Lexaria Bioscience Corp 10-Q for FY2022 Q3

Lexaria Bioscience Corp. (LEXX)

10-Q 2022-07-14 For: 2022-05-31

Added on April 09, 2026

About this 10-Q

Lexaria Bioscience Corp filed this 10-Q on July 14, 2022, covering the quarter ended May 31, 2022 (FY2022 Q3).

Headline figures

Quarter ended May 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $99.72K; down 51.1% from $204.06K a year earlier
Net loss: $2.42M; compared with a net loss of $2.57M a year earlier

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Nevada		20-2000871
State or other jurisdiction of incorporation or organization		(I.R.S. Employer IdentifiCAtion No.)

#100 – 740 McCurdy Road, Kelowna BC Canada		V1X 2P7
(Address of principal executive offices)		(Zip Code)

Title of Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.001	LEXX	NASDAQ
Warrants	LEXXW	NASDAQ

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

PART I—FINANCIAL INFORMATION		3

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Controls and Procedures	29

PART II—OTHER INFORMATION		31

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Exhibits	31

LEXARIA BIOSCIENCE CORP.
CONSOLIDATED BALANCE SHEET
(Expressed in U.S. Dollars)
	May 31,			August 31,
	2022			2021
ASSETS	(Unaudited)			(Audited)
Current
Cash	$	7,051,083		$	10,917,797
Marketable securities		288,032			833,841
Accounts receivable		154,868			342,401
Inventory		40,183			29,648
Prepaid expenses and deposit		757,308			319,253
Total Current Assets		8,291,474			12,442,940

Non-current assets, net
Lease right of use		62,363			91,041
Intellectual property		440,675			364,623
Property & equipment		343,431			368,213
Total Non-current Assets		846,469			823,877
TOTAL ASSETS	$	9,137,943		$	13,266,817

LIABILITIES
Current
Accounts payable and accrued liabilities	$	157,095		$	105,946
Loan payable		7,906			7,926
Lease payable		41,825			39,404
Total Current Liabilities		206,826			153,276

Long Term
Lease payable		18,339			49,989
Total Long Term Liabilities		18,339			49,989
TOTAL LIABILITIES		225,165			203,265

STOCKHOLDERS' EQUITY
Share Capital
Authorized:
220,000,000 common voting shares with a par value of $0.001 per share Issued and outstanding: 5,950,998 common shares at May 31, 2022 and 5,726,699 common shares at August 31, 2021		5,951			5,727
Additional paid-in capital		46,808,608			45,089,114
Deficit		(37,631,063	)		(31,829,204	)
Equity attributable to shareholders of the Company		9,183,496			13,265,637
Non-controlling Interest		(270,718	)		(202,085	)
Total Stockholders' Equity		8,912,778			13,063,552
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	9,137,943		$	13,266,817

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

LEXARIA BIOSCIENCE CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in U.S. Dollars)

	Nine Months Ended
	May 31,
	2022			2021
	(Unaudited)
Cash flows used in operating activities
Net loss and comprehensive loss	$	(5,870,492	)	$	(2,861,483	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation		519,718			410,007
Depreciation and amortization		77,986			83,788
Inventory write-off		-			2,482
Bad debt expense		-			37,000
Non-cash right of use lease expense		28,678			26,665
Gain on disposal of assets		-			(1,522,704	)
Unrealized loss on marketable securities		823,916			86,810
Shares issued for services		600,000			-
Warrants issued for services		-			785,895
Lease accretion		4,166			6,179
Change in working capital
Accounts receivable		(90,574	)		(1,106	)
Inventory		(9,196	)		71,976
Prepaid expenses and deposits		161,945			11,656
Accounts payable and accrued liabilities		56,352			86,981
Due to related parties		(5,223	)		(57,380	)
Deferred revenue		-			(44,255	)
Net cash used in operating activities	$	(3,702,724	)	$	(2,877,489	)

Cash flows used in investing activities
Disposal (acquisition) of assets		(49,188	)		273,375
Intellectual property		(81,407	)		(79,493	)
Net cash (used in) provided by investing activities	$	(130,595	)	$	193,882

Cash flows from financing activities
Repayment of loan payable		-			(23,163	)
Lease payments		(33,395	)		(32,962	)
Proceeds from issuance of equity		-			9,471,495
Net cash provided by (used in) financing Activities	$	(33,395	)	$	9,415,370

Net cash provided by discontinued operations	$	-		$	83,000

Net change in cash for the period		(3,866,714	)		6,814,763
Cash at beginning of period		10,917,797			1,293,749
Cash at end of period	$	7,051,083		$	8,108,512

Supplemental information of cash flows:
Income taxes paid in cash	$	-		$	3,450
Non-cash consideration on asset disposal	$	-		$	1,171,599
Non-cash shares for services included in prepaid expenses	$	600,000		$	-

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

LEXARIA BIOSCIENCE CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Expressed in U.S. Dollars, except number of shares)
					(Unaudited)

					ADDITIONAL								TOTAL
	SHARE CAPITAL				PAID-IN								STOCKHOLDERS'
	SHARES		AMOUNT		CAPITAL		DEFICIT			NCI			EQUITY
			$		$		$			$			$
Balance August 2020		3,001,476		3,001		30,324,398		(27,802,198	)		(42,943	)		2,482,258
Stock based compensation		-		-		48,887		-			-			48,887
Net loss		-		-		-		(696,028	)		-			(696,028	)
Non-controlling interest		-		-		-		-			(14,093	)		(14,093	)
Balance November 30, 2020		3,001,476		3,001		30,373,285		(28,498,226	)		(57,036	)		1,821,024
Stock based compensation		-		-		17,154		-			-			17,154
Brokered placement		2,102,856		2,104		9,469,393		-			-			9,471,497
Net Income		-		-		-		404,111			-			404,111
Non-controlling interest		-		-		-		-			(10,921	)		(10,921	)
Balance February 28, 2021		5,104,332		5,105		39,859,832		(28,094,115	)		(67,957	)		11,702,865
Stock based compensation		-		-		343,966		-			-			343,966
Warrants issued for services		-		-		785,895		-			-			785,895
Net loss		-		-		-		(2,556,997	)		-			(2,556,997	)
Non-controlling interest		-		-		-		-			(9,555	)		(9,555	)
Balance May 31, 2021		5,104,332		5,105		40,989,693		(30,651,112	)		(77,512	)		10,266,174
Exercise of warrants		610,189		610		4,014,433		-			-			4,015,043
Shares issued for services		12,178		12		84,988		-			-			85,000
Net loss		-		-		-		(1,178,092	)		-			(1,178,092	)
Non-controlling interest		-		-		-		-			(124,573	)		(124,573	)
Balance August 31, 2021		5,726,699		5,727		45,089,114		(31,829,204	)		(202,085	)		13,063,552
Stock based compensation		-		-		408,544		-			-			408,544
Net loss		-		-		-		(1,993,157	)		-			(1,993,157	)
Non-controlling interest		-		-		-		-			(10,325	)		(10,325	)
Balance November 30, 2021		5,726,699		5,727		45,497,658		(33,822,361	)		(212,410	)		11,468,614
Shares issued for services		224,299		224		1,199,776		-			-			1,200,000
Net loss		-		-		-		(1,425,777	)		-			(1,425,777	)
Non-controlling interest		-		-		-		-			(22,895	)		(22,895	)
Balance February 28, 2022		5,950,998		5,951		46,697,434		(35,248,138	)		(235,305	)		11,219,942
Stock based compensation		-		-		111,174		-			-			111,174
Net loss		-		-		-		(2,382,925	)		-			(2,382,925	)
Non-controlling interest		-		-		-		-			(35,413	)		(35,413	)
Balance May 31, 2022		5,950,998		5,951		46,808,608		(37,631,063	)		(270,718	)		8,912,778

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

Issued Patent #	Patent Certificate Grant Date	Patent Family
US 9,474,725 B1	10/25/2016	Food and Beverage Compositions Infused With Lipophilic Active Agents and Methods of Use Thereof
US 9,839,612 B2	12/12/2017
US 9,972,680 B2	05/15/2018
US 9,974,739 B2	05/22/2018
US 10,084,044 B2	09/25/2018
US 10,103,225 B2	10/16/2018
US 10,381,440	08/13/2019
US 10,374,036	08/06/2019
US 10,756,180	08/25/2020
US 11,311,559	04/26/2022	Compositions and Methods for Enhanced Delivery of Antiviral Agents

Patents
	May 31,			August 31,
	2022			2021
	$			$
Balance – beginning		364,623			292,000
Addition		81,407			79,493
Amortization*		(5,355	)		(6,870	)
Balance – ending		440,675			364,623

Nine Months Ended	Cost		Period Amortization			Additions		Accumulated Amortization			Net Balance May 31, 2022
May 31, 2022	$		$			$		$			$
Leasehold improvements		259,981		(40,528	)		-		(181,176	)		78,805
Computers		63,964		(8,691	)		6,817		(60,241	)		10,540
Furniture fixtures & equipment		31,126		(4,813	)		-		(21,233	)		9,893
Lab equipment		291,235		(19,874	)		42,375		(89,417	)		244,193
		646,306		(73,906	)		49,192		(352,067	)		343,431

Year Ended	Cost		Period Amortization			Disposal			Accumulated Amortization			Net Balance August 31, 2021
August 31, 2021	$		$			$			$			$
Leasehold improvements		259,981		(54,038	)		-			(140,648	)		119,333
Computers		63,964		(19,681	)		-			(51,550	)		12,414
Furniture fixtures & equipment		34,220		(6,417	)		(3,094	)		(16,420	)		14,706
Lab equipment		291,235		(35,008	)		-			(69,475	)		221,760
		649,400		(115,144	)		(3,094	)		(278,093	)		368,213

	May 31		August 31,
	2022		2021
	$		$
Accounts Payable
Trades payable		90,047		54,668
Sales tax payable		47,598		-
Related party payable		5,599		5,223
Accrued Liabilities
Corporate tax payable		-		1,055
Trades payable		13,851		45,000
Balance		157,095		105,946

	Number of Warrants			Weighted Average Exercise Price $
Balance August 31, 2020		471,608			16.77
Cancelled/expired		(44,161	)		67.50
Exercised		(610,189	)		6.58
Issued		2,630,017			6.58
Balance August 31, 2021		2,447,275			8.00
Cancelled/expired		(25,292	)		4.57
Balance May 31, 2022		2,421,983			8.04

# of Warrants	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price $
7,500	0.43 years	24.00
100,000	1.88 years	9.00
200,000	1.88 years	7.00
51,814	2.46 years	36.00
8,984	2.50 years	36.00
16,667	2.79 years	9.00
317,190	2.95 years	10.50
1,719,828	3.63 years	6.58
2,421,983	3.28 years	8.04

	Options			Weighted Average Exercise Price $		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value $
Balance August 31, 2020		171,604			11.17
Cancelled/expired		(50,334	)		10.76
Granted		84,900			5.41
Balance August 31, 2021		206,170			8.90
Cancelled		(3,334	)		9.60
Granted		81,800			6.23
		36,700			3.39
Balance May 31, 2022 (Outstanding)		321,336			6.59		3.46		-
Balance May 31, 2022 (Exercisable)		293,836			6.80		3.62		-

	May 31, 2022
Expected volatility		98% - 119	%
Risk-free interest rate		0.85% - 1.78	%
Expected life	5 years
Dividend yield		0	%
Estimated fair value per option		$2.50 - $5.10

	Nine Months Ended
		May 31, 2022 $		May 31, 2021 $
Product sales			111,597		360,558
Licensing revenue			16,160		326,474
Other revenue			16,490		4,685
Income from operations			144,247		691,717

Nine Months Ended May 31, 2022	IP Licensing $			Products $			Corporate $			Consolidated Total $
Revenue		16,160			111,597			16,490			144,247
Cost of goods sold		-			(30,592	)		-			(30,592	)
Operating expenses		(3,096,910	)		(430,951	)		(2,456,286	)		(5,984,147	)
Segment loss		(3,080,750	)		(349,946	)		(2,439,796	)		(5,870,492	)

Total assets		958,586			95,389			8,083,968			9,137,943

Nine Months Ended May 31, 2021	IP Licensing $			Products $			Corporate $			Consolidated Total $
External revenue		326,474			360,658			4,585			691,717
Cost of goods sold		-			(155,037	)		-			(155,037	)
Operating expenses		914,485			(402,846	)		(3,909,802	)		(3,398,163	)
Discontinued operations		(22,000	)		-			-			(22,000	)
Segment income (loss)		1,218,959			(197,225	)		(3,905,217	)		(2,883,483	)

Total assets		709,155			51,738			9,786,659			10,547,553

Capital Asset by Region	Cost US		Addition US		Net Balance US		Cost Canada		Addition Canada		Net Balance Canada		Total Net Balance
Nine Months Ended May 31, 2022	$		$		$		$		$		$		$
Leasehold Improvements		-		-		-		259,981		-		78,805		78,805
Computers		-		-		-		63,964		6,817		10,540		10,540
Furniture Fixtures Equipment		-		-		-		31,126		-		9,893		9,893
Lab Equipment		98,050		42,375		106,506		193,185		-		137,686		244,193
		98,050		42,375		106,506		548,256		6,817		236,924		343,431

Capital Asset by Region	Cost US		Disposal US			Net Balance US		Cost Canada		Net Balance Canada		Total Net Balance
Year Ended August 31, 2021	$		$			$		$		$		$
Leasehold Improvements		-		-			-		259,981		119,333		119,333
Computers		-		-			-		63,964		12,414		12,414
Furniture Fixtures Equipment		3,094		(3,094	)		-		31,126		14,706		14,706
Lab Equipment		98,050		-			69,580		193,185		152,180		221,760
		101,144		(3,094	)		69,580		548,256		298,633		368,213

	May 31, 2022			August 31, 2021
	$			$
Right of use assets – operating leases		126,920			126,920
Amortization		(64,557	)		(35,879	)
Total lease assets		62,363			91,041

Liabilities:		89,393			125,431
Lease payments		(33,395	)		(43,950	)
Interest accretion		4,166			7,912
Total lease liabilities		60,164			89,393

Operating lease cost		62,363			91,041
Operating cash flows for lease		33,395			43,950
Remaining lease term	1.4 Years			2.1 Years
Discount rate		7.50	%		7.50	%

2022	$	11,204
2023	$	44,816
2024	$	7,469
Thereafter		-
Total lease payments	$	63,489
Less: imputed interest		(3,325	)
Present value of operating lease liabilities	$	60,164
Less: current obligations under leases		(41,825	)
Total	$	18,339

	Cost Basis $		Unrealized Gains $		Unrealized Losses $			Total $
August 31, 2021
Common stock		1,037,025		16,243		(219,427	)
Total		1,037,025		16,243		(219,427	)		833,841
May 31, 2022
Common stock		278,107		58,893		(882,809	)		(545,809	)
Total		1,315,132		75,136		(1,102,236	)		288,032

Gain on asset disposal
Book value of assets sold	$	-
Cash consideration		273,373
Shares received		468,264
Shares receivable		781,067
Promissory note		-
	$	1,522,704

	Nine Months Ended
Results of Operations	May 31,
	2022			2021			Change
	$			$			$
Revenue		144,247			691,717			(547,470	)
Research and development		1,486,489			823,102			663,387
Consulting fees & salaries		1,672,825			2,304,280			(631,455	)
Legal and professional		439,942			594,158			(154,216	)
Other general and administrative		2,384,893			1,199,327			1,185,566
Discontinued operations		-			(22,000	)		22,000
Net Loss		(5,870,492	)		(2,861,483	)		(3,009,009	)

	May 31,			August 31,
Working Capital	2022			2021
	$			$
Current assets		8,291,474			12,442,940
Current liabilities		(206,826	)		(153,276	)
Net Working Capital		8,084,648			12,289,664

	Nine Months Ended
	May 31,
Cash Flows	2022			2021
	$			$
Cash flows (used in) provided by operating activities		(3,702,724	)		(2,877,489	)
Cash flows (used in) provided by investing activities		(130,595	)		193,882
Cash flows (used in) provided by financing activities		(33,395	)		9,415,370
Net cash flows (used in) discontinued operations		-			83,000
Increase (decrease) in cash		(3,866,714	)		6,814,763

Exhibit Number		Description

(3)		Articles of Incorporation and Bylaws
3.1		Articles of Incorporation (incorporated by reference as Exhibit 3.1 to our Registration Statement on Form S-1 filed June 3, 2020)
3.2		Bylaws (incorporated by reference as Exhibit 3.2 to our Registration Statement on Form S-1 filed June 3, 2020)
3.3		Amended and Restated Articles of Incorporation (Filed on Form 8-K January 14, 2021 Exh. 3.1)
3.4		Second Amended and Restated Bylaws (incorporated by reference as Exhibit 3.2 to our Current Report on Form 8-K filed January 14, 2021)
3.5		Amended and Restated Bylaws (Filed on Form S-1 June 3, 2020 Exh 3.4)
3.6		Amendment to Articles of Incorporation – Share Consolidation (Filed on Form 8-K June 23, 2009 Exh 3.1)
3.7		Amendment to Articles of Incorporation – Share Expansion (incorporated by reference as Exhibit 3.5 to our Registration Statement on Form S-1 filed June 3, 2020)
3.8		Amendment to Articles of Incorporation –Share Forward Split (Filed on Form 8-K December 16th, 2015 Exh 3.1)
3.9		Amendment to Articles of Incorporation – Name Change (Filed on Form 8-K May 11th, 2016 Exh 99.1)

(10)		Material Contracts
10.1		Executive Employment Agreement dated Dec. 31, 2021 with John Docherty (Filed on Form 10-Q January 14, 2022 Exh 10.1)
10.2		Management Services Agreement dated Dec. 31, 2021 with C.A.B. Financial Services Ltd. (Chris Bunka) (Filed on Form 10-Q January 14, 2022 Exh. 10.2)
10.3		Redacted Intellectual Property License Agreement dated May 20, 2022 between Lexaria Hemp Corp. and Premier Wellness Science Co., Ltd.

(21)		Subsidiaries
21.1		List of Subsidiaries of the Registrant (Filed on Form 10-K November 29, 2021 Exh 21.1)

(31)		Rule 13(a) - 14 (a)/15(d) - 14(a)
31.1		Section 302 Certifications under Sarbanes-Oxley Act of 2002 of Principal Executive Officer
31.2		Section 302 Certifications under Sarbanes-Oxley Act of 2002 of Principal Financial Officer and Principal Accounting Officer
(32)		Section 1350 Certifications
32.1		Section 906 Certification under Sarbanes Oxley Act of 2002 of Principal Executive Officer
32.2		Section 906 Certification under Sarbanes Oxley Act of 2002 of Principal Financial Officer and Principal Accounting Officer

(101)*		Interactive Data Files
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

“LICENSOR”		“LICENSEE”
LEXARIA HEMP CORP.		PREMIER WELLNESS SCIENCE CO., LTD.


By:	“John Docherty”	By:	“Shinji Hosoyama”
	John Docherty, President		Shinji Hosoyama, CEO

By:	“Chris Bunka”	By:	“Hiro Takeuchi”
	Chris Bunka, CEO		Hiro Takeuchi, Head of R & D

(1)	all technical know-how and trade secrets in regard to the Licensor’s business and the use, manufacture or formulation of its patented technology;

(2)	the following patent applications, patents granted, and PCT International Patent Applications that are owned or controlled by LICENSOR as of the Effective Date of this Agreement, as well as any future continuations, continuations in part or divisional applications filed pursuant to the patent applications (the “Licensed Patents”):

Product Line Name	Product Line Description Specifically EXCLUDED from all Product Categories is any/all right to produce, package or sell any product that has been expressly prohibited under 1 c) of the Agreement
Consumable Non-Liquid Products	Any product that can be produced in a solid oral format, including, but not limited to capsules, oral lozenges, food and candies; for further clarity, this product category includes powder or tablet products that are to be diluted into a liquid.
Consumable Liquids Products	Any READY TO CONSUME liquid products for consumption by way of ingestion.
Topical Skin Products	Any cream, oil, salve, gel, lotion, lip care preparation, cosmetic product, bath product, hair care product or similar consumer product designed to be delivered to and through human skin.

“LICENSEE”
PREMIER WELLNESS SCIENCE CO., LTD.

By:
	Shinji Hosoyama

“LICENSOR”
LEXARIA HEMP CORP.

By:
	<<< Insert Signatory Name >>>

“PARTNER”
<<< Insert Name >>>

By:
	<<< Insert Signatory Name >>>

1.	I have reviewed this Quarterly Report on Form 10-Q of Lexaria Bioscience Corp.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's first fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ " Chris Bunka "
Chris Bunka
CEO and Director
(Principal Executive Officer)

/s/ "Gregory Downey"
Gregory Downey CPA, CMA
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)

(1)	the Quarterly Report on Form 10-Q of Lexaria Bioscience Corp. for the quarter ended May 31, 2022 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Lexaria Bioscience Corp.