Cautionary Note Regarding Forward-Looking Statements
This quarterly report contains forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. Any statements
contained herein that are not statements of historical fact may be
forward-looking statements. These statements relate to future events or our
future financial performance. Any forward-looking statements are based on our
present beliefs and assumptions as well as the information currently available
to us. In some cases, forward-looking statements are identified by terminology
such as "may", "will", "should", "could", "targets", "goal", "expects", "plans",
"anticipates", "believes", "estimates", "predicts", "potential" or "continue" or
the negative of these terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, uncertainties and
other factors, including the risks in the section entitled "Risk Factors" set
forth in Item 1(A) in our annual report on Form 10-K, as filed with the
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We caution you not to place undue reliance on any forward-looking statements as they speak only as of the date on which such statements were made, and we undertake no obligation to update any forward-looking statement or to reflect the occurrence of an unanticipated event. New factors may emerge and it is not possible to predict all factors that may affect our business and prospects. Further, management cannot assess the impact of each factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Our unaudited interim consolidated financial statements are stated in
In this quarterly report, unless otherwise specified, all dollar amounts are
expressed in
The following discussion should be read in conjunction with our condensed
financial statements and accompanying notes in this quarterly report on Form
10-Q, and our audited financial statements with notes in our annual report on
Form 10-K for the year ended
Overview
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Page 19 of 31 Table of Contents Research & Development
During the quarter ended
In
In
On
The Company continues to report progress on its R&D programs through its filing of Form 8-Ks and other public releases. These results of these programs can also be found on the Company's website: www.LexariaBioscience.com.
Patents
Our current patent portfolio includes patent family applications or grants pertaining to our method of improving bioavailability and taste, and the use of DehydraTECH as a delivery platform for a wide variety of Active Pharmaceutical Ingredients ("APIs") including, but not limited to, fat soluble vitamins; nonsteroidal anti-inflammatory drugs ("NSAIDs"); anti-viral drugs; phosphodiesterase inhibitors; human hormones; regulated cannabinoids, and nicotine and its analogs.
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Page 20 of 31 Table of Contents
We will continue to pursue patent protection in more than 40 countries around
the world as vigorously as we are able, since the successful granting of more of
those applications could lead to material increases in shareholder value. The
Company currently has over 50 patent applications pending worldwide and during
the quarter ended
The Company's issued patents in
Issued/Allowed Patent Family Patent # US 9,474,725 B1 US 9,839,612 B2 US 9,972,680 B2 US 9,974,739 B2 US 10,084,044 B2 US 10,103,225 B2 US 10,381,440 Food and Beverage Compositions Infused with Lipophilic Active US 10,374,036 Agents and Methods of Use Thereof US 10,756,180 AU 2015274698 AU 2017203054 AU 2018202562 AU 2018202583 AU 2018202584 AU 2018220067 EP 3164141 JP 6920197 AU 2016367036 JP 6963507 Methods for Formulating Orally Ingestible Compositions MX 388203 B Comprising Lipophilic Active Agents AU 2016367037 Stable Ready-to-Drink Beverage Compositions Comprising IN 365864 Lipophilic Active Agents JP 6917310
Due to the complexity of pursuing patent protection, the quantity of patent applications will vary continuously as each application advances or stalls. The Company 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.
Reverse Stock Split
On
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Page 21 of 31 Table of Contents Public Offering
On
LEXX Market Listing
The Company's common stock was uplisted from trading on the OTCQX under "LXRP"
to the Nasdaq Capital Market where our common stock and warrants began trading
under the symbols "LEXX" and "LEXXW", respectively, effective as of the opening
of market trading on
The Company, trading under the symbol "LXX", voluntary delisted from the
Canadian Securities Exchanges ("CSE") effective after the closing of trading on
Asset Sale
On
In consideration for the Assets,
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Page 22 of 31 Table of Contents Impact of COVID-19
The COVID-19 pandemic continues to present uncertainty and unforecastable new
risks to the Company and its' business plan. Restrictions on national and
international travel and required business closures present challenges in
carrying out normal business activities related to corporate finance efforts and
the pursuit of new customers throughout
We have made modifications to our normal operations including requiring team members to work remotely on a staggered basis. To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel. At this time, these measures will continue in force for the near term.
We will continue to actively monitor the rapidly evolving situation related to COVID-19 and may take further actions that alter our operations, including those that may be required by federal, state, provincial, or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business. We do not know when, or if, it will become practical to relax or eliminate some or all these measures entirely.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Estimates
Our consolidated financial statements and accompanying notes are prepared in
accordance with US GAAP. These accounting principles require management to make
certain estimates, judgments and assumptions that affect the reported amounts of
assets, liabilities, revenue, and expenses during the periods reported. These
estimates, judgments and assumptions are reasonable based on information
available to management at the time that such estimates, judgments and
assumptions are made. We believe that understanding the basis and nature of the
estimates, judgments and assumptions involved with the following aspects of our
financial statements is critical to an understanding of our financials. For a
discussion of our critical accounting estimates, please read Note 3 to our
financial statements in our Annual Report on Form 10-K for the year ended
Capital Assets
Capital assets are stated at cost less accumulated depreciation and depreciated using the straight-line method over their useful lives or otherwise by units of production.
Patents
Capitalized patent costs represent legal costs incurred to establish patents.
When patents reach a mature stage, any associated legal costs are typically
maintenance fees and expensed as incurred. Capitalized patent costs are
amortized on a straight-line basis over the remaining life of the patent. In the
period ended
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Page 23 of 31 Table of Contents 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 actual sales returns.
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.
Funding Requirements
We anticipate that our expenditures will increase in connection with our ongoing R&D program, specifically with respect to our animal and human clinical trials of our DehydraTECH formulations for the purposes of treating hypertension and infectious diseases. As we move forward with our Investigational New Drug application with the FDA, we anticipate that our expenditures will further increase and accordingly, we expect to incur increased operating losses and negative cash flows for the foreseeable future.
Through
The continuation of our Company as a going concern is dependent upon our Company
raising additional capital and/or attaining and maintaining profitable
operations. The accompanying 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 do raise doubt about the Company's ability to continue as a
going concern within one year following the date that these consolidated
financial statements are issued. As of the issuance date of these consolidated
interim financial statements, we expect our cash and cash equivalents of
approximately
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Page 24 of 31 Table of Contents
Results of Operations for our Period Ended
Our net loss and comprehensive loss for the three months ended and the changes between those periods for the respective items are summarized as follows:
THREE MONTHS ENDED November 30, 2021 2020 Change $ $ $ Revenue 13,880 295,656 (281,776 ) Research and development 458,709 192,261 266,448 Consulting fees & salaries 738,111 331,512 406,599 Legal and professional 141,607 248,695 (107,088 ) Other general and administrative 673,365 171,831 501,534 Discontinued operations - 3,000 (3,000 ) Net Loss (2,003,482 ) (710,121 ) (1,293,361 ) Revenue
Product revenues of
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.
Research and Development
Expenditures on R&D increased by
General and Administrative
Our other general and administrative expenses increased by
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Page 25 of 31 Table of Contents
Consulting Fees and Salaries
Our consulting fees increased by
Legal and Professional Fees
Our professional fees decreased by
Liquidity and Financial Condition
Working Capital November 30, August 31, 2021 2021 $ $ Current assets 10,901,396 12,442,940 Current liabilities (237,699 ) (153,276 ) Net Working Capital 10,663,697 12,289,664 Cash Flows November 30, 2021 2020 $ $
Cash flows (used in) provided by operating activities (1,166,324 ) (809,533 ) Cash flows (used in) provided by investing activities (58,215 ) (5,775 ) Cash flows (used in) provided by financing activities (10,987 ) (8,767 ) Net cash flows (used in) discontinued operations
- 55,667 Increase (decrease) in cash (1,235,526 ) (768,408 ) Operating Activities
Net cash used in operating activities increased by
Investing Activities
Net cash from investing activities increased by
Financing Activities
Net cash provided from financing activities decreased
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Page 26 of 31 Table of Contents
Liquidity and Capital Resources
We have accumulated a large deficit since inception that has primarily resulted from executing our business plan, including R&D expenditures, 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 market 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 global economics may have a significant impact on the availability of funding sources and the terms at which any funding may be available.
Short Term Liquidity
On
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. If we pursue full commercial exploitation of all applicable market and industry segment opportunities, 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.
Cash requirements will vary depending on the results of our research programs and the requirements of each industry segment pursued. Pursuit of each segment will progress or be 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 and to market and license it. These changes to requirements and transactions may impact our liquidity as well as affect our expenditures.
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