What changed in this filing

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Item 1. Financial Statements

2022-07-14 compared with 2022-04-11 · 106 added, 62 removed, 358 unchanged (32% of the section changed)

13 unchanged sentences

Accounts payable and accrued liabilities

Due to a related party

Lease payable

6 unchanged sentences

220,000,000 common voting shares with a par value of $ 0.001 per share Issued and outstanding:

5,950,998 common shares at February 28, 2022 and 5,726,699 common shares at August 31, 2021

5,950,998 common shares at May 31, 2022 and 5,726,699 common shares at August 31, 2021

Additional paid-in capital

11 unchanged sentences

Three Months Ended

SIX MONTHS ENDED

Nine Months Ended

Cost of goods sold

9 unchanged sentences

Discontinued operations

Net and comprehensive income (loss) for the period

Net and comprehensive loss for the period

$ ( 2,418,338 )

1 unchanged sentence

$ ( 5,870,492 )

Net and comprehensive income (loss) attributable to:

$ ( 2,883,483 )

Net and comprehensive loss attributable to:

Common shareholders

1 unchanged sentence

( 2,556,997 )

$ ( 5,801,859 )

( 2,848,914 )

Non-controlling interest

Basic and diluted income (loss) per share

Basic and diluted loss per share

Continuing operations

6 unchanged sentences

(Expressed in U.S.

SIX MONTHS ENDED

Nine Months Ended

Cash flows used in operating activities

12 unchanged sentences

Shares issued for services

Warrants issued for services

Lease accretion

5 unchanged sentences

Deferred revenue

Net cash used in by operating activities

Net cash used in operating activities

$ ( 3,702,724 )

4 unchanged sentences

Net cash (used in) provided by investing activities

$ ( 130,595 )

Cash flows from financing activities

16 unchanged sentences

(Expressed in U.S.

Dollars, except number of shares)

SHARE CAPITAL

37 unchanged sentences

( 35,248,138 )

Stock based compensation

( 2,382,925 )

Non-controlling interest

Balance May 31, 2022

( 37,631,063 )

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

February 28, 2022

(Expressed in U.S.

2 unchanged sentences

(“Lexaria”, “we”, “our” or the “Company”) is a biotechnology company pursuing the enhancement of the bioavailability of a diverse and broad range of active pharmaceutical ingredients (“APIs”) using our patented drug delivery technology DehydraTECH TM .

Through continued validation of our research and development our focus is on national and international application for DehydraTECH.

Through continued validation of our research and development our focus is on national and international applications for DehydraTECH.

Revenues are primarily derived from licensing fees for the use of the Company’s patented technology to partners who pay either a fee to use DehydraTECH in the manufacturing of their own products or through the purchase of DehydraTECH manufactured products made to their specifications by Lexaria.

6 unchanged sentences

The losses attributable to common shareholders were $ 4.2 m, $ 4.1 m and $ 4.2 m for the years ended August 31, 2021, 2020 and 2019, respectively.

As of February 28, 2022, we had an accumulated deficit of $ 35.25 m.

As of May 31, 2022, we had an accumulated deficit of $ 37.6 m.

We expect to continue to incur significant operational expenses and net losses in the upcoming 12 months.

Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the stage and complexity of our R&D studies and 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.

On January 12, 2021, the Company closed an underwritten public offering for net proceeds of $ 9,471,497 .

In the fourth quarter of the year ended August 31, 2021, the Company received $ 4,015,043 from the exercise of warrants.

Until the Company is able to generate significant product revenue, operations will be supported with equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements.

We may offer additional securities for sale during fiscal year 2022 or thereafter 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 and is in the best interests of our stockholders.

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.

As of February 28, 2022, the Company had cash of approximately $ 8.4 m.

We believe this is sufficient to enable the Company to fund its operating and R&D expenses and any capital expenditure requirements through one year from the issuance date of these unaudited consolidated financial statements.

The Company has the option to raise up to one-third of its aggregate market value of its common equity held by non-affiliates through the issuance of securities pursuant to a Registration Statement on Form S-3 (333-262402) as filed with the SEC on January 28, 2022 and declared effective on February 4, 2022.

To date, we have obtained cash and funded our operations primarily through equity financings and license agreements.

1 unchanged sentence

There can be no assurance that we will be able to continue to raise additional capital in the future.

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.

As of May 31, 2022, the Company had cash of approximately $ 7 .0m.

Impacts of COVID-19 Pandemic

The emergence of the COVID-19 pandemic in 2020 continues to present uncertainty and unforecastable new risks to the Company and its business plans.

As of February 28, 2022, there has been no material impact on the Company’s financial position as a direct result of the pandemic.

However, the Company has experienced some supply chain disruptions and shortages in the timely procurement of ingredients and supplies used in both our R&D activities and production.

As of May 31, 2022, there has been no material impact on the Company’s financial position as a direct result of the pandemic.

However, the Company has experienced some supply chain disruptions and shortages in the procurement of ingredients and supplies used in both our R&D activities and production.

Management views this situation as transitory but cannot predict the length of time it may take for these disruptions to dissipate or if there will be a significant economic effect on the Company’s operations.

In the interim, it may cause delays in carrying out our research studies and in our production schedules.

Restrictions on international travel presents a challenge in carrying out normal business activities related to corporate finance efforts and the pursuit of new customers throughout North America who might otherwise access to our licensees’ retail products.

As a result, the pandemic has increased the risk of lower revenues and higher losses.

During the year ended August 31, 2020, we were in receipt of C$ 30,732 in COVID relief under the Canada Emergency Wage Subsidy programs for employees which reduced our employment costs in that year.

During the year ended August 31, 2020, we received C$ 30,732 in COVID relief under the Canada Emergency Wage Subsidy programs for employees which reduced our employment costs in that year.

During fiscal 2020 we also received C$ 40,000 from the Canadian Government sponsored Emergency Business Account loan program.

As specified by the terms of this program, we have repaid C$ 30,000 of the loan in fiscal 2021.

As specified by the terms of this program, we repaid C$ 30,000 of the loan in fiscal 2021.

The remaining $ 7,906 (C$10,000) of the loan payable is anticipated to be forgiven as directed under this program in the year ended August 31, 2023.

We continue to actively monitor the evolving effects of COVID-19 and may take further actions that alter our operations, including those that may be required by federal, state, provincial, or local authorities, or that we determine are in the best interests of our employees and third parties with which we do business.

We do not know when it will become practical to relax or eliminate some or all these measures entirely.

The economic effect of a prolonged pandemic is difficult to predict and could result in material financial impact in the Company’s future reporting periods.

The economic effect of the pandemic combined with increased geopolitical uncertainty and rising inflation is expected to have an impact on the Company’s future reporting periods.

The effects are difficult to predict and could result in material financial impact on the Company’s financial results.

Significant Accounting Policies

10 unchanged sentences

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated annual financial statements and notes thereto included in our annual report filed on Form 10-K for the year ended August 31, 2021.

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.

Estimates and Judgments

The preparation of financial statements in conformity with US GAAP requires us to make certain estimates, judgments and assumptions that affect the reported 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.

Some of the Company’s accounting policies require us to make subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.

7 unchanged sentences

Pronouncements Issued but Not Yet Adopted

In October of 2021, the FASB issued an update to Government Assistance (topic 832) to increase the transparency of government assistance and its disclosure in the notes to the financial statements.

In October of 2021, the Financial Accounting Standards Board (FASB) issued an update to Government Assistance (Topic 832) to increase the transparency of government assistance and its disclosure in the notes to the financial statements.

Amendments in this update take effect for annual periods beginning after December 31, 2021.

14 unchanged sentences

Raw materials

During the period ended February 28, 2022, the Company wrote down $Nil (February 28, 2021-$ 2,482 ) in finished goods.

Work in progress

Intellectual Property

Patent costs:

all non-US based patent-related costs incurred in connection with preparing, filing, maintaining and prosecuting patent applications are expensed as incurred due to the uncertainty in the recovery of the expenditures.

Amounts incurred are classified in general and administrative expenses.

Page 10 of 33

All related costs for US patents are recognized as Intellectual Property.

When a US patent is granted, it is amortized over the remaining useful life.

Any subsequent costs incurred for a US granted capitalized patent are expensed as incurred.

The following is a list of US capitalized patents held by the Company:

12 unchanged sentences

US 10,756,180

US 11,311,559

Compositions and Methods for Enhanced Delivery of Antiviral Agents

A continuity schedule for capitalized patents is presented below:

Balance – beginning

Amortization*

Balance – ending

Patents are amortized over their 20 year legal life.

*Patents are amortized over their legal life of 20 years.

Page 11 of 33

Property & Equipment

Six Months Ended February 28, 2022

Nine Months Ended

Period Amortization

Accumulated Amortization

Net Balance February 28, 2022

Leasehold improvements

1 unchanged sentence

Lab equipment

For the six months ended February 28, 2022, amortization of $ 1,118 (February 28, 2021 - $ 6,010 ) was included in the cost of goods sold.

Year Ended August 31, 2021

For the nine months ended May 31, 2022, amortization of $ 1,339 (May 31, 2021 - $ 9,325 ) was included in the cost of goods sold.

Period Amortization

Accumulated Amortization

August 31, 2021

Leasehold improvements

5 unchanged sentences

Sales tax payable

Related party payable

Accrued Liabilities

3 unchanged sentences

In December of 2021, the Company entered a one-year media outreach agreement to SRAX Inc.

and issued 224,299 shares as consideration for an aggregate value of $ 1.2 m.

During the quarter ended February 28, 2022, the Company issued no warrants.

and issued 224,299 shares as consideration for an aggregate value of $ 1.2 m of which $ 600,000 are included in prepaid expenses and deposits.

Page 12 of 33

During the quarter ended May 31, 2022, the Company issued no warrants.

A continuity schedule for warrants is presented below:

5 unchanged sentences

Cancelled/expired

Balance February 28, 2022

A summary of warrants outstanding as of February 28, 2022, is presented below:

Balance May 31, 2022

A summary of warrants outstanding as of May 31, 2022, is presented below:

# of Warrants

6 unchanged sentences

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

The Company did not grant any options during the quarter ended February 28, 2022.

During the quarter ended May 31, 2022, the Company granted 36,700 options at a strike price of $ 3.39 with a contractual life of 5 years.

These options were awarded to employees, directors and contractors.

Page 13 of 33

A continuity schedule for stock options is presented below:

5 unchanged sentences

Balance August 31, 2021

Balance February 28, 2022 (Outstanding)

Balance February 28, 2022 (Exercisable)

Balance May 31, 2022 (Outstanding)

Balance May 31, 2022 (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:

1 unchanged sentence

Risk-free interest rate

0.85 % - 1.78

Expected life

1 unchanged sentence

Estimated fair value per option

$ 2.50 - $ 5.10

Nine Months Ended

Product sales

2 unchanged sentences

Income from operations

Product revenues of $ 17.5 k and licensing usage fees of $ 16 k represent a significant decrease in intermediate product sales and related licensing usage fees during the six months ended February 28, 2022.

Related Party Transactions

Due to related parties :

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

As at February 28, 2022, $ 6,884 , included in accrued liabilities.

At August 31, 2021 - $ 5,223 was payable to and included in due to related parties.

Product revenues of $ 112 k and licensing usage fees of $ 16 k represent a significant decrease, year over year, in intermediate product sales and related licensing usage fees during the nine months ended May 31, 2022.

Segment Information

3 unchanged sentences

Intellectual Property and Products.

Licensing revenues are significantly concentrated on one licensee.

Six Months Ended February 28, 2022

To date, licensing revenues have been significantly concentrated on one licensee.

Page 14 of 33

Nine Months Ended

Consolidated Total

6 unchanged sentences

( 2,439,796 )

Six Months Ended February 28, 2021

( 5,870,492 )

Nine Months Ended

Consolidated Total

3 unchanged sentences

( 3,909,802 )

( 3,398,163 )

Discontinued operations

1 unchanged sentence

( 3,905,217 )

( 2,883,483 )

Capital Asset by Region

Addition Canada

Net Balance Canada

Total Net Balance

Six Months Ended February 28, 2022

Nine Months Ended May 31, 2022

Leasehold Improvements

2 unchanged sentences

Capital Asset by Region

Net Balance US

Net Balance Canada

8 unchanged sentences

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

Page 15 of 33

Right of use assets – operating leases

7 unchanged sentences

Discount rate

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

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 May 31, 2022:

Total lease payments

2 unchanged sentences

current obligations under leases

Page 16 of 33

Prepaid Expenses and Deposits

Prepaid expenses consist of the following at February 28, 2022, and August 31, 2021:

Prepaid expenses consist of the following at May 31, 2022, and August 31, 2021:

Advertising & conferences

4 unchanged sentences

August 31, 2021

February 28, 2022

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.

( 1,102,236 )

Unrealized gains and losses on marketable securities are derived from Hill Street Beverage Company Inc.

(“Hill Street”) (TSX-V:

HILL) common stock holdings and are due, in Managements opinion, to economic uncertainties in the market sector.

Management views the unrealized losses as temporary impairments based on our evaluation of available evidence.

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 to Hill Street Beverage Company (“Hill Street”) (TSX-V:

BEER) for gross proceeds of C$ 3,850,000 .

With the closing of the sale on December 10, 2020, the Company received C$ 350,000 in cash, 6,031,363 restricted common shares at a fair value at C$ 500,000 as the first required equity-based payment, and a C$ 2,000,000 promissory note bearing interest at 10 % per annum.

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

Pursuant to the terms of the transaction, the Company will receive an additional C$ 1,000,000 worth of common shares of Hill Street of which C$ 643,939 worth of Hill Street shares were issued to the Company on August 9, 2021, and the remaining C$ 356,061 worth of Hill Street shares are to be issued on April 9, 2022.

To date, minimal interest payments have been received and are included in Other Income.

Pursuant to the terms of the transaction, the Company received an additional C$ 1,000,000 worth of common shares of Hill Street and are included in Marketable Securities.

Gain on asset disposal

4 unchanged sentences

Promissory note

Page 17 of 33

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:

SIX MONTHS ENDED

Nine Months Ended

Operating Expenses

1 unchanged sentence

The following table presents cash flows of discontinued operations:

SIX MONTHS ENDED

Nine Months Ended

Cash flows used in discontinued operating activities

3 unchanged sentences

Subsequent Events

On March 8, 2022 Lexaria granted 36,700 stock options bearing an exercise price of $ 3.39 for a period of five years ending March 8, 2027.

The Options were issued pursuant to the Company’s registered Incentive Equity Plan and any common shares issued upon the exercise of the Options will be unrestricted securities.

As disclosed on our Form 8-K filed on June 9, 2022, Lexaria successfully filed a pre-Investigational New Drug (“IND”) meeting request with the US Food and Drug Administration (“FDA”).

The filing has been confirmed and a target date of July 30, 2022 for the meeting has been provided by the FDA, subject to certain conditions being met.

The request for a pre-IND meeting formally initiates communications with the FDA regarding development of Lexaria's DehydraTECH-CBD for the treatment of hypertension.

The purpose of the pre-IND meeting will be to confirm the details and acceptability of Lexaria's ongoing IND-enabling development program to be completed thereafter prior to proceeding with its full IND application filing.

As disclosed on our Form 8-K filed on June 3, 2022, the Company announced the signing of a commercial licensing agreement with Premier Wellness Science Co., Ltd.

of Japan (“Premier”).

Minimum quarterly payments to Lexaria will begin September 1, 2022, and, during the first five years of the Agreement, amount to US$ 4,527,500 .

Under the terms of the Agreement, Premier is purchasing the rights to DehydraTECH technology for the Japanese non-pharmaceutical market for use with cannabidiol (“CBD”) and hemp ingredients in oral liquid and non-liquid products, as well as for topical, hair-care, lip-care and cosmetics products.

Premier Wellness Science Co., Ltd.

is a wholly-owned subsidiary of Premier Anti-Aging Co., Ltd.

which is listed on the Tokyo Stock Exchange Mothers division with securities code 4934.

Page 18 of 33

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