What changed in this filing

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Item 1. Financial Statements

2024-01-12 compared with 2023-07-14 · 271 added, 234 removed, 190 unchanged (73% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(Expressed in US Dollars)

Marketable securities

Accounts receivable

Prepaid expenses and deposit

Prepaid expenses and other current assets

Total Current Assets

Non-current assets, net

Long-term receivables

Right of use assets

Intellectual property

Property & equipment

Intellectual property, net

Property & equipment, net

Total Non-current Assets

2 unchanged sentences

Accounts payable and accrued liabilities

Lease payable

Lease liability, current

Total Current Liabilities

Long Term Liabilities

Lease payable

Total Long Term Liabilities

Lease liabilities - non-current

TOTAL LIABILITIES

2 unchanged sentences

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

10,311,641 and 8,091,650 at 11/30/23 and 8/31/23, respectively.

Additional paid-in capital

Accumulated Deficit

( 46,942,750 )

( 45,763,427 )

Equity attributable to shareholders of the Company

Accumulated other comprehensive income

Equity attributable to shareholders of Lexaria

Non-controlling Interest

1 unchanged sentence

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

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

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

LEXARIA BIOSCIENCE CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in US Dollars except share amounts) (Unaudited)

THREE MONTHS ENDED

Nine-Months Ended

Cost of goods sold

Operating expenses

Research and development

1 unchanged sentence

Total operating expenses

$ ( 2,383,566 )

$ ( 2,418,338 )

Loss from operations

( 1,139,142 )

( 1,695,419 )

Net loss attributable to:

Common shareholders

Other income (loss)

Interest income

Unrealized loss on marketable securities

Total other income (loss)

Net loss for the period

$ ( 1,185,038 )

$ ( 1,769,306 )

Net loss attributable to non-controlling interest

Net loss attributable to Lexaria shareholders

$ ( 1,179,323 )

$ ( 1,755,944 )

Non-controlling interest

Other comprehensive income

Foreign currency translation adjustment

Total comprehensive loss

Basic and diluted loss per share

Weighted average shares outstanding

Weighted average number of common shares outstanding

- Basic and diluted

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

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

LEXARIA BIOSCIENCE CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine-Months Ended May 31,

(Expressed in US Dollars)

Three Months Ended

Cash flows used in operating activities

4 unchanged sentences

Depreciation and amortization

Noncash right-of-use lease expense

Noncash lease expense

Unrealized loss on marketable securities

Shares issued for services

Lease accretion

3 unchanged sentences

Accounts payable and accrued liabilities

Due to related parties

Operating lease liability

Lease Payments

Net cash used in operating activities

2 unchanged sentences

Cash flows used in investing activities

Purchase of equipment

Intellectual property

Purchase of equipment

Net cash used in investing activities

$ ( 101,173 )

$ ( 130,595 )

Cash flows from/(used in) financing activities

Proceeds from issuance of equity

Lease Payments

Proceeds from shares sold for cash

Proceeds from exercise of warrants

Net cash from/(used in) financing activities

Effect of exchange rate changes on cash

Net change in cash for the period

( 1,280,155 )

( 3,866,714 )

Cash at beginning of period

1 unchanged sentence

Supplemental information of cash flows:

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.

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

LEXARIA BIOSCIENCE CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

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

For the Three Months Ended November 30, 2023 and 2022

(Expressed in US Dollars)

Non-controlling

Balance August 31, 2023

1 unchanged sentence

$ ( 364,040 )

Stock issued in equity offering

Stock issued from exercise of warrants

Foreign currency translation adjustment

Stock based compensation

5 unchanged sentences

$ ( 369,755 )

Stock based compensation

( 1,298,131 )

Non-controlling interest

Balance February 28, 2023

$ ( 42,152,603 )

$ ( 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, 2022

8 unchanged sentences

$ ( 329,776 )

Shares issued for services

( 1,425,777 )

Non-controlling interest

Balance February 28, 2022

$ ( 35,248,138 )

$ ( 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.

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

LEXARIA BIOSCIENCE CORP.

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2023

(Expressed in U.S.

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 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.

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

Liquidity and Going concern

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 meet its financial obligations 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 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.

Net losses attributable to shareholders were $ 1.2 million and $ 1.8 million for the quarters ended November 30, 2023 and 2022, respectively.

As of November 30, 2023, we had an accumulated deficit of $ 46.9 million.

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

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, 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.

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.

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

During the quarter ended November 30, 2023, the Company entered into a Securities Purchase Agreement whereby on October 3, 2023, the Company issued, to a single healthcare-focused institutional investor, 889,272 shares of common stock and 729,058 pre-funded warrants in a registered direct offering.

In a concurrent private placement, the Company also sold to the investor, warrants to purchase up to 1,618,330 shares of common stock.

The combined effective offering price for each share of common stock (or pre-funded warrant in lieu thereof) and accompanying warrant was $ 0.97 (to note the pre-funded warrants were issued at a price of $ 0.9699 and have an exercise price of $ 0.0001 ).

The warrants will become exercisable six months from issuance, expire five and a half years from the issuance date, and have an exercise price of $0.97 per share.

The net proceeds to the Company from the registered direct offering and concurrent private placement totaled $ 1.25 million, after deducting placement agent fees and other estimated offering expenses payable by the Company.

To date all of the pre-funded warrants have been exercised, resulting in an issuance by the Company of an aggregate 729,058 common shares for gross proceeds of approx.

During the quarter ended November 30, 2023, the Company also issued an aggregate 601,661 common shares pursuant to the exercise of warrants that were issued under our May 11, 2023, financing, at an exercise price of $ 0.95 per share for gross proceeds of $ 571,578 .

We may also offer securities 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.

There is no certainty that future equity or debt financing will be available or that it will be at acceptable terms and the outcome of these matters is unpredictable.

A lack of adequate funding may force us to reduce spending, curtail or suspend planned programs or possibly liquidate assets.

Any of these actions could adversely and materially affect our business, cash flow, financial condition, results of operations, and potential prospects.

The sale of additional equity may result in additional dilution to our stockholders.

Entering into additional licencing agreements, collaborations, partnerships, alliances marketing, distribution, or licensing arrangements with third parties to increase our capital resources is also possible.

If we do so we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.

Based on existing cash resources, management believes that current funding will be sufficient to meet the Company’s financial obligations for a period of at least twelve months from the date of this report.

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.

However, there is no assurance that management’s plans will be successful.

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.

Significant Accounting Policies

The significant accounting policies of the Company are consistent with those of our audited financial statements on Form 10-K for the year ended August 31, 2022.

Basis of Consolidation

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., 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.

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, Lexaria Nutraceutical Corp., 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.

Basis of Presentation

The Company’s unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States generally accepted accounting principles (US GAAP) have been condensed or omitted pursuant to such rules and regulations.

In the opinion of management, all adjustments considered necessary for a fair presentation have been included.

Interim results are not necessarily indicative of results for a full year or for any subsequent period.

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.

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.

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 readily convertible to known cash amounts.

The Company had no cash equivalents as of November 30, 2023 or November 30, 2022.

Marketable Securities

The Company’s marketable securities consist of investments in common stock.

Investments in equity securities are reported at fair value with changes in unrecognized gains or losses included in other income (loss) on the consolidated statements of operations.

The Company accounts for its leases under ASC 842, Leases (“ASC 842”).

Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet as both a right of use asset and lease liability.

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.

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

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 costs include those incurred with respect to both pending and granted patents filed in the United States.

When patent applications are filed, the directly related capitalized costs are amortized on a straight-line basis over an estimated economic life of 20 years.

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

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, or the economic life of the improvements, whichever is shorter.

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 recoverable.

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 recognize the related 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.

Non-refundable minimum fees are recognized as revenue over the period to which they apply.

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.

Page 10 of 34

Intellectual property expenses

Non-capitalizable 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 consolidated statements of operations based on the fair value at grant date subject to vesting dates and amortized over the related vesting period.

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.

Foreign currency translation

The Company’s reporting currency is the U.S.

The Company has foreign operations whose functional currency is the local currency.

Assets and liabilities are translated into U.S.

dollars, the reporting currency, at the exchange rate on the balance sheet date.

Revenues and expenses are translated into U.S.

dollars at the average rates of exchange prevailing during the reporting period.

Foreign currency translation adjustments resulting from this process are reported as an element of other comprehensive income (loss) on the consolidated statements of operations and comprehensive loss.

Transactions executed in different currencies are translated at spot rates and resulting foreign exchange transaction gains and losses are charged to income.

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 is 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.

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Financial instruments

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

This establishes a fair value hierarchy based on the level of independent objective evidence surrounding the inputs used to measure fair value.

A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Inputs are prioritized into three levels used to measure fair value:

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;

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 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 rate changes for USD/CAD dollars is not expected to be material.

The following table provides a summary of financial instruments that are measured at fair value on a recurring basis as of November 30, 2023.

Fair Value Measurement Using

Marketable Securities

The following table provides a summary of financial instruments that are measured at fair value on a recurring basis as of August 31, 2023.

Fair Value Measurement Using

Marketable Securities

Credit risk and customer concentration

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

Periodically, the Company may carry cash balances at such financial institution in excess of the federally insured limit of $ 250,000 .

The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institution, that the credit risk with regard to these deposits is not significant.

In the three months ended November 30, 2023, two customers accounted for 96 % (2022 – two customers accounted for 95 %) of consolidated revenues.

As of November 30, 2023, the Company had $ 90,925 (2022 - $ 48,598 ) in sales tax receivable.

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

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.

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.

Reclassifications

Certain amounts in the prior period have been reclassified to conform with current period presentation.

Page 12 of 34

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.

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.

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, 2022.

Marketable Securities

The components of Marketable Securities were as follows:

Unrealized Gains

Unrealized Losses

August 31, 2021

$ ( 219,427 )

August 31, 2022

$ ( 1,102,236 )

$ ( 1,181,867 )

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 May 31, 2023, unrealized losses represent temporary impairments.

Accounts Receivable

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

Sales tax 99,091 84,162

$ 172,284 $ 201,784

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

We believe that these estimates are reasonable.

However, actual results could differ from these estimates.

Page 13 of 34

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 May 31, 2023 and August 31, 2022:

August 31, 2022

Recent Accounting Guidance

Recently Adopted Pronouncements

In June 2016, the FASB issued ASU No.

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

Measurement of Credit Losses on Financial Instruments .

This Accounting Standards Update represents a significant change in the accounting for credit losses model by requiring immediate recognition of management’s estimates of current expected credit losses (CECL).

Under the prior model, losses were recognized only as they were incurred.

The Company has determined that it has met the criteria of a smaller reporting company ("SRC") as of November 15, 2019.

As such, ASU 2019-10, Financial Instruments-Credit Losses, Derivatives and Hedging, and Leases:

Effective Dates amended the effective date for the Company to be for reporting periods beginning after December 15, 2022.

The Company adopted ASU 2016-13 effective September 1, 2023 and determined that its impact on the accompanying consolidated financial statements is immaterial.

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Accounts and Other Receivables

Accounts receivable at November 30, 2023 and August 31, 2023 consist of the following:

Amounts Receivable

Territory license fees

Other Receivable

Long Term Receivable

Prepaid Expenses and Other Current Assets

Prepaid expenses consist of the following at November 30, 2023 and August 31, 2023:

Advertising & Conferences

Legal & Accounting Fees

License, Filing Fees, Dues

2 unchanged sentences

Intellectual Property, net

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

Issued Patent #

Patent Certificate Grant Date

Patent Family

US 9,474,725 B1

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

US 9,839,612 B2

US 9,972,680 B2

US 9,974,739 B2

US 10,084,044 B2

US 10,103,225 B2

US 10,381,440

US 10,374,036

US 10,756,180

US 11,311,559

Compositions and Methods for Enhanced Delivery of Antiviral Agents

Page 15 of 34

A continuity schedule for capitalized patents is presented below:

August 31, 2022

Balance - beginning

Balance - ending

Patents are amortized over their 20 year legal life.

At November 30, 2023 the Company has capitalized a total of $ 494,377 of patents.

Included in the capitalized costs is $ 480,762 of costs associated with patents and licenses that have been filed.

Also included in the capitalized costs is $ 13,615 of costs associated with provisional patents and pending applications which have not yet been filed.

The Company evaluated its patent portfolio and determined that no pending applications have been abandoned or will not be pursued during the three months ended November 30, 2023.

As such, no impairment loss has been recognized for the period.

The Company recognized $ 8,274 of amortization expense related to patents and licenses in the three-months ended November 30, 2023 (2022 - $ 54,938 ).

Property & Equipment, net

Property and equipment consist of:

November 30, 2023

Period Amortization

13 unchanged sentences

$ ( 475,168 )

$ ( 379,993 )

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

During the three-month period ended November 30, 2023, amortization of $ 0 was included in cost of goods sold.

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Accounts Payable and Accrued Liabilities

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

August 31, 2022

Accounts payable and accrued liabilities at November 30, 2023 and August 31, 2023 consist of the following:

Accounts Payable

1 unchanged sentence

Sales tax payable

Accrued Liabilities

Trades payable

A breakdown of our revenues by type for the three-months ended November 30, 2023, and 2022 are as follows:

Three Months Ended November 30,

During the three-month period ended November 30, 2023, the Company recognized B2B product revenues of $ 5,388 (three months ended November 30, 2022 - $ 29,100 ) that relate to sales of our intermediate products for use by B2B customers in their products.

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

The Company recognized $ 144,990 (three months ended November 30, 2022 - $ 63,435 ) in licensing revenue in the same period.

For the three months ended November 30, 2023, the Company did not recognize a provision or benefit for income taxes as it has incurred net losses.

In addition, the net deferred tax assets generated from operating losses are fully offset by a valuation allowance as the Company believes it is more likely than not that the benefit will not be realized.

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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.

The Company recognized $ 104,935 (2022 - $ 16,160 ) in licensing revenue in the same period.

Common Shares, Warrants and Options

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:

Common Shares and Warrants

During the quarter ended November 30, 2023, the Company completed the following issuances of common shares and warrants:

On October 3, 2023, the Company entered into a securities purchase agreement with a single healthcare-focused institutional investor to purchase 889,272 shares of common stock and 729,058 pre-funded warrants in a registered direct offering.

In a concurrent private placement, the Company also sold to the investor, warrants to purchase up to 1,618,330 shares of common stock.

The warrants will become exercisable six months from issuance, expire five and a half years from the issuance date, and have an exercise price of $ 0.97 per share.

The net proceeds to the Company from the registered direct offering and concurrent private placement were $ 1.25 million, after deducting placement agent fees and other estimated offering expenses payable by the Company.

To date all of the pre-funded warrants have been exercised, resulting in an issuance by the Company of an aggregate 729,058 common shares for gross proceeds of approx.

The Company issued an aggregate 601,661 common shares pursuant to the exercise of warrants that were issued under our May 11, 2023, financing, at an exercise price of $ 0.95 per share for gross proceeds of $ 571,578 of which $ 33,250 was being held in Lexaria’s trust account with the warrant agent at November 30, 2023.

A continuity schedule for warrants for the three months ended November 30, 2023, is presented below:

Number of Warrants

Average Exercise

Weighted Average Exercise Price $

Balance, August 31, 2023

Cancelled/expired

Balance May 31, 2023

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

( 1,330,719 )

Balance, November 30, 2023

A summary of warrants outstanding as of November 30, 2023, is presented below:

Number of Warrants

Weighted Average

Exercise Price

Weighted Average Remaining

Contractual Life (years)

Weighted Average Exercise Price

Weighted Average Remaining Contractual Life (years)

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Stock Options

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.

The Company has established an Equity Incentive Plan which was most recently amended by the Company’s shareholders on May 9, 2023.

Pursuant to the amendments, the Equity Incentive Plan now has an evergreen formula, whereby on January 1 each year commencing January 1, 2024, the number of shares issuable pursuant to the Equity Incentive Plan may be increased to a number equal to up to 10% of the issued share capital on December 31 of the previous year .

The Company is currently in the process of preparing its S-8 Registration Statement to register an additional 527,111 common shares issuable pursuant to the Equity Incentive Plan, for an aggregate 1,037,544 common shares issuable under the Equity Incentive Plan.

Stock options currently 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.

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

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 nine-months ended May 31, 2023:

Weighted Average

Exercise Price

Contractual Life

Remaining Life) 4.39

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, 2022

1 unchanged sentence

Balance August 31, 2023

Balance May 31, 2023 (granted)

Balance May 31, 2023 (exercisable)

Cancelled/expired

Balance November 30, 2023 (outstanding)

Balance November 30, 2023 (exercisable)

On October 26, 2023, the Company granted 85,000 options to its officers and employees with an exercise price of $ 1.15 and a term of 5 years.

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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:

The fair value of stock options granted in the three-months ended November 30, 2023, were estimated as of the date of the grant by using the Black-Scholes option pricing model with the following assumptions:

November 30, 2023

Expected volatility

3 unchanged sentences

Estimated fair value per option

$ 1.60 - $ 2.58

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.

Stock-based compensation expense for the three-month periods ended November 30, 2023, and November 30, 2022, totaled $ 53,953 and $ 68,776 , respectively.

The expense for the three months ended November 30, 2023, relates entirely to options awarded during the quarter.

As of November 30, 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 0.32 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 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.

The related lease was renewed until November 15, 2028.

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

November 30, 2023

August 31, 2023

Right of use assets - operating leases

Remeasurement related to lease extension

Extension-related remeasurement

Total lease assets

Remeasurement related to lease extension

Lease payments

Interest accretion

Extension-related remeasurement

Total lease liabilities

3 unchanged sentences

Discount rate

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

2023 (three-months remaining)

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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, 2023:

Total lease payments

4 unchanged sentences

Segment Information

The Company’s operations involve the development and usage, including licensing, of its proprietary DehydraTECH Technology.

Lexaria is centrally managed and its chief operating decision makers, being the President and the CEO, use the consolidated and other financial information, supplemented by revenue information by category of alternative health consumer products and technology licensing, to make operational decisions and to assess the performance of the Company.

The Company has identified two reportable segments:

Intellectual Property and B2B Products.

Licensing revenues are significantly concentrated on one licensee.

Nine-Months Ended May 31, 2023

The Company’s operations involve the development and usage, including licensing, of DehydraTECH.

Lexaria is centrally managed and its chief operating decision makers, being the President and the CEO, use the consolidated and other financial information, supplemented by revenue information by category of business-to-business product production and technology licensing to make operational decisions and to assess the performance of the Company.

The Company has identified four reportable segments:

Intellectual Property, B2B Production, Research and Development and Corporate.

Licensing revenues are significantly concentrated on three licensees.

Three Months Ended November 30, 2023

Consolidated Total

2 unchanged sentences

$ ( 1,285,597 )

$ ( 5,661,651 )

Segment income (loss)

Other Income(Expense)

$ ( 585,705 )

1 unchanged sentence

$ ( 1,185,038 )

Nine-Months Ended May 31, 2022

Three Months Ended November 30, 2022

Consolidated Total

2 unchanged sentences

$ ( 1,777,359 )

( 2,456,286 )

( 5,984,147 )

Other Income(Expense)

$ ( 643,599 )

2 unchanged sentences

$ ( 1,769,306 )

Capital Asset by Region May 31, 2023

Addition Canada

Net Balance Canada

Total Net Balance

Leasehold Improvements

Furniture & Fixtures

Lab Equipment

Capital Asset by Region August 31, 2022

Addition Canada

Net Balance Canada

Total Net Balance

Leasehold Improvements

Furniture & Fixtures

Lab Equipment

Subsequent Events

Subsequent to the quarter ended November 30, 2023, the Company issued an aggregate 123,800 common shares pursuant to the exercise of warrants that were issued under our May 11, 2023, financing, at an exercise price of $ 0.95 per share for gross proceeds of $ 117,610 of which $57,000 is currently being held in Lexaria’s trust account with the warrant agent.

Page 22 of 34

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