SEC Form 10-Q filed by Lexaria Bioscience Corp.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from [ ] to [ ]
Commission file number
(Exact name of registrant as specified in its charter) |
| ||
(State or other jurisdiction of Incorporation or Organization) |
| (I.R.S. Employer Identification No.) |
|
|
|
| ||
(Address of principal executive offices) |
| (Zip Code) |
Registrant’s Telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
Title of Class | Trading Symbol(s) | Name of each exchange on which registered |
The | ||
The |
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.
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).
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 | ☐ |
☒ | 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
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
| 3 |
| |
|
|
|
|
| 3 |
| |
|
|
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| 18 |
|
|
|
|
|
| 26 |
| |
|
|
|
|
| 27 |
| |
|
|
|
|
| 27 |
| |
|
|
|
|
| 27 |
| |
|
|
|
|
| 27 |
| |
|
|
|
|
| 27 |
|
| 2 |
| Table of Contents |
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
LEXARIA BIOSCIENCE CORP. | |||||||||
CONSOLIDATED BALANCE SHEETS | |||||||||
(Expressed in US Dollars except share amounts) | |||||||||
(Unaudited) | |||||||||
|
| February 28, |
|
| August 31, |
| |||
|
| 2025 |
|
| 2024 |
| |||
ASSETS |
|
|
|
|
| ||||
Current |
|
|
|
|
|
| |||
Cash |
| $ |
|
| $ |
| |||
Marketable securities |
|
|
| $ |
| ||||
Accounts receivable |
|
|
| $ |
| ||||
Prepaid expenses and other current assets |
|
|
|
|
| ||||
Total Current Assets |
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
| |
Non-current assets, net |
|
|
|
|
|
|
|
| |
Long-term receivables |
|
|
|
|
|
| |||
Right of use assets |
|
|
|
|
|
| |||
Intellectual property, net |
|
|
|
|
|
| |||
Property & equipment, net |
|
|
|
|
|
| |||
Total Non-current Assets |
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
| |
TOTAL ASSETS |
| $ |
|
| $ |
| |||
|
|
|
|
|
|
|
|
| |
LIABILITIES and STOCKHOLDERS' EQUITY | |||||||||
Current Liabilities |
|
|
|
|
|
|
|
| |
Accounts payable and accrued liabilities |
| $ |
|
| $ |
| |||
Deferred revenue |
|
|
|
|
| ||||
Lease liability, current |
|
|
|
|
|
| |||
Total Current Liabilities |
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
| |
Lease liabilities - non-current |
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
| |
TOTAL LIABILITIES |
| $ |
|
| $ |
| |||
|
|
|
|
|
|
|
|
| |
Stockholders' Equity |
|
|
|
|
|
|
|
| |
Share Capital |
|
|
|
|
|
|
|
| |
Authorized: |
|
|
|
|
|
|
|
| |
Common shares issued and outstanding: |
|
|
|
|
|
|
|
| |
| $ |
|
| $ |
| ||||
Additional paid-in capital |
|
|
|
|
|
| |||
Accumulated Deficit |
|
| ( | ) |
|
| ( | ) | |
Accumulated other comprehensive loss |
|
| ( | ) |
|
| ( | ) | |
Equity attributable to shareholders of Lexaria |
|
|
|
|
|
| |||
Non-controlling Interest |
|
| ( | ) |
|
| ( | ) | |
Total Stockholders' Equity |
|
|
|
|
|
| |||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
| $ |
|
| $ |
| |||
|
|
|
|
|
|
|
|
| |
The accompanying notes are an integral part of these unaudited interim consolidated financial statements. | |||||||||
| 3 |
| Table of Contents |
LEXARIA BIOSCIENCE CORP. | ||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | ||||||||||||||||
(Expressed in US Dollars except share amounts) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| February 28, |
|
| February 29, |
|
| February 28, |
|
| February 29, |
| ||||
|
| 2025 |
|
| 2024 |
|
| 2025 |
|
| 2024 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
| ||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense) |
|
|
|
|
| ( | ) |
|
|
|
|
|
| |||
Unrealized gain (loss) on marketable securities |
|
|
|
|
|
|
|
|
|
|
| ( | ) | |||
Total other income (loss) |
|
|
|
|
|
|
|
|
|
|
| ( | ) | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Less: Net loss attributable to non-controlling interest |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Net loss attributable to Lexaria shareholders |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Total comprehensive loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Basic and diluted loss per share |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
| ||||
The accompanying notes are an integral part of these interim consolidated financial statements. | ||||||||||||||||
| 4 |
| Table of Contents |
LEXARIA BIOSCIENCE CORP. | ||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | ||||||||
For the Six Months Ended February 28, 2025 and February 29, 2024 | ||||||||
(Expressed in US Dollars) | ||||||||
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
|
| Additional |
|
|
|
|
|
| Non- |
|
|
| ||||||||||||
|
| Common Stock |
|
| Paid-in |
|
|
|
|
|
| controlling |
|
| Stockholders' |
| ||||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| AOCI |
|
| Interest |
|
| Equity |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance August 31, 2024 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ |
| ||||
Stock issued in equity offering |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Foreign currency translation adjustment |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||||
Stock-based compensation |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss |
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||||
Non-controlling interest |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
Balance November 30, 2024 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ |
| ||||
Stock issued in equity offering |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Foreign currency translation adjustment |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net loss |
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||||
Non-controlling interest |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
Balance February 28, 2025 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance August 31, 2023 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
| |||||
Stock issued in equity offering |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Stock issued in exercise of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Foreign currency translation adjustment |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Stock-based compensation |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss |
|
| - |
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | |||
Non-controlling interest |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
Balance November 30, 2023 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
| |||||
Stock issued in equity offering |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Stock issued from exercise of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Foreign currency translation adjustment |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||||
Net loss |
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||||
Non-controlling interest |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
Balance February 28, 2024 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited interim consolidated financial statements. | ||||||||||||||||||||||||||||
| 5 |
| Table of Contents |
LEXARIA BIOSCIENCE CORP. | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
For the Six Months Ended February 28, 2025 and February 29, 2024 | ||||||||
(Expressed in US Dollars) (Unaudited) | ||||||||
|
|
| ||||||
|
| February 28, |
|
| February 29, |
| ||
|
| 2025 |
|
| 2024 |
| ||
Cash flows used in operating activities |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Stock based compensation |
|
|
|
|
|
| ||
Depreciation and amortization |
|
|
|
|
|
| ||
Impairment loss |
|
|
|
|
|
| ||
Noncash lease expense |
|
|
|
|
|
| ||
Unrealized (gain) loss on marketable securities |
|
| ( | ) |
|
|
| |
Lease accretion |
|
|
|
|
|
| ||
Change in operating assets and liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| ( | ) |
|
| ( | ) |
Prepaid expenses and deposits |
|
|
|
|
|
| ||
Long-term receivables |
|
| ( | ) |
|
|
| |
Accounts payable and accrued liabilities |
|
|
|
|
| ( | ) | |
Operating lease liability |
|
| ( | ) |
|
| ( | ) |
Deferred revenue |
|
| ( | ) |
|
|
| |
Net cash used in operating activities |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities |
|
|
|
|
|
|
|
|
Additions to intellectual property |
| $ | ( | ) |
| $ | ( | ) |
Purchase of equipment |
|
| ( | ) |
|
|
| |
Net cash used in investing activities |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) financing activities |
|
|
|
|
|
|
|
|
Proceeds from shares sold for cash |
| $ |
|
| $ |
| ||
Proceeds from exercise of warrants |
|
|
|
|
|
|
| |
Net cash provided by (used in) financing activities |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
| $ | ( | ) |
| $ | ( | ) |
Net change in cash for the period |
|
| ( | ) |
|
|
| |
Cash at beginning of period |
|
|
|
|
|
| ||
Cash at end of period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited interim consolidated financial statements. | ||||||||
| 6 |
| Table of Contents |
LEXARIA BIOSCIENCE CORP.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
February 28, 2025
(Expressed in U.S. Dollars Except Share Amounts)
(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.
Going Concern
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 $
During the six months ended February 28, 2025, we raised $
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.
Given our current development plans and cash management efforts, we anticipate that our cash resources will be sufficient to fund operations through the fourth quarter of calendar year 2025. Our ability to continue operations after our current cash resources are exhausted is dependent on our ability to obtain additional debt or equity financing or a strategic partnership, which cannot be guaranteed. Cash requirements may vary materially from those now planned because of changes in our focus and direction of our research and development programs, competitive and technical advances, patent developments, regulatory changes or other developments. If adequate additional funds are not available when required, management may need to curtail its development efforts and planned operations to conserve cash.
As of February 28, 2025, the Company had cash and cash equivalents of approximately $
| 7 |
| Table of Contents |
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
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 February 28, 2025, 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.
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.
| 8 |
| Table of Contents |
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
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
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 |
| 9 |
| Table of Contents |
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 six months ended February 28, 2025 and February 29, 2024.
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.
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.
| 10 |
| Table of Contents |
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 February 28, 2025.
|
| Carrying |
|
| Fair Value Measurement Using |
| ||||||||||||||
|
| Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| |||||
Marketable Securities |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
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 |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
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 $
| 11 |
| Table of Contents |
In the six months ended February 28, 2025, two customers accounted for
As of February 28, 2025, the Company had $
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.
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.
| 12 |
| Table of Contents |
5. Accounts and Other Receivables
Accounts receivable as of February 28, 2025 and August 31, 2024 consist of the following:
|
| February 28, 2025 |
|
| August 31, 2024 |
| ||
Territory license fees |
| $ |
|
| $ |
| ||
Sales tax |
|
|
|
|
|
| ||
Long term receivable |
|
|
|
|
|
| ||
Total Receivables |
| $ |
|
| $ |
| ||
6. Prepaid Expenses and Other Current Assets
Prepaid expenses consist of the following as of February 28, 2025 and August 31, 2024:
|
| February 28, |
|
| August 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
Advertising & Conferences |
| $ |
|
| $ |
| ||
Research and Development |
|
|
|
|
|
| ||
Legal & Accounting Fees |
|
|
|
|
|
| ||
License, Filing Fees, Dues |
|
|
|
|
|
| ||
Office & Insurance |
|
|
|
|
|
| ||
Capital Financing |
|
|
|
|
|
| ||
Total Prepaid Expenses and Other Current Assets |
| $ |
|
| $ |
| ||
7. Intellectual Property, net
A continuity schedule for capitalized patents is presented below:
|
| February 28, |
|
| August 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
Balance – beginning |
| $ |
|
| $ |
| ||
Additions |
|
|
|
|
|
| ||
Impairment |
|
| ( | ) |
|
| ( | ) |
Amortization |
|
| ( | ) |
|
| ( | ) |
Balance – ending |
| $ |
|
| $ |
| ||
The Company evaluated its patent portfolio to determine whether certain pending applications had been abandoned or will not be pursued. During the six months ended February 28, 2025, the Company recognized an impairment loss of $
The following table summarizes expected future amortization of the Company’s patent portfolio as of February 28, 2025:
Fiscal Years Ending August 31, |
|
|
| |
2025 |
| $ |
| |
2026 |
| $ |
| |
2027 |
| $ |
| |
2028 |
| $ |
| |
2029 |
| $ |
| |
Thereafter |
| $ |
| |
Total |
| $ |
| |
| 13 |
| Table of Contents |
8. Property & Equipment, net
Consists of:
February 28, 2025 |
| Cost |
|
| Period Amortization |
|
| Additions |
|
| Accumulated Amortization |
|
| Net Balance |
| |||||
Leasehold improvements |
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| ||||
Computers |
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| |||
Furniture fixtures equipment |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| |||
Lab equipment |
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| |||
Total |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
| |||
August 31, 2024 |
| Cost |
|
| Period Amortization |
|
| Additions |
|
| Accumulated Amortization |
|
| Net Balance |
| |||||
Leasehold improvements |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
| |||
Computers |
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| |||
Furniture fixtures equipment |
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| |||
Lab equipment |
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| |||
Total |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
| |||
Depreciation and amortization for the six months ended February 28, 2025 and the year ended August 31, 2024 totaled $
9. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities as of February 28, 2025 and August 31, 2024 consist of the following:
|
| February 28, |
|
| August 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
Accounts Payable |
|
|
|
|
|
| ||
Vendors payable |
| $ |
|
| $ |
| ||
Sales tax payable |
| $ |
|
| $ |
| ||
Accrued Liabilities |
|
|
|
|
|
|
|
|
Vendors payable |
| $ |
|
| $ |
| ||
Balance Ending |
| $ |
|
| $ |
| ||
10. Revenues
A breakdown of our revenues by type for the six months ended February 28, 2025, and February 29, 2024, are as follows:
|
| Six Months Ended February |
| |||||
|
|
| 28, 2025 |
|
|
| 29, 2024 |
|
|
|
|
|
|
|
|
|
|
IP Licensing |
| $ |
|
| $ |
| ||
B2B |
|
|
|
|
|
| ||
Other |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
| 14 |
| Table of Contents |
During the six-month period ended February 28, 2025, and February 29, 2024, the Company recognized B2B product revenues of $
11. Income Taxes
For the six months ended February 28, 2025, 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 six months ended February 28, 2025, the Company completed the following issuances of common shares and warrants:
1. | In February 2025, the Company sold |
|
|
2. | On January 7, 2025 the Company issued |
| |
3. | On October 16, 2024, the Company entered into a Securities Purchase Agreement whereby we issued |
|
|
4. | In October 2024, the Company sold |
A continuity schedule for warrants for the six months ended February 28, 2025, is presented below:
|
| Number of Warrants |
|
| Weighted Average Exercise Price $ |
| ||
Balance, August 31, 2024 |
|
|
|
|
|
| ||
Issued |
|
|
|
|
|
| ||
Cancelled/Expired |
|
| ( | ) |
|
|
| |
Balance, February 28, 2025 |
|
|
|
|
|
| ||
| 15 |
| Table of Contents |
A summary of warrants outstanding as of February 28, 2025, is presented below:
Number of Warrants |
|
| Weighted Average Exercise Price ($) |
|
| Weighted Average Remaining Contractual Life ~in years~ |
| |||
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
|
|
| $ |
|
|
|
| |||
Stock Options
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 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Cancelled/expired |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
| ||
Exercised |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
| ||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Balance August 31, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Cancelled/expired |
|
| ( | ) |
|
|
|
|
| - |
|
|
| - |
| |
Granted |
|
|
|
|
|
|
|
|
|
|
| - |
| |||
Balance February 28, 2025 (outstanding) |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Balance February 28, 2025 (exercisable) |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
On October 1, 2024, the Company granted a total of
On November 27, 2024, the Company granted a total of
On December 9, 2024, the Company granted
On January 13, 2025, the Company granted an aggregate of
The fair value of stock options granted in the six months ended February 28, 2025, were estimated as of the date of the grant by using the Black-Scholes option pricing model with the following assumptions:
February 28, 2025 | ||||
Expected volatility | % | |||
Risk-free interest rate | % | |||
Expected life | years | |||
Dividend yield | % | |||
Estimated fair value per option | $ | |||
Stock-based compensation expense for the six-month periods ended February 28, 2025, and February 29, 2024, was $
As of February 28, 2025, the total unrecognized non-cash compensation costs are $
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.
|
| February 28, 2025 |
|
| August 31, 2024 |
| ||
|
| $ |
|
| $ |
| ||
Right of use assets - operating leases |
|
|
|
|
|
| ||
Amortization |
|
| ( | ) |
|
| ( | ) |
Total lease assets |
|
|
|
|
|
| ||
Liabilities: |
|
|
|
|
|
| ||
Lease payments |
|
| ( | ) |
|
| ( | ) |
Interest accretion |
|
|
|
|
|
| ||
Total lease liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Operating lease cost |
|
|
|
|
|
| ||
Operating cash flows for lease |
|
| ( | ) |
|
| ( | ) |
Remaining lease term |
|
|
|
| ||||
Discount rate |
|
| % |
|
| % | ||
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 February 28, 2025:
2025 (six months remaining) |
| $ |
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
2029 |
|
|
| |
Thereafter |
|
|
| |
Total lease payments |
|
|
| |
Less: imputed interest |
|
| ( | ) |
Present value of operating lease liabilities |
|
|
| |
Less: current obligations under leases |
|
| ( | ) |
Total |
| $ |
|
| 16 |
| Table of Contents |
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 two licensees.
Six Months Ended February 28, 2025 |
| IP Licensing |
|
| B2B Product |
|
| R&D |
|
| Corporate |
|
| Consolidated Total |
| |||||
Revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
Cost of goods sold |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | |||
Operating expenses |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Other Income(Expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Segment Income (Loss) |
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended February 29, 2024 |
| IP Licensing |
|
| B2B Product |
|
| R&D |
|
| Corporate |
|
| Consolidated Total |
| |||||
Revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
Cost of goods sold |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | |||
Operating expenses |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Other Income(Expense) |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||
Segment Income (Loss) |
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
| 17 |
| Table of Contents |
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 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 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.
Lexaria is advancing several R&D activities in preclinical as well as on-going and planned future clinical programs. During the six months ended February 28, 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 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.
Further, during the six months ended February 28, 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.
| 18 |
| Table of Contents |
During the six months ended February 28, 2025, 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 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 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. 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.
Lexaria via its wholly owned subsidiary, Lexaria (AU) Pty Ltd, received Ethics Board Approval and entered into a Project Agreement with Novotech (Australia) Pty Limited for the conduct of its Australian Phase 1b 12-week chronic clinical study of DehydraTECH Cannabidiol alone and in combination with glucagon-like peptide 1 agonists in pre- and Type II Diabetes (GLP-1-H24-4) and began the associated site initiation visits and initial dosing of patients. During the six months ended February 28, 2025, it was also determined to add a 5th study arm to GLP-1-H24-4 to investigate DehydraTECH formulated tirzepatide which has also received Ethics Board Approval.
On January 15, 2025, Lexaria received independent Ethics Board Approval to the commencement of its human pilot study GLP-1-H25-5 which will be investigating an oral version of liraglutide by way of formulating the commercial injectable liraglutide drug sold under the brand name Saxenda®, with DehydraTECH. This Study is expected to be conducted with 8-10 healthy volunteers with the goals of demonstrating safety and pharmacokinetic performance in humans utilizing orally dosed DehydraTECH-liraglutide. If the Study results are positive, it could support a decision to investigate oral DehydraTECH-liraglutide in a future Phase I registered trial.
Also, during the six months ended February 28, 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.
| 19 |
| Table of Contents |
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.
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 | |
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 |
| 20 |
| 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 February 28, 2025, Lexaria provided partial results from its third human pilot study which investigated DehydraTECH-tirzepatide as compared to the Zepbound® brand of injected tirzepatide, with DehydraTECH-tirzepatide evidencing a 47% reduction in adverse events, a comparable overall reduction in blood glucose and a comparable increase in insulin levels. 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.
Chronic Dosing Human Study (GLP-1-H24-4)
During the quarter ended February 28, 2025, Lexaria 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 of DehydraTECH Cannabidiol and glucagon-like peptide 1 agonists alone or in combination, in overweight or obese, pre- and Type II Diabetes participants (GLP-1-H24-4) and began the associated site initiation visits and initial dosing of patients. It was also determined during the quarter to add a 5th study arm to GLP-1-H24-4 to investigate DehydraTECH formulated tirzepatide.
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, |
| 21 |
| Table of Contents |
Human Pilot Study #5 (GLP-1-H25-5)
During the quarter ended February 28, 2025, Lexaria engaged a contract research organization and received Ethics Board Approval for the conduct of a human pilot study evaluation DehydraTECH-liraglutide against Saxenda® injectable liraglutide. This study is intended to be conducted with 8-10 healthy volunteers with goals of demonstrating safety and pharmacokinetic performance utilizing orally dosed DehydraTECH-liraglutide. On January 15, 2025, Lexaria received independent Ethics Board Approval to commence its human pilot study GLP-1-H25-5. If the Study results are positive, it could support a decision to investigate oral DehydraTECH-liraglutide in a future Phase I registered trial.
Chronic Dosing Animal Study (WEIGHT-A24-1)
During the quarter ended February 28, 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 February 28, 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 is 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.
Hypertension Phase 1b IND Trial HYPER-H23-1
The Company is evaluating the timing for commencement of this study.
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.
| 22 |
| Table of Contents |
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 six months ended February 28, 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 February 28, 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 $5,423,600 and $1,837,771 for the six months ended February 28, 2025, and February 29, 2024, respectively.
During the six months ended February 28, 2025, we raised $4.4 million in net proceeds from the sale of securities pursuant to our Registered Direct offering which closed in 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. Management believes 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. The Company expects that its current cash resources will be sufficient to fund the Company’s operations through the fourth quarter of calendar year 2025.
Results of Operations for the Period Ended February 28, 2025, and February 29, 2024
Our net loss for the six months ended for the respective items are summarized as follows:
|
| February 28, |
|
| February 29, |
|
|
| ||||
|
| 2025 |
|
| 2024 |
|
| Change |
| |||
|
|
|
|
|
|
|
|
|
| |||
Revenues |
| $ | 357,923 |
|
| $ | 296,278 |
|
| $ | 61,645 |
|
Cost of goods sold |
|
| (2,720 | ) |
|
| (4,822 | ) |
|
| 2,102 |
|
Research and development |
|
| (3,639,136 | ) |
|
| (820,270 | ) |
|
| (2,818,866 | ) |
Consulting fees & salaries |
|
| (1,004,672 | ) |
|
| (431,763 | ) |
|
| (572,909 | ) |
Legal and professional |
|
| (386,559 | ) |
|
| (361,405 | ) |
|
| (25,154 | ) |
Other general and administrative |
|
| (766,555 | ) |
|
| (485,165 | ) |
|
| (281,390 | ) |
Other income (loss) |
|
| 18,119 |
|
|
| (30,624 | ) |
|
| 48,743 |
|
Net Loss |
| $ | (5,423,600 | ) |
| $ | (1,837,771 | ) |
| $ | (3,585,829 | ) |
Revenue
Fees from intellectual property licensing and B2B sales totaled $357,923 and $296,278, respectively, for the six-month periods ended February 28, 2025 and February 29, 2024. For the six months ended February 28, 2025, relative to the six months ended February 29, 2024, license fees and B2B sales increased by $58,010 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.
| 23 |
| Table of Contents |
Research and Development
Expenditures on R&D increased by $2,818,866 year-over-year for the six-month period ended February 28, 2025, due primarily to the completion of the manufacturing of Investigational Drug Product and start-up activities related to our Phase 1b Clinical Trial (GLP-1-H24-4), combined with progression 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 six months ended February 28, 2025, consulting fees and salaries increased by $572,909 year-over-year primarily due to the transition of the Company’s former CEO to the newly created role of Strategic Executive Consultant, the award of restricted stock, the engagement of a new CEO, with significant experience in development stage pharmaceutical company management, and a new CFO.
Legal and Professional Fees
Our legal and professional fees increased by $25,154 during the six months ended February 28, 2025 as compared to the same prior year period due to incremental accounting and professional fees incurred during the period and associated with increased registration statement filings and the utilization of legal advisory services.
General and Administrative
Our other general and administrative expenses increased in total by $281,390 during the six-month period ended February 28, 2025, as compared to the same prior year period. The increase is attributable to advertising and promotion expenses, which increased by $138,222 as we continued 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 foreign currency transaction losses of $89,598 related to Canadian Dollar-denominated cash balances held by our US-based bioscience subsidiary.
Liquidity and Financial Condition
Working Capital |
| February 28, |
|
| August 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Current assets |
| $ | 7,724,402 |
|
| $ | 7,897,986 |
|
Current liabilities |
|
| (1,822,416 | ) |
|
| (1,099,419 | ) |
Net Working Capital |
| $ | 5,901,986 |
|
| $ | 6,798,567 |
|
Cash Flows |
| February 28, |
|
| February 29, |
| ||
|
| 2025 |
|
| 2024 |
| ||
Cash flows used in operating activities |
| $ | (4,223,936 | ) |
| $ | (1,801,267 | ) |
Cash flows used in investing activities |
|
| (65,698 | ) |
|
| (97,016 | ) |
Cash flows provided by financing activities |
|
| 4,357,113 |
|
|
| 5,272,206 |
|
Effect of exchange rate changes on cash |
|
| (98,430 | ) |
|
| (20,626 | ) |
Net change in cash for the period |
| $ | (30,951 | ) |
| $ | 3,353,297 |
|
Operating Activities
Net cash used in operating activities was approximately $4.2 million for the six months ended February 28, 2025, compared with $1.8 million during the same prior year period. The increase is attributable to an increase of $3.6 million in our net loss, which was partially offset by an increase of $0.2 million in non-cash expenses and a decrease in net working capital of $1.0 million, 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-H24-4.
| 24 |
| Table of Contents |
Investing Activities
Net cash used in investing activities was $65,698 for the six months ended February 28, 2025, compared to $97,016 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 $4.4 million for the six months ended February 28, 2025, compared to approximately $5.3 million for the same prior year period. The decrease relates to lower net proceeds from the exercise of warrants, which was partially offset by higher 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 $5.4 million and $1.8 million for the six months ended February 28, 2025, and February 29, 2024, respectively. As of February 28, 2025, we had an accumulated deficit of $57.0 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 six months ended February 28, 2025, the Company has completed the following:
| · | In February 2025, the Company sold 6,585 shares of common stock through an amendment to its ATM offering. Net proceeds from these sales totaled $11,720. |
|
| · | 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. |
|
| · | 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.
| 25 |
| Table of Contents |
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 February 28, 2025, the Company had cash and cash equivalents of approximately $6.5 million to settle $1.8 million in current liabilities. We have performed a review of our cash flow forecast and have 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 filing of these consolidated financial statements on Form 10-Q. 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 February 28, 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.
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 February 28, 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 February 28, 2025.
Inherent limitations on Effectiveness of Controls
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, regulations, segregation of management duties, scale of organization, and personnel factors. It is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. It can be circumvented by collusion or improper management override. Internal control over financial reporting may not prevent or detect misstatements on a timely basis. These inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, these risks. Systems determined to be effective can provide only reasonable assurances with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
During the quarter ended February 28, 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 February 28, 2025, that have materially or are reasonably likely to materially affect our internal controls over financial reporting.
| 26 |
| Table of Contents |
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 include those described in the Form 10-K for the year ended August 31, 2024, as filed with the SEC on November 26, 2024 and the following:
There is substantial doubt as to our ability to continue as a going concern, which may affect our ability to obtain future financing and may require us to curtail or cease our operations.
Our consolidated financial statements as of February 28, 2025 were prepared under the assumption that we will continue as a going concern. As of February 28, 2025, we had unrestricted cash and cash equivalents of approximately $6.5 million to settle $1.8 million in current liabilities. Our ability to continue as a going concern will depend on our ability to obtain additional equity, effect a collaborative or strategic partnership, reduce or contain expenditures, and, ultimately, to generate revenue. Based on these factors, management determined that there is substantial doubt as to our ability to continue as a going concern.
If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that investors will lose all or part of their investment. If we seek additional financing to fund our business activities as a result of the substantial doubt as to our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all.
Item 2. Recent Sales of Unregistered Equity Securities
During the quarter ended February 28, 2025, 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 February 28, 2025, 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).
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.
| 27 |
| Table of Contents |
b) Exhibits
Exhibit Number |
| Description |
(3) |
| Articles of Incorporation and Bylaws |
| ||
| ||
(4) |
| Instruments Defining the Rights of Security Holders |
| ||
| ||
(10) |
| Material Contracts |
| ||
| ||
| ||
(31) |
| Rule 13(a) - 14 (a)/15(d) - 14(a) |
| Section 302 Certifications under Sarbanes-Oxley Act of 2002 of Principal Executive Officer | |
| ||
(32) |
| Section 1350 Certifications |
| Section 906 Certification under Sarbanes Oxley Act of 2002 of Principal Executive 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.
| 28 |
| Table of Contents |
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: April 14, 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: April 14, 2025 |
| |
|
| |
By: | /s/ Michael Shankman |
|
Michael Shankman Chief Financial Officer (Principal Financial and Accounting Officer) Date: April 14, 2025 |
| |
| 29 |