What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-12 compared with 2024-04-09 · 85 added, 59 removed, 219 unchanged (40% of the section changed)

23 unchanged sentences

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.

During the nine-months ended May 31, 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:

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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.

Further, during the nine-months ended May 31, 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.

During the nine-months ended May 31, 2024, the Company also entered into a securities purchase agreement with a single healthcare-focused institutional investor to purchase 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 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 were $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.

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.

2 unchanged sentences

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.

During the nine-months ended May 31, 2024, the Company had warrant exercises resulting in the following share issuances:

1,622,250 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 $1,541,137;

1,618,330 common shares pursuant to the exercise of warrants that were issued under our October 3, 2023, financing, at an exercise price of $0.97 per share for gross proceeds of $1,569,780;

729,058 common shares pursuant to the exercise of pre-funded warrants that were issued under our October 3, 2023, financing, at an exercise price of $0.0001 per share for gross proceeds of $73 dollars;

1,298,702 common shares pursuant to the exercise of warrants that were issued under our February 16, 2024, financing, at an exercise price of $2.185 per share for gross proceeds of $2,837,664;

113,702 common shares pursuant to the exercise of pre-funded warrants that were issued under our February 16, 2024, financing, at an exercise price of $0.0001 per share for gross proceeds of $11 dollars.

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;

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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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Subsequent to the nine-months ended May 31, 2024, the Company was advised of the issuance of the following new patents:

European patent 3765088 in Family #6 – Transdermal and/or Dermal Delivery of Lipophilic Active Agents with validation in the following countries:

Austria, Czech Republic, France, UK, Germany, Italy, Poland, Spain, Sweden and Switzerland;

Canadian patent 3172889 in Family #18 – Compositions and Methods for Enhanced Delivery of Antiviral Agents;

US patent 12,023,346 in Family #24 – Compositions and Methods for Treating Epilepsy

Below we summarize Lexaria’s allowed/granted patents.

36 unchanged sentences

US 11,980,593

US 11,931,369

#24 Compositions and Methods for Treating Epilepsy

US 11,944,635

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US 11,986,485

US 12,023,346

Research & Development

3 unchanged sentences

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.

During the quarter ended May 31, 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.

8 unchanged sentences

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.

As announced on May 17, 2024, the dosing for this study has commenced.

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.

3 unchanged sentences

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

Targeted start of April/May 2024.

As announced on May 8, 2024, the dosing for this study has commenced with the first two dosing arms having been completed.

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®.

2 unchanged sentences

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

On June 5, 2024, we announced that human pilot study continues to make progress and the second round of dosing for all nine study participants is now complete.

Lexaria expects to complete the third (final) arm of the Study in early July

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

Targeted start in May/June, 2024.

As announced on May 23, 2024, the CRO has been selected for this study and the manufacture of the test articles is expected to be completed by the end of 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.

6 unchanged sentences

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.

On June 18, 2024, Lexaria announced that it has now hired a contract research organization ("CRO") to oversee execution of this study.

Mode of Action and Performance of DehydraTECH-GLP-1 Drugs

On May 6, 2024, Lexaria announced an applied research program to evaluate certain molecular characteristics of DehydraTECH processed with the glucagon-peptide 1 ("GLP-1") drug, semaglutide, related to its mode of action and performance.

The research will be conducted in partnership with the National Research Council of Canada ("NRC").

This work program will evaluate the molecular properties of DehydraTECH-processed pure semaglutide using simulated gastric fluid thereby mimicking conditions in the human gut.

A battery of testing methods will be employed, including polyacrylamide gel electrophoresis ("PAGE"), size exclusion chromatography ("SEC"), matrix assisted laser desorption ionization mass spectrometry ("MALDI MS") and dynamic light scattering ("DLS").

Long Term Stability Testing

1 unchanged sentence

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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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.

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

Off-Balance Sheet Arrangements

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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.

Through May 31, 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 $3,622,083 and $5,463,510 for the nine-months ended May 31, 2024, and 2023, respectively.

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

1 unchanged sentence

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:

During the nine-months ended May 31, 2024, the Company has completed the following:

Entered into a Warrant Exercise Agreement on April 30, 2024 to induce an existing accredited investor (the “Investor”) to exercise in full outstanding Common Stock Purchase Warrants (the “Exercise”) to purchase up to an aggregate of 2,917,032 shares of the Company’s common stock (the “Existing Warrant”) for gross proceeds of $4,407,444.

In consideration for the immediate and full exercise of the Existing Warrant, the Investor received a new unregistered Common Stock Purchase Warrant to purchase up to an aggregate of 2,917,032 shares of the Company’s common stock (the “New Warrant”) with an exercise price of $4.75 per share in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933 (the “Securities Act”).

The New Warrant was issued to the Investor for consideration of $0.125 per share for additional gross proceeds of $364,629.

The Company also issued 102,097 warrants with an exercise price of $5.9375 as part of a tail commission.

Placement agent fees and other offering expenses in the amount of $209,796 were netted against the proceeds.

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.

6 unchanged sentences

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.

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

1 unchanged sentence

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.

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 1,622,250 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 the gross proceeds of $1,541,138.

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:

Results of Operations for the Period Ended May 31, 2024, and 2023,

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

Cost of goods sold

Research and development

Consulting fees and salaries

Consulting fees & salaries

Legal and professional

Other general and administrative

Other income (loss)

Other expense, net

$ (3,622,083 )

$ (5,463,510 )

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Fees from intellectual property licensing increased by $269,055 while B2B sales decreased by $38,799 with other sales lower by $45,465 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.

Expenditures on R&D decreased by $1,772,956 year-over year for the period ended May 31, 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.

In the nine-months ended May 31, 2024, consulting fees and salaries decreased by $27,569, 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.

Our legal and professional fees increased by $254,285 during the period compared to the same prior year period due to increased patent filings and the utilization of additional legal advisory services related to various operational and administrative matters.

The increase also reflects increased accounting 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.

Our other general and administrative expenses decreased overall by $112,114 during the period ended May 31, 2024, over the same period last year.

Advertising and promotion decreased by $82,034 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.

We also incurred an impairment loss of $57,836 due to lapsed or abandoned Patents.

Liquidity and Financial Condition

Working Capital

February 29 ,

Current assets

1 unchanged sentence

Net Working Capital

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Cash flows used in operating activities

2 unchanged sentences

Cash flows used in investing activities

Cash flows used in financing activities

Cash flows provided by financing activities

Effect of exchange rate changes on cash

2 unchanged sentences

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.

Net cash used in operating activities was approximately $3.1 million for the nine-months ended May 31, 2024, compared with $4.3 million during the same period in 2023.

The decrease relates primarily to a lower net loss of $3.6 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.

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.

Net cash used in investing activities during the nine-months ended May 31, 2024, compared to the nine-months ended May 31, 2023, increased by $17,845 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.

Net cash from financing activities during the nine-months ended May 31, 2024, was $10,315,207.

The increase relates to net proceeds from the sale of common shares of $4,208,731, warrant exercises of $6,103,602 and a stock option exercise of $2,874.

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.

Net losses attributable to shareholders were $3.6 million and $5.5 million for the nine-months ended May 31, 2024, and 2023, respectively.

As of May 31, 2024, we had an accumulated deficit of $49.4 million.

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

1 unchanged sentence

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

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

Sources of Liquidity

During the nine-months ended May 31, 2024, the Company has completed the following:

Entered into a Warrant Exercise Agreement on April 30, 2024, to induce an existing accredited investor (the “Investor”) to exercise in full outstanding Common Stock Purchase Warrants (the “Exercise”) to purchase up to an aggregate of 2,917,032 shares of the Company’s common stock (the “Existing Warrant”) for gross proceeds of $4,407,444.

The New Warrant was issued to the Investor for consideration of $0.125 per share for additional gross proceeds of $364,629.

The Company also issued 102,097 warrants with an exercise price of $5.9375 as part of a tail commission.

Placement agent fees and other offering expenses in the amount of $209,796 were netted against the proceeds.

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.

6 unchanged sentences

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.

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

2 unchanged sentences

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.

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.

6 unchanged sentences

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.

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As of May 31, 2024, the Company had cash and cash equivalents of approximately $8.5 million to settle $271,375 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 In making this assessment, the Company believes that this alleviates any substantial doubt in connection with the Company's ability to continue as a going concern.

Controls and Procedures

1 unchanged sentence

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.

As of May 31, 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.

Inherent limitations on Effectiveness of Controls

7 unchanged sentences

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.

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During the quarter ended May 31, 2024, our controls and controls processes remained consistent with those in effect at August 31, 2023.

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended May 31, 2024, that have materially or are reasonably likely to materially affect our internal controls over financial reporting.

PART II—OTHER INFORMATION

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis