What changed in this filing

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Item 1. Financial Statements

2023-01-17 compared with 2022-07-14 · 146 added, 248 removed, 216 unchanged (65% of the section changed)

1 unchanged sentence

LEXARIA BIOSCIENCE CORP.

CONSOLIDATED BALANCE SHEET

CONSOLIDATED BALANCE SHEETS

(Expressed in U.S.

4 unchanged sentences

Non-current assets, net

Lease right of use

Right of use assets

Intellectual property

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

5,950,998 common shares at November 30, 2022 and at August 31, 2022

Additional paid-in capital

7 unchanged sentences

LEXARIA BIOSCIENCE CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in U.S.

1 unchanged sentence

THREE MONTHS ENDED

Nine Months Ended

Cost of Goods Sold

Research and development

General and administrative

Total operating expenses

Loss from operations

( 2,418,338 )

( 2,566,552 )

( 5,870,492 )

( 4,384,187 )

Gain on disposal of assets

Discontinued operations

Net and comprehensive loss for the period

Office and administration

( 1,769,306 )

( 2,003,482 )

Net loss for the period

$ ( 1,769,306 )

$ ( 2,003,482 )

Net and comprehensive loss attributable to:

Net loss attributable to:

Common shareholders

1 unchanged sentence

$ ( 1,993,157 )

$ ( 5,801,859 )

( 2,848,914 )

Non-controlling interest

Basic and diluted loss per share

Continuing operations

Discontinued operations

Weighted average number of common shares outstanding

Basic and diluted

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

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

LEXARIA BIOSCIENCE CORP.

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S.

Nine Months Ended

THREE MONTHS ENDED

Cash flows used in operating activities

Net loss and comprehensive loss

$ ( 1,769,306 )

$ ( 2,003,482 )

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

Adjustments to reconcile net loss to

net cash used in operating activities:

Stock based compensation

Depreciation and amortization

Inventory write-off

Bad debt expense

Non-cash right of use lease expense

Gain on disposal of assets

( 1,522,704 )

Noncash right-of-use lease expense

Unrealized loss on marketable securities

Shares issued for services

Warrants issued for services

Unrealized foreign exchange

Lease accretion

Change in working capital

Change in operating assets and liabilities

Accounts receivable

2 unchanged sentences

Due to related parties

Deferred revenue

Net cash used in operating activities

Net cash used in by operating activities

$ ( 1,234,109 )

1 unchanged sentence

Cash flows used in investing activities

Disposal (acquisition) of assets

Purchase of equipment

Intellectual property

Net cash (used in) provided by investing activities

$ ( 130,595 )

Net cash used in investing activities

Cash flows from financing activities

Repayment of loan payable

Lease Payments

Proceeds from issuance of equity

Net cash provided by (used in) financing Activities

Net cash provided by discontinued operations

Net cash used in financing activities

Net change in cash for the period

( 1,280,155 )

( 1,235,526 )

Cash at beginning of period

2 unchanged sentences

Income taxes paid in cash

Non-cash consideration on asset disposal

Non-cash shares for services included in prepaid expenses

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

2 unchanged sentences

(Expressed in U.S.

Dollars, except number of shares)

SHARE CAPITAL

STOCKHOLDERS'

2 unchanged sentences

Stock based compensation

Non-controlling interest

Balance November 30, 2020

( 1,993,157 )

Stock based compensation

Brokered placement

Non-controlling interest

Balance February 28, 2021

( 1,993,157 )

Stock based compensation

Warrants issued for services

( 2,556,997 )

Non-controlling interest

Balance May 31, 2021

( 30,651,112 )

Exercise of warrants

Shares issued for services

( 1,178,092 )

Balance November 30, 2021

( 33,822,361 )

Non-controlling interest

Balance August 31, 2022

6 unchanged sentences

( 40,854,472 )

Shares issued for services

( 1,425,777 )

Non-controlling interest

Balance February 28, 2022

( 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

November 30, 2022

(Expressed in U.S.

1 unchanged sentence

Lexaria Bioscience Corp.

(“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 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.

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.

The Company is headquartered in Kelowna, British Columbia, Canada.

The corporate website is www.lexariabioscience.com

Going Concern Analysis

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.

(“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 generated from licensing contracts for the Company’s patented DehydraTECH technology based on the terms of use and defined geographic and licensing 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

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.

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

The losses attributable to shareholders were $ 7.4 m, $ 4.2 m and $ 4.1 m for the years ended August 31, 2022, 2021 and 2020, respectively.

As of November 30, 2022, we had an accumulated deficit of $ 40.9 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.

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 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.

In order to continue the development of our drug candidates, at some point in the future we expect to pursue one or more capital transactions, whether through the sale of equity securities, debt financing, license agreements or entry into strategic partnerships.

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.

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.

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 from the licensing of our technology, if any, and the receipt of payments under any current or future collaborations we may enter into.

The recurring losses from operations and negative cash flows from operations raise substantial doubt about the Company’s ability to continue as a going concern.

As of November 30, 2022, the Company had cash of approximately $4.5m and carries no significant debt other than amounts payable in the short term.

Also, on August 12, 2022, we entered into a sales agreement with Maxim Group LLC, (“Maxim”), pursuant to which we may offer and sell shares of our common stock with an aggregate offering price of up to $5,925,000 under the At-The-Market (“ATM”) Offering.

The sales agreement provides that Maxim will be entitled to a sales commission equal to 3.0% of the gross sales price per share of all shares sold under the ATM Offering.

As of January 17, 2023 we have not sold any shares under the ATM Offering.

Based on our existing working capital and access to an ATM offering, as disclosed above management believes the Company has sufficient working capital to satisfy the Company’s estimated liquidity needs for the next 12 months.

Because of the above factors, the Company believes that this alleviates the substantial doubt in connection with the Company's ability to continue as a going concern.

However, there is no assurance that management’s plans will be successful due to the current economic climate in the United States and globally.

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 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.

As of November 30, 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 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 the retail products of our licensees.

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

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 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.

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.

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.

Significant Accounting Policies

2 unchanged sentences

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

Lexaria CanPharm ULC, Lexaria CanPharm Holdings Corp., PoViva Corp., Lexaria Hemp Corp., Kelowna Management Services Corp., and Lexaria Pharmaceutical Corp., and our 83.333 % owned subsidiary Lexaria Nicotine LLC ( 16.667 % Altria Ventures Inc., an indirect wholly owned subsidiary of Altria Group, Inc.).

Lexaria CanPharm ULC, Lexaria CanPharm Holdings Corp., PoViva Corp., Lexaria Hemp Corp., Kelowna Management Services Corp., and Lexaria Pharmaceutical Corp., and our 83.33 3% owned subsidiary Lexaria Nicotine LLC with the remaining 16.66 7% 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.

5 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, 2022.

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.

These accounting policies involve critical accounting estimates because they are particularly dependent on estimates and assumptions made by management about matters that are highly uncertain at the time the accounting estimates are made.

Although we have used our best estimates based on facts and circumstances available to us at the time, different estimates reasonably could have been used.

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.

Although we believe that these estimates are reasonable actual results could differ.

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, 2021.

Recent Accounting Guidance

Pronouncements Issued but Not Yet Adopted

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.

Early application of the amendments is permitted.

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

In June 2016, the FASB issued ASU No.

6 unchanged sentences

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

Accounts and Other Receivables

Trade and deposits receivable

Sale of assets – shares receivable

Sales tax receivable

Estimates and Judgments

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.

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.

Although we have used our best estimates based on facts and circumstances available to us at the time, different estimates reasonably could have been used.

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.

Although we believe that these estimates are reasonable actual results could differ.

Marketable Securities

The components of Marketable Securities were as follows:

August 31, 2021

August 31, 2022

( 1,102,236 )

November 30, 2022

( 1,179,864 )

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 quarter ended November 30, 2022, unrealized losses represent temporary impairments.

Accounts Receivables

Accounts receivable at November 30, 2022 and August 31, 2022 consist of the following:

Trade and deposits

Territory license fees

Inventory at November 30, 2022 and August 31, 2022 consist of the following:

Raw materials

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.

During the three month period ended November 30, 2022, inventory valued at $ 25,243 was expensed to research and development.

Page 10 of 28

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.

Prepaid Expenses and Deposits

Prepaid expenses consist of the following at November 30, 2022, and August 31, 2022:

Advertising & conferences

License, filing fees, dues

Office & insurance

Capital financing

Intellectual Property, net

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

16 unchanged sentences

Balance – beginning

Amortization*

Balance – ending

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

Patents are amortized over their 20 year legal life.

Page 11 of 28

Property & Equipment

Nine Months Ended

Period Amortization

Property & Equipment, net

Three Months Ended

November 30, 2022

Accumulated Amortization

2 unchanged sentences

Lab equipment

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, 2022

August 31, 2021

Accumulated Amortization

Leasehold improvements

1 unchanged sentence

Lab equipment

During the three-month period ended November 30, 2022, $2,438 of depreciation was included in cost of goods sold.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities at November 30, 2022 and August 31, 2022 consist of the following:

Accounts Payable

1 unchanged sentence

Sales tax payable

Related party payable

Accrued Liabilities

Corporate tax payable

Trades payable

Common Shares and Warrants

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 of which $ 600,000 are included in prepaid expenses and deposits.

Page 12 of 28

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

A breakdown of our revenues by type for the three months ended November 30, 2022 and 2021 are as follows:

Three Months Ended

During the period ended November 30, 2022, the Company recognized B2B product revenues of $ 29,100 (2021 - $ 7,000 ) that relate to sales of our intermediate products for use by 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 $ 63,435 (2021 - $Nil) in licensing revenue in the same period.

Common Shares and Warrants

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

During the quarter ended November 30, 2022, the Company issued no warrants.

A continuity schedule for warrants is presented below:

Number of Warrants

Weighted Average Exercise Price $

Balance August 31, 2022

Cancelled/expired

Balance August 31, 2021

Cancelled/expired

Balance May 31, 2022

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

Balance November 30, 2022

A summary of warrants outstanding as of November 30, 2022, is presented below:

# of Warrants

Weighted Average Remaining Contractual Life

Weighted Average Exercise Price $

Weighted Average

Remaining Contractual Life

Weighted Average Exercise

1.96 - 2 .00 years

1.38 - 2.29 years

Page 13 of 28

Stock Options

The Company has established the Equity Incentive Plan whereby the board of directors may, from time to time, grant stock options up to the equivalent of 10% of the number of common shares issued and outstanding to directors, officers, employees, and consultants .

The Company has established the Equity Incentive Plan whereby the board of directors may, from time to time, grant up to 510,433 stock options to directors, officers, employees, and consultants.

Stock options granted must be exercised within five years from the date of grant or such lesser period as determined by the Company’s board of directors.

1 unchanged sentence

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

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

The Company granted the following options during the quarter ended November 30, 2022:

Exercise Price $

A continuity schedule for stock options is presented below:

5 unchanged sentences

Balance August 31, 2022

Balance May 31, 2022 (Outstanding)

Balance May 31, 2022 (Exercisable)

Balance November 30, 2022 (granted)

Balance November 30, 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

2 unchanged sentences

$ 1.60 - $ 2.58

Nine Months Ended

Product sales

Licensing revenue

Other revenue

Income from operations

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.

Page 14 of 28

Commitments, Significant Contracts and Contingencies

Right of Use Assets - Operating Lease

The Corporate office and R&D lab space located in Kelowna, British Columbia, Canada is leased until November 15, 2023, with a five-year renewal option.

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

52,444 91,041

( 10,104 ) ( 38,597 )

Total lease assets

42,340 52,444

49,989 89,393

Lease payments

( 11,204 ) ( 44,600 )

Interest accretion

Total lease liabilities

39,629 49,988

Operating lease cost

52,444 52,444

Operating cash flows for lease

11,204 44,599

Remaining lease term

Discount rate

7.25 % 7.25 %

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, 2022:

Total lease payments

imputed interest

Present value of operating lease liabilities

current obligations under leases

Segment Information

3 unchanged sentences

Intellectual Property and Products.

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

Licensing revenues are significantly concentrated on one licensee.

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Nine Months Ended

Three Months Ended

November 30, 2022

Consolidated Total

3 unchanged sentences

( 1,854,987 )

( 5,984,147 )

( 3,080,750 )

Segment income (loss)

( 1,128,020 )

( 1,769,306 )

Nine Months Ended

Three Months Ended

November 30, 2021

Consolidated Total

4 unchanged sentences

( 2,011,792 )

Discontinued operations

Segment income (loss)

( 1,090,160 )

1 unchanged sentence

Capital Asset by Region

Addition Canada

Net Balance Canada

Total Net Balance

Nine Months Ended May 31, 2022

Three Months Ended

November 30, 2022

Leasehold Improvements

Furniture Fixtures Equipment

Furniture & Fixtures

Lab Equipment

Capital Asset by Region

Addition Canada

Net Balance Canada

2 unchanged sentences

Leasehold Improvements

Furniture Fixtures Equipment

Furniture & Fixtures

Lab Equipment

Commitments, Significant Contracts and Contingencies

Right of Use Assets – Operating Lease

The Corporate office and R&D laboratory located in Kelowna, British Columbia, Canada is leased until November 15, 2023, with a five-year renewal option.

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

Page 16 of 28

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, the following table summarizes the Company’s maturities of operating lease liabilities as of May 31, 2022:

Total lease payments

imputed interest

Present value of operating lease liabilities

current obligations under leases

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Prepaid Expenses and Deposits

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

Advertising & conferences

Licence, filing fees, dues

Office & insurance

Marketable Securities

The components of Marketable Securities were as follows:

August 31, 2021

( 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 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.

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

Book value of assets sold

Cash consideration

Shares received

Shares receivable

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:

Nine Months Ended

Operating Expenses

Net Income (loss)

The following table presents cash flows of discontinued operations:

Nine Months Ended

Cash flows used in discontinued operating activities

Change in working capital

Net cash used in discontinued operating activities

Net cash provided by discontinued operations

Subsequent Events

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