UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number000-52138

LEXARIA BIOSCIENCE CORP.

LEXARIA BIOSCIENCE CORP.

(Exact name of registrant as specified in its charter)

Registrant’s Telephone number, including area code: 250-765-6424

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange On Which Registered
N/A		N/A

Securities registered pursuant to Section 12(g)12(b) of the Act:

Common Stock, Par Value $0.001
(Title of class)

Title of Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.001	LXRP LXX	OTCQX CSE

Indicate by check mark if the registrantregistered is a well-known seasonedseasonal issuer, as defined in Rule 405 the Securities Act.
Act Yes [   ]      ¨ No [X]x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act
Yes [   ]      ¨ No [X]x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the

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Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the last 90 days.
Yes [X]     x No [   ]¨

Indicate by check mark whether the registrant has submitted electronically, and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-K (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X]       x No [   ]¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [   ]	¨	Accelerated filer                   [   ]	x
Non-accelerated filer   [   ]	¨	Smaller reporting company [X]	x
		Emerging growth company [   ]	¨

If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]Act ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [   ]       ¨ No [X]x

The aggregate market value of Common Stock held by non-affiliates of the Registrant on February 28, 20172019 was $12,520,308$83,889,033 based on the average of the high and low bid and asked price of the Registrant’s shares of common stock on the OTC Bulletin BoardOTCQX or $0.545$1.42 on February 28, 2017. For purposes of this computation, all executive officers and directors have been deemed to be affiliates. Such determination should not be deemed to be an admission that such executive officers and directors are, in fact, affiliates of the Registrant.2019.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.

69,435,19878,787,134 common shares as of November 22, 20175, 2019

DOCUMENTS INCORPORATED BY REFERENCE

None.

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TABLE OF CONTENTS

Business	4

TABLE OF CONTENTS

Item 1A.1.	Risk FactorsBusiness	20		3
Item 1A.	Risk Factors			24
Item 1B.	Unresolved Staff Comments	29		33
Item 2.	Properties			33
Item 2.3.	PropertiesLegal Proceedings	29		33
Item 3.	Legal Proceedings	30
Item 4.	Mine Safety Disclosures	30		33
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities	30		34
Item 6.	Selected Financial Data	33		36
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34		37
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	41		45
Item 8.	Financial Statements and Supplementary Data	41		45
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	65		69
Item 9A.	Controls and Procedures	66		69
Item 9B.	Other Information			70
Item 9B.	Other Information	67
Item 10.	Directors, Executive Officers and Corporate Governance	67		71
Item 11.	Executive Compensation			74
Item 11.	Executive Compensation	71
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters	75		77
Item 13.	Certain Relationships and Related Transactions, and Director Independence	76		78
Item 14.	Principal Accounting Fees and Services	77		78
Item 15.	Exhibits, Financial Statement Schedules	78		80

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PART I1

Item 1. Business

Cautionary Note Regarding Forward-Looking Statements

This annual report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact may be forward-looking statements. These statements relate to future events or our future financial performance. Any forward-looking statements are based on our present beliefs and assumptions as well as the information currently available to us. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “targets”, “goal”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” set forth in Item 1(A) in this report on Form 10-K, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. ExceptWe caution you not to place undue reliance on any forward-looking statements as required by applicable law, including the securities lawsthey speak only as of the United States,date on which such statements were made, and we do not intendundertake no obligation to update any forward-looking statement or to reflect the occurrence of an unanticipated event. New factors may emerge and it is not possible to predict all factors that may affect our business and prospects. Further, management cannot assess the impact of each factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements to conform these statements to actual results.statements.

Lexaria’s

Our audited annual consolidated financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.Principles (US GAAP). The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this report.

In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to “C$” or “CDN$” refer to Canadian dollars and all references to “common shares” and “shares” refer to the common shares in our common stock. References to “CAD$” refers to Canadian dollars.capital stock, unless otherwise indicated.

As used in this currentquarterly report, the terms “Lexaria” “we”, “us”, “our” and “Company” mean Company and/or our subsidiaries, unless otherwise indicated, the terms "we", "us", "our" and "our company" mean Lexaria Bioscience Corp., our wholly owned subsidiary, Lexaria CanPharm Corp., a Canadian corporation, our 51% owned (100% as of October 2017) subsidiary PoViva Tea, LLC (“PoViva"), an entity incorporated in the state of Nevada, and our 50% ownership of Ambarii Trade Corporation (“Ambarii”), a Canadian corporation, unless otherwise stated.indicated.

General and Historical Overview of Our Business

The Company was formed on December 9, 2004 under the laws of the State of Nevada as an independent oil and gas company engaged in the exploration, development and acquisition of oil and gas properties in the United States and Canada. In March of 2014, the Company began its entry into the bioscience and alternative health and wellness business and discontinued its involvement in the oil and gas business in November 2014. In May 2016, the Company also commenced out-licensing its patented DehydraTECH™ technology (the “Technology”) for improved delivery of bioactive compounds that promotes healthy ingestion methods, lower overall dosing and higher effectiveness in active molecule delivery. The Company has its office in Kelowna, BC, Canada.

Effective at the opening of trading on October 28, 2009, our shares of common stock began trading on the Canadian Securities Exchange (formerly, Canadian National Stock Exchange) under the trading symbol “LXX”.

Our common stock is quoted on the OTCQBOTCQX under the symbol "LXRP"“LXRP” and on the Canadian Securities Exchange under the symbol “LXX”.

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In 2014, the Company submitted an applicationchanged its business direction to enter into the hemp oil-based food supplement industry in the US and the legal medical marijuana businessindustry in Canada and also launchedvia a hemp oil-based food supplement company49% interest in the USA.

The Company entered into a joint venture agreement with Enertopia Corp for a prospective medical marijuana business under the Canadian Marijuana for Medical Purposes Regulations (“MMPR”) for aarrangement. The 49% net ownership interest in the business (Enertopia 51%) utilizing an identified location in Burlington, Ontario. On September 15^th, 2017, the Company issued 625,000 shares of its common stock from the exercise of warrants previously granted for proceeds of $93,750. All warrants were exercised by third parties who are neither officers nor directors of the Company.

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Onwas subsequently sold on June 26, 2015 for $4,900 by the Company entered into a definitive agreement with Enertopia Corp. and Shaxon Enterprises Ltd. to sellfocus on its 49% interest in the Burlington Joint Venture and the MMPR application number 10MMPR0610. Pursuant to the agreement, the joint venture received a non-refundable $10,000 deposit and is entitled to receive up to $1,500,000 in milestone payments upon the Burlington facility becoming licensed under the MMPR. All payments made pursuant to the agreement would be divided 51% to Enertopia Corp. and 49% to Lexaria Bioscience. Notwithstanding the foregoing, the Company can neither guarantee nor provide a meaningful time estimate regarding the grant of a production license for the Burlington facility.food sciences activities.

The Company’s food sciences activities include the development of our proprietary nutrient infusion technologies for the production of superfoods,functional foods, and the production of enhanced food products under our two consumer product brands, ViPova™, Lexaria Energy™, TurboCBD™ and Lexaria Energy™ChrgD+^TM. The Company’s patented lipid nutrient infusion DehydraTECH technology DehydraTECH^TM is believed to improve taste, rapidity and delivery of bioactive compounds that include cannabinoids, vitamins, NSAIDs NicotineNon-Steroidal Anti-Inflammatory Drugs (NSAIDs), nicotine and other molecules compared to what is possible without lipophilic enhancement technology. This can allow for lower overall dosing requirements and/or higher effectiveness in active molecule delivery. Lexaria has caused to be filed several patent pending applications with the US Patent Office, and also internationally under the Patent Cooperation Treaty (PCT). On October 26, 2016, the USPTO issued U.S. Patent No. 9,474,725 (granted June 15 2017 in Australia No. 2015274698), Cannabinoid Infused Food and Beverage Compositions and Methods of Use Thereof, pertaining to Lexaria’s method of improving bioavailability and taste of certain cannabinoid lipophilic active agents in food products. Lexaria hopes to reduce other common but less healthy ingestion methods, such as smoking, as it embraces the benefits of its technology for public health.

As at August 31, 2017, we only had one reportable segment, being the development and usage, including licensing of our proprietary nutrient infusion technology.

We maintain our registered agent'sagent’s office and our U.S. business office at Nevada Agency and Transfer Company, 50 West Liberty, Suite 880, Reno, Nevada 89501. Our telephone number is (755) 322-0626.

The address of our principal executive office is 156 Valleyview Rd,Unit 100–740 McCurdy Road, Kelowna BC Canada V1X3M4.V1X 2P7. We have administrative functions located in Vancouver,Phoenix, Arizona. Our main corporate website is located at www.lexariabioscience.com.

Due to the implementation of British Columbia Instrument 51-509 on September 30, 2008, by the British Columbia Securities Commission, we have been deemed to be a British Columbia based reporting issuer. As such, we are required to file certain information and Phoenix, Arizona.documents at www.sedar.com.

Available Information

We file annual, quarterly and current reports, proxy statements and other information with the Commission. These filings are available to the public on the Internet at the Commission's website at http://www.sec.gov.

Our Internet address is http://www.lexariabioscience.com/ (this website address is not intended to function as a hyperlink and the information contained on our website is not intended to be a part of this Report).

We make available free of charge on http://www.lexariabioscience.com/investors/regulatory-filings/ our annual, quarterly and current reports, and amendments to those reports, as soon as reasonably practical after we electronically file such material with, or furnish it to, the Commission. We may from time to time provide important disclosures to investors by posting them in the Investor Relations section of our website, as allowed by the Commission's rules. The information on the website listed above is not and should not be considered part of this Report and is intended to be an inactive textual reference only.

Our company’s business plan is currently focused on the development of strategic partnerships with licensees for our patented technologyTechnology in exchange for up front and/or staged licensing fees over time. Secondarily and more generally, we continue to investigate national and international opportunities for development and distribution of the Company’s enhanced functional food and supplement product offerings; to investigate expansions and additions to our intellectual property portfolio; and, to search for additional opportunities in alternative health sectors. This includes the acquisition or development of intellectual property if and when we believe it is advisable to do so. We announced issuance of our first

Our current patent by the U.S. Patent and Trademark Office (USPTO) on October 26, 2016 and have received a Notice of Acceptance from the Australian Patent Office with relatedportfolio includes patent issuance date June 15 2017 No. 2015274698. We announced on November 2, 2017 a new Notice of Allowance from the USPTO that included the delivery of additional molecules such as psychoactive cannabinoids, vitamins, non-steroidal anti-inflammatories, and nicotine all utilizing our DehydraTECH^TM delivery technology. We are seeking additional patent protection for what we believe to be a unique process for the nutritional delivery of certain molecules such as cannabinoids, Nicotine, Non-Steroidal Anti-Inflammatory Drugs (NSAIDs), and Vitamins. To achieve sustainable and profitable growth, our company intends to control the timing and costs of our projects wherever possible.

During the past fiscal year the Company experienced the following significant corporate developments:

On September 8th, 2016, the Company announced signing new definitive technology licensing and private label agreements. Lexaria will earn a pre-defined premium to costs on all raw ingredient sourcing and manufacturing, and will further earn a pre-defined royalty rate on all gross product sales revenues earned by Timeless Herbal Care Limited. The agreement is for an initial term of 5 years. No business activity has occurred as yet under this agreement.

On October 11, 2016, in exchange of business advisory services including marketing strategies and assistance in preparing presentation materials, dissemination of information and other business and capital advisory services, the Company granted 250,000 stock options to a consultant with a strike price of $0.14 per share, and expiry term of two years. The Company also paid a compensation of CAD$5,000 to the consultant. This contract was terminated December 12, 2016.

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On October 11, 2016, pursuant to its agreement with Docherty Management Ltd., the Company issued 252,000 restricted common shares and cash compensation of $6,240.

On October 11, 2016, the Company issued 750,000 warrants with an exercise price of $0.14 per share and valid for five years, in return for consulting services provided in August, September, and October.

On October 11, 2016, the Company reached an agreement with a director to settle the outstanding amount pursuant to a advisory agreement with him, through issuance of common shares of the Company. To settle the outstanding amount of $16,000 for four months to October 31, 2016, the Company issued 114,286 shares of its common stock at a value of $0.14 per share.

On October 11, 2016, the Company retained a consultant to provide market maintenance service for the Company in compliance with regulatory guidelines. The consultant trades shares of the Company on the Canadian Securities Exchange for purposes of maintaining a reasonable market and improving the liquidity of Lexaria’s shares.

On October 16, 2016, the Company received $12,500 from exercise of 55,000 stock options.

On October 26, 2016, the Company announced the USPTO issued U.S. Patent No. 9,474,725, Cannabinoidfamily grants relating to: Infused Food and Beverage Compositions and Methods of Use Thereof, pertaining to Lexaria’s method of improving bioavailability and taste, and the use of DehydraTECH technology as a delivery platform for a wide variety of Active Pharmaceutical Ingredients (“APIs”) encompassing all cannabinoids including tetrahydrocannabinol (“THC”); fat soluble vitamins; Non-Steroidal Anti-Inflammatory Drugs (“NSAIDs”) pain medications; and nicotine.

Lexaria hopes to reduce other common but less healthy administration methods, such as smoking, as it embraces the benefits of its technology for public health. The Company is aggressively pursuing patent protection in national jurisdictions around the world. The Company currently has more than 55 patent applications pending worldwide and, due to the complexity of pursuing patent protection, the quantity of patent applications will vary continuously as each application advances or stalls. Lexaria is also filing new patent applications for novel new discoveries that arise from the Company’s R&D programs and, due to the inherent unpredictability of scientific discovery, it is not possible to predict if or how often such new applications might be filed.

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During the past fiscal year the Company experienced the following significant corporate developments:

On September 7, 2018, the Company announced additions to its patent portfolio with three new Australian patents granted to Lexaria by the Australian Patent Office. The three Australian patents are projected to expire on June 10, 2035.

The USPTO also issued two new Notices of Allowance for pending patent applications and the Company announced the grants on October 16, 2018. The two new patents are related to certain cannabinoid lipophilic active agentsinfused beverage compositions utilizing Lexaria’s proprietary DehydraTECH process. Newly granted patent numbers US 10,103,225 B2 and US 10,084,044 B2 provide protection for compositions as well as methods for making the compositions, each of which include the use of both non-psychoactive cannabinoids such as cannabidiol (“CBD”) and also psychoactive cannabinoids such as THC. The Company holds fourteen issued patents within its first patent family, “Food and Beverage Compositions Infused With Lipophilic Active Agents and Methods of Use Thereof”, one in food products.the second patent family “Methods for Formulating Orally Ingestible Compositions Comprising Lipophilic Active Agents”, and one in the third patent family “Stable Ready-to-Drink Beverage Compositions Comprising Lipophilic Active Agents” that significantly strengthen Lexaria’s intellectual property claims in the US and Australia. Of note, issuance of these patents in the second and third patent families represents the first time the Company has been granted claims for use of its technology in connection with the treatment of specific diseases and medical conditions affecting humans, which the Company believes will prove to be of significance to the pharmaceutical industry sector as it further develops and grows. We continue to pursue claims in corresponding pending applications around the world.

On September 7, 2018, the Company announced the filing of a new strategic patent application. The new provisional patent application is entitled “Lipophilic Active Agent Infused Tobacco Leaves and/or Tobacco Materials and Methods of Use Thereof”. This application represents Lexaria’s tenth patent family and expands the applicability of the already-patented DehydraTECH process to impart benefits to tobacco leaves that may be utilized to deliver compounds that may or may not include nicotine.

On October 27, 2016,10, 2018, the Company received approval to offer existing warrant holders an incentive to exercise warrants early. Forannounced completed the creation of four wholly-owned subsidiary companies. This new corporate structure more suitably reflects the distinct customer bases and business applications for each exercise, in addition to the shares, the warrant holders were offered an additional warrant with identical terms. During the period ended February 28, 2017, a total of 3,245,000 warrants were exercised at a weighted average price of $0.2273 andsubsidiary, thereby allowing the Company issued 3,245,000 common sharesto focus its future research and 3,245,000 warrants with a weighted average exercise price of $0.2273consider financing structures and industry partnerships specifically optimized to buy one additional common share of the Company, expiring May 14, 2017. Total proceeds raised from such incentive amounted to $737,500.each.

	·	Lexaria CanPharm ULC, a Canadian company focused on providing DehydraTECH technology and other enhancements to the global cannabis industry.
	·	Lexaria Nicotine LLC, a US company with a global license to provide DehydraTECH technology to the global nicotine and tobacco industries.
	·	Lexaria Hemp Corp., a US company globally licensed to provide DehydraTECH to the rapidly growing hemp-based foods and supplements industries.
	·	Lexaria Pharmaceutical Corp., a US company globally empowered to license DehydraTECH to the large and diverse pharmaceutical sectors.

On November 1, 2016,13, 2018, the Company issued 56,250 sharesannounced the launch of its common stockChrgD+, a water-soluble, ready-mix hemp supplement powder packet formulation designed to be added to any drink. Lexaria engaged Cultivating Wellness Inc., a California-based brand development and distribution company, to create the ChrgD+ premium brand. Cultivating Wellness’ distribution network reaches tens of thousands of retail buyers in settlementc-stores, grocery chains, specialty retail, and national accounts. We subsequently launched our retail e-commerce website for public consumers in June of $9,000, recognized within accounts payable and accrued liabilities as at August 31, 2016.2019.

On November 1, 2016,26, 2018, the Company received $37,505 from exerciseannounced it submitted a research application under Health Canada’s Cannabis Tracking and Licensing System for the operation of 165,000 share purchase warrants.a Kelowna-based R&D laboratory within Lexaria’s new head office. The laboratory’s creation enhances Lexaria’s ability to formulate for analytical purposes, various products that may contain cannabinoids or other controlled substances. Experimental work on nicotine formulations, nonsteroidal anti-inflammatory drugs, vitamins and other bioactive compounds of interest began soon after completion of lab construction with work on cannabinoid related formulations occurring after receipt of Lexaria’s research license. Bringing formulation work in-house enables the Company to expand its work schedules while reducing costs and development timelines.

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On November 1, 2016,January 15, 2019, the Company issued 500,000 warrantsannounced that its wholly-owned subsidiary Lexaria Nicotine LLC (“Lexaria Nicotine”) and Altria Ventures Inc., an indirect wholly-owned subsidiary of Altria Group, Inc. (“Altria”), executed definitive agreements to a consultant. Each warrant is valid for purchase of one new common share of the Company at a price of $0.31 per share with and expiration date of May 31, 2017.

On November 16, 2016, the Company received $50,003 from exercise of 220,000 share purchase warrants.

On November 21, 2016, the Company received $50,000 from exercise of 220,000 share purchase warrants.

On November 22, 2016, the Company signed a Memorandum of Understanding with NeutriSci International Inc. (“NeutriSci”) for forming a 50/50 joint venture to develop, produce, and sell a line of healthy edible cannabinoidpursue innovation in oral, reduced risk nicotine consumer products using Lexaria’s patented DehydraTECH technology. Altria is funding a milestone-based research & development program (“R&D Program”) in exchange for a minority equity interest in Lexaria Nicotine and certain DehydraTECH license rights. Altria will provide initial funding of $1 million, with the option for additional funding of up to $12 million total through multiple phased private financings. Altria was granted a license to use Lexaria Bioscience’s DehydraTECH technology for oral nicotine delivery forms on an exclusive basis in the United States and a non-exclusive basis elsewhere globally. Altria will pay Lexaria Nicotine a royalty on revenue generated from the sale of all nicotine products containing DehydraTECH, until such time it may acquire 100% ownership in Lexaria Nicotine. Altria will initially have the right to appoint one of the seven managers of Lexaria Nicotine and, through the additional phased investments, may have the right to appoint up to three of the seven managers. Altria has the option to acquire 100% ownership interest in Lexaria Nicotine commensurate with then-current fair market value. Altria gained no rights of ownership to Lexaria Bioscience and has no rights of board of director representation on Lexaria Bioscience

On February 21, 2019, the Company announced additional findings upon completion of further data analyses from its 2018 randomized, placebo-controlled, double-blinded European human clinical study that evaluated TurboCBD, the Company’s proprietary, DehydraTECH powered, CBD fortified hemp-oil capsule. A single 90mg dose of TurboCBD provided evidence of lower blood pressure; higher blood flow to the brain; faster delivery onset of CBD into the bloodstream; and, larger quantities of CBD within the blood compared to a single 90mg dose of generic CBD.

Key metabolic and hemodynamic performance findings linked to bioavailability enhancements were revealed in the study, which compared a 90 mg dose of Lexaria’s TurboCBD to a 90 mg dose without Lexaria’s DehydraTECH technology (the “positive control”) as well as a placebo, as follows:

	·	Analysis of mean arterial blood pressure (MAP) at peak blood levels of CBD achieved with Lexaria’s TurboCBD demonstrated a significant reduction in MAP compared to placebo (95% CI; p=0.027). This finding was not observed with the dose-matched positive control formulation for which there was no significant decrease in MAP compared to placebo (95% CI; p=0.625);
	·	Cerebral perfusion was also analysed by an index of conductance in the middle cerebral artery (MCA). The findings revealed that Lexaria’s TurboCBD caused the greatest increase in MCA conductance relative to both the positive control formulation and placebo (95% CI; p=0.017 and P=0.002 respectively);

Finally, over the six-hour study, analysis of the total area under the curve (AUC) demonstrated that Lexaria’s TurboCBD resulted in a notable trend for higher levels of CBD in the bloodstream overall than the positive control formulation with total AUC of 10,865 ± 6,322 observed with Lexaria’s formulation compared to 7,115 ± 2,978 observed with the positive control (95% CI; p=0.096). Furthermore, when normalized to body mass, the AUC at the peak CBD concentration was markedly and significantly (95% CI; p=0.02) higher with the TurboCBD 90 mg dose compared to the 90 mg dose positive control formulation.

On March 20, 2019, the Company announced an in vivo research program to test Lexaria designed nanotech enhancements comprised of eleven separate animal studies. Lexaria also announced that, effective March 15, 2019, it terminated the definitive license agreement entered into between Lexaria CanPharm ULC and NeutriSci proprietary pterostilbene tablet formulaInternational Inc. that was originally announced on February 26, 2018.

On April 24, 2019, the Company announced that it entered a definitive 5-year agreement, via its subsidiary Lexaria Canpharm ULC, to provide Lexaria’s patented DehydraTECH technology to a private California-based company for its utilization in certain CBD-based beverages to be produced and sold in California and Nevada that may include any combination of ready-to-drink beverages such as non-alcoholic beers, wines and spirits; cold or hot coffee or teas, sports drinks and more.

On May 7, 2019, the Company announced that it entered a definitive 5-year agreement, via its subsidiary Lexaria Hemp Corp., to provide Lexaria’s patented DehydraTECH technology to a private Nevada-based company for its utilization in certain CBD-based beverages to be produced and sold across the USA that may include any combination of ready-to-drink beverages such as non-alcoholic beers, wines and spirits; cold or hot coffee or teas, sports drinks and more.

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On May 15, 2019, the Company released initial results from its research program announced March 2019 demonstrating measurable quantities of cannabidiol into blood in as little as 2 minutes. In each arm of the Lexaria animal studies, 10 male Sprague-Dawley rats were administered CBD at 25mg per kg of bodyweight. Delivery of CBD into the bloodstream was monitored over a 60-minute duration. In the first animal study results, Lexaria compared its standard DehydraTECH formulation that combines cannabinoids with long-chain fatty acids (“LCFA”) using Lexaria’s patented dehydration processing technique to a concentration-matched formulation utilizing coconut oil which is a commonly used medium chain triglyceride (“MCT”) oil in the cannabis edibles industry.

	·	At 2 minutes DehydraTECH’s LCFA formulation delivered measurable CBD in blood, compared to no measurable CBD in blood until 6 minutes and onwards for the MCT oil formulation.
	·	At 15 minutes DehydraTECH’s LCFA formulation achieved a CBD blood concentration level that was 475% more than the MCT oil formulation; and, the DehydraTECH LCFA formulation CBD blood levels reached at 15 minutes were greater than the CBD blood levels reached by the MCT oil formulation at any time point during the 60-minute evaluation.
	·	At 60 minutes DehydraTECH’s LCFA formulation achieved a CBD blood concentration level of 319% more than the MCT oil formulation.
	·	Over the entire 60-minute study, the animals that received the standard DehydraTECH LCFA formulation achieved an average maximum CBD blood concentration level that was 334% more than the average maximum blood concentration level of the animals that received the MCT oil formulation (p<0.0021).
	·	Over the entire 60-minute study, the area under the curve (AUC) (total quantity of CBD delivered) for the Lexaria DehydraTECH LCFA formulation was 389% more than the MCT oil formulation (p<0.0011).

Lexaria also tested for brain tissue concentrations to quantify 8-hour CBD delivery from the DehydraTECH-enabled LCFA formulation compared to the MCT oil formulation and DehydraTECH’s LCFA formulation outperformed the MCT oil formulation by 246%.

On May 21, 2019, the Company announced a major expansion in operations by Nuka Enterprises LLC, (“Nuka”) maker of “1906” brand edibles over the next two years into Illinois, Ohio, Massachusetts, Michigan and other states. The comprehensive semi-exclusive agreement provides Nuka and 1906 with competitive technological advantages until 2028. A second license provides Nuka and 1906 with the immediate ability to utilize DehydraTECH technology for CBD across the US marketplace.

On May 28, 2019, the Company released additional results from its research program wherein animal testing proved that combining Lexaria’s DehydraTECH delivery technology with generic nanotech techniques delivers 1,137% more cannabidiol into animal brain tissue following oral ingestion than certain existing industry formulations. Lexaria combined its DehydraTECH delivery technology with a standard form of nanotechnology and analyzed subsequent delivery into brain tissue following oral ingestion. In each arm of the Lexaria animal studies, 10 male Sprague-Dawley rats were orally administered CBD at the rate of 25mg per kg of bodyweight. Delivery of CBD into the brain was reported 8 hours after dosing.

	·	The Lexaria DehydraTECH LCFA formulation without nanotech achieved an average brain tissue accumulation level that was 246% higher than the average for those animals that received the MCT oil formulation (p=0.0013).
	·	The Lexaria DehydraTECH LCFA formulation with nanotech achieved an average brain tissue accumulation level that was 1,137% higher than the average for those animals that received the MCT oil formulation (p=0.0178).

On June 4, 2019 the Company announced additional results from the March 20, 2019 announced animal studies demonstrating improved performance characteristics resulting in new patent applications. This arm of the study tested DehydraTECH delivery technology with compounds postulated to behave in a synergistic fashion for enhancement of gastro-intestinal absorption separate and distinct from nanotech techniques.

On July 10, 2019, the Company announced that it entered a definitive 5-year agreement, via its subsidiary Lexaria Hemp Corp, to provide Lexaria’s patented DehydraTECH technology to Nic’s Beverages Ltd for use in CBD-based beverages to be produced and sold throughout the United States.

On July 11, 2019, the Company announced that it entered a definitive 5-year agreement, via its subsidiary Lexaria Hemp Corp., to provide Lexaria’s patented DehydraTECH technology to Universal Hemp LLC, a B2B manufacturing company of hemp-derived bulk ingredients to the nutraceutical and consumer packaged goods industries to be produced and sold across the USA immediately, and in Canada when regulations permit. Agreed to minimum payments over the life of the 5-year agreement are $3,750,000.

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On July 24, 2019, the Company announced that it entered a 10-year Joint Manufacturing Partnership (JMP) with Hill Street Beverages Company Inc. to produce commercial products including processed THC cannabis and/or CBD hemp powder including among other categories; tablets, capsules, or packets for sale in Canada and for export where permitted. The JMP will also produce similar powders as a bulk ingredient for manufacturing processes for sale to other licensed producers seeking to use DehydraTECH to create their own products for sale within Canada. Profits from this business unit will be shared equally between Hill Street and Lexaria. In addition to the JMP, Hill Street acquired two global semi-exclusive licenses (with minor exceptions) to utilize Lexaria’s DehydraTECH THC beverage infusion technology around the world, valid for 10 years. Under the terms of the agreements, Hill Street will pay an annual licensing fee and up to an additional $1,800,000 to Lexaria by issuing $800,000 in common shares of Hill Street to Lexaria initially, and Lexaria will issue $250,000 in restricted common shares to Hill Street. In addition, Hill Street will issue up to an additional $500,000 in shares of Hill Street when they enter each of the first two international distribution network. The joint venture expectsmarkets subject to commercialize any newly created cannabinoid edible products through distribution programsTSXV and existing strategic partners. Product developmentCSE approval, as applicable. Pursuant to the terms of the JMP agreements, Lexaria will issue an aggregate $250,000 in restricted common shares to Hill Street. Closing of the Hill Street / Lexaria agreements is underwaysubject to normal regulatory approvals and a joint venture subsidiarythe closing of the Hill Street / OneLeaf transaction announced by Hill Street. Subsequent to August 31, 2019, Hill Street has been formed.unable to close its transaction with OneLeaf and is currently searching for an alternate location from which to base the Hill Street / Lexaria agreements, thus there is a possibility that this transaction may not close as expected.

On November 29, 2016,August 8, 2019, the Company announced the entry of a letter of intent for the licensingsuccessful completion of its proprietary absorption and palatability enhancing technology to Hempco Food and Fiber Inc.Master Collaborative Research Agreement (“Hempco”). It was expected that the letter of intent would advance into a definitive agreement, however Hempco has since been majority acquired by another firm and our letter of intent has expired although casual business discussions remain.

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On December 1, 2016, the Company amended its agreement with CAB for a revised consulting fee of $12,000 per month. The term of the amended agreement is two years but can be terminated by either party by providing two months notice.

On December 19, 2016, the Company filed to internationally expand its U.S patent number 9474725, granted on October 26, 2016. National filing patent applications in Canada, Australia, Japan, China, India and all 37 countries belonging to the European Patent Convention were filed. All of these filings follow the Company’s initial international Patent Cooperation Treaty patent application.

On December 22, 2016, the Company extended the services of Frontier Merchant Capital Group (“Frontier”R&D Program”) for a period of three months, for a total fee of CAD$25,000. Frontier will assist the Company by increasing market awareness utilizing a number of financial market communication initiatives including media outreach, facilitating in-person introduction for the Company with institutional and retail brokers and investors in cities across Canada and the U.S., and more.

On January 10, 2017, the Company issued 500,000 incentive warrants to an arm’s length party in exchange for corporate development services. The exercise price of the incentive warrants is $0.44, vesting immediately, and expiring on January 9, 2018. The expiry date of these warrants has since been extended by one year, to January 9, 2019.

On January 19, 2017, the Company and NeutriSci International Inc. (“NeutriSci”) announced the successful development and initial trial of the industry’s first zero-sugar cannabinoid / pterostilbene edible tablet utilizing both NeutriSci’s and Lexaria’s proprietary and patented technologies. NeutriSci and Lexaria confirmed that the companies expect to officially bind the JV agreement to market and commercialize a line of edible products. Product development is continuing.

On February 8, 2017, the Company through its wholly owned Canadian subsidiary Lexaria CanPharm Corp., signed and entered a master collaborative research agreement with the National Research Council of Canada (“NRC”) to investigate technical aspects and new opportunities associated with bioavailability enhancement of lipophilic active ingredient compositions. Undercompositions using Lexaria’s patented DehydraTECH technology. The R&D Program determined that Lexaria’s DehydraTECH does not create a covalent-bonded new molecular entity. The R&D program also tested Lexaria’s formulations at highly acidic levels of pH 1.12, higher than many flavored beverages that have pH levels between 2.73 to 3.05, and mildly acidic levels of pH 4.82, and reports no chemical modification or presence of degradation of the agreement,active pharmaceutical ingredients for both of the formulation classes analysed in this aspect of the program: cannabinoids and nicotine polacrilex.

On August 8, 2019, the Company announced that its subsidiary, Lexaria CanPharm ULC., has been issued cannabis Research and Development (“R&D”) license LIC-7NONT76UNW-2019 by Health Canada with a four-year term until August 9, 2023 unless renewed.

On August 14, 2019, the NRC will both provide up to CAD$125,000 in fundingCompany announced four patent grants. Australia Patent #2016367036 Grant Date July 30, 2019 – Methods for this research, a total investment of up to CAD$250,000. The master research agreement has an 18-month term, during which a number of shorter-term studies will be undertaken. The collaboration will investigate and define the chemical nature of the molecular association that Lexaria`s patented technology is believed to effectuate betweenformulating orally ingestible compositions comprising lipophilic active agents, and fatty acids as solubility and bioavailability enhancing agents. The first phase of research under this agreement was underway as of August 31, 2017.

On February 8, 2017, the Company issued 29,091 shares of its common stock in settlement of $16,000 service fee, previously recognized within accounts payable and accrued liabilities.

On February 27, 2017, the Company received a Notice of Acceptance from the AustralianAustralia Patent Office that Lexaria’s Australian patent application 2015274698 was accepted with a patent issuance date expected in June, 2017. The Notice of Acceptance covers Lexaria patent application entitled “Food#2018220067 Grant Date July 30, 2019 – Food and beverage compositions infused with lipophilic active agents and methods of use thereof”, which has been accepted with the same set of claims previously issued inthereof, US Patent No 9,474,725 specific to non-psychoactive cannabinoids. Subsequently the Company received a Certificate#10,374,036 Grant Date August 6, 2019 - Food and beverage compositions infused with lipophilic active agents and methods of use thereof, and US Patent #10,381,440 / Grant for a Standard Patent No. 2015274698 dated June 15 2017Date August 13, 2019 - Food and beverage compositions infused with a twenty year term.lipophilic active agents and methods of use thereof.

On March 14, 2017, the Company commenced the formal design phase for studies to be conducted under the master collaborative research agreement with the NRC. A number of studies have been proposed and are currently being evaluated, with the intention to begin work and produce results over multiple intervals in the coming months. As noted above, the first phase of research under this agreement was underway as of August 31, 2017. In aggregate, results from these studies will add to the understanding of the physical and biochemical characteristics imparted on molecules that have been subjected to Lexaria’s technology, with a view to further demonstrating the power of the technology to prospective commercial partners across the various consumer product sectors the Company is targeting.

On March 24, 2017, the Company executed a twelve month marketing and lead generation campaign with Dig Media Inc. Investing News Network for $48,000.

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On April 27, 2017, the Company issued 1,075,000 shares of its common stock from the exercise of warrants previously granted for proceeds of $242,047.50. All warrants were exercised by third parties who are neither officers nor directors of the Company.

On June 1^st, 2017, the Company appointed Mr. Allan Spissinger as acting CFO, Corporate Secretary and Treasurer. The Company executed a twelve month consulting contract with M&E Services Ltd., solely owned by Mr. Allan Spissinger with monthly compensation of CAD$8,000. The Company may pay Mr. Spissinger a bonus from time to time, at its sole discretion. Mr. Spissinger was awarded 200,000 incentive stock options exercisable at $0.37 vesting immediately.

On June 19th, 2017, the Company entered into an agreement with a third party researcher for CAD$3,854 per month for a period of twelve months and continuing month to month and may be terminated thereafter with sixty days’ notice.

On June 19th, 2017, the Company executed a contract with Alex Blanchard Capital as manager of investor relations & communications. The agreement is for six months continuing month to month and may be terminated thereafter with one month’s notice for CAD$7,500 per month. Mr. Blanchard was granted 200,000 warrants exercisable at $0.29 and 300,000 stock options exercisable at $0.295 vesting 100,000 options at each of the 1^st, 2^nd and 3^rd anniversaries of the contract provided that the contract is not terminated. As at August 31^st, 2017 $37,878 was recognized in consulting for the grant of the warrants.

On June 22^nd, 2017, pursuant to its agreement with Docherty Management Ltd. and C.A.B. Financial Services Ltd. the company issued 420,000 restricted common shares and cash compensation of $23,600.

On August 16^th, 2017,22, 2019, the Company issued 663,525 sharesannounced the online commercial launch of its common stock from the exercise of warrants and options previously granted for proceeds of $97,030. All warrants and options were exercised by third parties who are neither officers nor directors of the Company.ChrgD+, a water-soluble multi-spectrum hemp oil in a powdered format with our DehydraTECH technology.

On August 16^th, 2017,22, 2019, the Company entered intoannounced a consulting agreement with a third party issuing 500,000 warrants to buy one common share each at an exercise price of $0.44 and valid for one year. 200,000 warrants vested immediately and a value of $34,344 was recognizedpatent granted in consulting. 150,000 warrants vest DecemberAustralia: #2016367037 Grant Date August 15,^th, 2017 and 150,000 warrants vest April 15^th 2018. 2019 – “Stable ready-to-drink beverage compositions comprising lipophilic active agents”.

As at August 31, 2017, certain existing convertible debt was converted into common shares for the amount of $45,000 @ $0.15 for 300,000 common shares plus the accrued interest of $1,125 for 7,500 shares for a total issuance of 307,500 common shares.

On August 31, 2017, the Company issued 32,433 shares of its common stock in settlement of $12,000, previously recognized within accounts payable and accrued liabilities.

The Company experienced the following significant corporate developments subsequent to August 31, 20172019

On September 15^th, 2017, the Company issued 625,000 shares of its common stock from the exercise of warrants previously granted for proceeds of $93,750. All warrants were exercised by third parties who are neither officers nor directors of the Company.

On October 31^st, 2017,17, 2019, the Company announced it received a Notice of Allowance from the United States Patent and Trademark Office (“USPTO”) for the use of its technology as a delivery platform for all cannabinoids including THC; fat soluble vitamins; non steroidal anti-inflammatory pain medications (“NSAIDs”); and nicotine. The patent application number is 15/225,799, “Food and Beverage Compositions Infused With Lipophilic Active Agents and Methods of Use Thereof”.

On November 2^nd, 2017, the Company announced it acquired 100% ownership interest in its majority owned subsidiary Poviva Tea, LLC. The Company previously owned a 51% interest in Poviva Tea, LLC and acquired the remaining 49% interest. Compensation was US$70,000, a waiver on certain debts, and a 5%, 20-year royalty on net profits of ViPova Tea^TM tea, coffee, and hot chocolate sales. No Lexaria stock or options were issued.

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Subsequent to August 31, 2017, the company plans to hold an annual and special meeting of stockholders at the office of our law firm, Macdonald Tuskey located in North Vancouver, British Columbia, Canada, to include as partthat final study results of the proceedings2018 human clinical study evaluating CBD delivery and effectiveness using its patented DehydraTECH powered TurboCBD capsules have been published in the approval of the plan of conversion whereby our corporate jurisdiction will be changed from the State of Nevada to the Province of British Columbia, Canada by means of a process called a “conversion”peer reviewed medical journal, “Advances in Therapy”. Advances in Therapy focuses on clinical medicine and a “continuation”. Important details for stockholders related to the conversionpharmaceutical research and has been published continually since 1984.

The study was conducted and well tolerated in 12 healthy young male athletes and the associated risks for the company and stockholdersinvestigators concluded that further studies are included in the S-4 Registration Statement to be released, as of the writing of this document. There are risks associated with not proceeding with the conversion regarding the increasing complexity of compliance with the regulatory framework and the associated increasing costs, the restrictions on the promotion and sale of our stocks to US investors that limit the potential liquidity of our stock, and an increasingly complex environment that can negatively impact Lexaria even as an ancillary involved company via technology licensing to entities in the state legal cannabidiol and cannabis markets. As at the time of the writing of this document the date of the meeting had not been specified.warranted.

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Food Science and Technology

Lexaria is a Biotechnologybiotechnology and food science company focused on developing and out-licensing its proprietary technology for improved taste, rapidity, and delivery of bioactive compounds in foods and other ingestible products Lexaria is focusing its capital and management time on its pursuit of intellectual property, technology licensing opportunities, an expanding portfolio of patent pending applications, and functional food and supplement formulations.

On November 11, 2014, the Company acquired 51% of PoViva Tea LLC (100% October 23, 2017) and executed an operating agreement to develop a business of legally producing, manufacturing, importing/exporting, testing, researching and developing, a line of hemp oil with cannabidiol-infused teas, drinks and foods. Lexaria oversees all aspects of the business including, but not limited to, production, product quality, licensing, testing, product legality, accounting, marketing, capital investment, capital raising, sales, branding, advertising and fulfillment. Pursuant to the agreement, there is a Management Committee, whereby there are two representatives from Lexaria and one of the founding members of PoViva. On October 31, 2017, Lexaria purchased all remaining ownership interest to own 100% of Poviva Tea LLC.

The Company introduced an expanding variety of hemp fortified consumer food products throughout 2015 to demonstrate Lexaria’s DehydraTECH^TM technology to both consumers and potential licensees. From January 2015 to December 2015, seven (7) flavors of teas; hot chocolate; coffee, and two (2) flavors of protein energy bars were introduced – all utilizing Lexaria’s patented technology DehydraTECH^TM for the more palatable and efficient delivery of bioactive molecules infused within those food products.

In the production of the products, for each raw material to be used in ViPova™ -brandedViPova branded products, the Company assesses if the product inputs and the completed products comply with all applicable food and drug laws, and that the inputs and the finished products meet all applicable legal and quality standards including and as it relates to hemp oil content; THC content; molds and mildews; heavy metals; and may measure additional components.

The US Federal government, through the US Department of Health and Human Services, owns US Patent #6630507, which among other things, claims that

“Cannabinoids have been found to have antioxidant properties, unrelated to NMDA receptor antagonism. This new found property makes cannabinoids useful in the treatment and prophylaxis of wide variety of oxidation associated diseases, such as ischemic, age-related, inflammatory and autoimmune diseases. The cannabinoids are found to have particular application as neuroprotectants, for example in limiting neurological damage following ischemic insults, such as stroke and trauma, or in the treatment of neurodegenerative diseases, such as Alzheimer'sAlzheimer’s disease, Parkinson'sParkinson’s disease and HIV dementia.”

For reference, cannabinoids are compounds that affect cannabinoid receptors located on many human cells. CB1 receptors are widely found within the human brain; and CB2 receptors are found with the human immune system and have been linked to anti-inflammatory and other responses.

Despite independent scientific findings in many locations around the world, some regulatory agencies do not officially recognize that a human endocannabinoid system exists.

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Over one hundred different cannabinoids have been isolated from the cannabis plant, most of which do not have psychoactive properties. One that does have psychoactive properties is tetrahydrocannabinol (THC).THC. Endocannabinoids are produced naturally in the human body while phytocannabinoidsPhyto cannabinoids are produced in several plant species, most abundantly in the Cannabis plant.

Cannabidiol (“CBD”)

CBD is one of the major phytocannabinoidPhyto cannabinoid forms of cannabinoids and is not psychoactive, often contributing more than 35% of the extracts from the cannabis plant resin. CannabidiolCBD occurs naturally in other plant species beyond cannabis. For example, the most widely acknowledged alternative source of phytocannabinoidPhyto cannabinoid is in the better understood Echinacea species, in widespread use as a dietary supplement. Most phytocannabinoidsPhyto cannabinoids are virtually insoluble in water but are soluble in lipids and alcohol. The World Anti Doping Agency (“WADA”) has exempted CBD from its 2018 list of banned substances.

The Alternative Health sector is large and growing. A long termlong-term Medical Expenditure Panel Survey was conducted from 2002 until 2008 with at least 29,370 subjects asked repeatedly if they had seen any kind of health care practitioner in the previous six months. The survey recorded whether the health care provider was a “complementary and alternative medicine care professional,” including “homeopathic, naturopathic, or herbalist.”

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Between 5.3% and 5.8% of the survey group at any one time reported that they had seen a complementary or alternative medicine provider. Based on the US population of ~323,000,000,~328,000,000, this suggests between 17.117.4 million and 18.719.0 million Americans are seeking an alternative health care professional at any given time.

Meanwhile the Centers for Disease Control and Prevention, in an April 2011 NCHS Data Brief, reported that more than 50% of the population uses dietary supplements of one kind or another. Detailed findings from that report included:

• Use of dietary supplements is common among the U.S. adult population. Over 40% used supplements in 1988– 1994, and over one-half in 2003–2006.

• 	·	Use of dietary supplements is common among the U.S. adult population. Over 40% used supplements in 1988–1994, and over one-half in 2003–2006.
  	·	Multivitamins/multiminerals are the most commonly used dietary supplements, with approximately 40% of men and women reporting use during 2003–2006.
  	·	Use of supplemental calcium increased from 28% during 1988–1994 to 61% during 2003–2006 among women aged 60 and over.

• Use of supplemental calcium increased from 28% during 1988–1994 to 61% during 2003–2006 among women aged 60 and over.

Status of operation;Operations; Consumer product development and sales

More than 150 million Americans drink tea every day, amounting to some 79 billion servings of tea in America every year. Our launch of ViPova™ TeaViPova black tea brand is meant to tap into this existing demand. Part of our corporate strategy is to build national brands through products that large groups of potential customers are already familiar and comfortable with.

PoViva Tea, LLC (now Poviva Corp.). has filed multiple patents pending and has received several granted patents to bind active hemp oil ingredients with a lipid, potentially allowing for more efficient and comforting delivery of the CBD.

Lexaria began producing cash flows from its products in January 2015; focused2015 focusing on the immediate opportunities in the hemp-oil-sectors that are federally legal. Cannabinoids have been found by many researchers to have antioxidant properties and Lexaria plans to use the patented DehydraTECH^TM patented process to infuse hemp oils into a number of popular food and beverages.

Lexaria has launched a line of premium products, always relying on ourits DehydraTECH^TM patented infusion process, to bring hemp oil into the mainstream. Because hemp oil does not have psychoactive properties we expect our products to appeal to the widest possible customer base. To date we have focused our sales efforts across the continental USA. Some studies have found that 3% of the Canadian population regularly consumes hemp food products, while 1% of the American population regularly consumes hemp food products. We believe the consumption of hemp basedhemp-based food products offers exceptional growth possibilities.

According to Nutrition Business Journal, the Organic Food sector was a $246 billion industry in the USA during 2014, while Dietary Supplements was a $34.6 billion industry. According to Arcview, state-legalLegal Cannabis was a $4.7 billion US industry in 2015 and expected to grow to over a $20 billion sector before 2025 but is clearly a much smaller industry sector than the more established food sectors. Lexaria has not yet determined whether our hemp oil-infused products will be accepted into any or all three of these particular sectors.

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Lexaria has a main corporate website (www.lexariabioscience.com) as well as smaller e-commerce focused websites devoted to consumer products. The majority of product sales have taken place through the e-commerce websites. A contracted national distribution center ensures rapid and accurate fulfillment of all orders. A 1-800 ordering center has also been placed into operation. Through its subsidiaries, Lexaria currently sells small quantities of 3 flavors of tea, a capsule, and a powdered drink additive, all infused with Lexaria’s technology to deliver multi spectrum hemp oil ingredients.

Lexaria had previously launched the “Lexaria Energy” brand that is 100% owned by the Company. Under this brand, the Company plans to develop hemp oil-infused food products for people with active lifestyles, such as protein bars, protein shakes and other similar products. On November 3, 2015, Lexaria Energy10 protein bars became available for retail sales with two flavors. The original contract manufacturer of these protein bars was unable to fulfill additional orders and we have not currently been able to locate and contract an alternative location to manufacture this more complicated food product, with the result that the product is temporarily discontinued while we search for a suitable manufacturing location.

Through the November 2014 acquisition of 51% of Poviva Teas LLC, and October 2017 100% acquisition, Lexaria acquired control of certain patents pending, allowances and grants with the United States Patent Office. Lexaria has worked to broaden the patents and extend their utility to molecules other than those originally named.

On June 11, 2015, Lexaria initiated the simultaneous filing of a U.S. utility patent application and an International patent application under the Patent Cooperation Treaty (PCT) procedure, both atthrough the U.S. Patent and Trademark Office (“USPTO”). These applications follow the Company’s 2014 and 2015 family of provisional patent application filings in the U.S. and serve two additional broad purposes:

1.

Lexaria is seeking protection of its intellectual property under international treaties. To this end Lexaria has filed for PCT patent application protection. There are 148 countries that are signatories to the Patent Cooperation Treaty, including such major markets as Canada, China, India, much of Europe and the Middle East, the United Kingdom and Japan among others.

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2.

Lexaria believes its lipid infusion technology has applications beyond the delivery of just cannabinoids. Based on further formulation testing, Lexaria has included additional lipophilic molecules that may be delivered via food and beverage formats utilizing its technology, widely encompassing three major new market opportunities for the Company: Nicotine; Nonsteroidal Anti-Inflammatories (NSAIDs); and Vitamins.

In December 2015, the Company filed two further provisional patent applications in the U.S. These new applications served to further broaden the variety and applicability of base compounds that can be used when formulating the Company’s lipid basedlipid-based technology. The first of these applications identify compounds like edible starches (e.g., tapioca starch) that are commonly used in food products today and could, therefore, serve as a base for formulating and incorporating the Company’s Technology into a wide variety of every day food products. The second of these applications identify emulsifier compounds like gum Arabicarabic that are commonly used in beverage products today in order to facilitate similar flexibility for formulating the Company’s Technologytechnology in every day, shelf-stable beverages.

On October 26, 2016, the USPTO issued U.S Patent No. 9474725, Cannabinoid Infused Food and Beverage Compositions and Methods of Use Thereof, pertaining to our method of improving bioavailability and taste of certain cannabinoid lipophilic active agents in food products. This iswas the Company’s first patent granted and has a publish date of October 27, 2016 (June 1015 2017 in Australia No. 2015274698) and protects our technology for twenty years. Additional patent grants include, but are not limited to: the use of DehydraTECH technology as a delivery platform, “composition of matter” claims that protect the specific combination of substances which enable improved taste and bio absorption properties, that protect processes for making specific compositions of matter for enhanced cannabinoid delivery utilizing the DehydraTECH technology. Of note, Lexaria has received issuance of patents in its second and third patent families representing the first time the Company has been granted claims for use of its technology in connection with the treatment of specific diseases and medical conditions affecting humans, which the Company believes will prove to be of significance to the pharmaceutical industry sector as it further develops and grows. Our portfolio consists of the following granted patents:

The Company does not know and cannot know whether these strategies will be successful, or if successful, how long it will take to gain consumer acceptance and customer loyalty. It can be a challenge to be successful by introducing new consumer products to a competitive retail marketplace, and we can offer no assurances that our products will be a commercial success.

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International patent protectionPatent Protection

When Lexaria first began examining the legal medical cannabis market in 2013, and entered the market in 2014, the Company believed it could make an impact in perhaps both the Canadian and U.S. marketplaces. Our pursuit and development of technology has expanded our potential area of impact, both geographically and by sector. Because of the applicability of our technology to markets outside of the legal cannabis sector, we have taken the necessary steps to protect that intellectual property within larger global markets regardless of whether they lie within the medical cannabis sector or in other unrelated sectors.sectors such as nicotine, vitamins, and pharmaceuticals.

Additional molecules

NICOTINE.Additional Molecules

NICOTINE. More than 99% of all nicotine that is consumed worldwide is delivered through smoking cigarettes. Approximately 6,000,000 deaths per year, worldwide, are attributed primarily to the delivery of nicotine through the act of smoking according to the Centers for Disease Control and Prevention, which also estimates that over $170 billion per year is spent just in the USA on direct medical care costs for adult smokers. 69% of U.S. adult smokers want to quit smoking and 43% of US adult smokers have attempted to quit in any twelve-month period.

Worldwide, retail cigarette sales were worth $722 billion in 2013, with over 5.7 trillion cigarettes sold to more than 1 billion smokers.

RELEVANCE: Lexaria postulates that delivery of nicotine to satisfy current demand, utilizing our patent pending lipid-delivery technology in common food groups, could shift demand from smoking cigarettes to alternative nicotine-based food products. Since most of the adverse health outcomes of nicotine consumption are associated with the delivery method and only to a lesser degree to the actual ingestion of nicotine, there could be a vast positive community health outcome through the reduction in smoking cigarettes. Additional research and regulatory compliant investigations would need to be conducted before otherwise healthy foods such as tea, coffee or energy bar snacks containing nicotine could be introduced. Nicotine is a named molecule in the latest Lexaria patent applications.

NSAIDNON-STEROIDAL ANTI-INFLAMMATORIES. . Non-steroidal Anti-inflammatoriesNSAIDs are the second-largest category of pain management treatment options in the world. The global pain management market was estimated at $22 billion in 2011, with $5.4 billion of this market being served by NSAID’s.NSAIDs. The U.S. makes up over one-half of the global market. The opioids market (such as morphine) form the largest single pain management sector but are known to be associated with serious dependence and tolerance issues.

Some of the most commonly known NSAIDs are ASA (Aspirin), Ibuprofen (Advil, Motrin), and Acetaminophen (Tylenol). (Acetaminophen(Tylenol - Acetaminophen is not accepted by all persons to be an NSAID.)NSAID). Although NSAIDs are generally a safe and effective treatment method for pain, they have been associated with a number of gastrointestinal problems including dyspepsia and gastric bleeding.

RELEVANCE: Lexaria postulates that delivery of NSAIDs through a lipid-based mechanism could provide the beneficial properties of pain relief with lessened negative gastrointestinal effects, and also potentially deliver lower dosages of active ingredients with similar pain management outcomes as current pill forms at higher dosages. ASA, Piroxicam, Diclofenac, Indomethacin, Ibuprofen, and Acetaminophen are all named molecules in the latest Lexaria patent applications.

VITAMINS.VITAMINS. The global vitamin and supplement market is worth $68 billion according to Euromonitor. The category is both broad and deep, comprised of many popular and some lesser known substances. Vitamins in general are thought to be an $8.5 billion annual market in the U.S. The U.S. is the largest single national market in the world, and China and Japan are the 2^nd2nd and 3^rd3rd largest vitamin markets.

Vitamin E is fat soluble and can be incorporated into cell membranes which can protect them from oxidative damage. Global consumption of natural source vitamin E was 10,900 metric tons in 2013 worth $611.9 million.

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RELEVANCE: Lexaria postulates that delivery of fat soluble vitamins through its patent-pending lipid-based delivery mechanism may result in less waste and lower dosages required than most current pill forms. As well, ingestion of pills is an unpleasant experience for many people so it is possible that vitamin delivery through common food groups could vastly expand market demand for this sector. Vitamin E is a named molecule in the latest Lexaria patent applications.

On August 11, 2015, Lexaria signed a license agreement with PoViva Tea LLC for $10,000, granting Lexaria a 35-year non exclusivenon-exclusive worldwide license to unencumbered use of PoViva Tea LLC’s IP Rights, including rights of resale. This license agreement ensures Lexaria has full access to the underlying patent pending infusion technology. On January 14, 2019 this agreement was updated whereby Poviva Corp. granted Lexaria an exclusive license to the DehydraTECH technologies lasting the later of 25 years of the expiration date of the last of Poviva Corp.’s granted patents.

Scientific testing and validation

On August 24, 2015, the Company announced potential industry-changing achievements in enhanced gastro-intestinal absorption of cannabidiol (CBD)CBD utilizing Lexaria’s patented technology. The third-party testing was conducted in two phases of in vitro tests beginning in June and completed in August 2015.

The independent laboratory results delivered average CBD permeability of 499% of baseline permeability, compared to CBD permeability without Lexaria’s technology.Technology. These results exceed Company expectations. This was assessed in a strictly controlled, in vitro experiment using a human intestinal tissue model. Samples of Lexaria’s commercially available CBD-fortified ViPova™ViPova black tea were administered in the model compared with concentration-matched CBD control preparations that lacked Lexaria’s patented formulation and process enhancements. Lexaria believes that its in vitro findings provide compelling evidence of the intestinal absorption enhancing capabilities of its technology, based on which it is exploring opportunities to progress to more advanced, follow-on bioavailability testing in animals.

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The tests also showed 325% of baseline gastro-intestinal permeability of CBD comparing Lexaria’s CBD-fortified ViPova™ViPova black tea to a second control of CBD and black tea combined, without Lexaria’s patented formulation enhancements. This confirmed that the specialized processing undertaken by Lexaria during its manufacturing process together with its formulation enhancements, does indeed significantly improve absorption levels.

The bioavailability of CBD (or of THC) varies greatly by delivery method. Smoking typically delivers cannabinoids at an average bioavailability rate of 30% (Huestis (2007) Chem. Biodivers.Biodiverse. 4:1770–1804; McGilveray (2005) Pain Res. Manag. 10 Suppl. A:15A – 22A). By comparison, orally consumed cannabis edibles typically deliver cannabinoids at an average bioavailability rate of only 5% (Karschner et al. (2011) Clin. Chem. 57:66–75).

The Company’s present findings suggest that its DehydraTECH^TM technology may achieve a 5-fold improvement in cannabinoid absorption in edible form over that which can be achieved without its proprietary process and formulation enhancements. This conceptually supports that Lexaria’s technology represents a significant breakthrough in cannabinoid delivery by approximating the high absorption levels achieved as though through administration by smoking, but without the associated negative effects on human health caused by smoking.

The tests were completed in two phases culminating with testing using simulated intestinal fluid conditions that delivered these findings. These results were stronger than earlier iterations of the tests that did not use a simulated intestinal fluid environment and contributed to Lexaria’s understanding of the mechanisms at work. For these and other reasons, Lexaria believes that bioavailability testing in animals is likely to yield even stronger absorption results in the presence of natural intestinal fluid conditions.

CBD has been repeatedly found to provide beneficial pain relieving, anti-inflammatory, anti-anxiety, neuroprotection, anti-psychotic, and anti-convulsive effects among others. Lexaria’s DehydraTECH^TMpatented technology could significantly reduce individual serving requirements for CBD to consumers. This could lead to reduced costs of consumption for consumers and increased profitability for Lexaria.

Lexaria believes that the same technology used to enhance the absorption of CBD in the recent laboratory tests, is applicable to THC, nicotine, NSAIDs and other lipophilic compounds that are widely used today.

During January 2015, Lexaria conducted a study of nitric oxide levels in humans, as a biomarker for absorption of cannabidiol,CBD, with the expectation that it would provide additional evidence of the efficient absorption of cannabidiolCBD from Lexaria food products enhanced with hemp oil, by demonstrating the elevation of nitric oxide in the human body in response to product ingestion.

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The study data from human subjects demonstrated significant elevation of systemic nitric oxide levels as a surrogate biomarker for cannabidiol (CBD) bioabsorptionCBD bio absorption in response to ingestion of Lexaria'sLexaria’s products. This provided clinical support for the CBD bioavailability enhancing properties of Lexaria'sLexaria’s patented DehydraTECH^TM technology,Technology, on the premise that bioavailable CBD is known to elevate levels of the endocannabinoid anandamide in the human body which, in turn, stimulates release of nitric oxide in the vascular system.

In summary, consuming Lexaria and ViPova™Lexaria’s food products resulted in elevated levels of nitric oxide within the body. The results of the study indicated that all of Lexaria and ViPova™ food products elicited significant increases in salivary nitric oxide, achieving levels from 110 µM to as high as 220 µM in the test subjects. The ViPova beverage products generally had faster initial responses in as little as 15 minutes after product ingestion, whereas the initial responses from the Lexaria Energy protein-energy bars required 30 minutes. The faster response time with the beverage products was to be expected, given the relative ease of digesting liquids versus solids. All products sustained their maximum levels of nitric oxide detection through to the 60-minute end-points used in the study, indicating a need for additional study to determine the length of time that nitric oxide levels remain elevated following production consumption.

The study assessed six flavors of ViPova™ViPova tea (Yunan Black, Herbal Cherry Black, Earl Grey, Herbal Bengal Chai, Herbal Masala Chai and Decaf English Breakfast), ViPova™ViPova Columbian Supremo Coffee, ViPova™ViPova Hot Chocolate and Lexaria Energy Foods’ Chocolate Berry Date and Cashew Berry Date protein-energy bars.

Six healthy human subjects (3 male and 3 female) between the ages of 22 and 65 years of age were recruited for the study. Subjects were screened for cardiovascular and allergic response to hemp products, were non-smokers and did not have any history of substance or alcohol abuse. One product was studied per day across all six subjects, with each subject consuming a full product serving size. Subjects were required to refrain from eating food or using vape products for at least 12 hours before test article administration on each day of the study. Nitric oxide levels in the test subjects were assessed using a commercially available, colorimetric test kit designed to quantify systemic nitric oxide via a detectable salivary marker. Immediately before test article administration each day, all subjects were required to demonstrate a negative baseline nitric oxide saliva test. Subjects were considered to have a negative test strip reading at a level of 20 µM according to the test strip scale, and positive readings anywhere above this. Subjects performed salivary nitric oxide testing at 15, 30, 45 and 60 minutes’ post-consumption of each product. All subjects remained sedentary from baseline through to the completion of testing for each product.

Product distribution agreements

On January 28,

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In August of 2018 we released results from our TurboCBD capsules in a randomized, placebo-controlled, double-blind European human clinical study that evaluated TurboCBD - a proprietary, DehydraTECH powered, CBD fortified hemp oil capsule developed by Lexaria. The degree and speed of CBD absorption into blood plasma and potential cardiovascular and cognitive performance enhancement in 12 healthy male volunteers were studied.

Key bioavailability data highlights from the study comparing the 90 mg dose of Lexaria’s TurboCBD to a 90 mg dose of a positive control formulation without Lexaria’s DehydraTECH technology were as follows:

	·	30 Minutes: CBD delivered from Lexaria’s TurboCBD capsules was absorbed much more effectively than from the positive control, delivering 317% more CBD to blood at the 30-minute mark of the study (i.e., 18.4 ng/mL compared to only 4.4 ng/mL on average respectively [95% CI; p=0.051]);
	·	60 Minutes: The TurboCBD capsules went on to deliver more CBD to the blood at the 60-minute mark (i.e., 38.8 ng/mL) than the positive control capsules were able to reach at any time during the 6-hour study, further demonstrating the exceptional rapidity of action and effectiveness of the TurboCBD capsules;
	·	90 Minutes: The TurboCBD capsules further went on to deliver significantly more CBD to the blood (86% more) than the positive control capsules at the 90-minute mark (i.e., 53.0 ng/mL compared to only 28.4 ng/mL respectively [95% CI; p=0.034]);
	·	Through to Study Completion: Lexaria’s TurboCBD capsules continued to deliver more CBD to blood than the positive control capsules at each subsequent time point in the study through to the 6-hour mark when the study was completed.

Additional study analysis was released in February 2019:

Key metabolic and hemodynamic performance findings linked to bioavailability enhancements were revealed in the study, which compared a 90 mg dose of Lexaria’s TurboCBD to a 90 mg dose without Lexaria’s DehydraTECH™ technology (the “positive control”) as well as a placebo, as follows:

	·	Analysis of mean arterial blood pressure (MAP) at peak blood levels of CBD achieved with Lexaria’s TurboCBD demonstrated a significant reduction in MAP compared to placebo (95% CI; p=0.027). This finding was not observed with the dose-matched positive control formulation for which there was no significant decrease in MAP compared to placebo (95% CI; p=0.625);
	·	Cerebral perfusion was also analysed by an index of conductance in the middle cerebral artery (MCA). The findings revealed that Lexaria’s TurboCBD caused the greatest increase in MCA conductance relative to both the positive control formulation and placebo (95% CI; p=0.017 and P=0.002 respectively);

Finally, over the six-hour study, analysis of the total area under the curve (AUC) demonstrated that Lexaria’s TurboCBD resulted in a notable trend for higher levels of CBD in the bloodstream overall than the positive control formulation with total AUC of 10,865 ± 6,322 observed with Lexaria’s formulation compared to 7,115 ± 2,978 observed with the positive control (95% CI; p=0.096). Furthermore, when normalized to body mass, the AUC at the peak CBD concentration was markedly and significantly (95% CI; p=0.02) higher with the TurboCBD 90 mg dose compared to the 90 mg dose positive control formulation.

These results corroborate and confirm other in vitro and in vivo studies that have evaluated Lexaria’s DehydraTECH technology. Although this study evaluated absorption only of CBD and its metabolites, Lexaria believes nearly identical bioavailability enhancement results would be achieved with other cannabinoids.

During March of 2019 we also launched an in vivo research program to test Lexaria designed nanotech enhancements comprised of eleven separate animal studies and released initial results during May 2019 demonstrating measurable quantities of cannabidiol into blood in as little as 2 minutes. In each arm of the animal studies, 10 male Sprague-Dawley rats were administered CBD at 25mg per kg of bodyweight. Delivery of CBD into the bloodstream was monitored over a 60-minute duration. In the first animal study results, Lexaria compared its standard DehydraTECH formulation that combines cannabinoids with long-chain fatty acids (“LCFA”) using Lexaria’s patented dehydration processing technique to a concentration-matched formulation utilizing coconut oil which is a commonly used MCT oil in the cannabis edibles industry.

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	·	At 60 minutes DehydraTECH’s LCFA formulation achieved a CBD blood concentration level of 319% more than the MCT oil formulation.
	·	Over the entire 60-minute study, the animals that received the standard DehydraTECH LCFA formulation achieved an average maximum CBD blood concentration level that was 334% more than the average maximum blood concentration level of the animals that received the MCT oil formulation (p<0.0021).
	·	Over the entire 60-minute study, the area under the curve (AUC) (total quantity of CBD delivered) for the Lexaria DehydraTECH LCFA formulation was 389% more than the MCT oil formulation (p<0.0011).

Lexaria also tested for brain tissue concentrations to quantify 8-hour CBD delivery from the DehydraTECH-enabled LCFA formulation compared to the MCT oil formulation and DehydraTECH’s LCFA formulation outperformed the MCT oil formulation by 246%.

The Company released additional results from its March 2019 research program wherein animal testing proved that combining Lexaria’s DehydraTECH delivery technology with generic nanotech techniques delivers 1,137% more CBD into animal brain tissue following oral ingestion than certain existing industry formulations. Lexaria combined its DehydraTECH delivery technology with a standard form of nanotechnology and analyzed subsequent delivery into brain tissue following oral ingestion. Delivery of CBD into the brain was reported 8 hours after dosing.

	·	The Lexaria DehydraTECH LCFA formulation without nanotech achieved an average brain tissue accumulation level that was 246% higher than the average for those animals that received the MCT oil formulation (p=0.0013).
	·	The Lexaria DehydraTECH LCFA formulation with nanotech achieved an average brain tissue accumulation level that was 1,137% higher than the average for those animals that received the MCT oil formulation (p=0.0178).

Further results demonstrated that Enhanced DehydraTECH led to 811% more CBD delivery into blood than generic industry MCT coconut-oil formulations (p=0.00008); and 110% more CBD into blood than DehydraTECH in its traditional format (p=0.02).

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	·	Enhanced DehydraTECH delivered roughly twice as much CBD to animal blood at all measured time points in the study from the 15-minute mark onwards, compared to traditional DehydraTECH; and during the same time points from 717% to 1098% more CBD than the generic industry MCT coconut oil formulations.
	·	Enhanced DehydraTECH delivered more CBD to blood in just 12 minutes than the MCT coconut-oil formulation was able to achieve at any point during the 1-hour test duration.
	·	Enhanced DehydraTECH is even faster acting, reaching a maximum blood concentration level (“tmax”) in just 45 minutes compared to traditional DehydraTECH at 50 minutes and the MCT coconut oil formulation at 57 minutes.
	·	Enhanced DehydraTECH delivered an astonishing 1,937% more CBD into animal brain tissue after 8 hours compared to generic industry MCT coconut oil formulations; and 487% more than traditional DehydraTECH.

Both traditional DehydraTECH and Enhanced DehydraTECH delivered maximum blood concentration levels prior to the 60-minute end-of-test, with levels tapering off thereafter. The DehydraTECH technology therefore demonstrates both fast onset and fast offset as tested which is of interest for dose titration purposes when repeated dosing is desired.

We have also completed our first study evaluating DehydraTECH used in a topical cream formulation for absorption of CBD through human skin. Results proved significant increases in both speed and quantity of CBD absorption through skin when compared to control formulations. The absorption study was performed on human skin at a California-based laboratory that specializes in Franz diffusion cell skin permeability testing. Lexaria’s DehydraTECH technology was used together with a sophisticated oil-in-water emulsion formulation design and compared to a series of matching oil-in-water emulsion formulations prepared with the same CBD inputs, with and without the DehydraTECH technology and with and without two leading skin penetration enhancers currently used in the skin products industry. Several factors were measured, including the time required to detect CBD skin penetration and quantity, and peak amounts of CBD absorbed into and through the skin, at multiple testing intervals over a 48-hour duration.

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Lexaria’s DehydraTECH-enabled topical formulation, absent either of the commercial penetration enhancers, was the fastest acting for absorption into the epidermis, dermis or through the skin into the systemic fraction representing permeation into the underlying circulatory system. Lexaria’s DehydraTECH-enabled product also had no odour even without the use of perfumes, contrary to other cannabinoid industry products that can be quite strongly odoriferous without the use of masking perfumes.

Furthermore, Lexaria’s DehydraTECH-enabled topical formulation without the addition of either of the commercial penetration enhancers, demonstrated the highest overall average quantity of CBD delivered through the skin and into the representative systemic fraction of all the formulations tested, with as much as a 225% increase in CBD permeability when compared to the highest performing commercial penetration enhancer formulation assessed and almost a 1,900% increase in CBD permeability when compared to a control formulation that was devoid of both the DehydraTECH technology or any commercial penetration enhancers. The commercial skin penetration enhancers only demonstrated performance that was on par or superior to the DehydraTECH-enabled formulations tested in so far as total CBD absorption into the shallow epidermis or dermis was concerned.

We have also completed our first ingestible nicotine in vivo (animal) absorption study. Lexaria is pursuing the use of its patented DehydraTECH technology as a possible new nicotine delivery method, an edible dose absorbed through the gastrointestinal tract, with potential both as a nicotine replacement therapy as well as an alternative product format for regular tobacco users.

DehydraTECH delivered the following major nicotine absorption performance improvements: 1,160% faster delivery of equivalent peak quantities of nicotine to the bloodstream than achieved with controls (within 15 min vs. 2.9 hours), 148% gain in the quantity of peak nicotine delivery to the bloodstream relative to controls, 560% higher brain levels of nicotine where nicotine effects are focused, compared to controls, Lower urine levels of nicotine excreted than controls, for enhanced nicotine activity and bioavailability over the course of the study, lower quantities of key liver metabolites in the bloodstream than controls as hypothesized, suggesting bypass of first pass liver metabolism.

Study Design Parameters:

The study was designed to principally assess the relative ingestible nicotine absorption performance of DehydraTECH-powered formulations compared to concentration-matched control formulations that lacked any form of delivery enabling technology in rats. Nicotine was administered in a nicotine polacrilex derivative format as is widely commercialized today in nicotine replacement therapy products such as chewing gums. Twelve male rats were divided into four groups of three, such that DehydraTECH and control formulations were each tested at a 1 mg/Kg and 10 mg/Kg dosage level. Formulations were administered orally and all rats were cannulated for blood collection at multiple intervals over an 8 hour duration post-dosing with the first data collection at the 15-minute mark. Urine and feces were also collected for up to a 24-hour duration post-dosing, and essential organ tissue samples were also collected for examination after the study. All samples were subjected to analytical testing in order to quantify the levels of nicotine therein, as well as the levels of three major liver metabolites thereof, hydroxycotinine, nicotine N’-oxide and cotinine, in order to assess the relative metabolite levels absorbed by the different formulations. Lexaria’s hypothesis was tested to prove that its DehydraTECH technology would influence more rapid and complete intestinal bio absorption of nicotine lymphatically with less metabolic degradation by the liver. All animals were also assessed for general tolerability of the administered formulations. The study was conducted at the same independent laboratory in Philadelphia where the Company completed its initial CBD absorption study in 2015.

Results & Observations:

The Lexaria formulations generally achieved faster absorption, higher peak absorption and higher overall quantities of nicotine, on average, in the blood than the concentration-matched control formulations at both the 1mg and 10 mg/Kg doses tested. Furthermore, as previously reported, there were no obvious signs of gastrointestinal distress such as vomiting or diarrhea indicating that the animals appeared to tolerate the treatment well.

Nicotine blood levels were evaluated multiple times over a period of 8 hours after dosing. In the 10mg/Kg dosing arm, the control formulation required nearly 3 hours to reach similar levels of blood absorption that the Lexaria formulation reached in only 15 minutes. Furthermore, the Lexaria formulation went on thereafter to demonstrate peak plasma levels that were 148% of those achieved by the control formulation. If replicated in human studies, these findings are suggestive that Lexaria’s technology could prove more effective in elevating blood nicotine levels through edible formats much more quickly and substantially than previously theorized, potentially making ingestible nicotine preparations a viable alternative to today’s available product formats while also leading to a more rapid nicotine craving satiation.

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Analysis of the liver metabolites revealed, as expected, that overall levels in the blood of two of the three metabolites studied were higher in the control group than in the Lexaria formulation group at the 10 mg/Kg dose. This result was especially pronounced in the 45-minute to 2-hour time interval post-dosing which is consistent with the expected timing of release of metabolites in higher quantity into the bloodstream by the liver following normal physiological processing of ingested nicotine with the control preparation, compared to the DehydraTECH technology that is believed to elude first pass liver metabolism. The Lexaria formulation also demonstrated lower quantities of nicotine in the rat urine at both doses, which is consistent with the fact that the levels of nicotine in the rat blood remained higher over the duration of the study with the Lexaria formulation than with the control. The study also revealed that the Lexaria formulation at the 10 mg/Kg level achieved up to 5.6-times as much nicotine upon analysis of the rat brain tissue than was recovered with the matching control formulation. These findings together perhaps suggest prolongation of nicotine effectiveness with the Lexaria formulation which may also be beneficial in humans to control cravings over an extended time-period from a single edible nicotine dose.

In our follow-up third-party in vivo statistically significant study, including two groups of 20 animals, further defining delivery of nicotine in edible form at each of the 2, 4, 6, 8 and 10-minute intervals post-dosing, with 90.2% greater delivery than the concentration-matched control formulation by the 10-minute mark (95% CI; p=0.044), and significantly greater absorption levels than the control formulation at all subsequent time points in the study. Speed of onset is a key attribute for oral drug administration, and it is of particular importance for the consideration of non-inhalation nicotine delivery formats.

Key highlights of the follow-up study are as follows:

	·	Peak Level: 79% improvement in peak blood levels (maximum concentration or “Cmax”) at 394 ng/mL using Lexaria’s DehydraTECH technology vs. 220 ng/mL with the control (95% CI; p=0.0257);
	·	Total Quantity: 94% improvement in total quantity of nicotine delivered (area under the curve or “AUC”) to the blood during the 60-minute course of the study, at 266 hr•ng/mL versus 137 hr•ng/mL (95% CI; p=0.0086);
	·	Rapidity: Lexaria’s technology delivered nicotine into the blood stream by the first time interval of blood sampling at the 2-minute mark. On average, Lexaria’s technology delivered 203 ng/mL to the blood in aggregate of the 2, 4, 6, 8, 10, 12 and 15-minute time points, compared to only 120 ng/mL in aggregate over the same period by the control, an improvement of 70% (95% CI; p=0.0004).

In addition to the above described scientific testing and validation studies, Lexaria has also conducted various cannabinoid formulation experiments, together with potential DehydraTECH licensee partners, on chocolates, candies, gummies, mouth-melts, chocolate bars, protein bars, beverages such as beer, spices, tea, coffee, supplements and more over the past several years. Beverage formulations have produced cannabinoid water-based products including de-alcoholized beer that mask unwanted cannabis flavor and are fast acting. Chocolate formulations were reported as being the fastest acting, most consistent, and best-tasting products relative to comparator control formulations in approximately 70% of cases in a recent 2017 consumer study. As well, on March 22, 2016, Lexaria signedannounced results from another chocolate formulation consumer study in which test subjects ranked those chocolates that had been created with Lexaria’s technology as the best tasting, most palatable and providing the best overall experience of the chocolates sampled. Furthermore, the test subjects in that study indicated a distribution agreementtime of onset of the cannabis oil effects in as little as 15-20 minutes on average. The study included 12 volunteers who were all regular cannabis consumers with Telluride Coffee Roasters, LLC. This agreement has since ended and willexperience ingesting conventional edibles. All chocolates used in the study were blinded (unmarked) in order that the subjects could not be renewed due to inactivity.discern the product formulations applied.

Technology out-licensing

On May 14, 2016, the Company entered into a Licensing Agreement allowing the Licensee,with Nuka Enterprises, LLC (“Nuka”) for a two-year period, to utilize the Company’s technology to create, test, manufacture, and sell marijuana-infused consumable and/or topical products, in the state of Colorado, with an option of extending the terms of the Licensing Agreement to Washington, Oregon, and California. On April 30, 2018, the Company announced a new 10-year renewal licensing agreement with Nuka, maker of 1906 brand cannabis chocolates and other edible products. The new agreement provides Nuka with semi-exclusive ability to utilize the DehydraTECH technology across the US. Nuka also acquired an option to expand its products and brand to Canada, including using Lexaria’s existing chocolate and confections contract manufacturer licensee Cannfections Group Inc. The agreement incorporates new rights in product categories in addition to the original chocolate formats, which include candies, beverages, capsules and pills, and topical creams. On May 21, 2019, we announced a major expansion in operations by Nuka over the next two years into Illinois, Ohio, Massachusetts, Michigan and other states. The comprehensive semi-exclusive agreement provides Nuka and 1906 with competitive technological advantages until 2028. A second license provides Nuka and 1906 with the immediate ability to utilize DehydraTECH technology for CBD across the US marketplace.

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On January 25, 2018, the Company announced it entered a definitive technology licensing agreement with a 7-year term with Cannfections Group Inc. whereby Lexaria is providing its patented DehydraTECH technology to empower next-generation performance in cannabis infused chocolates and candies to be developed and sold in Canada and internationally.

On February 26, 2018 the Company announced it entered an agreement with NeutriSci International Inc. whereby Lexaria granted an Intellectual Property License and Supply Agreement for the manufacturing and sale of CBD-based products. This agreement has been terminated effective March 15, 2019.

On February 27, 2018 the Company announced it entered a definitive technology licensing agreement with Los Angeles-based, privately-held Biolog, Inc. (“Biolog”) for a 5-year term whereby Lexaria provided its patented DehydraTECH technology to empower a unique set of next-generation food and beverage cannabis infusion products to be sold in the United States. On June 10, 2019 the Company terminated its license with Biolog.

On April 25, 2018, the Company announced that it entered a definitive technology licensing agreement with GP Holdings LLC, (“GP”) whereby Lexaria provided its patented DehydraTECH technology for cannabis infused beverages and topical skin products in California. GP acquired a 5-year semi-exclusive right. Subsequent to year end, on September 28, 2018, the Company cancelled the contract due to ongoing delays and non-performance.

On July 31, 2018, the Company and Hill Street Beverage Company Inc., (TSXV:BEER; “Hill Street”) jointly announced that they signed a Definitive Agreement to license Lexaria’s DehydraTECH, on a semi-exclusive basis, for a term of five (5) years, to produce a line of cannabis-infused alcohol-free beverages for Canadian distribution, following regulatory approval.

On January 15, 2019, the Company announced that its wholly-owned subsidiary Lexaria Nicotine and Altria Ventures Inc., an indirect wholly owned subsidiary of Altria Group, Inc. (“Altria”), executed definitive agreements to pursue innovation in oral, reduced risk nicotine consumer products using Lexaria’s patented DehydraTECH technology. Altria was granted a license to use Lexaria’s DehydraTECH technology for oral nicotine delivery forms on an exclusive basis in the United States and a non-exclusive basis elsewhere globally. Altria will pay Lexaria Nicotine a royalty on revenue generated from the sale of nicotine products containing DehydraTECH, until such time it may acquire 100% ownership in Lexaria Nicotine. There is no requirement that Altria must acquire 100% ownership in Lexaria Nicotine.

On April 24, 2019, the Company announced that it entered a definitive 5-year agreement, via its subsidiary Lexaria Canpharm ULC, to provide Lexaria’s patented DehydraTECH technology to a private California-based company for its utilization in certain CBD-based beverages to be produced and sold in California and Nevada that may include any combination of ready-to-drink beverages such as non-alcoholic beers, wines and spirits; cold or hot coffee or teas, sports drinks and more.

On May 7, 2019, the Company announced that it entered a definitive 5-year agreement, via its subsidiary Lexaria Hemp Corp., to provide Lexaria’s patented DehydraTECH technology to a private Nevada-based company for its utilization in certain CBD-based beverages to be produced and sold across the USA that may include any combination of ready-to-drink beverages such as non-alcoholic beers, wines and spirits; cold or hot coffee or teas, sports drinks and more.

On May 21, 2019, the Company announced a major expansion in operations by Nuka and its 1906 brand of edibles over the next two years into Illinois, Ohio, Massachusetts, Michigan and other states. The comprehensive semi-exclusive agreement provides Nuka and 1906 with competitive technological advantages until 2028. A second license provides Nuka and 1906 with the immediate ability to utilize DehydraTECH technology for CBD across the US marketplace.

On July 10, 2019, the Company announced that it entered a definitive 5-year agreement, via its subsidiary Lexaria Hemp Corp., to provide Lexaria’s DehydraTECH technology to Nic’s Beverages Ltd for use in CBD-based beverages to be produced and sold throughout the United States.

On July 11, 2019, the Company announced that it entered a definitive 5-year agreement, via its subsidiary Lexaria Hemp Corp., to provide Lexaria’s DehydraTECH technology to Universal Hemp LLC, a B2B manufacturing company of hemp-derived bulk ingredients to the nutraceutical and consumer packaged goods industries to be produced and sold across the USA immediately, and in Canada when regulations permit. Agreed to minimum payments over the life of the 5-year agreement are $3,750,000.

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On July 24, 2019, the Company announced that it entered a 10-year Joint Manufacturing Partnership (JMP) with Hill Street to produce commercial products including processed THC cannabis and/or CBD hemp powder including among other categories; tablets, capsules, or packets for sale in Canada and for export where permitted. The JMP will also produce similar powders as a bulk ingredient for manufacturing processes for sale to other licensed producers seeking to use DehydraTECH to create their own products for sale within Canada. Profits from this business unit will be shared equally between Hill Street and Lexaria. In addition to the granting ofJMP, Hill Street acquired two global semi-exclusive licenses (with minor exceptions) to utilize Lexaria’s DehydraTECH THC beverage infusion technology around the license, the Company will provide support services to the Licensee in connection with the use of the Company’s technology during the term of the Licensing Agreement. The Licensing Agreement is the first contracted, predictable, and significant revenue stream to be achieved as a direct result of Lexaria’s technological advantage in the marketplace.world, valid for 10 years. Under the terms of the Licensing Agreement, the Licenseeagreement, Hill Street will pay a minimuman annual licensing fee of $122,000 in pre-defined staged payments$15,000 and up to $1,800,000 to Lexaria over the initial two-year term. As per the Licensing Agreement, if the Licensee wereby issuing $800,000 in common shares of Hill Street to introduce certain product lines utilizing Lexaria’s technologyLexaria initially with up to an additional $500,000 in shares of Hill Street when they enter each of the four states contemplated,first two international markets subject to TSXV and CSE approval, as applicable. Pursuant to the terms of the JMP agreements, Lexaria could expectwill issue an aggregate $250,000 in restricted common shares to receive a maximumHill Street. Closing of $1,064,000 over approximately 3.5 years,the Hill Street / Lexaria agreements is subject to normal regulatory approvals and the Licensee would enjoy semi-exclusivity to introduce its products in each of those states. As of August 31 2017 the company had received allclosing of the pre-defined paymentsHill Street / OneLeaf transaction announced by Hill Street. Subsequent to August 31, 2017 for a total receipt of $70,000 corresponding to the areas under the license agreement where the licensee2019, Hill Street has been active to-date.unable to close its transaction with OneLeaf and is currently searching for an alternate location from which to base the Hill Street / Lexaria agreements, thus there is a possibility that this transaction may not close as expected.

14

The continuation of our business interests in these sectors is dependent upon obtaining further financing, a successful programsprogram of development, and, ultimately, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

We are not yet profitable and have not yet demonstrated our ability to generate significant revenues from our business plan. We will require additional corporate funds if our existing capital is not sufficient to support the Company until potential future profitability is reached. There are no assurances that we will be able to obtain further funds required for our long-term operations. We do not expect to require additional operating capital during our fiscal 20182020 year. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other longer-term obligations as they become due. In such event, we could be forced to scale down or perhaps even cease our operations. There is uncertainty as to whether we can obtain additional long-term financing if we do in fact require it.

Our business plan does not anticipateanticipates that we will hire a large number of employees or that we will require extensivetwo to four additional staff during fiscal 2020 to enhance operations in our new office and licenced laboratory space. We expect to be able to utilize contracted third partiesthird-parties for most of our production and distribution needs, instead focusing on our capital on higher value addedvalue-added aspects of the business such as research and development, and scientific testing. We have no current plans to build our own production facility.

Our company relies on the business experience of our existing management, on the technical abilities of consulting experts, and on the technical and operational abilities of its operating partner companies to evaluate business opportunities.

Competition

Competition in alternative health sectors and in consumer products in the USA is fierce. We expect to encounter competitive threats from existing participants in the sector and new entrants. Although PoViva Corp. has filed patent applications to protect intellectual property, there is no assurance that patents beyond those already issued will be granted nor that other firms may not file superior patents pending. Food supplements, organic foods, and health food markets are all well established and the Company will face many challenges trying to enter these markets. Lexaria is also aware of various competing technologies that exist in the marketplace that claim to also enhance the bio absorption of cannabinoids as Lexaria has demonstrated through repeated in vitro and in vivo scientific testing with its patented DehydraTECH technology. By and large, these technologies are mostly forms of nanotechnology that generally claim to enable the formation of microencapsulated microemulsions of cannabinoid active ingredients. These technologies can enable exceptional water solubility of cannabinoid ingredients and can impart improved intestinal bio absorption as a result.

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Competition in nicotine, alternative nicotine delivery and nicotine cessation sectors in the USA is comprised of long-established entities, brands, and new technologies competing to create less harmful options. The sectors are complicated by the significant historical empirical data of older products or technologies versus the more limited published supporting data regarding the effects of new products or technologies. Due to the size of the sectors we expect to encounter competitive threats from existing participants and unknown new entrants. There is no assurance that other technologies already deployed, or in development, will not form the basis of product formats that competitors or consumers choose to utilize. It is also possible that historic delivery methods that have been in use and the familiarity with them may prevent adoption of products utilizing our technology in alternative delivery formats. Competing technologies or products may utilize known delivery formats or entirely new and unforecastable formats. Lexaria has demonstrated through scientific testing with its patented DehydraTECH technology that it delivers nicotine rapidly and effectively through oral delivery. We believe that if we can educate and influence consumers to adopt a food grade edible product format, and if US regulatory bodies authorize such formats, we may be able to offer a competitively successful new product format that utilizes our technology.

The legal marijuana industry is comprised of several sub-sectors and is legal under different guidelines in many states though it remains illegal under most federal laws. Notwithstanding, the overall sector is generally recognized to be one of the fastest growing in the USA, with state-legal revenue of over $8 billion in 2016. Independent projections and publicized reports expect revenue of $20 billion or more in 2020, both as the sector gains in credibility and acceptance, and as more and more states legalize either medical use or adult recreational use; or both. In June of 2019 there were eleven states and one district that had legalized medical and recreational use, and more than twenty-two other states that had legalized medical use. In any fast growingfast-growing industry, competition is expected to be both strong and also difficult to evaluate as to the most effective competitive threats. While we are an early adopter within the cannabinoid delivery sector, there are already reports of more than 300 public companies that have claimed to be involved in the sector in some fashion; and an unknown number of private companies. Our current strategies may prove to be ineffective as the sector grows and matures, and if so, we will have to adapt quickly to changing sectoral circumstances. Accordingly, the Company intends to aggressively pursue technology out-licensing opportunities not only within the cannabinoids sector where it is already active, but also across other sectors where its DehydraTECH^TM technology is patent allowed and/or pending, including the opportunities in the vitamin and supplements sector, the pain relief sector and the nicotine products sector.

Competition

However, it is Lexaria’s belief that its patented DehydraTECH technology offers a host of benefits beyond what competing technologies can offer, including superior oral palatability, a more appealing and all-natural ingredient compositional profile from a food and beverage formulation perspective, more predictable time of delivery into bloodstream, and superior scalability and cost effectiveness from a manufacturing perspective. Lexaria believes that its DehydraTECH technology is, therefore, significantly distinguished from competing technologies in alternative health sectorsthese respects, with a view to growing the breadth and in consumer productsnumber of licensees that will adopt its technology for their product offerings going forward. Lexaria believes that these competitive advantages together with its wealth of scientific data showing noteworthy bio absorption enhancements with its DehydraTECH technology constitute a compelling value proposition for its prospective licensees, and it intends to continue to pursue license arrangements not only within the cannabinoids edibles sector where it is already active, but also in the USA is fierce. We expect to encounter competitive threats from existing participantsvarious other bioactive ingredient sectors identified in the sectorits issued and new entrants. Although PoViva Tea LLC has filed numerouspending patent pending applications to protect intellectual property, there is no assurance that patent applications beyond those already allowed and issued will be granted nor that other firms may not file superior patents pending. Food supplements, organic foods, and health food markets are all well established and our Company will face many challenges trying to enter these markets.applications.

Compliance with Government Regulation

At least 24

Over 30 States in the USA have passed some form of legislation related to that state’s permission to grow, cultivate, sell or use marijuana either for medical purposes or for recreational or “adult use” purposes; or both. The various state legislation is not necessarily harmonious with one another, leading to potential conflicts between state laws.another. It is most often not legal to transport cannabis-related products across state lines.

Lexaria does not “touch the plant” or manufacture, process or sell cannabis in any location within or outside of the USA. The Company compliesLexaria does conduct research and development on cannabis ingredients legally in Canada, in a federally licensed laboratory in compliance with all federal and local Canadian laws. We comply with US federal law that provides for certain exemptions for agricultural (industrial) hemp and certain byproductsby-products to be manufactured and sold in the US. The DehydraTECH^TM technology may have applications within the legal marijuana sector and Lexariawe may seek to license that technology to companies that have met and comply with state regulations for the sale or distribution of cannabis related products in any particular jurisdiction.

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Lexaria’s position is that, just as a telephone company provides communications services, and an electric company provides electrical power, our provision of technological services to a state-legal cannabis company is in compliance with laws and required regulations.

Lexaria’s patented DehydraTECH^TM technology may also have applicationhas applications in completely separate sectors such as vitamins, non-steroidal anti-inflammatories,NSAIDs, and nicotine. We have no products nor operations in any of these sectors today.today, although we have commenced formulation development for research and validation purposes in each of these areas. We have a formal relationship with the largest cigarette company in the US and are conducting R&D with that company related to the possible development of nicotine oral products. If we enter any of these sectors at any time, we will be exposed to and of necessity will have to comply with, all local, state and federal regulations in each of those sectors. As a result of the possibility of Lexaria being involved in a number of disparate business sectors, compliance with government regulations could require significant resources and expertise from our company.

Our Former Planned Medical Marijuana Production Operations

The US Federal Government passed the 2018 Farm Bill (the “Bill”), in December of 2018, that may have significant impacts on industry segments that we operate and have products in and potentially change some of the regulatory compliance risks that may affect our business. The Bill includes lifting restrictions on advertising, marketing, banking and other financial services as well as allowing interstate commerce for hemp and hemp-derived CBD, removing barriers for intellectual property protections under federal law such as patents and trademarks, as well as several other measures that may positively impact these industry segments overall. The impact the Bill may have on other regulatory bodies and their regulations will require ongoing monitoring to determine the outcome and timing of any revisions.

Enertopia Joint Venture

On June 7, 2013May 28, 2014, our Company entered into a joint venture agreement with Enertopia Corp. for a prospective medical marijuana business under the Government of Canada implemented then-new legislation, theCanadian Marijuana for Medical Purposes Regulations (MMPR), concerning the production and sale of medical marijuana. The MMPR permitted the licensing of commercial growers beginning April 1, 2014, while eliminating existing regulations permitting the production of medical marijuana on a personal-use basis. The revised regulations created conditions(“MMPR”) for a commercial industry49% net ownership interest in Canada that is responsible for medical marijuana production and distribution, by eliminating small-scale, personal-use production. Commercial growers are now able to submit applications to Health Canada for the production of medical marijuana and, if licensed, supply patients who qualify for the product at a price that would be established by market forces and at the discretion of producers. As of June 2017, 50 producers have become licensed under the latest versions of Canadian regulations.business (Enertopia 51%) utilizing an identified location in Burlington, Ontario (the “Burlington Joint Venture”).

On June 26, 2015, we entered into a share purchasedefinitive agreement with Enertopia Corp. and Shaxon Enterprises Ltd. and Enertopia Corp. to sell our 49% interest in ourthe Burlington Ontario medical marijuana project application, includingJoint Venture and the MMPR application (no. 10MMPR0610) for our proposed production facility. The Burlington MMPR license application has continued in the application process under new ownership.number 10MMPR0610. Pursuant to the sale terms of the agreement, the joint venturewe received a non-refundable $10,000$4,900 deposit and isare entitled to receive up to $1,500,000$735,000 in milestone payments upon the Burlington facility becoming licensed under the MMPR. These monies would be split 51% to Enertopia and 49% to our Company. Notwithstanding the foregoing, we can neither guarantee nor provide a meaningful time estimate regardingthe Company does not expect the grant of a production license for the Burlington facility and at this time believe it may be unlikely to be awarded.facility.

Since June 12, 2015 the Company has had no direct involvement or ownership interest in any active or prospective operations or permit applications under the MMPR. The Company has no plans at this time to apply for a license in any jurisdiction for the production or sale of legal medical marijuana.

Market for Medical Marijuana in Canada

It is estimated by Health Canada that the overall market for medical marijuana in Canada under the new MMPR will be approximately $1.3 billion per year by 2024 (source: Health Canada/Canadian Broadcasting Corporation). Health Canada projects that the number of licensed users will increase to over 450,000 by 2024. Health Canada formerly sold medical marijuana, produced on contract by Prairie Plant Systems (formerly the only licensed producer in Canada), for $5 a gram. It is estimated that the price per gram under the new licensing system will average $7.60 per gram as producers set prices without interference from government (source Health Canada/Canadian Broadcasting Corporation).

Despite these estimates the medical marijuana market is relatively new and largely unproven. The adoption rate of commercial medical marijuana by qualified patients is difficult to determine but a portion (approximately 13%) of the qualified patient population is already conditioned to purchasing government contracted producers under the old system (source: Health Canada). Furthermore, it is anticipated that the convenience of a wide selection of medical marijuana strains delivered directly to patients in a discrete and concealed package will be attractive. Healthcare practitioners are key stakeholders as they will be signing and providing the medical documentation needed for patients to register with commercial producers. Regulations under the MMPR are not significantly different for healthcare practitioners already familiar with the process under the former MMAR. Licensed producers are held responsible for quality of the product provided as the MMPR outlines strict rules for quality assessment and control, cleanliness, manufacturing, and pesticide use. Security and diversion to the black market remain a concern but MMPR outlines strict rules for segregation of duties and security clearances, background checks for employees and officers, tracking of product in and out of the premises, and camera surveillance.

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Trends, risks and uncertainties.

We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common shares.

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Item 1B. Unresolved Staff Comments

As a “smaller reporting company”, we are not required to provide the information required by this Item.

None.

Item 2. Properties

Executive Offices

The address of our principal executive office is 156 ValleyviewUnit 100–740 McCurdy Road, Kelowna BC Canada V1X3M4, where we share ~1,200 square feetV1X 2P7 with rent of office space, which includes several offices for a monthly rental of CAD$1,052.4,823. We have administrative functions located in Phoenix, Arizona at nominal cost. Our telephone number is (250) 765 6424. We have an additional administrative office space in Langley British Columbia and Phoenix Arizona at nominal costs. Our current locations provide adequate office space for our purposes at this stage of our development.

Significant Acquisitions and Dispositions

On November 12, 2014,

We have leased a new head-office location in Kelowna, Canada, that included the Company signed an agreement with PoVivapurchase and acquired 51%construction of PoViva with an initial consideration of $50,000. Lexaria serves as the Manager of Business Operations of PoViva’s Teas. As Manager, Lexaria oversees most aspects of the business including, but not limitedoffice equipment, furniture, computers, and communications systems. We also constructed space for a Canadian federal licensed laboratory on-premises for our internal R&D purposes, for which a license has been received from Health Canada. Costs incurred to Accounting, Marketing, Capital Investment, Capital Raising,Sales, Branding, Advertising and Fulfillment. The Founders served until 2015 as Production Manager and were responsible for all aspects of production, product quality, licensing, testing, and product legality. It is also expected that both parties to this Agreement will assist the other to fulfill their obligations as needed and the cost of business will be borne by revenues earned by the company and general corporate funds. As of October 2017 Lexaria acquired 100% of PoViva for US$70,000, a waiver on certain debts, and a 5%, 20-year royalty on net profits of ViPova Tea^TMtea, coffee, and hot chocolate sales. No Lexaria stock or options were issued.

On June 26, 2015, we entered into a definitive agreement with our joint venture partner Enertopia Corp., and Shaxon Enterprises Ltd. to sell our 49% interestdate are included in Capitalized Assets in the Burlington Joint Venturefinancial statements and the MMPR application number 10MMPR0610. The Burlington MMPR license application will continue in the application process under new ownership. Pursuant to the agreement, the joint venture received a non-refundable $10,000 deposit and is entitled to receive up to $1,500,000 in milestone payments upon the Burlington facility becoming licensed under the MMPR. All payments made pursuant to the Definitive Agreement would be divided 51% to Enertopia Corp. and 40% to our Company. Notwithstanding the foregoing, we can neither guarantee nor provide a meaningful time estimate regarding the grant of a production license for the Burlington facility.notes.

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Item 3. Legal Proceedings

We know of no other material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any other material proceeding or pending litigation. There are no other proceedings in which any of our directors, executive officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

Item 4. Mine Safety Disclosures

None.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common shares are quoted on the OTCQBOTCQX under the symbol “LXRP.” Our common shares are also quoted on the Canadian Securities Exchange under the symbol “LXX”. The following quotations, obtained from Yahoo Finance, reflect the high and low bids for our common shares as quoted on the OTCQBOTCQX based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

The high and low bid prices of our common stock for the periods indicated below are as follows:

OTC Bulletin Board (1)
Quarter Ended	High	Low
November 30, 2016	$0.35	$0.11
February 28, 2017	$0.699	$0.20
May 31, 2017	$0.625	$0.27
August 31, 2017	$0.43	$0.27
November 30, 2017	$1.01	$0.32
February 28, 2018	$2.54	$0.82
May 31, 2018	$1.65	$0.78
August 31, 2018	$2.43	$1.50
November 30, 2018	$2.20	$0.98
February 28, 2019	$1.70	$0.75
May 31, 2019	$1.34	$0.81
August 31, 2019	$1.00	$0.60
(1) Over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions

As of November 14, 2017,5, 2019, there were 8056 holders of record of our common stock. As of such date, 69,020,01178,787,134 shares of common stock were issued and outstanding.

Our common shares are issued in registered form. Computershare, 2nd Floor, 510 Burrard Street, Vancouver, BC V6C 3B9 (Telephone: 604-661-9400; Facsimile: 604-661-9549) is the transfer agent for our common shares.

Nevada Agency and Trust Company, 50 West Liberty Street, Suite 880, Reno, Nevada 89501 (Telephone: 775.322.0626; Facsimile: 775.322.5623) is our registrar.

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Dividend Policy

We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our board of directors.

Recent Sales of Unregistered Securities

Other than set out below, we did not sell any equity securities which were not registered under the Securities Act during the year ended August 31, 20172019 that were not otherwise disclosed on our quarterly reports on Form 10-Q or our current reports on Form 8-K filed during the year ended August 31, 2017.2019.

On October 11, 2016, pursuant to its agreement with Docherty Management Ltd.,

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A summary of the Company issued 252,000 restricted common shares with a value of $35,760.activity is set out in the table below:

On October 11, 2016, pursuant to the Advisory Agreement, the Company issued 750,000

Type of Issuance		Number of Shares				Total Value
Warrant exercise(1)			1,626,513				796,122
Option exercise			430,000				66,250
Private placement			947,150				1,515,440
Per agreements(2)			250,000				234,500
			3,253,663				2,612,312

(1)Includes 384,212 broker warrants exercised for gross proceeds of $191,742

(2) The Company awarded the restricted common shares as required by consulting contracts.

Warrants

Lexaria awarded 100,000 warrants with an exercise price of $0.14 per share$0.96 and terman expiration date of five years,May 21, 2021 to a vendor, pursuant to an investor relations contract. The warrants were valued at $52,817 and included in return for consulting services provided in August, September, and October. The Company recognizedinvestor relations.

During the fair value of $32,252 from 250,000 of such warrants for services received during the month of August 2016, during the yearperiod ended August 31, 2016, and during the three months ended November 30, 2016, further recognized $59,490 for the remaining 500,000 warrants issued in return for consulting services received during the months of September and October 2016.

The Company reached an agreement with a director to settle the outstanding amount pursuant to an advisory agreement (Note 14), through issuance of common shares of the Company. To settle the outstanding amount of $16,000 for four months to October 31, 2016,2019 the Company issued 114,286 shares of its common stock at a value of $0.14 per share, on October 11, 2016. On February 17, 2017, the Company issued a further 29,091 common shares to settle $16,000 of fees incurred during the four months ended February 28, 2017. A total of $8,000 of the $32,000 was recognized as consulting fees during the year ended August 31, 2016.

On October 27, 2016, the Company issued 56,250 shares of its common stock in settlement of $9,000, recognized within accounts payable and accrued liabilities as at August 31, 2016.

On November 1, 2016, the Company issued 500,00028,175 warrants to a consultant. Each warrant entitles the consultant to purchase one common share of the Company at a price of $0.31 per share with a term expiring on May 31, 2017. The Company recognized $48,313, representing the fair value of such warrants, during the nine months ended May 31, 2017.

During November, 2016, the Company provided to its warrant holders, an incentive for early exercise of their previously held warrants. Upon exercise of each warrant, in addition to the common shares of the Company, the warrant holders received a second warrant with identical terms to purchase one additional common share of the Company. The Company raised $737,508 from this early exercise warrant incentive program. A total of 3,245,000 warrants were exercised at a weighted average exercise price of $0.23 and the Company issued 3,245,000 common shares as well as 3,245,000 additional warrants to purchase common shares with an exercise price of $0.23 per share,$1.21 expiring on May 14, 2017. The fair value of these additionalOctober 3, 2019, 107,737 warrants was determined to be $298,777.

On January 10, 2017, the Company issued 500,000 warrants to a consultant. Each warrant entitles the consultant to purchase one common share of the Company at a price of $0.44 per share with a term$0.60 expiring on January 9, 2018. The Company recognized $112,725, representing the fair value of such warrants, during the nine months ended May 31, 2017.

On April 3, 2017, the Company closed its brokered private placement of 4,104,280 units2019. These warrants were valued at $22,579 and recorded as a price per Unit of $0.42 for total gross proceeds of $1,723,798. Each Unit consists of one common share and one-half of one Share purchase warrant. Each whole Warrant entitles the holder to acquire one common share of the Company at a price of $0.60 per Shareissue cost within additional paid in capital for a periodnet effect of 24 months. The Agents received a cash commission of seven percent of the gross proceeds and 287,300 compensation units exercisable for a period of 24 months at an exercise price of $0.42 consisting of one common share and one half share purchase warrant. Each whole compensation warrant is exercisable for one common share at an exercise price of $0.60 for a period of 24 months following closing.$Nil.

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On May 31, 2017, the Company reached an agreement with a director to settle the outstanding amount pursuant to a advisory agreement (Note 14), through issuance of common shares of the Company. To settle the outstanding amount of $12,000 to May 31, 2017, the Company issued 35,294 shares of its common stock at a value of $0.34 per share, on May 31, 2017.

On June 22, 2017, pursuant to the agreement with Mr. Chris Bunka (Note 16), the Company issued 210,000 common shares valued at $61,950, for services rendered as the Chief Executive Officer of the Company.

On June 22, 2017, pursuant to the agreement with Mr. John Docherty (Note 16), the Company issued 210,000 common shares valued at $61,950, for services rendered as the President of the Company.

On August 25, 2017, the Company issued 307,500 shares of its common stock for the conversion of the convertible debt of $45,000 plus accrued interest of $1,125 (Note 10).

On August 25, 2017, the Company issued 32,433 shares of its common stock at $0.37 in settlement of $12,000, recognized within accounts payable and accrued liabilities as at August 25, 2017.

Equity Compensation Plan Information

We have no long-term incentive plans other than the stock option plans described below:below updated for issuable options as at August 31, 2019:

2007 Equity Plan

On April 25, 2007, our shareholders approved our 2007 Equity Incentive Stock Option Plan.

The 2007 Plan permits our company to issue up to 550,000the remaining 412,500 shares of our common stock to eligible employees and directors of our company upon the exercise of stock options granted under the 2010 Plan.company.

2010 Equity Compensation Plan

On February 26, 2010, our shareholders approved and adopted our 2010 equity incentive plan.

The 2010 Plan permits our Company to issue up to 1,980,000the remaining 1,512,500 shares of our common stock to directors, officers, employees and eligible consultants of our Company upon exercise of stock options granted under the 2010 plan.

2014 Stock Option Plan

On June 11, 2014, our shareholders approved and adopted our company’s 2014 Stock Option Plan which permits our company to grant up to an aggregate of 3,850,000the remaining 2,107,500 options to acquire shares of our common stock, to directors, officers, employees and consultants of our company.

Equity Incentive Plan

On June 20, 2019 our shareholders approved and adopted our Equity Incentive Plan whereby the board of directors may, from time to time, grant up to the remaining 7,838,713 stock options to directors, officers, employees, and consultants.

The Board may amend, subject to the approval of any regulatory authority whose approval is required, suspend or terminate this Plan or any portion thereof. No such amendment, suspension or termination shall alter or impair any outstanding unexercised Options or any rights without the consent of such Participant. If this Plan is suspended or terminated, the provisions of this Plan and any administrative guidelines, rules and regulations relating to this Plan shall continue in effect for the duration of such time as any Option remains outstanding.

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It is the Company’s intent to terminate the 2007 Plan, the 2010 Plan and the 2014 Plan upon the expiration of all options currently issued and outstanding under such plans. All future option issuances shall be made under the Equity Incentive Plan.

Securities authorized for issuance under equity compensation plans
Plan Category	Number of securities to be based upon exercise of outstanding options, warrants and rights	Weighed-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plan [excluding securities reflected in column (a)]
Equity compensation plans not approved by shareholders	Nil	Nil	Nil
Equity compensation plans approved by shareholders
2007 Equity compensation plan	300,000	$1.53	112,500
2010 Equity compensation plan	1,325,000	$1.53	187,500
2014 Stock Option Plan approved by security holders	1,990,000	$0.36	117,500
Equity Incentive Plan	1,388,000	$0.92	6,450,713
Total	5,003,000	$0.89	6,868,213

Convertible Securities

As of August 31, 2017,2019, we had outstanding options to purchase 3,320,0005,003,000 shares of our common stock exercisable between prices of $0.09$0.10 and $0.37. In December 2015 we experienced a 1.1 for 1.0 forward stock split that adjusted quantities and strike prices of all previously granted options. Those adjustments are reflected herein.$1.53.

On October 10, 2016,

During the year ended August 31, 2019, the Company pursuant to existing stock option plans, granted 250,000 stock options to directors, officers, employees and consultants that enable the option holders to purchase up to 350,000 common shares of the Company at a consultant for business advisory services. The exercise price of the$0.99 and 100,000 common shares at $0.81 for a period of five years, vesting immediately. Vesting stock options is $0.14 per share, vesting immediately and expiring on October 10, 2018.

On June 2, 2017, the Company granted 200,000 stock options to an officer of the Company. The exercise price of the stock options is $0.37 per share, vesting immediately and expiring five years from the date of grant.

On June 21, 2017, the Company granted 300,000 stock options to a consultant, 100,000 vesting annually for 3 years, with an exercise price of $0.295 and expiring five years from the date of grant. The companywere also granted 100,000to purchase: 440,000 common shares at $0.99, 390,000 at $1.27 (which were subsequently cancelled and re-issued at $0.99), 240,000 at $1.06, 30,000 at $1.16, 48,000 at $0.96 and 450,000 at $0.81 that vest over three years. The vested options to consultants vesting immediately with an exercise price of $0.295were valued at $368,115 and expiring five years from the date of grant.included in consulting expense and R&D. Vesting options granted in a prior period were valued at $22,197 and included in consulting expense.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We did not purchase any of our shares of common stock or other securities during our fiscal year ended August 31, 2017.2019.

Item 6. Selected Financial Data

As

Not applicable. The Company qualifies as a “smaller reporting company”, we are“Smaller Reporting Company” and, accordingly, this Item and the related disclosure is not required to provide the information required by this Item.required.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our audited consolidated financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward lookingforward-looking statements. Factors that could cause or contribute to such differences include but are not limited to; those discussed below and elsewhere in this annual report, particularly in the section entitled "Risk Factors"“Risk Factors”.

Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Plan of Operation

During the next twelve monthtwelve-month period (beginning September 1, 2017)2019), we intend to:

• continue sales and marketing efforts for consumer product lines
• pursue technology out-licensing opportunities for our patented DehydraTECH^TMtechnology. This will be focused first primarily on cannabinoid sector, and will evolve as time allows for completed R&D in other sectors, to the NSAID, vitamin, and nicotine sectors;
• identify and secure sources of equity and/or debt financing for intellectual property pursuit and maintenance, R&D, and consumer product formulation and marketing;

	·	continue sales and marketing efforts for consumer product lines
	·	pursue technology out-licensing opportunities for our patented DehydraTECH technology. This will be focused first primarily on the cannabinoid and nicotine sectors, and will evolve as time allows for completed R&D in other sectors, to the NSAID, and vitamin sectors;
	·	identify and secure sources of equity and/or debt financing for intellectual property pursuit and maintenance, R&D, and consumer product formulation and marketing;

Our plans beyond fiscal 20182021 are dependent upon our ability to obtain sufficient capital through equity capital or other and by revenues generation to execute. During the previous year we did raise sufficient capital to fulfill all our plans. Without sufficient capital, our plans will change, and could change materially. We anticipate that we will incur up to the following operating expenses during this period:

Estimated Funding Required During the 12 Months beginning September 1, 2017

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12 Month Outlook for Current Product Line, Product Development & Design, Patents

As at August 31, 2017,2019, we had a working capital surplus of $2,703,148$1,634,322 and cash on hand of $2,533,337.$1,285,147. We therefore estimate that we will be required to raiserequire approximately $nil$2.5 million in cash to finance our planned expenditures for the 12 months beginning September 1, 2017.2019. In the uncertain event that we are unable to raise sufficient funds to execute our current business plan, or in the uncertain event that all of our debt obligations become due, we will be required to scale back our operations to prioritize immediate and necessary expenses, inshifting portions of our plan into our longer term planning intofor fiscal 2019.2021. We estimate our minimum necessary expenses for the year to be roughly $2.5 million. These necessary expenses include professional fees, wages and general and administrative expenses necessary to satisfy our public reporting requirements.

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Our business strategy involves several elements. We intend to prioritize our revenue generating efforts in 2017/182020/21 on technology licensing in the nicotine, hemp and cannabinoid sectors, with a secondary focus on our consumer food products enriched with full spectrum hemp oil. Revenues from existing licensees are anticipated to increase based on ongoing usage fees as licensees begin or ramp up products or contracted minimum requirements become due.

Our patented technology was developed to aid absorption and bioavailability of certain “payload” molecules, including cannabinoids such as cannabidiol (CBD)CBD and tetrahydrocannabinol (THC).THC. CBD is not psychoactive and may have desirable qualities, and is found in plant species such as hemp, cannabis, and Echinacea.Echinacea, is not psychoactive and may have desirable qualities. Our technology appears to improve absorption and bioavailability of CBD into human epi-intestinal cells. We are developing a line of food products fortified with full spectrum hemp oil that contains cannabinoids such as CBD, but contains less than 0.3% THC. Because of the low amounts of THC, and because the hemp oil is derived from legally importedlegal hemp, our research into the products areis legal under FederalUS federal law.

We first began selling trial amounts of ViPova™ViPova branded black tea fortified with hemp oil and utilizing our technology, in January 2015. In August 2015 weand added six newadditional flavours over time. We currently sell three flavors of tea to expand the brand’s reach.ViPova tea. Sales of these products have been modest but are expected to improve in the long term.

We also began offering our first coffee and hot chocolate also fortified with full spectrum hemp oil, and also under the ViPova™ViPova brand. Together, tea, coffee and hot chocolate comprise all our product offerings under the ViPova™ViPova brand, despite modest changes to flavors or perhaps packaging, etc. Offering a variety of self-made beverages to the consumers helps us to establish the ViPova™ViPova brand and may also help us to develop relationships with retail distributors who are less likely to place orders from manufacturers that can only offer a single product.

Generating meaningful revenue from product sales will be challenging and will rely in part on our ability to achieve widespread retail distribution access.access, which to date we have failed to achieve. We are also investigating the possibility of generating sales from international markets, in those locations where hemp oil fortified foods are permissible by law.

ViPova™

ViPova branded products are owned by our 51%-ownedwholly owned Poviva Tea LLCCorp subsidiary. As of October 2017 Lexaria acquired 100% of Poviva Tea LLC.

While the ViPova™ViPova line is focused on a “coffee house” experience, the “Lexaria Energy”Lexaria Energy line is focused on athletic performance and active lifestyle needs. The first Lexaria Energy product iswas believed to be unique or nearly so: a protein energy bar utilizing our technology to fortify it with full spectrum hemp oil. We first offered the Lexaria Energy Bar for sale in November 2015.2015, but it was since discontinued due to the complexities in locating reliable manufacturing. TurboCBDand ChrgD+ products have also been publicly released demonstrating additional product formats that benefit from our patented DehydraTECH technology’s advantages in capsules and powdered form for ready to drink beverages respectively.

Lexaria Energy, TurboCBDand ChrgD+ branded products are owned 100% by Lexaria Bioscience Corp.

A manufacturing facility was contracted to produce the Lexaria Energy bar in 2015. Recipes have evolved and at the time of this report the Company had no inventories of protein bars to be offered for sales and was negotiating for a suitable 2016/17 manufacturing facility and prices.

Our strategy wasis to encourage online sales via a dedicated website,websites, and also to encourage fitness enthusiasts to become aware of the Lexaria Energy Bars at fitness clubs and gyms, which they are likely to frequent. We did pursue traditional grocery store, convenience store, andspecialty stores, roadside store and wholesale distribution channels in 2016 with some success but limited due to our lack of an establishedchannels. To facilitate distribution, system.we have third-party fulfillment centers that process and ship orders.

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It is our intention, subject to sufficient funding being available, to provide R&D to develop additional fitness-style products in 2017 under the Lexaria Energy brand,our brands, such as protein powders for shakes or smoothies, and protein energy drinks.drinks, mouth melts, and intermediary materials that clientele can purchase as a raw material to use in making their own products. We are also pursuing other product development and expect to launch new products.

Through our product development we have communicated to the industry the versatility of our technology in specific CPG formats and we believe this strategy has been successful in assisting us in technology licensing discussions with potential new clients. We believe the range of products available and under development are sufficient to prepare for revenue growth and potentially profitable long termlong-term operations if we are able to generate sufficient consumer demand and obtain sufficiently widespread retail distribution locations.business clientele demand.

Meanwhile, our business strategy contains a second element that we believe will be more impactful to future corporate growth that involves the further development and out-licensing of our intellectual property of molecule delivery that enhances bioactivity or absorption.

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At this time we are not planning to offer for sale any products containing THC in quantities higher than 0.3%. However, we envisionare continuing to expand the number of licensees licensing our technology to companiesthat are legally state-licensed to offer THC products in the states or international jurisdictions where they do business. We also plan to license our technology to other companies for the delivery of molecules other than THC or cannabinoids.cannabinoids, such as nicotine that we have licensed to Altria Ventures Inc., an indirect wholly-owned subsidiary of Altria Group, Inc. Our October 31, 2017 announcement of the USPTO Notice of Allowance for our first patent granted and the subsequent 15 granted patents of our technology related to new molecule groups, along with our ongoing patent filing and grants, may enhance our ability to successfully pursue this initiative during fiscal 2018.2020.

We will attemptcontinue to communicate the benefits of our technology to potential licensing partners, i.e. with higher absorption levels a manufacturer could perhaps infuse smaller amounts of active molecules into a product, thus reducing their manufacturing input costs.costs, to provide higher bioavailability with the dosing limits being imposed or contemplated in many jurisdictions, to infuse beverages while masking the flavor and smell of the active molecules, and predictable delivery times. We believe thisthese to abe meaningful competitive advantageadvantages that may lead to the potential to generate licensing revenue, and will pursue these opportunities within the THC marketcannabinoids, nicotine and other bioactive molecular markets both within the USA and also internationally, in those locations where it isthey are legal and regulated by government.

We wouldwill not ourselves be sellingsell any THC products – we would only be licensinglicense technology to already-licensed participants in valid jurisdictions. We expect a low number of licensees initially and currently have onenine revenue generating agreementagreements with such a licenseelicensees and additional letters of intent and negotiations with other potential licensees. We do not sell any nicotine products and do not intend to – however our joint venture partner may elect to utilize our technology in products containing nicotine for sale to consumers in the USA or internationally.

Subject to budgetary availability, we also plan to conduct additional in vitro and in vivo studies testing the absorption of some or all of the molecules named within our patent applications – CBD, NSAIDs, Vitamins, PDE5 inhibitors and Nicotine – to substantiate the effectiveness of our invention.technology. More than simply satisfying scientific curiosity, successful tests could lead to increased awareness and acceptance of our technology as a meaningful method by which to deliver some or all of the named molecules more effectively than their current delivery methods. Therefore, absorption tests could become an important element leading towards higher rates of acceptance of our technology licensing initiatives.

We will pursue technology licensing opportunities as a method of generating highly profitable revenue streams over long periods of time. In addition, while oneeight of our patent applications hasUS patents and eight of our Australian patents have been granted byto date, we have multiple other applications filed in the USPTOUS and another patent application has generated a Notice of Allowance, our remaining patent applications have not yet been granted.around the world. It is not possible to forecast with certainty when, or if, our remaining patent pendingspatents pending will become granted patents. But if our remaining patent applications do become granted patents, our ability to generate meaningful license revenue from our intellectual property may increase in a very short period of time.

We will continue to pursue our remaining patents pending as vigorously as we are able, since the successful granting of more of those applications could lead to material increases in shareholder value. We are pursuing patent protection in more than 40 countries around the world.

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Results of Operations for our Year Ended August 31, 20172019 and August 31, 20162018

Our net loss and comprehensive loss for the year ended August 31, 2017, for the year ended August 31, 2016 and the changes between those periods for the respective items are summarized as follows:

		YEAR ENDED				YEAR ENDED
		August 31				August 31
		2019				2018				Change
Revenue		$	222,610			$	433,287			$	(210,677	)
General and administrative			4,358,130				7,017,289				(2,659,159	)
Consulting fees & Employees			1,777,934				5,332,398				(3,554,464	)
Legal and professional			670,863				289,062				381,801
Net Loss		$	(4,158,413	)		$	(6,609,186	)		$	2,450,773

Revenue

Licensing revenues of $198,000 represent the majority of the $63,639 in revenues during the year ended August 31, 2017. 2019 and reflect delays in usage fee revenues from existing licensees in Canada waiting for approval from Health Canada on products, and other licensees initiating or ramping up their production. Revenue was primarily based on new licence agreements entered into recognising the IP Territory Licensing fee, and existing licenses generating usage fees. Increasing ongoing usage fees are expected as licensees begin or ramp up products or contracted minimum requirements become due.

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Two years ago the Company had one Licensee and today we have nine Licensees. The territory fees consist of IP licensing fees for the transfer of the Technology at the signing of definitive agreements for the DehydraTECH technology. The additional Licensing fees include payments due upon transfer of the technology and installment payments that are receivable within 12 months (Note 7). We are pleased that we have signed additional licenses and are looking toward revenues increasing during fiscal 2020 with the legalization of edible products in Canada expected during October 2019 and the potential for licensee product launches early in calendar 2020 in that country. Our additional and expanded licenses in the US are anticipated to generate ongoing usage fee revenues based on contracted minimums or based on licensee sales starting during our fiscal 2020.

We have made progress in signing more corporate licensees than ever before in our corporate history, but most of these licensees are small start up companies that continue to present operational risk to us. We continue to attempt to work with larger more established companies to encourage them to adopt our technology, but the markets have been slow to adopt our technology, notwithstanding our new corporate relationship with a Fortune 500 company in the nicotine industry.

Consumer product sales revenues were lowerremain low due to ongoing challenges in securing expansive distribution opportunities, third-party production challenges, inconsistent federal vs. state or local regulations, and payment processing changes. Total licensing revenues increased as they were included on a pro-rated basis and also included additional contracted fees. Licensing revenues were recognized on a pro-rated basis overThe Company continues to pursue more widespread distribution possibilities which have the term of the licensing agreement as the Company is requiredpotential to provide additional support services during the term and is in a very early stage of this revenue cycle to identify a vendor-specific objective evidence of fair value of such services. Additional contracted fees were included as earned. As of August 31 2017 the company had received all of the pre-defined Licensing payments to August 31 2017 for a cash receipts of $50,000 of Licensing fees and $20,392 of additional fees corresponding to the areas under the license agreement where the licensee has been active to-date. unlock more significant consumer product revenues.

During the year ended August 31, 2017, $25,4172019, our revenues were derived within the following categories: $198,000 (2018 $415,183) of the $50,000 was included (2016 $7,500) on a pro-rated basis and $20,392 (2016 $NIL) of additional fees as licensing revenue for a total of $45,809 inintellectual property licensing revenue and $17,830$24,610 (2018 $18,104) in product and other revenues.

As fiscal 20172019 came to a close, hemp oil fortified foods, and hemp seed products continued gaining consumer acceptance and provide a reason to believe that sales could increase. In addition, legislative trends in America and in many nations around the world such as Canada and the UK are supportive of additional opportunities in the hemp-based foods and supplements sector. Those trends shouldcould support higher potential consumer product sales. Release of the ChrgD+ product was successful, but sales were limited due to ongoing payment processing issues outside of the Company’s control, and due to our not being successful in obtaining widespread retail distribution channels.

For 2020 the Company expects to continue to derive the majority of its revenues from technology licensing to third parties noting that IP territory fees are recognized when new definitive license agreements occur and IP usage fees are dependent upon our licensees’ opportunity to implement the technology pursuant to applicable regulatory approvals. Canadian regulatory approval for ingestible products was originally scheduled for October 17, 2019, but there are indications that actual individual product approvals required from Health Canada may delay licensee product launches into 2020 in that country. At August 31, 2015 the Company had zero technology licensing agreements entered. By August 31, 2016 we had entered several LOI’s or definitive agreements related to technology out-licensing. During the period ended August 31, 2019 we entered into nine active licensing agreements that are expected to generate additional revenue from the payment of usage fees as the licensees’ production and sales occur. It is the Company’s view its eight US patents granted and eight Australian patents granted along with its expanding patent portfolio is a positive step in enabling the generation of more significant revenues during fiscal 2020. At the time of this report the Company has entered more than 10 formal letters of intent or definitive agreements and is negotiating more.

We do not expect that all of the letters of intent into which we enter will result in definitive agreements with paying customers and cannot predict how many will. We believe that strengthening and expanding our intellectual property portfolio and conducting supportive R&D will jointly contribute to strengthening revenue prospects.

General and Administrative

Our general and administrative expenses decreased by $2,659,158 during the year ended August 31, 2019. The decrease in our general and administrative expenses was largely due to non-cash expenses related to valuation of grants for service and share-based payments required by contracts included in fiscal 2018. Increases during fiscal 2019 included expanded patent applications, R&D, IR programs and the addition of employees for a total of $1,061,125, which includes $368,115 of non-cash compensation and $58,243 increase in depreciation related to new facilities and equipment.

Interest Expense

Interest expense for the year ended August 31, 2019 was $Nil (2018 $Nil). The Company has no debt at this time other than month-to-month receivables.

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Consulting fees

Our consulting fees decreased by $3,887,663 primarily due to the non-cash payments for services included in fiscal 2018. Our executives are typically consultants and costs associated with those agreements comprise a significant portion of our consulting fees expense (Note 16).

Legal and Professional Fees

Our professional fees increased by $381,801 to $670,863 during the year primarily due to ongoing patent and trademark filings, consultations on licensing agreements, and other advisory services. Although we always try to minimize expenses, we consider increases in costs related to patent and trademark work to reflect positive progress in executing our business plan. We recognize certain legal fees, tax advice fees, and accounting services all as “Professional Fees.”

Liquidity and Financial Condition

		August 31				August 31
Working Capital		2019				2018
Current assets		$	1,818,829			$	2,284,051
Current liabilities		$	(184,507	)		$	(43,640	)
Net Working Capital		$	1,634,322			$	2,240,411

The Company’s working capital balance decrease during the year was limited due to exercises of outstanding options and warrants and the private placement (Note 13) completed during the year. The Company maintained a positive and strong working capital position throughout the year.

		August 31				August 31
Cash Flows		2019				2018
Cash flows (used in) provided by operating activities		$	(3,005,555	)		$	(2,517,979	)
Cash flows (used in) provided by investing activities		$	(769,165	)		$	(155,399	)
Cash flows (used in) provided by financing activities		$	3,332,683			$	1,867,224
Decrease in cash		$	(442,037	)		$	(806,153	)

Operating Activities

Net cash used in operating activities was $3,005,555 for the year compared with cash used in operating activities of $2,517,979 during the same period in 2018. This difference was largely due to the increased costs pertaining to consulting, advertising and promotion, patent and trademark related filings, legal advisory services, new employees, research and development, and travel.

Investing Activities

Net cash used in investing activities was $769,165 (2018 $155,399) for the year due to the Company’s cost incurred related to its patent applications $122,982 and our new office space and equipment (Note 10) $646,183.

Financing Activities

Net cash provided from financing activities was $3,332,683 during the year ended August 31, 2019 compared to net cash provided of $1,867,224 during the same period in 2018.

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Results of Operations for our Year Ended August 31, 2018 and August 31, 2017

Our net loss and comprehensive loss for the year ended August 31, 2018, for the year ended August 31, 2017 and the changes between those periods for the respective items are summarized as follows:

Revenue

Licensing revenues represent the majority of the $433,287 in revenues during the year ended August 31, 2018 and illustrate a significant gain from the previous year. Revenue increases were primarily based on new licence agreements entered into recognising the IP Territory Licensing fee and they are expected to generate future ongoing IP Usage Licensing fees.

One year ago the Company had one Licensee and today we have five Licensees. The Territory fees consist of IP licensing fees for the transfer of the Technology with the signing of definitive agreements for the DehydraTECH™ technology with: the Cannfections Group Inc. for a 7-year term for infused chocolates and candies to be developed and sold in Canada and internationally, NeutriSci International Inc. for a 2-year term for the manufacturing and sale of CBD based products, Biolog, Inc. for a 5-year term to manufacture food and beverage infused products to be sold in the United States, GP Holdings LLC for infused beverages and topical skin products for a 5-year term (subsequent to August 31, 2018 we cancelled this contract due to non-performance), Nuka Enterprises LLC for their 1906 Chocolates for 10 years renewing from their chocolate only 2 year contract to now include chocolate, candies, beverages, capsules and pills, and topical creams, and Hill Street Beverage Company for a 5-year term for infused alcohol-free beverages in Canada. The additional Licensing fees include payments due upon transfer of the Technology and installment payments that are receivable within 12 months (Note 7). We are pleased that our licensing revenues are increasing in scale and across a larger number of customers although they have not grown as quickly as anticipated.

Consumer product sales remain low due to challenges in securing expansive distribution opportunities, 3rd-party production challenges, inconsistent federal vs. state or local regulations, and payment processing changes. The Company continues to pursue more widespread distribution possibilities which have the potential to unlock more significant consumer product revenues.

During the year ended August 31, 2018, our revenues were derived within the following categories: $415,183 (2017 $45,809) (an 806% increase year over year) of licensing revenue and $18,104 (2017 $17,830) (a 1.5% increase year over year) in product and other revenues.

As fiscal 2018 came to a close, hemp oil fortified foods, and hemp seed products continued gaining consumer acceptance and provide a reason to believe that sales could increase. In addition, legislative trends in America and in many nations around the world such as Canada and the UK are supportive of additional opportunities in the hemp-based foods and supplements sector. Those trends could support higher potential consumer product sales. Release of the TurboCBD^TM product was successful but sales were limited by changes to payment processing services outside of the Company’s control. At the time of this report the Company had extinguished its supplies of certain products like protein bars and the lack of inventory was also a negative impact on consumer product sales potential.

For 20182019 the Company expects to continue to derive ever larger proportionsthe majority of its revenues from technology licensing to third parties.parties noting that IP Territory fees are recognized when new definitive license agreements occur and IP Usage fees are dependent up on licensees opportunity to implements the technology based upon regulatory approval. Canadian regulatory approval for ingestible products is anticipated within 12 months of the October 17, 2018 legalization of recreational cannabis in that country. At August 31, 2015 the Company had zero technology licensing agreements entered. By August 31, 2016 we had entered several LOI’s or definitive agreements related to technology out-licensing. During the period ended August 31, 2018 we have entered into six new licensing agreements that increased our IP licensing revenue and we expect additional revenue will be generated from the licensees utilizing the technology in their processes from the usage fees as their production and sales occur. It is the Company’s view that the December 9, 2017, grant of patent US 9839612 B2, and the grants of US 9972680 B2 and US 9974739 B2 during May 2018 and its expanding patent portfolio is a positive step in enabling the generation of more significant revenues during fiscal 2018. At the time of this report the Company has entered more than 10 formal letters of intent or definitive agreements and is negotiating more. The Company also has formed a joint venture to develop, produce, and sell a line of healthy edible cannabinoid products using our patented technology. It is the Company’s view that the October 2017 notice of allowance of its expanding patent portfolio will beis a positive step in enabling the generation of more significant revenues during 2018.2019.

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We do not expect that all of the Letters of Intent into which we enter will result in definitive agreements with paying customers and cannot predict how many will. We believe that strengthening and expanding our intellectual property portfolio and conducting supportive R&D will jointly contribute to strengthening revenue prospects.

General and Administrative

Our general and administrative expenses increased by $691,002$5,053,935 during the year ended August 31, 2017.2018. The increase in our general and administrative expenses was largely due to non-cash expenses related to valuation of grants for service and share based payments required by contracts. The total of non-cash based payments for the period was $4,446,565.

If this non-cash expense is subtracted from the total expenses increase, then our G&A expenses increased by only $607,370. Contemplating the expenses other than the non-cash related items, actual cash expenses are in line with our expected increasing R&D, patent and trademark filings, and brand awareness requirements. The increases in executing budgeted work. Examples are manywork included significant increases in R&D for execution of studies supporting our patent filings, such as the in vivo Nicotine and include additional consultants; increasingEuropean human studies, for a year on year increase of $438,679. Ongoing increases to legal feesexpenses, year on year of $152,852 for our world-wide patent and trademark filings, new product developmentas well as increases to our advertising and launch,promotions to engage our markets to generate awareness and more. However roughly two-thirds of the increase included in the G&A total is $258,406 valuation of warrants issued for services and $207,660 of share issuance for contracts and in settlement of services recognized in accounts payable regarding contractors. Significantlicensing clients, year on year $280,024. Fiscal 2019 expects to continue these increases are expected during fiscal 2018 executing the budgeted scientific testing and research and development.based on available funding.

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Interest Expense

Interest expense for the year ended August 31, 20172018 was $6,015 (2016 $2,250)$Nil (2017 $6,015). The increasedecrease was primarily due to the issuanceconversion as of aAugust 31, 2017 of the convertible debt and related payments. Asextinguishment of the year ended August 31, 2017 we eliminated our long-term loan and the convertibleloan. The Company has no debt was converted.at this time other than month-to-month receivables.

Consulting fees

Our consulting fees increased during the year ended August 31, 20172018 due to the involvement of additional consultants, including the appointmentcontract updates and non-cash payments for services of our interim CFO.$4,446,565. Our executives are typically hired and compensated as consultants and costs associated with those agreements comprise the largest majority of our consulting fees expense.expense (Note 16) and thus our Consulting Expenses category includes certain fees that might otherwise be recognized under wages and salaries.

Professional Fees

Our professional fees increased by $76,437$164,318 to $289,062 during fiscal 20172018 primarily due to increases in patent and trademark filings but were offset by some reductions dueof $152,852, with the balance primarily being increases in tax and other accounting services. Although we always try to the appointment ofminimize expenses, we consider increases in costs related to patent and trademark work to reflect positive progress in executing our interim CFO reducing financial report preparationbusiness plan. We recognize certain legal fees, from third party service providers. These efficiencies reduced outside professional fees.tax advice fees, and accounting services all as “Professional Fees.”

Liquidity and Financial Condition

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The Company’s working capital balance increaseddecrease during the year ended August 31, 2017 as2018, was limited due to the ongoing exercises of outstanding options and warrants providing significant incoming funds. The Company maintained a result of its financing activities. The warrant conversions from previous equity financings,positive and the new equity financings during fiscal 2017 resulted in a significant improvement in ourstrong working capital position of $2,626,863 compared tothroughout the year, earlier period.which is slightly weaker at year-end.

Operating Activities

Net cash used in operating activities was $1,545,909$2,514,332 for the year ended August 31, 20172018 compared with cash used in operating activities of $660,856$1,545,909 during the same period in 2016.2017. This difference was largely due to the increased costs pertaining to consulting, advertising and promotion, patent and trademark related filings, research and development, and travel.

Investing Activities

Net cash used in investing activities was $9,699 (2016 $20,102)$155,399 (2017 $9,699) for the year ended August 31, 20172018 is primarily due to the Company’s cost incurred related to its patent related applications.applications $85,399 and the purchase of the remaining 49% of Poviva LLC of $70,000.

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Financing Activities

Net cash provided from financing activities was $3,995,536$1,863,577 during the year ended August 31, 20172018 compared to net cash provided of $514,292$3,995,536 during the same period in 2016.2017. During fiscal 2017,2018, the Company closed a brokered private placementdid not pursue additional financing, instead utilizing existing funding and had significant warrant exercises. The Company also repaid its loan due to our Chief Executive Officer. We raised $1,635,242 from equity private placements $177,262 from optionongoing exercises of stock options and $2,233,032 from warrant exercises in fiscal 2017 compared to $419,292 of equity from private placements and $95,000 in debt during fiscal 2016.only.

Contractual Obligations

As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.

Going Concern

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has a net loss attributable to its common shareholders of $1,869,277$4,099,420 for the year ended August 31, 2017 (2016: $1,214,773)2019 (2018: $6,598,843) and at August 31, 20172019 had a deficit accumulated since its inception of $13,169,939 (2016: $11,300,662)$23,868,202 (2018: $19,768,782). The Company has a working capital balance of $2,703,148$1,634,322 as at August 31, 2017 (2016: $76,285)2019 (2018: $2,240,411). The Company requires additional funds to maintain its operations and developments beyond fiscal 2018.2020. Management’s plans in this regard are to raise equity and debt financing as required, but there is no certainty that such financing will be available or that it will be available at acceptable terms. The outcome of these matters cannot be predicted at this time.

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Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America.America (US GAAP). Preparing consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the aspects of our financial statements are critical to an understanding of our financial statements as more particularly described in Note 3 to our audited annual consolidated financial statements included herein.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued a new standard related to the revenue recognition. Under the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB has recently issued several amendments to the standards, including clarification on the accounting for licenses of intellectual property and identifying performance obligations.

The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The Company will apply the full retrospective approach to adopt the standard but does not anticipate that this standard will have a material impact on its consolidated financial statements.

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In July 2015, FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 requires that an entity measure inventory at the lower of cost and net realizable value. This ASU does not apply to inventory measured using last-in, first-out methodology. ASU 2015-11 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company does not expect the new standard to have a significant impact on its consolidated financial position, results of operations or cash flows.

In November 2015, the FASB issued guidance that requires companies to classify all deferred tax assets or liabilities as noncurrent on the balance sheet rather than separately disclosing deferred taxes as current and noncurrent. This standard is effective for the Company beginning on September 1, 2017 and can be applied either prospectively or retrospectively to all periods presented upon adoption. The standard is not expected to have any impact on the Company’s financial statements.

In January 2016, FASB issued a new standard to amend certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most prominent among the amendments is the requirement for changes in fair value of equity investments, with certain exceptions, to be recognized through profit or loss rather than other comprehensive income. The new standard will be effective for the Company beginning September 1, 2018. The standard is not expected to have any impact on the Company’s financial statements.

In February 2016 FASB issued ASU No. 2016-02, Leases (Topic 842) which supersedes FASB ASC Topic 840, Leases (Topic 840) and provides principles for the recognition, measurement, presentation, and disclosure of leases for both lessees and the lessors. The new standard requires the lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. The classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The standard is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance. When adopted, the Company does not expect this guidance to have a material impact on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. Under ASU 2016-09, companies will no longer record excess tax benefits and certain tax deficiencies in additional paid in capital (“APIC”). Instead, they will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement and the APIC pools will be eliminated. In addition, ASU 2016-09 eliminates the requirement that excess tax benefits be realized before companies can recognize them. ASU 2016-09 also requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity. Furthermore, ASU 2016-09 will increase the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer’s statutory income tax withholding obligation. An employer with a statutory income tax withholding obligation will now be allowed to withhold shares with the fair value up to the amount of taxes owed using the maximum statutory rate in the employee’s applicable jurisdiction(s). ASU 2016-09 requires a company to classify the cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation as a financing activity on the statement of cash flows. Under current U.S. GAAP, it is not specified how these cash flows should be classified. In addition, companies will now have to elect whether to account for forfeitures on share-based payments by (1) recognizing forfeiture awards as they occur or (2) estimating the number of awards expected to be forfeited and adjusting the estimate when it is likely to change, as in currently required. The amendments of this ASU are effective for reporting periods beginning after December 15, 2016, with early adoption permitted but all of the guidance must be adopted in the same period. The Company is currently assessing the impact the standard will have on its consolidated financial statements.

In June 2016, the FASB issued a new standard to replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss credit loss estimates. For trade and other receivables, loans and other financial instruments, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses relating to available for sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The new standard will be effective for Lexaria beginning September 1, 2020, with early adoption permitted. Application of the amendments is through a cumulative-effect adjustment to deficit as of the effective date. The Company is currently assessing the impact of the standard on its consolidated financial statements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

As

Not applicable. The Company qualifies as a “smaller reporting company”, we are“Smaller Reporting Company” and, accordingly, this Item and the related disclosure is not required to provide the information required by this Item.required.

Item 8. Financial Statements and Supplementary Data

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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 financial statementsbalance sheets of Lexaria Bioscience Corp. (the “Company”), which comprise the consolidated balance sheets as of August 31, 20172019 and 2016,2018, and the related consolidated statements of operations and comprehensive loss, changes in cash flows, and stockholders’ equity for the years ended August 31, 20172019 and 2016. 2018, 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, 2019 and 2018, and the results of its operations and its cash flows for the years ended August 31, 2019 and 2018 in conformity with accounting principles generally accepted in the United States of America.

Report on Internal Control Over Financial Reporting

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of August 31, 2019, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated November 13, 2019 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of material weaknesses.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesethe Company’s consolidated 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 audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).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. An audit includesmisstatement, whether due to error or fraud.

Our audits 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 supportingregarding the amounts and disclosures in the consolidated financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2016.

“DAVIDSON & COMPANY LLP”

Vancouver, Canada	Chartered Professional Accountants
November 13, 2019

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Directors of

Lexaria Bioscience Corp.

Opinion on Internal Control over Financial Reporting

We have audited Lexaria Bioscience Corp.’s (the “Company”) internal control over financial reporting as of August 31, 2019, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of August 31, 2019, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s consolidated balance sheet as of August 31, 2019, and the related consolidated statements of operations and comprehensive loss, cash flows, and stockholders’ equity for the year ended August 31, 2019, and the related notes and our report dated November 13, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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 effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment.

Management did not design and maintain effective controls over the following, each of which is a material weakness:

(a)     lack of adequate oversight related to the development and performance of internal controls;

(b)    lack of defined policies and procedures to collect, process and act on whistleblower complaints; and

(c)     lack of understanding and application of ASC 310 with respect to incurred losses.

These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Lexaria Bioscience Corp. as of August 31, 2017 and 2016, and the results of its operations and its cash flows for the yearsyear ended August 31, 20172019, of the Company, and 2016 in conformity with accounting principles generally accepted in the United States of America.this report does not affect our report on such financial statements.

	“DAVIDSON & COMPANY LLP”
Vancouver, Canada	Chartered Professional Accountants
November 13, 2019

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Vancouver, Canada	Chartered Professional Accountants
November 22, 2017	Table of Contents

LEXARIA BIOSCIENCE CORP.

CONSOLIDATED BALANCE SHEETS
SHEET

(Expressed in U.S. Dollars)

		August 31				August 31
		2019				2018
		(Audited)				(Audited)
ASSETS
Current
Cash and cash equivalents		$	1,285,147			$	1,727,184
Marketable Securities (Note 21)			64,214				10,151
Accounts receivable (Note 7)			273,145				265,751
Inventory (Note 8)			127,396				87,233
Prepaid expenses and deposit (Note 19)			68,927				193,732
Total Current Assets			1,818,829				2,284,051
Capital assets, net
Patent (Note 9)			265,127				146,538
Property & Equipment (Note 10)			591,263				1,237
			856,390				147,775
TOTAL ASSETS		$	2,675,219			$	2,431,826
LIABILITIES
Current
Accounts payable and accrued liabilities (Note 11)		$	136,411			$	35,785
Due to a related party (Note 16)			48,096				7,855
Total Current Liabilities			184,507				43,640
TOTAL LIABILITIES			184,507				43,640
STOCKHOLDERS' EQUITY
Share Capital (Note 13)
Authorized:
220,000,000 common voting shares with a par value of $0.001 per share Issued and outstanding: 78,787,134 common shares at August 31, 2019 and 75,533,471 common shares at August 31, 2018			78,787				75,533
Additional paid-in capital (Note 13, 14)			26,172,453				22,095,682
Accumulated Other Comprehensive Income			-				(14,247	)
Deficit			(23,868,202	)			(19,768,782	)
Equity attributable to shareholders of the Company			2,383,038				2,388,186
Non-Controlling Interest			107,674				-
Total Stockholders' Equity			2,490,712				2,388,186
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	2,675,219			$	2,431,826