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, you can identify forward-looking statements by terminology
such as "may", "will", "should", "could", "targets", "goal", "expects", "plans",
"anticipates", "believes", "estimates", "predicts", "potential" or "continue" or
the negative of these terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, uncertainties and
other factors, including the risks in the section entitled "Risk Factors" set
forth in Item 1(A) in 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
Company and Business Overview
We are a bioscience intellectual property (IP) research, development and
licensing company for our patented lipid nutrient infusion DehydraTECH™
technology (the "Technology") and were incorporated in 2004 in
The Company's food sciences activities include the development of our
proprietary nutrient infusion technologies for the production of functional
foods, and the production of enhanced food products under our consumer product
brands, ViPova™, Lexaria Energy™, TurboCBD™ and ChrgD+™. The Company's
Technology is believed to improve taste, rapidity and delivery of bioactive
compounds that include cannabinoids, vitamins, Non-Steroidal Anti-Inflammatory
Drugs (NSAIDs), nicotine and other molecules compared to what is possible
without lipophilic enhancement technology. All of
As at
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Our Current Business
Our Company's business plan is currently focused on the development 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 continue to investigate national and international opportunities for development and distribution of the Company's enhanced functional food and supplement product offerings; to investigate expansions and additions to our intellectual property portfolio; and to search for additional opportunities in alternative health sectors. This includes the acquisition or development of intellectual property if and when we believe it is advisable to do so.
Our current patent portfolio includes patent family grants relating to: Infused
Food and Beverage Compositions and Methods of Use Thereof, pertaining to
To date, the following patents have been awarded:
Issued Patent # Patent Issuance Date Patent Family
US 9,474,725 B1 10/25/2016
US 9,839,612 B2 12/12/2017
US 9,972,680 B2 5/15/2018
US 9,974,739 B2 5/22/2018
US 10,084,044 B2 9/25/2018 Food and Beverage Compositions
US 10,103,225 B2 10/16/2017 Infused With
US 10,381,440 8/13/19 Lipophilic Active Agents and
US 10,374,036 8/06/19 Methods of Use Thereof
AUS 2015274698 6/15/2017
AUS 2017203054 8/30/2018
AUS 2018202562 8/30/2018
AUS 2018202583 8/30/2018
AUS 2018202584 1/10/2019
AUS 2018220067 7/30/2019
AUS 2016367036 7/30/2019 Methods for Formulating Orally
Ingestible Compositions
Comprising Lipophilic Active
Agents
AUS 2016367037 8/15/2019 Stable Ready-to-Drink Beverage
Compositions Comprising
Lipophilic Active Agents
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. We have filed for patent protection of our Technology for additional compounds such as phosphodiesterase inhibitors, human hormones such as estrogen and testosterone and more.
During the period ended
The Company closed a non-brokered private placement of unregistered securities
for a total of 1,823,745 Units priced at
The Units were issued pursuant to registration exemptions either by way of the investor being an accredited investor as evidenced by the completion of an accredited investor certification, pursuant to Regulation D, Rule 506 (b), or a person representing that he is not a US person or acting on behalf of a US Person, pursuant to Regulation S, Rule 903, who purchased the securities in an offshore transaction and will bear the required regulatory hold period legends.
Subsequent toNovember 30, 2019 , 110,000 options were exercised for a total of$11,000 . [[Image Removed]] Page 16 of 24 Table of Contents Research and Development
The Company's plans to include in vitro absorption tests of our patented technology of molecules such as: Vitamin E, Ibuprofen, and Nicotine allowed us to perform testing on Nicotine with positive results. Our plan to conduct our first ever in vivo absorption tests on CBD also yielded positive results. Ongoing testing plans are proceeding to further define molecular compatibility, absorption rates, timing and viable formats of delivery.
The Company continually focuses on new R&D programs to investigate the potential of additional commercial applications for its technology. These include, but are not limited to ongoing programs to explore methods to integrate nanoemulsification chemistry techniques together with its technology and to further enhance intestinal bioabsorption rates with its technology, as well as ongoing programs to expand the types and breadth of product form factors into which its technology can be applied. Depending on how many of these tests are 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 re-direct research into specific avenues that offer the most reward.
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 generally accepted accounting principles used in
Capital Assets
Capital assets are stated at cost less accumulated depreciation and depreciated using the straight-line method over their useful lives or by units of production.
Patents
Capitalized patent costs represent legal costs incurred to establish patents. When patents reach a mature stage, any associated legal costs are comprised mostly of maintenance fees and are expensed as incurred. Capitalized patent costs are amortized on a straight-line basis over the remaining life of the patent.
Revenue Recognition Product Revenue
Revenue from the sale of alternative health products is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured, which typically occurs upon shipment. The Company reports its sales net of the amount of actual sales returns. Sales tax collected from customers is excluded from net sales.
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Licensing Revenue from Intellectual Property
We recognize revenue for license fees at a point in time following the transfer of our intellectual property, our patented lipid nutrient infusion technology DehydraTECH for infusing APIs, to the licensee, which typically occurs on delivery of documentation.
Usage Fees from Intellectual Property
We recognize revenue for usage fees when usage of our DehydraTECH intellectual property occurs by licensees infusing an API into one or more of their product lines for sale.
Going Concern
We have suffered recurring losses from operations. The continuation of our Company as a going concern is dependent upon our Company attaining and maintaining profitable operations and/or raising additional capital. The financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our Company discontinue operations. The recurring losses from operations and net capital deficiency raise substantial doubt about the Company's ability to continue as a going concern.
Results of Operations for our Period Ended
Our net loss and comprehensive loss and the changes between those periods for the respective items are summarized as follows:
PERIOD ENDED PERIOD ENDED
November 30 November 30
2019 2018 Change
Revenue $ 62,082 $ 22,209 $ 39,873
General and administrative 978,992 721,442 257,550
Consulting fees & Employees 571,389 242,991 328,398
Legal and professional 52,355 96,652 (44,297 )
Net Loss $ (924,763 ) $ (701,391 ) $ (223,372 )
Revenue
Licensing revenues of
Increases in revenues are expected during the 2020 calendar year.
Our licensing revenues consist of IP licensing fees for the transfer of the Technology at the signing of definitive agreements for the Technology. The additional licensing fees include payments due upon transfer of the Technology and installment payments that are receivable within 12 months (Note 7).
During the period ended
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General and Administrative
Our general and administrative expenses increased by
Interest Expense
Interest expense for the period ended
Consulting fees
Our consulting fees increased by
Legal and Professional Fees
Our professional fees decreased by
Liquidity and Financial Condition
November 30 August 31
Working Capital 2019 2019
Current assets $ 1,911,485 $ 1,818,829
Current liabilities $ (130,229 ) $ (184,507 )
Net Working Capital $ 1,781,256 $ 1,634,322 The Company's working capital balance decrease during the year was limited due to exercises of outstanding options and warrants and the private placement (Note 12) completed during the year. The Company maintained a positive and relatively strong working capital position throughout the period.
November 30 November 30
Cash Flows 2019 2018
Cash flows (used in) provided by operating
activities $ (762,845 ) $ (564,314 )
Cash flows (used in) provided by investing
activities $ (5,710 ) $ (167,200 )
Cash flows provided by financing activities $ 816,729 $ 1,649,190
Decrease in cash $ 48,174 $ 917,676
Operating Activities
Net cash used in operating activities was
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Investing Activities
Net cash used in investing activities was
Financing Activities
Net cash provided from financing activities was
Liquidity and Capital Resources
We have accumulated a large deficit since inception that has primarily resulted from executing our business plan including research and development expenditures we have made in seeking to identify and develop our intellectual property patents for licensing and product creation. We expect to continue to incur losses for at least the short term.
To date, we have obtained cash and funded our operations primarily through equity financings and limited amounts from revenue generation while our licensees ramp up production and expansions. We expect to continue to evaluate various funding alternatives on an ongoing basis as needed to maintain operations, to continue our research programs and to expand our patent portfolio. If we determine it is advisable to raise additional funds, there is no assurance that adequate funding will be available to us or, if available, that such funding will be available on terms that we or our stockholders view as favorable.
Short Term Liquidity
At
Long Term Liquidity
It will require substantial cash to achieve our objectives for developing and patenting our intellectual property across all applicable market and industry segments. This process typically takes many years and potentially millions of dollars for each segment. We will need to obtain significant funding from existing or new relationships, such as our research program with the Altria Group, increasing revenue streams or from other sources of liquidity such as the sale of equity, issuance of debt or other transactions.
The exact requirements will vary depending on the results of research programs and the requirements of each industry segment that we pursue. Pursuit of each segment will be prosecuted or curtailed based on available sources of cash with which to execute individual segment business plans. The requirements will also be affected by transactions with existing or new relationships and the depth of regulatory requirements in each segment for compliance required to approve our IP, to market and license it. These changes to requirements and transactions may impact our liquidity as well as affect our expenses if, for example, regulatory requirements necessitated additional testing incurring additional research time and costs and potentially delaying licensing our IP for a segment.
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