What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-11-26 compared with 2023-11-20 · 86 added, 74 removed, 91 unchanged (64% of the section changed)

9 unchanged sentences

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

Our primary focus during the year was on our investigations of CBD for the reduction of hypertension.

We previously completed human studies on hypertension with results that were supportive of our plans to file an Investigational New Drug (“IND”) application with the US Food and Drug Administration (“FDA”).

The FDA provided us with a positive written response from our pre-IND meeting in July 2022 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 regulatory pathway for our program.

We continue working toward our IND filing, however as announced in our news release of August 30, 2023, we have experienced some delays due to FDA compliance requirements of one of our ingredient suppliers which must be completed prior to our submission of our IND application.

During the year ended August 31, 2023, we also completed studies with estradiol and nicotine and reported improved drug delivery characteristics with both molecules after they were treated with DehydraTECH.

In fiscal 2023, we also advanced R&D activities in the fields of diabetes and weight loss management pursuant to successfully completed animal study work with our DehydraTECH-CBD in these areas.

It is now our intention to explore whether or not DehydraTECH has any benefits together with GLP-1 drugs in this regard.

Our primary focus during the fiscal year was on our investigations of DehydraTECH-enhanced GLP-1 and GIP drugs.

These investigations included two human pilot studies, with our second human pilot study testing an oral mouth melt form of DehydraTECH-enhanced semaglutide and an extensive 12 arm animal study to investigate DehydraTECH enhanced semaglutide (both pure API and formulated Rybelsus®) DehydraTECH enhanced liraglutide and DehydraTECH enhanced CBD for weight loss.

In addition, Lexaria has commenced start-up activities for its 12 week chronic human clinical trial study of diabetic patients comparing DehydraTECH-cannabidiol (“CBD”), DehydraTECH-semaglutide, DehydraTECH-CBD combined with DehydraTECH-semaglutide and DehydraTECH-tirzepatide against a Rybelsus® control.

In addition, we have continued to progress forward with addressing comments provided by the FDA on our IND application for the conduct of our Phase 1(b) clinical study investigation of DehydraTECH-CBD for the reduction of hypertension.

Subject to receipt of sufficient funding, we anticipate that we will be in a position to proceed with this study during the 2025 fiscal year.

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 product.

We were granted a total of nine new patents during fiscal 2023 including our first ever patents in the country of Canada, making it one of our most successful years ever for the acquisition of new intellectual property.

We were granted a total of ten new patents during fiscal 2024 including our first ever patents for the treatment of epilepsy, making it another successful year for the acquisition of new intellectual property.

Financial condition and operating performance

1 unchanged sentence

These findings encourage the pursuit of lucrative commercial applications in the pharmaceutical sector.

We continue to devote an increasing proportion of our resources toward pharmaceutical applications with the continuation of our programs directed at hypertension as we move toward FDA approved IND clinical studies.

During the year ended August 31, 2023, we completed seven studies investigating DehydraTECH infused CBD, nicotine and estradiol.

These programs, having been funded by the capital infusion of Lexaria’s 2021 financing of approximately $15 million, supported our significant advancements in the fields of heart disease and hypertension, hormones, oral nicotine, and diabetes.

We continue to devote an increasing proportion of our resources toward pharmaceutical applications with the continuation of our programs directed at the enhancement of GLP-1 and GIP drugs.

During the year ended August 31, 2024, we completed two human pilot studies and one animal study investigating DehydraTECH infused GLP-1, GIP and CBD formulations.

These programs, having been funded by the proceeds of Lexaria’s 2024 financing activities of approximately $10.3 million, supported our significant advancements in the fields of diabetes, weight loss, heart disease and hypertension.

We consider the advancement of our applied R&D studies as a vital step towards our goal of establishing commercial relationships with industry partners who can utilize DehydraTECH within existing or new product lines.

Conducting additional in vitro and in vivo studies which test the absorption of some, or all of the molecules named within our patents and patent applications, i.e.

CBD, vitamins, PDE5 inhibitors, nicotine and antiviral drugs, further substantiate the effectiveness of DehydraTECH.

Conducting additional in vitro and in vivo studies which test the absorption of some, or all of the molecules named within our patents and patent applications, further substantiate the effectiveness of DehydraTECH.

Successful tests are expected to increase awareness and acceptance of DehydraTECH as a meaningful method used to deliver some or all of the named molecules more effectively than current delivery methods avail.

1 unchanged sentence

Our R&D results serve to de-risk the potential API products that could conceivably develop into clinical trials and ultimately new drugs.

Our pursuit of opportunities within the cannabinoid, nicotine and other bioactive molecular markets in the US and internationally continue unabated.

Our pursuit of opportunities within the GLP-1/GIP drug, cannabinoid, nicotine and other bioactive molecular markets in the US and internationally continue unabated.

We believe there are meaningful competitive advantages in manufacturers adopting DehydraTECH in their products with its demonstrated higher absorption levels, its ability to infuse smaller quantities of active molecules in their products and the benefit of its predictable drug delivery times.

Implementing our technology could lead to smaller dosing and decreased manufacturing costs while masking unwanted flavor and smell of the active molecules.

We are anticipating these efforts will lead to increased licencing revenue through licensing partnerships.

We are anticipating these efforts will lead to increased licensing revenue through licensing partnerships.

We are pursuing technology licensing opportunities as a method of generating profitable revenue streams over long periods of time.

We have not yet, however, been able to secure a large client utilizing our technology in large quantities of products.

With thirty-seven patents granted to date of which thirteen are granted in the US, Lexaria believes that it has a robust patent portfolio but continues to seek additional protection for its intellectual property globally.

With forty-six patents granted to date of which eighteen are granted in the US, Lexaria believes that it has a robust patent portfolio but continues to seek additional protection for its intellectual property globally.

The successful granting of additional patents could lead to material increases in shareholder value through the ability to generate meaningful license revenues from our increased intellectual property portfolio.

2 unchanged sentences

Results of Operations for our Year Ended August 31, 2024

Our net loss from operations for the year ended August 31, 2023, was $6,712,525 (2022 - $7,383,653).

Our net loss from operations decreased by $903,871 to $5,808,654 for the year ended August 31, 2024 from $6,712,525 for the year ended August 31, 2023.

The changes between these periods for the respective items are summarized as follows:

4 unchanged sentences

Other general and administrative

Other income (loss)

Other expense, net

$ (5,808,654 )

4 unchanged sentences

Year Ended August 31,

The primary source of revenues for the Company are derived from Lexaria Hemp where sales of B2B processing of intermediary CBD product saw a significant decrease of approximately 61% (2023 - $44,167 vs 2022- $113,438) in the year.

During the year ended August 31, 2023, Other revenue included $35,241 (2022- $87,399) from R&D contracts for exploratory work the Company performed on behalf of third parties interested in our technology.

Challenges in the US market for small companies has made it difficult to generate larger revenue streams, irrespective of the use of our technology, with many small companies struggling to exist.

On the other hand, revenue generated by licensing our technology to others has grown substantially to reach $146,800 in fiscal 2023 vs only $54,560 in fiscal 2022.

Total Revenue

Total Revenue for fiscal year 2024 increased by $238,070, or 105%, to $464,278 from $226,208 in fiscal year 2023.

The primary source of revenue for the Company relates to the licensing of our technology to others.

Licensing revenue grew by $311,190, or 212%, to $457,990 in fiscal year 2024 as compared to $146,800 in fiscal year 2023.

This increase was attributable to minimum fees related to two license agreements.

The increase in licensing revenue was partially offset decreases in both the revenue from our B2B processing of intermediary CBD products and other revenues which decreased by $38,779 and $34,341 respectively in fiscal year 2024.

These decreases reflected the Company’s emphasis during the year on licensing DehydraTECH to new and existing industry participants to enable enhanced performance of their developmental and commercial stage products.

In fiscal 2025 and assuming our existing clients remain in compliance with their contracts, the Company expects to see an increase in revenue through further technology licensing from DehydraTECH processed hemp-based CBD and other consumer products.

3 unchanged sentences

Research and development (“R&D”) costs are expensed as incurred and account for a significant portion of our operational expenses.

With proceeds from our underwritten public offering in January of 2021, we were able to direct additional expenditures to the increased focus on studies pertaining to hypertension and anti-viral drugs.

Our R&D expenditures for fiscal 2023, at $3,666,721 were nearly double those of fiscal 2022 at $1,842,675.

This was in agreement with our internal plans.

In large part, this was due to our ongoing expenditures in preparation for our hypertension-related prospective IND filing;

and also because of R&D programs completed in the fields of a human oral nicotine study and animal based DehydraTECH-CBD seizure and diabetes studies.

Each of these three areas of study produced positive results.

We will continue to invest in our R&D programs for the foreseeable future and we expect these expenses to continue to increase in 2024 compared to 2023, assuming successful corporate financing activities.

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.

During the fiscal year ended August 31, 2024, funding constraints limited our ability to direct resources to studies pertaining to weight loss and diabetes.

R&D expenditures for fiscal year 2024 decreased by $1,306,156, or 36%, to $2,360,565 from $3,666,721 for fiscal year 2023.

The decrease in year-over-year R&D expenditures was driven by completion of studies related to hypertension and anti-viral drugs and a slow-down in activity as we prepared to begin our investigational studies related to GLP-1 and GIP drugs.

R&D expenditures relate primarily to our new investigations into GLP-1 and GIP drugs, along with ongoing expenditures in preparation for our hypertension-related prospective IND filing.

To date, Lexaria has been pleased with the results of our investigational studies with DehydraTECH enhanced GLP-1 and GIP drugs.

We will continue to invest in our R&D programs for the foreseeable future and we expect these expenses to increase in 2025 compared to 2024, assuming successful corporate financing activities.

Currently, our primary clinical research areas of interests are focused on the investigation of DehydraTECH-powered GLP-1/GIP drugs as well as CBD for the treatment of diabetes and weight loss and, also, CBD for the reduction of hypertension.

Of significant note, Lexaria submitted our preliminary pre-meeting application for an Investigational New Drug (“IND”) to the FDA with plans to develop a cannabidiol-based drug formulation, DehydraTECH-CBD for hypertension.

3 unchanged sentences

The regulator has also decided that there was no need to conduct additional non-clinical studies before the start of the IND program.

Lexaria has engaged its CRO and the start-up activities for this study have commenced.

We expect to file our IND application as soon as possible after our third-party ingredient supplier has completed its FDA compliance requirements.

Preclinical and clinical development is inherently unpredictable as is regulatory approval and commercialization, therefore we are unable to estimate with any certainty the costs we will incur, and the timelines required in our continued development and commercialization efforts.

Lexaria has been working with its third party regulatory affairs consultant to respond to certain requests of the FDA and amend its protocol accordingly.

These documents are expected to be submitted during the first calendar quarter of 2025.

Preclinical and clinical development is inherently unpredictable as is regulatory approval and commercialization, therefore we are unable to estimate with certainty the ultimate costs we will incur for multi-year programs, and the timelines required in our continued development and commercialization efforts.

We will require significant additional funding to complete any IND planned studies.

5 unchanged sentences

Also included are costs for advertising and marketing, investor relations, corporate facilities, insurance premiums, legal fees related to corporate matters, fees for auditing, and tax filings.

Our general and administrative expenses saw an overall decrease of $1,897,911 during the year ended August 31, 2023, as compared to a $753,185 increase during the previous year.

We decreased advertising and promotional expenditures by $817,363, 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.

Stock-based compensation expense (non-cash) decreased from $752,591 to $170,382 ($582,209), due to fewer options vesting during the year.

These year-to-year decreases are a significant driver of the year-to-year overall decrease in consulting wages and salaries expense.

Travel expenses were also down by $34,678 due primarily to a decrease in participation in industry conferences.

Unrealized losses on marketable securities decreased by $542,921 in the year.

General and administrative expenses for fiscal year 2024 increased by $790,012, or 26%, to $3,852,021 from $3,062,009 for fiscal year 2023.

The increase during Fiscal 2024 relates primarily to higher legal and professional, wages and salaries, and consulting expenses ($367,473, $267,330, and $252,677, respectively);

combined with higher advertising and promotional expenditures ($84,187), as we scaled 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;

partially offset by lower depreciation, office expenses, and impairment losses on the Company’s patent portfolio ($69,814, $63,499, and $48,925, respectively).

The increase in wages and salaries relates primarily to stock-based compensation expense (non-cash), which increased to $492,236 during the year ended August 31, 2024 from $170,382 for the year ended August 31, 2023 due to increased options vesting during the year.

The increase in consulting expense for the year ended August 31, 2024 relates primarily to separation payments to our Chief Executive Officer, who resigned effective August 31, 2024, but is maintaining his position as Chairman of the Board and as a Strategic Executive Consultant.

The increase in legal and professional fees reflects an increased level of equity financing-related activity during the fiscal year.

The Company evaluated its patent portfolio and determined that certain pending applications had been abandoned or would not be pursued.

As such, during the year ended August 31, 2024, the Company recognized an impairment loss of $57,836 related to those abandoned applications, as compared to $106,731 for the year ended August 31, 2023.

Other Income/(Loss)

Other Income/(Loss) for fiscal year 2024 decreased by $122,979, or 69%, to a loss of $55,524 from a loss of $178,503 for fiscal year 2023.

The change was primarily driven by the fact that fiscal year 2024 unrealized losses on marketable securities of $69,835 were $151,858, or 68%, lower than fiscal year 2023 unrealized losses on marketable securities of $221,693.

This is attributable to continuing decreases in the fair value of the Company’s investment in Hill Inc.

1 unchanged sentence

We remain confident that the loss may be temporary in nature as Hill Inc.

continues to make inroads to the US hemp markets with DehydraTECH enabled products produced and sold by their licensees.

Our consulting fees and salaries decreased by $943,699 in the year ended August 31, 2023, due primarily to a decrease of $582,209 in stock-based (non-cash) compensation expense, the elimination of one management position and the renegotiation for reduced fees with our consultants.

Legal and professional fees were $116,672 lower in the year ended 2023 as compared to the previous year’s expenses.

No bad debts were recorded in the years ended 2023 and 2022.

The Company evaluated its patent portfolio and determined that certain pending applications had been abandoned or would not be pursued.

As such, during the year ended August 31, 2023, the Company recognized an impairment loss of $106,761 related to those abandoned applications.

continues to make inroads into the US hemp markets with DehydraTECH enabled products produced and sold by their licensees.

Liquidity and Capital Resources

1 unchanged sentence

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-licencing of our technology, if any, and the receipt of payments under any current or future collaborations we may enter.

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.

On August 12, 2022, we entered into a sales agreement with Maxim Group LLC, (“Maxim”), pursuant to which we may offer and sell shares of our common stock with an aggregate offering price of up to $5,925,000 under the At-The-Market (“ATM”) Offering.

The sales agreement provides that Maxim will be entitled to a sales commission equal to 3.0% of the gross sales price per share of all shares sold under the ATM Offering.

During the fiscal year ended August 31, 2023, 34,652 shares were sold under the ATM for gross proceeds of $114,456.

Offering costs netted against proceeds amounted to $125,122 and, as per the terms of the sales agreement, the ATM was terminated July 30, 2023.

On May 8, 2023, we entered into a placement agency agreement with Maxim, pursuant to which we agreed to sell 2,106,000 units at a price of $0.95 per unit for aggregate gross and net proceeds of $2,000,700 and $1,600,397, respectively.

Each unit was comprised of one share and one warrant, with each warrant being exercisable for a five-year period to purchase an additional share at a price of $0.95.

The securities were issued on May 11, 2023, and were registered pursuant to a Form S-1 registration statement filed under number 333-271096.

Maxim was paid 7% of the gross proceeds and was also reimbursed $70,000 for its expenses.

The Company intends to form industry partnerships for later stage clinical development, which in any event is expected to be a multi-year process.

Our existing cash is not 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 or reach industry partnerships to achieve this business objective and/or delay or modify the program in accordance with the financial resources available.

Sources of Liquidity

During the year ended August 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.

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.

1,298,702 warrants were exercised pursuant to the Warrant Exercise Agreement entered into on April 30, 2024.

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 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.

All of the 1,618,330 warrants were exercised pursuant to the Warrant Exercise Agreement entered into on April 20, 2024.

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 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.

3 unchanged sentences

The sale of additional equity may result in additional dilution to our stockholders.

Entering into additional licencing 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 favourable to us.

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 August 31, 2023, the Company had cash on hand of approximately $1.4 million to settle $270,000 in current liabilities.

The Company believes this is sufficient to fund our expected R&D and operating expenditures for twelve-months following the filing date of this report.

We do not anticipate making any material capital expenditures in the fiscal 2024 as we believe our current facilities and equipment are sufficient for the forthcoming twelve months following the filing date of this report.

As of August 31, 2024, the Company had cash on hand of approximately $6.5 million to settle $1.1 million in current liabilities.

The Company believes this is sufficient to fund our expected R&D and operating expenditures for the twelve-month period following the filing date of this report.

We do not anticipate making any material capital expenditures in fiscal 2025, other than those currently budgeted for our R&D programs, as we believe our current facilities and equipment are sufficient for the forthcoming twelve months following the filing date of this report.

Working Capital

2 unchanged sentences

Net Working Capital

The Company’s working capital balance decreased by approximately $4.8 million due primarily to cash used in operating activities during the year ended August 31, 2023.

The Company’s working capital balance increased by approximately $4.9 million due primarily to the net impact of cash from financing activities and cash used in operating activities during the year ended August 31, 2024.

Cash flows used in operating activities

2 unchanged sentences

Cash flows used in investing activities

Cash flows used in financing activities

Decrease in cash

$ (4,461,116 )

Cash flows provided by financing activities

Effect of exchange rate changes on cash

Increase/(Decrease) in cash

$ (4,461,116 )

1 unchanged sentence

Net cash used in operating activities was approximately $5.0 million for the year ended August 31, 2024, compared with $5.9 million during the same period in 2023.

The increase in net cash used in operating activities during the year ended August 31, 2023 relates primarily to a decrease in non-cash expenses related to common shares issued for services ($1,200,000), stock-based compensation ($582,209) and unrealized loss on marketable securities ($542,921);

partially offset by a decrease in our net loss ($671,128) and a decrease in working capital ($494,738).

The decrease in net cash used in operating activities during the year ended August 31, 2024 relates primarily to a decrease in our net loss ($903,871).

Investing Activities

Net cash used in investing activities is attributable to increased spending on our intellectual property.

During the fiscal year, nine additional patents were granted.

Net cash used in investing activities is attributable to acquisitions of intellectual property and equipment.

During the fiscal year, ten additional patents were granted.

Financing Activities

Net cash provided by financing activities reflects net proceeds from the issuance of common shares.

Net proceeds from the ATM and May 11, 2023 offerings totaled $1,589,731.

Net cash provided by financing activities reflects net proceeds from the sale of common shares for cash and the exercise of warrants.

Net proceeds from the October 3, 2023, February 14, 2024 and April 30, 2024 financing transactions and from warrant exercises totaled approximately $10.3 million.

Critical Accounting Policies and Estimates

9 unchanged sentences

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-K

Item 7. Management’s Discussion and Analysis