LEXARIA BIOSCIENCE CORP. Cautionary Note Regarding Forward-Looking Statements
This quarterly report contains forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. Any statements
contained herein that are not statements of historical fact may be
forward-looking statements. These statements relate to future events or our
future financial performance. Any forward-looking statements are based on our
present beliefs and assumptions as well as the information currently available
to us. In some cases, forward-looking statements are identified by terminology
such as "may", "will", "should", "could", "targets", "goal", "expects", "plans",
"anticipates", "believes", "estimates", "predicts", "potential" or "continue" or
the negative of these terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, uncertainties and
other factors, including the risks in the section entitled "Risk Factors" set
forth in Item 1(A) in our annual report on Form 10-K, as filed with the
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We caution you not to place undue reliance on any forward-looking statements as they speak only as of the date on which such statements were made, and we undertake no obligation to update any forward-looking statement or to reflect the occurrence of an unanticipated event. New factors may emerge and it is not possible to predict all factors that may affect our business and prospects. Further, management cannot assess the impact of each factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Our unaudited interim consolidated financial statements are stated in
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in US$. All references to "C$" refer to Canadian dollars and all references to "common shares" and "shares" refer to the common shares in our capital stock, unless otherwise indicated. The terms "Lexaria" "we", "us", "our" and "Company" mean the Company and/or our subsidiaries, unless otherwise indicated.
The following discussion should be read in conjunction with our condensed
financial statements and accompanying notes in this quarterly report on Form
10-Q, and our audited financial statements with notes in our annual report on
Form 10-K for the year ended
Overview
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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
The Company continues to engage in small R&D projects and B2B formulation for third parties who are evaluating our technology for use in their product.
Patents
Our current patent portfolio includes patent family applications or grants pertaining to our method of improving bioavailability and taste, and the use of DehydraTECH as a delivery platform for a wide variety of Active Pharmaceutical Ingredients ("APIs") including, but not limited to, fat soluble vitamins; anti-viral drugs; phosphodiesterase inhibitors; human hormones; regulated cannabinoids, and nicotine and its analogs.
We continue to pursue patent protection in more than 40 countries around the world as vigorously as we are able, since the successful granting of more of those applications could lead to material increases in shareholder value. The Company currently has over 50 patent applications pending worldwide.
The Company has patents issued in
Issued Patent # Patent Family US 9,474,725 B1 US 9,839,612 B2 US 9,972,680 B2 US 9,974,739 B2 US 10,084,044 B2 US 10,103,225 B2 US 10,381,440 US 10,374,036 #1 Food and Beverage Compositions Infused With US 10,756,180 Lipophilic Active Agents and Methods of Use Thereof AU 2015274698 AU 2017203054 AU 2018202562 AU 2018202583 AU 2018202584 AU 2018220067 EP 3164141 JP 6920197 AU 2016367036 #2 Methods for Formulating Orally Ingestible JP 6963507 Compositions Comprising Lipophilic Active Agents MX 388 203 B AU 2016367037 IN 365864 #3 Stable Ready-to-Drink Beverage Compositions JP 6917310 Comprising Lipophilic Active Agents MX390001 CDN 3093414 #6 Transdermal and/or Dermal Delivery of Lipophilic Active Agents JP 7112510 #7 Lipophilic Active Agent Infused Compositions with Reduced Food Effect AU 2019256805 #8 Compositions Infused with Nicotine Compounds and Methods of Use Thereof US 11,311,559 #18 Compositions and Methods for Enhanced Delivery of Antiviral Agents Page 18 of 28
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Table of Contents Research & Development
The FDA has provided a written response from our pre-IND meeting regarding
DehydraTECH-CBD for the treatment of hypertension and has agreed with
During the quarter ended
devote an increasing proportion of our resources and focus towards pharmaceutical applications.
The first results of our hypertension study HYPER-H21-4 were announced on
On
On
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On
On
Impact of COVID-19
The COVID-19 pandemic continues to present uncertainty and unforecastable new risks to the Company and its' business plan. To date, we have not experienced a material impact on our financial statements, impairments of any of our assets or any major business disruptions, including with our vendors.
We have made modifications to our normal operations including requiring team members to work remotely on a staggered basis. To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel. At this time, these measures will continue in force for the near term.
We will continue to actively monitor the rapidly evolving situation related to COVID-19 and may take further actions that alter our operations, including those that may be required by federal, state, provincial, or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business. We do not know when, or if, it will become practical to relax or eliminate some or all these measures entirely.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Estimates
Our consolidated financial statements and accompanying notes are prepared in
accordance with US GAAP. These accounting principles require management to make
certain estimates, judgments and assumptions that affect the reported amounts of
assets, liabilities, revenue, and expenses during the periods reported. Based on
information available to management at the time, these estimates, judgments and
assumptions are considered reasonable. We believe that understanding the basis
and nature of the estimates, judgments and assumptions involved with the
following aspects of our financial statements is critical to an understanding of
our financials. For a discussion of our critical accounting estimates, please
read Note 4. Estimates and Judgements as found in the financial statements in
our Annual Report on Form 10-K for the year ended
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Table of Contents Capital Assets
Capital assets, consisting of property and equipment are stated at cost less accumulated depreciation and depreciated using the straight-line method over their useful lives or otherwise by units of production.
Patents
Capitalized patent costs represent legal costs incurred to establish US patents.
All other patent costs are expensed as incurred. When US patents reach a mature
stage, any associated legal costs are typically maintenance fees and therefore
expensed as incurred. Capitalized patent costs are amortized on a straight-line
basis over the remaining life of the patent. In the period ended
Revenue Recognition
Licensing revenue from intellectual property
Our revenues from licenses that grant the right to access our intellectual property, which we consider symbolic licenses of IP, are recognized over time following the transfer and use of our patented infusion technology DehydraTECH . Royalty revenues are recognized in the period in which our licensees sell the related products, which in certain cases may require us to estimate our royalty revenue.
Usage fees from intellectual property
We recognize usage fees from B2B clients in the period in which the counterparty completes the manufacturing of products which incorporate DehydraTECH enabled APIs. We generally recognize revenue when we have satisfied all contractual obligations and are reasonably assured of collecting the resulting receivable. We are often entitled to bill our customers and receive payment from our customers in advance of recognizing the revenue.
Product revenue
We generally recognize revenue when we have satisfied all contractual obligations and are reasonably assured of collecting the resulting receivable. We are often entitled to bill our customers and receive payment from our customers in advance of recognizing the revenue.
Cost of sales
Cost of sales includes all expenditures incurred in bringing the goods to the point of sale This includes third-party manufacturing and handling costs, direct costs of the raw material, inbound freight charges, warehousing costs, and applicable overhead expenses.
Funding Requirements
We anticipate that our expenditures will increase in connection with our ongoing R&D program, specifically with respect to our animal and human clinical trials of our DehydraTECH formulations for the purposes of treating hypertension, dementia and diabetes. As we move forward with our Investigational New Drug application with the FDA, we anticipate that our expenditures will further increase and accordingly, we expect to incur increased operating losses and negative cash flows for the foreseeable future.
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Through
The continuation of
The recurring losses from operations and net negative cash flows from operation
raise substantial doubt about the Company's ability to continue as a going
concern.. As of the issuance date of these consolidated interim financial
statements, we expect our positive working capital of approximately
On
Based on our existing working capital and access to an ATM offering, as
disclosed above, management's plans to improve cash flows, as disclosed above
management believes the Company has sufficient working capital to satisfy the
Company's estimated liquidity needs for the next 12 months. Because of the above
factors, the Company believes that this alleviates the substantial doubt in
connection with the Company's ability to continue as a going concern. However,
there is no assurance that management's plans will be successful due to the
current economic climate in
Results of Operations for our Period Ended
Our net loss and comprehensive loss for the three months ended and the changes between those periods for the respective items are summarized as follows:
Three Months Ended November 30, November 30,
2022 2021 Change
$ $ $
Revenue 101,476 13,880 87,596
Research and development 829,489 458,709 370,780
Consulting fees & salaries 321,074 738,111 (417,037 )
Legal and professional 94,482 141,607 (47,125 )
Other general and administrative 609,942 673,365 (63,423 )
Net Loss (1,769,306 ) (2,003,482 ) (234,176 )
Revenue
Fees from intellectual property licencing increased by
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Table of Contents Research and Development
Expenditures on R&D increased by
General and Administrative
Our other general and administrative expenses decreased overall by
Consulting Fees and Salaries
Consulting fees and salaries decreased by
Legal and Professional Fees
Our professional fees decreased by
Liquidity and Financial Condition
Working Capital November 30, August 31,
2022 2022
$ $
Current assets 5,359,370 6,977,516
Current liabilities (281,520 ) (194,036 )
Net Working Capital 5,077,850 6,783,480
Cash Flows November 30,
2022 2021
$ $Cash flows used in operating activities (1,234,109 ) (1,166,324 ) Cash flows used in investing activities (34,842 ) (58,215 ) Cash flows used in financing activities (11,204 ) (10,987 ) Decrease in cash
(1,280,155 ) (1,235,526 )
Operating Activities
Net cash used in operating activities increased by
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Table of Contents Investing Activities
Net cash from investing activities decreased by
Financing Activities
The change in net cash provided from financing activities was immaterial.
Liquidity and Capital Resources
We have incurred net losses of approximately
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 will not be sufficient to complete the full development, testing and commercialization of an FDA approved product candidate. To achieve this objective, we will require substantial funding.
On
We may also offer securities in response to market conditions or other circumstances if we believe such a plan of financing is required to advance the Company's business plans. There is no certainty that future equity or debt financing will be available or that it will be at acceptable terms and the outcome of these matters is unpredictable. A lack of adequate funding may force us to reduce spending, curtail or suspend planned programs or possibly liquidate assets. Any of these actions could adversely and materially affect our business, cash flow, financial condition, results of operations, 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 favourable 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
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