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What changed in Lexaria Bioscience Corp.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Lexaria Bioscience Corp.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+204 added−263 removedSource: 10-K (2023-11-20) vs 10-K (2022-11-28)

Top changes in Lexaria Bioscience Corp.'s 2023 10-K

204 paragraphs added · 263 removed · 135 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

73 edited+45 added−102 removed36 unchanged
Biggest changeIssued Patent # Patent Family US 9,474,725 B1 #1 Food and Beverage Compositions Infused With Lipophilic Active Agents and Methods of Use Thereof US 9,839,612 B2 US 9,972,680 B2 US 9,974,739 B2 US 10,084,044 B2 US 10,103,225 B2 US 10,381,440 US 10,374,036 US 10,756,180 AU 2015274698 AU 2017203054 AU 2018202562 AU 2018202583 AU 2018202584 AU 2018220067 EP 3164141 JP 6920197 AU 2016367036 #2 Methods for Formulating Orally Ingestible Compositions Comprising Lipophilic Active Agents JP 6963507 MX 388 203 B AU 2016367037 #3 Stable Ready-to-Drink Beverage Compositions Comprising Lipophilic Active Agents IN 365864 JP 6917310 MX 390001 JP 7112510 #7 Lipophilic Active Agent Infused Compositions with Reduced Food Effect AU 2019256805 #8 Compositions Infused with Nicotine Compounds and Methods of Use Thereof US 11,311,559 #18 Compositions and Methods for Enhanced Delivery of Antiviral Agents 5 Table of Contents Patents granted in the year ended August 31, 2022 In fiscal 2022, the Company’s patent portfolio expanded to include three new patent families.
Biggest changeIssued Patent # Patent Family US 9,474,725 B1 #1 Food and Beverage Compositions Infused With Lipophilic Active Agents and Methods of Use Thereof US 9,839,612 B2 US 9,972,680 B2 US 9,974,739 B2 US 10,084,044 B2 US 10,103,225 B2 US 10,381,440 US 10,374,036 US 10,756,180 AU 2015274698 AU 2017203054 AU 2018202562 AU 2018202583 AU 2018202584 AU 2018220067 EP 3164141 JP 6920197 CDN 2949369 AU 2016367036 #2 Methods for Formulating Orally Ingestible Compositions Comprising Lipophilic Active Agents JP 6963507 MX 388 203 B AU 2016367037 #3 Stable Ready-to-Drink Beverage Compositions Comprising Lipophilic Active Agents IN 365864 JP 6917310 MX 390001 JP 7232853 CDN 2984917 CDN 3093414 #6 Transdermal and/or Dermal Delivery of Lipophilic Active Agents JP 7112510 #7 Lipophilic Active Agent Infused Compositions with Reduced Food Effect AU 2019256805 #8 Compositions Infused with Nicotine Compounds and Methods of Use Thereof CDN 3096580 CDN 3111082 #14 Lipophilic Active Agent Infused Tobacco Leaves and/or Tobacco Materials and Methods of Use Thereof US 11,311,559 #18 Compositions and Methods for Enhanced Delivery of Antiviral Agents AU 2021261261 US 11,700,875 #20 Compositions and Methods for Sublingual Delivery of Nicotine US 11,666,544 #21 Compositions and Methods for Treating Hypertension US 11,666,543 Patents granted in the year ended August 31, 2023 In fiscal 2023, the Company’s patent portfolio expanded to include three new patent families.
In October 2022 Lexaria announced initial findings from HYPER-H21-4 evidencing a sustained drop in blood pressure (BP) in normally active hypertensive patients following multiple weeks of oral CBD therapy, using Lexaria’s patented DehydraTECH-CBD capsule formulation. The primary safety and efficacy objectives of study were successfully achieved.
In October 2022 Lexaria announced initial findings from HYPER-H21-4 evidencing a sustained drop in blood pressure (BP) in normally active hypertensive patients following multiple weeks of oral CBD therapy, using Lexaria’s patented DehydraTECH-CBD capsule formulation. The primary safety and efficacy objectives of the study were successfully achieved.
This delivery method, in the white pouch format specifically, involves absorption primarily through the buccal tissues of the mouth, of purified nicotine that has been separated from most other harmful compounds in the tobacco leaf. which avoids harmful lung outcomes experienced by smokers or vapers, The global market for the oral nicotine pouch category was US$2.33 billion in 2020 and is expected to reach $21.84 billion in 2027.
This delivery method, in the white pouch format specifically, involves absorption primarily through the buccal tissues of the mouth, of purified nicotine that has been separated from most other harmful compounds in the tobacco leaf and avoids harmful lung outcomes experienced by smokers or vapers, The global market for the oral nicotine pouch category was US$2.33 billion in 2020 and is expected to reach $21.84 billion in 2027.
DehydraTECH can be implemented in a multitude of ingestible or topically administered product formats including foods, beverages, oral suspensions, tablets, capsules, creams, lotions, and skin patches. It is suitable for use with a variety of product formats including pharmaceuticals, nutraceuticals, over-the-counter and consumer packaged goods.
DehydraTECH can be implemented in a multitude of ingestible or topically administered product formats including foods, beverages, oral suspensions, tablets, capsules, creams, lotions, and skin patches. It is suitable for use with a variety of product formats including pharmaceuticals, nutraceuticals, over-the-counter products, and consumer packaged goods.
DehydraTECH is a technology incorporated into the formulation and manufacturing process of new or existing orally ingestible and topical products. The procedure involves fusing the active ingredient as a delivery “payload” together with certain fatty acids and infusing the mixture into a substrate material. Using controlled dehydration synthesis, it combines the payload and fatty acids together at a molecular level.
DehydraTECH is a technology incorporated into the formulation and manufacturing process of new or existing orally ingestible and topical products. The procedure involves fusing the active ingredient as a delivery “payload” together with certain fatty acids and infusing the mixture into a substrate material. Using controlled dehydration processing, it combines the payload and fatty acids together at a molecular level.
Our Company relies on the business and technical experience of our existing management, on the technical abilities of consulting experts, and on the technical and operational abilities of its operating partner companies to identify and evaluate business opportunities. We currently have seven full time salaried employees under contract and may add personnel to expand our internal R&D capacity.
Our Company relies on the business and technical experience of our existing management, on the technical abilities of consulting experts, and on the technical and operational abilities of its operating partner companies to identify and evaluate business opportunities. We currently have five full time salaried employees under contract and may add personnel to expand our internal R&D capacity.
Only 21% of people with hypertension have it under control which demonstrates enormous unmet need. Among persons 50 years of age or older, isolated systolic hypertension is the most common form of hypertension, and systolic blood pressure becomes more important than diastolic blood pressure as an independent risk predictor for coronary events, stroke, heart failure, and end-stage renal disease.
Only 21% of people with hypertension have it under control which demonstrates enormous unmet need. Among persons 50 years of age or older, isolated systolic hypertension is the most common form of hypertension, and systolic blood pressure can be more important than diastolic blood pressure as an independent risk predictor for coronary events, stroke, heart failure, and end-stage renal disease.
Our current patent portfolio includes patent family applications or grants pertaining to Lexaria’s method of improving bioavailability and taste, and the use of DehydraTECH as a delivery platform for a wide variety of Active Pharmaceutical Ingredients (“APIs”) encompassing all cannabinoids; fat soluble vitamins; NSAIDs pain medications; and nicotine and its analogs.
Our current patent portfolio includes patent family applications or grants pertaining to Lexaria’s method of improving bioavailability and taste, and the use of DehydraTECH as a delivery platform, orally or topically, for a wide variety of Active Pharmaceutical Ingredients (“APIs”) encompassing cannabinoids; fat soluble vitamins; NSAIDs pain medications; and nicotine and its analogs.
None of our employees are represented by a labor union and we consider our employee relations to be good. We outsource virtually all analytical work to independent third-party laboratories located in the USA, Canada, and Europe. Our executive personnel are entitled to incentives as set by our Compensation Committee.
None of our employees are represented by a labor union and we consider our employee relations to be good. We outsource virtually all analytical work to independent third-party laboratories located in the USA, Canada, and Europe. 12 Table of Contents Our executive personnel are entitled to incentives as set by our Compensation Committee.
We make available free of charge on https://www.lexariabioscience.com/investors/regulatory-filings/ our annual, quarterly, and current reports, and amendments to those reports if any, as soon as reasonably practical after we electronically file such material with, or furnish it to, the SEC. Further details on our research programs are provided in our 2020 and 2021 Form 10-K filings.
We make available free of charge on https://www.lexariabioscience.com/investors/regulatory-filings/ our annual, quarterly, and current reports, and amendments to those reports if any, as soon as reasonably practical after we electronically file such material with, or furnish it to, the SEC. Further details on our research programs are provided in our 2022 and 2023 Form 10-K filings.
The study consisted of 66 volunteers between the ages of 40-70 and used a double blinded, randomized cross-over design, which utilized a placebo control. Some volunteers were recruited who were using hypertension drugs such as ACE inhibitors, with or without diuretics, to help evaluate the efficacy of DehydraTECH CBD with and without other hypertension treatments..
The study consisted of 66 volunteers between the ages of 40-70 and used a double blinded, randomized cross-over design, which utilized a placebo control. Some volunteers were recruited who were using hypertension drugs such as angiotensin-converting enzyme inhibitors, with or without diuretics, to help evaluate the efficacy of DehydraTECH CBD with and without other hypertension treatments.
Our competitors, either alone or with collaborative partners, may succeed in developing, acquiring, or licensing API delivery technologies that are more effective, safer, more easily commercialized or less costly than DehydraTECH. 14 Table of Contents Competition in alternative health sectors and consumer products in the U.S. is fierce.
Our competitors, either alone or with collaborative partners, may succeed in developing, acquiring, or licensing API delivery technologies that are more effective, safer, more easily commercialized or less costly than DehydraTECH. Competition in alternative health sectors and consumer products in the U.S. is fierce.
Lexaria believes that these competitive advantages together with our wealth of scientific data showing noteworthy bio absorption enhancements with DehydraTECH constitute a compelling value proposition for its prospective licensees. We intend to continue to pursue license arrangements in the multiple bioactive ingredient sectors identified in its issued and pending patent applications.
Lexaria believes that these competitive advantages together with our wealth of scientific data showing noteworthy bio absorption enhancements with DehydraTECH constitute a compelling value proposition for its prospective licensees. We intend to continue to pursue license arrangements in the multiple bioactive ingredient sectors identified in its issued and pending patent applications. Compliance with Government Regulation The U.S.
The Company currently has more than 50 patent 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 investigate expansions and additions to our intellectual property portfolio.
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 investigate expansions and additions to our intellectual property portfolio.
A part of our business plan is to encourage new and existing participants to license and utilize DehydraTECH to enable enhanced performance of their products. These products cross a wide range of lipophilic bioactive molecules including CBD with additional molecules of interest continually being evaluated.
A part of our business plan is to encourage new and existing participants to license and utilize DehydraTECH to enable enhanced performance of their products. These products cross a wide range of lipophilic bioactive molecules including nicotine and cannabidiol (“CBD”) with additional molecules of interest continually being evaluated.
In exchange for a minority equity interest (16.67%) in our subsidiary Lexaria Nicotine LLC, Altria was to fund up to $12m for Lexaria Nicotine to conduct milestone-based clinical investigations utilizing DehydraTECH.
In exchange for a minority equity interest (16.67%) in our subsidiary Lexaria Nicotine LLC, Altria was to fund up to $12 million for Lexaria Nicotine to conduct milestone-based clinical investigations utilizing DehydraTECH.
During each visit only one oral nicotine pouch will be administered and evaluated: either DehydraTECH-nicotine; On!™ brand manufactured by Altria; or Zyn™ brand manufactured by Swedish Match™.
During each visit only one oral nicotine pouch was administered and evaluated: either DehydraTECH-Nicotine; on!™ brand manufactured by Altria; or Zyn™ brand manufactured by Swedish Match™.
Compliance with Government Regulation More than thirty-nine states in the U.S. have passed some form of legislation related to that state’s permission to grow, cultivate, sell, or use marijuana and/or CBD for medical purposes or for recreational use. Legislation is not necessarily harmonious between states and in most circumstances, it is not legal to transport cannabis-related products across state lines.
As well, while more than thirty-nine states in the U.S. have passed some form of legislation related to that state’s permission to grow, cultivate, sell, or use marijuana and/or CBD for medical purposes or for recreational use, legislation is not necessarily harmonious between states and in most circumstances, it is not legal to transport cannabis-related products across state lines.
Drugs focused on blood pressure and related conditions are some of the best selling drugs in the world. Lipitor™, used to treat high cholesterol and reduce the risk of heart disease, has generated $94.7 billion in revenue from 1992 until 2017. Plavix™ is used to prevent heart attack and stroke, has sold $46.5 billion from 1992 until 2017.
Drugs focused on blood pressure and related conditions are some of the best selling drugs in the world. Lipitor™, used to treat high cholesterol and reduce the risk of heart disease, has generated $163 billion in revenue from 1992 until 2021. Plavix™ is used to prevent heart attack and stroke, has sold $84 billion from 1992 until 2017.
The pending and granted patents also cover the manufacturing and processing methods used to combine fatty acids with active pharmaceutical ingredients. This includes heating and drying methods and use of excipients and substrates. Below we summarize Lexaria’s allowed/granted patents.
The pending and granted patents also cover the manufacturing and processing methods used to combine fatty acids with active pharmaceutical ingredients. This includes heating and drying methods and use of excipients and substrates.
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.
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 allowed/granted patents.
We maintain our registered agent’s office and our U.S. business office at Nevada Agency and Transfer Company, 50 West Liberty, Suite 880, Reno, Nevada 89501. Our telephone number is (755) 322-0626.
We maintain our registered agent’s office and our U.S. business office at Nevada Agency and Transfer Company, 50 West Liberty, Suite 880, Reno, Nevada 89501. Our telephone number is (250) 765-6424.
Depending on the number of programs undertaken, R&D budgets are expected to vary significantly. It is in our best interests to remain flexible at this early stage of our R&D efforts in order to capitalize on potential novel findings from early-stage tests and thus redirect research into specific avenues that offer the most reward.
It is in our best interests to remain flexible at this early stage of our R&D efforts in order to capitalize on potential novel findings from early-stage tests and thus redirect research into specific avenues that offer the most reward.
There were no serious adverse events to reported as a result of the program dosing. This demonstrates a noteworthy safety and tolerability profile relative to conventional anti-hypertensive medications. This is a major achievement for Lexaria as avoiding serious adverse events at clinically efficacious doses will be a primary requirement to achieve eventual regulatory marketing authorizations.
This demonstrates a noteworthy safety and tolerability profile relative to conventional anti-hypertensive medications. This is a major achievement for Lexaria, as avoiding serious adverse events at clinically efficacious doses will be a primary requirement to achieve eventual regulatory marketing authorizations.
DehydraTECH can be used with a wide range of active molecules encompassing fat-soluble vitamins, pain medications, hormones, PDE5 inhibitors, antivirals, nicotine and its analogs, and all cannabinoids. Our technology can be applied to a variety of therapeutic indications, including hypertension and heart disease, dementia, SARS-CoV-2/COVID-19 and HIV/AIDS.
DehydraTECH can be used with a wide range of active molecules encompassing fat-soluble vitamins, pain medications, hormones, PDE5 inhibitors, antivirals, nicotine and its analogs, and cannabinoids. Our technology can be applied to a variety of therapeutic indications, including hypertension and heart disease, and diabetes.
Under the terms of these agreements, Lexaria will receive a fee to provide certain DehydraTECH powder-based nicotine formulations to be evaluated by Altria. In 2019, the Company entered into a definitive agreement with Altria to fund the R&D of DehydraTECH technology as it relates to nicotine.
Under the terms of these agreements, Lexaria received a fee to provide certain DehydraTECH powder-based nicotine formulations to be evaluated by Altria. Lexaria is not aware of Altria’s current intentions with regard to DehydraTECH. In 2019, the Company entered into a definitive agreement with Altria to fund the R&D of DehydraTECH technology as it relates to nicotine.
Our first human clinical study was published in 2019 ( Advances in Therapy titled “Examination of a New Delivery Approach for Oral Cannabidiol in Healthy Subjects: A Randomized, Double-Blinded, Placebo-Controlled Pharmacokinetics Study”-see PubMed.gov website: PMID: 31512143 ), where we demonstrated that DehydraTECH delivered higher volumes of CBD into the human circulatory system and did so more quickly than a concentration-matched positive control.
Our first human clinical study was published in 2019 under the title Examination of a New Delivery Approach for Oral Cannabidiol in Healthy Subjects: A Randomized, Double-Blinded, Placebo-Controlled Pharmacokinetics Study , where we demonstrated that DehydraTECH delivered higher volumes of CBD into the human circulatory system and did so more quickly than a concentration-matched positive control.
Recently achieved successful results from two human clinical pharmacodynamic hypertension studies and a 2018 human clinical pharmacokinetic (“PK”) study, along with a number of successful animal studies demonstrating PK performance and the molecular characterization work completed through Canada’s National Research Council, have together established a strong body of evidence for Lexaria’s DehydraTECH-CBD.
Recently achieved successful results from HYPER-H21-4 study along with the historical results from its HYPER-H21-3, HYPER-H21-3, HYPER-H21-1 and our 2018 human clinical study, along with a number of successful animal studies demonstrating pharmacokinetic (“PK”) performance; and the molecular characterization work completed through Canada’s National Research Council, have together established a strong body of evidence for Lexaria’s DehydraTECH-CBD.
With the continued favorable results from our 2021-2022 HYPER programs, we have begun the Investigational New Drug “(IND”) application process. Lexaria has retained the services of a regulatory affairs and quality assurance consultancy group that assisted us with the preparation of our pre-IND meeting with the FDA. They are now assisting us with our protocol finalization and IND filing.
With the continued favorable results from our 2021-2023 HYPER programs, we have begun the Investigational New Drug (“IND”) application process. Lexaria has retained the services of a regulatory affairs and quality assurance consultancy group that assisted us with the preparation of our pre-IND meeting with the FDA.
DehydraTECH formulations delivered some major nicotine absorption performance improvements: 1,160% faster delivery of equivalent peak quantities of nicotine to the bloodstream than achieved with controls (within 15 min vs. 2.9 hours), 148% gain in the quantity of peak nicotine delivery to the bloodstream relative to controls, 560% higher brain levels of nicotine where nicotine effects are focused, compared to controls, lower urine levels of nicotine excreted than controls, for enhanced nicotine activity and bioavailability over the course of the study, lower quantities of key liver metabolites in the bloodstream than controls as hypothesized, suggesting bypass of first pass liver metabolism.
DehydraTECH-Nicotine Research During fiscal 2023, Lexaria expanded on its previously completed ingestible nicotine in vivo (animal) absorption study work conducted in 2018, which had found that DehydraTECH formulations delivered some major nicotine absorption performance improvements in rats: 1,160% faster delivery of equivalent peak quantities of nicotine to the bloodstream than achieved with controls (within 15 min vs. 2.9 hours), 148% gain in the quantity of peak nicotine delivery to the bloodstream relative to controls, 560% higher brain levels of nicotine where nicotine effects are focused, compared to controls, lower urine levels of nicotine excreted than controls, for enhanced nicotine activity and bioavailability over the course of the study, lower quantities of key liver metabolites in the bloodstream than controls as hypothesized, suggesting bypass of first pass liver metabolism.
Within this communication the FDA agreed that additional non-clinical studies are not required prior to initiation of the DehydraTECH-CBD IND program, given the compelling data presented by Lexaria and others regarding the safety and tolerability of CBD.
Within this communication the FDA agreed that additional non-clinical studies are not required prior to initiation of the DehydraTECH-CBD IND program, given the compelling data presented by Lexaria and others regarding the safety and tolerability of CBD. This supports Lexaria’s belief that our recent human clinical study program would support our pursuit of eventual FDA registrations.
Nicotine Patent With the grant during the year ended August 31, 2022, of our Australian patent for nicotine, Lexaria believes that further potential patent awards would serve to support significant competitive advantages in the nicotine white pouch category, as well as other oral nicotine product formats such as pills, tablets, lozenges, capsules, gums and sprays.
Lexaria believes that further potential patent awards in these families would serve to support significant competitive advantages in the nicotine white pouch category, as well as other oral nicotine product formats such as pills, tablets, lozenges, capsules, gums and sprays.
Farm Bill, passed in December 2018, and the ambiguity regarding the incorporation of CBD into ingested and topical products has had significant impacts on the industry segments that we operate in. This could potentially change some of the regulatory compliance risks that may affect our business.
Accordingly, the ambiguity regarding the incorporation of CBD into ingested and topical products has had significant impacts on the industry segments to which we license DehydraTECH and could potentially change some of the regulatory compliance risks that may affect our business.
Research and Development Lexaria incurred $1,842,675 (2021- $1,262,895) in R&D expenditures during fiscal 2022. Specific programs are in ongoing development and are prioritized relative to our financial and operational ability to undertake each research phase for specific APIs. Due to our expanding portfolio coverage, we continue to explore accelerated timetable options for testing, research and further development.
Specific programs are in ongoing development and are prioritized relative to our financial and operational ability to undertake each research phase for specific APIs. Due to our expanding portfolio coverage, we continue to explore accelerated timetable options for testing, research, and further development.
The license for the Japanese market is perpetual assuming that Premier submits all required payments. In addition to the minimum payments, Lexaria will also receive royalty revenue from DehydraTECH licensed product sales under the agreed terms. Total revenue is anticipated to be significantly greater than the minimum payments if Premier is capable of meeting its forecasted revenue targets.
The license for the Japanese market is perpetual assuming that Premier submits all required payments. In addition to the minimum payments, Lexaria will also receive royalty revenue from DehydraTECH licensed product sales under the agreed terms. Lexaria Pharmaceutical Corp.
In 2019, the licence agreement was updated granting Lexaria an exclusive license to use DehydraTECH technology for a period of time ending 25 years after the date of the last patent granted to PoViva Corp.
Lexaria has been granted an exclusive license to use DehydraTECH technology from Poviva for a period of time ending 25 years after the date of the last patent granted to Poviva.
As a result of the possibility of Lexaria being involved in a number of disparate business sectors, compliance with government regulations could require significant resources and expertise from our Company. The U.S.
As a result of the possibility of Lexaria being involved in a number of disparate business sectors, compliance with government regulations could require significant resources and expertise from our Company. Employees and Contractors We utilize employees and consultants for the Company’s intellectual property development and licensing and business operations.
Nicotine More than 99% of all nicotine consumed worldwide is delivered through smoking cigarettes. Worldwide, approximately 6m deaths per year are attributed primarily to the delivery of nicotine through the act of smoking.
Nicotine Most nicotine consumed worldwide is delivered through smoking cigarettes. Worldwide, over 6 million deaths per year are attributed primarily to the delivery of nicotine through the act of smoking.
This further protects our exclusivity in the use of DehydraTECH with nicotine and antiviral agents, in compositions that have a reduced food effect and for delivery of lipophilic active agents via transdermal or dermal delivery.
This further protects our exclusivity in the use of DehydraTECH with sublingual delivery of nicotine, treatment of hypertension and delivery of lipophilic active agents via transdermal or dermal delivery.
DehydraTECH formulations have been found to reduce the need for unwanted sweeteners or chemical masking agents used for flavor and odor blocking allowing manufacturers to create low-sugar products with fewer calories and artificial sweeteners. The Company has developed a variety of demonstration products since 2015 exhibiting the potential uses for DehydraTECH to both consumers and potential licensees.
DehydraTECH formulations have been found in some cases to reduce the need for unwanted sweeteners or chemical masking agents used for flavor- and odor-blocking, allowing manufacturers to create low-sugar products with fewer calories and artificial sweeteners.
Predetermined questionnaires for subjective evaluation will be used for each oral nicotine pouch, and blood samples will be taken 8 times per visit to conduct objective evaluations related to quantity of nicotine in blood at various time points. Data on vital signs such as temperature, blood pressure, heart and respiratory rate will also be collected.
Predetermined questionnaires for subjective evaluation will be used for each oral nicotine pouch, and blood samples were taken 8 times per visit to conduct objective evaluations related to the quantity of nicotine in blood at various time points. Subjective evaluations related to throat burn, user experience, gastrointestinal experience were also conducted.
These technologies can enable exceptional water solubility of ingredients and can impart improved intestinal bio absorption as a result, but do not necessarily offer the breadth of performance and value enhancing benefits that Lexaria’s DehydraTECH technology offers to its licensees.
These technologies can enable exceptional water solubility of ingredients and can impart improved intestinal bio absorption as a result, but do not necessarily offer the breadth of performance and value enhancing benefits that Lexaria’s DehydraTECH technology offers to its licensees. 11 Table of Contents Competition in nicotine, alternative nicotine delivery and nicotine cessation sectors in the U.S. is comprised of long-established entities, brands, and new technologies competing to create less harmful options.
The DehydraTECH nicotine polacrilex pouch delivered over 10 times the nicotine level in blood plasma at peak than the generic version while still clearing from blood virtually as quickly as the controls. 10 Table of Contents Nicotine: NIC-H22-1 In November of 2022 we received independent review board approval for human clinical nicotine study NIC-H22-1, a 36-person human PK randomized, double blinded, cross-over study conducted in current cigarette smokers, wherein each person will visit the laboratory to be dosed three times over a period of weeks.
Smoking Cessation: NIC-H22-1 In November of 2022 we received independent review board approval for human clinical nicotine study NIC-H22-1, a 36-person human PK randomized, double blinded, cross-over study conducted in current cigarette smokers, wherein each person visited the laboratory to be dosed three times over a period of weeks.
The bill includes lifting restrictions on advertising, marketing, banking, and other financial services as well as allowing interstate commerce for hemp and hemp-derived CBD. It is also facilitating the removal of barriers for intellectual property protections under federal law such as patents and trademarks, as well as several other measures that may positively impact these industry segments overall.
Farm Bill, was passed in December 2018, and removed certain restrictions on advertising, marketing, banking, and other financial services as well as allowing interstate commerce for hemp and hemp-derived CBD. It also facilitated the removal of barriers for intellectual property protections under federal law such as patents and trademarks.
Lexaria Bioscience Corp. is a British Columbia based reporting issuer in Canada and as such, we are required to file certain information and documents at www.sedar.com Our corporate website is www.lexariabioscience.com. This website address is not intended to function as a hyperlink and the information contained on our website is not intended to be a part of this Report .
These filings are available to the public on the internet at the SEC’s website at http://www.sec.gov. Lexaria Bioscience Corp. is a British Columbia based reporting issuer in Canada and as such, we are required to file certain information and documents at www.sedarplus.ca Our corporate website is www.lexariabioscience.com.
The oral nicotine pouch category is one of the fastest growing segments of the nicotine industry due in part to its reduced risk health outcomes as noted by the FDA.
Lexaria hopes to see the reduction of common but less healthy nicotine administration methods by way of enabling development of safe and effective oral nicotine dosage formats. The oral nicotine pouch category is one of the fastest growing segments of the nicotine industry due in part to its reduced risk health outcomes as noted by the FDA.
It is also possible that historic delivery methods that have been in use and the familiarity with them may prevent adoption of products utilizing DehydraTECH in alternative delivery formats. Competing technologies or products may utilize known delivery formats or entirely new and unforecastable formats. Lexaria has demonstrated through scientific testing that DehydraTECH delivers nicotine rapidly and effectively through oral delivery.
Competing technologies or products may utilize known delivery formats or entirely new and unforecastable formats. Lexaria has demonstrated through scientific testing that DehydraTECH delivers nicotine rapidly and effectively through oral delivery.
Subsidiaries Lexaria Bioscience Corp. has the following wholly owned subsidiaries; Lexaria CanPharm ULC, Lexaria CanPharm Holding Corp., PoViva Corp., Lexaria Hemp Corp., Kelowna Management Services Corp. and Lexaria Pharmaceutical Corp., and our majority owned (83.333 . %) subsidiary Lexaria Nicotine LLC. Altria Ventures Inc. owns a 16.667% equity interest along with certain other rights in Lexaria Nicotine LLC.
Subsidiaries Lexaria Bioscience Corp. has the following wholly owned subsidiaries; · Lexaria CanPharm ULC (which is wholly-owned by Lexaria CanPharm Holding Corp.), · Lexaria CanPharm Holding Corp., · Poviva Corp., · Lexaria Hemp Corp., · Kelowna Management Services Corp., · Lexaria Nutraceutical Corp. and · Lexaria Pharmaceutical Corp., and our majority owned (83.333 . %) subsidiary Lexaria Nicotine LLC.
Also, there were no adverse changes observed in liver enzymes which is an important clinical safety biomarker of oral CBD therapy. Of note, these significant decreases in BP were achieved using relatively low doses of DehydraTECH-CBD as a direct result of the well-established drug delivery efficiencies of Lexaria’s DehydraTECH technology.
Of note, these significant decreases in BP were achieved using relatively low doses of DehydraTECH-CBD as a direct result of the well-established drug delivery efficiencies of Lexaria’s DehydraTECH technology. 6 Table of Contents There were no serious adverse events to report as a result of the program dosing.
The FDA confirmed that it has agreed with Lexaria’s proposal to pursue a 505(b)(2) new drug application (“NDA”) regulatory pathway for our program. This is advantageous because this abbreviated pathway, as it is often described, typically enables a quicker route to commercial approval than a traditional 505(b)(1) NDA pathway.
The FDA sent a positive written response from its pre-IND meeting regarding DehydraTECH-CBD and confirmed its agreement with Lexaria’s proposal to pursue a 505(b)(2) new drug application (“NDA”) regulatory pathway for its program. This abbreviated pathway typically enables a quicker route to commercial approval than a traditional 505(b)(1) NDA pathway.
This is according to the Centers for Disease Control and Prevention, which also estimates that over $170b per year is spent just in the U.S. on direct medical care costs for adult smokers. Lexaria hopes to see the reduction of common but less healthy nicotine administration methods by way of enabling development of safe and effective oral nicotine dosage formats.
This is according to the Centers for Disease Control and Prevention, which also estimates that over $170 billion per year is spent just in the U.S. on direct medical care costs for adult smokers.
This supports Lexaria’s belief that our recent human clinical study program would support our pursuit of eventual FDA registrations. 11 Table of Contents Lexaria’s new IND-enabling program is made possible through successfully completed studies that have provided support for more ambitious commercial goals.
Lexaria’s new IND-enabling program is made possible through successfully completed studies that have provided support for more ambitious commercial goals.
Patents have been filed specifically for the use of DehydraTECH with cannabinoids for the treatment of heart disease. Lexaria is also filing new patent applications for new discoveries that arise from the Company’s R&D programs. We will continue to seek beneficial acquisitions of intellectual property if and when we believe it is advisable to do so.
Patents have been filed specifically for the use of DehydraTECH with cannabinoids for the treatment of heart disease and hypertension to support our anticipated Investigational New Drug (“IND”) application with the Food and Drug Administration (“FDA”), and for treatment of epilepsy. 4 Table of Contents We will continue to seek beneficial acquisitions of intellectual property if and when we believe it is advisable to do so.
Available Information Lexaria’s common stock is quoted on the Nasdaq under the symbol “LEXX” and warrants are quoted under LEXXW. We file annual, quarterly, and current reports, proxy statements and other information with the U.S. Securities Exchange Commission (the “SEC”). These filings are available to the public on the internet at the SEC’s website at http://www.sec.gov.
Altria Ventures Inc. owns a 16.667% equity interest along with certain other rights in Lexaria Nicotine LLC. Available Information Lexaria’s common stock is quoted on the Nasdaq under the symbol “LEXX” and certain warrants are quoted under LEXXW. We file annual, quarterly, and current reports, proxy statements and other information with the U.S. Securities Exchange Commission (the “SEC”).
The Company regularly pursues new R&D programs that investigate potential commercial applications for the incorporation of DehydraTECH.
Our ongoing R&D programs are always subject to our existing financial resources and our ability to raise capital to fund them. The Company regularly pursues new R&D programs that investigate potential commercial applications for the incorporation of DehydraTECH.
On June 6, 2022, we successfully filed a pre-IND meeting request with the U.S. Food and Drug Administration (“FDA”). The FDA has responded to and confirmed Lexaria’s filing and requested a pre-IND meeting, which formally initiates communications with the FDA regarding development of Lexaria’s DehydraTECH-CBD for the treatment of hypertension.
They are now assisting us with our protocol finalization and IND filing which we hope to submit by the end of the calendar year. During the 2022 fiscal year, we filed a pre-IND meeting request with the U.S. Food and Drug Administration (“FDA”) regarding the development of Lexaria’s DehydraTECH-CBD for the treatment of hypertension.
A similar patent filing has been made in the USA. As Lexaria demonstrates the benefits of DehydraTECH enabled oral nicotine pouches as an alternative to smoking cigarettes as a delivery method for nicotine, we anticipate the possibilities of engaging in licensing arrangements with major tobacco companies.
As Lexaria demonstrates the benefits of DehydraTECH enabled oral nicotine pouches as an alternative to smoking cigarettes as a delivery method for nicotine, there are increased possibilities of engaging in licensing arrangements with major tobacco companies. Nicotine Collaborations In April of 2022 the Company announced new agreements with Altria Client Services, LLC (“Altria”) in effect until March 31, 2023.
Lexaria is determined to fill the need for a safe, effective, tolerable treatment for hypertension and have a meaningful impact on comorbidity-related costs and deaths with our DehydraTECH-CBD.
Hypertension, valued at $20.5 billion in 2021 and expected to reach $39.5 billion by 2030, is one subset of the broader cardiovascular disease category, which is estimated as a $82.5 billion market in 2023. 8 Table of Contents Lexaria is determined to fill the need for a safe, effective, tolerable treatment for hypertension and have a meaningful impact on comorbidity-related costs and deaths with our DehydraTECH-CBD.
Lexaria, on June 8, 2022, awarded AnodGen Bioceutical of Ireland a five-year, non-exclusive DehydraTECH license from its wholly-owned subsidiary, Lexaria Pharmaceutical Corp. The license is valid within Europe including the UK, Australia and New Zealand, for pharmaceutical and medical product applications incorporating DehydraTECH-infused psychoactive cannabinoid powders and medical product applications incorporating DehydraTECH-infused non-psychoactive cannabinoid powders.
As of the fiscal year ended August 31, 2023 LEXX Pharma had the following active licenses: · Non-exclusive license with AnodGen Bioceutical for pharmaceutical and medical product applications incorporating DehydraTECH-infused psychoactive cannabinoid powders and medical product applications incorporating DehydraTECH-infused non-psychoactive cannabinoid powders within Europe including the UK, Australia and New Zealand.
The Company gained extensive experience from the formulation and production of these products that enables us to provide expert advice to our licensees with the integration of DehydraTECH in their products. Lexaria does not intend to create or produce consumer products.
The Company has developed extensive experience from the formulation and production of its demonstration products, in various formats, that enables us to provide expert advice to our licensees with the integration of DehydraTECH in their products for the purpose of providing a more palatable and efficient delivery of bioactive molecules. Lexaria supports our licensee’s products with our technology.
Since our first patent filing in 2014 for DehydraTECH, we have increased the number of patent applications to more than 50 and to date have been allowed/granted 27 patents worldwide as of the date of this filing. Our pursuit and development of our technology has expanded our potential area of impact, both geographically and by sector.
Since our first patent grant in 2017 for DehydraTECH, we have continued to pursue patent applications internationally in regions that are considered to have the highest commercial potential and, to date, have been allowed/granted 37 patents worldwide as of the date of this filing.
There are several hypertension drugs that each generate $1 billion per year or more in revenue. Hypertension valued at $28 billion per year is one subset of the broader cardiovascular disease category, which is expected to be a $146 billion market in 2022.
There are several hypertension drugs that each generate $1 billion per year or more in revenue.
Diabetes: DIAB-A22-1 DIAB-A22-1, is a 56-day animal program undertaken by a third-party testing laboratory located in Canada to explore the ability of DehydraTECH-CBD to potentially affect treatment of diabetes. The laboratory work is expected to complete in the second quarter of calendar 2023 with data and reporting to follow thereafter.
Diabetes: DIAB-A22-1 DIAB-A22-1, was a 56-day animal program undertaken by a third-party testing laboratory located in Canada to explore the ability of DehydraTECH-CBD to potentially treat diabetes, a disease whereby the body does not produce sufficient insulin, leading to higher-than-normal levels of sugars in the blood.
Due to the size of the sectors we expect to encounter competitive threats from existing participants and unknown new entrants. There is no assurance that other technologies already deployed, or in development, will not form the basis of product formats that competitors or consumers choose to utilize.
There is no assurance that other technologies already deployed, or in development, will not form the basis of product formats that competitors or consumers choose to utilize. It is also possible that historic delivery methods that have been in use and the familiarity with them may prevent adoption of products utilizing DehydraTECH in alternative delivery formats.
Epidiolex’s effectiveness was studied in three randomized clinical trials involving a total of 516 patients and was shown to be effective in reducing the frequency of seizures when compared to placebo. 8 Table of Contents Lexaria’s animal study is being conducted by a leading US-based independent laboratory using advanced DehydraTECH 2.0 formulations and is fully funded through existing Lexaria resources.
Epidiolex was developed by GW Pharmaceuticals plc and is now sold by Jazz Pharmaceuticals subsequent to their 2021 takeover of GW Pharmaceuticals. Epidiolex’s effectiveness was studied in three randomized clinical trials involving a total of 516 patients and was shown to be effective in reducing the frequency of seizures when compared to placebo.
Competition in nicotine, alternative nicotine delivery and nicotine cessation sectors in the U.S. is comprised of long-established entities, brands, and new technologies competing to create less harmful options. The sectors are complicated by the significant historical empirical data of older products or technologies versus the more limited published supporting data regarding the effects of new products or technologies.
The sectors are complicated by the significant historical empirical data of older products or technologies versus the more limited published supporting data regarding the effects of new products or technologies. Due to the size of the sectors we expect to encounter competitive threats from existing participants and unknown new entrants.
The study is fully funded from internal company resources. Lexaria will provide further updates and any relevant material findings in due course. Business Development Hypertension Approximately 1.28 billion people worldwide suffer from hypertension - elevated blood pressure - and is recognized as one of the world’s top health problems.
Lexaria now seeks to commercialize DehydraTECH-Nicotine with suitable industry partners based on its clinical and intellectual property advancements. Business Development Hypertension Approximately 1.28 billion people worldwide suffer from hypertension - elevated blood pressure - and it is recognized as one of the world’s top health problems.
The results of this study significantly influenced the direction of Lexaria’s research and development of its DehydraTECH technology. 6 Table of Contents During fiscal 2022 Lexaria marked significant milestones in utilizing DehydraTECH-processed cannabidiol (“CBD”) for investigation of heart disease and hypertension; and separately, for oral nicotine delivery as a non-combusted, reduced-risk alternative to smoking.
During fiscal 2023 Lexaria marked significant milestones in utilizing DehydraTECH-processed CBD for investigating heart disease and hypertension; and separately, for nicotine delivery via an oral pouch format, as a non-combusted, reduced-risk alternative to smoking. The following studies are the most recent contributors to our applied R&D programs that were completed in fiscal 2023.
These patents are as follows: · our first ever patent granted in our 8 th patent family, to use DehydraTECH to more efficiently deliver nicotine through buccal tissue absorption.
These patents are as follows: · our first ever Canadian patent granted in our 6 th patent family, to use DehydraTECH to more efficiently deliver lipophilic active agents via transdermal or dermal delivery. · our first-ever US patent granted in our 20 th patent family, expands upon Lexaria’s international intellectual property rights to apply DehydraTECH enhancement technology to the sublingual delivery of nicotine.
In January of 2021 the global rights to DehydraTECH technology to make non-pharmaceutical products that contain over 0.3% THC and other psychoactive cannabinoids was sold to Hill Street Beverages Company Inc. Lexaria has retained the rights to use DehydraTECH with THC and other cannabinoids for pharmaceutical purposes.
In January 2021, Lexaria’s wholly-owned subsidiary, Lexaria CanPharm ULC sold its exclusive license rights and assigned all sublicenses for the use of DehydraTECH with non-pharmaceutical THC-related assets to Hill Incorporated (formerly Hill Street Beverage Company Inc.) ("Hill Inc.").
The following studies are the most recent contributors to our applied R&D programs. These studies have been entirely funded through the Company’s existing cash resources. HYPER-H21-1 During the spring of 2021 Lexaria commenced its human clinical study HYPER-H21-1 with the intent to validate DehydraTECH-CBD’s effect on hypertension.
These studies have been entirely funded through the Company’s existing cash resources. Hypertension: HYPER-H21-4 HYPER-H21-4 was the most ambitious study Lexaria had ever undertaken and was supported from the successful outcomes from our other 2021 human hypertension studies.
Additional study endpoint analyses as described in the complete study protocol are ongoing and any relevant material findings will be reported upon in due course as these findings become available. Cannabidiol: EPIL-A21-1 In March 2022, Lexaria commenced an initial animal study to determine if DehydraTECH-CBD evidences superior treatment of seizure activity when compared to Epidiolex.
Overall, HYPER-H21-4 resulted in the above-noted seven peer reviewed publications and data sets which further strengthens and supports the case for DehydraTECH-CBD offering distinctive mechanistic benefits for the treatment of hypertension. Epilepsy: EPIL-A21-1 In March 2022, Lexaria commenced an initial animal study to determine if DehydraTECH-CBD evidences superior treatment of seizure activity when compared to Epidiolex.
Drugs used to treat dementia represented a $15.5 billion market in 2021, expected to double to a $32.3 billion annual market by 2030, in part due to the generally aging populations. Lexaria has previously demonstrated in animal studies that DehydraTECH-CBD crosses the blood brain barrier (“BBB”) much more effectively than originally thought possible.
Dementia: DEM-A22-1 Lexaria had previously demonstrated in animal studies that DehydraTECH-CBD crosses the blood brain barrier (“BBB”) much more effectively than originally thought possible. Based on this validation, in November 2022 we commenced an investigation as to whether DehydraTECH-CBD might have some positive effect on dementia.
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These products included hot chocolate, coffee, seven flavors of teas, two flavors of protein energy bars, powder filled capsules and mix-and-serve powders. All utilized DehydraTECH for a more palatable and efficient delivery of bioactive molecules.
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Intellectual Property Lexaria’s involvement with the foundational technology to DehydraTECH dates back to 2014 when it entered into a strategic relationship with Poppy’s Teas LLC, and the original inventors of DehydraTECH, who had filed two initial US provisional patent applications for the technology.
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Intellectual Property DehydraTECH dates back to 2014 with two initial US provisional patent application filings made by the original inventors Poppy’s Teas LLC, which Lexaria acquired by way of exclusive, worldwide license rights to DehydraTECH via the acquisition of the controlling interest in the founding company. In 2015, Lexaria signed a license agreement with PoViva Corp.
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The strategic relationship evolved into the acquisition by Lexaria of Poviva Tea, LLC (formerly Poppy’s Teas LLC) which entity was then converted from a limited liability company to a corporation under the name Poviva Corp. (“ Poviva ”). Poviva is now the wholly-owned subsidiary of Lexaria and the named owner of all of the patents filed in connection with DehydraTECH.
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(formerly PoViva Tea LLC) granting Lexaria a 35-year non-exclusive worldwide license to unencumbered use of PoViva Tea LLC’s intellectual property rights, including rights of resale. This license agreement ensures Lexaria has full access to the underlying infusion technology. The United States Patent and Trademark Office (USPTO) granted our first patent on October 31, 2017.
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Our pursuit and development of our technology has expanded our potential area of impact, both geographically and by sector.
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Because of the applicability of DehydraTECH to many market sectors across the globe, we have taken the necessary steps to protect that intellectual property internationally. Lexaria has patents granted or patent applications progressing in countries around the world with aggregate populations of nearly 4 billion people.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur success is dependent on our or a third parties’ ability to successfully navigate the risks and obstacles associated with obtaining FDA clearance for any DehydraTECH enhanced formulated product. 21 Table of Contents Pharmaceutical products using DehydraTECH with CBD as an API have never been approved for the treatment of any disease.
Biggest changeRegulatory approval also requires the submission about the product manufacturing process and the inspection of the manufacturing facilities. Our success is dependent on our or a third parties’ ability to successfully navigate the risks and obstacles associated with obtaining FDA clearance for any DehydraTECH enhanced formulated product.
Risks Associated with our Business and Industry DehydraTECH-enabled pharmaceutical products may not successfully proceed to commercialization. The advancement of DehydraTECH-enabled products will be subject to successful completion of multi-phase testing under significant regulatory requirements and testing protocols, such as those required by the US Food and Drug Administration (FDA) and comparable foreign regulators.
Risks Associated with our Business and Industry DehydraTECH-enabled pharmaceutical products may not successfully proceed to commercialization. The advancement of DehydraTECH-enabled pharmaceutical products will be subject to successful completion of multi-phase testing under significant regulatory requirements and testing protocols, such as those required by the US Food and Drug Administration (FDA) and comparable foreign regulators.
These terms can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; 17 Table of Contents · the IRB may disagree with our design or change the requirements for approval even after it has incorporated their review and comments; · authorities may impose a hold on or suspend a program due to any number of factors, including a request for further information or other administrative actions, results of competitors programs, noncompliance with changing regulatory requirements or a finding that the participants are being exposed to unacceptable health risk or changes in governmental regulations; · studies or trials of various APIs may produce negative or inconclusive results.
These terms can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; · the IRB may disagree with our design or change the requirements for approval even after it has incorporated their review and comments; · authorities may impose a hold on or suspend a program due to any number of factors, including a request for further information or other administrative actions, results of competitors programs, noncompliance with changing regulatory requirements or a finding that the participants are being exposed to unacceptable health risk or changes in governmental regulations; 14 Table of Contents · studies or trials of various APIs may produce negative or inconclusive results.
Any delays in our manufacturing capabilities or research studies may have a material adverse impact on our business, financial condition and prospects. 18 Table of Contents Any failure to prevent or mitigate security breaches and improper access to or disclosure of our data or our user data could result in the loss or misuse of such data, which could harm our business and reputation and diminish our competitive position Awareness and sensitivity to personal data breaches and cyber security threats is at an all-time high.
Any delays in our manufacturing capabilities or research studies may have a material adverse impact on our business, financial condition and prospects. 15 Table of Contents Any failure to prevent or mitigate security breaches and improper access to or disclosure of our data or our user data could result in the loss or misuse of such data, which could harm our business and reputation and diminish our competitive position Awareness and sensitivity to personal data breaches and cyber security threats is at an all-time high.
The effects of such reversions could cause significant delays or abandonment of testing with negative effect to our business through financial loss, industry credibility and/or a temporary or permanent decline in valuation of our Company. 16 Table of Contents If we are unable to retain and hire qualified personnel, we may not be able to implement our business plan successfully.
The effects of such reversions could cause significant delays or abandonment of testing with negative effect to our business through financial loss, industry credibility and/or a temporary or permanent decline in valuation of our Company. 13 Table of Contents If we are unable to retain and hire qualified personnel, we may not be able to implement our business plan successfully.
We cannot predict if investors will find our common shares less attractive because we are not required to comply with more robust disclosure or the auditor attestation requirements. If investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and trading prices may be negatively affected. Item 1B.
We cannot predict if investors will find our common shares less attractive because we are not required to comply with more robust disclosure or the auditor attestation requirements. If investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and trading prices may be negatively affected.
The occurrence of any of the events, circumstances or developments described below could materially and adversely effect our business, financial conditions, results of operations and our future prospects. Our actual results could differ from those in forward looking statements as a result of numerous factors including the risks described below. A.
The occurrence of any of the events, circumstances or developments described below could materially and adversely affect our business, financial conditions, results of operations and our future prospects. Our actual results could differ from those in forward looking statements as a result of numerous factors including the risks described below. A.
As a result, we cannot guarantee that we will be able to submit INDs, or similar applications, within our projected timelines, if at all, or that the FDA, or similar regulatory authorities, will allow us to commence clinical trials. Pharmaceutical products incorporating DehydraTECH has never been approved for the treatment of disease.
As a result, we cannot guarantee that we will be able to submit INDs, or similar applications, within our projected timelines, if at all, or that the FDA, or similar regulatory authorities, will allow us to commence clinical trials. 17 Table of Contents Pharmaceutical products incorporating DehydraTECH has never been approved for the treatment of disease.
Inflation and recession or other sustained adverse economic events resulting from the pandemic could materially and adversely affect our business and the market for or value of our common stock. 19 Table of Contents B. Risks Associated with our Financial Condition Without additional financing to develop our business plan, our business may fail.
Inflation and recession or other sustained adverse economic events resulting from the pandemic could materially and adversely affect our business and the market for or value of our common stock. B. Risks Associated with our Financial Condition Without additional financing to develop our business plan, our business may fail.
We may issue shares in the future to raise working capital resulting in shareholders dilution in the ownership of our Company. 22 Table of Contents We are a “smaller reporting company” under the SEC’s disclosure rules and have elected to comply with the reduced disclosure requirements applicable to smaller reporting companies.
We may issue shares in the future to raise working capital resulting in shareholders dilution in the ownership of our Company. We are a “smaller reporting company” under the SEC’s disclosure rules and have elected to comply with the reduced disclosure requirements applicable to smaller reporting companies.
As a result, we may experience material fluctuations in future operating results on a quarterly and annual basis which could materially affect our business, financial condition, and operating results. The R&D programs required to evidence that DehydraTECH’s demonstrated efficacy also works with other APIs and molecules to develop the evidence may ultimately be unsuccessful.
As a result, we may experience material fluctuations in future operating results on a quarterly and annual basis which could materially affect our business, financial condition, and operating results. 16 Table of Contents The R&D programs required to evidence that DehydraTECH’s demonstrated efficacy also works with other APIs and molecules to develop the evidence may ultimately be unsuccessful.
We cannot predict the nature of any future laws, regulations, interpretations, or their application to non-pharmaceutical hemp-based CBD. It is probable that regulations may be enacted that will be directly applicable to our business. Violations, alleged or otherwise, could disrupt our business or the business of our licensees. Any compliance deficiencies with future government regulation could increase our operating costs.
We cannot predict the nature of any future laws, regulations, interpretations, or their application to non-pharmaceutical hemp-based CBD. It is probable that regulations may be enacted that will be directly applicable to our business. Violations, alleged or otherwise, could disrupt our business or the business of our licensees.
To date the FDA has approved only limited use of cannabinoids for the treatment of any disease or condition. The FDA has approved one cannabinoid-derived drug product for the treatment of seizures associated with Lennox-Gastaut syndrome and Dravet syndrome and three synthetic cannabinoid-related drug products for the treatment of nausea and vomiting caused by cancer chemotherapy.
The FDA has approved one cannabinoid-derived drug product for the treatment of seizures associated with Lennox-Gastaut syndrome and Dravet syndrome and three synthetic cannabinoid-related drug products for the treatment of nausea and vomiting caused by cancer chemotherapy.
In the US, interstate shipment of hemp-derived non-pharmaceutical CBD from one state to another is legal only where both states have laws and regulations that allow for the production and sale of such products and that qualify under the Farm Bill.
Any compliance deficiencies with future government regulation could increase our operating costs. 18 Table of Contents In the US, interstate shipment of hemp-derived non-pharmaceutical CBD from one state to another is legal only where both states have laws and regulations that allow for the production and sale of such products and that qualify under the Farm Bill.
We are authorized to issue up to 220,000,000 shares. Our Board has the authority to approve additional share issuances, and to determine the rights, preferences, and privileges of such shares, without consent of any of our stockholders.
We are authorized to issue up to 220,000,000 shares. Pursuant to Nevada corporate law, our Board has the authority to approve additional share issuances, and to determine the rights, preferences, and privileges of such shares, without consent of any of our stockholders, though pursuant to Nasdaq Rules, stockholder approval may be required for certain of these actions.
There is no assurance that we will be able to successfully develop our product candidates, and we may focus our efforts and resources on product candidates that may prove to be unsuccessful. 20 Table of Contents We cannot be certain of the outcome of preclinical testing and clinical studies and results from these studies may not predict the results that will be obtained in later phase trials of our product candidates.
We cannot be certain of the outcome of preclinical testing and clinical studies and results from these studies may not predict the results that will be obtained in later phase trials of our product candidates.
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Regulatory approval also requires the submission about the product manufacturing process and the inspection of the manufacturing facilities.
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There is no assurance that we will be able to successfully develop our product candidates, and we may focus our efforts and resources on product candidates that may prove to be unsuccessful.
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Pharmaceutical products using DehydraTECH with CBD as an API have never been approved for the treatment of any disease. To date the FDA has approved only limited use of cannabinoids for the treatment of any disease or condition.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe current lease commenced in November 2019 and expires November 2023. The term of the lease can be extended for another five years, subject to certain terms and conditions. We believe our current facilities are suitable and adequate for the Company’s current operational requirements.
Biggest changeThe current lease has been extended for an additional five years expiring on November 14, 2028. We believe our current facilities are suitable and adequate for the Company’s current operational requirements.
Item 2. Properties Description of Property The Company is located in Kelowna, British Columbia Canada in a leased facility with 2,250 square feet of office space to accommodate our finance and administrative functions and a Health Canada approved research lab of approximately 1,000 square feet accommodating our in-house research and development team.
Item 2. Properties Description of Property The Company headquarters is in Kelowna, British Columbia Canada in a leased facility with 2,250 square feet of office space to accommodate our finance and administrative functions as well as a Health Canada approved research lab of approximately 1,000 square feet accommodating our in-house research and development team.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeConvertible Securities Pursuant to our Equity Incentive Plan, during the year ended August 31, 2022, we granted stock options to directors, officers, employees, and consultants that enable the option holders to purchase 222,000 common shares of the Company. Options were granted at prices of: 81,800 at $6.23, 36,700 at $3.39, and 103,500 at $2.91 and have five year terms.
Biggest changeAs the Company still has the ability to issue options for the purchase of up to 109,497 common shares under its Equity Incentive Plan (being the 63,497 shares issuable as at fiscal year end and an additional 46,000 shares issuable due to options which expired on September 6, 2023), it has not yet filed a Form S-8 Registration Statement for the registration of the additional shares issuable pursuant to the approved proposals. 22 Table of Contents Convertible Securities Pursuant to our Equity Incentive Plan, during the year ended August 31, 2023, we granted stock options to directors, officers, employees, and consultants that enable the option holders to purchase 69,600 common shares of the Company.
Equity Compensation Plan Information We have no long-term incentive plans other than the equity incentive plan described below. 24 Table of Contents Equity Incentive Plan Securities authorized for issuance under equity compensation plans Plan Category Number of securities to be based upon exercise of outstanding options, warrants and rights Weighed-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plan [excluding securities reflected in column (a)] (a) (b) (c) Equity compensation plans not approved by shareholders Nil Nil Nil Equity compensation plans approved by shareholders 206,170 7.36 304,263 Total 206,170 7.36 304,263 All future option issuances shall be made under the Equity Incentive Plan.
Equity Compensation Plan Information We have no long-term incentive plans other than the equity incentive plan described below. 21 Table of Contents Equity Incentive Plan Securities authorized for issuance under equity compensation plans Plan Category Number of securities to be based upon exercise of outstanding options, warrants and rights Weighed-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plan [excluding securities reflected in column (a)] (a) (b) (c) Equity compensation plans not approved by shareholders Nil Nil Nil Equity compensation plans approved by shareholders 446,936 $ 3.36 63,497 Total 446,936 $ 3.36 63,497 All future option issuances shall be made under the Equity Incentive Plan.
There were 5,950,998 common shares issued and outstanding as of August 31, 2022 (5,726,699 at August 31, 2021). As of November 25, 2022, there were approximately 44 shareholders of record. Dividend Policy We have never declared or paid any dividends on our capital stock.
There were 8,091,650 common shares issued and outstanding as of August 31, 2023 (5,950,998 at August 31, 2022). As of November 20, 2023, there were approximately 35 shareholders of record. Dividend Policy We have never declared or paid any dividends on our capital stock.
If this Plan is suspended or terminated, the provisions of this Plan and any administrative guidelines, rules and regulations relating to this Plan shall continue in effect for the duration of such time as any Option remains outstanding.
If this Plan is suspended or terminated, the provisions of this Plan and any administrative guidelines, rules and regulations relating to this Plan shall continue in effect for the duration of such time as any Option remains outstanding. On May 9, 2023, the Company’s shareholders approved two proposals to amend the Equity Incentive Plan.
The 198,500 options granted and vested during the year had a fair value of $663,398 using the Black Scholes valuation method and the non-cash expense was included in consulting and salaries. Purchases of Equity Securities by the Issuer and Affiliated Purchasers Not applicable. Item 6.
Options were granted at prices of: 3,400 at $3.04, 41,200 at $1.96, 5,000 at $2.73 and 20,000 at $0.87 and have five year terms. The 69,600 options granted and vested during the year had a fair value of $89,057 using the Black Scholes valuation method and the non-cash expense was included in consulting compensation.
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Recent Sales of Unregistered Securities During the year ended August 31, 2022, the Company issued 224,299 restricted common shares with a value of $1.2m as required by a consulting contract. Warrants There were no warrants granted or exercised during the year ended August 31, 2022.
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Recent Sales of Unregistered Securities During the year ended August 31, 2023, the Company did not issue any restricted common shares. Warrants During the year ended August 31, 2023, 2,106,000 warrants were issued, none were exercised, and 7,500 were cancelled. The 2,106,00 warrants issued have an exercise price of $0.95 and are exercisable until May 11, 2028.
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The approval of the first proposal authorized the Board to amend the Equity Incentive Plan by increasing the maximum number of shares issuable to 10% of the issued share capital as at May 31, 2023 and the second proposal authorized the Board to amend the Equity Incentive Plan to allow for an evergreen formula whereby on January 1 of each calendar year the number of shares issuable pursuant to the Equity Incentive Plan may be increased, at the discretion of the Board, to 10% of the issued share capital as at December 31 of the preceding year.
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Further, during the year ended August 31, 2023, 267,969 previously granted options with exercise prices ranging from $9.60 to $4.80 were repriced to $3.00 following shareholder approval obtained at the Company’s annual shareholder meeting held on May 9, 2023. See Note 16. Purchases of Equity Securities by the Issuer and Affiliated Purchasers Not applicable. Item 6.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe Company has evaluated whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern. As of August 31, 2022, the Company had cash on hand of approximately $5.8m to settle $200,000 current liabilities.
Biggest changeIf we do so we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favourable to us. 26 Table of Contents The Company has evaluated whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern.
Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with the US GAAP.
Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with US GAAP.
The successful granting of additional patents could lead to material increases in shareholder value through the ability to generate meaningful license revenues from an increased intellectual property portfolio. Lexaria expects its current cash reserves to meet our operational requirements for the twelve months following the release of this report.
The successful granting of additional patents could lead to material increases in shareholder value through the ability to generate meaningful license revenues from our increased intellectual property portfolio. Lexaria expects its current cash reserves to meet our operational requirements for the twelve months following the release of this report.
We believe there are meaningful competitive advantages in manufacturers adopting DehydraTECH in their product with its demonstrated higher absorption levels, its ability to infuse smaller quantities of active molecules in their products and the benefit of its predictable drug delivery times.
We believe there are meaningful competitive advantages in manufacturers adopting DehydraTECH in their products with its demonstrated higher absorption levels, its ability to infuse smaller quantities of active molecules in their products and the benefit of its predictable drug delivery times.
Lexaria is advancing several R&D activities in both preclinical and future clinical programs. Our primary focus during the year was on our investigations of CBD for the reduction of hypertension.
Lexaria is advancing several R&D activities in both preclinical and planned future clinical programs. Our primary focus during the year was on our investigations of CBD for the reduction of hypertension.
We consider the advancement of our applied R&D studies as a vital step towards our goal of establishing commercial relationships with industry partners who can utilizes DehydraTECH within existing or new product lines. Conducting additional in vitro and in vivo studies which test the absorption of some, or all of the molecules named within our patents and patent applications, i.e.
We consider the advancement of our applied R&D studies as a vital step towards our goal of establishing commercial relationships with industry partners who can utilize DehydraTECH within existing or new product lines. Conducting additional in vitro and in vivo studies which test the absorption of some, or all of the molecules named within our patents and patent applications, i.e.
Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. Item 7A.
Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
CBD, vitamins, PDE5 inhibitors, nicotine and anti-viral drugs, further substantiate the effectiveness of DehydraTECH. Successful tests are expected to increase awareness and acceptance of DehydraTECH as a meaningful method used to deliver some or all of the named molecules more effectively than current delivery methods avail.
CBD, vitamins, PDE5 inhibitors, nicotine and antiviral drugs, further substantiate the effectiveness of DehydraTECH. Successful tests are expected to increase awareness and acceptance of DehydraTECH as a meaningful method used to deliver some or all of the named molecules more effectively than current delivery methods avail.
Accordingly, we will be required to obtain further funding to achieve this business objective. On August 12, 2022, we entered into a sales agreement with Maxim Group LLC, (“Maxim”), pursuant to which we may offer and sell shares of our common stock with an aggregate offering price of up to $5,925,000 under the At-The-Market (“ATM”) Offering.
On August 12, 2022, we entered into a sales agreement with Maxim Group LLC, (“Maxim”), pursuant to which we may offer and sell shares of our common stock with an aggregate offering price of up to $5,925,000 under the At-The-Market (“ATM”) Offering.
Any successful development and completion of clinical trials as well as regulatory approval and commercialization are uncertain and may not result in approved products. Completion dates and completion costs can vary significantly for each future product candidate and are difficult to predict.
We will require significant additional funding to complete any IND planned studies. Any successful development and completion of clinical trials as well as regulatory approval and commercialization are uncertain and may not result in approved products. Completion dates and completion costs can vary significantly for each future product candidate and are difficult to predict.
These findings encourage the pursuit of lucrative commercial applications in the pharmaceutical sector. We continue to devote an increasing proportion of our resources toward pharmaceutical applications with the continuation of our programs directed at hypertension as we move toward FDA approved IND clinical studies. During the year ended August 31, 2022, we completed ten studies and initiated a further seven.
These findings encourage the pursuit of lucrative commercial applications in the pharmaceutical sector. We continue to devote an increasing proportion of our resources toward pharmaceutical applications with the continuation of our programs directed at hypertension as we move toward FDA approved IND clinical studies.
Lexaria and our commercial partners will continue to explore multiple R&D programs directed toward further evaluation, development, and commercialization of our DehydraTECH technology. General and Administrative General and administrative expenses consist primarily of consulting fees, executive and employee salaries, the recording of non-cash expenses through stock-based compensation for options vesting in the year and unrealized gains/losses on marketable securities.
Lexaria and our commercial partners will continue to explore multiple R&D programs directed toward further evaluation, development, and commercialization of our DehydraTECH technology. General and Administrative General and administrative expenses consist primarily of consulting fees, executive and employee salaries and stock-based compensation expense (non-cash).
Our actual results of operations, performance, financial position and business prospects and opportunities for this fiscal year and the periods that follow could differ materially from those expressed in or implied by forward-looking statements.
Our actual results of operations, performance, financial position and business prospects and opportunities for this fiscal year and the periods that follow could differ materially from those expressed in or implied by forward-looking statements. This discussion and analysis should be read in conjunction with our consolidated financial statements and the accompanying notes related thereto that appear in this Report.
The Company believes this is sufficient to fund our expected R&D and operating expenditures for twelve months proceeding the date of filing this report. We do not anticipate making any material capital expenditures in the fiscal 2023 as we believe our current facilities and equipment are sufficient for the forthcoming twelve months proceeding the date of filing this report.
We do not anticipate making any material capital expenditures in the fiscal 2024 as we believe our current facilities and equipment are sufficient for the forthcoming twelve months following the filing date of this report.
Also included are costs for advertising and marketing, investor relations, corporate facilities, insurance premiums, legal fees related to corporate matters, fees for auditing, and tax filings. Our general and administrative expenses saw an overall increase of $753,185 during the year ended August 31, 2022, from $4,971,349 recorded in the previous year.
Also included are costs for advertising and marketing, investor relations, corporate facilities, insurance premiums, legal fees related to corporate matters, fees for auditing, and tax filings. 25 Table of Contents Our general and administrative expenses saw an overall decrease of $1,897,911 during the year ended August 31, 2023, as compared to a $753,185 increase during the previous year.
Preclinical and clinical development is inherently unpredictable as is regulatory approval and commercialization, therefore we are unable to estimate with any certainty the costs we will incur and the timelines required in our continued development and commercialization efforts.
We expect to file our IND application as soon as possible after our third-party ingredient supplier has completed its FDA compliance requirements. Preclinical and clinical development is inherently unpredictable as is regulatory approval and commercialization, therefore we are unable to estimate with any certainty the costs we will incur, and the timelines required in our continued development and commercialization efforts.
The anticipated expansion of our intellectual property portfolio and conducting supportive R&D will jointly contribute to strengthening revenue prospects as we continue to explore new applications for our technology.
The anticipated expansion of our intellectual property portfolio and conducting supportive R&D may jointly contribute to strengthening revenue prospects as we continue to explore new applications for our technology. Research and Development Research and development (“R&D”) costs are expensed as incurred and account for a significant portion of our operational expenses.
This discussion and analysis should be read in conjunction with our consolidated financial statements and the accompanying notes related thereto that appear in this Report. 25 Table of Contents The following management’s discussion and analysis of financial condition and results of operations (“MD&A”) is provided to enhance the readers understanding of our results of operations and financial condition for the year ended August 31, 2022, and in comparison, to the year ended August 31, 2021.
The following management’s discussion and analysis of financial condition and results of operations (“MD&A”) is provided to enhance the readers understanding of our results of operations and financial condition for the year ended August 31, 2023, and in comparison, to the year ended August 31, 2022.
Of significant note, Lexaria submitted our preliminary application for an Investigational New Drug (“IND”) to the FDA with plans to develop a cannabidiol-based drug formulation, DehydraTECH-CBD for hypertension.
Of these three, we do not expect to make any significant expenditures during fiscal 2024 on non-combusted nicotine R&D. Of significant note, Lexaria submitted our preliminary pre-meeting application for an Investigational New Drug (“IND”) to the FDA with plans to develop a cannabidiol-based drug formulation, DehydraTECH-CBD for hypertension.
The FDA has agreed with the Company’s proposed clinical protocol for DehydraTECH-CBD, which is designed to target 100 patients with hypertension. The regulator has also decided that there was no need to conduct additional non-clinical studies before the start of the IND program. We expect to file our IND application in late fiscal 2023.
The FDA has agreed with the Company’s proposed clinical protocol for DehydraTECH-CBD, which, as currently designed, would target 120 patients with hypertension. The regulator has also decided that there was no need to conduct additional non-clinical studies before the start of the IND program. Lexaria has engaged its CRO and the start-up activities for this study have commenced.
Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the stage and complexity of our R&D studies and related expenditures, the receipt of additional payments on the licencing of our technology, if any, and the receipt of payments under any current or future collaborations we may enter into. 28 Table of Contents Since Lexaria’s entry into the bioscience sector in 2015 and through to August 31, 2022, we have accumulated a $39.1m deficit despite generating total gross revenues of $2.1m.
Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the stage and complexity of our R&D studies and related expenditures, the receipt of additional payments related to the out-licencing of our technology, if any, and the receipt of payments under any current or future collaborations we may enter.
With proceeds from our underwritten public offering in January of 2021, we were able to direct additional expenditures to the increased focus on studies pertaining to hypertension and anti-viral drugs. We will continue to invest in our R&D programs for the foreseeable future and we expect these expenses to continue to increase in 2023 compared to 2022.
With proceeds from our underwritten public offering in January of 2021, we were able to direct additional expenditures to the increased focus on studies pertaining to hypertension and anti-viral drugs. Our R&D expenditures for fiscal 2023, at $3,666,721 were nearly double those of fiscal 2022 at $1,842,675. This was in agreement with our internal plans.
We increased advertising and promotional expenditures by $752,097 in our continued efforts to bring the results of the Company’s R&D programs to the attention of various industry sectors and to the scientific and investment communities. Stock-based compensation increased by $365,873 in the current fiscal year as result of options vested during the year.
We decreased advertising and promotional expenditures by $817,363, as we scaled back our efforts to bring the results of the Company’s R&D programs to the attention of various industry sectors and to the scientific and investment communities. Stock-based compensation expense (non-cash) decreased from $752,591 to $170,382 ($582,209), due to fewer options vesting during the year.
These programs, having been funded by the capital infusion of Lexaria’s 2021 financing of approximately $15m,supported our significant advancements in the fields of heart disease and hypertension, oral nicotine, and antiviral research.
During the year ended August 31, 2023, we completed seven studies investigating DehydraTECH infused CBD, nicotine and estradiol. These programs, having been funded by the capital infusion of Lexaria’s 2021 financing of approximately $15 million, supported our significant advancements in the fields of heart disease and hypertension, hormones, oral nicotine, and diabetes.
The sales agreement provides that Maxim will be entitled to a sales commission equal to 3.0% of the gross sales price per share of all shares sold under the ATM Offering. As of November 25, 2022 we have not sold any shares under the ATM Offering.
The sales agreement provides that Maxim will be entitled to a sales commission equal to 3.0% of the gross sales price per share of all shares sold under the ATM Offering. During the fiscal year ended August 31, 2023, 34,652 shares were sold under the ATM for gross proceeds of $114,456.
Cash Flows August 31 August 31 2021 2021 $ $ Cash flows (used in) provided by operating activities (4,879,339 ) (3,997,590 ) Cash flows (used in) provided by investing activities (180,640 ) 193,880 Cash flows (used in) provided by financing activities (44,600 ) 13,427,758 Cash flows (used in) provided by discontinued operations - 3,000 Increase (decrease) in cash (5,104,579 ) 9,624,048 Operating Activities Net cash used in operating activities was approximately $4.9m for the year ended August 31, 2022, compared with $4.0m during the same period in 2021.
Cash Flows August 31, August 31, 2023 2022 Cash flows used in operating activities $ (5,881,237 ) $ (4,879,339 ) Cash flows used in investing activities (169,610 ) (180,640 ) Cash flows used in financing activities 1,589,731 (44,600 ) Decrease in cash $ (4,461,116 ) $ (5,104,579 ) Operating Activities Net cash used in operating activities was approximately $5.9 million for the year ended August 31, 2023, compared with $4.9 million during the same period in 2022.
We remain confident that the loss is likely temporary in nature as Hill Street continues to make inroads to the US hemp markets with DehydraTECH enabled products produced and sold by their licensees. Our consulting fees and salaries decreased by $383,118 in the year ended August 31, 2022.
This is attributable to continuing decreases in the fair value of the Company’s investment in Hill Inc. common shares. We remain confident that the loss may be temporary in nature as Hill Inc. continues to make inroads to the US hemp markets with DehydraTECH enabled products produced and sold by their licensees.
We completed three human studies in the year on hypertension with final results of our fourth and largest hypertension study to date expected to be released in the second fiscal quarter of 2023. The FDA provided us with a positive written response from our pre-IND meeting regarding DehydraTECH-CBD for the treatment of hypertension.
We previously completed human studies on hypertension with results that were supportive of our plans to file an Investigational New Drug (“IND”) application with the US Food and Drug Administration (“FDA”). The FDA provided us with a positive written response from our pre-IND meeting in July 2022 regarding DehydraTECH-CBD for the treatment of hypertension.
The Company is continuing to explore strategic corporate business partnerships for many of its specific drug investigations after sufficient data has been generated which, if successful, could generate any combination of up-front milestone and/or royalty payments to the Company. 26 Table of Contents Asset Sale On December 9, 2020, Lexaria CanPharm ULC (“CanPharm”) completed a disposition (the “Disposition”) of its use and licensing rights for DehydraTECH technology (the “Assets”) specifically in association with non-pharmaceutical products containing cannabis molecules that contain 0.3% or greater THC.
The Company is continuing to explore strategic corporate business partnerships for many of its specific drug investigations after sufficient data has been generated which, if successful, could generate any combination of up-front milestone and/or royalty payments to the Company.
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.
Maxim was paid 7% of the gross proceeds and was also reimbursed $70,000 for its expenses. 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.
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.
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 licencing agreements, collaborations, partnerships, alliances marketing, distribution, or licensing arrangements with third parties to increase our capital resources is also possible.
The changes between these periods for the respective items are summarized as follows: August 31 August 31 2022 2021 Change $ $ $ Revenue 255,397 722,738 (467,341 ) Research & development 1,842,675 1,262,895 579,780 Consulting fees & employees 2,244,664 2,627,765 (383,101 ) Legal and professional 561,265 703,407 142,142 General and administrative 2,918,605 1,640,177 1,278,428 Net operating loss (7,383,653 ) (5,686,852 ) 1,696,801 Revenue Lexaria’s business operations include technology licensing agreements where corporate licensees implement DehydraTECH under license within our contracted facilities under royalty agreements.
The changes between these periods for the respective items are summarized as follows: August 31 August 31 2023 2022 Change Revenues $ 226,208 $ 255,397 $ (29,189 ) Cost of goods sold (31,500 ) (71,841 ) 40,341 Research and development 3,666,721 1,842,675 1,824,046 Consulting fees & salaries 1,300,965 2,244,664 (943,699 ) Legal and professional 444,593 561,265 (116,672 ) Other general and administrative 1,316,451 2,153,991 (837,540 ) Other income (loss) (178,503 ) (764,614 ) 586,111 Net Loss $ (6,712,525 ) $ (7,383,653 ) $ 671,128 24 Table of Contents Revenue Lexaria’s business operations include technology licensing agreements where corporate licensees implement DehydraTECH under license within our contracted facilities under royalty agreements.
August 31 August 31 Working Capital 2022 2021 $ $ Current assets 6,977,516 12,442,940 Current liabilities (194,036 ) (153,276 ) Net Working Capital 6,775,853 12,289,664 The Company’s working capital balance decreased by approximately $5.5m due to the lack of financing activities and lower revenue contributions to cash during the year ended August 31, 2022.
Working Capital August 31, August 31, 2023 2022 Current assets $ 2,199,772 $ 6,977,516 Current liabilities (267,735 ) (194,036 ) Net Working Capital $ 1,932,037 $ 6,783,480 The Company’s working capital balance decreased by approximately $4.8 million due primarily to cash used in operating activities during the year ended August 31, 2023.
The primary source of revenues for the Company are derived from Lexaria Hemp where sales of B2B processing of intermediary product saw a significant decrease of approximately 70% (2022 - $113,438 vs 2021- $383,179) in the year and contributed approximately 46% of the 2022 annual revenues.
Year Ended August 31, 2023 2022 Change IP Licensing $ 146,800 $ 54,560 $ 92,240 B2B 44,167 113,438 (69,271 ) Other 35,241 87,399 (52,158 ) $ 226,208 $ 255,397 $ (29,189 ) The primary source of revenues for the Company are derived from Lexaria Hemp where sales of B2B processing of intermediary CBD product saw a significant decrease of approximately 61% (2023 - $44,167 vs 2022- $113,438) in the year.
Our R&D programs are focused on three core business segments; heart disease including hypertension, reduced-risk non-combusted nicotine and CBD from hemp.
We will continue to invest in our R&D programs for the foreseeable future and we expect these expenses to continue to increase in 2024 compared to 2023, assuming successful corporate financing activities. Our R&D programs are focused on three core business segments: pharmaceutical applications, reduced-risk non-combusted nicotine and CBD from hemp.
The Company continues to engage in small R&D projects and B2B formulation for third parties who are evaluating our technology for use in their product. Financial condition and operating performance The data generated from our past and ongoing R&D programs continues to support confirmatory results and are contributing greatly to our understanding of the workings of DehydraTECH.
It is now our intention to explore whether or not DehydraTECH has any benefits together with GLP-1 drugs in this regard. The Company continues to engage in small R&D projects and B2B formulation for third parties who are evaluating our technology for use in their product.
The FDA confirmed that it has agreed with Lexaria’s proposal to pursue a 505(b)(2) new drug application (“NDA”) regulatory pathway for our program. We continue working toward our IND filing which is anticipated to be in late fiscal 2023 or early 2024. During the year ended August 31, 2022, we also completed studies in NSAIDS, THC, PDE5s and nicotine.
The FDA confirmed that it had agreed with Lexaria’s proposal to pursue a 505(b)(2) new drug application regulatory pathway for our program.
During the year ended August 31, 2022, the Company also generated $54,560 (2021- $86,921) from R&D contracts. In fiscal 2023 the Company expects to see an increase in revenue through further technology licensing from DehydraTECH processed hemp-based CBD consumer products.
In fiscal 2024 and assuming our existing clients remain in compliance with their contracts, the Company expects to see an increase in revenue through further technology licensing from DehydraTECH processed hemp-based CBD and other consumer products. One of our contracted clients is contractually required to make significantly larger quarterly payments to us during fiscal 2024 than during fiscal 2023.
Legal and professional fees were $140,142 lower in the year ended 2022 as compared to the previous years expenses that included the additional fees related to our Nasdaq listing. In the previous year we recorded bad debts of $50,500 with no bad debts recorded in the year ended 2022.
Legal and professional fees were $116,672 lower in the year ended 2023 as compared to the previous year’s expenses. No bad debts were recorded in the years ended 2023 and 2022. The Company evaluated its patent portfolio and determined that certain pending applications had been abandoned or would not be pursued.
Removed
With ten US and nine Australian patents granted to date we also have numerous patent applications filed in the US and around the world. It is not possible to forecast with certainty when, or if, our applications will be granted as patents. We continue to vigorously seek patent protection in more than 40 countries around the world.
Added
We continue working toward our IND filing, however as announced in our news release of August 30, 2023, we have experienced some delays due to FDA compliance requirements of one of our ingredient suppliers which must be completed prior to our submission of our IND application.
Removed
The purpose of the Disposition was to remove the Company’s association with cannabis as it remains a Schedule 1 Drug and thereby eliminating any such regulatory restrictions cannabis products may create. The Disposition also assisted in obtaining a listing on the Nasdaq on January 12, 2021.
Added
During the year ended August 31, 2023, we also completed studies with estradiol and nicotine and reported improved drug delivery characteristics with both molecules after they were treated with DehydraTECH. In fiscal 2023, we also advanced R&D activities in the fields of diabetes and weight loss management pursuant to successfully completed animal study work with our DehydraTECH-CBD in these areas.
Removed
As a result of the Disposition, CanPharm assigned to the purchaser, Hill Street Beverage Company Ltd. (“Hill Street”), license agreements with three existing non-related-party licensees.
Added
We were granted a total of nine new patents during fiscal 2023 including our first ever patents in the country of Canada, making it one of our most successful years ever for the acquisition of new intellectual property. 23 Table of Contents Financial condition and operating performance The data generated from our past and ongoing R&D programs continues to support confirmatory results and are contributing greatly to our understanding of the workings of DehydraTECH.
Removed
In consideration for the Assets, Hill Street provided CanPharm with C$350,000 cash, a promissory note bearing a principal amount of C$2,000,000 and bearing an interest rate of 10% (the “Note”) and C$1,500,000 in shares of Hill Street, issuable in three tranches by April 9, 2022.
Added
We have not yet, however, been able to secure a large client utilizing our technology in large quantities of products. With thirty-seven patents granted to date of which thirteen are granted in the US, Lexaria believes that it has a robust patent portfolio but continues to seek additional protection for its intellectual property globally.
Removed
The repayment of the Note does not have a fixed maturity date and is based on quarterly instalments equal to 5% of the gross sales realized by Hill Street of DehydraTECH-enabled products.
Added
Results of Operations for our Year Ended August 31, 2023 Our net loss from operations for the year ended August 31, 2023, was $6,712,525 (2022 - $7,383,653).
Removed
Due to the uncertainty pertaining to the settlement of the Note, management concluded that the note had $Nil value at the time of the sale and was recorded as such.
Added
During the year ended August 31, 2023, Other revenue included $35,241 (2022- $87,399) from R&D contracts for exploratory work the Company performed on behalf of third parties interested in our technology.
Removed
Some of the factors considered in the $Nil valuation of the Note were that the legal sales of THC products in the US and Canada have little or no history which made the expectant quarterly payments very difficult to forecast.
Added
Challenges in the US market for small companies has made it difficult to generate larger revenue streams, irrespective of the use of our technology, with many small companies struggling to exist. On the other hand, revenue generated by licensing our technology to others has grown substantially to reach $146,800 in fiscal 2023 vs only $54,560 in fiscal 2022.
Removed
Further, Hill Street had no experience selling THC products and at the time of the sale was not licenced to produce and sell such products. Therefore, the Company considered risk of default high and the collectability of the Note as highly doubtful.
Added
In large part, this was due to our ongoing expenditures in preparation for our hypertension-related prospective IND filing; and also because of R&D programs completed in the fields of a human oral nicotine study and animal based DehydraTECH-CBD seizure and diabetes studies. Each of these three areas of study produced positive results.
Removed
Since the date of sale Hill Street has repaid $25,083 of the Note and these amounts are considered other income when received. Results of Operations for our Year Ended August 31, 2022 Our net loss from operations for the year ended August 31, 2022, was $7,391,283 (2021 - $5,686,852).
Added
These year-to-year decreases are a significant driver of the year-to-year overall decrease in consulting wages and salaries expense. Travel expenses were also down by $34,678 due primarily to a decrease in participation in industry conferences. Unrealized losses on marketable securities decreased by $542,921 in the year.
Removed
In prior years, Lexaria developed a line of demonstration oral-delivered products that were utilized to show the efficacy of DehydraTECH and enabled the ability of manufacturers to incorporate the technology into their product lines. We had offered these products for sale to consumers through our web-based sales platform.
Added
Our consulting fees and salaries decreased by $943,699 in the year ended August 31, 2023, due primarily to a decrease of $582,209 in stock-based (non-cash) compensation expense, the elimination of one management position and the renegotiation for reduced fees with our consultants.
Removed
During the year-ended August 31, 2021, we discontinued these direct-to-consumer demonstration products and closed our web sales platform in order to intensify our efforts on B2B production. 27 Table of Contents Research and Development Research and development costs are expensed as incurred and account for a significant portion of our operational expenses.
Added
As such, during the year ended August 31, 2023, the Company recognized an impairment loss of $106,761 related to those abandoned applications. Liquidity and Capital Resources Since Lexaria’s entrance into the bioscience sector, it has accumulated net losses of $45.8 million of which approximately $6.7 million and $7.4 million were incurred, respectively, in the past two fiscal years.
Removed
With the data collected during the fiscal year 2022 management has concluded that our studies related to the improvement of antiviral drug delivery using DehydraTECH indicate that the economics are not attractive enough to further pursue this segment at this time.
Added
Accordingly, we will be required to obtain significant further funding to achieve this business objective and/or delay or modify the program in accordance with the financial resources available.
Removed
Travel expenses were up by $49,105 in the year as covid restrictions were less of a barrier and we returned to near pre-pandemic excursion levels. Unrealized losses on marketable securities increased by $598,359 in the year. This is attributable to shares received as a part of the sale of assets to Hill Street Beverage Company in the year 2021.
Added
Offering costs netted against proceeds amounted to $125,122 and, as per the terms of the sales agreement, the ATM was terminated July 30, 2023.
Removed
The loss during fiscal 2022 on these securities was exacerbated by receipt of shares in the year that were valued according to the contract of sale and not at market value.
Added
On May 8, 2023, we entered into a placement agency agreement with Maxim, pursuant to which we agreed to sell 2,106,000 units at a price of $0.95 per unit for aggregate gross and net proceeds of $2,000,700 and $1,600,397, respectively.
Removed
Corporate general and administrative expenses are expected to increase moderately in fiscal 2023 as compared to 2022 as a result of higher human resource, regulatory, legal and investor relations costs and the potential impact of inflation. Liquidity and Capital Resources We have incurred net losses of approximately $7.4m and $4.2m respectively in the past two fiscal years.
Added
Each unit was comprised of one share and one warrant, with each warrant being exercisable for a five-year period to purchase an additional share at a price of $0.95. The securities were issued on May 11, 2023, and were registered pursuant to a Form S-1 registration statement filed under number 333-271096.
Removed
We have used the issuance of common shares to raise the majority of capital required to fund our business operations. Since fiscal 2014, we have raised an aggregate of $25.3m, of which $16.1m was from the sale of our common stock, $8.8m from warrants and $0.4m from the exercise of stock options.
Added
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.
Removed
Entering into additional licencing agreements, collaborations, partnerships, alliances marketing, distribution, or licensing arrangements with third parties to increase our capital resources is also possible. If we do so we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.
Added
As of August 31, 2023, the Company had cash on hand of approximately $1.4 million to settle $270,000 in current liabilities. The Company believes this is sufficient to fund our expected R&D and operating expenditures for twelve-months following the filing date of this report.
Removed
The increase in cash used in operating activities during fiscal 2022 was primarily driven by increased research and development programs, slight increases in office and administrative expenditures and significantly lower revenue. Investing Activities Net cash used in investing activities is attributable to increased spending on our intellectual property.
Added
The increase in net cash used in operating activities during the year ended August 31, 2023 relates primarily to a decrease in non-cash expenses related to common shares issued for services ($1,200,000), stock-based compensation ($582,209) and unrealized loss on marketable securities ($542,921); partially offset by a decrease in our net loss ($671,128) and a decrease in working capital ($494,738).
Removed
During the year, four additional patents were granted. 29 Table of Contents Financing Activities Net cash used in financing activities reflects payments made on the lease of our facilities.
Added
Investing Activities Net cash used in investing activities is attributable to increased spending on our intellectual property. During the fiscal year, nine additional patents were granted. Financing Activities Net cash provided by financing activities reflects net proceeds from the issuance of common shares. Net proceeds from the ATM and May 11, 2023 offerings totaled $1,589,731.
Removed
Stock-based compensation We account for our stock-based compensation awards in accordance with the FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). This requires all stock-based payments to employees, including grants of employee stock options and modifications to existing agreements to be recognized in the consolidated statements of operations and comprehensive loss based on their fair values.
Removed
We use the Black-Scholes option-pricing model to determine the fair value of options granted. Compensation expense related to our stock-based awards to employees, executives, directors and consultants have service-based vesting conditions and are recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, generally the vesting term.
Removed
The vesting terms of each grant is determined by our Board and typically have a 5-year contractual term. The fair value estimation of options requires the input of subjective assumptions, including expected life of the option, stock price volatility, the risk-free interest rate, and expected dividends.

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