What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-11-28 compared with 2021-11-29 · 238 added, 315 removed, 354 unchanged (61% of the section changed)

5 unchanged sentences

We have audited the accompanying consolidated balance sheets of Lexaria Bioscience Corp.

(the “Company”) as of August 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, cash flows, and stockholders’ equity for each of the two years in the period ended August 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

(the “Company”), as of August 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the years ended August 31, 2022 and 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Lexaria Bioscience Corp.

as of August 31, 2022 and 2021, and the results of its operations and its cash flows for the years ended August 31, 2022 and 2021 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

1 unchanged sentence

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

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/s/ DAVIDSON & COMPANY LLP

Vancouver, Canada Chartered Professional Accountants

Vancouver, Canada

Chartered Professional Accountants

November 25, 2022

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PCAOB ID - 731

LEXARIA BIOSCIENCE CORP.

11 unchanged sentences

Accounts payable and accrued liabilities

Deferred revenue

Due to related party

Lease liabilities

5 unchanged sentences

Share capital

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

Issued and outstanding:

5,726,699 common shares at August 31, 2021

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

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

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

Additional paid-in capital

5 unchanged sentences

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

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

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

LEXARIA BIOSCIENCE CORP.

27 unchanged sentences

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

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LEXARIA BIOSCIENCE CORP.

17 unchanged sentences

Lease accretion

Gain on forgiveness of loan

Change in working capital

8 unchanged sentences

Cash flows from (used in) investing activities

Sale of marketable securities

Intellectual property

1 unchanged sentence

Net cash from (used in) investing activities

Cash flows from financing activities

$ ( 180,640 )

Cash flows from (used in) financing activities

Long term loan

2 unchanged sentences

Proceeds from warrant exercises

Net cash from financing activities

Net cash from (used in) financing activities

Increase in cash

( 5,104,579 )

Cash, beginning of year

2 unchanged sentences

Income taxes paid in cash

Marketable securities received on amounts receivable

Marketable securities received on accounts receivable

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

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LEXARIA BIOSCIENCE CORP.

2 unchanged sentences

Dollars except number of shares)

ADDITIONAL PAID-IN CAPITAL $

TOTAL STOCKHOLDERS’

STOCKHOLDERS’

Balance August 31, 2020

6 unchanged sentences

( 4,027,006 )

Non-controlling interest

3 unchanged sentences

Stock based compensation

Warrants issued for services

Exercise of warrants

Private placement

( 7,269,324 )

Non-controlling interest

2 unchanged sentences

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

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LEXARIA BIOSCIENCE CORP.

4 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 (“API”) using our proprietary DehydraTECH drug delivery technology.

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

The Company has relationships with several consumer products companies in the CBD and nutraceuticals spaces that use Lexaria’s technology in consumer goods being sold online and at retailers in the US and Canada.

Revenues are generated from licensing contracts for the Company’s patented DehydraTECH technology based on the terms of use and defined geographic and licencing arrangements.

We derive income from our third party contracted manufacturing of B2B DehydraTECH enhanced products made to customer specifications that are sold online and in-store in the US and Canada.

We also perform contract services in R&D for customer specific formulations that are used in comparison testing to customers existing products.

Going Concern Consideration

The Company’s consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States (“US GAAP”) applicable to a going concern which assumes the Company will have sufficient funds to pay it operational, research and development and capital expenditures for a period of at least 12 months from the date this financial report.

Since inception, the Company has incurred significant operating and net losses.

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.

The losses attributable to shareholders were $ 7.34 m, $ 4.2 m and $ 4.1 m for the years ended August 31, 2022, 2021 and 2020, respectively.

As of August 31, 2022, we had an accumulated deficit of $39.1m.

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 .

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 corporate expenditures, additional revenues received 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 with 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.

We did not receive any proceeds from the sale of shares or exercise of convertible securities in the year ended August 31, 2022.

We may offer additional securities for sale during our fiscal year 2023 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 August 31, 2021, the Company had cash and cash equivalents of approximately $ 10.9 m, carries no debt.

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 the audited consolidated financial statements.

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As of August 31, 2022, the Company had cash and cash equivalents of approximately $ 5.8 m and carries no significant debt other than amounts payable in the short term.

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

Impacts of COVID-19 Pandemic

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As of August 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 timely procurement of ingredients and supplies used in both our R&D activities and production.

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 B2B 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.

There may be further actions we must take 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 other 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.

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.

1 unchanged sentence

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

The remaining $7,926 (C$ 10,000 ) of the loan payable is anticipated to be forgiven as directed under this program in the year ended August 31, 2022.

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 other 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 remaining C$ 10,000 was forgiven and included as net loss in 2022.

Significant Accounting Policies

a) Basis of presentation

Basis of presentation and consolidation

These consolidated financial statements have been prepared in conformity with generally accepted accounting principles of the United States (“US GAAP”) and pursuant to the rules and regulations of the SEC.

All amounts, unless otherwise stated, are in U.S.

These consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries;

Lexaria Pharmaceutical Corp., Lexaria Hemp Corp., Lexaria CanPharm ULC, PoViva Corp., Lexaria CanPharm Holding Corp., and Kelowna Management Services Corp.

The Company owns 83.3% of Lexaria Nicotine LLC and the remaining 16.7% is owned by Altria Ventures Inc.

(an indirect wholly owned subsidiary of Altria Group, Inc.).

All significant intercompany balances and transactions have been eliminated upon consolidation.

On December 9, 2020, the Company completed the sale of the business assets in the THC related segment of our subsidiary Lexaria CanPharm ULC.

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

On January 11, 2021, the Company effected a 1-for-30 reverse stock split with no fractional shares issued.

All share, option, warrant and per share information within these consolidated financial statements have been retroactively restated accordingly.

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b) Revenue recognition

Licensing revenue from intellectual property

We recognize revenue for license fees at a point in time following the transfer of our intellectual property, namely our patented lipid nutrient infusion technology DehydraTECH for infusing Active Pharmaceutical Ingredients (“API”), to the licensee, which occurs on delivery of documentation.

Usage fees from intellectual property

We recognize revenue for usage fees when usage of our DehydraTECH intellectual property occurs by licensees infusing an API into one or more of their product lines for sale.

Product revenue

Revenue from the sale of products is recognized when the sales price is fixed or determinable, there is persuasive evidence that an arrangement exists, delivery has occurred and collectability is reasonably assured.

c) Inventory and cost of sales

The Company’s inventory consists of raw materials, work in progress and finished goods.

In all classes, inventory is valued at the lower of cost or market.

Cost is determined on a first-in, first-out basis.

Cost of sales includes all expenditures incurred in bringing the goods to the point of sale.

Inventory costs and costs of sales include direct costs of the raw material, inbound freight charges, warehousing costs, handling costs (purchasing and receiving) and overhead expenses.

d) Cash and cash equivalents

Cash and cash equivalents

Cash and cash equivalents include cash-on-hand and demand deposits with financial institutions and other short-term investments with maturities of less than three months when acquired and convertible to known cash amounts.

The Company had no cash equivalents as at August 31, 2022 or August 31, 2021.

We have elected the package of practical expedients allowed under ASC Topic 842, Leases (“ASC 842”) which permits us to account for our existing operating leases as operating leases under the new guidance, without reassessing our prior conclusions about lease identification, lease classification and initial direct cost.

As a result of the adoption of the new lease accounting guidance on September 1, 2019, we recognized operating lease right-of-use assets of $ 160,289 and operating lease liabilities of $ 158,773 .

We determined the initial classification and measurement of our right-of-use assets and lease liabilities at the lease commencement date and thereafter if modified.

The lease term includes any renewal options and termination options that we are reasonably certain to exercise.

The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable;

otherwise, we use our incremental borrowing rate.

The incremental borrowing rate is determined by using the rate of interest that we would pay to borrow on a collateralized basis an amount equal to the lease payments for a similar term and in a similar economic environment.

Operating lease expenses are recognized on a straight-line basis, unless the right-of-use asset has been impaired, over the reasonably certain lease term based on the total lease payments.

They are included in operating expenses in the consolidated statements of operations and comprehensive loss.

For operating leases that reflect impairment, we will recognize the amortization of the right-of-use asset on a straight-lined basis over the remaining lease term with rent expense still included in operating expenses in the consolidated statements of operations and comprehensive loss.

For all leases, rent payments that are based on a fixed index or rate at the lease commencement date are included in the measurement of lease assets and lease liabilities at the lease commencement date.

We have elected the practical expedient to not separate lease and non-lease components.

Our non-lease components are primarily related to property taxes and maintenance, which vary based on future outcomes, and thus differences to original estimates are recognized in rent expense when incurred.

Intellectual property

Capitalized intellectual property represents US registered patents that include legal costs incurred in pursuing patents applications in the United States.

When such applications result in patents being issued, the directly related capital cost is amortized over the life of the patent on a straight-line basis.

Equipment is stated at cost less accumulated depreciation and impairment and depreciated using the straight-line method over their useful lives of the various asset classes.

Laboratory equipment, office furniture and computer equipment are depreciated over 3 - 10 years.

Laboratory and computer equipment and office furniture are depreciated over 3 - 10 years.

Certain production equipment is depreciated by units of production method.

Leasehold improvements are amortized over the term of the related leases.

f) Intellectual property

Capitalized patent costs represent legal costs incurred in pursuing patents applications in the United States.

When such applications result in patents being issued, the directly related capital cost is amortized over the life of the patent on a straight-line basis.

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g) Stock-based compensation

The Company accounts for its stock-based compensation awards whereby all stock-based payments to employees, including grants of employee stock options, are recognized as expenses in the statements of operations based on the fair value at grant date.

For stock options granted to employees, executives and to members of the Board of directors for their services, the Company estimates the grant date fair value of each option award using the Black-Scholes option-pricing model.

Impairment of long-lived assets

Long-lived assets, including equipment and intangible assets, namely the Company’s patents, are assessed for potential impairment when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered.

An impairment loss is recognized when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value.

The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.

Any required impairment loss is measured as the amount by which the carrying amount of the long-lived asset exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to the profit or loss.

Intangible assets with indefinite lives are tested for impairment annually and in interim periods if certain events occur indicating that the carrying value of the intangible assets may be impaired.

Revenue recognition

Licensing revenue from intellectual property

Our revenues from licenses that grant the right to access our intellectual property, which we consider symbolic licenses of IP, are recognized over time following the transfer and use of our patented infusion technology DehydraTECH .

Royalty revenues are recognized in the period in which our licensees sell the related products and recognizes the related revenue, which in certain cases may require us to estimate our royalty revenue.

Usage fees from intellectual property

We recognize usage fees from B2B clients in the period in which the counterparty completes the manufacturing which incorporates DehydraTECH enabled APIs into the related product.

We generally recognize revenue when we have satisfied all contractual obligations and are reasonably assured of collecting the resulting receivable.

We are often entitled to bill our customers and receive payment from our customers in advance of recognizing the revenue.

Product revenue

We generally recognize revenue when we have satisfied all contractual obligations and are reasonably assured of collecting the resulting receivable.

We are often entitled to bill our customers and receive payment from our customers in advance of recognizing the revenue.

Cost of sales

Cost of sales includes all expenditures incurred in bringing the goods to the point of sale This includes third-party manufacturing and handling costs, direct costs of the raw material, inbound freight charges, warehousing costs, and applicable overhead expenses.

Research and development

Research and development costs are expensed as incurred.

These expenditures are comprised of both in-house research programs and through third-party contracts including consultants, academic and non-profit institutions, contract manufacturing, and other expenses.

Intellectual property expenses

Costs associated with intellectual property-related matters are expensed as incurred and included in general and administrative expenses within the consolidated statements of operations.

Stock-based compensation

The Company accounts for its stock-based compensation awards whereby all stock-based grants are recognized as expenses in the statements of operations based on the fair value at grant date subject to vesting dates.

The grant date fair value of each option award is estimated using the Black-Scholes option-pricing model.

The use of the Black-Scholes option-pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the common stock.

Stock-based payments issued to non-employees are recorded at their fair values and are periodically revalued as the equity instruments vest and are expensed over the related service period.

The Company recognizes stock-based compensation expense on vesting for equity instruments granted.

h) Loss per share

The calculation of loss per share uses the weighted average number of shares outstanding during the year.

Diluted net income per share includes the effect, if any, from the potential exercise or conversion of securities, such as restricted stock and stock options, which would result in the issuance of incremental shares of common stock.

Diluted loss per share is equivalent to basic loss per share if the potential exercise of the equity-based financial instruments was anti-dilutive.

i) Foreign currency translation

Foreign currency translation

The Company maintains its accounting records in US dollars.

1 unchanged sentence

at the year end, monetary assets and liabilities are translated at the exchange rate in effect at that date.

The resulting foreign exchange gains and losses are included in profit or loss.

j) Financial instruments

The resulting foreign exchange gains and losses are included within the consolidated statements of operations.

Loss per share

The calculation of loss per share uses the weighted average number of shares outstanding during the year.

Diluted loss per share is equivalent to basic loss per share if the potential exercise of the equity-based financial instruments was anti-dilutive.

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method.

Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the year in which the differences are expected to reverse.

Comprehensive loss

The Company discloses comprehensive loss, its components, and accumulated balances on its Statement of Stockholders’ Equity.

Comprehensive loss comprises equity changes except those transactions resulting from investments by stakeholders and owners and distributions to owners, if any.

Financial instruments

When measuring fair value, the Company seeks to maximize the use of observable inputs and minimize the use of unobservable inputs.

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Level 1 - Quoted prices in active markets for identical assets or liabilities;

Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable and

Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable;

Level 3 - Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

The Company’s financial instruments consist primarily of cash, marketable securities, accounts receivable and payable, accrued liabilities, loan payable and due to related parties.

The carrying amounts of cash, accounts receivable and payable, accrued liabilities, loan payable and due to related parties approximate their fair values due to their short maturities or quoted market prices.

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The Company’s financial instruments consist primarily of cash, marketable securities, accounts receivable and payable, accrued liabilities and loan payable.

The carrying amounts of instruments approximate their fair values due to their short maturities or quoted market prices.

The Company’s headquarters and operations are located in Canada which results in exposure to market risks from fluctuations in foreign currency rates.

The foreign currency exchange risk is the financial risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates.

Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk as the impact of a change in a few basis points for USD/CAD is not expected to be material.

k) Income taxes

l) Impairment of long-lived assets

Long-lived assets, including equipment and intangible assets, such as the Company’s patents, are assessed for potential impairment when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered.

An impairment loss is recognized when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value.

The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.

Intangible assets with indefinite lives are tested for impairment annually and in interim periods if certain events occur indicating that the carrying value of the intangible assets may be impaired.

m) Comprehensive income

The Company discloses comprehensive income (loss), its components, and accumulated balances on its Statement of Stockholders’ Equity.

Comprehensive income (loss) comprises equity changes except those transactions resulting from investments by stakeholders and owners and distributions to owners.

n) Credit risk and receivable concentration

Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk as the impact of a rate changes for USD/CAD dollars is not expected to be material.

Credit risk and receivable concentration

The Company places its cash with a high credit quality financial institution.

As of August 31, 2021, the Company had approximately $ 10,917,797 on deposit.

As of August 31, 2022, the Company had approximately $ 5.8 m on deposit.

(August 31, 2021:

$ 1,293,749 ).

Included in amounts relievable is $ 278,107 which represent the value of shares receivable from the sale of assets during the year ended August 31, 2021.

In the year ended August 31, 2022, one licensee accounted for 100 % (2021 – 72 %) of revenues.

As at August 31, 2021, we had $Nil (2020 – $ 143,500 ) in IP Territory license fees receivable.

These receivable amounts are based on contractual terms for payments that are payable within twelve months of signing the definitive agreements or routine IP usage fees.

The Company incurred $ 50,500 in bad debt in fiscal 2021 (2020 – $ 50,000 ) primarily due to cancellations of IP license agreements.

At fiscal year end 2022, we had $ 37,248 (2021 - $Nil) in licence fees receivable.

The Company incurred a bad debt in fiscal 2021 ($ 50,500 ) primarily due to cancellations of IP license agreements.

As at August 31, 2022, the Company had $ 84,162 (2021 - $ 47,741 ) in sales tax receivable.

The Company considers its credit risk to be low for such receivables.

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o) Commitments and contingencies

Commitments and contingencies

The Company policy is to record accruals for any such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.

In the event that estimates, or assumptions prove to differ from actual results, adjustments are made in subsequent periods to reflect more current information.

Historically, the Company has not experienced any material claims.

The Company, from time to time, may be subject to legal claims and proceedings related to matters arising in the ordinary course of business.

Management has no knowledge of any such claim against the Company with, at minimum, a reasonable possibility that a material loss may be incurred.

p) Research and development

Research and development costs are expensed as incurred.

These expenditures are comprised of both in-house research programs including consultants and employee-related expenses and through third-party contracts including consultants, research organizations and contract manufacturing.

On September 1, 2019, we adopted ASC Topic 842, Leases (“ASC 842”) using the optional transition method and applied the standard only to leases that existed at that date.

Under the optional transition method, we do not need to restate the comparative periods in transition and will continue to present financial information and disclosures for periods before September 1, 2019, in accordance with ASC Topic 840.

We have elected the package of practical expedients allowed under ASC Topic 842, which permits us to account for our existing operating leases as operating leases under the new guidance, without reassessing our prior conclusions about lease identification, lease classification and initial direct cost.

As a result of the adoption of the new lease accounting guidance on September 1, 2019, we recognized operating lease right-of-use assets of $ 160,289 and operating lease liabilities of $ 158,773 .

We determined the initial classification and measurement of our right-of-use assets and lease liabilities at the lease commencement date and thereafter if modified.

The lease term includes any renewal options and termination options that we are reasonably certain to exercise.

The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable;

otherwise, we use our incremental borrowing rate.

Rent expense for operating leases is recognized on a straight-line basis, unless the right-of-use asset has been impaired, over the reasonably certain lease term based on the total lease payments and is included in operating expenses in the consolidated statements of operations and comprehensive loss.

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We have elected the practical expedient to not separate lease and non-lease components.

Basis of Consolidation

These consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries;

Lexaria Pharmaceutical Corp., Lexaria Hemp Corp., Lexaria CanPharm ULC, PoViva Corp., and Kelowna Management Services Corp.

The Company owns 83.3 % of Lexaria Nicotine LLC and the remaining 16.7 % is owned by Altria Ventures Inc.

(an indirect wholly owned subsidiary of Altria Group, Inc.).

All significant intercompany balances and transactions have been eliminated upon consolidation.

Recent Accounting Guidance

Pronouncements Issued but Not Yet Adopted

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and transition date of January 1, 2023.

These standards require that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks.

For available-for-sale debt securities with unrealized losses, these standards now require allowances to be recorded instead of reducing the amortized cost of the investment.

These standards limit the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases.

The Company does not currently expect the adoption of these standards to have a material impact on its consolidated financial statements.

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 year.

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

2 unchanged sentences

Changes in the accounting estimates used by the Company are reasonably likely to occur from time to time, which may have a material effect on the presentation of financial condition and results of operations.

The Company reviews these estimates, judgments, and assumptions periodically and reflect the effects of revisions in the period in which they are deemed to be necessary.

Management reviews our estimates, judgments, and assumptions periodically and reflect the effects of any revisions in the period in which they are deemed to be necessary.

We believe that these estimates are reasonable.

1 unchanged sentence

Significant accounting estimates and assumptions are used for, but not limited to:

a) The Valuation of Deferred Tax Assets

Revenue Recognition

The Company records revenue from out-licensing our technology, including the License Agreement with Premier Wellness Science Co.

Judgment is necessary to determine the appropriate amount of revenue to be recognized as the Company fulfils its obligations under these agreements.

The Company has granted the counterparty a license to develop and commercialize the underlying licensed product and these agreements contain license fee payments, sales-based royalty payments and additional performance obligations related to the license after delivery.

The Valuation of Deferred Tax Assets

Judgment is required in determining whether deferred tax assets are recognized on the balance sheet.

1 unchanged sentence

Due to the Company’s history of losses, deferred tax assets have not been recognized by Lexaria.

b) Value of Stock Options and Warrants

The Company provides compensation benefits to its employees, directors, officers, and consultants, through a stock option plan.

Value of Stock Options and Warrants

The Company provides compensation benefits to its employees, officers, directors, and consultants, through a stock option plan.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model.

4 unchanged sentences

All estimates used in the model are based on historical data which may not be representative of future results.

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c) Disposals of Assets - Value of Note Receivable

The Asset Purchase Agreement for the sale of assets to Hill Street Beverages included C$2m note receivable as partial payment of the agreement.

Disposals of Assets - Value of Note Receivable

The Asset Purchase Agreement for the sale of assets to Hill Street Beverages included C$2m note (the “Note”) receivable as partial payment of the agreement.

The Note does not contain a fixed repayment schedule nor a maturity date.

The repayment of the Note is based on the purchaser repaying the outstanding value of the Note and interest from the future revenues generated from an untested market with no existing revenue streams.

Therefore, with any repayment being highly doubtful, management determined at that time that the value of the note to be notional and recorded the note at a $NIL value for accounting purposes.

Any subsequent payment of principle and/or interest is to be recorded in the period received as income.

Recent Accounting Guidance

Pronouncements Issued but Not Yet Adopted

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and transition date of January 1, 2023.

For available-for-sale debt securities with unrealized losses, these standards now require allowances to be recorded instead of reducing the amortized cost of the investment.

The Company does not currently expect the adoption of these standards to have a material impact on its consolidated financial statements.

Therefore, with any repayment being highly doubtful, management determined at that time and as at August 31, 2022 & 2021 that the value of the note to be notional and recorded the note at a $Nil value for accounting purposes.

Marketable Securities

The components of Marketable Securities were as follows:

Unrealized Gains

Unrealized Losses

August 31, 2020

August 31, 2021

August 31,2022

( 1,102,236 )

Marketable securities represented the common shares of Hill Street Beverage Company Inc.

held by Lexaria.

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

In Management’s opinion based on the evaluation of available information at the year ended August 31, 2022, unrealized losses represent temporary impairments.

Accounts and Other Receivables

3 unchanged sentences

Sales tax receivable

Page 62 of 90

Raw materials

Work in progress

Finished goods

During the year ended August 31, 2021, the Company divested its operations in on-line sales of consumer products and as a result finished goods inventory valued at $ 44,851 was expensed as advertising and promotion with the goods being donated to a registered charity.

A further $ 2,482 (2020 - $ 8,240 ) of inventory was written off to reflect its net realisable value.

In the year ended August 31, 2022, inventory valued at $2,465 (2021 $2,482) was written off to reflect its net realisable value.

In the year ended August 31, 2021, the Company divested its operations in on-line sales of consumer products and as a result finished goods inventory valued at $44,851 was expensed as advertising and promotion with the goods being donated to a registered charity.

Prepaid Expenses

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

Advertising and conferences

Licence, filing fees, dues

Office and insurance

Capital Financing

Intellectual Property

1 unchanged sentence

Issued Patent #

Patent Issuance Date

Patent Certificate Grant Date

Patent Family

9 unchanged sentences

US 10,756,180

US 11,311,559

Compositions and Methods for Enhanced Delivery of Antiviral Agents

Schedule of continuity for capitalized patents:

2 unchanged sentences

Patents are amortized over their legal life of 20 years.

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Property & Equipment

Year Ended August 31, 2021

Accumulated Amortization

Year Ended Aug.

Leasehold improvements

Furniture fixtures equipment

Furniture & fixtures

Lab equipment

Year Ended August 31, 2020

Accumulated Amortization

Year Ended Aug.

Leasehold improvements

Furniture fixtures equipment

Furniture & fixtures

Lab equipment

During the year ended August 31, 2021, $ 10,926 (2020 - $ 1,928 ) of amortization was included in the cost of inventory.

During the year ended August 31, 2022, amortization of $ 3,655 (2021 - $ 10,926 ) was included in the cost of goods sold.

Accounts Payable and Accrued Liabilities

1 unchanged sentence

Vendors payable

Sales tax payable

Accrued Liabilities

1 unchanged sentence

Vendors payable

Related Party Transactions

Related party transactions, Aug 31, 2022, ($Nil), Aug 31 2021, ($ 5,223 ) are included in accounts payable and represent expenses incurred in the ordinary course of business.

Licensing Revenue

Research & Development

Other Revenue

The Company recognized B2B product revenues of $ 113,438 (2021 - $ 383,179 ) that relate to sales of our intermediate products for use by four B2B customers in their products.

Licensing revenue consist of IP licensing fees for transfer of the DehydraTECH technology in line with definitive agreements and also includes royalty fees.

The Company recognized $ 54,560 (2021 - $ 334,974 ) in licensing revenue during the year.

The following table reconciles the income tax benefit at the U.S.

Federal statutory rate to income tax benefit at the Company’s effective tax rates as at August 31, 2022 and 2021:

Loss before taxes

( 4,169,832 )

Expected income tax recovery

Non-deductible items

Change in estimates

Effect of changes in foreign and long-term tax rates

Change in valuation allowance

Total income taxes

Deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes.

Deferred tax assets at August 31, 2022 and 2021 are comprised of the following:

Non-capital losses

Marketable securities

Total unrecognized deferred tax assets

The Company has net operating loss carry-forwards of approximately $ 36,387,000 which may be carried forward to apply against future year income tax for U.S.

tax purposes.

Common Shares and Warrants

Fiscal 2022 Activity

On January 11, 2021, the Company filed an amendment and restatement of its articles of incorporation to effectuate a 1-for-30 reverse stock split of the issued and outstanding share of common stock of the Company.

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During the year ended August 31, 2021, the Company closed an underwritten public offering for an aggregate total of 2,102,856 units priced at $ 5.25 .

Each unit consists of one common share and one share purchase warrant entitling the holder to acquire one common share, for a period of five years, at $6.58 per share.

The Company paid fees of $ 1,568,499 and issued 227,161 broker warrants with a term of 24 months, each exercisable into one common share at $ 6.58 per share.

The net proceeds of the offering were $ 9,471,497 after deducting underwriters discount, fees and expenses.

During the year ended August 31, 2021, the Company issued 610,189 common shares on the exercise of warrants for proceeds of $ 4,015,043 .

During the year ended August 31, 2021, the Company granted 300,000 warrants with an exercise price of $ 9.00 pursuant to consulting agreements.

Using the Black-Scholes pricing model, the warrants were valued at $ 785,895 and were recorded as a consulting expense.

Subsequent to the grant, 200,000 warrants were repriced at $ 7.00 .

During the year ended August 31, 2022, the Company issued 224,299 restricted shares valued at $ 1,200,000 for payment of contracted services.

We did not issue any warrants, no warrants were exercised, and 25,292 warrants expired.

A summary of share issuances for the year ended August 31, 2022, is presented below:

Type of Issuance

Number of Shares

Total Value $

Warrant exercise

1 unchanged sentence

Per agreements (1)

(1) Fees of $ 1,568,499 were paid for total net receipt of $ 9,471,497 .

(1) The Company awarded restricted common shares as required by consulting contracts.

Fiscal 2020 Activity

During the year ended August 31, 2020, the Company closed two tranches of a non-brokered private placement for an aggregate total of 60,792 units priced at $ 13.50 each.

Each unit consisted of one common share and one share purchase warrant.

Each warrant shall entitle the holder to acquire one common share of the Company for a period of two years at a price of $ 24.00 per Share until the first anniversary of issuance, and thereafter at a price of $36.00 until the second anniversary of issuance.

The Company paid $ 3,938 in fees and issued 292 broker warrants having a term of 24 months.

Each warrant is exercisable into one common share at $24.00 until the first anniversary of issuance, and thereafter at $ 36.00 until the second anniversary of issuance.

The fair value of these broker warrants was determined to be $ 1,850 , which was recorded as a share issuance cost within additional paid in capital for a net effect of $Nil.

The Company also issued an aggregate of 294,540 units at $ 6.90 , in two tranches, for gross proceeds of $ 2,039,229 .

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

The warrants are exercisable on issuance at $ 10.50 with 267,608 expiring May 6, 2025, and 21,637 expiring on May 11, 2025 .

Pursuant to the agent agreement $ 151,623 and 21,637 broker warrants with a price of $ 10.50 , expiring May 6, 2025, were paid.

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

The Company paid related legal fees on the offering of $ 65,600 .

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Presented below is a summary of options exercised, share issuance and as per agreement requirements for the year ended August 31, 2020:

Type of Issuance

Number of Shares

Total Value $

Warrants exercised

Options exercised

Private placement (1)

Per agreements (2)

(1) Total fees of $ 221,889 were paid for total net receipt of $ 2,638,025 .

(2) The Company awarded the restricted common shares as required by consulting contracts.

In the year ended August 31, 2020, the Company granted a total of 16,667 warrants at $ 9.00 pursuant to a consulting agreement valued at $ 98,081 , recorded as a consulting expense and recognized a total of $168,833 in consulting expense as per vesting requirements for warrants granted to consultants during the year ended August 31, 2020.

Presented below is a continuity schedule for warrants:

Number of Warrants

Weighted Average

Exercise Price $

Balance August 31, 2020

6 unchanged sentences

Risk-free interest rate

0.36 %- 2.87 %

Expected life

1 unchanged sentence

Estimated fair value per warrant

$ 8.40 – $ 16.20

Page 66 of 90

Presented below is a summary of warrants outstanding as of August 31, 2022:

Number of Warrants

Weighted Average Remaining Contractual Life

Weighted Average Remaining

Contractual Life

Weighted Average Exercise Price $

1.63 - 2.68 years

3.68 – 3.70 years

2.62 – 3.54 years

Fiscal 2021 Activity

During the year ended August 31, 2021, the Company closed an underwritten public offering for an aggregate total of 2,102,856 units priced at $ 5.25 .

Each unit consists of one common share and one share purchase warrant entitling the holder to acquire one common share, for a period of five years, at $ 6.58 per share.

The Company paid fees of $ 1,568,499 and issued 227,161 broker warrants with a term of 24 months, each exercisable into one common share at $6.58 per share.

The net proceeds of the offering were $ 9,471,497 after deducting underwriters discount, fees and expenses.

During the year ended August 31, 2021, the Company issued 610,189 common shares on the exercise of warrants for proceeds of $ 4,015,043 .

The Company granted 300,000 warrants with an exercise price of $ 9.00 pursuant to consulting agreements in fiscal 2021.

Using the Black-Scholes pricing model, the warrants were valued at $ 785,895 and were recorded as a consulting expense.

Subsequent to the grant, 200,000 warrants were repriced at $ 7.00 .

Stock Options

The Company established an Equity Incentive Plan whereby the board of directors may, from time to time, grant up to 261,290 stock options to directors, officers, employees, and consultants.

The Company established an Equity Incentive Plan whereby our Board may grant up to 261,290 stock options to directors, officers, employees, and consultants.

During the Company’s 2021 Annual Meeting of Shareholders, shareholders voted in favour of increasing the number of allowable stock options by an additional 249,143 options.

The aggregate number of shares issuable under the Equity Incentive Plan is now 510,433 shares, 10% of the Company’s issued share capital at that time.

Stock options granted must be exercised no later than five years from the date of grant or such lesser period as determined by the Company’s Board of directors.

The aggregate number of shares issuable under the Equity Incentive Plan is 510,433 shares, representing 10% of the Company’s issued share capital at the time of the 2021 Annual General Meeting.

Stock options granted must be exercised no later than five years from the date of grant as determined by our Board.

The exercise price of an option is equal to or greater than the closing market price of the Company’s common shares on the day preceding the date of grant.

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

The Company estimates the fair value of each stock option award on the measurement date using a Black-Scholes option pricing model.

During the year ended August 31, 2021, the Company cancelled its 2014 Stock Option Plan.

All outstanding options expired during the year.

During the year ending August 31, 2020, the 2007 Equity Incentive Plan and the 2010 Stock Option Plan were cancelled.

Any outstanding options were cancelled and reissued under the Equity Incentive Plan.

Vesting terms are set by our Board.

The estimated fair value of each stock option award is estimated on the date of grant using Black-Scholes option pricing model.

Fiscal 2022 Activity

1 unchanged sentence

Exercise Price $

During the year, 87,935 options at a strike price of $ 9.60 were cancelled and re-issued with a strike price of $ 7.08 .

Page 67 of 90

August 31, 2022

Fiscal 2021 Activity

1 unchanged sentence

Exercise Price $

(1) 132,067 vested, and 29,533 are subject to vesting provisions.

August 31, 2021

During the year ended August 31, 2021 87,935 previously granted options at a strike price of $9.60 were cancelled and re-issued at $ 7.08 .

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, 2020

4 unchanged sentences

Balance August 31, 2022 (Exercisable)

The intrinsic value of stock option awards that vested during the fiscal year represents the value of the Company’s closing stock price on the last trading day of the fiscal year in excess of the exercise price multiplied by the number of options that vested.

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

133 % – 134 %

Risk-free interest rate

6 unchanged sentences

$ 4.00 – $ 4.86

Page 68 of 90

Licensing revenue

Other revenue

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

The licensing fees include payments due upon transfer of the technology and installment payments that are receivable within 12 months.

The Company recognized $ 334,974 of licensing revenue (2020 - $ 232,909 ) and $ 383,179 of B2B product revenues (2020 - $ 151,634 ) that relate to sales of our intermediate products for use by nine B2B customers in their products.

Related Party Transactions

Due to related parties:

As at August 31, 2021, $5,233 (August 31, 2020 - $ 58,704 ) was payable to related parties included in due to related parties.

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

Commitments, Significant Contracts and Contingencies

Right of Use Assets - Operating Lease

Corporate offices and R&D lab space is leased in Kelowna, British Columbia, Canada until November 15, 2023, with an optional five-year extension.

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:

Total lease assets

Lease payments

Interest accretion

Total lease liabilities

Operating lease cost

Operating cash flows for lease

Remaining lease term

Discount rate

Pursuant to the terms of the Company’s lease agreements in effect at August 31, 2022, the following table summarizes the Company’s maturities of operating lease liabilities:

Total lease payments

imputed interest

Present value of operating lease liabilities

current obligations under leases

Segment Information

5 unchanged sentences

For year ended August 31, 2022

Consolidated Total

External revenue

3 unchanged sentences

( 7,383,653 )

( 1,529,553 )

( 1,203,876 )

( 1,430,702 )

( 4,164,131 )

For year ended August 31, 2021

Consolidated Total

External revenue

8 unchanged sentences

( 1,430,702 )

Page 69 of 90

( 4,164,131 )

Capital Asset by Region

Net Balance Canada

Net Balance Total

Year Ended August 31, 2022

6 unchanged sentences

Lab Equipment

Commitments, Significant Contracts and Contingencies

Right of Use Assets - Operating Lease

Corporate offices and R&D lab space is leased in Kelowna, British Columbia, Canada until November 15, 2023, with an optional five-year extension.

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

August 31, 2021

August 31, 2020

Right of use assets - operating leases:

Total lease assets

Lease payments

Interest accretion

Total lease liabilities

Operating lease cost

Operating cash flows for lease

Remaining lease term

Discount rate

Page 70 of 90

Pursuant to the terms of the Company’s lease agreements in effect at August 31, 2021, the following table summarizes the Company’s maturities of operating lease liabilities:

Total lease payments

imputed interest

Present value of operating lease liabilities

current obligations under leases

Prepaid Expenses

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

Advertising and conferences

Licence, filing fees, dues

Office and insurance

Research and development

Marketable Securities

The components of Marketable Securities were as follows:

Unrealized Gains

Unrealized Losses

August 31, 2020

August 31, 2021

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

In Managements’ opinion based on the evaluation of available information at the year ended August 31, 2021, unrealized losses represent temporary impairments.

Page 71 of 90

Discontinued Operations

5 unchanged sentences

Based on the agreed terms, the value of the 5,882,353 shares issued was $ 390,533 (C$500,000).

An over-allotment of 1,693,405 shares with a value of $ 122,426 (C$143,939) were received at this time and has been applied to the future issuance of the 3 rd and final tranche with a reduction in the outstanding amount receivable.

An over-allotment of 1,693,405 shares with a value of $ 122,426 (C$143,939) were received at this time and was applied to the future issuance of the third tranche with a reduction in the outstanding amount receivable.

The third and final tranche of 4,188,948 shares was received on April 8, 2022.

The gain on the transaction is presented below:

3 unchanged sentences

Shares received

Shares receivable

Promissory note

3 unchanged sentences

Net income (loss)

Page 72 of 90

The following table presents cash flows of discontinued operations:

3 unchanged sentences

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

Current Liabilities

Accounts payable

The following table reconciles the income tax benefit at the U.S.

Federal statutory rate to income tax benefit at the Company’s effective tax rates as at August 31, 2021 and 2020:

Loss before taxes

( 4,169,832 )

( 3,987,018 )

Expected income tax recovery

Non-deductible items

Change in estimates

Effect of changes in foreign and long-term tax rates

Change in valuation allowance

Total income taxes

Page 73 of 90

Deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes.

Deferred tax assets at August 31, 2021 and 2020 are comprised of the following:

Non-capital losses

Marketable securities

Total unrecognized deferred tax assets

The Company has net operating loss carry-forwards of approximately $ 31,621,000 which may be carried forward to apply against future year income tax for U.S.

tax purposes.

Subsequent Events

Subsequent to the year ended August 31, 2021, 25,000 warrants with a strike price of $ 4.20 expired and the Company issued 81,800 stock options to employees and consultants at a strike price of $ 6.23 .

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On September 2, 2022, Catherine Turkel, PharmD, PhD was appointed to our Board and was awarded 3,400 options at a strike price of $ 3.04 , vesting immediately with a 5 year term and a value of $ 7,757 using the Black Scholes pricing model.

Subsequent to the year ended August 31, 2022, the Company issued 41,200 stock options to the Company’s independent directors at a strike price of $ 1.96 , vesting immediately with a 5 year term and a value of $ 61,109 using the Black Scholes pricing model.

On November 5, 2022, 7,500 warrants with a strike price of $ 24.00 expired.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

During the year ended August 31, 2022, our principal accountants indicated that they have declined to stand for re-election after the completion of the current audit of our fiscal year 2022.

During the past two years there have been no adverse opinions, disclaimer of opinion or qualification or modification as to uncertainty, audit scope or accounting principles.

The decision to change accountants was recommended by the Company’s Audit Committee and approved by our Board.

There were no disagreements related to accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the two fiscal years and their respective interim periods.

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-K

Item 8. Financial Statements and Supplementary Data