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) and in our annual report on Form 10-K, as filed with the Securities and Exchange Commission on November 26, 2024, 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$”) and are prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”). The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. In this quarterly report, unless otherwise specified, all dollar amounts are expressed in US$. 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, 2024. Company Overview Lexaria’s DehydraTECH patented technology is a drug delivery platform technology that improves the way that Active Pharmaceutical Ingredients (“API”) enter 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, offering potential to lower 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. 19 Table of Contents Research & Development Lexaria is advancing several R&D activities in preclinical as well as on-going and planned future clinical programs. During the nine months ended May 31, 2025, Lexaria announced results from its 12 week, 12 study-arm, GLP-1 Diabetes Animal Study (WEIGHT-A24-1) which was completed using diabetic, pre-conditioned Zucker rats. An arm relates to a subset of participants or test subjects assigned to receive a specific treatment (for example, a formulation of DehydraTECH and semaglutide). Each arm was compared to others to evaluate the effectiveness, safety, and outcomes of the treatments being tested. Each group of the Study was dosed for a 12-week period following the initial acclimation period. During the Study, over 1,500 blood plasma samples were collected from the total starting rat population of 72 animals for purposes of detailed PK drug delivery analyses. Results showed that DehydraTECH-enhanced liraglutide and certain CBD formulations outperformed the Rybelsus ® formulations with respect to lowering blood sugar and having greater body weight-control. Blood and brain tissue PK is also in the process of being analyzed to help determine whether DehydraTECH processing resulted in higher blood and brain absorption than non-DehydraTECH groups, as Lexaria has evidenced numerous times in previous animal studies. The Study also included a comprehensive battery of liver and kidney function testing and blood chemistry analyses that remain to be analyzed and reported. Further, during the nine months ending May 31, 2025, Lexaria completed the dosing in nine (9) healthy human volunteers to investigate DehydraTECH-enhanced tirzepatide, a dual action glucagon-like peptide-1 + glucose-dependent insulinotropic peptide receptor agonist, as compared to the Zepbound® brand of injected tirzepatide. Results indicated that DehydraTECH-tirzepatide, as compared to Zepbound®, evidenced a 47% reduction in adverse events, a comparable overall reduction in blood glucose and a comparable increase in insulin levels. In addition, the DehydraTECH-tirzepatide blood levels increased steadily and more consistently each day of the study, avoiding the abrupt peaks or declines seen with Zepbound® injections. Of note was the fact that on the final day of the study, 50% of the participants dosed with DehydraTECH-tirzepatide experienced their peak levels, indicating that their levels were still rising. Also during the nine months ending May 31, 2025, Lexaria via its wholly owned subsidiary, Lexaria (AU) Pty Ltd, received Ethics Board Approval pursuant to a Project Agreement with Novotech (Australia) Pty Limited for the conduct of its Australian Phase 1b 12-week chronic clinical study of DehydraTECH formulated cannabidiol and semaglutide (separately and in combination) and tirzepatide in overweight or obese, or pre- and Type II diabetic participants (GLP-1-H24-4). As announced April 3, 2025, participant enrolment for all five arms of study GLP-1-H24-4 had been completed entering a total of 24 subjects per arm, with the full results from the study expected to be reported during the fourth quarter of calendar-2025. More recently, on June 11, 2025, Lexaria announced completion of its human pilot study GLP-1-H25-5 in ten (10) overweight human volunteers, which tested a DehydraTECH-enhanced liraglutide glucagon-like peptide-1 receptor agonist compared to the Saxenda® brand of injected liraglutide. Positive partial results were released indicating that DehydraTECH-liraglutide, as compared to Saxenda®, evidenced a 22.7% reduction in adverse events with, notably, a 67% reduction in nausea incidence and a 31% reduction in gastrointestinal adverse events overall. The results also indicated 9 out of 10 subjects experienced weight loss in each arm, with remarkable similarity in blood glucose and insulin levels and patterns evidenced throughout the duration of the study between arms. Lexaria noted that these positive findings provide support for possible pursuit of a 505(b)2 new drug application expedited regulatory development pathway for DehydraTECH-liraglutide, pending pharmaceutical partner interest that the Company is now searching for and subject to successful completion of pending pharmacokinetic findings from the study that remain to be analyzed and reported upon. 20 Table of Contents Financings During the nine months ended May 31, 2025, the Company also entered into Securities Purchase Agreements whereby on: · October 16, 2024, the Company issued 1,633,987 shares of common stock at a purchase price of $3.06 per share for gross and net proceeds of $5.0 million and $4.5 million, respectively. Concurrently, the Company issued, by way of a private placement transaction, 4,551,019 share purchase warrants, entitling the holder thereof to purchase up to 4,551,019 shares of common stock at a price of $3.06 per share for a period of five years from January 14, 2025, the date of shareholder approval for such warrant issuance. The shares registered pursuant to a take down of the Company’s Form S-3 registration statement and the warrants and related warrant shares were registered pursuant to a Form S-3 registration statement As part of the terms and conditions of the warrant issuance, the sole investor agreed to cancel the 2,917,032 share purchase warrants bearing an exercise price of $4.75 that were issued to them in the April 30, 2024 financing. We also issued the placement agent warrants to purchase up to 57,190 shares for a period of five years from the date of issuance, at an exercise price of $3.825 per share; and · April 28, 2025, the Company issued 2,000,000 shares of common stock at a purchase price of $1.00 per share for gross and net proceeds of $2.0 million and $1.7 million, respectively. The shares were registered pursuant to a take down of the Company’s Form S-3 registration statement. We also issued the placement agent warrants to purchase up to 70,000 shares for a period of five years at an exercise price of $1.25 per share. In October 2024, the Company sold 8,402 shares of common stock through an At the Market (ATM) offering for gross proceeds of $26,146. Share issuance costs related to the ATM offering of $144,812 were charged to additional paid in capital. The ATM was amended and renewed under the Company’s new Form S-3 Registration Statement pursuant to an amending agreement entered into on February 5, 2025. Share issuance costs of $94,000 related to the amended ATM have been deferred pending termination of the offering. In February 2025, 6,585 shares were sold for net proceeds of $11,720 under the amended ATM offering. Corporate Governance Also, during the nine months ended May 31, 2025, the Company entered into an Executive Management Contract to re-engage John Docherty as its President and to engage him as the Company’s Chief Science Officer, and created a Scientific Advisory Board led by Mr. Docherty and comprised of: · Dr. Michael Gibson, an interventional cardiologist, cardiovascular researcher, and educator who is CEO of the combined non-profit Baim and PERFUSE research institutes at Harvard Medical School; · Dr. Karen Aust, who holds a Ph. D in Molecular Pharmacology from Stanford University and is deeply experienced in select therapeutic areas including cardiovascular and neuroscience; and · Dr. Philip Ainslie, Professor, Research Chair, and co-director of the Centre of Heart, Lung, and Vascular Health at the University of British Columbia, Canada. Patents Our current patent portfolio includes patent family applications or grants pertaining to Lexaria’s compositions, methods of use in improving API bioavailability and palatability and methods of treatment for a range of therapeutic indications, orally or topically, for a wide variety of APIs encompassing cannabinoids; fat soluble vitamins; NSAID pain medications; and nicotine and its analogs. The pending and granted patents also cover the manufacturing and processing methods used to combine a variety of fatty acid-rich triglyceride oils 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 pursue expansions and additions to our intellectual property portfolio. Patents have been filed and/or granted specifically for the use of DehydraTECH with cannabinoids for the treatment of heart disease and hypertension to support our anticipated clinical trial work under our cleared Investigational New Drug (“IND”) application with the Food and Drug Administration (“FDA”), and for treatment of other prospective therapeutic indications of interest to us including epilepsy and diabetes/weight loss. Patents have also been filed specifically for the use of DehydraTECH with GLP-1/GIP drugs to support our ongoing and expanding cardiometabolic clinical research programs in this therapeutic field and for diabetes/weight loss. 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. 21 Table of Contents Below we summarize Lexaria’s 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 EP 3765088 03/20/2024 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 CDN 3172889 05/28/2024 US 11,700,875 07/18/2023 #20 Compositions and Methods for Sublingual Delivery of Nicotine CDN 3196911 12/05/2023 JP 7675819 05/01/2025 US 11,666,544 06/06/2023 #21 Compositions and Methods for Treating Hypertension US 11,666,543 06/06/2023 US 11,980,593 05/14/2024 US 11,931,369 03/19/2024 #24 Compositions and Methods for Treating Epilepsy US 11,944,635 04/02/2024 US 11,986,485 05/21/2024 US 12,023,346 07/02/2024 US 12,213,986 02/04/2025 US 12,220,422 02/11/2025 AU 2024202475 06/12/2025 22 Table of Contents Research & Development Lexaria is advancing several R&D activities in both preclinical and clinical programs. Currently, our primary clinical research areas of interest are focused on the investigation of DehydraTECH-powered GLP-1/GIP and related drugs as well as CBD for the treatment of diabetes and weight loss and, also, CBD for the reduction of hypertension for which our IND application to perform a Phase 1b study has received a Study May Proceed letter from the FDA in early calendar-2024. From time to time the Company will engage in contract R&D for third parties who are interested in evaluating DehydraTECH in their products. Human Pilot Study #3 (GLP-1-H24-3) During the quarter ended May 31, 2025, Lexaria completed the dosing in nine (9) healthy human volunteers to investigate DehydraTECH-enhanced tirzepatide, a dual action glucagon-like peptide-1 + glucose-dependent insulinotropic peptide receptor agonist, as compared to the Zepbound® brand of injected tirzepatide. Results indicated that DehydraTECH-tirzepatide, as compared to Zepbound®, evidenced a 47% reduction in adverse events, a comparable overall reduction in blood glucose and a comparable increase in insulin levels. In addition, the DehydraTECH-tirzepatide blood levels increased steadily and more consistently each day of the study, avoiding the abrupt peaks or declines seen with Zepbound® injections. Of note was the fact that on the final day of the study, 50% of the participants dosed with DehydraTECH-tirzepatide experienced their peak levels, indicating that their levels were still rising. Chronic Dosing Human Study (GLP-1-H24-4) During the quarter ended May 31, 2025, Lexaria via its wholly owned subsidiary, Lexaria (AU) Pty Ltd, commenced its Australian clinical study (GLP-1-H24-4), with Novotech (Australia) Pty Limited its CRO. GLP-1-H24-4 will investigate DehydraTECH formulated cannabidiol and semaglutide alone or in combination, as well as DehydraTECH formulated tirzepatide, in overweight or obese or pre- and Type II diabetes participants. Participant enrolment for all five arms of study GLP-1-H24-4 had been completed entering a total of 24 subjects per arm, whereby currently the dosing of the 100+ participants is over half-way completed. The full results from the study are expected to be reported during the fourth quarter of calendar 2025. The objectives for the Study include discovering whether: · DehydraTECH processed CBD and/or semaglutide or tirzepatide is safe over the study duration in the study population? · DehydraTECH processing of pure semaglutide will outperform Rybelsus®-semaglutide with its proprietary SNAC technology in measures of blood sugar control or weight loss? · DehydraTECH processing enhances real world outcomes such as weight loss and blood sugar control over the study duration? · DehydraTECH processing of pure semaglutide evidences reduced side effects during daily dosing for 12 weeks, as DehydraTECH processing of Rybelsus® seemed to achieve in our prior human pilot study, utilizing one single daily dose? · DehydraTECH processing of (pure or Zepbound®) tirzepatide evidences reduced side effects during daily dosing for 12 weeks, Human Pilot Study #5 (GLP-1-H25-5) Subsequent to the quarter ended May 31, 2025, Lexaria announced completion of its human pilot study GLP-1-H25-5 in ten (10) overweight human volunteers, which tested a DehydraTECH-enhanced liraglutide glucagon-like peptide-1 receptor agonist compared to the Saxenda® brand of injected liraglutide. Positive partial results were released indicating that DehydraTECH-liraglutide, as compared to Saxenda®, evidenced a 22.7% reduction in adverse events with, notably, a 67% reduction in nausea incidence and a 31% reduction in gastrointestinal adverse events overall. The results also indicated 9 out of 10 subjects experienced weight loss in each arm, with remarkable similarity in blood glucose and insulin levels and patterns evidenced throughout the duration of the study between arms. Lexaria noted that these positive findings provide support for possible pursuit of a 505(b)2 new drug application expedited regulatory development pathway for DehydraTECH-liraglutide, pending pharmaceutical partner interest that the Company is now searching for and subject to successful completion of pending pharmacokinetic findings from the study that remain to be analyzed and reported upon. 23 Table of Contents Chronic Dosing Animal Study (WEIGHT-A24-1) During the quarter ended May 31, 2025, brain and other tissue samples from this obese rat diabetic-conditioned study investigating weight loss, PK, and blood sugar control of varied DehydraTECH formulations of semaglutide and liraglutide, alone and together with DehydraTECH-CBD as compared to commercially available Rybelsus®, were sent for analysis by a third-party lab. These analyses are still in progress and will be reported upon when concluded. Biodistribution Study of DehydraTECH-semaglutide During the quarter ended May 31, 2025, Lexaria completed its study which fluorescently tagged DehydraTECH-semaglutide and a non-DehydraTECH-processed Rybelsus® mimicking comparator formulation ingested by Sprague-Dawley rats to track semaglutide distribution and localization with additional information being provided by key tissue samples. Analytical testing and interpretation are in progress and will be reported upon when concluded. Long Term Stability Testing Lexaria is also actively studying the chemical and microbiological purity and stability of select DehydraTECH compositions that it has prepared for the above 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. Stability findings thus far are positive and meeting internal expectations. Hypertension Phase 1b IND Trial HYPER-H23-1 In early calendar year 2024, we received a Study May Proceed letter from the FDA with regard to our IND application to perform a Phase 1b study to evaluate the use of DehydraTECH-CBD for the reduction of hypertension. Since that time, the study has been placed on hold due to budgetary constraints. The commencement of this study is contingent upon the receipt of significant additional capital, or our ability to attract a development partner to fund the study, the timing of which is currently unknown. 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. A critical accounting estimate is an accounting estimate for which a) the nature of the estimate is material due to the related level of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and b) the impact of the estimate on the Company’s financial position or operating performance is material. We did not identify any such estimates in our Annual Report on Form 10-K for the year ended August 31, 2024 and none have been identified for the nine months ended May 31, 2025. 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 2025, 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 May 31, 2025, 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 $9,214,206 and $3,622,083 for the nine months ended May 31, 2025, and May 31, 2024, respectively. 24 Table of Contents During the nine months ended May 31, 2025, we raised $6.0 million in net proceeds from the sale of securities pursuant to our Registered Direct offerings which closed in April, 2025 and October, 2024 and our At the Market (ATM) offerings. The continuation of Lexaria as a going concern depends on raising additional capital and/or attaining and maintaining profitable operations. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern within one year following the date that these consolidated financial statements on Form 10-Q are filed and 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 Company expects that its current cash resources will be sufficient to fund the Company’s operations through the third quarter of fiscal year 2026. However, management has also concluded that given the Company’s current cash position, recurring losses from operations and net capital deficiency, there is substantial doubt as to the Company’s ability to continue as a going concern within one year following the date that these consolidated financial statements are issued. Results of Operations for the Period Ended May 31, 2025, and May 31, 2024 Our net loss for the nine months ended for the respective items are summarized as follows: May 31, May 31, 2025 2024 Change Revenue $ 531,923 $ 380,278 $ 151,645 Cost of goods sold (2,720 ) (4,822 ) 2,102 Research & development (6,356,637 ) (1,393,359 ) (4,963,278 ) Consulting fees & salaries (1,922,449 ) (1,002,473 ) (919,976 ) Legal and professional (449,890 ) (619,064 ) 169,174 Other general & administrative (992,367 ) (910,626 ) (81,741 ) Other income (loss) (22,066 ) (72,017 ) 49,951 Net Loss $ (9,214,206 ) $ (3,622,083 ) $ (5,592,123 ) Revenue Fees from intellectual property licensing and B2B sales totalled $531,923 and $380,278, respectively, for the nine-month periods ended May 31, 2025 and May 31, 2024. For the nine months ended May 31, 2025, relative to the nine months ended May 31, 2024, license fees and B2B sales increased by $148,010 and $4,535, respectively, reflecting an increase in minimum fees earned within our licensee contract and a continuing shift in emphasis away from pursuit of B2B clients as we move toward pharmaceuticals. Other revenue decreased by $900 for the nine-month period ended May 31, 2025 relative to the nine months ended May 31, 2024. Research and Development Expenditures on R&D increased by $4,963,278 year-over-year for the nine-month period ended May 31, 2025, due primarily to the completion of the manufacturing of Investigational Drug Product and the conduct of our Phase 1b Clinical Trial (GLP-1-H24-4), combined with the completion and analyses of our other GLP-1 studies. 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 nine months ended May 31, 2025, consulting fees and salaries increased by $919,976 year-over-year primarily due to the transition of the Company’s former CEO to the newly created role of Strategic Executive Consultant, the awards of stock options and restricted stock, the engagement of a new CEO with significant experience in development stage pharmaceutical company management, and of a new CFO. 25 Table of Contents Legal and Professional Fees Our legal and professional fees decreased by $169,174 during the nine months ended May 31, 2025 as compared to the same prior year period due to lower accounting and professional fees associated with registration statement filings, financing activities and the utilization of legal advisory services. General and Administrative Our other general and administrative expenses increased in total by $81,741 during the nine-month period ended May 31, 2025, as compared to the same prior year period. The increase is attributable to foreign currency transaction losses of $103,582 related to Canadian Dollar-denominated cash balances held by our US-based bioscience subsidiary and realized foreign exchange losses incurred by our Australian subsidiary, combined with higher insurance premiums and partially offset by lower advertising and promotion expenses and impairment losses. Liquidity and Financial Condition Working Capital May 31, August 31, 2025 2024 Current assets $ 5,806,778 $ 7,897,986 Current liabilities (1,488,131 ) (1,099,419 ) Net working capital $ 4,318,647 $ 6,798,567 Cash Flows May 31, May 31, 2025 2024 Cash flows used in operating activities $ (7,807,889 ) $ (3,067,344 ) Cash flows used in investing activities (85,141 ) (119,018 ) Cash flows provided by financing activities 6,046,163 10,315,207 Effect of exchange rate changes on cash (61,257 ) (21,866 ) Net change in cash for the period $ (1,908,124 ) $ 7,106,979 Operating Activities Net cash used in operating activities was approximately $7.8 million for the nine months ended May 31, 2025, compared with $3.1 million during the same prior year period. The increase is attributable to an increase of $5.6 million in our net loss, which was partially offset by an increase of $0.3 million in non-cash expenses and a decrease in net working capital of $0.6 million, as we continued with the studies of DehydraTECH-powered GLP-1/GIP drugs, including completion of manufacturing and delivery of investigational product to our Australian distributor for labelling, packaging, and distribution in connection with Study GLP-1-H24-4. Investing Activities Net cash used in investing activities was $85,141 for the nine months ended May 31, 2025, compared to $119,018 for the same prior year period. The decrease relates primarily to lower spending on the prosecution of intellectual property, partially offset by purchases of laboratory equipment. Financing Activities Net cash from financing activities was approximately $6.0 million for the nine months ended May 31, 2025, compared to approximately $10.3 million for the same prior year period. The decrease relates to lower net proceeds from the sale of common shares and the lack of warrants being exercised. Liquidity and Capital Resources Since inception, the Company has incurred significant operating and net losses. Net losses attributable to shareholders were $9.2 million and $3.6 million for the nine months ended May 31, 2025, and May 31, 2024, respectively. As of May 31, 2025, we had an accumulated deficit of $60.8 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 into which we may enter. The recurring losses and negative net cash flows raise substantial doubt as to the Company’s ability to continue as a going concern. 26 Table of Contents Sources of Liquidity During the nine months ended May 31, 2025, the Company has completed the following: · Entered into a Securities Purchase Agreement whereby on April 28, 2025, the Company issued 2,000,000 shares of common stock for gross and net proceeds of $2.0 million and $1.7 million, respectively. The shares were registered pursuant to a take down of the Company’s Form S-3 registration statement. We also issued the placement agent warrants to purchase up to 70,000 shares for a period of five years at an exercise price of $1.25 per share. · In February 2025, the Company sold 6,585 shares of common stock through an amendment to its At the Market (ATM) offering. Net proceeds from these sales totalled $11,720. · In October 2024, the Company sold 8,402 shares of common stock through an ATM offering for gross proceeds of $26,146. Share issuance costs related to the ATM offering of $144,812 were charged to additional paid in capital. · Entered into a Securities Purchase Agreement whereby on October 16, 2024, the Company issued 1,633,987 shares of common stock at a purchase price of $3.06 per share for gross and net proceeds of $5.0 million and $4.5 million, respectively. Concurrently, the Company issued, by way of a private placement transaction, 4,551,019 share purchase warrants, entitling the holder thereof to purchase up to 4,551,019 shares of common stock at a price of $3.06 per share for a period of five years from the date of shareholder approval for such warrant issuance. The shares registered pursuant to a take down of the Company’s Form S-3 registration statement and the warrants and related warrant shares were registered pursuant to a Form S-3 registration statement As part of the terms and conditions of the warrant issuance, the sole investor agreed to cancel the 2,917,032 share purchase warrants bearing an exercise price of $4.75 that were issued to them in the April 30, 2024 financing. We also issued the placement agent warrants to purchase up to 57,190 shares for a period of five years from the date of issuance at an exercise price of $3.825 per share. 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. Going Concern The accompanying unaudited consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business. As of May 31, 2025, the Company had cash and cash equivalents of approximately $4.6 million to settle $1.5 million in current liabilities. We have performed a review of our cash flow forecast, and given our current development plans and cash management efforts, we anticipate that our cash resources will be sufficient to fund operations through the third quarter of fiscal year 2026. However, we have also concluded that our existing cash, combined with inflows expected from executed license agreements, will not be sufficient to meet the Company's financial obligations for the twelve-month period following the issuance of these consolidated financial statements. Accordingly, there is substantial doubt as to our ability to continue as a going concern for at least one year following the date of the financial statements included in this Quarterly Report. We intend to fund operations, working capital and other cash requirements for the twelve-month period subsequent to May 31, 2025 through equity financing arrangements and potentially from collaborations or strategic partnerships. The successful outcome of future activities cannot be determined at this time and there is no assurance that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operating results. 27 Table of Contents The consolidated financial statements do not include any adjustments related to this uncertainty and as to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable to continue as a going concern. 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 May 31, 2025, 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 May 31, 2025. Inherent limitations on Effectiveness of Controls Internal control over financial reporting has inherent limitations which include but are 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 May 31, 2025, our controls and controls processes remained consistent with those in effect at August 31, 2024. There have been no changes in our internal controls over financial reporting that occurred during the quarter ended May 31, 2025, that have materially or are reasonably likely to materially affect our internal controls over financial reporting. 28 Table of Contents PART II—OTHER INFORMATION