What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-11-26 compared with 2023-11-20 · 207 added, 230 removed, 399 unchanged (52% of the section changed)

1 unchanged sentence

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Directors of

Lexaria Bioscience Corp.

Opinion on the Consolidated Financial Statements

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

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

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

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

Basis for Opinion

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

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

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

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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

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

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

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

Accordingly, we express no such opinion.

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

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

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

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

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

We have not identified any critical audit matters for the year ended August 31, 2022.

We served as the Company’s auditor from 2016 to 2022.

Vancouver, Canada

/s/ DAVIDSON & COMPANY LLP

Chartered Professional Accountants

November 25, 2022

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

2 unchanged sentences

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

and its subsidiaries (collectively, the “Company”) as of August 31, 2023, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2023, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

and its subsidiaries (collectively, the “Company”) as of August 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2024 and 2023, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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

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

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

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

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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

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

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

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

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

Accordingly, we express no such opinion.

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

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

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

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

We believe that our audit provides a reasonable basis for our opinion.

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

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

Critical Audit Matters

10 unchanged sentences

(Expressed in US Dollars)

Year Ended August 31,

Marketable securities

3 unchanged sentences

Non-current assets, net

Long-term receivables

Right of use assets

Intellectual property, net

Property & equipment, net

Total Non-current Assets

Intellectual property, net

LIABILITIES and STOCKHOLDERS' EQUITY

1 unchanged sentence

Accounts payable and accrued liabilities

Deferred revenue

Lease liability, current

Total Current Liabilities

Lease liabilities - non-current

Lease liability, non-current

TOTAL LIABILITIES

1 unchanged sentence

Share Capital

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

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

Common shares issued and outstanding:

15,810,205 and 8,091,650 at August 31, 2024, and August 31, 2023, respectively

3 unchanged sentences

( 45,763,427 )

Accumulated other comprehensive loss

Equity attributable to shareholders of Lexaria

4 unchanged sentences

LEXARIA BIOSCIENCE CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in US Dollars except share amounts)

12 unchanged sentences

Total other income (loss)

Net loss for the year

$ ( 5,808,654 )

$ ( 6,712,525 )

Net loss attributable to:

Common shareholders

Net loss attributable to non-controlling interest

Net loss attributable to Lexaria shareholders

$ ( 5,795,345 )

$ ( 6,664,899 )

Non-controlling interest

Other comprehensive income

Foreign currency translation adjustment

Total comprehensive loss

$ ( 5,815,161 )

$ ( 6,664,899 )

Basic and diluted loss per share

13 unchanged sentences

Impairment loss

Bad debt expense

Noncash lease expense

Unrealized loss on marketable securities

Shares issued for services

Lease accretion

Gain on forgiveness of loan

Change in operating assets and liabilities

1 unchanged sentence

Prepaid expenses and deposits

Long-term receivables

Accounts payable and accrued liabilities

Due to related parties

Operating lease liability

Deferred revenue

Net cash used in operating activities

7 unchanged sentences

$ ( 169,610 )

Cash flows from/(used in) financing activities

Proceeds from issuance of equity

Lease Payments

Net cash from/(used in) financing activities

Net change in cash for the year

( 4,461,116 )

Cash flows from financing activities

Proceeds from exercise of stock options

Proceeds from sale of common shares for cash

Proceeds from exercise of warrants

Net cash from financing activities

Effect of exchange rate changes on cash

Net change in cash for the period

( 4,461,116 )

Cash at beginning of year

Cash at end of year

Cash at beginning of period

Cash at end of period

Supplemental information of cash flows:

Income taxes paid in cash

Marketable securities received on accounts receivable

Remeasurement of operating lease right of use assets and liabilities

4 unchanged sentences

(Expressed in US Dollars)

Comprehensive

(Loss) Income

Balance August 31, 2022

1 unchanged sentence

$ ( 316,414 )

Shares issued for services

Shares sold for cash

Stock based compensation

6 unchanged sentences

Shares sold for cash

Shares issued from exercise of warrants

Shares issued from exercise of options

Stock based compensation

Foreign currency translation loss

( 5,795,345 )

11 unchanged sentences

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

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

Our current focus is the investigation of the incorporation of our DehydraTECH drug delivery technology with GLP-1 and GIP drugs to enhance absorption and reduce adverse side effects.

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.

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 least 12 months from the date of 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 meet its financial obligations for a period of at least 12 months from the date of this report.

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

3 unchanged sentences

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 as to the Company’s ability to continue as a going concern.

During the year ended August 31, 2023, we raised $ 114,456 from the sale of shares pursuant to our ATM offering and on May 11, 2023 we raised an additional $ 2 million pursuant to a brokered registered offering.

Net proceeds from these offerings totaled $ 1,589,731 , respectively.

On October 3, 2023, the Company closed a registered direct offering resulting in net proceeds of approximately $ 1.29 million.

During the year ended August 31, 2024, we raised an approximate aggregate $ 10.3 million in net proceeds from the sale of securities pursuant to our equity financings from October 3, 2023, February 14, 2024 and April 30, 2024 and from the exercise of warrants.

Subsequent to August 31, 2024, we raised an additional $ 4.5 million in net proceeds in a registered direct offering.

We may offer additional securities for sale during our fiscal year 2025 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, 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.

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.

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.

Significant Accounting Policies

3 unchanged sentences

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.

Lexaria Pharmaceutical Corp., Lexaria Hemp Corp., Lexaria CanPharm ULC, Lexaria Nutraceutical Corp., Poviva Corp., Lexaria CanPharm Holding Corp., Lexaria (AU) Pty Ltd 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.

6 unchanged sentences

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.

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 and Comprehensive Loss.

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

6 unchanged sentences

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.

They are included in operating expenses in the Consolidated Statements of Operations and Comprehensive Loss.

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

4 unchanged sentences

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.

Property and equipment

Property and 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 periods ranging from 3 to 10 years.

Certain production equipment is depreciated by units of production method.

4 unchanged sentences

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

The Company recognizes revenue in accordance with ASC 606’s core principle by applying the following five steps:

Identify contracts with customers

Identify the performance obligations in the contracts

Determine the contract price

Allocate the contract price

Recognize revenue when/as performance obligations are satisfied

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.

Our revenues from licenses that grant exclusive rights to use our intellectual property, which we consider functional IP, are recognized at a point in time following the transfer and use of our patented infusion technology DehydraTECH.

Our licensees are also required to pay quarterly fixed non-refundable minimum performance fees which are recognized as revenue over the period to which they apply.

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.

The Company may also earn sales-based or usage-based royalties from its licensing contracts.

The Company recognizes usage fees in the period when our licensees recognize sales of end-products that incorporate our licensed technology.

No sales-based usage fees were recognized for the years ended August 31, 2024 and 2023.

Third Party Contracted Manufacturing

The Company recognizes revenue with respect to contract manufacturing arrangements when the related performance obligations have been satisfied (i.e., when it has completed the related manufacturing work) and in accordance with the five steps described in the ASC 606.

Contract Research and Development

The Company recognizes revenue from contract research and development arrangements when the related performance obligations have been satisfied and in accordance with the five steps described in ASC 606.

The related performance obligation typically entails preparation of customer-specific formulations (i.e., DehydraTECH paired with the customer’s active ingredient) that the customer then uses in comparison testing relative to its existing product(s).

Revenue is recognized upon shipment of the formulation to the customer.

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.

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

2 unchanged sentences

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.

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 and Comprehensive Loss.

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 Company accounts for its stock-based compensation awards whereby all stock-based grants are recognized as expenses in the Consolidated Statements of Operations and Comprehensive Loss 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.

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 term of the option, risk-free interest rates and expected dividend yields of the common stock.

Foreign currency translation

The Company maintains its accounting records in US dollars.

At the transaction date, each asset, liability, revenue, and expense that was acquired or incurred in a foreign currency is translated into US dollars by using the exchange rate in effect at that date;

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

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

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 net income per share includes the effect, if any, from the potential exercise or conversion of securities, such as restricted stock, stock options, and warrants, 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.

1 unchanged sentence

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.

Financial instruments

A valuation allowance is established to reduce deferred tax assets to an amount whose realization is more likely than not.

Fair Value Measurements

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

5 unchanged sentences

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

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

2 unchanged sentences

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 August 31, 2024.

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

2 unchanged sentences

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 year ended August 31, 2023, four customers accounted for 95% (2022 – one customer was accounted for 100%) of consolidated revenues.

At fiscal year-end 2023, we had $ 24,635 (2022 - $ 37,248 ) in license fees receivable.

The Company did not incur any bad debt expense in fiscal 2022 or 2023.

As of August 31, 2023, the Company had $ 102,051 (2022 - $ 84,162 ) in sales tax receivable.

In the year ended August 31, 2024, two customers accounted for 99% of consolidated revenues, whereas for the year ended August 31,2023, four customers accounted for 95% of consolidated revenue.

At fiscal year-end 2024, we had $ 84,000 in license fees receivable, compared to $ 24,635 as of August 31, 2023.

The Company recognized bad debt expense of $ 7,760 and $ 0 for the years ended August 31, 2024 and August 31, 2023, respectively.

As of August 31, 2024, the Company had $ 70,477 in sales tax receivable, compared to $ 102,051 as of August 31, 2023.

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.

The Company's policy is to record accruals for any 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.

4 unchanged sentences

Recent Accounting Guidance

Pronouncements Issued but Not Yet Adopted

Recently Adopted Pronouncements

In June 2016, the FASB issued ASU No.

6 unchanged sentences

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

The Company will adopt ASU 2016-13 effective September 1, 2023.

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

Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280)) – Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

This ASU also expands disclosure requirements to enable users of financial statements to better understand the entity’s measurement and assessment of segment performance and resource allocation.

This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently assessing the effect of this ASU on its consolidated financial statements and related disclosures.

In March 2024, the FASB issued ASU 2024-02-Codification Improvements-Amendments to Remove References to the Concepts Statements, that contains amendments to the Codification that remove references to various FASB Concepts Statements.

This effort facilitates Codification updates for technical corrections such as conforming amendments, clarifications to guidance, simplifications to wording or the structure of guidance, and other minor improvements.

The amendments are effective for public business entities for fiscal years beginning after December 15, 2024, with early adoption permitted.

Early application of the amendments in this ASU is permitted for all entities, for any fiscal year or interim period for which financial statements have not yet been issued (or made available for issuance).

If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period.

The Company is currently assessing the effect of this ASU on its consolidated financial statements and related disclosures.

Estimates and Judgments

18 unchanged sentences

The risk-free interest rate for the expected term of the option is based on the yields of government bonds.

Changes in these assumptions, especially the share price volatility and the expected life determination could have a material impact on the Company’s profit and loss for the years presented.

Changes in these assumptions, especially the share price volatility and the expected term determination could have a material impact on the Company’s profit and loss for the years presented.

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

1 unchanged sentence

The Asset Purchase Agreement for the sale of assets to Hill Inc.

Beverages included C$ 2 million note (the “Note”) receivable as partial payment of the agreement.

included C$ 2 million note (the “Note”) receivable as partial payment of the agreement.

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

1 unchanged sentence

Therefore, with any repayment being highly doubtful, management determined at that time and as of August 31, 2024 and 2023 that the value of the note to be notional and recorded the note at a zero value for accounting purposes.

During fiscal 2023, we received interest income on the note totaling $ 43,190 (2022 - $ 29,060 ).

During fiscal 2024, we received interest income on the note totalling $ 14,117 .

continues to operate and make ongoing interest payments to us in relation to this Note.

2 unchanged sentences

As such, during the year ended August 31, 2024, the Company recognized an impairment loss of $ 57,836 related to those abandoned applications.

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 )

August 31, 2023

$ ( 1,325,785 )

Marketable securities represented the common shares of Hill Inc.

held by Lexaria.

which are carried at fair value using Level 1 inputs.

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

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

Accounts and Other Receivables

Accounts receivable at August 31, 2024 and August 31, 2023 consist of the following:

Trade and deposits

Territory license fees

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

Raw materials

In the year ended August 31, 2023, raw materials inventory valued at $ 38,418 was expensed to R&D.

Long term receivable

Total Receivables

Prepaid Expenses and Other Current Assets

1 unchanged sentence

Advertising & Conferences

Research and Development

Legal & Accounting Fees

2 unchanged sentences

Capital Financing

Total Prepaid Expenses and Other Current Assets

Intellectual Property, net

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

Issued Patent #

Patent Certificate Grant Date

Patent Family

US 9,474,725 B1

#1 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

#18 Compositions and Methods for Enhanced Delivery of Antiviral Agents

US 11,700,875

#20 Compositions and Methods for Sublingual Delivery of Nicotine

US 11,666,544

#21 Compositions and Methods for Treating Hypertension

US 11,666,543

A continuity schedule for capitalized patents is presented below:

1 unchanged sentence

Balance – ending

At August 31, 2023 the Company has capitalized a total of $ 462,625 of patents.

Included in the capitalized costs is $ 457,445 of costs associated with patents and licenses that have been filed.

Also included in the capitalized costs is $ 5,180 of costs associated with provisional patents and pending applications which have not yet been filed.

The Company evaluated its patent portfolio and determined that certain pending applications had been abandoned or would not be pursued.

As such, during the year ended August 31, 2023, the Company recognized an impairment loss of $ 106,761 (2022 - $Nil) related to those abandoned applications.

The Company evaluated its patent portfolio and determined that certain pending applications had been abandoned or will not be pursued.

As such, during the year ended August 31, 2024, the Company recognized an impairment loss of $ 57,836 related to those abandoned applications.

The Company recognized $ 33,704 of amortization expense related to patents and licenses in the year ended August 31, 2024.

The following table summarizes expected future amortization of the Company’s patent portfolio as of August 31, 2024:

Years Ending December 31,

Property & Equipment, net

Property and equipment, net consists of:

August 31, 2023

Period Amortization

Saturday, August 31, 2024

Accumulated Amortization

5 unchanged sentences

August 31, 2023

Period Amortization

Accumulated Amortization

4 unchanged sentences

$ ( 475,168 )

$ ( 379,993 )

During the year ended August 31, 2023, amortization of $ 4,651 (2022 - $ 3,655 ) was included in cost of goods sold.

During the years ended August 31, 2024 and August 31, 2023, amortization of $ 0 and $ 4,651 was included in cost of goods sold.

Accounts Payable and Accrued Liabilities

1 unchanged sentence

Accounts Payable

Trade payables

Vendors payable

Sales tax payable

Accrued Liabilities

Trade payables

Vendors payable

Balance Ending

Revenues for the years ended August 31, 2024 and 2023 consist of the following:

Year Ended August 31,

The Company recognized B2B product revenues of $ 44,167 (2022 - $ 113,438 ) that relate to sales of our intermediate products for use by two 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.

Total Revenue

Licensing revenue consists of IP licensing fees for transfer of the DehydraTECH technology in line with definitive agreements and includes non-refundable minimum performance fees.

The Company recognized $ 457,990 in licensing revenue during the year.

The Company recognized B2B product revenues of $ 5,388 that relate to sales of our intermediate products for use by B2B customers in their products.

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

1 unchanged sentence

Loss before taxes

( 6,712,525 )

( 7,383,653 )

Expected income tax recovery

( 1,427,529 )

( 1,619,854 )

Non-deductible items

11 unchanged sentences

Valuation Allowance

( 9,580,837 )

( 7,865,660 )

Net Deferred tax assets

3 unchanged sentences

Fiscal 2024 Activity

During the year ended August 31, 2023, the Company completed the following issuances of common shares and warrants:

34,652 shares were sold pursuant to an at-the-market offering (“ATM”) for gross proceeds of $ 114,456 .

Offering costs netted against proceeds amounted to $ 125,122 ;

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 and 7,500 warrants expired during the year ended August 31, 2023.

During the year ended August 31, 2024, the Company entered into Securities Purchase Agreements whereby on February 16, 2024, the Company issued 1,444,741 shares of common stock and 113,702 pre-funded warrants in a registered direct offering.

The Company also sold to investors, warrants to purchase up to 1,558,443 shares of common stock.

The combined effective offering price for each share of common stock and accompanying warrant was $ 2.31 .

The warrants will expire five years from the issuance date, and have an exercise price of $ 2.185 per share.

The Company also agreed to partially compensate the placement agent through the issuance of warrants to purchase up to 54,546 shares of common stock.

Such warrants will expire five years from the issuance date, and have an exercise price of $ 2.8875 per share.

The net proceeds to the Company from the registered direct offering was $ 3 .0 million, after deducting placement agent fees and other offering expenses paid by the Company.

As of August 31, 2024, 1,298,702 warrants had been exercised.

In addition, all 113,702 pre-funded warrants had been exercised for gross proceeds of $ 11 .

During the year ended August 31, 2024, the Company also 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 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 were $ 1.25 million, after deducting placement agent fees and other offering expenses payable by the Company.

To date all of the pre-funded warrants have been exercised, resulting in the issuance by the Company of an aggregate 729,058 common shares for gross proceeds of $ 73 .

Further, all 1,618,330 warrants had been exercised by August 31, 2024.

On April 30 2024, the Company entered into a Warrant Exercise Agreement with an existing accredited investor (the "Investor”) to exercise in full outstanding Common Stock Purchase Warrants (the "Exercise”) to purchase up to an aggregate of 2,917,032 shares of the Company’s common stock (the "Existing Warrant”) for gross proceeds of $ 4,407,444 .

Immediately upon full exercise of the Existing Warrant, the Investor received a new unregistered Common Stock Purchase Warrant to purchase up to an aggregate of 2,917,032 shares of the Company’s common stock (the "New Warrant”).

The New Warrant was issued to the Investor for consideration of $ 0.125 per share for additional gross proceeds of $ 364,629 .

In addition, 102,097 warrants with an exercise price of $ 5.9375 were issued as part of a tail commission.

Placement agent fees and other offering expenses in the amount of $ 209,796 were netted against the proceeds.

During the fiscal year ended August 31, 2024, the Company had warrant exercises resulting in the following share issuances:

1,622,250 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 $ 1,541,137 ;

1,618,330 common shares pursuant to the exercise of warrants that were issued under our October 3, 2023, financing, at an exercise price of $ 0.97 per share for gross proceeds of $ 1,569,780 ;

729,058 common shares pursuant to the exercise of pre-funded warrants that were issued under our October 3, 2023, financing, at an exercise price of $ 0.0001 per share for gross proceeds of $ 73 dollars;

1,298,702 common shares pursuant to the exercise of warrants that were issued under our February 16, 2024, financing, at an exercise price of $ 2.185 per share for gross proceeds of $ 2,837,664 ;

113,702 common shares pursuant to the exercise of pre-funded warrants that were issued under our February 16, 2024, financing, at an exercise price of $ 0.0001 per share for gross proceeds of $ 11 dollars.

During the year ended August 31, 2024, 300,000 warrants expired.

Presented below is a continuity schedule for warrants:

Weighted Average Exercise Price $

Balance, Aug 31, 2021

Cancelled/expired

Balance, Aug 31, 2022

Balance, August 31, 2022

Cancelled/expired

Balance, August 31, 2023

( 5,382,042 )

Balance, August 31, 2024

Presented below is a summary of warrants outstanding as of August 31, 2024:

Number of Warrants

Weighted Average

1 unchanged sentence

Weighted Average Remaining

Contractual Life (years)

Contractual Life in Years

Fiscal 2023 Activity

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

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

During the year ended August 31, 2023, the Company completed the following issuances of common shares and warrants:

34,652 shares were sold pursuant to an at-the-market offering ("ATM”) for gross proceeds of $ 114,456 .

Offering costs netted against proceeds amounted to $ 125,122 .

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

No warrants have been exercised and 7,500 warrants expired during the year ended August 31, 2023.

Stock Options

The Company established an Equity Incentive Plan whereby our Board, pursuant to shareholder approved amendments, may grant up to 1,037,544 stock options to directors, officers, employees, and consultants with such number being increased to up to 10% of the issued share capital at the end of each calendar year, at the discretion of the board, pursuant to an evergreen formula .

While these amendments have been approved by the Company’s shareholders, the Company has not filed an S-8 Registration Statement to register these additional securities, accordingly, until such S-8 Registration Statement is filed with the SEC, the Company may only issue up to 510,433 shares under the current registered Equity Incentive Plan .

Stock options may be exercised for a maximum period of up to ten ( 10 ) years but to date all currently issued options must be exercised, as determined by our Board, by no later than five years from the date of grant.

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

Vesting terms are set by our Board.

2 unchanged sentences

The Company granted the following stock options during the year ended August 31, 2024:

Weighted Average

Granted Quantity

Exercise Price

Contractual Life) 5

Contractual Life (years)

Of the 200,000 options granted on March 15, 2024, 150,000 were subsequently cancelled and 50,000 were fully vested.

Fiscal 2023 Activity

The Company granted the following stock options during the year ending August 31, 2022:

The Company granted the following stock options during the year ended August 31, 2023:

Weighted Average

Exercise Price

Contractual Life (years)

August 31, 2022

Contractual Life) 5

During the year ended August 31, 2023, 267,969 previously granted 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.

A continuity schedule for stock options is presented below:

Weighted Average Exercise Price

Weighted Average Remaining Contractual Term (years)

Aggregate Intrinsic Value

Average Remaining Contractual

Aggregate Intrinsic

Balance August 31, 2022

9 unchanged sentences

Risk Free interest rate

0.78 % – 3.30

Expected life

3 unchanged sentences

$ 0.63 -$ 2.57

Stock-based compensation expense for the fiscal years ended August 31, 2023 and August 31, 2022 totalled $ 170,382 and $ 752,591 , respectively.

Of the current fiscal year expense, $ 89,057 relates to current year option awards, $ 25,194 relates to the repricing of 267,969 options disclosed above, and $ 56,131 relates to the vesting of options awarded in previous fiscal years.

$ 2.25 -$ 5.10

Stock-based compensation expense for the fiscal years ended August 31, 2024 and August 31, 2023 totaled $ 492,236 and $ 170,382 , respectively.

Of the current fiscal year expense, $ 453,119 relates to current year option awards, and $ 39,117 relates to the vesting of options awarded in previous fiscal years.

As of August 31, 2024, unrecognized non-cash stock-based compensation expense totaled $ 533,619 related to 210,000 unvested stock options with a weighted average exercise price of $ 3.89 .

This expense is expected to be recognized over a weighted average period of 2.26 years.

Commitments, Significant Contracts and Contingencies

2 unchanged sentences

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

August 31, 2024

August 31, 2023

Right of use assets - operating leases

Extension-related remeasurement

Remeasurement related to lease extension

Total lease assets

Remeasurement related to lease extension

Lease payments

Interest accretion

Extension-related remeasurement

Total lease liabilities

8 unchanged sentences

current obligations under leases

Non-Current Portion

Segment Information

14 unchanged sentences

$ ( 5,808,654 )

$ ( 2,887,126 )

$ ( 6,712,525 )

Year Ended August 31, 2023

4 unchanged sentences

$ ( 6,728,730 )

Other income/(expense)

$ ( 178,503 )

3 unchanged sentences

$ ( 6,712,525 )

Capital Asset by Region

Year Ended August 31, 2023

Net Balance Canada

Total Net Balance

Leasehold Improvements

Furniture & Fixtures

Lab Equipment

Capital Asset by Region

Year Ended August 31, 2022

Net Balance Canada

Total Net Balance

Leasehold Improvements

Furniture & Fixtures

Lab Equipment

Subsequent Events

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 agreed to issue and sell 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 $ 1.29 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 shares issued pursuant to the pre-funded warrant exercises were registered pursuant to an S-3 registration statement (333-262402).

Subsequent to the fiscal year end, the Company issued an aggregate 566,661 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 $ 538,328 of which $29,569 is currently held in Lexaria’s trust account with the warrant agent.

The shares issued pursuant to the warrant exercise were registered pursuant to an S-1 registration statement (333-271096).

Subsequent to the fiscal year end, the Company issued an aggregate 85,000 options for the issuance of 85,000 shares at an exercise price of $ 1.15 and exercisable for a five-year term expiring October 27, 2028.

The options were issued pursuant to the Company’s registered equity incentive plan.

Subsequent to the fiscal year end, the Company engaged Mr.

Michael Shankman as its Chief Financial Officer to fill the vacancy created when Mr.

Cabatuan resigned from this position on July 15, 2024.

Pursuant to the Executive Management Agreement entered into between the Company and Mr.

Shankman, Mr.

Shankman will be compensated with a base annual salary of US$ 120,000 , subject to annual increases of 1.25 x the annual inflation rate as determined by the US Federal Reserve Board, an option grant for the issuance of up to 50,000 common shares vested over three years, and annual performance milestone bonuses of up to 35% during the first year, 40% during the second year and thereafter up to 50% of the base salary.

Shankman be terminated without cause, after an initial six months with the Company, he will be entitled to severance pay equal to two (2) months base salary, with such severance pay increasing by a month for each completed year of employment.

Shankman will also be entitled to medical and dental benefits equal in value to up to $2,000 per month and four (4) weeks of paid vacation .

Subsequent to the fiscal year end, on September 4, 2024, we entered into an engagement agreement with H.C.

Wainwright & Co.

LLC (“HCW”), pursuant to which we agreed to sell in a registered direct offering, 1,633,987 shares of common stock at a purchase price of $ 3.06 per share for gross and net proceeds of $ 5.0 million and $ 4.5 million, respectively.

Concurrently, the Company issued, by way of a private placement transaction, 4,551,019 share purchase warrants, entitling the holder thereof to purchase up to 4,551,019 shares of common stock at a price of $ 3.06 per share for a period of five years from the date of shareholder approval for such warrant issuance.

The securities were issued on October 16, 2024, with the shares registered pursuant to a take down of the Company’s Form S-3 registration statement and the warrants and related warrant shares are required to be registered pursuant to a Form S-1 registration statement As part of the terms and conditions of the warrant issuance, the sole investor agreed to cancel the share purchase warrants that were issued to them in the April 30, 2024 financing.

We also issued HCW warrants to purchase up to 57,190 shares at an exercise price of $3.825 per share .

HCW was paid 7 % of the gross proceeds and was also reimbursed $ 70,000 for its expenses and $ 15,950 in closing fees.

On October 1, 2024, the Company awarded an option grant to an employee for the purchase of up to 12,000 common shares at an exercise price of $ 3.17 per share.

In October 2024, the Company sold 8,402 shares of common stock through an At the Market (ATM) offering.

Net proceeds from these sales totaled $ 25,359 .

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

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

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

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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data