What changed in this filing

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Item 1. Financial Statements

2023-07-14 compared with 2023-04-14 · 110 added, 81 removed, 314 unchanged (38% of the section changed)

14 unchanged sentences

Accounts payable and accrued liabilities

Deferred revenue

Lease payable

6 unchanged sentences

Share Capital

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

Issued and outstanding:

5,950,998 common shares at February 28, 2023

and at August 31, 2022

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

8,091,650 and 5,950,998 at May 31, 2023 and August 31, 2022, respectively

Additional paid-in capital

8 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

For the Six Months Ended

Three-Months Ended

Nine-Months Ended

Cost of goods sold

19 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

Nine-Months Ended May 31,

Cash flows used in operating activities

1 unchanged sentence

$ ( 5,870,492 )

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

10 unchanged sentences

Operating lease liability

Deferred revenue

Net cash used in operating activities

5 unchanged sentences

Net cash used in investing activities

Cash flows from financing activities

$ ( 101,173 )

$ ( 130,595 )

Cash flows from/(used in) financing activities

Proceeds from issuance of equity

Lease Payments

Net cash used in financing activities

Net cash from/(used in) financing activities

Net change in cash for the period

5 unchanged sentences

Non-cash shares for services included in prepaid expenses

Income taxes paid in cash

Recognition of ROU Asset and Liability due to modification

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the Six Months Ended February 28, 2023 and 2022

For the Nine-Months Ended May 31, 2023 and 2022

Balance August 31, 2022

10 unchanged sentences

( 1,298,131 )

Non-controlling interest

2 unchanged sentences

$ ( 342,283 )

At The Market financing

S-1 financing

Stock based compensation

( 2,371,505 )

Non-controlling interest

Balance May 31, 2023

$ ( 44,524,108 )

$ ( 354,344 )

Balance August 31, 2021

15 unchanged sentences

$ ( 235,305 )

Stock based compensation

( 2,382,925 )

Non-controlling interest

Balance May 31, 2022

$ ( 37,631,063 )

$ ( 270,718 )

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

1 unchanged sentence

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2023

Nature of Business

1 unchanged sentence

(“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 DehydraTECH TM , our patented proprietary drug delivery technology.

We are primarily a research and development company that continues to investigate the benefits of using DehydraTECH with numerous molecules.

Revenues are generated from intellectual property (“IP”) licensing contracts for DehydraTECH based on the terms of use and defined geographic and licensing arrangements.

We derive income from our third party contracted manufacturing of Business-to-Business (“B2B”) DehydraTECH enhanced products which are made to customer specifications and sold online and in stores in the US.

We are primarily a research and development company relying on our expanding intellectual property portfolio that continues to investigate the benefits of using DehydraTECH with numerous molecules.

We have also begun an investigational new drug (“IND”) registration process with the US Food and Drug Administration (“FDA”).

Revenues are generated primarily from intellectual property (“IP”) licensing contracts for DehydraTECH based on the terms of use and defined geographic and licensing arrangements.

We also derive income from our third party contracted manufacturing of Business-to-Business (“B2B”) DehydraTECH enhanced ingredients which are processed to corporate customer specifications and sold by them online and in stores in the US.

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 Report.

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 its operational, research and development and capital expenditures for a period of at least 12 months from the date this Report.

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

Annual losses attributable to shareholders were $ 7.4 m (2022), $ 4.2 m (2021) and $ 4.1 m (2020).

As of February 28, 2023, we had an accumulated deficit of $ 42.2 m.

Annual losses attributable to shareholders were $ 7.4 million (2022), $ 4.2 million (2021) and $ 4.1 million (2020).

As of May 31, 2023, we had an accumulated deficit of $ 44.5 million.

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

2 unchanged sentences

These financial statements do not contain any adjustments that might result for this uncertainty.

The Company entered into a sales agreement with Maxim Group LLC, (“Maxim”) on August 12, 2022, 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 an At-The-Market (“ATM”) Offering.

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

This 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.

Based on the current equity value of the Company’s shares, the Company’s revised ability to use the ATM is limited to $1,965,533.

Pursuant to the terms of the Company’s May 11, 2023, financing described below, the Company’s ability to use its ATM is currently on hold.

We may also offer 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.

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

On May 8, 2023, the Company announced the pricing of its public offering of 2,106,000 units, with each unit consisting of one share of common stock and one unlisted warrant to purchase one share of common stock.

Each unit was sold at a public offering price of $ 0.95 .

The warrants were immediately exercisable at a price of $ 0.95 per share on the date of issuance, being May 11, 2023, and will expire five years from the date of issuance.

The shares of common stock and accompanying warrants were purchased together in this offering but were immediately separable upon issuance.

Gross proceeds, before deducting placement agent fees to Maxim Group LLC, the sole placement agent, and other offering expenses, were approximately $ 2.0 million.

The securities described above are registered pursuant to a registration statement on Form S-1, as amended (File No.

333-271096), which was declared effective by the Securities and Exchange Commission (the “SEC”) on May 8, 2023.

Based on our existing working capital, management believes the Company has sufficient working capital to satisfy the Company’s estimated liquidity needs for the next 12 months.

In making this assessment, the Company believes that this alleviates the substantial doubt in connection with the Company’s ability to continue as a going concern.

1 unchanged sentence

If the Company is unable to obtain funding, the Company would be forced to delay, reduce or eliminate some or all of its research and development programs, preclinical and clinical testing or commercialization efforts, which could adversely affect its business prospects.

Impacts of COVID-19 Pandemic

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

As of February 28, 2023, there has been no material impact on the Company’s financial position as a direct result of the pandemic.

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.

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 a 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 with the remaining 16.66 7% owned by Altria Ventures Inc.

Lexaria CanPharm ULC, Lexaria CanPharm Holdings Corp., PoViva Corp., Lexaria Hemp Corp., Kelowna Management Services Corp., Lexaria Nutraceutical 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.

33 unchanged sentences

$ ( 1,102,236 )

February 28, 2023

$ ( 1,181,867 )

Marketable securities held by Lexaria represent available-for-sale common stock of Hill Street Beverage Company Inc.

Marketable securities held by Lexaria represent available-for-sale common stock of Hill Incorporated (formerly Hill Street Beverage Company Inc.).

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

In management’s opinion based on the evaluation of available information at February 28, 2023, unrealized losses represent temporary impairments.

In management’s opinion based on the evaluation of available information at May 31, 2023, unrealized losses represent temporary impairments.

Accounts Receivable

Accounts receivable at February 28, 2023 and August 31, 2022 consist of the following:

Accounts receivable at May 31, 2023 and August 31, 2022 consist of the following:

August 31, 2022

Trade and deposits $ 48,559 $ 80,374

Territory license fees 24,634 37,248

Inventory at February 28, 2023, and August 31, 2022, consists of the following:

Raw materials

Work in progress

During the six-month period ended February 28, 2023, raw materials inventory valued at $ 29,391 was expensed to R&D.

Sales tax 99,091 84,162

$ 172,284 $ 201,784

Page 10 of 29

Inventory of raw materials on May 31, 2023, and August 31, 2022, consist of the following:

August 31, 2022

Raw materials

During the nine-month period ended May 31, 2023, raw materials inventory valued at $ 38,418 was expensed to R&D.

Prepaid Expenses and Deposits

Prepaid expenses consist of the following at February 28, 2023 and August 31, 2022:

Prepaid expenses consist of the following at May 31, 2023 and August 31, 2022:

August 31, 2022

Advertising & conferences

3 unchanged sentences

Intellectual Property, net

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

The following is a list of capitalized US patents held by the Company as at May 31, 2023:

Issued Patent #

13 unchanged sentences

Compositions and Methods for Enhanced Delivery of Antiviral Agents

Page 11 of 29

A continuity schedule for capitalized patents is presented below:

August 31, 2022

Balance beginning

1 unchanged sentence

Patents are amortized over their 20 year legal life.

Page 11 of 30

Property & Equipment

Six Months Ended February 28, 2023

Property & Equipment, net

Property and equipment consist of:

Period Amortization

5 unchanged sentences

$ ( 452,413 )

Year Ended August 31, 2022

August 31, 2022

Period Amortization

6 unchanged sentences

$ ( 379,993 )

During the six month period ended February 28, 2023, amortization of $ 2,883 was included in cost of goods sold.

During the nine-month period ended May 31, 2023, amortization of $ 4,647 was included in cost of goods sold.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities at February 28, 2023 and August 31, 2022 consist of the following:

Accounts payable and accrued liabilities at May 31, 2023 and August 31, 2022 consist of the following:

August 31, 2022

Accounts Payable

4 unchanged sentences

Page 12 of 29

A breakdown of our revenues by type for the six months ended February 28, 2023 and 2022 are as follows:

Six Months Ended February 28,

During the six month period ended February 28, 2023, the Company recognized licensing revenue consisting of IP licensing fees for transfer of the DehydraTECH technology in line with definitive agreements and also includes royalty fees.

A breakdown of our revenues by type for the nine-months ended May 31, 2023, and 2022 are as follows:

Nine-Months Ended May 31,

During the nine-month period ended May 31, 2023, the Company recognized licensing revenue consisting of IP licensing fees for transfer of the DehydraTECH technology in line with definitive agreements and includes royalty fees.

B2B product revenues of $ 44,167 (2022 - $ 111,597 ) were recorded that relate to sales of our intermediate products for use by B2B customers in their products.

1 unchanged sentence

Common Shares, Warrants and Options

There was no change to our issued and outstanding shares during the six-months ended February 28, 2023.

During the six months ended February 28, 2023, no warrants were issued or exercised.

A continuity schedule for warrants for the six months ended February 28, 2023, is presented below:

During the quarter ended May 31, 2023, the Company completed the following issuances of common shares, warrants and options:

34,652 common shares were sold at an average price of $ 3.30 per share for net proceeds of $ 111,021 from our ATM Offering;

267,969 options with exercise prices ranging from $ 9.60 to $ 4.80 were repriced to $ 3.00 following shareholder approval obtained at the Company’s annual shareholder meeting held on May 9, 2023;

2,106,000 units were sold at a price of $ 0.95 per unit, with each unit consisting of one common share and one warrant exercisable to purchase an additional common share at $0.95 per share, for net proceeds of $1,600,397.

The 2,106,000 warrants are exercisable for a period of five ( 5 ) years.

No warrants have been exercised during the nine-months ended May 31, 2023.

A continuity schedule for warrants for the nine-months ending May 31, 2023, is presented below:

Number of Warrants

Weighted Average Exercise Price

Average Exercise

Balance August 31, 2022

Cancelled/expired

Balance February 28, 2023

Balance May 31, 2023

Page 13 of 29

A summary of warrants outstanding as of February 28, 2023, is presented below:

Weighted Average Exercise Price

Weighted Average Remaining Contractual Life (years)

A summary of warrants outstanding as of May 31, 2023, is presented below:

Number of Warrants

Weighted Average

Exercise Price

Weighted Average Remaining

Contractual Life (years)

Stock Options

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

The Company has established an Equity Incentive Plan which currently allows the board of directors to grant up to 510,433 stock options to directors, officers, employees, and consultants.

On May 9, 2023, at its annual shareholder meeting, the Company’s shareholders approved amendments to the Equity Incentive Plan, whereby the board of directors were authorized to grant up to 809,165 stock options to directors, officers, employees, and consultants with such amount being adjusted on January 1 each year commencing January 1, 2024, pursuant to an evergreen formula, to be equal to up to 10% of the issued share capital on December 31 of the previous year .

As at the current date, the Company has not elected to affect the amendments approved by its shareholders to its Equity Incentive Plan.

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 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 Company granted the following options during the six months ended February 28, 2023:

Weighted Average Exercise Price

The Company granted the following options during the nine-months ended May 31, 2023:

Weighted Average

Exercise Price

Contractual Life

1 unchanged sentence

A continuity schedule for stock options is presented below:

Average Exercise

Weighted Average Remaining Contractual

Balance August 31, 2021

1 unchanged sentence

Balance August 31, 2022

Balance February 28, 2023 (granted)

Balance February 28, 2023 (exercisable)

Balance May 31, 2023 (granted)

Balance May 31, 2023 (exercisable)

Page 14 of 29

The fair value of stock options granted in the six months ended February 28, 2023 were estimated as of the date of the grant by using the Black-Scholes option pricing model with the following assumptions:

The fair value of stock options granted in the nine-months ended May 31, 2023, were estimated as of the date of the grant by using the Black-Scholes option pricing model with the following assumptions:

Expected volatility

4 unchanged sentences

$ 1.60 - $ 2.58

As of February 28, 2023, the total unrecognized non-cash compensation costs are $ 95,369 related to 27,500 non-vested stock options with a weighted average price of $ 4.40 .

As of May 31, 2023, the total unrecognized non-cash compensation costs are $ 39,117 related to 11,750 non-vested stock options with a $ 3.27 weighted average price.

These costs are expected to be recognized over a weighted average period of 0.82 years.

All non-vested options are attributable to employees.

Stock based compensation expense recognized in the nine-months ended May 31, 2023, totaled $ 160,748 , including $ 25,194 related to the repricing of the 267,969 options.

Commitments, Significant Contracts and Contingencies

1 unchanged sentence

The corporate office and R&D laboratory are located in Kelowna, British Columbia, Canada.

The facility is leased until November 15, 2023, with a five-year renewal option.

The facility is leased until November 14, 2023, and the Company has exercised its five-year renewal option, the term of which commences on November 15, 2023, and expires on November 14, 2028.

On March 31,2023, the Company remeasured the ROU asset and Lease liability for the lease extension.

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

February 28, 2023

August 31, 2022

Right of use assets - operating leases

Remeasurement related to lease extension

Total lease assets

Remeasurement related to lease extension

Lease payments

5 unchanged sentences

Discount rate

Pursuant to the terms of the Company’s lease agreements in effect, the following table summarizes the Company’s maturities of operating lease liabilities as of February 28, 2023:

2023 (six months remaining)

The following table summarizes the Company’s maturities of operating lease liabilities as of May 31, 2023:

2023 (three-months remaining)

Total lease payments

9 unchanged sentences

Licensing revenues are significantly concentrated on one licensee.

Six Months Ended February 28, 2023

Nine-Months Ended May 31, 2023

Consolidated Total

7 unchanged sentences

$ ( 5,463,510 )

Six Months Ended February 28, 2022

Nine-Months Ended May 31, 2022

Consolidated Total

8 unchanged sentences

$ ( 5,870,492 )

Page 16 of 30

Capital Asset by Region

Six Months Ended February 28, 2023

Capital Asset by Region May 31, 2023

Addition Canada

4 unchanged sentences

Lab Equipment

Capital Asset by Region

Year Ended August 31, 2022

Capital Asset by Region August 31, 2022

Addition Canada

5 unchanged sentences

Subsequent Events

Subsequent to February 28, 2023, the Company sold 34,652 shares under the ATM Offering for gross proceeds of $ 114,456 with an average price of $ 3.30 per share.

Page 16 of 29

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