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
Company and Business Overview
We are a biotechnology R&D company incorporated in 2004 in
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.
As at
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
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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.
Our current patent portfolio includes patent family applications or grants
pertaining to
To date, the following patents have been issued in
Patent Issuance
Issued Patent # Date Patent Family
US 9,474,725 B1 10/25/2016
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 Food and Beverage Compositions Infused With
US 10,374,036 08/06/2019 Lipophilic Active Agents and Methods of Use
US 10,756,180 08/25/2020 Thereof
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
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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
On
On
The buyer of the THC-Related Assets is
On
AUClast*
Delivery & AUC?** Delivery &
Improvement Control Improvement Control
Drug Drug Class (hr·ng/mL) (hr·ng/mL) (hr·ng/mL) (hr·ng/mL)
Darunavir Protease 721 ± 332 469 ± 252 726 ± 211 536 ± 223
Inhibitor 54% 35%
(p=0.036) (p=0.062)
Efavirenz Non-nucleoside 752 ± 203 650 ± 148 1072 ±40 757 ±103
Reverse 16% 42%
Transcriptase (p=0.11) (p=0.028)
Inhibitor
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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
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
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
The Company continues to monitor governmental programs being released to assist with the COVID-19 pandemic.
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Subsequent to
On
On
On
The warrants issued will trade under the symbol LEXXW.
Research and Development
During the quarter ended
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.
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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.
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Going Concern
We have suffered recurring losses from operations. The continuation of our Company as a going concern is dependent upon our Company attaining and maintaining profitable operations and/or raising additional capital. The financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our Company discontinue operations. The recurring losses from operations and net capital deficiency raise substantial doubt about the Company's ability to continue as a going concern.
Results of Operations for our Period Ended
Our net loss and comprehensive loss and the changes between those periods for the respective items are summarized as follows:
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
A significant number of our licensees are experiencing suspended business
activities in
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.
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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
General and Administrative
Our total general and administrative expenses (consisting of consulting & wages,
legal & professions, and all other) decreased by
Interest Expense
Interest expense for the period ended
Consulting Fees
Our consulting fees decreased by
Legal and Professional Fees
Our professional fees increased by
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
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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
Investing Activities
Net cash used in investing activities was
Financing Activities
Net cash provided from financing activities was $NIL during the period ended
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
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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.
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