subsidiaries, unless otherwise indicated. 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. Company Overview 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 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; faster achievement of peak drug delivery; reduced side effects; sustained lower levels of blood glucose and lowered blood-glucose spike after eating. 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. Page 21 of 34 Table of Contents 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. Patents 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 APIs encompassing cannabinoids; fat soluble vitamins; NSAIDs pain medications; 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. The Company currently has several applications pending worldwide and due to the complexity of pursuing patent protection, the quantity of patent applications will vary continuously as each application advances or stalls. 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 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. Page 22 of 34 Table of Contents Below we summarize Lexaria’s allowed/granted patents. Issued Patent # Patent Certificate Grant Date Patent Family US 9,474,725 B1 10/25/2016 #1 Food and Beverage Compositions Infused With Lipophilic Active Agents and Methods of Use Thereof US 9,839,612 B2 12/12/2017 US 9,972,680 B2 05/15/2018 US 9,974,739 B2 05/22/2018 US 10,084,044 B2 09/25/2018 US 10,103,225 B2 10/16/2018 US 10,381,440 08/13/2019 US 10,374,036 08/06/2019 US 10,756,180 08/25/2020 AU 2015274698 06/15/2017 AU 2017203054 08/30/2018 AU 2018202562 08/30/2018 AU 2018202583 08/30/2018 AU 2018202584 01/10/2019 AU 2018220067 07/30/2019 EP 3164141 11/11/2020 JP 6920197 07/28/2021 CDN 2949369 06/13/2023 AU 2016367036 07/30/2019 #2 Methods for Formulating Orally Ingestible Compositions Comprising Lipophilic Active Agents JP 6963507 10/19/2021 MX 388 203 B 11/26/2021 AU 2016367037 08/15/2019 #3 Stable Ready-to-Drink Beverage Compositions Comprising Lipophilic Active Agents IN 365864 04/30/2021 JP 6917310 07/21/2021 MX 390001 02/10/2022 JP 7232853 02/22/2023 CDN 2984917 09/26/2023 CDN 3093414 12/13/2022 #6 Transdermal and/or Dermal Delivery of Lipophilic Active Agents JP 7112510 07/26/2022 #7 Lipophilic Active Agent Infused Compositions with Reduced Food Effect AU 2019256805 06/16/2022 #8 Compositions Infused with Nicotine Compounds and Methods of Use Thereof CDN 3096580 05/23/2023 CDN 3111082 08/29/2023 #14 Lipophilic Active Agent Infused Tobacco Leaves and/or Tobacco Materials and Methods of Use Thereof US 11,311,559 04/26/2022 #18 Compositions and Methods for Enhanced Delivery of Antiviral Agents AU 2021261261 03/23/2023 JP 7415045 01/05/2024 US 11,700,875 07/18/2023 #20 Compositions and Methods for Sublingual Delivery of Nicotine CDN 3196911 12/05/2023 US 11,666,544 06/06/2023 #21 Compositions and Methods for Treating Hypertension US 11,666,543 06/06/2023 US 11,931,369 03/19/2024 #24 Compositions and Methods for Treating Epilepsy US 11,944,635 04/02/2024 Page 23 of 34 Table of Contents Research & Development Lexaria is advancing several R&D activities in both preclinical and clinical programs. 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. FDA. 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. 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 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 incidence of moderate to severe side effects; sustained lower levels of blood glucose and lowered blood-glucose spike after eating. 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: Page 24 of 34 Table of Contents 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. Page 25 of 34 Table of Contents Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders. Critical Accounting Policies and Estimates Our consolidated financial statements and accompanying notes are prepared in accordance with US GAAP. These accounting principles require management to make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses during the periods reported. Based on information available to management at the time, these estimates, judgments and assumptions are considered reasonable. 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. 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. There have been no material changes to the critical accounting estimates as previously disclosed in our 2023 Form 10-K. 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 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 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. Page 26 of 34 Table of Contents 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 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. 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: February 29, February 28, 2024 2023 Change Revenues $ 296,278 $ 117,760 $ 178,518 Cost of goods sold (4,822 ) (18,753 ) 13,931 Research and development (820,270 ) (1,525,667 ) 705,397 Consulting fees and salaries (431,763 ) (627,475 ) 195,712 Legal and professional (361,405 ) (197,650 ) (163,755 ) Other general and administrative (485,165 ) (767,259 ) 282,094 Other income (loss) (30,624 ) (60,900 ) 30,276 Net Loss $ (1,837,771 ) $ (3,079,944 ) $ 1,242,173 Page 27 of 34 Table of Contents Revenue 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 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 $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 $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 February 29 , August 31, 202 4 202 3 Current assets $ 5,416,984 $ 2,151,213 Current liabilities (81,717 ) (267,735 ) Net Working Capital $ 5,335,267 $ 1,883,478 Page 28 of 34 Table of Contents Cash Flows February 29, February 28, 2024 2023 Cash flows used in operating activities $ (1,801,267 ) $ (2,473,590 ) Cash flows used in investing activities (97,016 ) (67,526 ) Cash flows used in financing activities 5,272,206 - Effect of exchange rate changes on cash (20,626 ) - Net change in cash for the period $ 3,353,297 $ (2,541,116 ) Operating Activities 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 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 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 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. Page 29 of 34 Table of Contents 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 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 $73. · 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 may also offer securities in response to market conditions or other circumstances if we believe such a plan of financing is required to advance the Company’s business plans. There is no certainty that future equity or debt financing will be available or that it will be at acceptable terms and the outcome of these matters is unpredictable. A lack of adequate funding may force us to reduce spending, curtail or suspend planned programs or possibly liquidate assets. Any of these actions could adversely and materially affect our business, cash flow, financial condition, results of operations, and potential prospects. The sale of additional equity may result in additional dilution to our stockholders. Entering into additional licensing agreements, collaborations, partnerships, alliances marketing, distribution, or licensing arrangements with third parties to increase our capital resources is also possible. If we do so we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. The Company has evaluated whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern. As of February 29, 2024, the Company had cash and cash equivalents of approximately $4.7 million to settle $81,717 in current liabilities. We have performed a review of our cash flow forecast and have concluded that our existing cash, 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. Page 30 of 34 Table of Contents Item 3. Controls and Procedures Management’s Report on Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our President, our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial and Accounting Officer) to allow for timely decisions regarding required disclosure. As of February 29, 2024, the fiscal quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of February 29, 2024. Inherent limitations on Effectiveness of Controls Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, regulations, segregation of management duties, scale of organization, and personnel factors. It is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. It can be circumvented by collusion or improper management override. Internal control over financial reporting may not prevent or detect misstatements on a timely basis. These inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, these risks. Systems determined to be effective can provide only reasonable assurances with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Changes in Internal Control over Financial Reporting During the quarter ended February 29, 2024, our controls and controls processes remained consistent with August 31, 2023. There have been no changes in our internal controls over financial reporting that occurred during the quarter ended February 29, 2024, that have materially or are reasonably likely to materially affect our internal controls over financial reporting. Page 31 of 34 Table of Contents PART II—OTHER INFORMATION