UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X]

(Mark One)
☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year endedAugust 31, 20172022

[   ]

or

For the transition period from [     ][____] to [     ][____]

Commission file number000-52138

LEXARIA BIOSCIENCE CORP.

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

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

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

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

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]☒

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]☒

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]☒     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]☒      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.

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]☒

The

As of February 28, 2022, the last day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of Common Stockthe common stock held by non-affiliates of the Registrant on February 28, 2017registrant was $12,520,308approximately $21 million, based on the average of the high and low bid and askedclosing price of the Registrant’sregistrant’s shares of common stock on the OTC Bulletin Board or $0.545 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.2022.

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

69,435,198

5,950,998 common shares as of November 22, 201725, 2022.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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TABLE OF CONTENTS

TABLE OF CONTENTS

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PART I

Item 1.       Business

Cautionary Note Regarding Forward-Looking Statements

This annual reportAnnual Report on Form 10-K (“this report”) contains forward-looking statements. These statements relateas 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 relating to future events or our future financial performance.performance and are based on our present beliefs, assumptions, and information currently available to us. In some cases, youforward-looking statements can identify forward-looking statementsbe identified by terminology such as “may”, “will”, “should”, “could”, “targets”, “goal”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” and other comparable terminology or the negative of these terms or other comparable terminology. terms.

These statements are onlycontain 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, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance, achievements, or achievementsactual results to be materially different from any future results, levels of activity, performance, achievements, or achievementsresults expressed or implied by these forward-looking statements.

Although we believecontend that the expectations reflected in the forward-looking statementsherein are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, or achievements. Exceptfuture result.

Forward-looking statements in this report include statements about, among other things: the status, progress and results of our research programs; our ability to obtain regulatory approvals for, and the level of market opportunity for, our product candidates; our business plans, strategies and objectives, including plans to pursue collaboration, licensing or other similar arrangements or transactions; our expectations regarding our liquidity and performance, including our expense levels, sources of capital and ability to maintain our operations as required by applicable law, includinga going concern; the securities lawscompetitive landscape of our industry; and general market, economic and political conditions.

We caution placing undue reliance on any forward-looking statements as they speak only as of the United States,date on which such statements were made, and we do not intendassume any 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 statementsstatements.

Solely for convenience, tradenames and trademarks referred to conform these statementsin this report appear without the “®” or “TM” symbols, but those references are not intended to actual results.

Lexaria’s consolidated financial statements are statedindicate, in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” referany way, that we will not assert, to the sharesfullest extent under applicable law, our rights to these tradenames or trademarks, as applicable. All tradenames, trademarks, and service marks included or incorporated by reference in our common stock. References to “CAD$” refers to Canadian dollars.this report are the property of Lexaria Bioscience Corp.

As used in this current report, and unless otherwise indicated, the terms "we"“Lexaria” “we”, "us"“us”, "our"“our” and "our company"“Company” mean Lexaria Bioscience Corp., and/or 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,subsidiaries, unless otherwise stated.indicated.

General and Historical

PART 1

Item 1. Business

Company Overview of Our Business

The Company was formed on December 9, 2004 under

Lexaria Bioscience Corp. is a biotechnology company developing the lawsenhancement of the Statebioavailability of Nevada as an independent oila broad range of fat-soluble active molecules and gas company engaged in the exploration, developmentactive pharmaceutical ingredients (“APIs”) using our patented DehydraTECH^TM drug delivery technology. DehydraTECH combines lipophilic molecules or APIs with specific long-chain fatty acids 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 technology for improved delivery of bioactivecarrier 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 atimprove 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 OTCQB under the symbol "LXRP" and on the Canadian Securities Exchange under the symbol “LXX”.

In 2014, the Company submitted an application toway they enter the legal medical marijuana business in Canadabloodstream, increasing their effectiveness and also launched a hemp oil-based food supplement company 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 a 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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On June 26, 2015, the Company entered into a definitive agreement with Enertopia Corp. and Shaxon Enterprises Ltd. to sell 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.

The Company’s food sciences activities include the development of our proprietary nutrient infusion technologies for the production of superfoods, and the production of enhanced food products under our two consumer product brands, ViPova™ and Lexaria Energy™. The Company’s patented lipid nutrient infusion technology DehydraTECH^TM is believed to improve taste, rapidity and delivery of bioactive compounds that include cannabinoids, vitamins NSAIDs Nicotine and other molecules compared to what is possible without lipophilic enhancement technology. This can allowallowing for lower overall dosing requirements and/while promoting healthier oral ingestion methods.

DehydraTECH can be used with a wide range of active molecules encompassing fat-soluble vitamins, pain medications, hormones, PDE5 inhibitors, antivirals, nicotine and its analogs, and all cannabinoids. Our technology can be applied to a variety of therapeutic indications, including hypertension and heart disease, dementia, SARS-CoV-2/COVID-19 and HIV/AIDS. DehydraTECH can be implemented in a multitude of ingestible or higher effectiveness intopically administered product formats including foods, beverages, oral suspensions, tablets, capsules, creams, lotions, and skin patches. It is suitable for use with a variety of product formats including pharmaceuticals, nutraceuticals, over-the-counter and consumer packaged goods.

DehydraTECH is a technology incorporated into the formulation and manufacturing process of new or existing orally ingestible and topical products. The procedure involves fusing the active molecule delivery. Lexariaingredient as a delivery “payload” together with certain fatty acids and infusing the mixture into a substrate material. Using controlled dehydration synthesis, it combines the payload and fatty acids together at a molecular level. The newly combined molecules are then integrated into production of the end-product using any number of dosage formats. From foods and beverages to cosmetics and nutraceuticals, this technology extends across many product categories beyond the primary pharmaceutical focus of the Company. DehydraTECH formulations have been found to reduce the need for unwanted sweeteners or chemical masking agents used for flavor and odor blocking allowing manufacturers to create low-sugar products with fewer calories and artificial sweeteners.

The Company has causeddeveloped a variety of demonstration products since 2015 exhibiting the potential uses for DehydraTECH to be filed several patent pending applicationsboth consumers and potential licensees. These products included hot chocolate, coffee, seven flavors of teas, two flavors of protein energy bars, powder filled capsules and mix-and-serve powders. All utilized DehydraTECH for a more palatable and efficient delivery of bioactive molecules. The Company gained extensive experience from the formulation and production of these products that enables us to provide expert advice to our licensees 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 2017integration of DehydraTECH in Australia No. 2015274698), Cannabinoid Infused Food and Beverage Compositions and Methodstheir products.

Lexaria does not intend to create or produce consumer products. A part 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'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, Kelowna BC Canada V1X3M4. We have administrative functions located in Vancouver, British Columbia and Phoenix, Arizona.

Our Current Business

Our company’s business plan is currently focused onto encourage new and existing participants to license and utilize DehydraTECH to enable enhanced performance of their products. These products cross a wide range of lipophilic bioactive molecules including CBD with additional molecules of interest continually being evaluated.

Intellectual Property

DehydraTECH dates back to 2014 with two initial US provisional patent application filings made by the developmentoriginal inventors Poppy’s Teas LLC, which Lexaria acquired by way of strategic partnerships with licensees for our patented technology in exchange for up front and/or staged licensing fees over time. Secondarily and more generally, we continueexclusive, worldwide license rights to investigate national and international opportunities for development and distributionDehydraTECH via the acquisition of the Company’s enhanced functional food and supplement product offerings;controlling interest in the founding company. In 2015, Lexaria signed a license agreement with PoViva Corp. (formerly PoViva Tea LLC) granting Lexaria a 35-year non-exclusive worldwide license to investigate expansions and additions to ourunencumbered use of PoViva Tea LLC’s intellectual property portfolio; and, to search for additional opportunities in alternative health sectors.rights, including rights of resale. This includes the acquisition or development of intellectual property if and when we believe it advisable to do so. We announced issuance of our first 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 related 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.license agreement ensures 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$5,000full access 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.underlying infusion technology. 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, 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.

On October 27, 2016, the Company received approval to offer existing warrant holders an incentive to exercise warrants early. 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 and the Company issued 3,245,000 common shares and 3,245,000 warrants with a weighted average exercise price of $0.2273 to buy one additional common share of the Company, expiring May 14, 2017. Total proceeds raised from such incentive amounted to $737,500.

On November 1, 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 received $37,505 from exercise of 165,000 share purchase warrants.

On November 1, 2016, the Company issued 500,000 warrants 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 cannabinoid products using Lexaria’s patented technology and NeutriSci proprietary pterostilbene tablet formula and international distribution network. The joint venture expects to commercialize any newly created cannabinoid edible products through distribution programs and existing strategic partners. Product development is underway and a joint venture subsidiary has been formed.

On November 29, 2016, the Company announced the entry of a letter of intent for the licensing of its proprietary absorption and palatability enhancing technology to Hempco Food and Fiber Inc. (“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”) 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. Under the agreement, the Company and the NRC will both provide up to CAD$125,000 in funding 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 between 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 Australian 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 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 in US Patent No 9,474,725 specific to non-psychoactive cannabinoids. Subsequently the Company received a Certificate of Grant for a Standard Patent No. 2015274698 dated June 15 2017 with a twenty year term.

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, the Company issued 663,525 shares 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.

On August 16^th, 2017, the Company entered into 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 recognized in consulting. 150,000 warrants vest December 15^th, 2017 and 150,000 warrants vest April 15^th 2018.

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, 2017

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, the Company announced it received a Notice of Allowance from the United States Patent and Trademark Office (“USPTO”)(USPTO) granted our first patent on October 31, 2017. In 2019, the licence agreement was updated granting Lexaria an exclusive license to use DehydraTECH technology for the usea period 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 part of the proceedings 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” and a “continuation”. Important details for stockholders related to the conversion and the associated risks for the company and stockholders 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 documentending 25 years after the date of the meeting had not been specified.

Food Science and Technology

Lexaria is a Biotechnology and food science company focused on developing and out-licensing its proprietary technologylast patent granted to PoViva Corp. Since our first patent filing in 2014 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 portfolioDehydraTECH, we have increased the number of patent pending applications to more than 50 and functional food and supplement formulations.

On November 11, 2014, the Company acquired 51% of PoViva Tea LLC 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 aspectsdate have been allowed/granted 27 patents worldwide as 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 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™ -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's disease, Parkinson'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). Endocannabinoids are produced naturally in the human body while phytocannabinoids are produced in several plant species, most abundantly in the Cannabis plant.

Cannabidiol (“CBD”) is one of the major phytocannabinoid forms of cannabinoids and is not psychoactive, often contributing more than 35% of the extracts from the cannabis plant resin. Cannabidiol occurs naturally in other plant species beyond cannabis. For example, the most widely acknowledged alternative source of phytocannabinoid is in the better understood Echinacea species, in widespread use as a dietary supplement. Most phytocannabinoids 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 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.”

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, this suggests between 17.1 million and 18.7 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.

• 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.

Status of operation; 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™ 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 has filed patents pending 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; focused 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 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 our 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 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-legal 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 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.

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 at 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:

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 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 Arabic that are commonly used in beverage products today in order to facilitate similar flexibility for formulating the Company’s Technology 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 is the Company’s first patent granted and has a publish date of October 27, 2016 (June 10 2017 in Australia No. 2015274698) and protects our technology for twenty years.

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 protection

When Lexaria first began examining the legal medical cannabis market in 2013, the Company believed it could make an impact in perhaps both the Canadian and U.S. marketplaces.this filing. Our pursuit and development of our technology has expanded our potential area of impact, both geographically and by sector. Because of the applicability of our technologyDehydraTECH to markets outside ofmany market sectors across the legal cannabis sector,globe, we have taken the necessary steps to protect that intellectual property internationally.

Lexaria has patents granted or patent applications progressing in countries around the world with aggregate populations of nearly 4 billion people. We pursue international patent protection through filings under the Patent Cooperation Treaty, followed by national filings. Our global patent portfolio now stands at 27 and we have more than 50 patent applications filed in over 40 jurisdictions which are considered as having the highest commercial potential. The patents and patent applications apply to fat-soluble versions of vitamins, NSAIDs, nicotine, cannabinoids, hormones, PDE5 inhibitors, antivirals, and other molecules. Several of our patent families include intellectual property addressing the manufacturing and processing methods used to combine long-chain fatty acids with active pharmaceutical ingredients.

In addition, while ten of our US patents and nine of our Australian patents have been granted to date, we now have received granted patents in the European Union, Japan, India and Mexico, and have multiple other applications filed in the US and around the world. It is not possible to forecast with certainty when, or if, our remaining patents pending will become granted patents. 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. If our remaining patent applications do become granted patents, our ability to generate meaningful license revenue from our intellectual property may increase from multiple jurisdictions outside of the US.

Our current patent portfolio includes patent family applications or grants pertaining to Lexaria’s method of improving bioavailability and taste, and the use of DehydraTECH as a delivery platform for a wide variety of Active Pharmaceutical Ingredients (“APIs”) encompassing all cannabinoids; fat soluble vitamins; NSAIDs pain medications; and nicotine and its analogs. The Company currently has more than 50 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. We continue to investigate national and international opportunities to investigate expansions and additions to our intellectual property portfolio. Patents have been filed specifically for the use of DehydraTECH with cannabinoids for the treatment of heart disease.

Lexaria is also filing new patent applications for new discoveries that arise from the Company’s R&D programs. We will continue to seek beneficial acquisitions of intellectual property if and when we believe it is advisable to do so. Due to the inherent unpredictability of scientific discovery, it is not possible to predict if or how often such new applications might be filed or patents issued.

The substance of the patents centre on the use of DehydraTECH in a variety of products including those that are ingested or topically administered such as CBD, food, beverage, patches, creams, lotions et cetera. Patents have been filed (and granted in both Australia and the EU) specifically for the use of DehydraTECH with cannabinoids for the treatment of heart disease. The pending and granted patents also cover the manufacturing and processing methods used to combine fatty acids with active pharmaceutical ingredients. This includes heating and drying methods and use of excipients and substrates. Below we summarize Lexaria’s allowed/granted patents.

Patents granted in the year ended August 31, 2022

In fiscal 2022, the Company’s patent portfolio expanded to include three new patent families. This further protects our exclusivity in the use of DehydraTECH with nicotine and antiviral agents, in compositions that have a reduced food effect and for delivery of lipophilic active agents via transdermal or dermal delivery. These patents are as follows:

Research and Development

Lexaria incurred $1,842,675 (2021- $1,262,895) in R&D expenditures during fiscal 2022. Specific programs are in ongoing development and are prioritized relative to our financial and operational ability to undertake each research phase for specific APIs. Due to our expanding portfolio coverage, we continue to explore accelerated timetable options for testing, research and further development.

The Company regularly pursues new R&D programs that investigate potential commercial applications for the incorporation of DehydraTECH. These include, but are not limited to, ongoing programs to explore methods to integrate nano emulsification chemistry techniques together with DehydraTECH that have demonstrated positive results to date, programs to further enhance intestinal bio absorption rates with DehydraTECH, as well as ongoing programs to expand the types and breadth of product form factors into which DehydraTECH can be applied. Depending on the number of programs undertaken, R&D budgets are expected to vary significantly. It is in our best interests to remain flexible at this early stage of our R&D efforts in order to capitalize on potential novel findings from early-stage tests and thus redirect research into specific avenues that offer the most reward.

Lexaria has conducted a number of pharmacokinetic studies designed to provide potential early-stage indications of enhancing delivery characteristics of various drugs for potential future use. Our first human clinical study was published in 2019 (Advances in Therapy titled “Examination of a New Delivery Approach for Oral Cannabidiol in Healthy Subjects: A Randomized, Double-Blinded, Placebo-Controlled Pharmacokinetics Study”-see PubMed.gov website: PMID: 31512143), where we demonstrated that DehydraTECH delivered higher volumes of CBD into the human circulatory system and did so more quickly than a concentration-matched positive control. The study demonstrated a statistically significant reduction in human blood pressure (“BP”) from the DehydraTECH processed CBD, versus no statistical reduction in human blood pressure from the positive control. The results of this study significantly influenced the direction of Lexaria’s research and development of its DehydraTECH technology.

During fiscal 2022 Lexaria marked significant milestones in utilizing DehydraTECH-processed cannabidiol (“CBD”) for investigation of heart disease and hypertension; and separately, for oral nicotine delivery as a non-combusted, reduced-risk alternative to smoking. The following studies are the most recent contributors to our applied R&D programs. These studies have been entirely funded through the Company’s existing cash resources.

HYPER-H21-1

During the spring of 2021 Lexaria commenced its human clinical study HYPER-H21-1 with the intent to validate DehydraTECH-CBD’s effect on hypertension. This was a randomized, double-blind, controlled study with 24 subjects aged 45-65 and enrolled with symptoms of either pre-hypertension or mild hypertension. A single 300 mg dose of a DehydraTECH 2.0 CBD formulation was compared against a non-DehydraTECH control of matched concentration. Time series blood pressure and heart rate analyses were the primary objectives of the study. Secondary objectives included pharmacokinetic speed and rate of absorption of CBD and its main metabolites together with assessment of inflammatory markers of cardiovascular disease and nitric oxide biomarkers. The Company noted that the DehydraTECH-CBD treatment was well tolerated by the volunteers with no serious adverse events or side effects observed or reported. Early results disclosed in July 2021 noted a difference between the DehydraTECH-CBD formulation and the control arm at the 20-minute mark that was statistically significant (p=0.025).

HYPER-A21-1

Animal study HYPER-A21-1, an animal study utilized three new “DehydraTECH 2.0” formulation variations designed to enable CBD delivery performance enhancements and pharmacokinetic optimization. All three new formulations delivered improved performance when compared to both Lexaria’s original DehydraTECH 1.0 and 2.0 concentration-matched formulations, as well as to a medium chain triglyceride (“MCT”) oil based control formulation representative of standard industry practices. The study demonstrated that each of the new DehydraTECH 2.0 formulations delivered very high levels of CBD absorption into brain tissues, dwarfing the levels achieved with the MCT oil-based control formulation. The three new DehydraTECH 2.0 formulations delivered between 907%-1,737% more CBD into brain tissue than the MCT oil-based control formulation, similar to the up to 1,937% increase over the MCT oil based control formulation announced previously for Lexaria’s original DehydraTECH 2.0 formulation.

HYPER-H21-2

Dosing was completed in July of 2021 in our second human clinical study in 2021which was conducted at a European medical research hospital and designated as HYPER-H21-2. On September 7, 2021, Lexaria announced the results which evaluated 16 volunteers (8 male; 8 female) aged 45-65 who were pre or mildly hypertensive and received three separate doses of 150mg DehydraTECH 2.0 CBD versus placebo. The study concentrated on monitoring blood pressure reduction continuously over 24 hours and studying central arterial stiffness, physical activity, and sleep quality.

At selected times during the 24-hour study, volunteers with mild to moderate hypertension averaged as much as a 20 mmHg (i.e., 23%) decrease in BP relative to placebo. Over the 24-hour ambulatory monitoring period, volunteers averaged a significant reduction of 7.0% (p < 0.001) in systolic pressure with DehydraTECH-CBD relative to placebo. The study indicated that, within larger global markets, regardlessa 24 hour period, DehydraTECH 2.0 CBD provided a significant reduction of 3.5% in diastolic pressure relative to an increase in diastolic pressure from baseline. This is a substantial discovery as existing drugs for hypertension typically take several weeks before comparable blood pressure reductions are seen.

Further results from the study were announced on December 8, 2021, whereby DehydraTECH 2.0 CBD was also found to reduce arterial stiffness after only one day of dosing which could have the potential as a treatment for cardiovascular and other disease. This potentially broadens its application to treatment of cardiovascular and other disease states beyond hypertension where it has already shown promise.

HYPER-H21-3

Final results from HYPER-H21-3 illustrated DehydraTECH CBD’s ability to reduce blood pressure pursuant to a simulated pulmonary hypertension scenario. The study was successfully completed with positive safety and efficacy findings. Findings indicated a tendency (p=0.1) during 15 minutes of simulated low levels of oxygen (hypoxia) for reduced pulmonary artery systolic pressure (“PASP”) with DehydraTECH-CBD treatment versus placebo. Most notably, PASP was significantly attenuated by about 5 mmHg or 41% overall (p=0.045) in male participants specifically suggesting differences by sex in responsiveness to CBD treatment under hypoxic stress conditions.

Study HYPER-H21-3 used a placebo-controlled and double-blinded design, with administration of a single 300mg dose of a specific DehydraTECH-2.0 CBD formulation compared to placebo in a target group of sixteen enrolled volunteers (8 females and 8 males; aged 18-35 years). The study participants were subjected to a 30-minute period of rest following dosing, during which time they breathed normal room air (i.e., 21% oxygen), followed by a 40-minute period of simulated hypoxia (i.e., 12% oxygen) that was induced in order to safely simulate robust hypoxic pulmonary vasoconstriction (“HPV”) and, as a result, an acute state of pulmonary hypertension. The hypoxia state was intended to mimic conditions experienced by those traveling or walking at high altitude or by those engaging in other activities of diminished oxygen availability conducive to development of HPV. Adverse elevations in HPV also commonly occur in related hypoxemic pathologies (e.g., severe lung disease) and pulmonary hypertension. Measurements of PASP were performed via echocardiography at intervals of 15 and 30 minutes during the 40-minute hypoxic period comparing the effects of DehydraTECH-CBD to placebo.

HYPER-H21-4

HYPER-H21-4 is the most ambitious study Lexaria has ever undertaken and is enabled from the successful outcomes from our other 2021 human hypertension studies. This study was intended to “de-risk” outcomes prior to Lexaria’s planned entry into formal investigational new drug (“IND”) regulatory pathways for the use of DehydraTECH-CBD to treat hypertension and possibly other forms of cardiovascular disease. The study protocols were approved by the Independent Review Board in December 2021 with the program commencing in April 2022 and dosing completion in July 2022. The primary efficacy outcome from the study was the data related to 24-hour ambulatory blood pressure. Secondary study outcomes included: vascular health including arterial stiffness and autonomic balance; electrocardiogram analysis; brain structure and function through magnetic resonance imaging (MRI) testing; blood biomarkers (including renal, hepatic inflammation, lipids such as cholesterol); sleep quality / daytime sleepiness / sleep disorders; actigraphy, geriatric depression scale, perceived stress, and Beck anxiety inventory.

The study consisted of 66 volunteers between the ages of 40-70 and used a double blinded, randomized cross-over design, which utilized a placebo control. Some volunteers were recruited who were using hypertension drugs such as ACE inhibitors, with or without diuretics, to help evaluate the efficacy of DehydraTECH CBD with and without other hypertension treatments..

Large quantities of data have been gathered since the inception of the study with data analyses beginning in September 2022 as results became available from ongoing bioanalyses of biological samples collected during the study. Each of these sets of data may lead to additional applications for DehydraTECH-CBD. For example, the MRI data may assist one of the secondary outcome measurements in the study to evaluate possible positive effects upon brain structure and function; and the detailed psychometric testing may reveal new insights into the potential benefits for mental health. The wide range of data collection could provide additional insights into the long-term health benefits of DehydraTECH-CBD that might otherwise remain undetected.

In December of 2021 the Independent Review Board approval was received and the program began in April 2022 with dosing with DehydraTECH-CBD completed in July 2022. In October 2022 Lexaria announced initial findings from HYPER-H21-4 evidencing a sustained drop in blood pressure (BP) in normally active hypertensive patients following multiple weeks of oral CBD therapy, using Lexaria’s patented DehydraTECH-CBD capsule formulation. The primary safety and efficacy objectives of study were successfully achieved. BP was significantly reduced by 2.5 weeks and was sustained over the full 5-weeks of dosing using relatively low doses of CBD (as compared to other regulator approved pharmaceutical CBD applications) as a direct result of the well-established drug delivery efficiencies of Lexaria’s DehydraTECH technology. These reductions in BP were achieved with zero serious adverse events being reported. Also, there were no adverse changes observed in liver enzymes which is an important clinical safety biomarker of oral CBD therapy. Of note, these significant decreases in BP were achieved using relatively low doses of DehydraTECH-CBD as a direct result of the well-established drug delivery efficiencies of Lexaria’s DehydraTECH technology.

There were no serious adverse events to reported as a result of the program dosing. This demonstrates a noteworthy safety and tolerability profile relative to conventional anti-hypertensive medications. This is a major achievement for Lexaria as avoiding serious adverse events at clinically efficacious doses will be a primary requirement to achieve eventual regulatory marketing authorizations.

Another important discovery from study HYPER-H21-4 was that the decreases in BP were similar in persons currently being treated with standard of care BP medications as in persons who were not undergoing any current standard of care BP treatment. This observation is suggestive that Lexaria’s DehydraTECH-CBD has the potential to offer additive BP reduction benefits on top of any degree of improvements the standard of care medications achieved for those patients before entry into the study. This additive improvement as an adjunct therapy, together with the exceptional safety profile of DehydraTECH-CBD, could become a significant value enhancer should it eventually enter the marketplace as an approved hypertension treatment. As expected, the study produced an enormous amount of data that is initially supportive of Lexaria’s plans to enter regulatory pathways under IND with a view to eventual regulatory approval to use DehydraTECH-CBD to treat hypertension if successful. Additional study endpoint analyses as described in the complete study protocol are ongoing and any relevant material findings will be reported upon in due course as these findings become available.

Cannabidiol: EPIL-A21-1

In March 2022, Lexaria commenced an initial animal study to determine if DehydraTECH-CBD evidences superior treatment of seizure activity when compared to Epidiolex. Epidiolex is an FDA-approved oral solution prescription CBD available to children 1 year of age and older to treat seizures associated with Lennox-Gastaut syndrome, Dravet syndrome or tuberous sclerosis complex. In September 2019, Epidiolex was approved for use in all 27 member countries of the European Union. Epidiolex was developed by GW Pharmaceuticals plc and is now sold by Jazz Pharmaceuticals subsequent to their 2021 takeover of GW Pharmaceuticals. Epidiolex’s effectiveness was studied in three randomized clinical trials involving a total of 516 patients and was shown to be effective in reducing the frequency of seizures when compared to placebo.

Lexaria’s animal study is being conducted by a leading US-based independent laboratory using advanced DehydraTECH 2.0 formulations and is fully funded through existing Lexaria resources. Lexaria hopes to demonstrate similar or superior levels of efficacy based on the known advanced drug delivery capabilities of DehydraTECH. Lexaria’s seizure program expects to leverage the significant gains in systemic delivery and brain uptake that the Company has evidenced from other studies comparing DehydraTECH 2.0 CBD formulations with concentration-matched controls.

THC-A21-1

In the first quarter of 2022, Lexaria announced the results from its tetrahydrocannabinol (“THC”) animal study which compared DehydraTECH-enhanced THC with concentration matched controls. We discovered that DehydraTECH-enhanced THC delivery into the blood plasma occurred within 15 minutes of oral ingestion as compared to parallel levels of THC delivery into blood plasma occurring at 45 minutes for the concentration matched controls. Furthermore, DehydraTECH-THC delivered more THC into the bloodstream than the industry standard medium chain triglyceride (“MCT” or “coconut oil”) based control formulation from the 2-minute mark onwards, then dropped to the same level as the MCT control by the 6-hour mark.

Estradiol: HOR-A22-1

Lexaria began a tolerability and PK pilot study in animals using a DehydraTECH-estrogen composition in an effort to determine if absorption enhancement following oral administration was possible. After commencing this study work, our third-party laboratory performing the study concluded that the bioanalytical methodology employed required modification in order to adequately detect and quantify estrogen analytes in the animal bloodstream. Methodological optimization is in progress, following which blood plasma samples will be analysed and results reported.

Ibuprofen and Naproxen: NSAID-A21-1

The Company commenced a tolerability pilot study in animals evaluating DehydraTECH-processed formulations of ibuprofen and naproxen in an effort to determine if dosing evidenced superior gastrointestinal tolerability comparing Lexaria’s DehydraTECH test articles to concentration-matched controls. The study was undertaken based on the possibility that DehydraTECH-processed NSAIDs might achieve higher bioavailability and brain uptake than conventional formulations and, in turn, be able to be used at lower dosage levels in order to lower unwanted side effects. Our results saw some indications of less stomach ulcerations with our DehydraTECH formulations although the findings were generally unremarkable. As a result, no further research on NSAIDs is currently contemplated although this may be revisited.

Sildenafil: PDE5-A21-1

PDE5-A21-1 was an animal PK study conducted by third-party laboratories to evaluate DehydraTECH processing of the phosphodiesterase inhibitor (“PDE5 inhibitor”) sildenafil for potential application in the management of erectile dysfunction. PDE5 inhibitor drugs work using a process of vasodilation and most are considered to be slow-acting, requiring 1-2 hours to reach peak levels in the bloodstream for maximum effectiveness.

Lexaria announced the results of our comparison study in February 2022 of DehydraTECH enhanced sildenafil with concentration matched controls. It was discovered that DehydraTECH-enhanced sildenafil delivered 74% more sildenafil into the bloodstream in as little as four minutes when compared to the concentration-matched, generic control formulation. This clear trend toward faster and higher overall delivery of sildenafil into the bloodstream was evidenced over the course of the study. Seven minutes after dosing, the DehydraTECH-sildenafil formulation achieved an average blood level higher than the generic sildenafil control formulation reached at any point during the study.

Viral-A20-3

In July of 2021, we released the positive results of our completed tolerability and pharmacokinetic animal study VIRAL-A20-3 which enhanced colchicine with DehydraTECH. This study was performed by an independent, premier animal testing laboratory located in the United States using 20 Sprague-Dawley rats, dosed via oral gavage using either DehydraTECH or control colchicine formulations (i.e. 10 rats per test article). The study evaluated peak concentration (“Maximum Concentration” or “Cmax”) and total drug delivery into the rodent bloodstream (“Area Under the Curve” or “AUClast”).

Similar to other antiviral agents that Lexaria has processed with DehydraTECH (e.g., darunavir, efavirenz, remdesivir’s nucleoside analogue GS-441524 and ebastine), oral colchicine in its available forms today exhibits diminished bioavailability (approximately 45%) in humans. This study demonstrated that DehydraTECH enabled colchicine, benefited from our proprietary formulation and processing, resulting in increased delivery.

Colchicine is an approved therapeutic with anti-inflammatory effects that is principally used to treat gout and conditions such as cardiac inflammation (i.e., pericarditis), and also has potent effects in mitigating the cytokine storm associated with SARS-CoV-2/COVID-19. Colchicine is occasionally recommended and used to treat emergent pericarditis in children in cases where this form of cardiac inflammation develops following administration of mRNA COVID-19 vaccines. Due to its narrow therapeutic index, meaning the distinction between toxic and non-toxic doses is marginal, there could be significant benefits in dosage reduction through the use of DehydraTECH, while maintaining therapeutic delivery levels.

Diabetes: DIAB-A22-1

DIAB-A22-1, is a 56-day animal program undertaken by a third-party testing laboratory located in Canada to explore the ability of DehydraTECH-CBD to potentially affect treatment of diabetes. The laboratory work is expected to complete in the second quarter of calendar 2023 with data and reporting to follow thereafter. Lexaria is exploring the use of DehydraTECH-CBD for the treatment of diabetes due to its evidenced the safety and efficacy of DehydraTECH-CBD in human hypertension studies and the strong connections between heart disease, hypertension, and diabetes. Diabetes is a disease whereby the body does not produce sufficient insulin, leading to higher-than-normal levels of sugars in the blood. Risks of kidney disease, vision loss, heart and cardiovascular disease and more are greatly enhanced by sufferers of diabetes. Because diabetes is often closely connected to obesity, it is a chronic and growing problem around much of the world.

Dementia: DEM-A22-1

Lexaria has evidenced the efficacy of DehydraTECH-CBD in human hypertension studies with no serious side effects. The connections between hypertension and dementia have been established in recent clinical studies. Individuals who have high blood pressure are more likely to develop vascular dementia, which is the second most common form of dementia following Alzheimer’s disease. Dementia is a term describing the loss over time of cognitive abilities related to memory, language, problem solving abilities and behaviour. Certain trials are underway to investigate the use of nicotine for possible utility related to dementia, where some clinical success has already been reported. Others have conducted research evidencing therapeutic potential of cannabinoids including CBD in a variety of neurodegenerative diseases. Alzheimer’s is the most common form of dementia and accounts for at least 60% of all cases, and nicotine is showing promising results related to its treatment. According to the World Health Organization, 55 million people are currently suffering from dementia with roughly 10 million additional people being diagnosed each year, with 78 million expected to be living with some form of dementia by 2030. Drugs used to treat dementia represented a $15.5 billion market in 2021, expected to double to a $32.3 billion annual market by 2030, in part due to the generally aging populations.

Lexaria has previously demonstrated in animal studies that DehydraTECH-CBD crosses the blood brain barrier (“BBB”) much more effectively than originally thought possible. Given the propensity of DehydraTECH-CBD to cross the BBB; the established fact that DehydraTECH-CBD lowers human blood pressure; and the fact that CBD is known to act with vasodilation properties, we intend to investigate whether they lie withinDehydraTECH-CBD might have some positive effect on dementia. This efficacy animal study, DEM-A22-1 will evaluate if DehydraTECH-CBD may potentially have therapeutic utility against dementia. The laboratory work is expected to complete in second quarter of 2023. Depending on the medical cannabis sectoroutcomes, Lexaria is considering additional studies that might utilize either DehydraTECH-processed nicotine alone or in other unrelated sectors.combination with CBD.

Additional molecules

NICOTINE.Rheumatic Diseases: RHEUM-A22-1

Lexaria is considering an animal study to investigate the ability of DehydraTECH-CBD to potentially affect treatment of rheumatoid disease. Rheumatic diseases are autoimmune and inflammatory diseases that cause the immune system to attack joints, bones, muscles and organs. There are over 100 rheumatic diseases including Fibromyalgia, Lupus, Osteoarthritis and Rheumatoid Arthritis. The Rheumatoid Arthritis therapeutics market alone is expected to be over $30 billion per year by 2025. Lexaria has yet to commence study RHEUM-A22-1 as we are in the process of evaluating potential third-party service providers and suitable animal models to do so.

Nicotine: NIC-A21-1.

The results of our investigative work on the pharmacokinetic performance of DehydraTECH 2.0 nicotine formulations, specifically via the oral buccal/sublingual route of administration, were released in October 2021. We reported our Study NIC-A21-1 conducted in male beagle dogs, which demonstrated that DehydraTECH nicotine administered via the oral pouch product format required only 2 to 4 minutes to deliver nicotine levels in blood plasma comparable to levels achieved at 45 minutes with concentration-matched controls. DehydraTECH-nicotine also reached statistically significant peak blood plasma levels up to 10-fold higher overall than controls (p=0.004) while still clearing from blood virtually as quickly as the controls. Two nicotine formats were investigated in this study: nicotine benzoate and nicotine polacrilex. We found that the generic nicotine benzoate pouch required approximately 45 minutes to reach its peak delivery rate whereas the DehydraTECH nicotine benzoate pouch reached peak delivery rates at both 8 minutes and again at 30 minutes. It was found that 4 minutes after the pouch was placed in the mouth, the DehydraTECH-nicotine had reached a higher delivery level than the generic achieved at any point during the study. Similarly, the generic nicotine polacrilex pouch also required approximately 45 minutes to reach its very subdued peak delivery rate while the DehydraTECH nicotine polacrilex pouch achieved a comparable level in just 2 minutes. The DehydraTECH nicotine polacrilex pouch delivered over 10 times the nicotine level in blood plasma at peak than the generic version while still clearing from blood virtually as quickly as the controls.

Nicotine: NIC-H22-1

In November of 2022 we received independent review board approval for human clinical nicotine study NIC-H22-1, a 36-person human PK randomized, double blinded, cross-over study conducted in current cigarette smokers, wherein each person will visit the laboratory to be dosed three times over a period of weeks. During each visit only one oral nicotine pouch will be administered and evaluated: either DehydraTECH-nicotine; On!™ brand manufactured by Altria; or Zyn™ brand manufactured by Swedish Match™. Predetermined questionnaires for subjective evaluation will be used for each oral nicotine pouch, and blood samples will be taken 8 times per visit to conduct objective evaluations related to quantity of nicotine in blood at various time points. Data on vital signs such as temperature, blood pressure, heart and respiratory rate will also be collected. Subjective evaluations related to throat burn, user experience, gastrointestinal experience will also be conducted. Lexaria hopes to evidence that processing purified nicotine with DehydraTECH leads to better oral-tissue absorption and reduced negative experiences compared to currently marketed brands. The study had earlier faced certain time extensions due to manufacturing and logistics, those issues since resolved. The study is fully funded from internal company resources. Lexaria will provide further updates and any relevant material findings in due course.

Business Development

Hypertension

Approximately 1.28 billion people worldwide suffer from hypertension - elevated blood pressure - and is recognized as one of the world’s top health problems. Only 21% of people with hypertension have it under control which demonstrates enormous unmet need. Among persons 50 years of age or older, isolated systolic hypertension is the most common form of hypertension, and systolic blood pressure becomes more important than diastolic blood pressure as an independent risk predictor for coronary events, stroke, heart failure, and end-stage renal disease.

Drugs focused on blood pressure and related conditions are some of the best selling drugs in the world. Lipitor™, used to treat high cholesterol and reduce the risk of heart disease, has generated $94.7 billion in revenue from 1992 until 2017. Plavix™ is used to prevent heart attack and stroke, has sold $46.5 billion from 1992 until 2017. There are several hypertension drugs that each generate $1 billion per year or more in revenue. Hypertension valued at $28 billion per year is one subset of the broader cardiovascular disease category, which is expected to be a $146 billion market in 2022.

Lexaria is determined to fill the need for a safe, effective, tolerable treatment for hypertension and have a meaningful impact on comorbidity-related costs and deaths with our DehydraTECH-CBD. In pre-clinical and exploratory studies conducted to-date, Lexaria has evaluated through in vivo, in vitro, and human clinical testing the repeatedly evidenced efficacy in utilizing DehydraTECH-CBD to reduce blood pressure while avoiding serious negative adverse effects. Efficacy and lack of negative side effects are two major objectives of FDA-registered clinical studies. With the continued favorable results from our 2021-2022 HYPER programs, we have begun the Investigational New Drug “(IND”) application process. Lexaria has retained the services of a regulatory affairs and quality assurance consultancy group that assisted us with the preparation of our pre-IND meeting with the FDA. They are now assisting us with our protocol finalization and IND filing.

On June 6, 2022, we successfully filed a pre-IND meeting request with the U.S. Food and Drug Administration (“FDA”). The FDA has responded to and confirmed Lexaria’s filing and requested a pre-IND meeting, which formally initiates communications with the FDA regarding development of Lexaria’s DehydraTECH-CBD for the treatment of hypertension. The purpose of the pre-IND meeting is to confirm the details and acceptability of Lexaria’s ongoing IND-enabling development program to be completed thereafter prior to proceeding with its full IND application filing.

On August 10, 2022, the FDA sent a positive written response from its pre-IND meeting regarding DehydraTECH-CBD for the treatment of hypertension. The FDA confirmed that it has agreed with Lexaria’s proposal to pursue a 505(b)(2) new drug application (“NDA”) regulatory pathway for our program. This is advantageous because this abbreviated pathway, as it is often described, typically enables a quicker route to commercial approval than a traditional 505(b)(1) NDA pathway. Within this communication the FDA agreed that additional non-clinical studies are not required prior to initiation of the DehydraTECH-CBD IND program, given the compelling data presented by Lexaria and others regarding the safety and tolerability of CBD. This supports Lexaria’s belief that our recent human clinical study program would support our pursuit of eventual FDA registrations.

Lexaria’s new IND-enabling program is made possible through successfully completed studies that have provided support for more ambitious commercial goals. Recently achieved successful results from two human clinical pharmacodynamic hypertension studies and a 2018 human clinical pharmacokinetic (“PK”) study, along with a number of successful animal studies demonstrating PK performance and the molecular characterization work completed through Canada’s National Research Council, have together established a strong body of evidence for Lexaria’s DehydraTECH-CBD. These studies have shown that DehydraTECH-CBD demonstrates superior bio absorption upon oral administration and is effective at reducing blood pressure with no significant unwanted side effects.

Subject to budgetary constraints, Lexaria plans to continue with in vitro and in vivo studies testing the absorption of many API’s – CBD, vitamins, PDE5 inhibitors, antiviral drugs, nicotine, and others – to substantiate the effectiveness of DehydraTECH. More than simply satisfying scientific curiosity, successful tests are expected to lead to increased awareness and acceptance of our technology as a meaningful effective alternative to current delivery methods. Therefore, absorption tests could increasingly become an important element leading towards higher rates of acceptance of our technology licensing initiatives.

Nicotine

More than 99% of all nicotine that is consumed worldwide is delivered through smoking cigarettes. Approximately 6,000,000Worldwide, approximately 6m deaths per year worldwide, are attributed primarily to the delivery of nicotine through the act of smokingsmoking. This is according to the Centers for Disease Control and Prevention, which also estimates that over $170 billion$170b per year is spent just in the USAU.S. on direct medical care costs for adult smokers. 69%Lexaria hopes to see the reduction of U.S. adultcommon but less healthy nicotine administration methods by way of enabling development of safe and effective oral nicotine dosage formats.

The oral nicotine pouch category is one of the fastest growing segments of the nicotine industry due in part to its reduced risk health outcomes as noted by the FDA. This delivery method, in the white pouch format specifically, involves absorption primarily through the buccal tissues of the mouth, of purified nicotine that has been separated from most other harmful compounds in the tobacco leaf. which avoids harmful lung outcomes experienced by 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 $722or vapers, The global market for the oral nicotine pouch category was US$2.33 billion in 2013,2020 and is expected to reach $21.84 billion in 2027.

DehydraTECH-Nicotine Research

Lexaria has previously completed ingestible nicotine in vivo (animal) absorption study work. In a 2018 we conducted a study designed to assess the relative ingestible nicotine absorption performance of DehydraTECH-powered formulations when compared to concentration-matched control formulations in rats. DehydraTECH formulations delivered some 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 5.7 trillion cigarettes soldthe course of the study, lower quantities of key liver metabolites in the bloodstream than controls as hypothesized, suggesting bypass of first pass liver metabolism.

The DehydraTECH 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, 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 DehydraTECH formulation reached in only 15 minutes. Furthermore, the DehydraTECH 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 DehydraTECH could prove more effective in elevating blood nicotine levels through edible formats much more quickly and substantially than 1 billion smokers.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.

RELEVANCE: Lexaria postulates

Analysis of the liver metabolites revealed that overall levels in the blood of two of the three metabolites studied were higher in the control group than in the DehydraTECH formulation group at the 10 mg/Kg dose. The study also revealed that the DehydraTECH 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 DehydraTECH formulation which may also be beneficial in humans to control cravings over an extended time-period from a single edible nicotine dose.

Following the above study, additional results were reported in August 2018 by way of a follow-up third-party in vivo study including two groups of 20 animals. This study further demonstrated 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 mostedible form at each of the adverse health outcomes2, 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 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. Nicotineonset is a named molecule inkey attribute for oral drug administration, and it is of particular importance for the latest Lexaria patent applications.

NSAID. Non-steroidal Anti-inflammatories are the second-largest categoryconsideration 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. 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.

non-inhalation nicotine delivery formats. Some of the most commonly known NSAIDs are ASA (Aspirin), Ibuprofen (Advil, Motrin),highlights of this study were: 79% improvement in peak blood levels; 94% improvement in total quantity of nicotine delivered to the blood during the 60-minute course of the study and; Lexaria’s technology delivered nicotine into the blood stream by the first time interval of blood sampling at the 2-minute mark.

Nicotine Patent

With the grant during the year ended August 31, 2022, of our Australian patent for nicotine, Lexaria believes that further potential patent awards would serve to support significant competitive advantages in the nicotine white pouch category, as well as other oral nicotine product formats such as pills, tablets, lozenges, capsules, gums and Acetaminophen (Tylenol). (Acetaminophen is not accepted by all personssprays. A similar patent filing has been made in the USA. As Lexaria demonstrates the benefits of DehydraTECH enabled oral nicotine pouches as an alternative to be an NSAID.) Although NSAIDs are generallysmoking cigarettes as a safe and effective treatmentdelivery method for pain, they have been associatednicotine, we anticipate the possibilities of engaging in licensing arrangements with a numbermajor tobacco companies. Given the rapid progress Lexaria is making towards development of gastrointestinal problems including dyspepsiaoral nicotine products, the intellectual property protection afforded by this patent and gastric bleeding.other similar patent applications, could be meaningful towards building stakeholder value.

RELEVANCE: Lexaria postulates that delivery

Nicotine Collaborations

In April 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. 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^nd and 3^rd 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 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.

Scientific testing and validation

On August 24, 2015,2022 the Company announced potential industry-changing achievementsnew agreements with Altria Client Services, LLC (“Altria”) in enhanced gastro-intestinal absorptioneffect until March 31, 2023. Under the terms of cannabidiol (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. These results exceed Company expectations. This was assessed inthese agreements, Lexaria will receive a strictly controlled, in vitro experiment using a human intestinal tissue model. Samples of Lexaria’s commercially available CBD-fortified 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.

The tests also showed 325% of baseline gastro-intestinal permeability of CBD comparing Lexaria’s CBD-fortified 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. 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 foundfee to provide beneficial pain relieving, anti-inflammatory, anti-anxiety, neuroprotection, anti-psychotic, and anti-convulsive effects among others. Lexaria’scertain DehydraTECH^TM 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 laboratory tests, is applicable to THC, powder-based 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, with the expectation that it would provide additional evidence of the efficient absorption of cannabidiol 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) bioabsorption in response to ingestion of Lexaria's products. This provided clinical support for the CBD bioavailability enhancing properties of Lexaria's patented DehydraTECH^TM 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™ food products resulted in elevated levels of nitric oxide within the body. The results of the study indicated that all 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 beverage products generally had faster initial responses in as little as 15 minutes after product ingestion, whereas the initial responses from the protein-energy bars required 30 minutes. The faster response time with the beverage products wasformulations 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™ tea (Yunan Black, Herbal Cherry Black, Earl Grey, Herbal Bengal Chai, Herbal Masala Chai and Decaf English Breakfast), ViPova™ Columbian Supremo Coffee, 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, 2016, Lexaria signed a distribution agreement with Telluride Coffee Roasters, LLC. This agreement has since ended and will not be renewed due to inactivity.

Technology out-licensing

On May 14, 2016,evaluated by Altria. In 2019, the Company entered into a Licensing Agreement allowingdefinitive agreement with Altria to fund the Licensee,R&D of DehydraTECH technology as it relates to nicotine. In exchange for a two-year period,minority equity interest (16.67%) in our subsidiary Lexaria Nicotine LLC, Altria was to utilizefund up to $12m for Lexaria Nicotine to conduct milestone-based clinical investigations utilizing DehydraTECH. Altria did not exercise its First Warrant Tranche to invest a further staged payment into Lexaria Nicotine and that warrant therefore expired on October 8, 2020 along with Altria’s former exclusive access to DehydraTECH for nicotine in the Company’sUS market.

Licencing

The Company began out-licensing our technology in the US in 2018 for the use of DehydraTECH for vitamins and food and beverages infused with cannabinoids in concentrations greater than 0.3% THC. In 2019 we granted US licences for DehydraTECH enabled CBD products and also entered into a definitive agreement in the US for licencing DehydraTECH. In December of 2020, Lexaria sold our non-pharmaceutical THC-related assets held within our wholly owned subsidiary Lexaria CanPharm ULC to create, test, manufacture, andHill Street Beverage Company Ltd. As a part of the sale agreement, the Company transferred our THC licence contracts for manufacturers that sell, marijuana-infused consumable and/or topicalintend to sell, THC infused products in the stateUS and Canada.

In January of Colorado,2021 the global rights to DehydraTECH technology to make non-pharmaceutical products that contain over 0.3% THC and other psychoactive cannabinoids was sold to Hill Street Beverages Company Inc. Lexaria has retained the rights to use DehydraTECH with an optionTHC and other cannabinoids for pharmaceutical purposes. Lexaria’s investigation of extendingenhanced delivery characteristics of THC utilizing DehydraTECH technology is now focused on medical applications. Our study findings have demonstrated rapid delivery, increased overall THC delivery, and higher brain tissue delivery; all of which is consistent with the termswants and needs of medicinal THC customers.

During the last fiscal quarter of 2022, Premier Wellness Science Co. Ltd., (“Premier”) of Japan agreed to purchase the rights to DehydraTECH technology for the Japanese non-pharmaceutical market for use with CBD and hemp ingredients in oral liquid and non-liquid products, as well as for topical, hair-care, lip-care and cosmetics products. Exclusive rights are subject to two previously issued licenses for use of DehydraTECH in Japan, which remain valid. Lexaria will not be issuing any further licenses in Japan for non-pharmaceutical cannabinoid products.

In order to retain ongoing exclusivity, the negotiated minimum quarterly payments to Lexaria begin September 1, 2022 and during the first five years of the Licensing Agreementagreement amount to Washington, Oregon, and California. a minimum of $4.5m. The license for the Japanese market is perpetual assuming that Premier submits all required payments.

In addition to the granting ofminimum payments, Lexaria will also receive royalty revenue from DehydraTECH licensed product sales under 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 Agreementagreed terms. Total revenue is the first contracted, predictable, and significant revenue streamanticipated to be achieved as a direct resultsignificantly greater than the minimum payments if Premier is capable of Lexaria’s technological advantage inmeeting its forecasted revenue targets. If Premier achieves even their worst-case projected penetration into the marketplace. Under the terms of the Licensing Agreement, the Licensee will pay a minimum of $122,000 in pre-defined staged payments to Lexaria over the initial two-year term. As per the Licensing Agreement, if the Licensee were to introduce certain product lines utilizing Lexaria’s technology in each of the four states contemplated,Japanese non-pharmaceutical CBD market, then based on their projections Lexaria could expect to receive a maximumannual payments of $1,064,000 over approximately 3.5 years,$5 million by the fifth year of the contract.

Following rigorous product development and the Licensee would enjoy semi-exclusivityformula optimization Premier is expected to introduce its productsthe “Ko” brand containing Lexaria’s DehydraTECH delivery technology in each of those states. As of August 31 20172023. The product line focuses on the company had received all of the pre-defined payments to August 31 2017 for a total receipt of $70,000 corresponding to the areas under the license agreement where the licensee has been active to-date.

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The continuation of our business interests in these sectors is dependent upon obtaining further financing, a successful programs of development,endocannabinoid system 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 sufficientcircadian rhythm to support the health and wellness. It will contain CBD and other botanical extracts. Premier will create its own e-commerce infrastructure and digital marketing campaigns in collaboration with its parent company, Premier Anti-Aging Co., Ltd. Originally founded in 2009, Premier Anti-Aging Co. it is a large distributor and logistics supplier for cosmetics, OTC pharmaceuticals and nutraceuticals to wholesalers and retailers. It has shipped more than 3.5 billion products in its most recent fiscal year comprised of over 50,000 products distributed to over 50,000 retail stores.

Lexaria, on June 8, 2022, awarded AnodGen Bioceutical of Ireland a five-year, non-exclusive DehydraTECH license from its wholly-owned subsidiary, Lexaria Pharmaceutical Corp. The license is valid within Europe including the UK, Australia and New Zealand, for pharmaceutical and medical product applications incorporating DehydraTECH-infused psychoactive cannabinoid powders and medical product applications incorporating DehydraTECH-infused non-psychoactive cannabinoid powders. AnodGen will pay royalty fees to Lexaria for all cannabinoid powders sold that utilize the DehydraTECH technology. AnodGen has the right to manufacture and sell these DehydraTECH-infused powders to third party companies for their own products that are designated by a national regulator as a medical product, drug, nutraceutical, pharmaceutical or biopharmaceutical, as applicable, under its cannabinoid product license rights. Consumer products purchased without physician or medical professional consultation are not permitted under the terms of this License. AnodGen is expected to have their new facility in Ireland fully operational in 2023

On June 21, 2022, the Company until potentialentered into two agreements with BevNology LLC. The first agreement is a manufacturing operating agreement that expands production capabilities for Lexaria’s own growing list of business-to-business (“B2B”) clientele interested in purchasing DehydraTECH-powered active ingredients for consumer packaged-goods. A new processing facility custom-built by BevNology increases and broadens their production capacity and is now serving Lexaria’s B2B clients. Lexaria has installed specialized DehydraTECH manufacturing equipment into the new facility as it prepares for future profitabilitygrowth in its B2B ingredient processing business.

The second agreement is reached. Therea commercial license agreement that empowers BevNology to offer DehydraTECH products with active ingredients derived from hemp, including CBD under BevNology and partnered brands. For powdered DehydraTECH formulations this agreement is non-exclusive. For liquid DehydraTECH formulations, where BevNology has specialized skills and capabilities, the license is non-exclusive in most areas of the world but includes limited exclusivity rights in the United States only that require certain minimum fee payments in order to maintain those rights. Lexaria will receive royalties from BevNology as a result of their utilization of this license. The only countries specifically excluded under this license are no assurancesJapan, the Republic of Korea, and the People’s Republic of China.

On September 16, 2021, Lexaria Hemp entered into a 10-year license with GlobalCanna Inc. for the non-exclusive use of DehydraTECH in multiple CBD infused products in Canada. Pursuant to the terms of the agreement, GlobalCanna is required to pay minimum quarterly fees beginning in the quarter ended November 30, 2022.

Competition

The biopharmaceutical industry is characterized by intense competition and rapid innovation. We believe the key competitive factors that we will be able to obtain further funds required for our long-term operations.affect the development and commercial success of any DehydraTECH enhanced product candidates are efficacy, safety, tolerability, reliability, convenience of use, price, and reimbursement. We do not expect to require additional operating capital during our fiscal 2018 year.face competition from segments of the pharmaceutical, biotechnology and other related markets that pursue the development of API delivery platforms. We anticipate facing intense and increasing competition as new more advanced API delivery technologies become available. 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 weour competitors are not able to obtaincurrently developing, or will not in the additional financing on a timely basis, we will be unable to conductfuture develop, technology that is equally or more effective or is more economically attractive than any of our operations as planned, and we will notcurrent or any enhanced versions of DehydraTECH.

Our competitors may be able to meetdevelop other drug delivery platforms that are able to achieve similar or better results than DehydraTECH. Our competitors include major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, universities, and other research institutions. Many of our competitors have substantially greater financial, technical, and other longer-term obligationsresources, such as larger research and development staff and experienced marketing and manufacturing organizations and well-established sales forces. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel therapeutics or to in-license novel therapeutics that could make DehydraTECH-enabled product candidates obsolete. Smaller or early-stage companies may also prove to be significant competitors, particularly as they become due. In such event, we could be forceddevelop novel approaches to scale downoral or perhapstopical drug delivery that DehydraTECH is focused on.

Mergers and acquisitions in the biotechnology and pharmaceutical industries result in even ceasegreater concentration of resources and capital in our operations. Therecompetitors. Our competitors, either alone or with collaborative partners, may succeed in developing, acquiring, or licensing API delivery technologies that are more effective, safer, more easily commercialized or less costly than DehydraTECH.

Competition in alternative health sectors and consumer products in the U.S. is uncertainty as to whether we can obtain additional long-term financing if we do in fact require it.

Our business plan does not anticipate that we will hire a large number of employees or that we will require extensive office space.fierce. We expect to encounter competitive threats from existing and new participants in the sector with competing technologies. Food supplements, organic foods, and health food markets are all well established and the Company and/or its licensees will face many challenges within these markets. 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. Lexaria is aware of other competing technologies that claim to also enhance the bio absorption of bioactive molecules as DehydraTECH has repeatedly demonstrated through in vitroand in vivo scientific testing. By and large, these technologies are mostly forms of nanotechnology that generally claim to enable the formation of microencapsulated microemulsions of active ingredients. These technologies can enable exceptional water solubility of ingredients and can impart improved intestinal bio absorption as a result, but do not necessarily offer the breadth of performance and value enhancing benefits that Lexaria’s DehydraTECH technology offers to its licensees.

Competition in nicotine, alternative nicotine delivery and nicotine cessation sectors in the U.S. 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 DehydraTECH 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 that DehydraTECH 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 format, we may be able to utilize contracted third parties for most of our production and distribution needs, instead focusing on our capital on higher value added aspects of the business such as research and development, and scientific testing. We have no current plans to build our own production facility.offer a competitively successful new product format that utilizes DehydraTECH.

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

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 any fast 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 withinproviding technology to the cannabinoid delivery sector, there are already reportsa large number of more than 300 public companies that have claimed to be involved in the sector in some fashion;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 and nicotine sector where it iswe are 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 and the pain relief sectorsector.

Lexaria believes DehydraTECH 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 an oral product and beverage formulation perspective, more predictable time of delivery into bloodstream and certain target tissues, and superior scalability and cost effectiveness from a manufacturing perspective. Lexaria believes that DehydraTECH is significantly distinguished from competing technologies in these respects and has a view of growing the nicotine products sector.

Competition in alternative health sectorsbreadth and in consumer productsnumber of licensees who will adopt DehydraTECH into their product offerings. Lexaria believes that these competitive advantages together with our wealth of scientific data showing noteworthy bio absorption enhancements with DehydraTECH constitute a compelling value proposition for its prospective licensees. We intend to continue to pursue license arrangements in the USA is fierce. We expect to encounter competitive threats from existing participantsmultiple 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 States

More than thirty-nine states in the USAU.S. have passed some form of legislation related to that state’s permission to grow, cultivate, sell, or use marijuana eitherand/or CBD for medical purposes or for recreational or “adult use” purposes; or both. The various state legislationuse. Legislation is not necessarily harmonious with one another, leading to potential conflicts between state laws. Itstates and in most circumstances, it is most often not legal to transport cannabis-related products across state lines.

Lexaria does not “touch the plant”legally conducts R&D on cannabis ingredients in any location within or outside of the USA. The Company compliesour Canadian federally licensed laboratory in compliance with all federal and local Canadian laws. We abide by U.S. federal law that provides for certain exemptions for agricultural (industrial) hemp and certain byproductsby-products to be manufactured and sold in the US. TheU.S. DehydraTECH^TM technology may have applications within the legal marijuana sector and Lexaria may seek is only licensed to license that technology tothose companies that have met and comply with state regulations for the sale orand distribution of cannabis related products in any particular jurisdiction.their licensed operating territories.

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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 application has applications in completely separate sectors such as vitamins, non-steroidal anti-inflammatories,CBD for applications under pursuit for medical applications registered with the FDA, and nicotine. We have no products nor operationsare continuing formulation development for research and validation purposes in anyeach of these sectors today.areas. We have a formal relationship with the Altria Group and have conducted R&D with that company related to the possible development of nicotine oral products. If we do enter any of these sectors, at any time, we willmay be exposed to and of necessity willmay 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.Company.

Our Former Planned Medical Marijuana Production Operations

On June 7, 2013The U.S. Farm Bill, passed in December 2018, and the Government of Canada implemented then-new legislation, the 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 for a commercial industry 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.

On June 26, 2015, we entered into a share purchase agreement with Shaxon Enterprises Ltd. and Enertopia Corp. to sell our 49% interest in our Burlington, Ontario medical marijuana project application, including the MMPR application (no. 10MMPR0610) for our proposed production facility. The Burlington MMPR license application has continued 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. 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 estimateambiguity regarding the grantincorporation of a production license for the Burlington facilityCBD into ingested and at this time believe it may be unlikely to be awarded.

Since June 12, 2015 the Companytopical products has had no direct involvement or ownership interest in any active or prospective operations or permit applications undersignificant impacts on the MMPR.industry segments that we operate in. This could potentially change some of the regulatory compliance risks that may affect our business. The Company has no plans at this time to applybill includes lifting restrictions on advertising, marketing, banking, and other financial services as well as allowing interstate commerce for a license in any jurisdiction for the production or sale of legal medical marijuana.

Market for Medical Marijuana in Canada

hemp and hemp-derived CBD. It is estimated by Health Canada thatalso facilitating the overall marketremoval of barriers 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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The Use of Marijuana for Medical Purposes (source Cantech Letter: Canada’s Medical Marijuana Industry: A Top Down Look)

The marijuana or cannabis plant, aka cannabis sativa, contains more than 80 cannabinoids, a group of chemical compounds which includes delta 9-tetrahydrocannabinol (THC) and cannabidiol (CBD). Research has shown that THC and CBD influence different regions of the central nervous system and have different effects on cannabis users [Borgwardt, Biol Psychiatry, 2008]. Most of the psychoactive effects associated with the use of cannabis are caused by THC, whereas CBD has been shown to have anti-anxiety, anti-nausea, anti-inflammatory, and anti-psychotic effects [Bergamaschi, Curr Drug Saf., 2011; Niesink, Front Psychiatry, 2013]. Cannabis smoking often leads to adverse effects such as increases and fluctuations in heart rate and blood pressure, euphoria, anxiety, and impairment of cognition and memory. Cannabis also contains a similar array of detrimental and carcinogenic compounds compared to cigarette smoke, some of which are present even at higher concentrations [Leung, J Am Board Fam Med, 2011].

Medical marijuana is used and has been tested in a variety of indications. In the last ten years, there have been estimated 300 individually registered trials used cannabis, THC, or CBD as the intervention. Excluding addiction, the indication that accounted for the majority (42%) of trials, medical marijuana has been tested in a wide range of indications to help patients cope with pain not only from disease itself, but also for relief from strong and sometimes toxic medication, such as chemotherapy. Neurological disorders, mental health, muscle and back problems, and inflammation (such as gastrointestinal disorders) are common indications under study.

Current Status of our Previous Medical Marijuana Business

Following the announcement of the MMPR in June, 2013, our management began identifying and evaluating opportunities for entry into the medical marijuana industry in Canada. We do not currently have any direct involvement in marijuana related activities in the United States or Canada.

Enertopia Joint Venture

On May 28, 2014, our company and Enertopia Corp. entered into a definitive agreement to develop a joint business for the production, manufacture, propagation, import/export, testing, research and development of marijuana in the Province of Ontario under the MMPR.

On June 26, 2015, we signed a Definitive agreement to sell our interest in the Burlington joint venture along with 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. These monies would be split 51% to Enertopia and 49% to Lexaria. The Enertopia and Lexaria Master Joint Venture Agreement entered into on March 5, 2014 still governs the relationship between the Company and Enertopia. Notwithstanding the foregoing, we can neither guarantee nor provide a meaningful time estimate regarding the grant of a production license for the Burlington facility. There is no assurance that any monies will in fact ever be received from our sale of the license application.

Marijuana Production in the United States

In the United States it is still illegalintellectual 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 effects the Bill may have on other regulatory bodies and their regulations will require ongoing monitoring to grow, cultivatedetermine the timing and sell medical or adult use marijuana. However more than twenty-five states have approved medical marijuana for useoutcome of any revisions.

Employees and at least eight states have approved adult use regulations. The United States Federal government justice department has released memos that will respect the individual states where strict guidelines are followed and enforced so that the health, safety and security are protected at all times by state authorities but there is no assurance that federal laws will not at any time be more vigorously enforced. If the individual state framework fails to protect the public the Federal government will act in enforcing the controlled substances act of 1970 and the DEA will enforce the federal law.Contractors

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As at the date of this document, our company has not entered into any prospective or definitive arrangements to produce or distribute marijuana products in the United States and has no intention of engaging in such marijuana related activities in the United States. However, our company continually reviews opportunities and monitors legal and regulatory developments related the medical marijuana sector in both Canada and the United States. We anticipate that we may re-evaluate our participation in the United States medical marijuana sector in the event that medical marijuana production becomes federally sanctioned and, in the meantime, we plan to limit our foray into the marijuana industry to ancillary involvement based on out-licensing of our DehydraTECH^TM technology to state licensed producers.

On November 8 2016 referendums held in various US states increased those areas in the USA where either medical or recreational use marijuana was state-legal. More than 50% of the US population now lives in a state where either medical or recreational marijuana use is permitted by state law, although it is still banned by US federal laws.

Contractors

The Company primarily uses sub-contractorsutilize employees and consultants infor the Company’s intellectual property development and licensing and alternative health product sectors. It primarily engages with consultantsbusiness operations. Our Company relies on the business and technical 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 serveidentify and evaluate business opportunities. We currently have seven full time salaried employees under contract and may add personnel to expand our internal R&D capacity. None of our employees are represented by a labor union and we consider our employee relations to be good. We outsource virtually all analytical work to independent third-party laboratories located in the USA, Canada, and Europe.

Our executive needs.personnel are entitled to incentives as set by our Compensation Committee. All executives, directors, employees and select contractors are eligible for participation in the Company’s equity incentive plan, the primary purpose of which is to attract, retain and motivate our team members by granting stock-based compensation awards.

On November 27, 2008,

Subsidiaries

Lexaria Bioscience Corp. has the Company entered into a consulting agreement with CAB Financial Services Ltd. (“CAB")following wholly owned by Christopher Bunka for $8,000 per month plus applicable taxes. Effective December 1, 2014,subsidiaries; Lexaria CanPharm ULC, Lexaria CanPharm Holding Corp., PoViva Corp., Lexaria Hemp Corp., Kelowna Management Services Corp. and Lexaria Pharmaceutical Corp., and our majority owned (83.333^.%) subsidiary Lexaria Nicotine LLC. Altria Ventures Inc. owns a 16.667% equity interest along with certain other rights in Lexaria Nicotine LLC.

Available Information

Lexaria’s common stock is quoted on the Company updatedNasdaq under the consulting agreement for consulting servicessymbol “LEXX” and warrants are quoted under LEXXW. We file annual, quarterly, and current reports, proxy statements and other information with the U.S. Securities Exchange Commission (the “SEC”). These filings are available to the public on the internet at the SEC’s website at http://www.sec.gov. Lexaria Bioscience Corp. is a British Columbia based reporting issuer in Canada and as such, we are required to file certain information and documents at www.sedar.com

Our corporate website is 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 $10,000 a month plus applicable taxes.

On December 1 2016this Report. We make available free of charge on https://www.lexariabioscience.com/investors/regulatory-filings/ our annual, quarterly, and current reports, and amendments to those reports if any, as soon as reasonably practical after we electronically file such material with, or furnish it to, the Company entered into a new consulting agreement for consulting services of $12,000 a month plus applicable taxes with CAB, superseding the prior agreement. The term of the agreement is two years but can be terminated by either party by providing two months notice. The CompanySEC. Further details on our research programs are provided in our 2020 and 2021 Form 10-K filings. We may, pay Mr. Bunka a bonus from time to time, at its sole discretion. Mr. Bunka will be entitledprovide important disclosures to receive common stock-based and stock option based bonuses upon achieving certain milestones during the time of his consultancy with the Company. These milestones are during the first 12 months after the date of the agreement with CAB,:

Revenue Incentive Milestones (Revenue Incentives “A”)

• Upon the Company achieving non-refundable revenues of $200,000 to any single customer in any consecutive 60-day period, CAB would be entitled to an award of 100,000 restricted common shares of the Company and after the first 12-month period, expiring after 24 months of the amended agreement, upon the Company achieving non-refundable revenues of $200,000 to any single customer in any consecutive 60-day period, CAB would be entitled to an award of 50,000 restricted common shares of the Company. These awards are limited to one payment per customer during the 24-month period but payable for each customer that meets the revenue thresholds.
• Upon the Company achieving non-refundable revenues of $500,000 in any fiscal quarter would result in an award to CAB of 200,000 common shares of the Company and after the first 12 months, expiring 24 months after the amended agreement, the Company achieving non-refundable revenues of $500,000 in any fiscal quarter would result in an award to CAB of 100,000 common shares of the Company. These awards are limited to one payment per fiscal quarter.

Intellectual Property Milestones (IP Incentives “B”)

• During the term of the agreement, for each provisional patent application substantively devisedinvestors by CAB and successfully created, written and filed with the US Patent Office for the Company’s Technology, CAB will be entitled to an award of 250,000 restricted common shares of the Company.

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On December 1, 2014, the Company updated its consulting agreement for consulting services of CAD$7,500 a month plus applicable taxes (from CAD$5,500 plus applicable taxes) with BKB Management Ltd a consulting company controlled by Lexaria’s former Chief Financial Officer, Bal Bhullar. Ms. Bhullar resigned as the Company’s chief financial officer effective April 29, 2016.

On December 23, 2014, the Company entered into an Executive Management consulting agreement with Mr. Tom Ihrke for consulting services of $3,000 a month. Mr. Ihrke subsequently tendered his resignation on March 8, 2016.

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., a wholly owned company by Mr. Allan Spissinger, with monthly compensation of CAD$8,000 superseding the previously CAD$3,400 plus hourly billing for additional work and applicable taxes. 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. Mr. Spissinger will be entitled to receive additional common stock-based and stock option based bonuses upon achieving certain milestones during the time of his consultancy with the Company. These milestones are during the first 12 months after the date of the agreement with M&E Services Ltd.:

• Revenue Incentives “A” as defined above.

The Company appointed Mr. John Docherty as President of Lexaria effective April 15, 2015. On March 1, 2017, the Company executed a twenty four month consulting contract with Docherty Management Limited, solely owned by Mr. John Docherty with monthly compensation of CAD$15,000 plus applicable taxes, superseding the previous agreement with monthly compensation of CAD$12,500 plus applicable taxes. The Company may pay Mr. Docherty a bonus from time to time, at its sole discretion. Pursuant to the previous agreement, Mr. Docherty received 800,000 stock options and 924,000 restricted common shares of the Company. Mr. Docherty will be entitled to receive additional common stock-based and stock option based bonuses upon achieving certain milestones during the time of his consultancy with the Company. These milestones are during the first 12 months after the date of the agreement with Docherty Management Ltd.:

• Revenue Incentives “A” as defined above.
• IP Incentives “B” as defined above.

On June 19th, 2017, the Company executed a contract with Alex Blanchard Capital as manager for investor relations and 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 1st – 3rd anniversaries of the contract provided that the contract is not terminated. Mr. Blanchard will be entitled to receive additional common stock-based and stock option based bonuses upon achieving certain milestones during the time of his consultancy with the Company. These milestones are during the first 12 months after the date of the agreement with Alex Blanchard Capital:

• Revenue Incentives “A” as defined above.

We do not expect any material changesposting them in the number of contractors over the next 12 month period although individual personnel changes and fluctuations should always be expected. We do and will continue to outsource contract employment as needed. However, with product advancement or retail acceptanceInvestor Relations section of our new products, we may need to retain additional contractors particularly in the fields of product manufacturing, development, sales and distribution. It is not possible to accurately project potential needs into the future based on circumstances that may or may not occur.website.

Research and Development

Lexaria incurred $54,185 (2016 $9,024) in research and development expenditures over the last fiscal year. With the successful financing efforts during fiscal 2017, the Company announced a $1 million budget to conduct research and development and additional scientific testing. Specific R&D programs are in development at this time and will be tightly related to our financial ability to undertake such steps. Due to the notice of allowance in October 2017 significantly expanding the Company’s portfolio coverage, Lexaria is examining accelerated timetable options for testing, research and development.

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The Company’s plans includein vitro absorption testsaddress of our patented technology of molecules such as: Vitamin E, Ibuprofen,principal executive office and Nicotine.research laboratory is #100–740 McCurdy Road, Kelowna, British Columbia, Canada V1X 2P7. We also plan to conductmaintain our first everin vivo absorption tests on CBDregistered agent’s office and on nicotine, all during the upcoming fiscal year.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.

Depending on how many of these tests are undertaken, it could require budgets of as much as $1,000,000, or as little as $65,000, to do so. It is in our best interests to remain flexible at this early stage of our R&D efforts in order to capitalize on potential novel findings from early-stage tests and thus re-direct research into specific avenues that offer the most reward.

Subsidiaries

Lexaria has one wholly owned subsidiary, Lexaria CanPharm Corp., a Canadian corporation. We also have a 51%-owned subsidiary Poviva Tea, LLC which was incorporated on December 12, 2014, under the laws of the State of Nevada. As of October 2017 Poviva Tea, LLC is a 100% owned subsidiary. We also have a 50%-owned subsidiary Ambarii Trade Corporation that was incorporated on April 24, 2017 under the laws of the Province of British Columbia.

Item 1A. Risk Factors

Much

Lexaria operates in the intensely competitive biotechnology industry and is subject to numerous risks. Investment in this sector involves a high degree of risk. You should carefully consider the risks described below as well as other information in this report. The occurrence of any of the information includedevents, circumstances or developments described below could materially and adversely effect our business, financial conditions, results of operations and our future prospects. Our actual results could differ from those in this quarterly report includes or is based upon estimates, projections or other "forward looking statements". Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.

Risks Associated with Our Business

Because cannabis is a controlled substance in some regulatory jurisdictions our Licensee’s operations may be subject to regulatory actions.

Lexaria and its subsidiaries are not involved directly or indirectly in the cultivation, processing, distribution, or utilization of Cannabis or Cannabis derived components. All of Lexaria’s consumer products utilize legally sourced Hemp and Hemp components in their production. Lexaria has an ancillary involvement exposure via out-licensing of its patented technology to licensees that may utilize the technology in the production of products that contain contents which are locally or state approved but federally controlled. Where licensee’s products contain controlled contents any revenue streams from such licensee’s may be interrupted by regulatory involvement in their business. It is possible some jurisdictions may even interpret Lexaria’s ancillary involvement as in contravention with regulations.

Lexaria has no knowledge of any non-compliance by its licensees with the regulatory framework(s) in which its licensee(s) operate.

Because there is no assurance that we will generate material revenues, we face a high risk of business failure.

There can be no assurance that our current or future products will be successful, and we cannot be sure that our overall business model within any particular sector will ever come to fruition, and if they do, will not decline over time. We may not recover all or any portion of our capital investment in product development, marketing, or other aspects of the business. Although we will exercise due consideration in our development of new products, and the marketing of them, ultimate consumer acceptance of these products is not reliably forecastable.

In addition, our product development plans may be curtailed, delayed or cancelled as a result of numerous factors including the risks described below. 

A. Risks Associated with our Business and Industry

DehydraTECH-enabled pharmaceutical products may not successfully proceed to commercialization.

The advancement of DehydraTECH-enabled products will be subject to successful completion of multi-phase testing under significant regulatory requirements and testing protocols, such as those required by the US Food and Drug Administration (FDA) and comparable foreign regulators. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of adequate capitalefficacy or adverse safety profiles, notwithstanding promising results in earlier studies. It is possible we could face similar setbacks. The effects of such reversions could cause significant delays or abandonment of testing with negative effect to our business through financial loss, industry credibility and/or a temporary or permanent decline in valuation of our Company.

If we are unable to retain and other factors, such as weather, compliancehire qualified personnel, we may not be able to implement our business plan successfully.

In developing DehydraTECH, we rely upon our employees, consultants, contractors, and collaborators. Our current business prospects are dependent on the principal members of our executive team, the loss of whose services could make it difficult for us to manage our business successfully and to achieve our business objectives. The loss of the services of any key research, product development, regulatory and technical personnel, or our inability to hire new personnel with governmental regulations, currentthe requisite skills, could restrict our ability to carry out our R&D programs and/or develop our product candidates. Each position in a small company carries relatively greater duties and forecasted pricesresponsibilities than that position would in a larger organization. The loss of any of our key personnel could result in severe disruptions to our operations and business plans. Our ability to identify, attract, integrate, and retain additional qualified key personnel is critical to our success. Competition for input costs of foodskilled research, product development, regulatory and technical personnel is intense, and we may not be able to recruit and retain the personnel we need.

We face substantial competition, which may result in others discovering, developing and/or commercializing technology or products similar to ours before or more successfully than us.

Our commercial and/or licensing opportunities may be reduced or potentially eliminated if our competitors develop and changescommercialize products utilizing a similar technology that compete directly with those incorporating DehydraTECH. Significant delays in the estimatesdevelopment of costsour product candidates could allow competitors to completebring products to market before us which may impair the projects. We will continueability to gather information aboutcommercialize our plannedproduct candidates. This could result in reduced sales and negative pricing pressure on our technology lessening our ability to increase or even sustain revenues and causing deterioration of market prospects.

Our competitors could also develop drugs that are more effective, more widely used and less expensive than our technology supports. They may also be more successful in manufacturing and marketing their products. Competitors could acquire regulatory approval of their products and it is possible that additional information may causebefore we are able to obtain patent protection or other intellectual property rights, limiting our companyability to alterlicense our schedule respective patents and/or determine thatdevelop or commercialize a product should not be pursued at all. You should understand thatcandidate. These appreciable advantages could render our plans regarding our products are subject to change.product candidates non-competitive or obsolete before we can recover the expenses of research, development, and commercialization.

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Our revenues now are generated from being a food sciencescompetition includes pharmaceutical and products company. We should be considered to be a start-up: the revenue recognized for the year ended August 31, 2017 was $63,639.

The food industry is highly competitivebiotechnology companies, educational institutions, and there is no assurance that we will be successful in developing or successfully selling products.

The food industry is intensely competitive. We compete with numerous individuals and companies, including many food manufacturing and production companies, whichresearch foundations. They may have substantially greater technical, financialcapital resources, research and operational resourcesdevelopment workforce and staff. Accordingly, there is a high degree of competition for desirable distribution channels, “shelf space”facilities and salespeople in both the food industries as well as the legal cannabis industries. We cannot predict if the necessary funds can be raised to assist in our development of any distribution channels thatsuperior marketing experience than Lexaria. They may be helpfulable to respond more rapidly to new regulations and/or devote greater resources to the development and promotion of their business model. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, and in acquiring technologies and technology licenses competitive to our programs or of potential use to our business.

Early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors and could increase their ability to generate sales and potential profits.rapidly gain market share.

There can be no assurance that we will develop any product that will meet with widespread consumer acceptance.

Both new and established food and cannabis products fail to generate consumer interest onAs a regular basis. There is no assurance that a food or cannabis product that is successfully adopted by consumers at one time; will still be in demand at a future time. If we cannot develop and sell products in commercial quantities, our business will fail.

Even if we develop food or intellectual property-based products or revenue streams, the potential profitability of each depends upon factors beyond the control of our company.

The potential profitability of food products and of intellectual property revenue streams is dependent upon many factors beyond our control. For instance, prices and markets for food products are unpredictable, highly volatile, potentially subject to controls or any combination or other factors, and respond to changes in domestic, international, political, social and economic environments. These changes and events may materially affect our future financial performance. These factors cannot be accurately predicted and the combinationresult of these factors, may resultmanagement cannot be certain that the Company will be able to compete against current or future competitors or that competitive pressure will not seriously harm our business.

Any failure in our company not receiving an adequate return on invested capital.

In addition, a product or technology that is initially successful and possibly even profitable may not remain so due to changes in consumer demand, regulatory environments, or other causes. There is no assurance that an initially successful product or technology will remain so.

Our failure to protectprotecting our intellectual property may have a materialnegative impact adverse effect on our ability to develop and commercialize our productslicence DehydraTECH.

Because patents involve complex legal and factual questions, the issuance, scope, validity, and enforceability of patents cannot be predicted with certainty.

Some of our patent pending applications maywill not be granted as patents. Even if patents are issued, they may not be issuedgranted with claims of sufficient breadth to protect our nutrient infusionDehydraTECH technology or may not provide us with a competitive advantage against competitors with similarover other products or technologies. Issued patents may be challenged, invalidated, or circumvented. If patents issued to usthey are invalidated or found to be unenforceable, we could lose the ability to exclude others from making, using, or selling the inventions claimed. Moreover, anAn issued patent does not give us the automatic right to use the patented technology or commercialize a product using the technology. Third parties may have blocking patents that could be used to prevent us from developing our products, selling our products, or commercializing our nutrient infusionDehydraTECH technology. Others may also independently develop products or technologies similar to those that we have developed or may reverse engineer or discover our trade secrets through proper means.

Enforcing

Technological R&D in the bioscience industry involves a claim that a third party infringes on, has illegally obtainedlengthy, expensive process with an uncertain outcome. We may incur additional costs or is using an intellectual property right, is expensiveexperience delays in completing, or ultimately be unable to complete our studies or trials.

We could encounter numerous unintended and time-consuming andunforeseen events including but not limited to the outcome is unpredictable. In addition, enforcing such a claim could divert management’s attention fromfollowing:

Our R&D costs will increase with delays in testing and/or regulatory approvals. We do not know whether any of our business. If any intellectual property rights wereprojected studies or trials will begin as planned, will need to be infringed, disclosed to,restructured once commenced, or independently developed by a competitor, our competitive position could be harmed. Any adverse outcome of such litigation or settlement of such dispute could subject us to significant liabilities and could put one or more of our patent pending applications at risk of being invalidated.

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Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is risk that some of our confidential information could be compromised. This disclosure could provide our competitors with access to our proprietary information and may harm our competitive position.

The marketability of food products will be affected by numerous factors beyondcompleted on schedule, or at all. Any delays in our control which may result in us not receiving an adequate return on invested capital to be profitable or viable.

The marketabilitydevelopment programs could significantly impact our share value, business prospects, financial condition, and results of food products will be affected by numerous factors beyond our control. These factors include market fluctuations in consumer preferences for various food items based on factors such as pricing, macro trends for certain ingredients or flavors, ruling by regulators on health issues associated with certain foods, and more. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on invested capital to be profitable or viable.

Both food products and cannabis products are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excess of those anticipated causing an adverse effect on our company.

Food production and safety operations, and cannabis products and sales operations, are subject to federal, state, and local laws relating to the protection of human health and safety. Food production and cannabis operations are each also subject to federal, state, and local laws and regulations which seek to maintain health and safety standards through a wide variety of regulations. Various permits from government bodies may be required by us in order to conduct our business. Regulations and standards imposed by federal, provincial, or local authorities may be changed at any moment in time and any such changes may have material adverse effects on our activities. Changes in regulations are impossible to foresee and could be disruptive or destructive to our business plans and execution. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for contaminants or other damages. To date, we have not been required to spend any material amount on compliance with environmental regulations. However, we may be required to do so in the future and this may affect our ability to expand or maintain our operations.

If we are unable to hireobtain and retain key personnel, wemaintain sufficient patent protection, or if the scope of the patent protection is not sufficiently broad, our competitors could develop technology similar to ours.

We may not be able to implementeffectively enforce our business plan.

Our success is largely dependent on our ability to hire highly qualified personnel. This is particularly true in those parts of our business that are related to intellectual property generation or exploitation. These individuals are in high demand and we may not be able to attractrights throughout the personnel we need. In addition, we may not be able to afford the high salaries and fees demanded by qualified personnel, or may lose such employees after they are hired. Failure to hire key personnel when needed, or on acceptable terms, would have a significant negative effect on our business.

We are not the "operator" of vertically integrated food production facilities, and so we are exposed to the risks of our third-party operators.

We rely on the expertise of contracted third-parties for their judgment, experience and advice related to the manufacturing and/or packaging of our food products. We can give no assurance that these third party operators or consultants will always act in our best interests, and we are exposed as a third party to their operations and actions and advice in those operations and activities in which we are contractually bound.

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Our management has limited experience and training in the food processing and manufacturing industries, and in the cannabis products industries, and could make uninformed decisions that negatively impact our operations and our company.

Because our management has limited experience and training in the food processing and manufacturing industry, and in the cannabis products industry, we may not have sufficient expertise to make informed best practices decisions regarding our operations. It is possible that, due to our limited knowledge, we might elect to undergo manufacturing processes and incur financial burdens that a more experienced food manufacturing team might elect not to complete.world. Our ability to internally evaluate foodprotect and cannabis operations and opportunities couldenforce our intellectual property rights may be less thorough than thatadversely affected by unforeseen changes in foreign intellectual property laws. Patent laws of a more highly trained management team.

Our independent certified public accounting firm, in the notessome foreign countries do not provide protection to the audited financial statementssame extent as the laws of the United States. These factors could make it difficult for us to stop the year ended August 31, 2016 states that there is ainfringement of our patents or the misappropriation of our intellectual property rights. Legal actions to enforce our patent rights in foreign jurisdictions could result in substantial doubtcosts and divert our efforts and resources from other aspects of our business. We cannot ensure that we will be able to continue as a going concern.initiate or maintain legal efforts in all jurisdictions which could limit the markets for our technology and reduce possible future revenues.

We are dependent on the services of third parties and unsatisfactory performance will negatively affect our Company.

We have experienced significant losses since inception. Failurerely on third parties to arrange adequate financing on acceptable termsconduct, supervise, and monitor our R&D programs. Third-party service providers are not our employees, and except for remedies available to achieve profitability would have an adverse effect onus under contract, we cannot control whether or not they devote sufficient time, skill, and resources to our financial position,programs. We remain responsible for ensuring that each of our programs are conducted in accordance with the applicable protocol, legal, regulatory and scientific standards.

If third parties do not successfully carry out their contractual duties in meeting expected deadlines or not conducting our R&D programs or preclinical studies as prescribed, if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our protocols, regulatory requirements or for other reasons, we or our collaborators may be subject to regulatory enforcement or other legal actions.

Resultant data generated in our preclinical programs may be deemed unreliable and our studies and trials may need to be repeated, extended, delayed, or terminated. We may be delayed in or unable to obtain marketing approvals for our product candidates or to successfully commercialize our product candidates. As a result, our results of operations cash flows and prospects. As a result of the financings completed during the year ended August 31 2017, management believes it has sufficient funds to meet its obligations as they become duecommercial prospects for the next twelve months.

The possession, cultivationour product candidates would be harmed, our costs could increase and distribution of marijuana may under certain circumstances lead to prosecution under United States federal law, which may cause our business to fail.

All applicable Regulations, in the United Sates, over 20 states, including our state of incorporation, Nevada, have approved and regulate medical marijuana use. Similarly, four states have approved and regulate non-medical marijuana use by adults. However, it remains illegal under United States federal law to grow, cultivate or sell marijuana for any purpose. In that regard, the United States Justice Department has released the COLE Memorandum of 8-29-13 which states that the Justice Department will not prioritize the prosecution of marijuana related activities authorized under state laws provided that state authorities implement and enforce strict guidelines to ensure the health, safety and security of the public. Where the individual state framework fails to protect the public, the Justice Department has instructed federal prosecutors to enforce the Controlled Substances Act of 1970. The Department of Justice has not, to our knowledge, published any policy or guidance specifically regarding the participation of a United States corporation in lawful medical marijuana related activities outside of the United States.

We do not currently, nor at any time in our corporate history have we ever cultivated, grown, processed, manufactured or sold marijuana in any location. Although we believe this fact to provide protection against prosecution related to marijuana legislation, we cannot provide any assurance to that effect. We do not hold a license in any jurisdiction enabling us to grow or sell marijuana or cannabis related edibles, but because of our business model we do not feel that is a barrier to entry for us. Instead, we plan to license our technology related to bio-absorption of THC, to those entities that do have valid licenses in various North American jurisdictions to sell cannabis related edibles. If we are unable to license our technology to any valid license holders, then we may be shut out of this market.

Our company has no operating history and an evolving business model, which raises doubt about our ability to achieve profitability or obtain financing.generate revenues could be delayed.

Our company has no significant history of operations in

We also rely on third party suppliers and manufacturers to provide us with the legal medical marijuana sector, the legal hemp oil infused products sector, or in the food products sector. Moreover,facilities, materials, and services to manufacture our business model is still evolving and subject to change. Our company's ability to continue as a going concern is dependent upon our ability to obtain adequate financing and to reach profitable levels of operations. In that regard we have no proven history of performance, earnings or success. There can be no assurance that we will achieve profitability or obtain future financing.

Uncertain demandDehydraTECH compounds for our products may causeresearch programs and our business plan to be unprofitable.

Demand for medical marijuana and for cannabis or hemp related productsB2B customers. It is dependent on a number of social, political and economic factors that are beyond the control of our company. While we believe that demand for marijuana and hemp products will continue to grow across North America, there is no assurancepossible that such increase in demand will happen or that our endeavors will be profitable.

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Wethird parties may not acquire market share or achieve profits due to competition in our industries.

Our company operates in highly competitive marketplaces with various competitors. Increased competition may result in reduced gross margins and/or loss of market share, either of which would seriously harm its business and results of operations. Management cannot be certain that the company will be able to compete against current or future competitors or that competitive pressure will not seriously harm its business. Some of our company's competitors are much larger and have greater access to capital, sales, marketing and other resources. These competitors may be able to respond more rapidly to new regulations or devote greater resources to the development and promotion ofsuccessfully carry out their business model than the company can. Furthermore, some of these competitors may make acquisitions or establish co-operative relationships among themselves or with third parties in the industry to increase their ability to rapidly gain market share.

Conflicts of interest between our company and our directors and officers may result in a loss of business opportunity.

Our directors and officers are not obligated to commit their full time and attentioncontractual obligations, meet expected deadlines, adhere to our business and, accordingly, they may encounter a conflict of interest in allocating their time between our future operations and those of other businesses. In the course of their other business activities, they may become aware of investment and business opportunities which may be appropriate for presentation to us as well as other entities to which they owe a fiduciary duty. As a result, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. They may also in the future become affiliatedprotocols, or comply with entities, engaged in business activities similar to those we intend to conduct.

In general, officers and directors of a corporation are required to present business opportunities to a corporation if:

• The corporationregulatory requirements. This could financially undertake the opportunity;
• The opportunity is within the corporation’s line of business; and
• It would be unfair to the corporation and its stockholders not to bring the opportunity to the attention of the corporation.

We have adopted a code of ethics that obligates our directors, officers and employees to disclose potential conflicts of interest and prohibits those persons from engaging in such transactions without our consent. Despite our intentions, conflicts of interest may nevertheless arise which may deprive our company of a business opportunity, which may impede the successful development of our business and negatively impact the value of an investment in our company.

The speculative nature of our business plan may result in the loss of your investment.

Our operations are in the start-up stage only, and are unproven. We may not be successful in implementing our business plan to become profitable. There may be less demand for our services than we anticipate. There is no assurance that our business will succeed and you may lose your entire investment.

Changing consumer preferences may cause our planned products to be unsuccessful in the marketplace.

The decision of a potential client to purchase our products may be motivated by cultural phenomenalost revenue or by perceived health or nutritional benefits. The cultural desirability or popularity of hemp related products is subject to change due to factors beyond our immediate control. Similarly, the perceived nutritional or health related benefits of our products are subject to change in light of continuing research or the introduction of competitive products. Changes in consumer and commercial preferences, or trends, toward or away from cannabis or hemp related products would have a corresponding impact on the development of the market for our current and planned products. There can be no assurance that the products supplied by our company and or its partners will be successful in establishing or maintaining a significant share of the consumer market.

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General economic factors may negatively impact the market for our planned products.

The willingness of businesses to spend time and money on non-essential food and health products may be dependent upon general economic conditions; and any material downturn may reduce the likelihood of consumers incurring costs toward what some may consider a discretionary expense item. Willingness by customers to buy our products may be dependent upon general economic conditions and any material downturn may reduce the potential profitability of the food sciences or medical marijuana business sectors.

A wide range of economic and logistical factors may negatively impact our operating results.

Our operating results will be affected by a wide variety of factors that could materially affect revenues and profitability, including the timing and cancellation of customer orders and projects, competitive pressures on pricing, availability of personnel, and market acceptance of our services. As a result, we may experience material fluctuations in future operating results on a quarterly and annual basis which could materially affect our business, financial condition and operating results.

Loss of consumer confidence in our company or in our industry may harm our business.

program delays. Demand for our services may be adversely affected if consumerscustomers lose confidence in the quality of our services or the industry’s practices. Adverse publicity may discourage businesses from buyingcontracting our services and could have a material adverse effect on future revenue generation.

Agreements with third parties conducting services on our behalf might terminate for a variety of reasons, including a failure to perform by the third parties. If any of these terminate, we may be unable to enter into arrangements with alternative providers or to do so on commercially reasonable terms. Switching or adding additional third parties involve increased management time, focus, regulatory approvals and/or additional cost. Any delays in our manufacturing capabilities or research studies may have a material adverse impact on our business, financial condition and results of operations.prospects.

Unethical business practices may compromise the growth

Any failure to prevent or mitigate security breaches and developmentimproper access to or disclosure of our business.data or our user data could result in the loss or misuse of such data, which could harm our business and reputation and diminish our competitive position

The production

Awareness and salesensitivity to personal data breaches and cyber security threats is at an all-time high. Our computer systems and those of medical marijuana isour contractors and consultants are vulnerable to damage from unauthorized access, computer viruses, telecommunications and electrical failures, and natural disasters. If such an emerging industryevent were to occur and cause interruptions in our operations, it could result in a material disruption of our R&D programs. We depend on digital technologies for the successful operation of our business, including corporate email communications to and from employees, licensees, consultants and third-party providers, collection, use and retention of investor data, security systems with respect to our Health Canada licensed laboratory and maintenance of confidential information.

As part of our business model, we collect, retain, and transmit confidential information over public networks. We may be vulnerable to targeted or random personal data or security breaches, acts of vandalism, computer malware, misplaced or lost data, programming and/or human errors, or other similar events. Any misappropriation of our internal confidential or personal information gathered, stored or used by us, be it intentional or accidental, could have a material impact on the operation of our business, including severely damaging our reputation and our relationships with licensees, employees and investors. We may incur further significant costs implementing additional security measures to protect against new or enhanced data security or privacy threats, or to comply with current and new international, federal, and state laws governing the unauthorized disclosure of confidential and personal information which business practices are not yet standardizedcontinuously being enacted. We could also experience loss of revenues resulting from unauthorized use of proprietary information including our intellectual property. We could also face sizable fines, significant breach containment and arenotification costs to supervisory authorities and the affected data subjects, and increased litigation as a result of cyber security or personal data breaches.

We may be subject to frequent scrutiny and evaluation by federal, state, provincial, and municipal authorities, academics, and media outlets, among others, Although we intend to developclaims that our business in accordance with best ethical practices, we may suffer negative publicity if we, our partners,employees, consultants, or independent contractors have wrongfully used or customers are found to have engaged in any environmentally, insensitive practices or other business practices that are viewed as unethical.disclosed alleged trade secrets.

The failure to secure customers may cause our operations to fail.

We currently do not have many long-term agreements with any customers. Many ofemploy, and may employ in the future, individuals who were previously employed at other biotechnology or pharmaceutical companies, including our products and services may be provided on a “onetime” basis. Accordingly, we will require new customers on a continuous basis to sustain our operations.

competitors or potential competitors. We could be requiredsubject to enterclaims that the Company or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Successful claims could result in our loss of valuable intellectual property rights or personnel in addition to suffering monetary damages. Even if we are successful in any litigation, it could result in substantial costs and be a distraction to management with an adverse impact on our business.

Risks related to the effects of COVID-19

The outbreak of the coronavirus (COVID-19) has evolved into fixed price contractsa global pandemic. The extent to which will expose us to significant market risk.

Fixed price contracts require the service provider to perform all agreed services for a specified lump-sum amount. We anticipate a material percentage of our services will be performed on a fixed price basis. Fixed price contracts expose us to some significant risks, including under-estimation of costs, ambiguities in specifications, unforeseen costs or difficulties, and delays beyond our control. These risks could lead to losses on contracts which may be substantial and which could adversely affect the results of our operations.

If we fail to effectively and efficiently advertise, the growth ofvirus impacts our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the virus, its variants, and the actions to contain the coronavirus or treat its impact, among others.

With the continued spread of the virus, our business operations could be compromised.

The future growth and profitability ofinterrupted or delayed. It is possible that our food products business willR&D programs could be dependent in part onadversely affected by the effectiveness and efficiency of our advertising and promotional expenditures, includingrestrictions imposed during the pandemic. Travel restrictions, lock-down quarantines or other such limitations may hamper our ability to (i) create greater awarenessconduct our R & D programs. In some of our services, (ii) determineprograms, particularly our human studies, participant recruitment and enrolment, participant dosing, distribution of results, study monitoring and data analysis may be paused or delayed due to the appropriate creative messageeffects that the pandemic has in different localities. If the virus continues to spread, some participants and media mix for future advertising expenditures, and (iii) effectively manage advertising and promotional costs in order to maintain acceptable operating margins. There can be no assurance that we will experience benefits from advertising and promotional expenditures in the future. In addition, no assurance can be given that our planned advertising and promotional expenditures will result in increased revenues, will generate levels of service and name awareness or that we willclinical investigators may not be able to manage such advertisingcomply with clinical trial protocols. We currently utilize third parties to conduct our R&D programs and promotional expenditures on a cost-effective basis.

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Our successin the production of our B2B customers’ products. These relationships could be adversely impacted by any future covid-related restrictions. It is dependent onpossible that our unproven ability to attract qualified personnel.

We will depend onsupply chain may be disrupted, limiting our ability to attract, retainmanufacture products for our R&D operations or for our B2B customers.

The spread of COVID-19 and motivate our management team, consultants and other employees. There is strong competition for qualified technical and management personnel in the food science sector, and it is expected that such competition will increase. Our planned growth will place increased demandsits variants has caused a broad global impact which could have a material economic effect on our existing resources and will likely requirebusiness. While the addition of technical personnelpotential economic impact brought by and the developmentduration of additional expertise by existing personnel. There canthe pandemic may be no assurance thatdifficult to assess or predict, it has already caused, and is likely to result in further significant disruption of global financial markets, which may reduce our compensation packages will be sufficientability to ensureaccess capital either on favorable terms or at all. Inflation and recession or other sustained adverse economic events resulting from the continued availability of qualified personnel who are necessarypandemic could materially and adversely affect our business and the market for the developmentor value of our business.common stock.

B. Risks Associated with our Financial Condition

Without additional financing to develop our business plan, our business may fail.

Because we

We have generated only minimal revenue from our business and cannot anticipate when we will be able to generate meaningful revenue from our business, we will need to raise additional funds to conduct and grow our business. We do not currently have sufficient financial resources to completely fund the development of our business plan. We anticipate that we will need to raise further financing.financing to conduct and grow our business. We do not currently have any arrangements for financing and we can provide no assurance to investors that we will be able to findsecure such financing if required.financing. The most likely source of future funds presently available to us is through the sale of equity capital. Any sale of share capital will result in dilution to existing security-holders.

The longer-term growth of our business depends on our ability to expand our portfolio of patents and industry segments where DehydraTECH is demonstrably applicable, which may require substantial financial resources and may ultimately be unsuccessful.

There can be no assurance that we will achieve significant revenues or profitable operations or will generate adequate funds to continue our intellectual property development. Many factors, such as competition, patent protection, appropriate regulatory approvals, availability of personnel, and market acceptance of our services can influence the revenue and profitability potential. As a result, we may experience material fluctuations in future operating results on a quarterly and annual basis which could materially affect our business, financial condition, and operating results.

The R&D programs required to evidence that DehydraTECH’s demonstrated efficacy also works with other APIs and molecules to develop the evidence may ultimately be unsuccessful. We cannot be certain that our overall business model within any particular sector will ever come to fruition, and if they do, may not generate meaningful profits. We may not recover all or any portion of our capital investment in our research and technology development, marketing, or other aspects of the business.

We may enter into collaborations with third parties for the development and commercialization of our product candidates. If we fail to enter into such collaborations, or such collaborations are not successful, we may not be able to obtain allcapitalize on the market potential of our product candidates.

We face significant competition in seeking appropriate partners. Our ability to reach a definitive agreement in any collaboration depends in part on our assessment of their resources, expertise and intent, the terms and conditions of the licensesproposed agreement and the evaluation of numerous factors by the proposed collaborator. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.

If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce or delay our development programs. This might delay our potential development schedule or reduce the scope of research activities or increase our expenditures. We may have to undertake further discovery or preclinical development activities at our own expense. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development activities, we may not be able to operatefurther develop our product candidates or continue to develop our product candidates and our business may be materially and adversely affected.

Future collaborations may involve the following risks whereby collaborators may:

C. Risk Associated with Current Regulatory Environments

Our product candidates are in an early stage of development and may fail or experience significant delays or may never advance to the clinical stage, which would causemay materially and adversely impact our businessbusiness.

All of our R&D programs are in the preclinical development stage and our future success heavily depends on the successful development of our DehydraTECH product candidates which may never occur. These product candidates could be delayed, not advance into the clinic, or unexpectedly fail at any stage of development. Before we can commence clinical trials for a product candidate, we must conduct extensive preclinical and other non-clinical tests in order to fail.

Our operations may require licensessupport an investigational new drug (“IND”) application, including IND-enabling good laboratory practice toxicology studies. Preclinical studies and permits from various governmental authoritiesclinical trials are expensive, difficult to conduct our business activities. We believedesign and can take many years. There is no assurance that we will be able to obtain all necessary licensessuccessfully develop our product candidates, and permits under applicable lawswe may focus our efforts and regulations for our operationsresources on product candidates that may prove to be unsuccessful.

We cannot be certain of the outcome of preclinical testing and believe weclinical studies and results from these studies may not predict the results that will be obtained in later phase trials of our product candidates. Even if we are able to complycomplete our preclinical studies and planned clinical trials in all material respectsline with the terms ofour projected timelines, results from such licensesstudies and permits. However,trials may be not replicated in subsequent preclinical studies or clinical trial results. Additionally, such licenses and permits are subjectstudies may be delayed due to change in various circumstances. There can be noevents beyond our control. As a result, we cannot guarantee that we will be able to submit INDs, or similar applications, within our projected timelines, if at all, or that the FDA, or similar regulatory authorities, will allow us to commence clinical trials.

Pharmaceutical products incorporating DehydraTECH has never been approved for the treatment of disease.

In order to commercialize a product that utilizes DehydraTECH for the treatment of any disease, we and/or our commercial partner must obtain regulatory product approvals for treatment of a particular indication. Satisfying regulatory requirements is an expensive process that typically takes many years. There are compliance requirements covering R&D, testing, manufacturing, quality control, labelling, and promotion of drugs for human use. To obtain necessary regulatory approvals we must complete clinical trials demonstrating that our product is safe and effective for a particular indication. There can be no assurance that any product enhanced by DehydraTECH will be proven to be safe and effective, that clinical trials will demonstrate the necessary safety and effectiveness of the product candidates, or maintain allthat we will be successful in obtaining regulatory approval for any treatment developed, even if such safety and effectiveness are demonstrated.

We may encounter obstacles in obtaining regulatory approval from the FDA or other international regulatory organizations during clinical trials including:

Any success achieved at a given stage of the clinical trials does not guarantee that the future achievement of success at any subsequent stage, including without limitation, final FDA approval.

Delays or rejections in the regulatory approval process because of additional government regulation resulting from future legislation or administrative action, or from changes in the policies of the FDA or other regulatory bodies during the period of product development, clinical trials, or regulatory review may occur. Failure to comply with applicable regulatory requirements may result in criminal prosecution, civil penalties, recall or seizure of products, total or partial suspension of production, or an injunction preventing certain activity, as well as other regulatory action against our product candidates or our Company.

We currently have no commercial pharmaceutical products and therefore generate no revenue from pharmaceutical products and may never be able to develop marketable pharmaceutical products. We have no experience in filing the applications necessary licensesto obtain approval and permits.expect that we will need to rely on CROs and regulatory consultants to assist us with this process. Regulatory approval also requires the submission about the product manufacturing process and the inspection of the manufacturing facilities. Our success is dependent on our or a third parties’ ability to successfully navigate the risks and obstacles associated with obtaining FDA clearance for any DehydraTECH enhanced formulated product.

If

Pharmaceutical products using DehydraTECH with CBD as an API have never been approved for the treatment of any disease.

To date the FDA has approved only limited use of cannabinoids for the treatment of any disease or condition. The FDA has approved one cannabinoid-derived drug product for the treatment of seizures associated with Lennox-Gastaut syndrome and Dravet syndrome and three synthetic cannabinoid-related drug products for the treatment of nausea and vomiting caused by cancer chemotherapy. While we failexpect any product candidates that we develop will be regulated as a new drug under the Federal Food, Drug, and Cosmetic Act, the FDA could decide to effectively manage our growth ourregulate them or any other products incorporating DehydraTECH under a different regulatory regime. The lack of policies, practices or guidelines may hinder or slow review by the FDA of any regulatory filings that we may submit. The FDA may respond to these submissions by defining requirements that we may not have anticipated.

Regulation of non-pharmaceutical hemp-based CBD products is evolving.

We cannot predict the nature of any future business results could be harmed and our managerial and operational resourceslaws, regulations, interpretations, or their application to non-pharmaceutical hemp-based CBD. It is probable that regulations may be strained.enacted that will be directly applicable to our business. Violations, alleged or otherwise, could disrupt our business or the business of our licensees. Any compliance deficiencies with future government regulation could increase our operating costs.

As we proceed with

In the US, interstate shipment of hemp-derived non-pharmaceutical CBD from one state to another is legal only where both states have laws and regulations that allow for the production and sale of such products and that qualify under the Farm Bill. The marketing and sale of DehydraTECH products containing hemp-derived non-pharmaceutical CBD is limited by such factors and is restricted to such states. A repeal or adverse amendment of laws and regulations that are now favorable to the distribution, marketing, and sale of finished products of hemp-derived CBD our licensees intend to sell could significantly limit, restrict, or prevent us from generating revenue related to these DehydraTECH enabled non-pharmaceutical products. Any such repeal or adverse amendment of now favorable laws and regulations could have an adverse impact on our business plan we expectwith respect to experience significant and rapid growthsuch revenues.

Controlled substance legislation differs between localities. Legislation in the scope and complexity ofcertain jurisdictions may restrict or limit our business. We will need to add staff to market our services, manage operations, handle sales and marketing efforts and perform finance and accounting functions. We will be required to hire a broad range of additional personnel in order to successfully advance our operations. This growth is likely to place a strain on our management and operational resources. The failureability to develop and implement effective systems, orcommercialize products using DehydraTECH.

We currently have licensees who produce hemp-derived non-pharmaceutical CBD products. The Farm Bill delegates the authority to hirethe states to regulate and retain sufficient personnellimit the production of these products within their territories. Many states now have laws and regulations that allow for the performanceproduction and sale of all of the functions necessary to effectively servicehemp-derived CBD products. We can offer no assurance that these state laws will not be repealed or amended which could render these products illegal. Such actions would adversely impact our product revenue and manage our potential business, or the failure to manage growth effectively, could have a materially adverse effect on our business and financial condition.royalties derived from DehydraTECH-enabled CBD products.

D. Risks Associated with OurSecurities Markets and Ownership of our Common Stock

Trading on

The trading price of the OCTQB and CSE may be volatile and sporadic, which could depress the market priceshares of our common stock could be highly volatile and make it difficultas such investors could incur substantial losses.

Prospects for our stockholders to resell their shares.

Our common stock is quoted oncompanies in the OTCQB electronic quotation service operated by OTC Markets Group Inc. Tradingbiotechnology industry may be regarded generally as uncertain given the nature of the industry and, accordingly, investments in stock quoted on the OTCQB is often thinbiotechnology companies should be regarded as speculative. We have experienced erratic share price and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market pricevolume movement of our common stock for reasons unrelatedwhich could be influenced by any number of factors including those extraneous to our operating performance. Moreover, the OTCQB isperformance and business prospects.

Our by-laws do not contain anti-takeover provisions, which could result in a stock exchange, and trading of securities on the OTCQB is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like Amex. Accordingly, shareholders may have difficulty reselling any of the shares.

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In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes thatdirectors if there is a high probability that speculative low priced securities willtake-over of our Company.

We do not be suitablecurrently have a shareholder rights plan or any anti-takeover provisions in our by-laws. Without any anti-takeover provisions, there is no deterrent for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buyan unwanted take-over of our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.Company. This could result in a change of management, business strategy, a lower enterprise valuation than anticipated and/or dilution of current shareholdings.

Because we

We do not intend to pay any dividends on our shares, investors seeking dividend income or liquidity should not purchase our shares.

We have not declared or paid any dividends on our shares since inception, and do not anticipate paying any such dividends for the foreseeable future.inception. We presently do not anticipate that we will pay dividends on any of our common stock in the foreseeable future. If payment of dividends does occur at some point in the future, it would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any common stock dividends will be within the discretion of our Board of Directors. We presently intend to retain allany earnings to implement our business plan; accordingly, we do not anticipate the declaration of any dividends for common stock in the foreseeable future.

plan. Investors seeking dividend income or liquidity should not invest in our shares.

Because we can issue additional shares, purchasers

Purchasers of our shares may incur immediate dilution and may experience further dilution.

We are authorized to issue up to 220,000,000 shares. The board of directors of our companyOur Board has the authority to cause us to issueapprove additional shares,share issuances, and to determine the rights, preferences, and privileges of such shares, without consent of any of our stockholders. Consequently, our stockholdersWe may experience moreissue shares in the future to raise working capital resulting in shareholders dilution in theirthe ownership of our company in the future.Company.

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Other Risks

Protection against environmental risks.

We believe that our operations comply, in all material respects, with all applicable environmental regulations.

Our operating partners maintain insurance coverage customary to the industry; however, we are not fully insured against all possible environmental risks.

Any change to government regulation/administrative practices may have a negative impact on our ability to operate and our profitability.

The laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the United States, Canada, or any other jurisdiction, may be changed, applied or interpreted in a manner which will fundamentally alter the ability of our company to carry on our business.

The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on us. Any or all of these situations may have a negative impact on our ability to operate and/or our profitably.

Our by-laws contain provisions indemnifying our officers and directors against all costs, charges and expenses incurred by them.

Our by-laws contain provisions with respect to the indemnification of our officers and directors against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him, including an amount paid to settle an action or satisfy a judgment in a civil, criminal or administrative action or proceeding to which he is made a party by reason of his being or having been one of our directors or officers.

Investors’ interests in our company will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares or raise funds through the sale of equity securities.

Our constating documents authorize the issuance of 220,000,000 shares of common stock with a par value of $0.001. In the event that we are required to issue any additional shares or enter into private placements to raise financing through the sale of equity securities, investors’ interests in our company will be diluted and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold. If we issue any such additional shares, such issuances also will cause a reduction in the proportionate ownership and voting power of all other shareholders. Further, any such issuance may result in a change in our control.

Our by-laws do not contain anti-takeover provisions, which could result in a change of our management and directors if there is a take-over of our company.

We do not currently have a shareholder rights plan or any anti-takeover provisions in our By-laws. Without any anti-takeover provisions, there is no deterrent for a take-over of our company, which may result in a change in our management and directors.

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As a “smaller reporting company”, under the SEC’s disclosure rules and have elected to comply with the reduced disclosure requirements applicable to smaller reporting companies.

As a smaller reporting company, we have elected to adopt the accommodations for scaled-back disclosure in our SEC filings, resulting in less information about our Company being available compared to other public companies. We are also a non-accelerated filer and are not required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. Our internal controls over financial reporting will not receive the level of review provided by the process relating to the auditor attestation included in annual reports of issuers that are subject to these requirements.

We cannot predict if investors will find our common shares less attractive because we are not required to providecomply with more robust disclosure or the information required by this Item.auditor attestation requirements. If investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and trading prices may be negatively affected.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Executive Offices

Description of Property

The address of our principal executive officeCompany is 156 Valleyview Road,located in Kelowna, BCBritish Columbia Canada V1X3M4, where we share ~1,200in a leased facility with 2,250 square feet of office space which includes several offices forto accommodate our finance and administrative functions and a monthly rentalHealth Canada approved research lab of CAD$1,052. Our telephone number is (250) 765 6424. We have an additional administrative office spaceapproximately 1,000 square feet accommodating our in-house research and development team. The current lease commenced in Langley British ColumbiaNovember 2019 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

Onexpires November 12, 2014, the Company signed an agreement with PoViva and acquired 51% 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 aspects2023. The term of the business including, but not limitedlease can be extended for another five years, subject to Accounting, Marketing, Capital Investment, Capital Raising,Sales, Branding, Advertisingcertain terms and Fulfillment. The Founders served until 2015 as Production Managerconditions. We believe our current facilities are suitable 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% interest in the Burlington Joint Venture 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 licenseadequate for the Burlington facility.Company’s current operational requirements.

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Item 3. Legal Proceedings

We know of no otherare not party to any material, existingpending or pendingexisting legal proceedings against our company,Company or its subsidiaries 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.Lexaria or any of its subsidiaries.

Item 4. Mine Safety Disclosures

None.

Not Applicable.

PART II

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

Our

On January 12, 2021, the Company’s common shares arestock and warrants began trading on the National Association of Securities Dealers Automated Quotations Stock Market (“Nasdaq”) under the trading symbols “LEXX” and “LEXXW”, respectively. Prior to this date the Company’s common stock was quoted on the OTCQBOTCQX under the symbol “LXRP.” Our common shares are alsowere previously quoted on the Canadian Securities Exchange (“CSE”) under the symbol “LXX”. until July 8, 2021.

The following quotations, obtained from Yahoo Finance, reflectstock market in general has experienced extreme stock price fluctuations in the highpast few years. In some cases, these fluctuations have been unrelated to the operating performance of the affected companies. Many companies have experienced dramatic volatility in trading volumes and low bids for ourthe market prices of their common stock. The Company believes that several factors, both within and outside of its’ control, could cause the daily volumes and price of the Company’s common stock to fluctuate. There were 5,950,998 common shares issued and outstanding as quoted on the OTCQB 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:

August 31, 2022 (5,726,699 at August 31, 2021). As of November 14, 2017,25, 2022, there were 80 holdersapproximately 44 shareholders of record of our common stock. As of such date, 69,020,011 shares of common stock were issued and outstanding.record.

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 notnever declared or paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our commoncapital stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. OurAs a result, we anticipate that only appreciation of the price of our common stock, if any, will provide a return to investors for at least the foreseeable future. Any future determination related to dividend policy will be determined from time to time bymade at the discretion of our boardBoard of directors.Directors (“our Board”) and will depend on, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our Board may deem relevant.

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

During the year ended August 31, 2017 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.

On October 11, 2016, pursuant to its agreement with Docherty Management Ltd.,2022, the Company issued 252,000224,299 restricted common shares with a value of $35,760.$1.2m as required by a consulting contract.

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

Warrants

There were no warrants with an exercise price of $0.14 per share and term of five years, in return for consulting services provided in August, September, and October. The Company recognized the fair value of $32,252 from 250,000 of such warrants for services received during the month of August 2016,granted or exercised during the year 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 2016.2022.

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, 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 500,000 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, expiring on May 14, 2017. The fair value of these additional 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 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 units at 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 Share for a period 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.

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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 plansequity incentive plan described below:below.

2007 Equity Plan

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

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

All future option issuances shall be made under the 2010Equity Incentive Plan.

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 1,980,000 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 3,850,000 options to acquire shares of our common stock, to directors, officers, employees and consultants of our company.

The Our Board may amend, subject to the approval of any regulatory authority whose approval is required, suspend, or terminate this Plan or any portion thereof.thereof subject to the approval of any requisite regulatory authority. 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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Convertible Securities

As of

Pursuant to our Equity Incentive Plan, during the year ended August 31, 2017,2022, we had outstanding options to purchase 3,320,000 shares of our common stock exercisable between prices of $0.09 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.

On October 10, 2016, the Company granted 250,000 stock options to a consultant for business advisory services. The exercise price ofdirectors, officers, employees, and consultants that enable the 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 optionsoption holders to an officerpurchase 222,000 common shares of the Company. Options were granted at prices of: 81,800 at $6.23, 36,700 at $3.39, and 103,500 at $2.91 and have five year terms. The exercise price198,500 options granted and vested during the year had a fair value of $663,398 using the stock options is $0.37 per share, vesting immediatelyBlack Scholes valuation method and expiring five years from the date of grant.non-cash expense was included in consulting and salaries.

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 company also granted 100,000 options to consultants vesting immediately with an exercise price of $0.295 and expiring five years from the date of grant.

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.

Not applicable.

Item 6. Selected Financial Data

As a “smaller reporting company”“Smaller Reporting Company”, we arethis 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

Overview

This discussion and analysis contain forward-looking statements that involve not only risks and uncertainties but also changes in condition, significance, value and other factors as described in “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Our actual results of operations, performance, financial position and business prospects and opportunities for this fiscal year and the periods that follow could differ materially from those expressed in or implied by forward-looking statements. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and the accompanying notes related notesthereto that appear elsewhere in this annual report. Report.

The following management’s discussion contains forward-looking statements that reflectand analysis of financial condition and results of operations (“MD&A”) is provided to enhance the readers understanding of our plans, estimatesresults of operations and beliefs.financial condition for the year ended August 31, 2022, and in comparison, to the year ended August 31, 2021.

Executive Summary

Lexaria’s DehydraTECH patented technology improves the delivery of bioactive compounds while promoting healthy ingestion methods, lowers overall dosing, and is highly effective in active molecule delivery available in a range of formats from oral ingestible to oral buccal/sublingual to topical products. DehydraTECH substantially improves the rapidity and quantity of API transport to the blood plasma and brain using the body’s natural process for distributing fatty acids via the oral route. This technology extends across many categories beyond the primary pharmaceutical focus of the Company from foods and beverages to cosmetic products and nutraceuticals.

Lexaria is advancing several R&D activities in both preclinical and future clinical programs. Our actual results could differ materially from those discussedprimary focus during the year was on our investigations of CBD for the reduction of hypertension. We completed three human studies in the forward looking statements. Factors that could cause or contributeyear on hypertension with final results of our fourth and largest hypertension study to such differences include, but are not limited to; those discussed below and elsewhere in this annual report, particularlydate expected to be released in the section entitled "Risk Factors".second fiscal quarter of 2023.

Our audited financial statements

The FDA provided us with a positive written response from our pre-IND meeting regarding DehydraTECH-CBD for the treatment of hypertension. The FDA confirmed that it has agreed with Lexaria’s proposal to pursue a 505(b)(2) new drug application (“NDA”) regulatory pathway for our program. We continue working toward our IND filing which is anticipated to be in late fiscal 2023 or early 2024. During the year ended August 31, 2022, we also completed studies in NSAIDS, THC, PDE5s and nicotine.

The Company continues to engage in small R&D projects and B2B formulation for third parties who are statedevaluating our technology for use in United States Dollarstheir product. 

Financial condition and operating performance

The data generated from our past and ongoing R&D programs continues to support confirmatory results and are preparedcontributing greatly to our understanding of the workings of DehydraTECH. These findings encourage the pursuit of lucrative commercial applications in accordancethe pharmaceutical sector. We continue to devote an increasing proportion of our resources toward pharmaceutical applications with United States Generally Accepted Accounting Principles.the continuation of our programs directed at hypertension as we move toward FDA approved IND clinical studies.

Plan of Operation

During the next twelve month period (beginning September 1, 2017), 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;

Our plans beyond fiscal 2018 are dependent upon our ability to obtain sufficient capital 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 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 atended August 31, 2017,2022, we hadcompleted ten studies and initiated a workingfurther seven. These programs, having been funded by the capital surplusinfusion of $2,703,148 and cash on handLexaria’s 2021 financing of $2,533,337. We therefore estimate that we will be required to raise approximately $nil in cash to finance$15m,supported our planned expenditures for the 12 months beginning September 1, 2017. In the uncertain event that we are unable to raise sufficient funds to execute our current business plan, orsignificant advancements in the uncertain event that allfields of heart disease and hypertension, oral nicotine, and antiviral research.

We consider the advancement of our debt obligations become due, we will be required to scale backapplied R&D studies as a vital step towards our operations to prioritize immediate and necessary expenses in our longer term planning into fiscal 2019. These necessary expenses include professional fees and general and administrative expenses necessary to satisfy our public reporting requirements.

Our business strategy involves several elements. We intend to prioritize our revenue generating efforts in 2017/18 on technology licensing, with a secondary focus on our consumer food products enriched with full spectrum hemp oil.

Our patented technology was developed to aid absorption and bioavailabilitygoal of certain “payload” molecules, including cannabinoids such as cannabidiol (CBD) and tetrahydrocannabinol (THC). CBD is not psychoactive and may have desirable qualities, and is found in plant species such as hemp, cannabis, and Echinacea. 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 imported hemp, the products are legal under Federal law.

We first began selling trial amounts of ViPova™ branded black tea fortified with hemp oil and utilizing our technology, in January 2015. In August 2015 we added six new flavors of tea to expand the brand’s reach. 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™ brand. Together, tea, coffee and hot chocolate comprise all our product offerings under the 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™ brand and may also help us to developestablishing commercial relationships with retail distributorsindustry partners who are less likely to place orders from manufacturers that can only offer a single product.

Generating meaningful revenue fromutilizes DehydraTECH within existing or new product sales will be challenging and will rely in part on our ability to achieve widespread retail distribution access. 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™ branded products are owned by our 51%-owned Poviva Tea LLC subsidiary. As of October 2017 Lexaria acquired 100% of Poviva Tea LLC.

While the ViPova™ line is focused on a “coffee house” experience, the “Lexaria Energy” line is focused on athletic performance and active lifestyle needs. The first Lexaria Energy product is believed to be unique or nearly so: a protein energy bar utilizing our technology to fortify with full spectrum hemp oil. We first offered the Lexaria Energy Bar for sale in November, 2015.

Lexaria Energy branded products are owned 100% by Lexaria Corp.

A manufacturing facility was contracted to produce the 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 was to encourage online sales via a dedicated website, 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, and roadside store distribution channels in 2016 with some success but limited due to our lack of an established distribution system.

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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, such as protein powders for shakes or smoothies, and protein energy drinks. We are also pursuing other product development and expect to launch new products.

We believe the range of products available and under development are sufficient to prepare for revenue growth and potentially profitable long term operations if we are able to generate sufficient consumer demand and obtain sufficiently widespread retail distribution locations.

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.

At this time we are not planning to offer for sale any products containing THC in quantities higher than 0.3% . However we envision licensing our technology to companies 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. Our October 31, 2017 announcement of the USPTO Notice of Allowance of our technology related to new molecule groups may enhance our ability to successfully pursue this initiative during fiscal 2018.

We will attempt to communicate the benefits of our technology to potential licensing partners, i.e. with higher absorption levels a manufacturer could infuse smaller amounts of active molecules into a product, thus reducing their manufacturing input costs. We believe this to a meaningful competitive advantage that may lead to the potential to generate licensing revenue, and will pursue these opportunities within the THC market both within the USA and also internationally, in those locations where it is legal and regulated by government.

We would not ourselves be selling any THC products – we would only be licensing technology to already-licensed participants in valid jurisdictions. We expect a low number of licensees initially and currently have one revenue generating agreement with such a licensee and additional letters of intent and negotiations with other potential licensees.

Subject to budgetary availability, we also plan to conductlines. Conducting additional in vitro and in vivo studies testingwhich test the absorption of some, or all of the molecules named within our patents and patent applications, –i.e. CBD, NSAIDs, Vitamins,vitamins, PDE5 inhibitors, nicotine and Nicotine – toanti-viral drugs, further substantiate the effectiveness of our invention. More than simply satisfying scientific curiosity, successfulDehydraTECH. Successful tests could leadare expected to increasedincrease awareness and acceptance of our technologyDehydraTECH as a meaningful method by whichused to deliver some or all of the named molecules more effectively than their current delivery methods. Therefore absorptionmethods avail. Absorption tests could becomeare an important element leading towards higher rates of acceptance and the implementation of our technology licensing initiatives. Our R&D results serve to de-risk the potential API products that could conceivably develop into clinical trials and ultimately new drugs.

Our pursuit of opportunities within the cannabinoid, nicotine and other bioactive molecular markets in the US and internationally continue unabated. We believe there are meaningful competitive advantages in manufacturers adopting DehydraTECH in their product with its demonstrated higher absorption levels, its ability to infuse smaller quantities of active molecules in their products and the benefit of its predictable drug delivery times. Implementing our technology could lead to smaller dosing and decreased manufacturing costs while masking unwanted flavor and smell of the active molecules. We are anticipating these efforts will pursuelead to increased licencing revenue through licensing partnerships. We are pursuing technology licensing opportunities as a method of generating highly profitable revenue streams over long periods of time. In addition, while one of our

With ten US and nine Australian patents granted to date we also have numerous patent applications has been granted byfiled 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 pendingsapplications will becomebe granted as 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 pursuingseek patent protection in more than 40 countries around the world. The successful granting of additional patents could lead to material increases in shareholder value through the ability to generate meaningful license revenues from an increased intellectual property portfolio.

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Lexaria expects its current cash reserves to meet our operational requirements for the twelve months following the release of this report. The Company is continuing to explore strategic corporate business partnerships for many of its specific drug investigations after sufficient data has been generated which, if successful, could generate any combination of up-front milestone and/or royalty payments to the Company.

Asset Sale

On December 9, 2020, Lexaria CanPharm ULC (“CanPharm”) completed a disposition (the “Disposition”) of its use and licensing rights for DehydraTECH technology (the “Assets”) specifically in association with non-pharmaceutical products containing cannabis molecules that contain 0.3% or greater THC. The purpose of the Disposition was to remove the Company’s association with cannabis as it remains a Schedule 1 Drug and thereby eliminating any such regulatory restrictions cannabis products may create. The Disposition also assisted in obtaining a listing on the Nasdaq on January 12, 2021. As a result of the Disposition, CanPharm assigned to the purchaser, Hill Street Beverage Company Ltd. (“Hill Street”), license agreements with three existing non-related-party licensees.

In consideration for the Assets, Hill Street provided CanPharm with C$350,000 cash, a promissory note bearing a principal amount of C$2,000,000 and bearing an interest rate of 10% (the “Note”) and C$1,500,000 in shares of Hill Street, issuable in three tranches by April 9, 2022. The repayment of the Note does not have a fixed maturity date and is based on quarterly instalments equal to 5% of the gross sales realized by Hill Street of DehydraTECH-enabled products. Due to the uncertainty pertaining to the settlement of the Note, management concluded that the note had $Nil value at the time of the sale and was recorded as such. Some of the factors considered in the $Nil valuation of the Note were that the legal sales of THC products in the US and Canada have little or no history which made the expectant quarterly payments very difficult to forecast. Further, Hill Street had no experience selling THC products and at the time of the sale was not licenced to produce and sell such products. Therefore, the Company considered risk of default high and the collectability of the Note as highly doubtful. Since the date of sale Hill Street has repaid $25,083 of the Note and these amounts are considered other income when received.

Results of Operations for our Year Ended August 31, 2017 and August 31, 20162022

Our net loss and comprehensive lossfrom operations for the year ended August 31, 2017, for the year ended August 31, 2016 and the2022, was $7,391,283 (2021 - $5,686,852). The changes between thosethese periods for the respective items are summarized as follows:

Revenue

LicensingRevenue

Lexaria’s business operations include technology licensing agreements where corporate licensees implement DehydraTECH under license within our contracted facilities under royalty agreements. This includes specific B2B pre-processed DehydraTECH CBD-powders manufactured at a Lexaria contracted GMP-certified food facility for clients to integrate into their final product formats. Fees are derived from a combination of manufacturing charges, royalties and trademark fees.

The primary source of revenues representfor the majorityCompany are derived from Lexaria Hemp where sales of B2B processing of intermediary product saw a significant decrease of approximately 70% (2022 - $113,438 vs 2021- $383,179) in the year and contributed approximately 46% of the $63,639 in revenues during the year ended August 31, 2017. Consumer product sales revenues were lower due to challenges in securing expansive distribution opportunities, production challenges 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 over the term of the licensing agreement as the Company is required 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.2022 annual revenues. During the year ended August 31, 2017, $25,417 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 in licensing revenue and $17,830 in product and other revenues.

As fiscal 2017 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. Those trends should support higher potential consumer product sales. Release of the TurboCBD product was successful but sales were limited by changes to payment processing services outside of the Company’s control. At the time of this report2022, 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.generated $54,560 (2021- $86,921) from R&D contracts.

For 2018

In fiscal 2023 the Company expects to derive ever larger proportions of its revenues fromsee an increase in revenue through further technology licensing to third parties. 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. At the timefrom DehydraTECH processed hemp-based CBD consumer products. The anticipated expansion 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 be a positive step in enabling the generation of more significant revenues during 2018.

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.prospects as we continue to explore new applications for our technology.

In prior years, Lexaria developed a line of demonstration oral-delivered products that were utilized to show the efficacy of DehydraTECH and enabled the ability of manufacturers to incorporate the technology into their product lines. We had offered these products for sale to consumers through our web-based sales platform. During the year-ended August 31, 2021, we discontinued these direct-to-consumer demonstration products and closed our web sales platform in order to intensify our efforts on B2B production.

Research and Development

Research and development costs are expensed as incurred and account for a significant portion of our operational expenses. With proceeds from our underwritten public offering in January of 2021, we were able to direct additional expenditures to the increased focus on studies pertaining to hypertension and anti-viral drugs. We will continue to invest in our R&D programs for the foreseeable future and we expect these expenses to continue to increase in 2023 compared to 2022. Our R&D programs are focused on three core business segments; heart disease including hypertension, reduced-risk non-combusted nicotine and CBD from hemp. With the data collected during the fiscal year 2022 management has concluded that our studies related to the improvement of antiviral drug delivery using DehydraTECH indicate that the economics are not attractive enough to further pursue this segment at this time.

Of significant note, Lexaria submitted our preliminary application for an Investigational New Drug (“IND”) to the FDA with plans to develop a cannabidiol-based drug formulation, DehydraTECH-CBD for hypertension. We received a written response following our pre-IND meeting in August 2022 where the agency has agreed with the Company’s plans to pursue a faster 505(b)(2) new drug application regulatory pathway for the program. The 505(b)(2) pathway permits a faster commercial approval than the traditional 505(b)(1) NDA pathway. The FDA has agreed with the Company’s proposed clinical protocol for DehydraTECH-CBD, which is designed to target 100 patients with hypertension. The regulator has also decided that there was no need to conduct additional non-clinical studies before the start of the IND program. We expect to file our IND application in late fiscal 2023. Preclinical and clinical development is inherently unpredictable as is regulatory approval and commercialization, therefore we are unable to estimate with any certainty the costs we will incur and the timelines required in our continued development and commercialization efforts. Any successful development and completion of clinical trials as well as regulatory approval and commercialization are uncertain and may not result in approved products. Completion dates and completion costs can vary significantly for each future product candidate and are difficult to predict. Lexaria and our commercial partners will continue to explore multiple R&D programs directed toward further evaluation, development, and commercialization of our DehydraTECH technology.

General and Administrative

General and administrative expenses consist primarily of consulting fees, executive and employee salaries, the recording of non-cash expenses through stock-based compensation for options vesting in the year and unrealized gains/losses on marketable securities. Also included are costs for advertising and marketing, investor relations, corporate facilities, insurance premiums, legal fees related to corporate matters, fees for auditing, and tax filings.

Our general and administrative expenses increased by $691,002saw an overall increase of $753,185 during the year ended August 31, 2017. The increase2022, from $4,971,349 recorded in the previous year. We increased advertising and promotional expenditures by $752,097 in our general and administrative expenses was largely duecontinued efforts to expected increases in executing budgeted work. Examples are many and include additional consultants; increasing legal fees for patent and trademark filings, new product development and launch, and more. However roughly two-thirdsbring the results of the increase includedCompany’s R&D programs to the attention of various industry sectors and to the scientific and investment communities. Stock-based compensation increased by $365,873 in the G&A totalcurrent fiscal year as result of options vested during the year. Travel expenses were up by $49,105 in the year as covid restrictions were less of a barrier and we returned to near pre-pandemic excursion levels.

Unrealized losses on marketable securities increased by $598,359 in the year. This is $258,406 valuationattributable to shares received as a part of warrants issued for services and $207,660the sale of share issuance for contracts andassets to Hill Street Beverage Company in settlement of services recognized in accounts payable regarding contractors. Significant increases are expectedthe year 2021. The loss during fiscal 2018 executing2022 on these securities was exacerbated by receipt of shares in the budgeted scientific testingyear that were valued according to the contract of sale and researchnot at market value. We remain confident that the loss is likely temporary in nature as Hill Street continues to make inroads to the US hemp markets with DehydraTECH enabled products produced and development.sold by their licensees.

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Interest Expense

Interest expense forOur consulting fees and salaries decreased by $383,118 in the year ended August 31, 2017 was $6,015 (2016 $2,250). The increase was primarily due to the issuance of a convertible debt2022. Legal and related payments. As ofprofessional fees were $140,142 lower in the year ended August 31, 20172022 as compared to the previous years expenses that included the additional fees related to our Nasdaq listing. In the previous year we eliminated our long-term loan and the convertible debt was converted.

Consulting fees

Our consulting fees increased duringrecorded bad debts of $50,500 with no bad debts recorded in the year ended August 31, 2017 due2022.

Corporate general and administrative expenses are expected to the involvement of additional consultants, including the appointment of our interim CFO. Our executives are typically hired and compensatedincrease moderately in fiscal 2023 as consultants and costs associated with those agreements comprise the largest majority of our consulting fees expense.

Professional Fees

Our professional fees increased by $76,437 during fiscal 2017 primarily duecompared to increases in patent and trademark filings, but were offset by some reductions due to the appointment of our interim CFO reducing financial report preparation fees from third party service providers. These efficiencies reduced outside professional fees.

Liquidity and Financial Condition

The Company’s working capital balance increased during the year ended August 31, 20172022 as a result of its financing activities. The warrant conversions from previous equity financings,higher human resource, regulatory, legal and investor relations costs and the new equity financings duringpotential impact of inflation.

Liquidity and Capital Resources

We have incurred net losses of approximately $7.4m and $4.2m respectively in the past two fiscal 2017 resultedyears. We expect to continue to incur significant operational expenses and net losses in a significant improvementthe upcoming 12 months and beyond. Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the stage and complexity of our R&D studies and related expenditures, the receipt of additional payments on the licencing of our technology, if any, and the receipt of payments under any current or future collaborations we may enter into.

Since Lexaria’s entry into the bioscience sector in our working capital position of $2,626,863 compared2015 and through to the year earlier period.

Operating Activities

Net cash used in operating activities was $1,545,909 for the year ended August 31, 2017 compared2022, we have accumulated a $39.1m deficit despite generating total gross revenues of $2.1m. We have used the issuance of common shares to raise the majority of capital required to fund our business operations. Since fiscal 2014, we have raised an aggregate of $25.3m, of which $16.1m was from the sale of our common stock, $8.8m from warrants and $0.4m from the exercise of stock options.

As the Company continues with our IND application process and progresses into the clinical development of our initial product candidate, the need for substantial capital resources increases. Our existing cash usedwill not be sufficient to complete the full development, testing and commercialization of an FDA approved product candidate. Accordingly, we will be required to obtain further funding to achieve this business objective.

On August 12, 2022, we entered into a sales agreement with Maxim Group LLC, (“Maxim”), pursuant to which we may offer and sell shares of our common stock with an aggregate offering price of up to $5,925,000 under the At-The-Market (“ATM”) Offering. The sales agreement provides that Maxim will be entitled to a sales commission equal to 3.0% of the gross sales price per share of all shares sold under the ATM Offering. As of November 25, 2022 we have not sold any shares under the ATM Offering.

We may also offer securities in operating activitiesresponse to market conditions or other circumstances if we believe such a plan of $660,856 during the same period in 2016. This difference was largely duefinancing is required 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) for the year ended August 31, 2017 is primarily due toadvance the Company’s cost incurred related to its patent related applications.

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Financing Activities

Net cash provided from financing activities was $3,995,536 during the year ended August 31, 2017 compared to net cash provided of $514,292 during the same period in 2016. During fiscal 2017, the Company closed a brokered private placement 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 option 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.

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 for the year ended August 31, 2017 (2016: $1,214,773) and at August 31, 2017 had a deficit accumulated since its inception of $13,169,939 (2016: $11,300,662). The Company has a working capital balance of $2,703,148 as at August 31, 2017 (2016: $76,285). The Company requires additional funds to maintain its operations and developments beyond fiscal 2018. Management’s plans in this regard are to raise equity and debt financing as required, but therebusiness plans. There is no certainty that suchfuture equity or debt financing will be available or that it will be available at acceptable terms. Theterms and the outcome of these matters cannot be predicted at this time.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that haveis unpredictable. A lack of adequate funding may force us to reduce spending, curtail or are reasonably likely to have a currentsuspend planned programs or future effect onpossibly liquidate assets. Any of these actions could adversely and materially affect our business, cash flow, financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity,and potential prospects. The sale of additional equity may result in additional dilution to our stockholders. Entering into additional licencing agreements, collaborations, partnerships, alliances marketing, distribution, or licensing arrangements with third parties to increase our capital resources is also possible. If we do so we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.

The Company has evaluated whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern. As of August 31, 2022, the Company had cash on hand of approximately $5.8m to settle $200,000 current liabilities. The Company believes this is sufficient to fund our expected R&D and operating expenditures for twelve months proceeding the date of filing this report. We do not anticipate making any material capital expenditures orin the fiscal 2023 as we believe our current facilities and equipment are sufficient for the forthcoming twelve months proceeding the date of filing this report.

The Company’s working capital resources that are materialbalance decreased by approximately $5.5m due to stockholders.the lack of financing activities and lower revenue contributions to cash during the year ended August 31, 2022.

Operating Activities

Net cash used in operating activities was approximately $4.9m for the year ended August 31, 2022, compared with $4.0m during the same period in 2021. The increase in cash used in operating activities during fiscal 2022 was primarily driven by increased research and development programs, slight increases in office and administrative expenditures and significantly lower revenue.

Investing Activities

Net cash used in investing activities is attributable to increased spending on our intellectual property. During the year, four additional patents were granted.

Financing Activities

Net cash used in financing activities reflects payments made on the lease of our facilities.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordanceconformity with the accounting principles generally accepted in the United States of America.US GAAP. Preparing consolidated financial statements requires management to make estimates, judgements and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue, and expenses. TheseActual results may differ from these estimates.

Information about critical judgments in applying the accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is discussed below. Further details of the nature of these judgments, estimates and assumptions are affected by management’s application of accounting policies. We believe that understandingmay be found in 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 relatedrelevant notes 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,Stock-based compensation

We account for our stock-based compensation awards in accordance with the FASB issued ASU 2015-11, SimplifyingASC Topic 718, Compensation—Stock Compensation (“ASC 718”). This requires all stock-based payments to employees, including grants of employee stock options and modifications to existing agreements to be recognized in 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, resultsstatements of operations or cash flows.

In November 2015,and comprehensive loss based on their fair values. We use the FASB issued guidance that requires companiesBlack-Scholes option-pricing model to classify all deferred tax assets or liabilities as noncurrent ondetermine 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,options granted.

Compensation expense related to beour stock-based awards to employees, executives, directors and consultants have service-based vesting conditions and are 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 based on the grant date fair value over the termassociated service period of the lease, respectively. A lesseeaward, generally the vesting term. The vesting terms of each grant is also required to recorddetermined by our Board and typically have a right-of-use asset5-year contractual term.

The fair value estimation of options requires the input of subjective assumptions, including expected life of the option, stock price volatility, the risk-free interest rate, and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve monthsexpected dividends. The assumptions used in our Black-Scholes option-pricing model represent our best estimates involving numerous variables, uncertainties, assumptions, and the application judgment. They are inherently subjective. If any assumptions change, our stock-based compensation expense could be materially different in the future.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have 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 guidanceare reasonably likely to have a current or future material impacteffect on its consolidatedour financial statements.condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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 a “smaller reporting company”“Smaller Reporting Company”, we arethis 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, 20172022 and 2016,2021, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows and stockholders’ equity for the years ended August 31, 20172022 and 2016. 2021, and the related notes (collectively referred to as the “financial statements”).  In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Lexaria Bioscience Corp. as of August 31, 2022 and 2021, and the results of its operations and its cash flows for the years ended August 31, 2022 and 2021 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on 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. Anmisstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit includesof its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our 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.

In

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, referredtaken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to 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 flowswhich they relate.

We have not identified any critical audit matters for the years ended August 31, 20172022 and 2016 in conformity with accounting principles generally accepted in2021.

We have served as the United States of America.Company’s auditor since 2016.

LEXARIA BIOSCIENCE CORP.

CONSOLIDATED BALANCE SHEETS
SHEET

(Expressed in U.S. Dollars)

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

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LEXARIA BIOSCIENCE CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in U.S. Dollars, except number of shares)