What changed in this filing

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Item 1. Financial Statements

2021-01-14 compared with 2020-06-29 · 154 added, 157 removed, 279 unchanged (53% of the section changed)

8 unchanged sentences

Prepaid expenses and deposit (Note 18)

Current assets from discontinued operations (Note 21)

Total Current Assets

Capital assets, net

Non-current assets, net

Lease right of use

Intellectual Property (Note 9)

Property & equipment (Note 10)

Total Non-current Assets

Accounts payable and accrued liabilities (Note 11)

1 unchanged sentence

Due to a related party (Note 15)

Lease current (Note 17)

Current liabilities from discontinued operations (Note 21)

Total Current Liabilities

Lease long term (Note 17)

Loan payable (Note 19)

Total Long Term Liabilities

TOTAL LIABILITIES

3 unchanged sentences

Issued and outstanding:

89,587,090 common shares at May 31, 2020

3,001,476 common shares at November 30, 2020

and 3,001,476 common shares at August 31, 2020

6 unchanged sentences

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

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

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

LEXARIA BIOSCIENCE CORP.

3 unchanged sentences

THREE MONTHS ENDED

NINE MONTHS ENDED

Revenue (Note 14)

4 unchanged sentences

Consulting (Notes 13, 15, 17)

Investor relation

Investor relations

Legal and professional

1 unchanged sentence

Research and development

Wages and salaries (Note 19)

Loss on disposal of marketable securities (Note 20)

Wages & salaries

Unrealized (gain) loss on marketable securities (Note 19)

Inventory writeoff (Note 8)

Net loss and comprehensive loss for the period

$ (1,390,653 )

$ (1,187,936 )

$ (3,312,908 )

$ (3,042,438 )

Net loss from continuing operations

Discontinued operations

Income from discontinued operations (Note 21)

Net (loss) and comprehensive loss for the year

Net (loss) and comprehensive loss attributable to:

Common shareholders

$ (1,361,381 )

$ (1,171,805 )

$ (3,219,038 )

$ (3,021,172 )

Non-controlling interest

Basic and diluted (loss) per share

Continuing operations

Discontinued operations

Weighted average number of common shares outstanding

- Basic and diluted

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

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

LEXARIA BIOSCIENCE CORP.

1 unchanged sentence

(Expressed in U.S.

NINE MONTHS ENDED

THREE MONTHS ENDED

Cash flows used in operating activities

Net loss and comprehensive loss

$ (3,312,908 )

$ (3,042,438 )

Adjustments to reconcile net loss to net cash used in operating activities:

3 unchanged sentences

Bad debt expense

Realized Loss on disposal of investment (Note 20)

Noncash right of use lease expense

Unrealized loss on marketable securities

Common shares issued for services

Unrealized foreign exchange

Warrants issued for services

4 unchanged sentences

Due to related parties

Operating lease liability

Deferred revenue

Net cash used in operating activities

$ (1,981,314 )

$ (2,268,946 )

Cash flows used in investing activities

Sale of marketable securities (Note 20)

Intellectual property

2 unchanged sentences

Cash flows from financing activities

Long Term Loan

Proceeds from issuance of equity

Net cash from financing Activities

Decrease in cash and cash equivalents

Net cash from discontinued operations

Net Change in cash and cash equivalents for the period

Cash and cash equivalents at beginning of period

2 unchanged sentences

Income taxes paid in cash

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

Subscription Receivable

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

LEXARIA BIOSCIENCE CORP.

1 unchanged sentence

(Expressed in U.S.

ADDITIONAL PAID-IN CAPITAL $

TOTAL STOCKHOLDERS’

STOCKHOLDERS'

Balance August 31, 2019

1 unchanged sentence

Stock based compensation

Private placement of shares, net of issuance cost

Exercise of stock options

Exercise of warrants

Warrants issued for services

Private placement

Non-controlling interest

Balance November 30, 2019

(24,775,515 )

Shares issued for services

Stock based compensation

Exercise of stock options

Exercise of warrants

Net loss non-controlling interest

Non-controlling Interest (Note 3)

Non-controlling interest

Balance February 29, 2020

(25,725,859 )

Exercise of stock options

Exercise of warrants

Warrants Issued for Service

Stock based compensation

Net loss non-controlling interest

Non-controlling Interest (Note 3)

Balance May 31, 2019

(22,789,954 )

Shares issued for services

Exercise of warrants

Stock based compensation

Net loss non-controlling interest

Balance August 31, 2019

(23,868,202 )

Stock based compensation

Warrants issued for services

1 unchanged sentence

Non-controlling interest

Balance November 30, 2019

Balance May 31, 2020

(27,087,240 )

Stock based compensation

Exercise of stock options

Shares issued for service

Private placement

Non-controlling interest

Balance February 29, 2020

Balance August 31, 2020

(27,802,198 )

3 unchanged sentences

Non-controlling interest

Balance May 31, 2020

Balance November 30, 2020

(28,498,226 )

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

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

LEXARIA BIOSCIENCE CORP.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2020

(Expressed in U.S.

2 unchanged sentences

(“Lexaria”, or the “Company”) was formed on December 9, 2004 under the laws of the State of Nevada.

In March of 2014, the Company began its entry into the bioscience and alternative health and wellness business.

In March of 2014, the Company began work in the fields of enhanced delivery of active ingredients and drugs.

In May 2016, the Company commenced out-licensing its patented DehydraTECH™ technology (the “Technology”) for improved delivery of bioactive compounds that promotes healthy ingestion methods, lower overall dosing and higher effectiveness in active molecule delivery.

10 unchanged sentences

The outcome of these matters cannot be predicted at this time.

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic.

This contagious disease outbreak and any related adverse public health developments may adversely affect workforces, economies, and financial markets globally, potentially leading to an economic downturn.

It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or results of operations at this time.

During November of 2020, our Board of Directors ("Board") approved a plan to sell the businesses assets underlying our Canpharm THC related segment.

As a result, the related financial results were reflected in our consolidated statement of income, retrospectively, as discontinued operations beginning in the first quarter of fiscal 2021.

On November 18, 2020, we signed a definitive agreement to sell the assets.

As at November 30, 2020, the transaction was pending final approval from the TSX Venture Exchange.

As a result, the related assets and liabilities associated with the discontinued operations in the prior year consolidated balance sheet are classified as discontinued operations.

See "Note 21 - Discontinued Operations" for additional information.

Subsequent to November 30, 2020, the Company approved a 1:30 reverse stock split with no fractional shares issued.

All share and per share information within these condensed interim consolidated financial statements have been retroactively restated to reflect the effects of the approved reversed stock split.

Business Risk and Liquidity

The Company is subject to several categories of risk associated with its operating activities.

The production and sale of alternative health products is an emerging industry in which business practices are not yet standardized and are subject to frequent scrutiny and evaluation by federal, state, provincial, and municipal authorities, academics, and media outlets, among others.

Although we intend to develop our businesses in accordance with best ethical practices, we may suffer negative publicity if we, our partners, contractors, or customers are found to have engaged in any environmentally insensitive practices or other business practices that are viewed as unethical.

4 unchanged sentences

Lexaria and its subsidiaries are not involved directly or indirectly in the cultivation, processing, distribution, or utilization of cannabis or cannabis derived components.

All of Lexaria’s consumer products utilize legally sourced hemp and hemp components in their production.

Lexaria does have an ancillary involvement risk via out-licensing of its patented technology to licensees that choose to utilize its Technology to manufacture products that contain locally or state approved but federally regulated and controlled contents.

Lexaria does have an ancillary involvement risk via out-licensing of its patented technology to licensees that choose to utilize DehydraTECH to manufacture products that contain locally or state approved but federally regulated and controlled contents.

There can be no guarantee that changes in the regulatory framework and environment will not occur and such changes could have a materially adverse effect on the Company.

1 unchanged sentence

Products containing nicotine have historically been involved in litigation in the USA.

Lexaria’s corporate licensee may introduce products containing nicotine that utilize Lexaria’s Technology to the US consumer market, which could therefore introduce third-party risks to Lexaria.

Lexaria’s corporate licensee may introduce products containing nicotine that utilize DehydraTECH to the US consumer market, which could therefore introduce third-party risks to Lexaria.

Lexaria and its subsidiaries are not involved directly or indirectly in the production or sale of any pharmaceutical or antiviral products.

Licensees may enhance their product’s delivery using our Technology, which could therefore introduce third-party risks to Lexaria.

Significant Accounting Policies

16 unchanged sentences

Recent Accounting Guidance

In February 2016 FASB issued ASU No.

201602, Leases (Topic 842) which supersedes FASB ASC Topic 840, Leases (Topic 840) and provides principles for the recognition, measurement, presentation, and disclosure of leases for both lessees and the lessors.

The new standard requires the lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

The classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively.

A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification.

Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases.

In November 2019 FASB issued ASU No 201910 revised the effective date based on updated criteria with the effective date for fiscal years beginning after December 15, 2020.

In June 2020 FASB issued ASU No 202005 further delaying the effective date for fiscal years beginning after December 15, 2021 due to the COVID-19 pandemic.

The Company is assessing the impact on its consolidated financial statements.

In June 2016, the FASB issued a new standard to replace the incurred loss impairment methodology in current U.S.

5 unchanged sentences

The Company is currently assessing the impact of the standard on its consolidated financial statements.

In February 2018, the FASB issued ASU No.

201802, Income Statement–Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act enacted by the U.S.

federal government on December 22, 2017 (the “2017 Tax Act”).

Consequently, the amendments eliminate the stranded tax effects resulting from the 2017 Tax Act and will improve the usefulness of information reported to financial statement users.

The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.

Early adoption is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance.

The Company adopted the ASU on September 1, 2019 for a $NIL effect.

In June 2018, the FASB issued ASU No.

201807, Compensation—Stock Compensation (Topic 718):

Improvements to Nonemployee Share Based Payment Accounting.

This is a simplification that involves several aspects of accounting for nonemployee share-based payments resulting from expanding the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees.

The Company adopted the ASU on September 1, 2019 for a $NIL effect.

Accounts and Other Receivables

Trade and deposits receivable

Territory license fee receivable

Intellectual Property Fees

Sales tax receivable

2 unchanged sentences

Finished goods

During the period ended May 31, 2020, the Company wrote down $8,240 (2019 - $NIL) of inventory to reflect its net realisable value.

During the period ended November 30, 2020, the Company wrote down $1,765 (2020 - $8,240 full year) of inventory to reflect its net realisable value.

Intellectual Property

13 unchanged sentences

US 10,374,036

Page 10 of 31

US 10,756,180

The Company also holds non-capitalized patents outside the US.

4 unchanged sentences

*The patents are amortized over their legal life of 20 years.

Page 10 of 31

Property & Equipment

Quarter Ended May 31, 2020

Period Amortization

Accumulated Amortization

November 30, 2020

Quarter Ended November 30, 2020

Leasehold improvements

1 unchanged sentence

Lab equipment

Year Ended August 31, 2019

Period Amortization

Accumulated Amortization

August 31, 2019

Year Ended August 31, 2020

Leasehold improvements

1 unchanged sentence

Lab equipment

During the period $371 of amortization was included in the cost of inventory.

During the three month period ended November 30, 2020, $4,790 of amortization was included in the cost of inventory.

Accounts Payable and Accrued Liabilities

1 unchanged sentence

Trades payable

Sales tax payable

Accrued Liabilities

Corporate tax payable

Trades payable

Balance – ending

Page 11 of 31

Common Shares and Warrants

During the quarter ended May 31, 2020 the Company issued an aggregate of 8,866,211 units at $0.23, issued in two tranches for gross proceeds of $2,039,229.

Each unit consists of one common share and one full warrant.

The warrants are exercisable on issuance at an exercise price of $0.35 with 8,028,254 expiring May 6, 2025 and 837,957 on May 11, 2025.

Pursuant to the agent agreement $151,623 and 649,123 broker warrants with an exercise price of $0.35 expiring May 6, 2025, were paid.

The warrants were valued at $128,329 and were recorded as a share issue cost within additional paid in capital for a net effect of $Nil.

A year to date summary of share issuances is presented below:

Type of Issuance

Option exercise

Private placements (1)

(1) Total fees of $156,288 were paid for total net receipt of $2,703,626.

During the quarter ended November 30, 2020 the Company did not issue any shares or warrants.

A continuity schedule for warrants is presented below:

Number of Warrants

Weighted Average Exercise Price $

Balance August 31, 2019

2 unchanged sentences

Cancelled/expired

Balance May 31, 2020

The fair value of share purchase warrants granted was estimated as of the date of the grant by using the Black-Scholes option pricing model with the following assumptions:

Expected volatility

Risk-free interest rate

Expected life

Dividend yield

Estimated fair value per warrant

Balance November 30, 2020

Page 11 of 31

A summary of warrants outstanding as of May 31, 2020 is presented below:

A summary of warrants outstanding as of November 30, 2020 is presented below:

# of Warrants

Weighted Average Remaining Contractual Life

Weighted Average Exercise Price $

Weighted Average

Remaining Contractual Life

Weighted Average Exercise

Stock Options

4 unchanged sentences

The vesting terms of each grant are set by the board of directors.

During the period ending May 31, 2020 the formerly established 2007 Equity Incentive Plan and the 2010 Stock Option Plan were cancelled.

Outstanding options were cancelled and reissued under the 2019 Equity Incentive Plan.

The Company granted the following options during the quarter ended May 31, 2020:

Exercise Price $

(1) 3,092,000 vested on grant, 146,000 vest annually over 2 years until fully vested.

Page 13 of 31

The Company did not grant options during the quarter ended November 30, 2020.

A continuity schedule for stock options is presented below:

Average Exercise Price $

Remaining Contractual Term (Years)

Intrinsic Value $

Balance August 31, 2019

1 unchanged sentence

Balance August 31, 2020

Cancelled/expired

Balance May 31, 2020 (Outstanding)

Balance May 31, 2020 (Exercisable)

The fair value of options granted was estimated as of the date of the grant by using the Black-Scholes option pricing model with the following assumptions:

Expected volatility

Risk-free interest rate

Expected life

Dividend yield

Estimated fair value per option

Balance November 30, 2020 (Outstanding)

Balance November 30, 2020 (Exercisable)

Page 12 of 31

Product sales

1 unchanged sentence

Freight revenue

During the nine months ended May 31, 2020, the Company recognized $73,759 of Intellectual Property Licensing fees and $56,750 of Usage Fees (May 2019 - $40,000 and $50,000).

Licensing revenues are significantly concentrated on a single customer.

There was an increase in product sales in the current year compared to the previous years as the Company was able to solve some payment processing issues late in fiscal 2019, allowing for improved ability to conduct online retail transactions.

Intermediate products sales began during the second quarter, which typically is a DehydraTECH enabled powder that companies can purchase to include in their products.

Intermediate product sales constituted the majority of our product sales segment revenue and is a new form of revenue for the current fiscal year.

The Licensing fees consist of IP licensing fees for transfer of the Technology with the signing of definitive agreements for the DehydraTECH technology and usage fees.

The Licensing fees include payments due upon transfer of the Technology and installment payments that are receivable within 12 months (Note 7).

Page 14 of 31

Income from ongoing operations

Income from discontinued operations

During the three months ended November 30, 2020, the Company recognized $3,138 of Intellectual Property Licensing fees and $127,446 of usage fees from ongoing operations and $3,000 of income from discontinued operations (November 2019 - $33,750 licensing and $18,000 usage fees all relating to discontinued operations).

Revenues are significantly concentrated on one customer.

There was an increase in our intermediate product sales and licensing revenues in the current year compared to the prior year, which began in the second quarter of fiscal 2020, with increasing volume to customers.

Intermediate products are typically a DehydraTECH enabled powder that companies can purchase to include in their products.

Intermediate product sales and licensing revenue constituted the majority of our revenue.

The licensing fees consist of intellectual property licensing fees for transfer of the Technology with the signing of definitive agreements for the DehydraTECH technology and usage fees.

Related Party Transactions

8 unchanged sentences

Related party transactions are recorded at the exchange amount established and agreed to between the related parties.

As at May 31, 2020, $29,595 (August 31, 2019 - $48,096) was payable to related parties and included in due to related parties.

As at November 30, 2020, $87,185 (August 31, 2020 - $58,704) was payable to related parties and included in due to related parties.

Page 13 of 31

Segment Information

The Company’s operations involve the development and usage, including licensing, of its proprietary nutrient infusion Technology.

The Company’s operations involve the development and usage, including licensing, of its proprietary DehydraTECH Technology.

Lexaria is centrally managed and its chief operating decision makers, being the president and the CEO, use the consolidated and other financial information supplemented by revenue information by category of alternative health consumer products and technology licensing to make operational decisions and to assess the performance of the Company.

The Company has identified two reportable segments:

Intellectual Property Licensing and Consumer Products.

Intellectual Property and Products.

Licensing revenues are significantly concentrated on one licensee.

Page 15 of 31

Consolidated Total

External revenue

Operating expenses

Discontinued operations

Segment income(loss)

Capital Asset by Region

Nine Months Ended May 31, 2020

Net Balance Canada

Total Net Balance

Three Months Ended November 30, 2020

Leasehold Improvements

7 unchanged sentences

Lab Equipment

Commitments, Significant Contracts and Contingencies

Management and Service Agreements:

As at May 31, 2020, the Company is party to the following contractual commitments:

Commitments, Significant Contracts and Contingencies Management and Service Agreements:

As at November 30, 2020, the Company is party to the following contractual commitments:

Monthly Commitment

10 unchanged sentences

Month to Month

Service Term (1)

Office rent (2)

Office operating lease (1)

November 15, 2023

Director agreements are in effect during their term of service as a director.

Corporate Offices:

Page 14 of 31

Right of Use Assets - Operating Lease

Corporate office and R&D lab space leased in Kelowna, British Columbia, Canada until November 15, 2023 with an option to extend an additional five years.

In addition to minimum lease payments, the lease requires us to pay property taxes and operating costs which are subject to annual adjustments.

Right of use assets - operating leases:

November 30, 2020

Total right of use assets

November 30, 2020

Lease payments

Interest accretion

Total lease liabilities

Operating lease cost as at November 30, 2020

Operating cash flows for lease

Remaining lease term

Discount rate

Pursuant to the terms of the Company’s lease agreements in effect, the following table summarizes the Company’s maturities of operating lease liabilities as of November 30, 2020:

Total lease payments

imputed interest

Present value of operating lease liabilities

current obligations under leases

Page 15 of 31

Prepaid Expenses

Prepaid expenses consist of the following at May 31, 2020 and August 31, 2019:

Prepaid expenses consist of the following at November 30, 2020 and August 31, 2020:

Advertising & conferences

Office & Insurance

Licence, filing fees, dues

Office & insurance

Research & development

We have applied for, and received, governmental assistance related to the COVID-19 pandemic.

As of May 31, 2020 there are two Canadian governmental programs that currently provide:

As of November 30, 2020 there is one Canadian governmental programs that currently provides:

A Canadian dollar loan of C$40,000 under the Canada Emergency Business Account (CEBA) program.

1 unchanged sentence

The loan can be converted into a 3-year term loan at 5% annual interest paid monthly effective January 1, 2023.

Canada Emergency Wage Subsidy (CEWS) program that provides a subsidy of 75% of wages for up to 24 weeks retroactive from March 15 2020, to August 29, 2020.

During the nine months ended May 31, 2020, the Company received $15,272 in subsidies from the CEWS program which is recognized as a recovery of wages and salaries in profit and loss.

Marketable Securities

1 unchanged sentence

August 31, 2020

During the period ended May 31, 2020 common stock with a cost basis of $25,000, received from a licensee in lieu of cash, was sold for $6,802 realizing an $18,198 loss.

November 30, 2020

Unrealized losses from common stock are due to market price movements.

2 unchanged sentences

Page 16 of 31

Discontinued Operations

On November 19, 2020 the Company entered a definitive asset sale agreement through its wholly owned subsidiary Lexaria Canpharm ULC to sell certain non-core business assets for gross proceeds of C$3,850,000.

The financial results of the group of assets sold are presented as income (loss) from discontinued operations, net of income taxes in our consolidated statement of income.

The following table presents financial results of the assets:

THREE MONTHS ENDED

Operating Expenses

The following table presents cash flows of discontinued operations:

THREE MONTHS ENDED

Cash flows used in discontinued operating activities

Change in working capital

Net cash used in discontinued operating activities

Net cash provided by (used in) discontinued operations

The following table presents the aggregate carrying amounts of the classes of assets and liabilities of discontinued operations of the assets:

Current Assets

Accounts receivable

Total assets classified as discontinued operations in the consolidated balance sheet

Current Liabilities

Accounts payable

Total liabilities classified as discontinued operations in the consolidated balance sheet

Subsequent Events

On December 9, 2020, the Company announced that it closed the sale of its non-pharmaceutical THC-related assets held within Lexaria Canpharm ULC to Hill Street Beverage Company Inc.

Lexaria received C$350,000 in cash, 6,031,363 restricted common shares of Hill Street at a deemed price of C$0.0829 per share, a C$2,000,000 promissory note bearing interest at the rate of 10% per annum, and a limited license to use the DehydraTECH technology outside of Canada and the US for use with certain products that contain 0.3% or greater THC and which are not classified by a national regulator as drug, pharmaceutical or biopharmaceutical product.

Pursuant to the terms of the transaction, Lexaria will receive another C$1,000,000 worth of common shares of Hill Street over a period sixteen months in C$500,000 issuances eight months and sixteen months after the closing date.

On January 11, 2021, at 4:30 p.m.

Eastern time, the Company performed a 1:30 reverse stock split with no fractional shares issued.

The issued and outstanding balance of shares at that time changed from 90,044,312 to 3,001,476 as per shareholder approval at the annual general meeting of the company held June 23, 2020.

Concurrently, the Company began listing its common shares on the NASDAQ exchange under the symbol LEXX.

On January 14, 2021, the Company closed an underwritten public offering for $11,039,994, issuing 2,102,856 units consisting of one common share and one warrant for $5.25.

Total fees of $1,410,506 were estimated at time of closing.

The warrants issued will trade under the symbol LEXXW.

Page 17 of 31

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements