Company Quick10K Filing
Lexaria Bioscience
Price0.87 EPS-0
Shares81 P/E-16
MCap70 P/FCF-23
Net Debt-2 EBIT-4
TEV68 TEV/EBIT-16
TTM 2019-05-31, in MM, except price, ratios
10-Q 2020-11-30 Filed 2021-01-14
S-1 2020-11-20 Public Filing
10-K 2020-08-31 Filed 2020-10-15
S-1 2020-06-03 Public Filing
10-Q 2020-05-31 Filed 2020-06-29
10-Q 2020-02-29 Filed 2020-04-03
10-Q 2019-11-30 Filed 2020-01-09
10-K 2019-08-31 Filed 2019-11-14
10-Q 2019-05-31 Filed 2019-07-08
10-Q 2019-02-28 Filed 2019-04-15
10-Q 2018-11-30 Filed 2019-01-11
10-K 2018-08-31 Filed 2018-11-14
10-Q 2018-05-31 Filed 2018-07-13
10-Q 2018-02-28 Filed 2018-04-12
10-Q 2017-11-30 Filed 2018-01-12
10-K 2017-08-31 Filed 2017-11-27
10-Q 2017-05-31 Filed 2017-07-14
10-Q 2017-02-28 Filed 2017-04-14
10-Q 2016-11-30 Filed 2017-01-13
10-K 2016-08-31 Filed 2016-11-29
10-Q 2016-05-31 Filed 2016-07-13
10-Q 2016-02-29 Filed 2016-04-13
10-Q 2015-11-30 Filed 2016-01-08
10-K 2015-08-31 Filed 2015-11-27
10-Q 2015-05-31 Filed 2015-07-14
10-Q 2015-02-28 Filed 2015-04-14
10-Q 2014-11-30 Filed 2015-01-14
10-Q 2014-07-31 Filed 2014-09-11
10-Q 2014-04-30 Filed 2014-06-12
10-Q 2014-01-31 Filed 2014-03-12
10-K 2013-10-31 Filed 2014-01-24
10-Q 2013-07-31 Filed 2013-09-10
10-Q 2013-04-30 Filed 2013-06-12
10-Q 2013-01-31 Filed 2013-03-13
10-K 2012-10-31 Filed 2013-01-29
10-Q 2012-07-31 Filed 2012-09-12
10-Q 2012-04-30 Filed 2012-06-07
10-Q 2012-01-31 Filed 2012-03-13
10-K 2011-10-31 Filed 2012-01-30
10-Q 2011-07-31 Filed 2011-09-14
10-Q 2011-04-30 Filed 2011-06-13
10-Q 2011-01-31 Filed 2011-03-15
10-K 2010-10-31 Filed 2011-01-31
10-Q 2010-07-31 Filed 2010-09-07
10-Q 2010-04-30 Filed 2010-06-01
10-Q 2010-01-31 Filed 2010-03-15
10-K 2009-10-31 Filed 2010-01-20
8-K 2020-11-18
8-K 2020-11-05
8-K 2020-08-07
8-K 2020-07-08
8-K 2020-06-29
8-K 2020-06-23
8-K 2020-05-04
8-K 2020-03-19
8-K 2020-02-28
8-K 2020-01-14
8-K 2020-01-09
8-K 2019-11-28
8-K 2019-11-13
8-K 2019-08-27
8-K 2019-08-14
8-K 2019-08-01
8-K 2019-07-23
8-K 2019-07-11
8-K 2019-06-20
8-K 2019-06-04
8-K 2019-05-15
8-K 2019-04-29
8-K 2019-04-15
8-K 2019-04-05
8-K 2019-03-20
8-K 2019-01-28
8-K 2019-01-15
8-K 2019-01-15
8-K 2018-12-14
8-K 2018-12-07
8-K 2018-11-26
8-K 2018-11-13
8-K 2018-10-31
8-K 2018-10-16
8-K 2018-10-10
8-K 2018-09-07
8-K 2018-08-30
8-K 2018-08-07
8-K 2018-07-31
8-K 2018-07-03
8-K 2018-06-29
8-K 2018-06-20
8-K 2018-05-28
8-K 2018-05-23
8-K 2018-04-27
8-K 2018-04-25
8-K 2018-04-17
8-K 2018-04-11
8-K 2018-03-23
8-K 2018-03-20
8-K 2018-03-13
8-K 2018-02-27
8-K 2018-02-02
8-K 2018-01-25
8-K 2018-01-17
8-K 2018-01-08

LXRP 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits, Financial Statement Schedules
EX-31.1 lxrp_ex311.htm
EX-31.2 lxrp_ex312.htm
EX-32.1 lxrp_ex321.htm
EX-32.2 lxrp_ex322.htm

Lexaria Bioscience Earnings 2020-11-30

Balance SheetIncome StatementCash Flow
4.93.92.92.01.00.02012201420172020
Assets, Equity
0.2-0.1-0.4-0.6-0.9-1.22013201520172020
Rev, G Profit, Net Income
2.92.11.30.4-0.4-1.22012201420172020
Ops, Inv, Fin

10-Q 1 lxrp_10q.htm FORM 10-Q lxrp_10q.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended November 30, 2020

 

or

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from [  ] to [  ]

 

Commission file number

 

LEXARIA BIOSCIENCE CORP.

(Exact name of registrant as specified in its charter)

 

Nevada

 

20-2000871

State or other jurisdiction of

incorporation or organization

 

(I.R.S. Employer

Identification No.)

 

 

 

#100 – 740 McCurdy Road,

Kelowna BC Canada

 

V1X 2P7

(Address of principal executive offices)

 

 (Zip Code)

 

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

 

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

 

Title of Class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, Par Value $0.001

LEXX

NASDAQ

Warrants

LEXXW

NASDAQ

  

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 ☒     No ☐

 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 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 ☒     No ☐

 

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

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No ☒

 

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

 

5,104,332 common shares as of January 14, 2021                                        

 

DOCUMENTS INCORPORATED BY REFERENCE

None.

 

 

 

TABLE OF CONTENTS

 

 

 
Page 2 of 31

Table of Contents

 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

LEXARIA BIOSCIENCE CORP.

CONSOLIDATED BALANCE SHEET

(Expressed in U.S. Dollars)

 

 

 

November 30

 

 

August 31

 

 

 

2020

 

 

2020

 

ASSETS

 

(Unaudited)

 

 

(Audited)

 

Current

 

 

 

 

 

 

Cash and cash equivalents

 

$ 525,341

 

 

$ 1,293,749

 

Marketable securities (Note 20)

 

 

43,731

 

 

 

19,321

 

Accounts receivable (Note 7)

 

 

427,330

 

 

 

208,925

 

Inventory (Note 8)

 

 

125,963

 

 

 

116,871

 

Prepaid expenses and deposit (Note 18)

 

 

136,016

 

 

 

182,095

 

Current assets from discontinued operations (Note 21)

 

 

49,333

 

 

 

105,250

 

Total Current Assets

 

 

1,307,714

 

 

 

1,926,211

 

 

 

 

 

 

 

 

 

 

Non-current assets, net

 

 

 

 

 

 

 

 

Lease right of use

 

 

118,193

 

 

 

126,920

 

Intellectual Property (Note 9)

 

 

296,058

 

 

 

292,000

 

Property & equipment (Note 10)

 

 

452,355

 

 

 

483,357

 

Total Non-current Assets

 

 

866,606

 

 

 

902,277

 

TOTAL ASSETS

 

$ 2,174,320

 

 

$ 2,828,488

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities (Note 11)

 

$ 83,095

 

 

$ 86,920

 

Deferred revenue

 

 

35,500

 

 

 

44,255

 

Due to a related party (Note 15)

 

 

87,185

 

 

 

58,704

 

Lease current (Note 17)

 

 

36,695

 

 

 

36,038

 

Current liabilities from discontinued operations (Note 21)

 

 

-

 

 

 

250

 

Total Current Liabilities

 

 

242,475

 

 

 

226,167

 

 

 

 

 

 

 

 

 

 

Long Term

 

 

 

 

 

 

 

 

Lease long term (Note 17)

 

 

79,969

 

 

 

89,393

 

Loan payable (Note 19)

 

 

30,852

 

 

 

30,670

 

Total Long Term Liabilities

 

 

110,821

 

 

 

120,063

 

TOTAL LIABILITIES

 

 

353,296

 

 

 

346,230

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Share Capital

 

 

 

 

 

 

 

 

Authorized:

 

 

 

 

 

 

 

 

220,000,000 common voting shares with a par value of $0.001 per share

 

 

 

 

 

 

 

 

Issued and outstanding: 3,001,476 common shares at November 30, 2020

 

 

 

 

 

 

 

 

and 3,001,476 common shares at August 31, 2020

 

 

3,001

 

 

 

3,001

 

Additional paid-in capital

 

 

30,373,285

 

 

 

30,324,398

 

Deficit

 

 

(28,498,226 )

 

 

(27,802,198 )

Equity attributable to shareholders of the Company

 

 

1,878,060

 

 

 

2,525,201

 

Non-Controlling Interest

 

 

(57,036 )

 

 

(42,943 )

Total Stockholders' Equity

 

 

1,821,024

 

 

 

2,482,258

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$ 2,174,320

 

 

$ 2,828,488

 

  

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

 

 
Page 3 of 31

Table of Contents

  

LEXARIA BIOSCIENCE CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in U.S. Dollars, except number of shares)

 

 

 

 

THREE MONTHS ENDED

 

 

 

November 30

 

 

November 30

 

 

 

2020

 

 

2019

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Revenue (Note 14)

 

$ 295,656

 

 

$ 10,332

 

Cost of goods sold

 

 

64,478

 

 

 

7,853

 

Gross profit

 

 

231,178

 

 

 

2,479

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

Accounting and audit

 

 

15,628

 

 

 

19,036

 

Depreciation and amortization (Note 9, 10)

 

 

27,929

 

 

 

27,512

 

Advertising and promotions

 

 

27,906

 

 

 

45,861

 

Bad debt

 

 

12,000

 

 

 

-

 

Consulting (Notes 13, 15, 17)

 

 

256,014

 

 

 

483,796

 

Investor relations

 

 

33,964

 

 

 

17,515

 

Legal and professional

 

 

248,695

 

 

 

52,355

 

Office and miscellaneous

 

 

76,517

 

 

 

74,027

 

Research and development

 

 

192,261

 

 

 

107,463

 

Travel

 

 

532

 

 

 

21,853

 

Wages & salaries

 

 

75,498

 

 

 

87,593

 

Unrealized (gain) loss on marketable securities (Note 19)

 

 

(24,410 )

 

 

41,574

 

Inventory writeoff (Note 8)

 

 

1,765

 

 

 

-

 

 

 

 

944,299

 

 

 

978,585

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations

 

 

(713,121 )

 

 

(976,106 )

 

 

 

 

 

 

 

 

 

Discontinued operations

 

 

 

 

 

 

 

 

Income from discontinued operations (Note 21)

 

 

3,000

 

 

 

51,344

 

 

 

 

 

 

 

 

 

 

Net (loss) and comprehensive loss for the year

 

$ (710,121 )

 

$ (924,762 )

Net (loss) and comprehensive loss attributable to:

 

 

 

 

 

 

 

 

Common shareholders

 

$ (696,028 )

 

$ (907,312 )

Non-controlling interest

 

$ (14,093 )

 

$ (17,450 )

 

 

 

 

 

 

 

 

 

Basic and diluted (loss) per share

 

 

 

 

 

 

 

 

Continuing operations

 

$ (0.24 )

 

$ (0.35 )

Discontinued operations

 

 

0.00

 

 

 

0.02

 

 

 

$ (0.24 )

 

$ (0.33 )

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

- Basic and diluted

 

 

3,001,476

 

 

 

2,636,578

 

  

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

 

 

 
Page 4 of 31

Table of Contents

  

LEXARIA BIOSCIENCE CORP.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Expressed in U.S. Dollars)

 

 

 

 

THREE MONTHS ENDED

 

 

 

November 30

 

 

November 30

 

 

 

2020

 

 

2019

 

 

 

 (Unaudited)

 

 

 (Unaudited)

 

Cash flows used in operating activities

 

 

 

 

 

 

Net loss and comprehensive loss

 

$ (710,121 )

 

$ (924,763 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Stock based compensation

 

 

48,887

 

 

 

162,414

 

Depreciation and amortization (Note 8, 9, 10)

 

 

27,929

 

 

 

27,512

 

Inventory write-off (Note 8)

 

 

1,765

 

 

 

-

 

Bad debt expense

 

 

12,000

 

 

 

-

 

Noncash right of use lease expense

 

 

8,727

 

 

 

-

 

Unrealized loss on marketable securities

 

 

(24,410 )

 

 

41,574

 

Unrealized foreign exchange

 

 

182

 

 

 

-

 

Warrants issued for services

 

 

-

 

 

 

70,752

 

Change in working capital

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(230,405 )

 

 

155,010

 

Inventory

 

 

(6,067 )

 

 

(6,160 )

Prepaid expenses and deposits

 

 

46,079

 

 

 

(27,140 )

Accounts payable and accrued liabilities

 

 

(3,825 )

 

 

(43,382 )

Due to related parties

 

 

28,481

 

 

 

(10,896 )

Operating lease liability

 

 

(8,767 )

 

 

-

 

Deferred revenue

 

 

(8,755 )

 

 

-

 

Net cash used in operating activities

 

$ (818,300 )

 

$ (555,079 )

 

 

 

 

 

 

 

 

 

Cash flows used in investing activities

 

 

 

 

 

 

 

 

Intellectual property

 

 

(5,775 )

 

 

(5,710 )

Property & equipment

 

 

-

 

 

 

-

 

Net cash used in investing activities

 

$ (5,775 )

 

$ (5,710 )

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of equity

 

 

-

 

 

 

706,704

 

Net cash from financing Activities

 

$ -

 

 

$ 706,704

 

 

 

 

 

 

 

 

 

 

Net cash from discontinued operations

 

$ 55,667

 

 

$ (97,742 )

 

 

 

 

 

 

 

 

 

Net Change in cash and cash equivalents for the period

 

 

(768,408 )

 

 

48,174

 

Cash and cash equivalents at beginning of period

 

 

1,293,749

 

 

 

1,285,147

 

Cash and cash equivalents at end of period

 

$ 525,341

 

 

$ 1,333,321

 

 

 

 

 

 

 

 

 

 

Supplemental information of cash flows:

 

 

 

 

 

 

 

 

Income taxes paid in cash

 

$ 3,540

 

 

$ 957

 

Subscription Receivable

 

$ -

 

 

$ 110,025

 

  

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

 

 
Page 5 of 31

Table of Contents

  

LEXARIA BIOSCIENCE CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Expressed in U.S. Dollars)

 

 

 

 

 

ADDITIONAL

 

 

 

 

 

 

 

 

 

 

 

 

COMMON STOCK

 

 

PAID-IN

 

 

 

 

 

 

 

 

TOTAL

 

 

 

SHARES

 

 

AMOUNT

 

 

CAPITAL

 

 

DEFICIT

 

 

NCI

 

 

STOCKHOLDERS'

 

 

 

 

 

 

$

 

 

$

 

 

$

 

 

$

 

 

EQUITY

 

Balance August 31, 2019

 

 

2,626,236

 

 

 

2,626

 

 

 

26,248,614

 

 

 

(23,868,202 )

 

 

107,674

 

 

 

2,490,712

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

162,414

 

 

 

-

 

 

 

-

 

 

 

162,414

 

Warrants issued for services

 

 

-

 

 

 

-

 

 

 

70,752

 

 

 

-

 

 

 

-

 

 

 

70,752

 

Private placement

 

 

60,792

 

 

 

61

 

 

 

815,959

 

 

 

 

 

 

 

 

 

 

 

816,020

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(907,313 )

 

 

-

 

 

 

(907,313 )

Non-controlling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(17,450 )

 

 

(17,450 )

Balance November 30, 2019

 

 

2,687,028

 

 

 

2,687

 

 

 

27,297,739

 

 

 

(24,775,515 )

 

 

90,224

 

 

 

2,615,135

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

294,293

 

 

 

-

 

 

 

-

 

 

 

294,293

 

Exercise of stock options

 

 

3,667

 

 

 

4

 

 

 

10,996

 

 

 

-

 

 

 

-

 

 

 

11,000

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(950,344 )

 

 

-

 

 

 

(950,344 )

Non-controlling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(47,148 )

 

 

(47,148 )

Balance February 29, 2020

 

 

2,690,695

 

 

 

2,691

 

 

 

27,603,028

 

 

 

(25,725,859 )

 

 

43,076

 

 

 

1,922,936

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

682,563

 

 

 

-

 

 

 

-

 

 

 

682,563

 

Warrants issued for services

 

 

-

 

 

 

-

 

 

 

98,081

 

 

 

-

 

 

 

-

 

 

 

98,081

 

Private placement

 

 

295,540

 

 

 

296

 

 

 

1,887,310

 

 

 

-

 

 

 

-

 

 

 

1,887,606

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,361,381 )

 

 

-

 

 

 

(1,361,381 )

Non-controlling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(29,272 )

 

 

(29,272 )

Balance May 31, 2020

 

 

2,986,235

 

 

 

2,986

 

 

 

30,270,983

 

 

 

(27,087,240 )

 

 

13,804

 

 

 

3,200,533

 

Exercise of stock options

 

 

3,667

 

 

 

4

 

 

 

19,026

 

 

 

-

 

 

 

-

 

 

 

19,030

 

Shares issued for service

 

 

11,574

 

 

 

12

 

 

 

99,988

 

 

 

-

 

 

 

-

 

 

 

1,00,000

 

Private placement

 

 

-

 

 

 

-

 

 

 

(65,600 )

 

 

-

 

 

 

-

 

 

 

(65,600 )

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(714,958 )

 

 

-

 

 

 

(714,958 )

Non-controlling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(56,747 )

 

 

(56,747 )

Balance August 31, 2020

 

 

3,001,476

 

 

 

3,001

 

 

 

30,324,398

 

 

 

(27,802,198 )

 

 

(42,943 )

 

 

2,482,258

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

48,887

 

 

 

-

 

 

 

-

 

 

 

48,887

 

Warrants issued for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Private placement

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(696,028 )

 

 

-

 

 

 

(696,028 )

Non-controlling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(14,093 )

 

 

(14,093 )

Balance November 30, 2020

 

 

3,001,476

 

 

 

3,001

 

 

 

30,373,285

 

 

 

(28,498,226 )

 

 

(57,036 )

 

 

1,821,024

 

  

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

 

 
Page 6 of 31

Table of Contents

  

LEXARIA BIOSCIENCE CORP.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2020

(Expressed in U.S. Dollars)

 

1.

Organization, Business and Going Concern 

 

Lexaria Bioscience Corp. (“Lexaria”, or the “Company”) was formed on December 9, 2004 under the laws of the State of Nevada. In March of 2014, the Company began work in the fields of enhanced delivery of active ingredients and drugs. In May 2016, the Company commenced out-licensing its patented DehydraTECH™ technology (the “Technology”) for improved delivery of bioactive compounds that promotes healthy ingestion methods, lower overall dosing and higher effectiveness in active molecule delivery. The Company has its office in Kelowna, BC, Canada.

 

The Company’s unaudited interim consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States generally accepted accounting principles (US GAAP) have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of results for a full year.

 

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated annual financial statements and notes thereto included in our annual report filed on Form 10-K for the year ended August 31, 2020.

 

The Company’s unaudited interim consolidated financial statements have been prepared in accordance with US 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 recurring losses from operations and net capital deficiency raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company requires additional funds or revenues to maintain its operations and developments. Management’s plans in this regard are to raise equity and debt financing as required, but there is no certainty that such financing will be available or that it will be available at acceptable terms. The outcome of these matters cannot be predicted at this time.

 

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments may adversely affect workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or results of operations at this time.

 

During November of 2020, our Board of Directors ("Board") approved a plan to sell the businesses assets underlying our Canpharm THC related segment. As a result, the related financial results were reflected in our consolidated statement of income, retrospectively, as discontinued operations beginning in the first quarter of fiscal 2021. On November 18, 2020, we signed a definitive agreement to sell the assets. As at November 30, 2020, the transaction was pending final approval from the TSX Venture Exchange. As a result, the related assets and liabilities associated with the discontinued operations in the prior year consolidated balance sheet are classified as discontinued operations. See "Note 21 - Discontinued Operations" for additional information.

 

 
Page 7 of 31

Table of Contents

 

Subsequent to November 30, 2020, the Company approved a 1:30 reverse stock split with no fractional shares issued.  All share and per share information within these condensed interim consolidated financial statements have been retroactively restated to reflect the effects of the approved reversed stock split.

 

2.

Business Risk and Liquidity

 

The Company is subject to several categories of risk associated with its operating activities. Although we intend to develop our businesses in accordance with best ethical practices, we may suffer negative publicity if we, our partners, contractors, or customers are found to have engaged in any environmentally insensitive practices or other business practices that are viewed as unethical.

 

Our operations may require licenses and permits from various governmental authorities. We believe that we will be able to continue to obtain all necessary licenses and permits under applicable laws and regulations for our operations and believe we will be able to comply in all material respects with the terms of such licenses and permits. However, such licenses and permits are subject to change in various circumstances. There can be no guarantee that we will be able to obtain or maintain all necessary licenses and permits and failing to obtain or retain required licenses could have a materially adverse effect on the Company.

 

Lexaria and its subsidiaries are not involved directly or indirectly in the cultivation, processing, distribution, or utilization of cannabis or cannabis derived components. Lexaria does have an ancillary involvement risk via out-licensing of its patented technology to licensees that choose to utilize DehydraTECH to manufacture products that contain locally or state approved but federally regulated and controlled contents. There can be no guarantee that changes in the regulatory framework and environment will not occur and such changes could have a materially adverse effect on the Company.

 

Lexaria and its subsidiaries are not involved directly or indirectly in the production or sale of any products containing nicotine. Products containing nicotine have historically been involved in litigation in the USA. Lexaria’s corporate licensee may introduce products containing nicotine that utilize DehydraTECH to the US consumer market, which could therefore introduce third-party risks to Lexaria.

 

Lexaria and its subsidiaries are not involved directly or indirectly in the production or sale of any pharmaceutical or antiviral products. Licensees may enhance their product’s delivery using our Technology, which could therefore introduce third-party risks to Lexaria.

 

3.

Significant Accounting Policies

 

The significant accounting policies of the Company are consistent with those of our audited financial statements on Form 10-K for the year ended August 31, 2020.

 

4.

Basis of Consolidation

 

These interim consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries; Lexaria CanPharm ULC, PoViva Corp., Lexaria Hemp Corp., Kelowna Management Services Corp. and Lexaria Pharmaceutical Corp., and our 83.333% subsidiary Lexaria Nicotine LLC (16.667% Altria Ventures Inc., an indirect wholly owned subsidiary of Altria Group, Inc.). All significant intercompany balances and transactions have been eliminated.

 

 
Page 8 of 31

Table of Contents

 

5.

Estimates and Judgments

 

The preparation of financial statements in conformity with U.S GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Some of the Company’s accounting policies require us to make subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. These accounting policies involve critical accounting estimates because they are particularly dependent on estimates and assumptions made by management about matters that are highly uncertain at the time the accounting estimates are made. Although we have used our best estimates based on facts and circumstances available to us at the time, different estimates reasonably could have been used. Changes in the accounting estimates used by the Company are reasonably likely to occur from time to time, which may have a material effect on the presentation of financial condition and results of operations.

 

The Company reviews these estimates, judgments and assumptions periodically and reflect the effects of revisions in the period in which they are deemed to be necessary. We believe that these estimates are reasonable; however, actual results could differ from these estimates.

 

In preparing these unaudited interim consolidated financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the audited consolidated financial statements for the year ended August 31, 2020.

 

6.

Recent Accounting Guidance

 

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 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. In November 2019 FASB issued ASU No 201910 revised the effective date based on updated criteria with the effective date for fiscal years beginning after December 15, 2022. 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.

 

7.

Accounts and Other Receivables

 

 

 

November 30

 

 

August 31

 

 

 

2020

 

 

2020

 

 

 

$

 

 

$

 

Trade and deposits receivable

 

 

3,792

 

 

 

82,492

 

Intellectual Property Fees

 

 

325,304

 

 

 

38,250

 

Sales tax receivable

 

 

98,234

 

 

 

88,183

 

 

 

 

427,330

 

 

 

208,925

 

 

 
Page 9 of 31

Table of Contents

 

8.

Inventory 

 

 

 

November 30

 

 

August 31

 

 

 

2020

 

 

2020

 

 

 

$

 

 

$

 

Raw materials

 

 

53,676

 

 

 

51,404

 

Work in progress

 

 

11,557

 

 

 

15,705

 

Finished goods

 

 

60,730

 

 

 

49,762

 

 

 

 

125,963

 

 

 

116,871

 

  

During the period ended November 30, 2020, the Company wrote down $1,765 (2020 - $8,240 full year) of inventory to reflect its net realisable value.

 

9.

Intellectual Property 

 

The following is a list of US capitalized patents held by the Company

 

Issued Patent #

Patent Issuance Date

Patent Family

US 9,474,725 B1

10/25/2016

Food and Beverage Compositions Infused With

Lipophilic Active Agents and Methods of Use Thereof

 

US 9,839,612 B2

12/12/2017

US 9,972,680 B2

05/15/2018

US 9,974,739 B2

05/22/2018

US 10,084,044 B2

09/25/2018

US 10,103,225 B2

10/16/2018

US 10,381,440

08/13/2019

US 10,374,036

08/06/2019

US 10,756,180

08/25/2020

 

The Company also holds non-capitalized patents outside the US. A continuity schedule for capitalized patents is presented below:

 

 

 

November 30

 

 

August 31

 

 

 

2020

 

 

2020

 

 

 

$

 

 

$

 

Balance – beginning

 

 

292,000

 

 

 

265,127

 

Addition

 

 

5,775

 

 

 

33,645

 

Amortization*

 

 

(1,717 )

 

 

(6,772 )

Balance – ending

 

 

296,058

 

 

 

292,000

 

 

*The patents are amortized over their legal life of 20 years.

 

 
Page 10 of 31

Table of Contents

 

10.

Property & Equipment

  

 

Cost

 

 

Period Amortization

 

 

Disposal

 

 

Accumulated Amortization

 

 

Net Balance

November 30, 2020

 

Quarter Ended November 30, 2020

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Leasehold improvements

 

 

259,981

 

 

 

(13,509 )

 

 

-

 

 

 

(100,120 )

 

 

159,861

 

Computers

 

 

63,964

 

 

 

(4,920 )

 

 

-

 

 

 

(36,789 )

 

 

27,175

 

Furniture fixtures equipment

 

 

34,220

 

 

 

(1,604 )

 

 

(3,094 )

 

 

(11,608 )

 

 

19,518

 

Lab equipment

 

 

291,235

 

 

 

(10,967 )

 

 

-

 

 

 

(45,434 )

 

 

245,801

 

 

 

 

649,400

 

 

 

(31,001 )

 

 

(3,094 )

 

 

(193,951 )

 

 

452,355

 

    

 

Cost

 

 

Period Amortization

 

 

Accumulated Amortization

 

 

Net Balance

August 31,

2020

 

Year Ended August 31, 2020

 

$

 

 

$

 

 

$

 

 

$

 

Leasehold improvements

 

 

259,981

 

 

 

(53,268 )

 

 

(86,610 )

 

 

173,371

 

Computers

 

 

63,964

 

 

 

(19,681 )

 

 

(31,869 )

 

 

32,095

 

Furniture fixtures equipment

 

 

34,220

 

 

 

(7,036 )

 

 

(13,097 )

 

 

21,123

 

Lab equipment

 

 

291,235

 

 

 

(27,921 )

 

 

(34,467 )

 

 

256,768

 

 

 

 

649,400

 

 

 

(107,906 )

 

 

(166,043 )

 

 

483,357

 

 

During the three month period ended November 30, 2020, $4,790 of amortization was included in the cost of inventory.

  

11.

Accounts Payable and Accrued Liabilities

  

 

 

 

 

 

 

 

 

 

November 30

 

 

August 31

 

 

 

2020

 

 

2020

 

 

 

$

 

 

$

 

Accounts Payable

 

 

 

 

 

 

Trades payable

 

 

12,659

 

 

 

45,080

 

Accrued Liabilities

 

 

 

 

 

 

 

 

Corporate tax payable

 

 

1,785

 

 

 

3,834

 

Trades payable

 

 

68,651

 

 

 

38,006

 

Balance – ending

 

 

83,095

 

 

 

86,920

 

 

12.

Common Shares and Warrants

 

During the quarter ended November 30, 2020 the Company did not issue any shares or warrants.

 

A continuity schedule for warrants is presented below:

 

 

 

Number of Warrants

 

 

Weighted Average Exercise Price $

 

Balance August 31, 2019

 

 

94,177

 

 

 

41.40

 

Cancelled/expired

 

 

(25,000 )

 

 

44.90

 

Issued

 

 

402,431

 

 

 

12.74

 

Balance August 31, 2020

 

 

471,608

 

 

 

16.77

 

Cancelled/expired

 

 

(32,510 )

 

 

67.50

 

Balance November 30, 2020

 

 

439,098

 

 

 

14.68

 

 

 

 
Page 11 of 31

Table of Contents

 

A summary of warrants outstanding as of November 30, 2020 is presented below:

 

# of Warrants

 

 

Weighted Average

Remaining Contractual Life

 

Weighted Average Exercise

Price $

 

 

3,333

 

 

0.47 years

 

 

28.80

 

 

8,333

 

 

0.48 years

 

 

46.50

 

 

25,000

 

 

0.86 years

 

 

4.20

 

 

291

 

 

0.95 years

 

 

36.00

 

 

7,500

 

 

1.93 years

 

 

24.00

 

 

51,808

 

 

3.96 years

 

 

36.00

 

 

8,983

 

 

4.00 years

 

 

36.00

 

 

16,666

 

 

4.29 years

 

 

9.00

 

 

267,616

 

 

4.43 years

 

 

10.50

 

 

49,568

 

 

4.45 years

 

 

10.50

 

 

439,098

 

 

4.01 years

 

 

14.68

 

   

13.

Stock Options 

 

The Company has established the 2014 Stock Option Plan whereby the board of directors may, from time to time, grant up to 62,917 stock options to directors, officers, employees, and consultants; and the 2019 Equity Incentive Plan whereby the board of directors may, from time to time, grant up to 261,290 stock options to directors, officers, employees, and consultants. Stock options granted must be exercised no later than five years from the date of grant or such lesser period as determined by the Company’s board of directors. The exercise price of an option is equal to or greater than the closing market price of the Company’s common shares on the day preceding the date of grant. The vesting terms of each grant are set by the board of directors.

 

The Company did not grant options during the quarter ended November 30, 2020.

 

A continuity schedule for stock options is presented below:

 

 

 

Options

 

 

Weighted

Average

Exercise

Price $

 

 

Weighted

Average

Remaining

Contractual

Term (Years)

 

 

Aggregate

Intrinsic

Value $

 

Balance August 31, 2019

 

 

166,767

 

 

 

21.30

 

 

 

 

 

 

 

Cancelled/expired

 

 

(149,437 )

 

 

29.51

 

 

 

 

 

 

 

Exercised

 

 

(7,333 )

 

 

4.09

 

 

 

 

 

 

 

Granted

 

 

161,600

 

 

 

11.66

 

 

 

 

 

 

 

Balance August 31, 2020

 

 

171,596

 

 

 

11.17

 

 

 

 

 

 

 

Cancelled

 

 

(1,333 )

 

 

12.90

 

 

 

 

 

 

 

Balance November 30, 2020 (Outstanding)

 

 

170,263

 

 

 

11.16

 

 

 

4.05

 

 

 

30,000

 

Balance November 30, 2020 (Exercisable)

 

 

146,231

 

 

 

10.51

 

 

 

4.05

 

 

 

30,000

 

 

 
Page 12 of 31

Table of Contents

 

14.

Revenues 

 

 

 

 

 

 

 

 

 

 

November 30

 2020

$

 

 

November 30

 2019

$

 

Product sales

 

 

164,990

 

 

 

10,015

 

Licensing revenue

 

 

130,584

 

 

 

-

 

Freight revenue

 

 

82

 

 

 

317

 

Income from ongoing operations

 

 

295,656

 

 

 

10,332

 

Income from discontinued operations

 

 

3,000

 

 

 

51,750

 

 

 

 

298,656

 

 

 

62,082

 

 

During the three months ended November 30, 2020, the Company recognized $3,138 of Intellectual Property Licensing fees and $127,446 of usage fees from ongoing operations and $3,000 of income from discontinued operations (November 2019 - $33,750 licensing and $18,000 usage fees all relating to discontinued operations). Revenues are significantly concentrated on one customer.

 

There was an increase in our intermediate product sales and licensing revenues in the current year compared to the prior year, which began in the second quarter of fiscal 2020, with increasing volume to customers. Intermediate products are typically a DehydraTECH enabled powder that companies can purchase to include in their products. Intermediate product sales and licensing revenue constituted the majority of our revenue. The licensing fees consist of intellectual property licensing fees for transfer of the Technology with the signing of definitive agreements for the DehydraTECH technology and usage fees.

 

15.

Related Party Transactions 

 

 

 

 

 

 

 

 

 

November 30

 

 

 

 

 

 

 

 

November 30

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

2019

 

 

Contract

 

 

Non Cash

 

 

Total

 

 

Contract

 

 

Non Cash

 

 

Total

 

Management, consulting and director services

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

CAB Financial Services(1)

 

 

67,537

 

 

 

-

 

 

 

67,537

 

 

 

65,757

 

 

 

-

 

 

 

65,757

 

M&E Services Ltd.(1)

 

 

31,822

 

 

 

-

 

 

 

31,822

 

 

 

29,382

 

 

 

-

 

 

 

29,382

 

Docherty Management Limited(1)

 

 

52,579

 

 

 

-

 

 

 

52,579

 

 

 

56,730

 

 

 

-

 

 

 

56,730

 

Directors

 

 

17,076

 

 

 

-

 

 

 

17,076

 

 

 

16,717

 

 

 

-

 

 

 

16,717

 

 

 

 

169,014

 

 

 

-

 

 

 

169,014

 

 

 

168,586

 

 

 

-

 

 

 

168,586

 

 

(1)C.A.B. Financial Services is owned by the CEO of the Company, M&E Services Ltd. is owned by the CFO of the Company, and Docherty Management Limited is owned by the President of the Company.

 

All related party transactions pertain to management and director agreements entered into in the normal course of business (Note 17).

 

Due to related parties:

 

Related party transactions are recorded at the exchange amount established and agreed to between the related parties.

 

As at November 30, 2020, $87,185 (August 31, 2020 - $58,704) was payable to related parties and included in due to related parties.

 

 
Page 13 of 31

Table of Contents

 

16.

Segment Information 

 

The Company’s operations involve the development and usage, including licensing, of its proprietary DehydraTECH Technology. Lexaria is centrally managed and its chief operating decision makers, being the president and the CEO, use the consolidated and other financial information supplemented by revenue information by category of alternative health consumer products and technology licensing to make operational decisions and to assess the performance of the Company. The Company has identified two reportable segments: Intellectual Property and Products. Licensing revenues are significantly concentrated on one licensee.

 

 

 

IP Licensing

$

 

 

Products

$

 

 

Corporate

$

 

 

Consolidated Total

$

 

External revenue

 

 

130,584

 

 

 

165,072

 

 

 

-

 

 

 

295,656

 

CoGS

 

 

-

 

 

 

(64,478 )

 

 

-

 

 

 

(64,478 )

Operating expenses

 

 

(127,868 )

 

 

(92,038 )

 

 

(724,393 )

 

 

(944,299 )

Discontinued operations

 

 

3,000

 

 

 

-

 

 

 

-

 

 

 

3,000

 

Segment income(loss)

 

 

5,716

 

 

 

8,556

 

 

 

(724,393 )

 

 

(710,121 )

Total assets

 

 

817,830

 

 

 

125,963

 

 

 

1,230,527

 

 

 

2,174,320

 

 

Capital Asset by Region

 

Cost

US

 

 

Disposal

US

 

 

Net Balance

US

 

 

Cost

Canada

 

 

Net Balance Canada

 

 

Total Net Balance

 

Three Months Ended November 30, 2020

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Leasehold Improvements

 

 

-

 

 

 

-

 

 

 

-

 

 

 

259,981

 

 

 

159,861

 

 

 

159,861

 

Computers

 

 

-

 

 

 

-

 

 

 

-

 

 

 

63,964

 

 

 

27,175

 

 

 

27,175

 

Furniture Fixtures Equipment

 

 

3,094

 

 

 

(3,094 )

 

 

-

 

 

 

31,126

 

 

 

19,518

 

 

 

19,518

 

Lab Equipment

 

 

98,050

 

 

 

-

 

 

 

79,128

 

 

 

193,185

 

 

 

166,673

 

 

 

245,801

 

 

 

 

101,144

 

 

 

(3,094 )

 

 

79,128

 

 

 

548,256

 

 

 

373,227

 

 

 

452,355

 

 

Capital Asset by Region

 

Cost

US

 

 

Net Balance

US

 

 

Cost

Canada

 

 

Net Balance Canada

 

 

Total Net

Balance

 

Year Ended August 31, 2020

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Leasehold Improvements

 

 

-

 

 

 

-

 

 

 

259,981

 

 

 

173,371

 

 

 

173,371

 

Computers

 

 

-

 

 

 

-

 

 

 

63,964

 

 

 

32,095

 

 

 

32,095

 

Furniture Fixtures Equipment

 

 

3,094

 

 

 

-

 

 

 

31,126

 

 

 

21,123

 

 

 

21,123

 

Lab Equipment

 

 

98,050

 

 

 

85,263

 

 

 

193,185

 

 

 

171,505

 

 

 

256,768

 

 

 

 

101,144

 

 

 

85,263

 

 

 

548,256

 

 

 

398,094

 

 

 

483,357

 

  

17.

Commitments, Significant Contracts and Contingencies Management and Service Agreements: 

 

As at November 30, 2020, the Company is party to the following contractual commitments:

 

 

 

Party

Monthly Commitment

Expiry Date

C.A.B Financial Services

CAD $29,706

January 1, 2022

Docherty Management Ltd.

CAD $25,609

January 1, 2022

M&E Services Ltd.

CAD $13,997

June 1, 2021

Corporate Development

CAD $1,500

Month to Month

Office Management

CAD $10,800

August 15, 2022

Research & Development

CAD $3,854

Month to Month

Office operating lease(1)

CAD $4,823

November 15, 2023

 

 
Page 14 of 31

Table of Contents

 

Right of Use Assets - Operating Lease

 

 

(1)

Corporate office and R&D lab space leased in Kelowna, British Columbia, Canada until November 15, 2023 with an option to extend an additional five years. In addition to minimum lease payments, the lease requires us to pay property taxes and operating costs which are subject to annual adjustments.

  

Right of use assets - operating leases:

 

$

 

November 30, 2020

 

 

126,920

 

Amortization

 

 

(8,727 )

Total right of use assets

 

 

118,193

 

Liabilities:

 

 

 

 

November 30, 2020

 

 

125,431

 

Lease payments

 

 

(10,987 )

Interest accretion

 

 

2,220

 

Total lease liabilities

 

 

116,664

 

Operating lease cost as at November 30, 2020

 

$ 118,193

 

Operating cash flows for lease

 

 

10,948

 

Remaining lease term

 

2.8 Years

 

Discount rate

 

 

7.25 %

  

Pursuant to the terms of the Company’s lease agreements in effect, the following table summarizes the Company’s maturities of operating lease liabilities as of November 30, 2020:

 

 

 

 

 

2021

 

 

32,746

 

2022

 

 

44,815

 

2023

 

 

44,815

 

2024

 

 

7,469

 

Thereafter

 

 

-

 

Total lease payments

 

 

129,845

 

Less: imputed interest

 

 

(13,181 )

Present value of operating lease liabilities

 

 

116,664

 

Less: current obligations under leases

 

 

(36,695 )

Total

 

 

79,969

 

 

 
Page 15 of 31

Table of Contents

 

18.

Prepaid Expenses 

 

Prepaid expenses consist of the following at November 30, 2020 and August 31, 2020:

 

 

 

November 30

 

 

August 31

 

 

 

2020

 

 

2020

 

 

 

$

 

 

$

 

Advertising & conferences

 

 

21,539

 

 

 

21,878

 

Legal fees

 

 

130

 

 

 

47,498

 

Licence, filing fees, dues

 

 

30,138

 

 

 

8,541

 

Office & insurance

 

 

58,823

 

 

 

78,792

 

Research & development

 

 

25,386

 

 

 

25,386

 

 

 

 

136,016

 

 

 

182,095

 

 

19.

Loan Payable 

 

We have applied for, and received, governmental assistance related to the COVID-19 pandemic. As of November 30, 2020 there is one Canadian governmental programs that currently provides:

 

A Canadian dollar loan of C$40,000 under the Canada Emergency Business Account (CEBA) program. The loan is a 0% interest bearing loan with no principle payments and if repaid before December 31, 2022 will result in a loan forgiveness of 25% (up to C$10,000). The loan can be converted into a 3-year term loan at 5% annual interest paid monthly effective January 1, 2023.

 

20.

Marketable Securities 

 

The components of Marketable Securities were as follows:

 

 

 

 

 

 

 

 

 

 

 

Cost Basis

$

 

 

Unrealized

Gains $

 

 

Unrealized

Losses $

 

 

Total

$

 

August 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

56,250

 

 

 

9,997

 

 

 

(38,584 )

 

 

 

Total

 

 

56,250

 

 

 

9,997

 

 

 

(46,926 )

 

 

19,321

 

November 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

56,250

 

 

 

24,410

 

 

 

-

 

 

 

 

 

Total

 

 

56,250

 

 

 

34,407

 

 

 

(46,926 )

 

 

43,731

 

 

Unrealized losses from common stock are due to market price movements. Management does not believe any remaining unrealized losses represent other-than-temporary impairments based on our evaluation of available evidence. The COVID-19 pandemic has caused significant market turbulence and it is possible that our evaluation will change dependant upon new information as it arises.

 

 
Page 16 of 31

Table of Contents

 

21.

Discontinued Operations 

 

On November 19, 2020 the Company entered a definitive asset sale agreement through its wholly owned subsidiary Lexaria Canpharm ULC to sell certain non-core business assets for gross proceeds of C$3,850,000.

 

The financial results of the group of assets sold are presented as income (loss) from discontinued operations, net of income taxes in our consolidated statement of income. The following table presents financial results of the assets:

 

 

 

 THREE MONTHS ENDED

 

 

 

November 30

 

 

November 30

 

 

 

2020

 

 

2019

 

Revenue

 

$ 3,000

 

 

$ 51,750

 

Operating Expenses

 

 

-

 

 

 

406

 

Net Income

 

$ 3,000

 

 

$ 51,344

 

 

The following table presents cash flows of discontinued operations:

 

 

 

THREE MONTHS ENDED

 

 

 

November 30

 

 

November 30

 

 

 

2020

 

 

2019

 

Cash flows used in discontinued operating activities

 

 

 

 

 

 

Net income

 

$ 3,000

 

 

$ 51,344

 

Change in working capital

 

 

55,667

 

 

 

(97,742 )

Net cash used in discontinued operating activities

 

$ 58,667

 

 

$ (46,398 )

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) discontinued operations

 

 

58,667

 

 

 

(46,398 )

 

The following table presents the aggregate carrying amounts of the classes of assets and liabilities of discontinued operations of the assets:

 

 

 

November 30

 

 

August 31

 

 

 

2020

 

 

2020

 

Current Assets

 

 

 

 

 

 

Accounts receivable

 

$ 49,333

 

 

$ 105,250

 

Total assets classified as discontinued operations in the consolidated balance sheet

 

 

49,333

 

 

 

105,250

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$ -

 

 

$ 250

 

Total liabilities classified as discontinued operations in the consolidated balance sheet

 

 

-

 

 

 

250

 

 

22.

Subsequent Events 

 

 

1.

On December 9, 2020, the Company announced that it closed the sale of its non-pharmaceutical THC-related assets held within Lexaria Canpharm ULC to Hill Street Beverage Company Inc. Lexaria received C$350,000 in cash, 6,031,363 restricted common shares of Hill Street at a deemed price of C$0.0829 per share, a C$2,000,000 promissory note bearing interest at the rate of 10% per annum, and a limited license to use the DehydraTECH technology outside of Canada and the US for use with certain products that contain 0.3% or greater THC and which are not classified by a national regulator as drug, pharmaceutical or biopharmaceutical product. Pursuant to the terms of the transaction, Lexaria will receive another C$1,000,000 worth of common shares of Hill Street over a period sixteen months in C$500,000 issuances eight months and sixteen months after the closing date.

 

2.

On January 11, 2021, at 4:30 p.m. Eastern time, the Company performed a 1:30 reverse stock split with no fractional shares issued. The issued and outstanding balance of shares at that time changed from 90,044,312 to 3,001,476 as per shareholder approval at the annual general meeting of the company held June 23, 2020. Concurrently, the Company began listing its common shares on the NASDAQ exchange under the symbol LEXX.

 

3.

On January 14, 2021, the Company closed an underwritten public offering for $11,039,994, issuing 2,102,856 units consisting of one common share and one warrant for $5.25. Total fees of $1,410,506 were estimated at time of closing. The warrants issued will trade under the symbol LEXXW.

  

 
Page 17 of 31

Table of Contents

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

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 Securities and Exchange Commission on October 14, 2020, that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. 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 United States Dollars (“US$”) and are prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”). The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report.

 

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "C$" or "CDN$" refer to Canadian dollars and all references to "common shares" and "shares" refer to the common shares in our capital stock, unless otherwise indicated. The terms "Lexaria" "we", "us", "our" and "Company" mean Company and/or our subsidiaries, unless otherwise indicated.

 

Company and Business Overview

 

We are a biotechnology R&D company incorporated in 2004 in Nevada and focused on developing and out licensing our patented DehydraTECH™ Technology. DehydraTECH improves delivery orally and topically of active ingredients and drugs. The Company is focusing its capital and management time on its pursuit of intellectual property, technology licensing opportunities, and an expanding portfolio of patent pending applications.

 

The Company developed a variety of demonstration products throughout 2015 to demonstrate the potential uses for DehydraTECH to both consumers and potential licensees. The Company subsequently developed additional demonstration products including powder filled capsules and mix and serve powders for beverage incorporation also utilizing DehydraTECH for the more palatable and efficient delivery of bioactive molecules. The Company gained extensive experience and knowledge from the formulation and production of these demonstration products that facilitates assisting our licensees with the integration of DehydraTECH in their products.

 

In the manufacturing of our intermediate ingredients for Consumer Packaged Goods (“CPG”) companies to use, each raw material, intermediate stage and completed product is assessed for compliance with all applicable regulations. The inputs and the finished ingredients meet all applicable legal and quality standards including and as it relates to content; molds and mildews; heavy metals; and other additional components.

 

Lexaria hopes to reduce other common but less healthy administration methods, such as smoking, as manufacturers embrace the intended benefits of DehydraTECH for public health. The Company is aggressively pursuing patent protection in national jurisdictions around the world. 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. Lexaria is also filing new patent applications for new discoveries that arise from the Company’s R&D programs and, due to the inherent unpredictability of scientific discovery, it is not possible to predict if or how often such new applications might be filed.

 

As at November 30, 2020, we have identified two reportable operating segments: Intellectual Property and Products.

 

The following discussion should be read in conjunction with our condensed financial statements and accompanying notes in this quarterly report on Form 10-Q, our audited financial statements with notes in our annual report on Form 10-K for the year ended August 31, 2020.

 

 
Page 18 of 31

Table of Contents

 

Our Current Business

 

Our business plan is currently focused on the development of strategic partnerships with licensees for our patented DehydraTECH technology in exchange for up front and/or staged licensing fees and/or royalty payments over time. We continue to investigate national and international opportunities to investigate expansions and additions to our intellectual property portfolio. We plan to perform additional human clinical investigations in early 2021 related to enhanced DehydraTECH formulations of cannabidiol in pre- and mildly-hypertensive middle-aged subjects to gather additional information on blood pressure reduction potential. Lexaria also plans to conduct during calendar 2021 evaluations of DehydraTECH’s ability to improve the oral delivery characteristics and pharmacological performance of certain antiviral drugs. We will continue to seek beneficial acquisitions of intellectual property if and when we believe it is advisable to do so.

 

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 including tetrahydrocannabinol (“THC”); fat soluble vitamins; NSAIDs pain medications; and nicotine and its analogs.

 

Lexaria hopes to reduce common but less healthy administration methods, such as smoking cigarettes as a delivery method for nicotine, by way of enabling development of safe and effective oral nicotine dosage forms through licensing arrangements with major tobacco companies, as it demonstrates the intended benefits of DehydraTECH for public health. The Company is aggressively pursuing patent protection in jurisdictions around the world. The Company currently has more than 50 patent applications pending worldwide, with 18 patents granted to date. Due to the complexity of pursuing patent protection, the quantity of patent applications will vary continuously as each application advances or stalls. Lexaria is also filing new patent applications for new discoveries that arise from the Company’s R&D programs and, due to the inherent unpredictability of scientific discovery, it is not possible to predict if or how often such new applications might be filed.

 

To date, the following patents have been issued in the United States, Australia and Europe:

 

Issued Patent #

Patent Issuance

Date

Patent Family

US 9,474,725 B1

10/25/2016

Food and Beverage Compositions Infused With

Lipophilic Active Agents and Methods of Use Thereof

US 9,839,612 B2

12/12/2017

US 9,972,680 B2

05/15/2018

US 9,974,739 B2

05/22/2018

US 10,084,044 B2

09/25/2018

US 10,103,225 B2

10/16/2018

US 10,381,440

08/13/2019

US 10,374,036

08/06/2019

US 10,756,180

08/25/2020

AU 2015274698

03/02/2017

AU 2017203054

05/17/2018

AU 2018202562

05/17/2018

AU 2018202583

05/17/2018

AU 2018202584

09/27/2018

AU 2018220067

04/18/2019

EP 3164141

11/11/2020

AU 2016367036

04/18/2019

Methods for Formulating Orally Ingestible Compositions Comprising Lipophilic Active Agents

AU 2016367037

05/02/2019

Stable Ready-to-Drink Beverage Compositions Comprising Lipophilic Active Agents

 

 
Page 19 of 31

Table of Contents

 

We are seeking additional patent protection for what we believe to be a unique process for oral delivery of certain molecules such as Cannabinoids, Nicotine, 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 DehydraTECH for use with additional compounds such as phosphodiesterase inhibitors, human hormones such as estrogen and testosterone, antivirals and more. We are investigating other compounds and molecules for potential patent protection.

 

During the quarter ended November 30, 2020, and up to the date of this report, we experienced the following significant corporate developments:

 

On September 22, 2020, the Company announced that U.S. Patent No. 10,756,180 was granted; it has claims that protect the use of its DehydraTECH technology together with cannabinoids, nicotine, nonsteroidal anti-inflammatory drugs, or vitamins in mix and serve beverage formats. The patent is entitled “Food and Beverage Compositions Infused With Lipophilic Active Agents and Methods of Use Thereof”.

 

On November 19, 2020 the Company entered a definitive asset sale agreement through its wholly owned subsidiary Lexaria Canpharm ULC (“CanPharm”), to sell certain non-core, non-pharmaceutical THC-related business assets (the “THC-Related Assets”) for gross proceeds of C$3.85 million.

 

The buyer of the THC-Related Assets is Lexaria’s long-standing Canadian licensee Hill Street Beverage Company Inc. (“Hill Street”) (TSXV: BEER). Under the terms of the agreement, Hill Street will pay C$350,000 in cash on closing; an additional C$2,000,000 payable over time in the form of a promissory note bearing 10% interest per annum; and C$1,500,000 in common shares of Hill Street equity, issuable in three equal tranches of C$500,000 at closing; C$500,000 eight months after closing; and C$500,000 16 months after closing.

 

On December 2, 2020, the Company announced that its DehydraTECH technology significantly improved delivery in study animals of representative drugs from two classes of antiviral therapies (a Protease Inhibitor and a Reverse Transcriptase Inhibitor) under investigation against SARS-CoV-2/COVID-19 and already in use against HIV/AIDS. The study animals were not infected with or treated for any diseases.  These are the first two of a series of antiviral drugs to be tested using Lexaria’s DehydraTECH technology. The improved delivery of the antivirals along with the animal’s demonstrated safety and tolerability of the DehydraTECH formulations has led the Company to begin preparations for expanded investigations into antiviral drug delivery enhancement and effectiveness and filing additional patent applications.

 

Drug

Drug Class

AUClast* Delivery &

Improvement

 (hr∙ng/mL)

Control

 (hr∙ng/mL)

AUC∞** Delivery &

Improvement

 (hr∙ng/mL)

Control

 (hr∙ng/mL)

Darunavir

Protease Inhibitor

721 ± 332

54% 

(p=0.036)

469 ± 252 

726 ± 211

35% 

(p=0.062)

536 ± 223

Efavirenz

Non-nucleoside Reverse Transcriptase Inhibitor

752 ± 203 

16% 

(p=0.11)

650 ± 148

1072 ±40

42% 

(p=0.028)

757 ±103 

 

 
Page 20 of 31

Table of Contents

 

The emergence of COVID-19 beginning in January of 2020, now in over 220 countries and territories around the world, presents significant and unforecastable new risks to the Company and its business plan. Restrictions on national and international travel, and required business closures, have made it increasingly difficult to carry out normal business activities related to corporate finance efforts, to the pursuit of new customers, and to retail customers throughout North America who might otherwise access the products of our business partners and licensees. As a result, the COVID-19 pandemic will almost certainly increase risks of lower revenues and higher losses. We are monitoring our licensees and are working with them, where possible, to prevent default and contract terminations. In some cases we have had to issue termination of contract notices in accordance to provisions within our contracts.

 

The Company is encountering significant challenges in executing its business plan and normal business operations as a result of COVID-19 and does not have sufficient resources to withstand a protracted term during which most business activities are curtailed. We have implemented cost containment initiatives to reduce operating expenses and preserve cash that include dismissal of one employee, termination of contracts with two consultants and reduction of compensation payable to certain other consultants as a result of the COVID-19 pandemic. The Company currently has six (6) employees and/or independent contractors who dedicate all or a majority of their time to the business of the Company and eight (8) consultants. We may need to dismiss additional employees or terminate services contracts to preserve resources. We have not had to close operations or locations as our contractors and staff can work remotely and our third-party facilities continue to operate. To the date of this report, we have not directly had to quarantine contractors or staff, however we have implemented additional safety precautions and measures for their protection. Due to our historic and current geographic diversity of our contractors and employees, we have long established and ongoing experience in remote work and collaboration. Our procedures and controls have been built over time to address remote working requirements.

 

We have not experienced any significant impacts on our material supply chains but have noted increased timelines from some third-party research facilities regarding their ability to conduct research and testing. To date, this has not significantly impacted our R&D programs, but we cannot predict whether our R&D programs will be impacted in the future.

 

The Company is simultaneously investigating emerging opportunities related to the COVID-19 crisis in relation to its patented DehydraTECH technology that has been tested for its superior delivery of other compounds and drugs, and whether any of these characteristics might be applicable to compounds or drugs used to treat symptoms caused by the Coronavirus. It is unknown at this time whether there is any such applicability.

 

On March 19, 2020 the Company announced that it intended to commence a program to conduct tests to research the intended benefits of DehydraTECH in connection with enhancing the delivery of certain antiviral drugs. The tests are intended to include a pilot human pharmacokinetic exploratory study in healthy volunteers of two antiviral drugs that had previously been studied against other coronavirus strains, comparing DehydraTECH formulations to controls without DehydraTECH. The Company intends to conduct the study at a leading Canadian university where a study design and plan was submitted and ethics board approval was received. The study is subject to further government regulatory approval. The Company is currently in the process of pursuing the necessary steps to file for study approval from Canadian federal regulators.

 

In parallel, the Company launched a separate rodent antiviral study to evaluate pharmacokinetic benefits from the use of DehydraTECH in the delivery of representative drugs from two classes of antiviral drugs under investigation for treatment of COVID-19. The results of that animal study were released on December 1, 2020 whereby the DehydraTECH enhanced antiviral drug formulations demonstrated increased delivery effectiveness of the antiviral drugs into the bloodstream of the animals. The results of this animal study have encouraged the Company to conduct expanded investigations into antiviral drug delivery enhancement, with such investigations including remdesivir (a nucleotide reverse transcriptase inhibitor); as well as three additional drugs known to target the main protease associated with SARS-CoV-2 infection. The Company intends to make its research results available to researchers throughout the world looking to maximize the effectiveness of their own drug investigations. The Company’s business model relies on performing early stage studies like these to help support its efforts to form commercial relationships with more established companies.

 

The Company continues to monitor governmental programs being released to assist with the COVID-19 pandemic.

 

 
Page 21 of 31

Table of Contents

 

Subsequent to November 30, 2020

 

On December 10, 2020 the Company announced that it closed the sale of its non-pharmaceutical THC-related assets (“the Assets”) held within Lexaria Canpharm ULC to Hill Street Beverage Company Inc. Lexaria received C$350,000 in cash, 6,031,363 restricted common shares of Hill Street at a deemed price of C$0.0829 per share as the first required equity-based payment, a promissory note having a principal amount of C$2,000,000 and bearing interest at the rate of 10% per annum, and a limited license to use the DehydraTECH technology outside of Canada and the US for certain non-pharmaceutical, therapeutic and medicinal products that contain 0.3% or greater THC and which are not classified by a national regulator as drug, pharmaceutical or biopharmaceutical product. Pursuant to the terms of the transaction, Lexaria will receive another C$1,000,000 worth of common shares of Hill Street over a period sixteen months in C$500,000 issuances eight months and sixteen months after the closing date.

 

On January 11, 2021, the Company performed a 1:30 reverse stock split with no fractional shares issued. The issued and outstanding balance of shares at that time changed from 90,044,312 to 3,001,476 as per shareholder approval at the annual general meeting of the company held June 23, 2020. On January 12, 2021, the Company began its listing its common shares on the NASDAQ exchange under the symbol LEXX.

 

On January 14, 2021, the Company closed an underwritten public offering for $11,039,994, issuing 2,102,856 units consisting of one common share and one warrant for $5.25. Total fees of $1,410,506 were estimated at time of closing.  The warrants issued will trade under the symbol LEXXW.

 

Research and Development

 

During the quarter ended November 30, 2020, Lexaria incurred $192,261 (2019 $107,463) in research and development expenditures during the period ending November 30, 2020. Specific R&D programs are in ongoing development and will be tightly related to our financial ability to undertake each research phase for each API. Due to our expanding portfolio coverage, we are continuing to examine accelerated timetable options for testing, research and development of each API.

 

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, and in our first preclinical tests of representative drugs from two classes of antiviral therapies we had 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.

 

 
Page 22 of 31

Table of Contents

 

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. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financials.

 

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 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.

 

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.

 

 
Page 23 of 31

Table of Contents

 

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 November 30, 2020 and November 30, 2019

 

Our net loss and comprehensive loss and the changes between those periods for the respective items are summarized as follows:

 

 

 

 THREE MONTHS ENDED

 

 

 

 

 

 

November 30

 

 

November 30

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

 

 

$

 

 

$

 

 

$

 

Revenue

 

 

295,656

 

 

 

10,332

 

 

 

285,324

 

Consulting fees & employees

 

 

331,512

 

 

 

571,389

 

 

 

(239,877 )

Legal and professional

 

 

248,695

 

 

 

52,355

 

 

 

196,340

 

Other general and administrative

 

 

364,092

 

 

 

354,841

 

 

 

9,251

 

Discontinued operations

 

 

3,000

 

 

 

51,344

 

 

 

(48,344 )

Net Loss

 

 

(710,121 )

 

 

(924,763 )

 

 

214,642

 

  

Revenue

 

Product revenues of $164,990 represent more than half of revenues during the period ended November 30, 2020, the majority of which are intermediate product sales to business customers. Intermediate products we produce are typically a DehydraTECH enabled powder that third party companies include in their product’s manufacturing process. Our licensing revenue of $130,584 was primarily related to intermediate product sales.

 

A significant number of our licensees are experiencing suspended business activities in Canada in part from waiting on product approval by Health Canada and the impact of the COVID-19 on markets and consumer spending, however this phenomenon has been mitigated following the sale of our THC-related business division that closed on December 9, 2020. The abilities of other licensees to generate ongoing sales, thereby increasing usage fees are expected to continue to be impacted by the pandemic. We are working with our licensees to assist them and prevent further license terminations. However, we are not able to determine how severe the long-term impact of the pandemic will be and when recovery of the general economy will translate into increasing licensing or usage revenues.

 

Our licensing revenues consist of IP licensing fees for the transfer of the Technology and usage fees that occur over time. IP licensing fees are due at the signing of definitive agreements for the Technology and can include payments due upon transfer of the Technology and installment payments that are receivable within 12 months (Note 7).

 

Our intermediate products, which easily allows consumer product manufacturers to add DehydraTECH enabled powder to their existing products, are expected to simplify and enhance the adoption of our Technology for manufacturers. We have continued interest in our intermediate products but cannot predict how long the pandemic will affect purchasing decisions of retail customers that will affect the consumer product manufacturers that utilize our intermediate products.

 

 
Page 24 of 31

Table of Contents

 

The majority of our revenue was primarily based on one licensee of our intermediate products ramping up their production and product distribution. From the initial introduction of our intermediate products in the second quarter of our fiscal 2020 year, we have experienced substantial growth in intermediate product sales.

 

During the period ended November 30, 2020, our revenues were derived within the following categories: $130,584 (2020: $51,344 in discontinued operations) of intellectual property licensing revenue and $164,990 (2020: $10,015) in product revenues (Note 14, 16).

 

General and Administrative

 

Our total general and administrative expenses (consisting of consulting & wages, legal & professions, and all other) decreased by $34,286 during the period ended November 30, 2020. The decrease is comprised of reductions in consulting expense, travel and wages due to staffing decreases, offset by increases legal filing for patents and research programs being initiated. We are continuing to focus on cost constraints to preserve cash where possible while executing portions of our business plan.

 

Interest Expense

 

Interest expense for the period ended November 30, 2020 was $Nil (2019: $Nil). The Company has a C$40,000 noninterest-bearing loan until January 2023 (Note 19).

 

Consulting Fees

 

Our consulting fees decreased by $227,782, which is primarily due to non-cash stock-based compensation included in 2020 of $233,166 that was not incurred in the current period.

 

Legal and Professional Fees

 

Our professional fees increased by $196,340 during the period primarily due to increased patent and trademark filings and additional advisory services utilized during the period. We recognize certain legal fees, tax advice fees, and accounting services all as “Professional Fees.”

 

Liquidity and Financial Condition

 

Working Capital

 

November 30

 

 

August 31

 

 

 

2020

 

 

2020

 

 

 

$

 

 

$

 

Current assets

 

 

1,307,714

 

 

 

1,925,961

 

Current liabilities

 

 

(242,475 )

 

 

(225,917 )

Net Working Capital

 

 

1,065,239

 

 

 

1,700,044

 

 

 

 
Page 25 of 31

Table of Contents

 

The Company’s working capital balance decreased during the period due to normal execution of our business plan. The Company maintained a positive and relatively strong working capital position throughout the period.

 

 

 

November 30

 

 

November 30

 

 

 

2020

 

 

2019

 

Cash Flows

 

$

 

 

$

 

Cash flows (used in) provided by operating activities

 

 

(818,300 )

 

 

(555,078 )

Cash flows (used in) provided by investing activities

 

 

(5,775 )

 

 

(5,710 )

Cash flows (used in) provided by financing activities

 

 

-

 

 

 

706,704

 

Net cash flows (used in) discontinued operations

 

 

55,667

 

 

 

(97,742 )

Increase (decrease) in cash

 

 

(768,408 )

 

 

48,174

 

 

Operating Activities

 

Net cash used in operating activities was $818,300 for the period compared with cash used in operating activities of $555,078 during the same period in 2020. This difference was largely due to the increased costs pertaining to professional fees and research and development.

 

Investing Activities

 

Net cash used in investing activities was $5,775 (2020 $5,710) for the period to support capitalized patent filings.

 

Financing Activities

 

Net cash provided from financing activities was $NIL during the period ended November 30, 2020.

 

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. Market volatility and concerns over a global recession may have a significant impact on the availability of funding sources and the terms at which any funding may be available.

 

Short Term Liquidity

 

At November 30, 2020 we had $525,341 in cash and cash equivalents. On January 14, 2021 we closed an underwritten public offering for $11,039,994, issuing 2,102,856 units consisting of one common share and one warrant for $5.25. Total fees of $1,410,506 were estimated at time of closing. We believe our cash resources are sufficient to allow us to continue operations for at least the next twelve months from the date of this Quarterly Report.

 

 
Page 26 of 31

Table of Contents

 

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, 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.

 

Item 4. Controls and Procedures

 

Management’s Report on Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial and Accounting Officer) to allow for timely decisions regarding required disclosure.

 

As of November 30, 2020, the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our CEO, President and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our President, CEO and the CFO concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of November 30, 2020.

 

Management’s Report on Internal Control over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with US GAAP. Our management assessed the effectiveness of our internal control over financial reporting as of November 30, 2020. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Our management has concluded that, as of November 30, 2020, our internal control over financial reporting is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP. Our management reviewed the results of their assessment with our Board of Directors.

 

 
Page 27 of 31

Table of Contents

 

Inherent limitations on Effectiveness of Controls

 

Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, regulations, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Changes in Internal Control over Financial Reporting

 

During the quarter ended November 30, 2020 our controls and controls processes remained consistent with August 31, 2020. There have been no changes in our internal controls over financial reporting that occurred during the quarter ended November 30, 2020 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

 

Our control processes are designed to include remote workers, which we have utilized for many years. The advent of the COVID-19 pandemic has not materially impacted our internal controls over financial reporting other than increasing requirements for social distancing and some additional remote working requirements for staff.

 

 
Page 28 of 31

Table of Contents

 

PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings

 

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

 

Item 1A. Risk Factors

 

Much of the information included 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.

 

The risks associated with our business, common stock and other factors were with those described in the consolidated financial statements for the year ended August 31, 2020.

 

  

 
Page 29 of 31

Table of Contents

 

Item 6. Exhibits, Financial Statement Schedules

 

31.1

 

Section 302 Certifications under Sarbanes-Oxley Act of 2002 of Principal Executive Officer

31.2

 

Section 302 Certifications under Sarbanes-Oxley Act of 2002 of Principal Financial Officer and Principal Accounting Officer

 

 

 

32.1

 

Section 906 Certification under Sarbanes Oxley Act of 2002 of Principal Executive Officer

32.2

 

Section 906 Certification under Sarbanes Oxley Act of 2002 of Principal Financial Officer and Principal Accounting Officer

 

 

 

(101)**

 

Interactive Data Files

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

*Incorporated by reference to same exhibit filed with the Company's Registration Statement on Form SB-2 dated January 10, 2006.

 

** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

 

 
Page 30 of 31

Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

LEXARIA BIOSCIENCE CORP.

 

 

 

 

By:

/s/ Christopher Bunka

 

Christopher Bunka

Chief Executive Officer, Chairman and Director

(Principal Executive Officer)

Date: January 14, 2021

 

In accordance with the Exchange Act, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:

/s/ Christopher Bunka

 

Christopher Bunka

Chief Executive Officer, Chairman and Director

(Principal Executive Officer)

Date: January 14, 2021

 

 

 

By:

/s/ John Docherty

 

John Docherty

President and Director

Date: January 14, 2021

 

 

 

By:

/s/ Allan Spissinger

 

Allan Spissinger CPA, CA

Chief Financial Officer

(Principal Financial and Accounting Officer)

Date: January 14, 2021

  

 
Page 31 of 31