SEC Form 10-Q filed by Lexaria Bioscience Corp.

1/10/25 2:19:12 PM ET

$LEXX

Biotechnology: Pharmaceutical Preparations

Health Care

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lxrp_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2024

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from [ ] to [ ]

Commission file number 000-39874

LEXARIA BIOSCIENCE CORP.

(Exact name of registrant as specified in its charter)

Nevada		20-2000871
(State or other jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

#100 – 740 McCurdy Road, Kelowna BC Canada		V1X 2P7
(Address of principal executive offices)		(Zip Code)

Registrant’s Telephone number, including area code: 1.250.765.6424

Securities registered pursuant to Section 12(b) of the Act:

Title of Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.001	LEXX	The NASDAQ Capital Market
Warrants	LEXXW	The NASDAQ Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the last 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

17,552,594 common shares as of January 10, 2025

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION		3

Item 1. Financial Statements		3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19

Item 3. Controls and Procedures.		27

PART II—OTHER INFORMATION		28

Item 1. Legal Proceedings		28

Item 1A. Risk Factors		28

Item 2. 10b5-1 Trading Plans.		28

Item 3. Exhibits, Financial Statement Schedules		28

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

LEXARIA BIOSCIENCE CORP.

CONSOLIDATED BALANCE SHEETS

(Expressed in US Dollars except share amounts)

(Unaudited)

	November 30,			August 31,
	2024			2024
ASSETS
Current
Cash	$	8,078,254		$	6,499,885
Marketable securities	$	39,875		$	55,807
Accounts receivable	$	263,491		$	154,477
Prepaid expenses and other current assets	$	444,121			1,187,817
Total Current Assets		8,825,741			7,897,986

Non-current assets, net
Long-term receivables		64,014			63,575
Right of use assets		128,025			134,843
Intellectual property, net		505,373			516,676
Property & equipment, net		270,621			254,709
Total Non-current Assets		968,033			969,803

TOTAL ASSETS	$	9,793,774		$	8,867,789

LIABILITIES and STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities	$	268,986		$	1,066,409
Deferred revenue	$	-			4,963
Lease liability, current		28,812			28,047
Total Current Liabilities		297,798			1,099,419

Lease liabilities non - current		101,920			109,319

TOTAL LIABILITIES	$	399,718		$	1,208,738

Stockholders' Equity
Share Capital
Authorized: 220,000,000 common voting shares with a par value of $0.001 per share
Common shares issued and outstanding:
17,452,594 and 15,810,205 at November 30, 2024, and August 31, 2024, respectively	$	17,453		$	15,810
Additional paid-in capital		64,042,343			59,599,178
Accumulated Deficit		(54,262,471	)		(51,558,772	)
Accumulated other comprehensive loss		(22,991	)		(19,816	)
Equity attributable to shareholders of Lexaria		9,774,334			8,036,400
Non-controlling Interest		(380,278	)		(377,349	)
Total Stockholders' Equity		9,394,056			7,659,051
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	9,793,774		$	8,867,789

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

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LEXARIA BIOSCIENCE CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in US Dollars except share amounts)

(Unaudited)

	Three Months Ended November 30,
	2024			2023

Revenue	$	183,923		$	151,278
Cost of goods sold		2,720			4,822
Gross profit		181,203			146,456

Operating expenses
Research and development		1,953,220			574,491
General and administrative		918,690			711,107
Total operating expenses		2,871,910			1,285,598

Loss from operations		(2,690,707	)		(1,139,142	)

Other income (loss)
Interest income		11			7,319
Unrealized loss on marketable securities		(15,932	)		(53,215	)
Total other income (loss)		(15,921	)		(45,896	)

Net loss	$	(2,706,628	)	$	(1,185,038	)
Less: Net loss attributable to non-controlling interest		(2,929	)		(5,715	)
Net loss attributable to Lexaria shareholders	$	(2,703,699	)	$	(1,179,323	)

Other comprehensive income
Foreign currency translation adjustment	$	(3,175	)	$	4,372
Total comprehensive loss	$	(2,706,874	)	$	(1,174,951	)
Basic and diluted loss per share	$	(0.16	)	$	(0.13	)

Weighted average number of common shares outstanding
- Basic and diluted		16,668,513			9,051,531

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

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LEXARIA BIOSCIENCE CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the Three Months Ended November 30, 2024 and 2023

(Expressed in US Dollars)

(Unaudited)

	Common Stock				Additional Paid-in								Non-controlling			Stockholders
	Shares		Amount		Capital		Deficit			AOCI			Interest			Equity

Balance August 31, 2024		15,810,205	$	15,810	$	59,599,178	$	(51,558,772	)	$	(19,816	)	$	(377,349	)	$	7,659,051
Stock issued in equity offering		1,642,389		1,643		4,343,750		-			-			-			4,345,393
Foreign currency translation adjustment		-		-		-		-			(3,175	)		-			(3,175	)
Stock-based compensation		-		-		99,415		-			-			-			99,415
Net loss		-		-		-		(2,703,699	)		-			-			(2,703,699	)
Non-controlling interest		-		-		-		-			-			(2,929	)		(2,929	)
Balance November 30, 2024		17,452,594	$	17,453	$	64,042,343	$	(54,262,471	)	$	(22,991	)	$	(380,278	)	$	9,394,056

Balance August 31, 2023		8,091,650	$	8,091	$	48,799,454	$	(45,763,427	)	$	-		$	(364,040	)	$	2,680,078
Stock issued in equity offering		889,272		889		1,246,829		-			-			-			1,247,718
Stock issued in exercise of warrants		1,330,719		1,331		570,320		-			-			-			571,651
Foreign currency translation adjustment		-		-		-		-			4,372			-			4,372
Stock-based compensation		-		-		53,953		-			-			-			53,953
Net loss		-		-				(1,179,323	)		-			-			(1,179,323	)
Non-controlling interest		-		-		-		-			-			(5,715	)		(5,715	)
Balance November 30, 2023		10,311,641	$	10,311	$	50,670,556	$	(46,942,750	)	$	4,372		$	(369,755	)	$	3,372,734

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

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LEXARIA BIOSCIENCE CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in US Dollars)

(Unaudited)

	Three Months Ended November 30,
	2024			2023
Cash flows used in operating activities
Net loss	$	(2,706,628	)	$	(1,185,038	)
Adjustments to reconcile net loss to
net cash used in operating activities:
Stock based compensation		99,415			53,953
Depreciation and amortization		33,195			28,778
Noncash lease expense		6,818			10,881
Unrealized loss on marketable securities		15,932			53,215
Lease accretion		2,451			67
Change in operating assets and liabilities
Accounts receivable		(109,014	)		(408,045	)
Prepaid expenses and deposits		743,696			414,472
Long-term receivables		(439	)		-
Accounts payable and accrued liabilities		(797,423	)		(140,973	)
Lease payments		(9,085	)		(8,963	)
Deferred revenue		(4,963	)		-
Net cash used in operating activities	$	(2,726,045	)	$	(1,181,653	)

Cash flows used in investing activities
Additions to intellectual property	$	(13,159	)	$	(40,026	)
Purchase of equipment		(24,645	)		-
Net cash used in investing activities	$	(37,804	)	$	(40,026	)

Cash flows from/(used in) financing activities
Proceeds from shares sold for cash	$	4,345,393		$	1,247,719
Proceeds from exercise of warrants		-			571,651
Net cash from financing activities	$	4,345,393		$	1,819,370

Effect of exchange rate changes on cash	$	(3,175	)	$	4,372
Net change in cash for the period		1,578,369			602,063
Cash at beginning of period		6,499,885			1,352,102
Cash at end of period	$	8,078,254		$	1,954,165

Supplemental information of cash flows:
Income taxes paid in cash	$	-		$	3,662

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

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LEXARIA BIOSCIENCE CORP.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2024

(Expressed in U.S. Dollars)

(Unaudited)

1. Nature of Business

Lexaria Bioscience Corp. (“Lexaria”, “we”, “our” or “the Company”) is a biotechnology company pursuing the enhancement of the bioavailability of a diverse and broad range of active pharmaceutical ingredients (“API”) using our proprietary DehydraTECH drug delivery technology. Our current focus is the investigation of the incorporation of our DehydraTECH drug delivery technology with GLP-1 and GIP drugs to enhance absorption and reduce adverse side effects.

Revenues are generated from licensing contracts for the Company’s patented DehydraTECH technology based on the terms of use and defined geographic and licensing arrangements. We derive income from our third party contracted manufacturing of B2B DehydraTECH enhanced products made to customer specifications that are sold online and in-store in the US and Canada. We also perform contract services in R&D for customer specific formulations that are used in comparison testing to customers’ existing products.

Liquidity

The Company’s consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States (“US GAAP”) applicable to a going concern, which assumes the Company will have sufficient funds to meet its financial obligations for a period of at least 12 months from the date of this report.

Since inception, the Company has incurred significant operating and net losses. Net losses attributable to shareholders were $2.7 million and $1.2 million for the three-months ended November 30, 2024, and 2023, respectively. As of November 30, 2024, we had an accumulated deficit of $54.3 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 research and development (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.

During the three months ended November 30, 2024, we raised $4.3 million in net proceeds from the sale of securities pursuant to our registered direct and At the Market offerings which closed in October, 2024.

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We may 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.

Based on existing cash resources, management believes that current funding will be sufficient to meet the Company’s financial obligations for a period of at least twelve months from the date of this report.

2. Significant Accounting Policies

The significant accounting policies of the Company are consistent with those of our audited financial statements on Form 10-K for the year ended August 31, 2024.

Basis of Consolidation

These unaudited interim consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries; Lexaria CanPharm ULC, Lexaria CanPharm Holding Corp., PoViva Corp., Lexaria Hemp Corp., Kelowna Management Services Corp., Lexaria Nutraceutical Corp., Lexaria (AU) Pty Ltd., and Lexaria Pharmaceutical Corp., and our 83.333% owned subsidiary Lexaria Nicotine LLC with the remaining 16.667% owned by Altria Ventures Inc., an indirect wholly owned subsidiary of Altria Group, Inc. All significant intercompany balances and transactions have been eliminated upon consolidation.

Basis of Presentation

The Company’s unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States generally accepted accounting principles (US GAAP) have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of results for a full year or for any subsequent period.

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated annual financial statements and notes thereto included in our annual report filed on Form 10-K for the year ended August 31, 2024.

Cash and Cash Equivalents

Cash and cash equivalents include cash-on-hand and demand deposits with financial institutions and other short-term investments with maturities of less than three months when acquired and readily convertible to known cash amounts. The Company had no cash equivalents as of November 30, 2024, or August 31, 2024.

Marketable Securities

The Company’s marketable securities consist of investments in common stock. Investments in equity securities are reported at fair value with changes in unrecognized gains or losses included in other income (loss) on the Consolidated Statements of Operations and Comprehensive Loss.

Leases

The Company accounts for its leases under ASC 842, Leases (“ASC 842”). Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right-of-use asset and lease liability.

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We determined the initial classification and measurement of our right-of-use assets and lease liabilities at the lease commencement date and thereafter if modified. The lease term includes any renewal options and termination options that we are reasonably certain to exercise. The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, we use our incremental borrowing rate. The incremental borrowing rate is determined by using the rate of interest that we would pay to borrow on a collateralized basis an amount equal to the lease payments for a similar term and in a similar economic environment.

Operating lease expenses are recognized on a straight-line basis, unless the right-of-use asset has been impaired, over the reasonably certain lease term based on the total lease payments. They are included in operating expenses in the Consolidated Statements of Operations and Comprehensive Loss.

For operating leases that reflect impairment, we will recognize the amortization of the right-of-use asset on a straight-line basis over the remaining lease term with rent expense still included in operating expenses in the consolidated statements of operations. For all leases, rent payments that are based on a fixed index or rate at the lease commencement date are included in the measurement of lease assets and lease liabilities at the lease commencement date.

We have elected the practical expedient to not separate lease and non-lease components. Our non-lease components are primarily related to property taxes and maintenance, which vary based on future outcomes, and thus differences to original estimates are recognized in rent expense when incurred.

Intellectual property

Capitalized intellectual property costs include those incurred with respect to both pending and granted patents filed in the United States. When patent applications are filed, the directly related capitalized costs are amortized on a straight-line basis over an estimated economic life of 20 years.

Property and equipment

Property and equipment is stated at cost less accumulated depreciation and impairment and depreciated using the straight-line method over the useful lives of the various asset classes. Laboratory and computer equipment and office furniture are depreciated over 3-10 years. Leasehold improvements are amortized over the term of the related leases, or the economic life of the improvements, whichever is shorter.

Impairment of long-lived assets

Long-lived assets, including equipment and intangible assets, namely the Company’s patents, are assessed for potential impairment when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of the long-lived asset exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to the profit or loss. Intangible assets with indefinite lives are tested for impairment annually and in interim periods if certain events occur indicating that the carrying value of the intangible assets may be impaired.

Revenue recognition

The Company recognizes revenue in accordance with ASC 606’s core principle by applying the following five steps:

	1.	Identify contracts with customers
	2.	Identify the performance obligations in the contracts
	3.	Determine the contract price
	4.	Allocate the contract price
	5.	Recognize revenue when/as performance obligations are satisfied

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Licensing revenue from intellectual property

Our revenues from licenses that grant exclusive rights to use our intellectual property, which we consider functional IP, are recognized at a point in time following the transfer and use of our patented infusion technology DehydraTECH. Our licensees are also required to pay quarterly fixed non-refundable minimum performance fees which are recognized as revenue over the period to which they apply.

Usage fees from intellectual property

The Company may also earn sales-based or usage-based royalties from its licensing contracts. The Company recognizes usage fees in the period when our licensees recognize sales of end-products that incorporate our licensed technology. No sales-based usage fees were recognized for the three months ended November 30, 2024 and 2023.

Third Party Contracted Manufacturing

The Company recognizes revenue with respect to contract manufacturing arrangements when the related performance obligations have been satisfied (i.e., when it has completed the related manufacturing work) and in accordance with the five steps described in ASC 606.

Contract Research and Development

The Company recognizes revenue from contract research and development arrangements when the related performance obligations have been satisfied and in accordance with the five steps described in ASC 606. The related performance obligation typically entails preparation of customer-specific formulations (i.e., DehydraTECH paired with the customer’s active ingredient) that the customer then uses in comparison testing relative to its existing product(s). Revenue is recognized upon shipment of the formulation to the customer.

Cost of sales

Cost of sales includes all expenditures incurred in bringing the goods to the point of sale. This includes third-party manufacturing and handling costs, direct costs of raw material, inbound freight charges, warehousing costs, and applicable overhead expenses.

Research and development

Research and development costs are expensed as incurred. These expenditures are comprised of both in-house research programs and through third-party contracts including consultants, academic and non-profit institutions, contract manufacturing, and other expenses.

Intellectual property expenses

Non-capitalizable costs associated with intellectual property-related matters are expensed as incurred and included in general and administrative expenses within the Consolidated Statements of Operations and Comprehensive Loss.

Stock-based compensation

The Company accounts for its stock-based compensation awards whereby all stock-based grants are recognized as expenses in the Consolidated Statements of Operations and Comprehensive Loss based on the fair value at grant date subject to vesting dates and amortized over the related vesting period. The grant date fair value of each option award is estimated using the Black-Scholes option-pricing model. The use of the Black-Scholes option-pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected term of the option, risk-free interest rates and expected dividend yields of the common stock.

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Foreign currency translation

The Company’s reporting currency is the U.S. dollar. The Company has foreign operations whose functional currency is the local currency. Assets and liabilities are translated into U.S. dollars, the reporting currency, at the exchange rate on the balance sheet date. Revenues and expenses are translated into U.S. dollars at the average rates of exchange prevailing during the reporting period. Foreign currency translation adjustments resulting from this process are reported as an element of other comprehensive income (loss) on the Consolidated Statements of Operations and Comprehensive Loss. Transactions executed in different currencies are translated at spot rates and resulting foreign exchange transaction gains and losses are charged to income.

Loss per share

The calculation of loss per share uses the weighted average number of shares outstanding during the year. Diluted net income per share includes the effect, if any, from the potential exercise or conversion of securities, such as restricted stock, stock options, and warrants, which would result in the issuance of incremental shares of common stock. Diluted loss per share is equivalent to basic loss per share if the potential exercise of the equity-based financial instruments is anti-dilutive.

Income taxes

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the year in which the differences are expected to reverse. A valuation allowance is established to reduce deferred tax assets to an amount whose realization is more likely than not.

Fair value measurements

When measuring fair value, the Company seeks to maximize the use of observable inputs and minimize the use of unobservable inputs. This establishes a fair value hierarchy based on the level of independent objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Inputs are prioritized into three levels used to measure fair value:

	·	Level 1 - Quoted prices in active markets for identical assets or liabilities;

	·	Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and

	·	Level 3 - Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

The Company’s financial instruments consist primarily of cash, marketable securities, accounts receivable and payable as well as accrued liabilities. The carrying amounts of instruments approximate their fair values due to their short maturities or quoted market prices.

The Company’s headquarters and operations are located in Canada which results in exposure to market risks from fluctuations in foreign currency rates. The foreign currency exchange risk is the financial risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk as the impact of rate changes for USD/CAD dollars is not expected to be material.

The following table provides a summary of financial instruments that are measured at fair value on a recurring basis as of November 30, 2024.

	Carrying		Fair Value Measurement Using
	Value		Level 1		Level 2		Level 3		Total
Marketable Securities	$	39,875	$	39,875	$	-	$	-	$	39,875

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The following table provides a summary of financial instruments that are measured at fair value on a recurring basis as of August 31, 2024.

	Carrying		Fair Value Measurement Using
	Value		Level 1		Level 2		Level 3		Total
Marketable Securities	$	55,807	$	55,807	$	-	$	-	$	55,807

Credit risk and customer concentration

The Company places its cash with a high credit quality financial institution. Periodically, the Company may carry cash balances at such financial institution in excess of the federally insured limit of $250,000. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institution, that the credit risk with regard to these deposits is not significant.

In the three-months ended November 30, 2024, two customers accounted for 100% of consolidated revenues. In the three-months ended November 30, 2023, two customers accounted for 96% of consolidated revenues.

As of November 30, 2024, the Company had $89,491 in sales tax receivable, as compared to $70,477 as of August 31, 2024. The Company considers its credit risk to be low for such receivables.

Commitments and contingencies

The Company’s policy is to record accruals for any such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In the event that estimates or assumptions prove to differ from actual results, adjustments are made in subsequent periods to reflect more current information. The Company, from time to time, may be subject to legal claims and proceedings related to matters arising in the ordinary course of business. Management has no knowledge of any such claim against the Company with, at minimum, a reasonable possibility that a material loss may be incurred.

3. Recent Accounting Guidance

Recently Adopted Pronouncements

None.

Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280)) – Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU also expands disclosure requirements to enable users of financial statements to better understand the entity’s measurement and assessment of segment performance and resource allocation. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing the effect of this ASU on its consolidated financial statements and related disclosures.

In March 2024, the FASB issued ASU 2024-02-Codification Improvements-Amendments to Remove References to the Concepts Statements, that contains amendments to the Codification that remove references to various FASB Concepts Statements. This effort facilitates Codification updates for technical corrections such as conforming amendments, clarifications to guidance, simplifications to wording or the structure of guidance, and other minor improvements. The amendments are effective for public business entities for fiscal years beginning after December 15, 2024, with early adoption permitted. Early application of the amendments in this ASU is permitted for all entities, for any fiscal year or interim period for which financial statements have not yet been issued (or made available for issuance). If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. The Company is currently assessing the effect of this ASU on its consolidated financial statements and related disclosures.

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4. Estimates and Judgments

The preparation of financial statements in conformity with US GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amount of revenue and expenses during the fiscal period. Some of the Company’s accounting policies require us to make subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. These accounting policies involve critical accounting estimates because they are particularly dependent on estimates and assumptions made by management about matters that are highly uncertain at the time the accounting estimates are made. Although we have used our best estimates based on facts and circumstances available to us at the time, different estimates reasonably could have been used. Changes in the accounting estimates used by the Company are reasonably likely to occur from time to time, which may have a material effect on the presentation of financial condition and results of operations.

Management reviews our estimates, judgments, and assumptions periodically and reflects the effects of any revisions in the period in which they are deemed to be necessary. We believe that these estimates are reasonable. However, actual results could differ from these estimates.

5. Accounts and Other Receivables

Accounts receivable as of November 30, 2024 and August 31, 2024 consist of the following:

	November 30, 2024		August 31, 2024
Territory license fees	$	174,000	$	84,000
Sales tax		89,491		70,477
Long term receivable		64,014		63,575
Total Receivables	$	327,505	$	218,052

6. Prepaid Expenses and Other Current Assets

Prepaid expenses consist of the following as of November 30, 2024 and August 31, 2024:

	November 30,		August 31,
	2024		2024
Advertising & Conferences	$	133,250	$	204,894
Research and Development		176,631		673,126
Legal & Accounting Fees		25,000		45,600
License, Filing Fees, Dues		5,731		22,925
Office & Insurance		103,509		122,245
Capital Financing		-		119,027
Total Prepaid Expenses and Other Current Assets	$	444,121	$	1,187,817

7. Intellectual Property, net

A continuity schedule for capitalized patents is presented below:

	November 30,			August 31,
	2024			2024
Balance – beginning	$	516,676		$	462,625
Addition		13,159			145,591
Impairment		-			(57,836	)
Amortization		(24,462	)		(33,704	)
Balance – ending	$	505,373		$	516,676

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The Company evaluated its patent portfolio to determine whether certain pending applications had been abandoned or will not be pursued. During the three-months ended November 30, 2024, the Company did not recognize an impairment loss related to those applications. The Company recognized $24,462 of amortization expense related to patents and licenses in the three months ended November 30, 2024 as compared to $8,274 for the three months ended November 30, 2023.

The following table summarizes expected future amortization of the Company’s patent portfolio as of November 30, 2024:

Years Ending December 31,
2025	$	25,269
2026	$	25,269
2027	$	25,269
2028	$	25,269
2029	$	25,269
Thereafter	$	379,028
Total	$	505,373

8. Property & Equipment, net

Property and equipment, net consists of:

November 30, 2024	Cost		Period Amortization			Additions		Accumulated Amortization			Net Balance
Leasehold improvements	$	259,981	$	-		$	-	$	(259,981	)	$	-
Computers		70,781		(569	)		-		(69,645	)		1,136
Furniture fixtures equipment		31,126		-			-		(31,126	)		-
Lab equipment		410,438		(8,165	)		24,646		(165,599	)		269,485
Total	$	772,326	$	(8,734	)	$	24,646	$	(526,351	)	$	270,621

August 31, 2024	Cost		Period Amortization			Additions		Accumulated Amortization			Net Balance
Leasehold improvements	$	259,981	$	(11,258	)	$	-	$	(259,981	)	$	-
Computers		70,781		(2,920	)		-		(69,076	)		1,705
Furniture fixtures equipment		31,126		(1,870	)		-		(31,126	)		-
Lab equipment		367,423		(26,400	)		43,014		(157,433	)		253,004
Total	$	729,311	$	(42,448	)	$	43,014	$	(517,616	)	$	254,709

Depreciation and amortization for the three months ended November 30, 2024 and the year ended August 31, 2024 totaled $8,734 and $42,448, respectively, of which $0 and $0 was included in cost of goods sold, respectively.

9. Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities as of November 30, 2024 and August 31, 2024 consist of the following:

	November 30,		August 31,
	2024		2024
Accounts Payable
Vendors payable	$	262,094	$	379,882
Sales tax payable	$	6,892	$	8,528
Accrued Liabilities
Vendors payable	$	-	$	677,999
Balance Ending	$	268,986	$	1,066,409

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10. Revenues

A breakdown of our revenues by type for the three-months ended November 30, 2024, and November 30, 2023, are as follows:

	Three-Months Ended November 30
	2024		2023

IP Licensing	$	174,000	$	144,990
B2B		9,923		5,388
Other		-		900
	$	183,923	$	151,278

During the three-month period ended November 30, 2024, and 2023, the Company recognized B2B product revenues of $9,923 and $5,388, respectively, that relate to sales of our intermediate products for use by B2B customers in their products. Licensing revenue consists of IP licensing fees for transfer of the DehydraTECH technology in line with definitive agreements and includes non-refundable minimum performance fees. The Company recognized $174,000 and $144,990 in licensing revenue in the three-months ended November 30, 2024, and 2023, respectively.

11. Income Taxes

For the three-months ended November 30, 2024, the Company did not recognize a provision or benefit for income taxes as it has incurred net losses. In addition, the net deferred tax assets are fully offset by a valuation allowance as the Company believes it is more likely than not that the benefit will not be realized.

12. Issuances of Common Shares and Warrants

During the three-months ended November 30, 2024, the Company completed the following issuances of common shares and warrants:

1.	On October 16, 2024, the Company entered into a Securities Purchase Agreement whereby we 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 at an exercise price of $3.825 per share.

2.	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.

A continuity schedule for warrants for the three-months ended November 30, 2024, is presented below:

	Number of Warrants			Weighted Average Exercise Price $
Balance, August 31, 2024		5,931,649			5.50
Cancelled/Expired		(2,977,830	)		5.39
Balance, November 31, 2024		2,953,819			5.62

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A summary of warrants outstanding as of November 30, 2024, is presented below:

Number of Warrants		Weighted Average Exercise Price	Weighted Average Remaining Contractual Life ~in years~

317,190		10.50	.68-.69
16,667		9.00	0.54
1,719,828		6.58	1.13
483,750		0.95	3.45
314,287		2.31	4.22
102,097		5.94	4.22
2,953,819	$	5.62	1.86

The share purchase and placement agent warrants issued on October 16, 2024 are exercisable on or after the related stockholder approval date. Because they were not exercisable as of November 30, 2024, they are excluded from the continuity table and summary of warrants outstanding above.

Stock Options

The Company established an Equity Incentive Plan whereby our Board, pursuant to shareholder approved amendments, may grant up to 1,745,259 stock options to directors, officers, employees, and consultants with such number being increased to up to 10% of the issued share capital at the end of each calendar year, at the discretion of the board, pursuant to an evergreen formula.

Stock options currently granted must be exercised within five years from the date of grant or such lesser period as determined by the Company’s board of directors. The vesting terms of each grant are also set by the board of directors. The exercise price of an option is equal to or greater than the closing market price of the Company’s common shares on the date of grant.

A continuity schedule for stock options is presented below:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Balance August 31, 2023		446,936			3.32		3.25	$	3,600
Cancelled/expired		(196,000	)		2.94		4.27
Exercised		(2,500	)		1.15		4.16
Granted		696,500			2.91		4.63
Balance August 31, 2024		944,936			3.11		3.64	$	971,959
Cancelled/expired		(16,667	)		16.50		-
Granted		82,000			2.91		4.88
Balance November 30, 2024 (outstanding)		1,010,269			2.87		3.47	$	105,869
Balance November 30, 2024 (exercisable)		745,269			2.56		3.18	$	105,869

On October 1, 2024, the Company granted 62,000 options to its employees with an exercise price of $3.17 and a term of 5 years. The options granted vest as follows: 4,000 at grant date, 20,000 on February 28, 2025, and 38,000 over a period of two years.

On November 27, 2024, the Company granted 20,000 fully vested options to its Scientific Advisory Board members with an exercise price of $2.10 and a term of 5 years.

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The fair value of stock options granted in the three-months ended November 30, 2024, were estimated as of the date of the grant by using the Black-Scholes option pricing model with the following assumptions:

November 30, 2024
Expected volatility	94-96		%
Risk-free interest rate	3.57-4.18		%
Expected life	2.50		years
Dividend yield		0.00	%
Estimated fair value per option	$	1.21-1.72

Stock-based compensation expense for the three-month periods ended November 30, 2024, and 2023, was $99,415 and $53,953, respectively.

As of November 30, 2024, the total unrecognized non-cash compensation costs are $627,783 related to 265,000 non-vested stock options with a $3.74 weighted average exercise price. These costs are expected to be recognized over a weighted average period of 1.97 years.

13. Commitments, Significant Contracts and Contingencies

Right-of-Use Assets - Operating Lease

The corporate office and R&D laboratory are located in Kelowna, British Columbia, Canada. The related lease was renewed until November 15, 2028. In addition to minimum lease payments, the lease requires us to pay property taxes and other operating costs which are subject to annual adjustments.

	November 30, 2024			August 31, 2024
	$			$
Right of use assets - operating leases		156,748			167,446
Amortization		(28,723	)		(32,603	)
Total lease assets		128,025			134,843
Liabilities:		156,748			163,967
Lease payments		(37,456	)		(33,273	)
Interest accretion		11,440			6,672
Total lease liabilities		130,732			137,366

Operating lease cost		128,026			134,843
Operating cash flows for lease		(37,456	)		(33,273	)
Remaining lease term	3.96 Years			4.21 Years
Discount rate		7.25	%		7.25	%

Pursuant to the terms of the Company’s lease agreements in effect, the following table summarizes the Company’s maturities of operating lease liabilities as of November 30, 2024:

2024	$	-
2025		28,009
2026		37,345
2027		38,641
2028		38,901
2029		8,104
Thereafter		-
Total lease payments		151,000
Less: imputed interest		(20,268	)
Present value of operating lease liabilities		130,732
Less: current obligations under leases		(28,812	)
Total	$	101,920

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14. Segment Information

The Company’s operations involve the development and usage, including licensing, of DehydraTECH. Lexaria is centrally managed and its chief operating decision makers, the President and the CEO, use the consolidated and other financial information, supplemented by revenue information by category of business-to-business product production and technology licensing to make operational decisions and to assess the performance of the Company. The Company has identified four reportable segments: Intellectual Property, B2B Production, Research and Development and Corporate. Licensing revenues are significantly concentrated on three licensees.

Three Months Ended November 30, 2024	IP Licensing			B2B Product			R&D			Corporate			Consolidated Total
Revenue	$	174,000		$	9,923		$	-		$	-		$	183,923
Cost of goods sold		-			(2,720	)		-			-			(2,720	)
Operating expenses		(382	)		(637	)		(1,953,220	)		(917,671	)		(2,871,910	)
Other Income(Expense)		-			-			-			(15,921	)		(15,921	)
Segment Income (Loss)	$	173,618		$	6,566		$	(1,953,220	)	$	(933,592	)	$	(2,706,628	)

Total assets	$	185,450		$	61,783		$	528,761		$	9,017,780		$	9,793,774


Three Months Ended November 30, 2023	IP Licensing			B2B Product			R&D			Corporate			Consolidated Total
Revenue	$	144,990		$	5,388		$	900		$	-		$	151,278
Cost of goods sold		-			(4,822	)		-			-			(4,822	)
Operating expenses		(41,478	)		(54,169	)		(586,605	)		(603,345	)		(1,285,597	)
Other Income(Expense)		-			-			-			(45,897	)		(45,897	)
Segment Income (Loss)	$	103,512		$	(53,603	)	$	(585,705	)	$	(649,242	)	$	(1,185,038	)

Total assets	$	132,627		$	63,573		$	76,245		$	3,354,329		$	3,626,774

15. Subsequent Events

Effective December 9, 2024, the Company issued 10,000 fully vested options with an exercise price of $2.42 to a Scientific Advisory Board member.

Effective January 7, 2025, the Company issued 100,000 fully vested Restricted Stock Awards (“RSAs”) with a fair value of $224,000 and having a six (6) month Restricted Period, as that term is defined in the Company’s incentive equity plan, to Christopher Bunka.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

This quarterly report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact may be forward-looking statements. These statements relate to future events or our future financial performance. Any forward-looking statements are based on our present beliefs and assumptions as well as the information currently available to us. In some cases, forward-looking statements are identified by terminology such as “may”, “will”, “should”, “could”, “targets”, “goal”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” set forth in Item 1(A) in our annual report on Form 10-K, as filed with the Securities and Exchange Commission on November 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 dollars. All references to “common shares” and “shares” refer to the common shares in our capital stock, unless otherwise indicated. The terms “Lexaria” “we”, “us”, “our” and “Company” mean the Company and/or our subsidiaries, unless otherwise indicated.

The following discussion should be read in conjunction with our condensed financial statements and accompanying notes in this quarterly report on Form 10-Q, and our audited financial statements with notes in our annual report on Form 10-K for the year ended August 31, 2024.

Company Overview

Lexaria’s DehydraTECH patented technology is a drug delivery platform technology that provides more predictable time of delivery of Active Pharmaceutical Ingredients (“API”) into the bloodstream and brain tissue. Based on R&D studies completed in animals and humans, DehydraTECH has been shown to improve the delivery of bioactive compounds into the bloodstream, 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.

Lexaria is advancing several R&D activities in preclinical as well as on-going and planned future clinical programs. During the three-months ended November 30, 2024, 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 is 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 analysed 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 analysed and reported.

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Further, during the three-months ended November 30, 2024, 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, with no serious adverse events having been observed. A battery of PK and pharmacodynamic outcomes remain to be analysed and reported.

Lexaria, through its wholly-owned subsidiary, Lexaria (AU) Pty Ltd. also received Ethics Board Approval to conduct its Australian Phase 1b 12-week chronic study in 80 overweight, obese, pre- or type 2 diabetic patients to investigate the efficacy of DehydraTECH-CBD and DehydraTECH-enhanced semaglutide as compared to Rybelsus®.

During the three-months ended November 30, 2024, the Company also 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 at an exercise price of $3.825 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.

Effective December 2, 2024, the Company, via its wholly owned subsidiary, Lexaria (AU) Pty Ltd, entered into a Project Agreement with Novotech (Australia) Pty Limited for the conduct of its Australian clinical study DehydraTECH Cannabidiol alone and in combination with glucagon-like peptide 1 agonists in pre- and Type II Diabetes (GLP-1-H24-4).

Effective January 1, 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.

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.

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Below we summarize Lexaria’s allowed/granted patents.

Issued Patent #	Patent Certificate Grant Date	Patent Family
US 9,474,725 B1	10/25/2016	#1 Food and Beverage Compositions Infused With Lipophilic Active Agents and Methods of Use Thereof
US 9,839,612 B2	12/12/2017
US 9,972,680 B2	05/15/2018
US 9,974,739 B2	05/22/2018
US 10,084,044 B2	09/25/2018
US 10,103,225 B2	10/16/2018
US 10,381,440	08/13/2019
US 10,374,036	08/06/2019
US 10,756,180	08/25/2020
AU 2015274698	06/15/2017
AU 2017203054	08/30/2018
AU 2018202562	08/30/2018
AU 2018202583	08/30/2018
AU 2018202584	01/10/2019
AU 2018220067	07/30/2019
EP 3164141	11/11/2020
JP 6920197	07/28/2021
CDN 2949369	06/13/2023
AU 2016367036	07/30/2019	#2 Methods for Formulating Orally Ingestible Compositions Comprising Lipophilic Active Agents
JP 6963507	10/19/2021
MX 388 203 B	11/26/2021
AU 2016367037	08/15/2019	#3 Stable Ready-to-Drink Beverage Compositions Comprising Lipophilic Active Agents
IN 365864	04/30/2021
JP 6917310	07/21/2021
MX 390001	02/10/2022
JP 7232853	02/22/2023
CDN 2984917	09/26/2023
CDN 3093414	12/13/2022	#6 Transdermal and/or Dermal Delivery of Lipophilic Active Agents
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
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

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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 November 30, 2024, Lexaria completed dosing for this human pilot study in nine (9) healthy human volunteers without any serious adverse events. The purpose of this study was to investigate a single daily dose of oral ingested DehydraTECH-tirzepatide capsules (compound-formulated using Zepbound® by Eli Lilly) administered over a seven-day period as compared to commercially available Zepbound® to evaluate tolerability, PK, and blood sugar. Zepbound® is currently administered by injection only and was used as the tirzepatide input material for production of the DehydraTECH-tirzepatide capsules. No serious adverse events were reported, and results from a battery of PK and pharmacodynamic outcomes from this human pilot study remain to be reported.

Chronic Dosing Animal Study (WEIGHT-A24-1)

During the quarter ended November 30, 2024, results from this obese rat diabetic-conditioned study of 12 study arms and 6-10 animals per arm were released. The study investigated weight loss, PK, and blood sugar control over time of varied DehydraTECH formulations of semaglutide and liraglutide, alone and together with DehydraTECH-CBD as compared to commercially available Rybelsus®.

Specific results pertaining to body weight and blood sugar were released on October 22, and October 24, 2024, respectively, with the overall final body weight and blood sugar results from all 12 study arms being released on November 20, 2024. These final results verified that DehydraTECH-liraglutide and a select DehydraTECH-CBD formulation were the top performing study arms, outperforming the Rybelsus® control group in both body weight-loss, by 11.53% and 10.65% respectively, and in blood sugar, by 11.13% and 3.35% respectively. Additional blood and brain tissue PK data as well as liver and kidney function testing and blood chemistry analyses remain to be analysed and reported.

Based on these outcomes, Lexaria, via its wholly owned subsidiary, Lexaria (AU) Pty Ltd solidified plans for its study design for a Phase 1b Australian human study to evaluate select top performing DehydraTECH formulations to allow for maximum impact on blood glucose and body weight control while also evaluating safety and tolerability.

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

During the quarter ended November 30, 2024, Lexaria via its wholly owned subsidiary, Lexaria (AU) Pty Ltd, received ethics board approval for its primary clinical sites and manufactured and delivered the Investigational Product to the Australian distributor for labelling, packaging and distribution for Study GLP-1-H24-4. The Study is planned to commence with 80 overweight, obese, pre- or type 2 diabetic patients to investigate and compare the efficacy of DehydraTECH-CBD capsules, DehydraTECH-semaglutide capsules, DehydraTECH semaglutide combined with DehydraTECH-CBD capsules and Rybelsus® tablets (acting as the positive control). All drugs will be administered daily by oral tablet or capsule – there are no drug injections involved in this Study. First patient dosing commenced as announced December 19, 2024. The objectives for the Study include discovering whether:

	·	DehydraTECH processed CBD and/or semaglutide is safe over the Study duration in the Study population?
	·	DehydraTECH-(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?

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Biodistribution Study of DehydraTECH-semaglutide

On November 14, 2024, Lexaria announced that it had engaged a contract research organization to fluorescently tag DehydraTECH-semaglutide and a non-DehydraTECH-processed Rybelsus® mimicking comparator formulation to be ingested by Sprague-Dawley rats to track semaglutide distribution and localization with additional information being provided by key tissue samples. This study work is underway and will be reported upon in due course.

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.

Hypertension Phase 1b IND Trial HYPER-H23-1

The Company intends to raise sufficient capital to commence this study in due course, upon more favorable financial market conditions.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Critical Accounting Policies and Estimates

Our consolidated financial statements and accompanying notes are prepared in accordance with US GAAP. These accounting principles require management to make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses during the periods reported. Based on information available to management at the time, these estimates, judgments and assumptions are considered reasonable. We believe that understanding the basis and nature of the estimates, judgments and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financials.

For a discussion of our critical accounting estimates, please read Note 4, Estimates and Judgments, as found in the financial statements in our Annual Report on Form 10-K for the year ended August 31, 2024. There have been no material changes to the critical accounting estimates as previously disclosed in our 2024 Form 10-K.

Funding Requirements

We anticipate that our expenditures will increase in connection with our ongoing R&D program, specifically with respect to our animal and human clinical trials of our DehydraTECH formulations for the purposes of our investigations with GLP-1 drugs and treating hypertension. As we move forward with our planned R&D studies in 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 November 30, 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 $2,706,628 and $1,185,038 for the three-months ended November 30, 2024, and 2023, respectively.

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The continuation of Lexaria as a going concern depends on raising additional capital and/or attaining and maintaining profitable operations. The accompanying financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our Company discontinue operations. The recurring losses from operations and net capital deficiency may raise substantial doubt about the Company’s ability to continue as a going concern within one year following the date that these consolidated financial statements are issued.

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 November 30, 2024, and 2023

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

	November 30,			November 30,
	2024			2023			Change

Revenues	$	183,923		$	151,278		$	32,645
Cost of goods sold		(2,720	)		(4,822	)		2,102
Research and development		(1,953,220	)		(574,491	)		(1,378,729	)
Consulting fees & salaries		(359,650	)		(225,621	)		(134,029	)
Legal and professional		(136,346	)		(178,784	)		42,438
Other general and administrative		(422,694	)		(306,702	)		(115,992	)
Other income (loss)		(15,921	)		(45,896	)		29,975
Net Loss	$	(2,706,628	)	$	(1,185,038	)	$	(1,521,590	)

Revenue

Fees from intellectual property licensing and B2B sales totaled $174,000 and $9,923, respectively, for the three months ended November 30, 2024. For the three months ended November 30, 2024, relative to the three months ended November 30, 2023, license fees and B2B sales increased by $29,010 and $4,535, respectively, while R&D sales decreased by $900 year-over year, 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.

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Research and Development

Expenditures on R&D increased by $1,378,729 year-over-year for the three-month period ended November 30, 2024, due mainly to the completion of the manufacturing of its Investigational Drug Product for its Phase 1b Clinical Trial GLP-1-H24-4 and payment for certain start-up activities, licenses and engagements. Lexaria continues with applied development and programs in our pharmaceutical division with our primary focus being on optimization of DehydraTECH formulations of GLP-1 drugs as well as advancing our DehydraTECH-CBD drug to treat hypertension.

Consulting Fees and Salaries

In the three-months ended November 30, 2024, consulting fees and salaries increased by $134,029 year-over-year primarily due to the replacement of the Company’s CEO, the addition of the former CEO as a Strategic Executive Consultant and the engagement of a new CFO.

Legal and Professional Fees

Our legal and professional fees decreased by $42,438 during the period compared to the same prior year period due to decreased patent filings and the utilization of legal advisory services. The decrease also reflects reduced accounting fees related to financing activities in the period.

General and Administrative

Our other general and administrative expenses increased overall by $115,992 during the period ended November 30, 2024, over the same period last year. Advertising and promotion increased by $55,477 as we embarked on an advertising campaign 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 recognized a foreign currency transaction loss of $71,574 related to Canadian Dollar-denominated cash balances held by our US-based Bioscience subsidiary.

Liquidity and Financial Condition

Working Capital	November 30,			August 31,
	2024			2024

Current assets	$	8,825,741		$	7,897,986
Current liabilities		(297,798	)		(1,099,419	)
Net Working Capital	$	8,527,943		$	6,798,567

Cash Flows	November 30,			November 30,
	2024			2023
Cash flows used in operating activities	$	(2,726,045	)	$	(1,181,653	)
Cash flows used in investing activities		(37,804	)		(40,026	)
Cash flows provided by financing activities		4,345,393			1,819,370
Effect of exchange rate changes on cash		(3,175	)		4,372
Net change in cash for the period	$	1,578,369		$	602,063

Operating Activities

Net cash used in operating activities was approximately $2.73 million for the three months ended November 30, 2024, compared with $1.18 million during the same period in 2023. The increase relates primarily to an increase of $1.52 million in our net loss, as we continued with the studies of DehydraTECH-powered GLP-1/GIP drugs listed above; 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.

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Investing Activities

Net cash used in investing activities was $37,804 for the three-months ended November 30, 2024, compared to $40,026 for the same period in 2023. The decrease was attributable 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 $4.35 million for the three months ended November 30, 2024, compared to approximately $1.82 million for the same period in 2023. The increase relates to net proceeds from the sale of common shares.

Liquidity and Capital Resources

Since inception, the Company has incurred significant operating and net losses. Net losses attributable to shareholders were $2.70 million and $1.18 million for the three-months ended November 30, 2024, and 2023, respectively. As of November 30, 2024, we had an accumulated deficit of $54.26 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.

Sources of Liquidity

During the three-months ended November 30, 2024, the Company has completed the following:

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 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.

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 November 30, 2024, the Company had cash and cash equivalents of approximately $8.1 million to settle $0.3 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.

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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 November 30, 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 November 30, 2024.

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 November 30, 2024, 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 November 30, 2024, that have materially or are reasonably likely to materially affect our internal controls over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We are not party to any material, pending or existing legal proceedings against our Company or its subsidiaries, nor are we involved as a plaintiff in any other material proceeding or pending litigation. There are no proceedings in which any of our directors, executive officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

Item 1A. Risk Factors

Much of the information included in this quarterly report includes or is based upon estimates, projections or other "forward-looking statements". Such forward-looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.

The risks associated with our business, common stock and other factors are those described in the Form 10-K for the year ended August 31, 2024, as filed with the SEC on November 26, 2024.

Item 2. Recent Sales of Unregistered Equity Securities

During the quarter ended November 30, 2024 the Company did not issue any unregistered equity securities.

Item 3. Rule 10b5-1 Trading Plans

Our Insider Trading Policy provides that our insiders, employees and consultants may enter into trading plans to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. During the fiscal quarter ended November 30, 2024, none of the Company’s insiders had entered into a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (as such terms are defined in Item 408(a) of Regulation S-K of the Securities Act of 1933).

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Item 4. Exhibits, Financial Statement Schedules

a) Financial Statements

1) Financial statements for our Company are listed in the index under Item 1 of this document.

2) All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto.

b) Exhibits

Exhibit Number		Description
(3)		Articles of Incorporation and Bylaws
3.1		Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed January 14, 2021)
3.2		Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed January 14, 2021)
(4)		Instruments Defining the Rights of Security Holders
4.1		Form of Private Placement Warrant (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed October 16, 2024)
4.2		Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed October 16, 2024)
(10)		Material Contracts
10.1		Executive Employment Agreement dated October 1, 2024 with Michael Shankman (incorporated by reference to Exhibit 10.10 to our Annual Report on Form 10-K filed November 26, 2024)
10.2		Engagement Agreement by and between the Company and H.C. Wainwright & Co., LLC, dated September 4, 2024 (incorporated by reference to Exhibit 1.1 to our Current Report on Form 8-K filed October 16, 2024)
10.3		Form of Securities Purchase Agreement with certain purchasers dated October 14, 2024 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed October 16, 2024)
10.4		Project Agreement effective December 2, 2024 with Novotech (Australia) Pty Limited
10.5		Executive Employment Agreement dated December 31, 2024 with John Docherty
(31)		Rule 13(a) - 14 (a)/15(d) - 14(a)
31.1		Section 302 Certifications under Sarbanes-Oxley Act of 2002 of Principal Executive Officer
31.2		Section 302 Certifications under Sarbanes-Oxley Act of 2002 of Principal Financial Officer and Principal Accounting Officer
(32)		Section 1350 Certifications
32.1		Section 906 Certification under Sarbanes Oxley Act of 2002 of Principal Executive Officer
32.2		Section 906 Certification under Sarbanes Oxley Act of 2002 of Principal Financial Officer and Principal Accounting Officer
(101)**		Interactive Data Files
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

LEXARIA BIOSCIENCE CORP.

By:

/s/ Richard Christopher

Richard Christopher

Chief Executive Officer

(Principal Executive Officer)

Date: January 10, 2025

In accordance with the Exchange Act, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ Richard Christopher
Richard Christopher Chief Executive Officer (Principal Executive Officer) Date: January 10, 2025

By:	/s/ Michael Shankman
Michael Shankman Chief Financial Officer (Principal Financial and Accounting Officer) Date: January 10, 2025

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SEC Form 10-Q filed by Lexaria Bioscience Corp.

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