What changed in this filing

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Item 1. Financial Statements

2021-04-14 compared with 2021-01-14 · 128 added, 101 removed, 332 unchanged (41% of the section changed)

3 unchanged sentences

(Expressed in U.S.

Cash and cash equivalents

Marketable securities (Note 19)

5 unchanged sentences

Non-current assets, net

Lease right of use

Long term receivable (Note 7)

Lease right of use (Note 17)

Intellectual property (Note 9)

3 unchanged sentences

Deferred revenue

Due to a related party (Note 15)

Lease current (Note 17)

Due to related parties (Note 15)

Lease payable (Note 17)

Current liabilities from discontinued operations (Note 20)

Total Current Liabilities

Lease long term (Note 17)

Loan payable (Note 19)

Lease payable (Note 17)

Total Long Term Liabilities

1 unchanged sentence

STOCKHOLDERS' EQUITY

Share Capital

Share Capital (Note 12)

220,000,000 common voting shares with a par value of $0.001 per share

Issued and outstanding:

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

Issued and outstanding:5,104,332 common shares at February 28, 2021

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

Additional paid-in capital

Additional paid-in capital (Note 12)

(28,094,115 )

10 unchanged sentences

THREE MONTHS ENDED

SIX MONTHS ENDED

Revenue (Note 14)

8 unchanged sentences

Research and development

Wages & salaries

Wages and salaries (Note 17)

Gain on disposal of assets (Note 20)

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

Inventory writeoff (Note 8)

Net loss from continuing operations

Net income (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:

Income (loss) from discontinued operations (Note 20)

Net and comprehensive income (loss) for the period

$ (1,922,255 )

Net and comprehensive income (loss) attributable to:

Common shareholders

Non-controlling interest

Basic and diluted (loss) per share

Basic and diluted income (loss) per share

Continuing operations

6 unchanged sentences

(Expressed in U.S.

THREE MONTHS ENDED

SIX MONTHS ENDED

Cash flows used in operating activities

Net loss and comprehensive loss

Net loss from continuing operations

$ (1,986,439 )

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

Stock based compensation

Depreciation and amortization (Note 8, 9, 10)

Inventory write-off (Note 8)

Depreciation and amortization

Inventory write-off

Bad debt expense

Noncash right of use lease expense

Gain on disposal of assets

Unrealized loss on marketable securities

Unrealized foreign exchange

Warrants issued for services

7 unchanged sentences

Net cash used in operating activities

$ (1,742,757 )

$ (1,308,963 )

Cash flows used in investing activities

Intellectual property

Property & equipment

Disposal of Assets (Note 20)

Net cash used in investing activities

Cash flows from financing activities

Repayment of loan payable

Proceeds from issuance of equity

1 unchanged sentence

Net cash from discontinued operations

Net Change in cash and cash equivalents for the period

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Net Change in cash for the period

Cash at beginning of period

Cash at end of period

Supplemental information of cash flows:

Income taxes paid in cash

Subscription Receivable

Non-cash consideration on asset disposal

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

34 unchanged sentences

(28,498,226 )

Stock based compensation

Brokered placement, net

Non-controlling interest

Balance February 28, 2021

(28,094,115 )

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

1 unchanged sentence

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2020

February 28, 2021

(Expressed in U.S.

11 unchanged sentences

The Company’s unaudited interim consolidated financial statements have been prepared in accordance with US GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

The recurring losses from operations and net capital deficiency raise substantial doubt about the Company’s ability to continue as a going concern.

The Company requires additional funds or revenues to maintain its operations and developments.

Management’s plans in this regard are to raise equity and debt financing as required, but there is no certainty that such financing will be available or that it will be available at acceptable terms.

The Company has recurring losses from operations and net capital deficiency.

On January 12, 2021 the Company closed an underwritten public offering for net proceeds of $9,471,495 (Note 12).

The Company will require additional funds or revenues to maintain its operations and developments in the future.

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

3 unchanged sentences

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 financial results were reflected in our consolidated statement of operations, 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 and the transaction was completed during December 2020.

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 20 - 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.

On January 11, 2021, the Company approved a 30:1 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 reverse stock split.

Business Risk and Liquidity

20 unchanged sentences

All significant intercompany balances and transactions have been eliminated.

Estimates and Judgments

Estimates and Judgements

The preparation of financial statements in conformity with U.S GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

6 unchanged sentences

however, actual results could differ from these estimates.

In preparing these unaudited interim consolidated financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the audited consolidated financial statements for the year ended August 31, 2020.

Discontinued Operations

Judgement is required in determining whether a subsidiary or group of assets qualifies as a business and as discontinued operations.

A business is presumed to be an integrated set of activities and assets capable of being conducted and managed for the purpose of providing economic benefits.

The Company determined that the assets sold were a business.

The Company derecognizes a subsidiary or a group of assets only when the rights to the cash flows from the asset expire, or when it transfers the subsidiary or group of asset and substantially all the risks and rewards of ownership of the assets to another entity.

Determination of the date of recognition was based on the closing date, final clearance, and approval by the TSX of the share issuances forming part of the consideration.

As all consideration is in CDN$ and the share value is based on fixed CDN$ values, regardless of the share price of the underlying stock, the amounts were translated at the spot foreign exchange rate on the date of final closing.

The valuation of the note receivable was included at its nominal value of $NIL as payment of the note is not determinable.

Recent Accounting Guidance

10 unchanged sentences

Sales tax receivable

Short term trade and deposits receivable includes $390,533 of the current portion receivable from the asset sale (Note 20).

$390,533 receivable related to the asset sale is also included in long term receivable as the payment is due greater than one year from February 28, 2021

Raw materials

1 unchanged sentence

Finished goods

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.

During the period ended February 28, 2021, the Company wrote down $2,482 (2020 - $8,240 full year) of inventory to reflect its net realisable value.

Intellectual Property

1 unchanged sentence

Issued Patent #

Patent Issuance Date

Patent Certificate Grant Date

Patent Family

US 9,474,725 B1

Food and Beverage Compositions Infused With

Lipophilic Active Agents and Methods of Use Thereof

Food and Beverage Compositions Infused With Lipophilic Active Agents and Methods of Use Thereof

US 9,839,612 B2

6 unchanged sentences

US 10,756,180

Page 10 of 35

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

Period Amortization

Six Months Ended February 28, 2021

Accumulated Amortization

November 30, 2020

Quarter Ended November 30, 2020

Net Balance February 28, 2021

Leasehold improvements

1 unchanged sentence

Lab equipment

Period Amortization

Accumulated Amortization

Year Ended August 31, 2020

Accumulated Amortization

August 31, 2020

Leasehold improvements

1 unchanged sentence

Lab equipment

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

During the six month period ended February 28, 2021, $6,010 of amortization was included in the cost of inventory.

Page 11 of 35

Accounts Payable and Accrued Liabilities

4 unchanged sentences

Trades payable

Balance – ending

Common Shares and Warrants

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

During the quarter ended February 28, 2021 the Company issued the following shares and warrants summarized in the table presented below:

Type of Issuance

Number of Shares

Placement (1)

(1) Total fees of $1,568,499 were paid for total net receipt of $9,471,495

A continuity schedule for warrants is presented below:

5 unchanged sentences

Cancelled/expired

Balance November 30, 2020

Page 11 of 31

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

Balance February 28, 2021

A summary of warrants outstanding as of February 28, 2021 is presented below:

# of Warrants

Weighted Average

Remaining Contractual Life

Weighted Average Exercise

Weighted Average Remaining Contractual Life

Weighted Average Exercise Price $

Page 12 of 35

Stock Options

4 unchanged sentences

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

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

The Company granted the following options during the quarter ended February 28, 2021:

Exercise Price $

A continuity schedule for stock options is presented below:

Weighted Average Exercise Price $

Weighted Average Remaining Contractual Term (Years)

Aggregate Intrinsic Value $

Balance August 31, 2019

1 unchanged sentence

Balance August 31, 2020

Balance November 30, 2020 (Outstanding)

Balance November 30, 2020 (Exercisable)

Balance February 28, 2021 (Outstanding)

Balance February 28, 2021 (Exercisable)

The fair value of share purchase options granted were 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

Page 13 of 35

2 unchanged sentences

Freight revenue

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).

Income from continuing operations

During the six months ended February 28, 2021, the Company recognized $255,844 of usage fees from continuing 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.

Our intermediate product sales significantly increased to $231,718 with licensees increasing their orders of our intermediate product.

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

3 unchanged sentences

Management, consulting and director services

February 28, 2021

February 29, 2020

CAB Financial Services (1)

6 unchanged sentences

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

As at February 28, 2021, $206,806 (August 31, 2020 - $58,704) was payable to related parties and included in due to related parties.

Page 14 of 35

5 unchanged sentences

Licensing revenues are significantly concentrated on one licensee.

Consolidated Total

External revenue

IP Licensing $

Cost of goods sold

Operating expenses

4 unchanged sentences

Total Net Balance

Three Months Ended November 30, 2020

Six Months Ended February 28, 2021

Leasehold Improvements

3 unchanged sentences

Net Balance Canada

Total Net Balance

Year Ended August 31, 2020

2 unchanged sentences

Lab Equipment

Commitments, Significant Contracts and Contingencies Management and Service Agreements:

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

Commitments, Significant Contracts and Contingencies

Management and Service Agreements:

As at February 28, 2021, the Company is party to the following contractual commitments:

Monthly Commitment

4 unchanged sentences

M&E Services Ltd.

Corporate Development

Month to Month

Office Management

9 unchanged sentences

Right of use assets - operating leases:

November 30, 2020

Total right of use assets

November 30, 2020

Total right of use assets (February 28, 2021)

Lease payments

Interest accretion

Total lease liabilities

Operating lease cost as at November 30, 2020

Total lease liabilities (February 28, 2021)

Operating lease cost as at February 28, 2021

Operating cash flows for lease

1 unchanged sentence

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:

Pursuant to the terms of the Company’s lease agreements in effect, the following table summarizes the Company’s maturities of operating lease liabilities as of February 28, 2021:

Total lease payments

4 unchanged sentences

Prepaid Expenses

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

Prepaid expenses consist of the following at February 28, 2021 and August 31, 2020:

Advertising & conferences

Investor relations

Licence, filing fees, dues

1 unchanged sentence

Research & development

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

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.

The loan is a 0% interest bearing loan with no principle payments and if repaid before December 31, 2022 will result in a loan forgiveness of 25% (up to C$10,000).

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

Marketable Securities

1 unchanged sentence

August 31, 2020

November 30, 2020

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

February 28, 2021

During the period ended February 28, 2021, the Company added $468,263 in marketable securities as a component of the sale of assets (Note 20).

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

Management does not believe any remaining unrealized losses represent other-than-temporary impairments based on our evaluation of available evidence.

The COVID-19 pandemic has caused significant market turbulence and it is possible that our evaluation will change dependant upon new information as it arises.

Page 16 of 31

The COVID-19 pandemic has caused significant market turbulence and it is possible that our evaluation will change dependent upon new information as it arises.

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.

On December 10, 2020 the sale closed.

The Company received from Hill Street Beverage Company C$350,000 in cash, 6,031,363 restricted common shares at a deemed price of C$0.0829 per share as the first required equity-based payment, a promissory note having a principal amount of C$2,000,000 and bearing interest at the rate of 10% per annum.

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

The C$ were converted at the spot rate of 0.78107 at the closing date.

The promissory note was included at its nominal value of $NIL.

Page 17 of 35

Gain on asset disposal

Book value of assets sold

Cash consideration

Shares received

Shares receivable

Promissory note

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

SIX MONTHS ENDED

Operating Expenses

The following table presents cash flows of discontinued operations:

THREE MONTHS ENDED

SIX 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 operating activities

Net cash provided by (used in) discontinued operations

6 unchanged sentences

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 18 of 35

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