Lexaria Bioscience(US:LEXX)2025-07-14 13:23PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents Lexaria Bioscience Corp.'s unaudited interim consolidated financial statements for the period ended May 31, 2025, covering balance sheets, operations, equity, cash flows, and detailed notes on business and accounting policies Consolidated Balance Sheets Consolidated Balance Sheet Highlights (May 31, 2025 vs. August 31, 2024) | Metric | May 31, 2025 | August 31, 2024 | | :-------------------------------- | :----------- | :-------------- | | Total Current Assets | $5,806,778 | $7,897,986 | | Total Non-current Assets | $934,588 | $969,803 | | TOTAL ASSETS | $6,741,366 | $8,867,789 | | Total Current Liabilities | $1,488,131 | $1,099,419 | | TOTAL LIABILITIES | $1,574,845 | $1,208,738 | | Total Stockholders' Equity | $5,166,521 | $7,659,051 | - Total assets decreased from $8.87 million to $6.74 million, and total stockholders' equity decreased from $7.66 million to $5.17 million, indicating a reduction in the company's overall financial position1314 Consolidated Statements of Operations and Other Comprehensive Loss Consolidated Statements of Operations Highlights (Nine Months Ended May 31) | Metric | 2025 | 2024 | Change (YoY) | | :-------------------------------- | :----------- | :----------- | :----------- | | Revenue | $531,923 | $380,278 | +39.88% | | Gross profit | $529,203 | $375,456 | +40.95% | | Total operating expenses | $9,721,343 | $3,925,522 | +147.64% | | Loss from operations | $(9,192,140) | $(3,550,066) | +158.93% | | Net loss | $(9,214,206) | $(3,622,083) | +154.40% | | Basic and diluted loss per share | $(0.53) | $(0.32) | +65.63% | - Revenue increased significantly by 39.88% for the nine months ended May 31, 2025, compared to the prior year, but this was overshadowed by a substantial 147.64% increase in total operating expenses, leading to a 154.40% increase in net loss1516 Consolidated Statements of Stockholders' Equity Stockholders' Equity Changes (Nine Months Ended May 31, 2025) | Metric | August 31, 2024 | May 31, 2025 | | :-------------------------------- | :-------------- | :----------- | | Common Stock Shares | 15,810,205 | 19,559,179 | | Common Stock Amount | $15,810 | $19,559 | | Additional Paid-in Capital | $59,599,178 | $66,378,362 | | Accumulated Deficit | $(51,558,772) | $(60,764,775)| | Total Stockholders' Equity | $7,659,051 | $5,166,521 | - The company issued 3,748,974 common shares and raised significant additional paid-in capital, but the accumulated deficit increased by $9.2 million, leading to a decrease in total stockholders' equity1819 Consolidated Statements of Cash Flows Consolidated Cash Flow Highlights (Nine Months Ended May 31) | Cash Flow Activity | 2025 | 2024 | | :-------------------------------- | :------------- | :------------- | | Operating Activities | $(7,807,889) | $(3,067,344) | | Investing Activities | $(85,141) | $(119,018) | | Financing Activities | $6,046,163 | $10,315,207 | | Net change in cash for the period | $(1,908,124) | $7,106,979 | | Cash at end of period | $4,591,761 | $8,459,081 | - Net cash used in operating activities significantly increased to $7.8 million in 2025 from $3.1 million in 2024, while cash provided by financing activities decreased from $10.3 million to $6.0 million, resulting in a net decrease in cash for the period21 Notes to the Interim Consolidated Financial Statements - Lexaria Bioscience Corp. is a biotechnology company focused on enhancing the bioavailability of active pharmaceutical ingredients (API) using its proprietary DehydraTECH drug delivery technology, with a current focus on GLP-1 and GIP drugs24 - The company's recurring losses and negative net cash flows raise substantial doubt about its ability to continue as a going concern, with existing cash expected to fund operations only through Q3 fiscal year 2026273132 - Revenue is primarily generated from licensing contracts for DehydraTECH technology and third-party contracted manufacturing of DehydraTECH-enhanced products25 Revenue Breakdown (Nine Months Ended May 31) | Revenue Type | 2025 | 2024 | | :------------- | :--------- | :--------- | | IP Licensing | $522,000 | $373,990 | | B2B | $9,923 | $5,388 | | Other | $- | $900 | | Total | $531,923 | $380,278 | - Two customers accounted for 100% of consolidated revenues in the nine months ended May 31, 2025, highlighting significant customer concentration67 Intellectual Property, Net (May 31, 2025 vs. August 31, 2024) | Metric | May 31, 2025 | August 31, 2024 | | :---------------- | :----------- | :-------------- | | Balance – beginning | $516,676 | $462,625 | | Additions | $60,496 | $145,591 | | Impairment | $(33,540) | $(57,836) | | Amortization | $(27,212) | $(33,704) | | Balance – ending | $516,420 | $516,676 | - The company recognized an impairment loss of $33,540 on abandoned patent applications during the nine months ended May 31, 202579 Issuances of Common Shares and Warrants (Nine Months Ended May 31, 2025) | Event | Shares Issued | Gross Proceeds | Net Proceeds | | :-------------------------------- | :------------ | :------------- | :----------- | | April 28, 2025 Equity Offering | 2,000,000 | $2.0 million | $1.7 million | | February 2025 ATM Offering | 6,585 | - | $11,720 | | October 16, 2024 Equity Offering | 1,633,987 | $5.0 million | $4.5 million | | October 2024 ATM Offering | 8,402 | $26,146 | - | - Stock-based compensation expense increased to $736,770 for the nine months ended May 31, 2025, from $395,726 in the prior year, reflecting increased equity awards93 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Lexaria's financial condition, operations, DehydraTECH technology, R&D, financings, and substantial going concern risk Company Overview - Lexaria's core business is its DehydraTECH drug delivery platform, designed to improve the bioavailability of Active Pharmaceutical Ingredients (API) into the bloodstream and brain tissue, applicable across pharmaceuticals, foods, beverages, cosmetics, and nutraceuticals105 Research & Development - DehydraTECH-enhanced liraglutide and certain CBD formulations outperformed Rybelsus® in lowering blood sugar and controlling body weight in a 12-week GLP-1 Diabetes Animal Study (WEIGHT-A24-1)106 - A human pilot study (GLP-1-H24-3) on DehydraTECH-enhanced tirzepatide showed a 47% reduction in adverse events, comparable blood glucose reduction, and increased insulin levels compared to Zepbound® injections108122 - The Australian Phase 1b 12-week chronic clinical study (GLP-1-H24-4) for DehydraTECH formulated cannabidiol, semaglutide, and tirzepatide has completed participant enrollment, with full results expected in Q4 calendar-2025109123 - A human pilot study (GLP-1-H25-5) on DehydraTECH-enhanced liraglutide showed a 22.7% reduction in adverse events, including a 67% reduction in nausea, compared to Saxenda® injections, supporting a potential 505(b)2 new drug application pathway110125 - The FDA granted a 'Study May Proceed' letter for the HYPER-H23-1 Phase 1b IND trial for DehydraTECH-CBD to reduce hypertension, but the study is on hold due to budgetary constraints129 Financings - The company completed several equity offerings, including a $2.0 million gross proceeds offering in April 2025 and a $5.0 million gross proceeds offering in October 2024, along with ATM offerings112115 Corporate Governance - John Docherty was re-engaged as President and Chief Science Officer, and a Scientific Advisory Board was created, comprising Dr. Michael Gibson, Dr. Karen Aust, and Dr. Philip Ainslie113116 Patents - Lexaria's patent portfolio includes applications and grants for DehydraTECH compositions and methods to improve API bioavailability and palatability for cannabinoids, fat-soluble vitamins, NSAIDs, and nicotine113 - Patents have been filed specifically for DehydraTECH with GLP-1/GIP drugs to support ongoing cardiometabolic clinical research and for diabetes/weight loss114 Off-Balance Sheet Arrangements - The company has no off-balance sheet arrangements that are material to its financial condition or results of operations130 Critical Accounting Policies and Estimates - Management did not identify any new critical accounting estimates for the nine months ended May 31, 2025, beyond those disclosed in the annual report132 Funding Requirements - Expenditures are expected to increase due to ongoing R&D programs, particularly animal and human clinical trials for DehydraTECH formulations of GLP-1 drugs and hypertension treatment133 - The company incurred net losses of $9.2 million and $3.6 million for the nine months ended May 31, 2025 and 2024, respectively, primarily funded through common stock sales134135 Results of Operations for the Period Ended May 31, 2025, and May 31, 2024 Key Financial Results (Nine Months Ended May 31) | Metric | 2025 | 2024 | Change | | :-------------------------- | :----------- | :----------- | :----------- | | Revenue | $531,923 | $380,278 | +$151,645 | | Cost of goods sold | $(2,720) | $(4,822) | +$2,102 | | Research & development | $(6,356,637) | $(1,393,359) | $(4,963,278) | | Consulting fees & salaries | $(1,922,449) | $(1,002,473) | $(919,976) | | Legal and professional | $(449,890) | $(619,064) | +$169,174 | | Other general & administrative | $(992,367) | $(910,626) | $(81,741) | | Other income (loss) | $(22,066) | $(72,017) | +$49,951 | | Net Loss | $(9,214,206) | $(3,622,083) | $(5,592,123) | - Revenue increased by $151,645, driven by higher license fees and B2B sales, but R&D expenses surged by $4.96 million due to clinical trials and GLP-1 studies, and consulting fees/salaries increased by $919,976 due to executive transitions and equity awards138139140141 - Legal and professional fees decreased by $169,174 due to lower accounting and financing-related costs, while other general and administrative expenses increased by $81,741, mainly due to foreign currency transaction losses143144 Liquidity and Financial Condition Working Capital and Cash Flows (May 31, 2025 vs. August 31, 2024) | Metric | May 31, 2025 | August 31, 2024 | | :-------------------------------- | :----------- | :-------------- | | Net working capital | $4,318,647 | $6,798,567 | | Cash flows used in operating activities | $(7,807,889) | $(3,067,344) | | Cash flows used in investing activities | $(85,141) | $(119,018) | | Cash flows provided by financing activities | $6,046,163 | $10,315,207 | | Net change in cash for the period | $(1,908,124) | $7,106,979 | - Net cash used in operating activities increased significantly to $7.8 million, primarily due to a $5.6 million increase in net loss, partially offset by non-cash expenses and working capital changes146 - Net cash from financing activities decreased to $6.0 million from $10.3 million, mainly due to lower proceeds from common share sales and fewer warrant exercises148 - The company's recurring losses and negative net cash flows raise substantial doubt about its ability to continue as a going concern, with current cash expected to fund operations only through Q3 fiscal year 2026149150152 Item 3. Controls and Procedures Management concluded disclosure controls were effective as of May 31, 2025, with no material changes in internal controls over financial reporting during the quarter - Disclosure controls and procedures were deemed effective at a reasonable assurance level as of May 31, 2025157 - No material changes in internal controls over financial reporting occurred during the quarter ended May 31, 2025159 PART II—OTHER INFORMATION Item 1. Legal Proceedings The company is not involved in any material legal proceedings, nor are its directors, executive officers, or affiliates in adverse proceedings - The company is not party to any material, pending, or existing legal proceedings160 Item 1A. Risk Factors The primary risk is substantial doubt about the company's ability to continue as a going concern, potentially impacting future financing and leading to investor losses - There is substantial doubt about the company's ability to continue as a going concern, which may affect its ability to obtain future financing and could require it to curtail or cease operations162163 - If the company is unable to continue as a going concern, it may have to liquidate assets, and investors could lose all or part of their investment164 Item 2. Recent Sales of Unregistered Equity Securities The company issued 70,000 share purchase warrants to H.C. Wainright & Co. LLC nominees for equity financing under a registration exemption during the quarter - The company issued 70,000 share purchase warrants with an exercise price of $1.25, expiring April 24, 2030, to nominees of H.C. Wainright & Co. LLC as consideration for equity financing165 Item 3. Rule 10b5-1 Trading Plans No insiders entered into Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended May 31, 2025 - No insiders, employees, or consultants entered into Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended May 31, 2025166 Item 4. Exhibits, Financial Statement Schedules This section lists financial statements and exhibits filed as part of the Form 10-Q, including articles of incorporation, material contracts, and Sarbanes-Oxley Act certifications - The report includes financial statements, articles of incorporation, material contracts (e.g., Securities Purchase Agreement, Change Order to Project Agreement with Novotech), and Section 302 and 906 certifications167169