Cautionary Note Regarding Forward Looking Statements



This Quarterly Report on Form 10-Q ("Form 10-Q") contains statements that are,
or may be considered to be, "forward-looking statements." Forward-looking
statements are neither historical facts nor assurances of future performance.
Instead, they are based on current beliefs, expectations or assumptions
regarding the future of the business, future plans and strategies, operational
results and other future conditions. All statements other than statements of
historical fact included in this Form 10-Q regarding the prospects of LexaGene
Holdings, Inc., ("LexaGene", the "Company" or "we"), the industry or its
prospects, plans, financial position or business strategy may constitute
forward-looking statements. In addition, forward-looking statements generally
can be identified by the use of forward-looking words such as "plans," "expects"
or "does not expect," "is expected," "look forward to," "budget," "scheduled,"
"estimates," "forecasts," "will continue," "intends," "the intent of," "have the
potential," "anticipates," "does not anticipate," "believes," "should," "should
not," or variations of such words and phrases that indicate that certain
actions, events or results "may," "could," "would," "might," or "will," "be
taken," "occur," or "be achieved," or the negative of these terms or variations
of them or similar terms. Furthermore, forward-looking statements may be
included in various filings that the Company makes with the SEC or press
releases or oral statements made by or with the approval of one of the Company's
authorized executive officers. Although the Company believes that the
expectations reflected in these forward-looking statements are reasonable, it
cannot assure you that these expectations will prove to be correct. These
forward-looking statements are subject to certain known and unknown risks and
uncertainties, as well as assumptions that could cause actual results to differ
materially from those reflected in these forward-looking statements. (All
capitalized and undefined terms used in this section shall have the same
meanings hereafter defined in this Quarterly Report on Form 10-Q.)

The following discussion and analysis of financial condition and results of
operations should be read in conjunction with, and is qualified in its entirety
by, the unaudited condensed consolidated financial statements and the
accompanying notes in this Form 10-Q and the sections entitled "Item 1A. Risk
Factors" and "Item 2. Financial Information" in our Annual Report on Form 10 for
the year ended February 28, 2022. Except for historical information, the
discussion in this section contains forward-looking statements that involve
risks and uncertainties, as discussed in the "Cautionary Note Regarding Forward
Looking Statements." Future results could differ materially from those discussed
below for many reasons, including the risks described in Item 1A-"Risk Factors"
in our Annual Report on Form 10 for the year ended February 28, 2022, and in
Part II, Item 1A-Risk Factors" of this Form 10-Q.

Management's Discussion & Analysis of LexaGene Holdings, Inc.


For purposes of this discussion, "LexaGene," "we," or the "Company" refers to
LexaGene Holdings, Inc. and its wholly-owned subsidiaries: LexaGene, Inc. and
Bionomics Diagnostics, Inc. The results herein have been prepared in accordance
with accounting principles generally accepted in the United States of America
("U.S. GAAP").

Amounts are presented in thousands of United States dollars, unless otherwise indicated.



Business Overview

LexaGene is a molecular diagnostics company that develops diagnostic systems for
pathogen detection and genetic testing for other molecular markers for on-site
rapid testing in veterinary diagnostics, and for use in open-access markets such
as food and water safety, clinical research, agricultural testing and
biodefense. The MiQLab system delivers excellent sensitivity, specificity, and
breadth of detection and can return results in approximately two hours. The
unique open-access feature is designed for custom testing so that end-users can
load their own real-time PCR assays onto the instrument to target any genetic
target of interest.

The Company's shares trade on the TSXV under the symbol LXG and on the OTCQB Venture Market in the United States under the symbol LXXGF.

Transition to US GAAP From IFRS



During the year ended February 28, 2022, the Company transitioned to US GAAP
from IFRS. As a result, the information related to the year ended February 28,
2021 has been recast to conform with US GAAP.

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Selected Financial Information



                                                 Three Months Ended November 30,        Nine Months Ended November 30,
                                                     2022                2021               2022               2021
Total revenues                                 $          42,912     $      48,309    $        117,886     $      88,934
Cost of revenues                               $         189,928     $     148,571    $        592,296     $     378,188

Selling, marketing and promotional expenses    $         167,316     $     546,886    $        629,848     $   1,736,549
General administrative expenses                $         470,999     $     544,054    $      1,424,242     $   1,607,115
Research and development expenses              $         887,336     $   1,506,024    $      3,357,090     $   4,709,756
Other income (expense)                         $         (5,688)     $       5,546    $        (5,688)     $      32,000
Net loss and comprehensive loss                $     (1,686,992)     $ (2,695,761)    $    (5,910,991)     $ (8,158,111)
Loss per common share                          $          (0.01)     $      (0.02)    $         (0.04)     $      (0.07)
Total assets                                   $       3,489,764     $   5,449,980    $      3,489,764     $   5,449,980
Long-term liabilities                          $         561,160     $     910,287    $        561,160     $     910,287
Working capital                                $         640,285     $   2,980,475    $        640,285     $   2,980,475

Three Months Ended November 30, 2022 Compared to Three Months Ended November 30, 2021



Revenue

The Company's revenue is derived from the sale of MiQLab Systems and its
consumables.

                    Three Months Ended November 30,       % Increase
                       2022                 2021          (Decrease)
Total revenues    $        42,912      $        48,309          (11) %


Revenues remained consistent from year to year. During the three months ended
November 30, 2022, the Company recognized revenue of $42,912 from product sales
as compared to $48,309 for revenues during the three months ended November 30,
2021 as the Company sold two units in both of the three-month periods.

Cost of Revenues


Cost of goods sold includes the cost of inventory sold and production costs
expensed. Direct and indirect production costs include direct labor, processing,
testing, packaging, quality assurance, shipping, production management and other
related expenses. The primary factors that can impact cost of goods sold on a
period-to-period basis include the volume of products sold, the mix of product
sold, transportation, and overhead allocations.

The components of cost of goods sold are as follows:



                                                        Three Months Ended

November 30, % Increase


                                                           2022                  2021          (Decrease)
Cost of revenues                                     $        189,928      $        148,571            28 %

Inventory expensed to cost of goods sold             $         44,338     

$         49,668          (11) %
Other production costs                                        145,590                98,903            47 %
Total                                                $        189,928      $        148,571            28 %



During the period ended November 30, 2022, the Company incurred an expense of
$189,928 in relation to the MiQLab System product line as compared to $148,571
for the same period in 2021. This increase of $41,357 is primarily the result of
the following items:

Wages and salaries increased to $120,643 during the three months ended November

· 30, 2022 compared to $79,752 in the same period of 2021. The increase is due to

the increase in the number of production staff.

The Company determined that one MiQLab System and its consumables were

· unrecoverable and expensed those material costs to cost of revenues. The


   Company made numerous attempts to collect the unit from a customer but was
   unable to do so.


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Gross Loss

The primary factors that can impact gross margins include the volume of products
sold, the mix of products sold, transportation costs and changes in inventory
costs.

Gross loss is as follows:



                 Three Months Ended November 30,        % Increase
                    2022                  2021          (Decrease)
Gross loss    $        147,016      $        100,262            47 %


Gross loss increased by 47% for the three months ended November 30, 2022
compared to 2021 caused by an increase in cost of goods sold and minimal changes
in revenue. An increase in cost of goods sold is due to an increase in a number
of manufacturing employees and the MiQLab System written off by the Company.

Selling, General and Administrative Expenses, and Research and Development

Total Selling, general, and administrative and research and development expenses
are as follows:

                                                        Three Months Ended November 30,       % Increase
                                                           2022                 2021          (Decrease)

Sales and marketing expenses                         $        167,316     $        546,886          (69) %
General and administrative expenses                           470,999              544,054          (13) %
Research and development expenses                             887,336      

     1,506,024          (41) %
Total                                                $      1,525,651     $      2,596,964          (41) %

Sales, marketing and promotional expense



Comparing the three months ended November 30, 2022 to the same period in 2021,
sales, marketing and promotional expenses decreased to $167,316 from $546,866.
This decrease of $379,570 in sales, marketing and promotional expenses is
primarily from the following items:

Salaries and wages associated with sales, marketing and promotional activities

decreased to $96,534 during the three months ended November 30, 2022, as

· compared to $381,589 for the same period in 2021. This decrease of $285,055 in

expense in salaries and wages is directly related to the decrease in headcount

year over year.

Marketing, advertising and promotional expenses decreased to $58,238 during the

three months ended November 30, 2022, from $131,950 for the same period in

· 2021. This decrease of $73,712 is related to the Company focusing on specific

major conferences during 2022 in addition to reducing the use of outside

marketing consultants in order to conserve capital.

General and administrative expenses

General and administrative expenses remained relatively consistent during the three months ended November 30, 2022 compared to the same period of 2021. However, there have been changes in the composition of these expenses as follows:

Professional fees expense increased to $189,308 in 2022, as compared to

$101,743 for the same period in 2021. This increase during the three months

· ended November 30, 2022, of $87,565 is directly related to the legal expenses

in connection with the convertible debenture, quarterly reviews and SEC filing

obligations due to the changes related to the Company's filing status.

Transfer agent and filing fees decreased by $19,840 in 2022 as compared to the

· same period in 2021. This decrease is primarily related to the filing fees

incurred during the three months ended November 30, 2021 in relation to the


   Short Form Base Shelf Prospectus that the Company had filed.


   Costs associated with investor relations decreased to $8,611 in 2022, as

compared to $110,776 for the same period in 2021. This decrease of $102,165 in

? expense for the three months ended November 30, 2022, as compared to same


   period in 2021, is due to the Company reducing its cash burn by reducing
   expenses for outside investor relation activities.


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Share-based compensation expense decreased to $107,556 in 2022, as compared to

$139,498 in 2021. This decrease of $31,942 in expense is from the decrease in

· the value of new options and restricted share units granted to employees as

compared to the same period in 2021 as well as forfeitures of the previously

granted options and RSUs due to employee departures.

Research and development expenses



Comparing the three months ended November 30, 2022, to the same period in 2021,
research and development expenses decreased to $887,336 from $1,506,024. This
decrease in expense of $618,688 in research and development expenses is
primarily from the following items:

Salaries and wages decreased to $630,764 for the three months ended November

· 30, 2022, compared to $886,232 for the three months ended November 30, 2021.

This decrease of $255,468 is directly related to the decrease in headcount


   year over year.


   For the three months ended November 30, 2022, share-based compensation

decreased to $30,785 as compared to $83,663 for the same period in 2021. This

decrease of $52,878 in expense is from the decrease in the value of new options

· and restricted share units granted to employees in addition to the forfeiture

of unvested stock options and unvested restricted share units previously

granted to employees that have left the Company during the three months ended

November 30, 2022.

MiQLab System materials decreased by $266,978 from $327,210 in 2021 to $60,232

for the three months ended November 30, 2022 in comparison to the same period

· in 2021. Lab administration and supplies decreased from $141,042 to $101,100.

These decreases were due to the Company's efforts to control costs to reduce

the Company's cash burn.

Net Loss and Comprehensive Loss

For the three months ended November 30, 2022, Net loss decreased by 38% and comprehensive loss decreased by 34% as compared to the same period in 2021. Total net loss and comprehensive loss is as follows:



                         Three Months Ended November 30,       % Increase
                            2022                 2021          (Decrease)
Net loss              $      1,678,454     $      2,691,680           (38) %

Comprehensive loss    $      1,686,992     $      2,695,761           (37) %

Nine Months Ended November 30, 2022 Compared to Nine Months Ended November 30, 2021



Revenue

The Company's revenue is derived from the sale of MiQLab Systems and its
consumables.

                     Nine Months Ended November 30,       % Increase
                        2022                 2021          (Decrease)
Total revenues    $        117,886      $       88,934             33 %


The increase of 33% in revenue recognized during the nine months ended November
30, 2022 is largely due to the Company selling five units and consumables during
the nine months ended November 30, 2022 compared to four units and consumables
in the same period of 2021.

Cost of Revenues


Cost of goods sold include the cost of inventory sold and production costs
expensed. Direct and indirect production costs include direct labor, processing,
testing, packaging, quality assurance, shipping, production management and other
related expenses. The primary factors that can impact cost of goods sold on a
period-to-period basis include the volume of products sold, the mix of product
sold, transportation, and overhead allocations.

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The components of cost of goods sold are as follows:



                                                        Nine Months Ended

November 30, % Increase


                                                          2022                 2021          (Decrease)
Cost of revenues                                     $       592,296      $       378,188             57 %

Inventory expensed to cost of goods sold             $       142,149      $

       88,048             61 %
Other production costs                                       450,147              290,140             55 %
Totals                                               $       592,296      $       378,188             57 %



During the nine month period ended November 30, 2022, the Company incurred an
expense of $592,296 in relation to the MiQLab System product line as compared to
$378,188 for the same period in 2021. This increase of $214,108 is primarily the
result of the following items:

Costs of revenues increased during the nine months ended November 30, 2020 as

· compared to the same period in 2021. This increase is directly related to the

increase in MiQLab Systems sold as well as the increase in costs related to raw

materials caused by inflation as compared to the same period in 2021.

Salaries and wages associated with manufacturing units and consumables as well

as costs incurred from the installation of units increased to $346,565 during

· the nine months ended November 30, 2022, as compared to $231,103 for the same

period in 2021. This increase of $115,462 in expense in salaries and wages is

directly related to the increase in manufacturing headcount as compared to the


   same period in 2021.


Gross Loss

The primary factors that can impact gross margins include the volume of products
sold, the mix of products sold, transportation costs and changes in inventory
costs.

Gross loss is as follows:



                 Nine Months Ended November 30,       % Increase
                   2022                 2021          (Decrease)
Gross loss    $       474,410      $       289,254             64 %

Gross loss increased 64% for the nine months ended November 30, 2022 compared to 2021. This is due to an increase in manufacturing salaries and wages.

Selling, General and Administrative Expenses, and Research and Development



Total Selling, general, and administrative and research and development expenses
are as follows:

                                                        Nine Months Ended November 30,        % Increase
                                                           2022                 2021          (Decrease)
Sales, marketing and promotional expenses            $        629,848     $      1,736,549           (64) %
General and administrative expenses                         1,424,242            1,607,115           (11) %
Research and development expenses                           3,357,090      

     4,709,756           (29) %
Totals                                               $      5,411,180     $      8,053,420           (33) %


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Sales, marketing and promotional expenses



Comparing the nine months ended November 30, 2022 to the same period in 2021,
sales, marketing and promotional expenses decreased to $629,848 from $1,736,549.
This decrease of $1,106,701 in sales, marketing and promotional expenses is
primarily from the following items:

Salaries and wages associated with sales, marketing and promotional activities

decreased to $403,700 during the nine months ended November 30, 2022, as

· compared to $1,157,571 for the same period in 2021. This decrease of $753,871


   in expense in salaries and wages is directly related to the decrease in
   headcount year over year.

Marketing, advertising and promotional expenses decreased to $200,433 during

the nine months ended November 30, 2022, from $509,670 for the same period in

· 2021. In the nine-month period ended November 30, 2021, the Company engaged

several outside marketing consultants for a marketing campaign and other work,

which was not repeated in the same period of 2022.

Share-based compensation decreased by $41,594 during the period ended November

? 30, 2022 compared to the same period in 2021 due to the lower value of awards


   granted in 2022 and forfeitures of awards granted in previous years.

General and administrative expenses



Comparing the nine months ended November 30, 2022, to the same period of 2021,
general and administrative expenses decreased to $1,424,242 from $1,607,115.
This decrease in expense of $182,873 in general and administrative activities
are primarily from the following items:

Share-based compensation expense decreased to $330,910 in 2022, as compared to

· $585,289 in 2021. This decrease of $254,379 in expense is from the decrease in

the value of new options and restricted share units granted to employees as

compared to the same period in 2021.

Costs associated with investor relations decreased to $25,614 in 2022, as

compared to $257,040 for the same period in 2021. This decrease of $231,426 in

· expense for the nine months ended November 30, 2022, as compared to same period

in 2021, is due to the Company reducing its cash burn by reducing expenses for

outside investor relation activities.

Transfer agent and filing fees decreased by $46,015 to $20,082 during the nine

· months ended November 30, 2022 as compared to the same period in 2021. This

decrease is mainly attributed to costs associated with the filing of its Short

Form Base Shelf Prospectus in 2021.

During the nine months ended November 30, 2022, professional fees increased to

$591,889 from $258,194 as compared to the same period in 2021. This increase of

$333,695 was a result of additional legal, accounting and other professional

? services required in relation to the Company's filings of its Form 10 and the

amendment to Form 10, SEC filing requirements, as well as additional costs

incurred in relation to the convertible debenture that the Company entered into

during the nine months ended November 30, 2022.

Research and development expenses



Comparing the nine months ended November 30, 2022, to the same period in 2021,
research and development expenses decreased to $3,357,090 from $4,709,756. This
decrease in expense of $1,352,666 in research and development expenses is
primarily from the following items:

Salaries and wages decreased to $2,146,302 for the nine months ended November

· 30, 2022, compared to $2,699,286 for the nine months ended November 30, 2021.

This decrease of $552,984 is directly related to the decrease in headcount

year over year.

For the nine months ended November 30, 2022, share-based compensation decreased

to $119,738 as compared to $363,337 for the same period in 2021. This decrease

of $243,599 in expense is from the decrease in the value of new options and

· restricted share units granted to employees, as well as the forfeiture of

unvested stock options and unvested restricted share units previously granted


   to employees that have left the Company during the nine months ended November
   30, 2022.


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Materials used in research and development decreased to $415,735 during the

nine-month period ended November 30, 2022 compared to $999,528 in the same

· period of 2021. This decrease of $583,793 is related to the Company

prioritizing research and development projects related to the MiQLab System

product line as compared to materials purchased and optimization required for

the FDA EUA-related projects in 2021.

Lab administration and supplies increased to $428,564 in 2022 as compared to

? $395,768 for the same period in 2021. This increase of $32,796 was mainly

attributed to the increase in costs associated with inflationary increases in

chemistries, buffers and other materials used within the Company's labs.

Net Loss and Comprehensive Loss

For the nine months ended November 30, 2022, Net loss decreased by 29% and comprehensive loss decreased by 27% as compared to the same period in 2021. Total net loss and comprehensive loss is as follows:



                         Nine Months Ended November 30,        % Increase
                            2022                 2021          (Decrease)
Net loss              $      5,891,278     $      8,310,674           (29) %

Comprehensive loss    $      5,910,991     $      8,158,111           (27) %

Liquidity, Capital Resources and Going Concern



The Company's working capital as of November 30, 2022 was $640,285 including
cash of $464,131 compared to a working capital of $5,676,454 including cash of
$4,722,710 as of February 28, 2022.

The Company's business currently does not generate positive cash flows from
operations. As of November 30, 2022, the Company had an accumulated deficit of
$50,339,236 since inception. Management's plans to meet the Company's current
and future obligations are to raise capital in equity and private debt markets,
private placements, rely on the financial support of its shareholders and
related parties as well as to further expand commercial sales of the MiQLab
System. There can be no assurance that the Company will be successful in raising
that additional capital or that such capital, if available, will be on terms
that are acceptable to the Company. If the Company is unable to raise sufficient
additional capital, the Company may be compelled to reduce the scope of its
operations and planned capital expenditures.

The Company believes that its cash of $464,131 as of November 30, 2022 will not
be sufficient to fund its current operating plan at least one year from issuance
of these condensed financial statements unless additional funds are raised.
Certain elements of our operating plan cannot be considered probable.

These conditions raise substantial doubt regarding the Company's ability to
continue as a going concern for a period of one year after the date that the
financial statements are issued. Management has concluded the likelihood that
its plan to successfully obtain sufficient funding from one or more of these
sources or adequately reduce expenditures, while reasonably possible, is less
than probable. Accordingly, the Company has concluded that substantial doubt
exists about the Company's ability to continue as a going concern for a period
of at least 12 months from the date of issuance of these condensed consolidated
financial statements. See Note 1 of the Condensed Consolidated Financial
Statements.

The Company is subject to a number of risks similar to other early commercial
stage life science companies, including, but not limited to commercially
launching the Company's products, development and market acceptance of the
Company's product candidates, development by its competitors of new
technological innovations, protection of proprietary technology, and raising
additional capital. The Company's ability to fund operating expenses and capital
expenditures will depend on its future operating performance, the ability to
further develop its genetic analyzer, the MiQLab System, which will be affected
by general economic conditions, financial, regulatory, and other factors beyond
the Company's control (See "Risk Factors").

Cash Flows



The Company's working capital as of November 30, 2022, was $640,285 including
cash of $464,131 compared to a working capital of $2,980,475 including cash of
$1,715,440 as of November 30, 2021.

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The Company's business currently does not generate positive cash flows from
operations. On November 30, 2022, the Company had an accumulated deficit of
$50,339,236 since inception. The Company is reliant on equity financings to
provide the necessary cash to continue the commercialization of the MiQLab
System described in the Summary of Operations, and generating cash flow from
operations in the future. These factors form a material uncertainty, which may
raise significant doubt about the Company's ability to continue as a going
concern.

Cash from Operating Activities

Net cash used in operating activities for the nine months ended November 30, 2022 and for the same period in 2021 were as follows:



                                                        Nine Months Ended

November 30, % Increase


                                                            2022                 2021         (Decrease)
Cash used in operating activities                    $      5,063,871     $      7,809,568           (35) %


The decrease of $2,745,697 in the amount of cash used was primarily due to the
Company significantly reducing its expenses during the period, purchasing less
inventory in 2022 and the timing of repayment of accounts payable.

Cash from Investing Activities

Net cash used in investing activities for the nine months ended November 30, 2022 and for the same period in 2021 were as follows:



                                                          Nine Months Ended

November 30, % Increase


                                                        2022                    2021               (Decrease)
Cash used in investing activities                    $         -       $

(17,860) (100) %

During the period ended November 30, 2021, the Company purchased $17,860 of property and equipment compared to none purchased during the same period of 2022. As a result, no cash was used in investing activities of the nine months ended November 30, 2022, compared to $17,860 used in the same period of 2021.

Cash Provided by (Used in) Financing Activities

Net cash provided by (used in) financing activities for the nine months ended November 30, 2022 and for the same period in 2021 were as follows:



                                                        Nine Months Ended

November 30, % Increase


                                                          2022                2021           (Decrease)
Cash provided by (used in) financing activities      $      809,491     $       (239,117)           439 %


Cash provided by financing activities during the period ended November 30, 2022
increased by 467% or $1,048,608 compared to the same period of 2021, due to cash
obtained through a convertible note in the amount of $900,000 and  $263,295
generated through warrant exercises by warrant holders.

Critical Accounting Policies and Estimates



Note 2 to the Condensed Consolidated Financial Statements of the Company for
2022 describes the significant accounting estimates and policies used in
preparation of the consolidated financial statements. During the period ended
November 30, 2022, the Company early adopted ASU 2020-06. There have been no
other significant changes in the company's critical accounting policies during
the nine months ended November 30, 2022.

Recent Accounting Pronouncements

Note 2 to the Condensed Consolidated Financial Statements describes recent accounting pronouncements under the header Recent Accounting Standards.

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