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 November 14, 2019, 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 bioscience intellectual property (“IP”) research, development and licensing company for our patented lipid nutrient infusion DehydraTECH™ technology (the “Technology”) and were incorporated in 2004 in Nevada. Our Technology improves delivery of bioactive compounds that promotes healthy ingestion methods, lower overall dosing and higher effectiveness in active molecule delivery.
The Company’s oral sciences activities include the development of our proprietary nutrient infusion technologies for the production of functional foods, and the production of enhanced oral products under our consumer product brands, ViPova™, Lexaria Energy™, TurboCBD™ and ChrgD+TM. The Company’s Technology is believed to improve taste, rapidity and delivery of bioactive compounds that include cannabinoids, vitamins, Non-Steroidal Anti-Inflammatory Drugs (NSAIDs), nicotine and other molecules compared to what is possible without lipophilic enhancement technology. This can allow for lower overall dosing requirements and/or higher effectiveness in active molecule delivery.
Our current patent portfolio includes patent family grants relating to: Infused Food and Beverage Compositions and Methods of Use Thereof, pertaining to Lexaria’s method of improving bioavailability and taste, and the use of the Technology 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.
Lexaria hopes to reduce other common but less healthy administration methods, such as smoking, as it embraces the benefits of its Technology for public health. The Company is aggressively pursuing patent protection in national jurisdictions around the world. The Company currently has more than 55 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 May 31, 2020, we have identified two reportable operating segments: Intellectual Property Licensing and Consumer 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, 2019 and our Form S-1 filed June 3, 2020.
Our Current Business
Our business plan is currently focused on the development of strategic partnerships with licensees for our patented DehydraTECH™ Technology (referred to herein as “DehydraTECH” or the “Technology”) in exchange for up front and/or staged licensing fees over time. Secondarily and more generally, we continue to investigate national and international opportunities for development and distribution of the Company’s enhanced functional oral and supplement product offerings; to investigate expansions and additions to our intellectual property portfolio; and, to search for additional opportunities in alternative health sectors. This includes the acquisition or development of intellectual property if and when we believe it is advisable to do so.
Our current patent portfolio includes patent family grants relating to: (i) Food and Beverage Compositions Infused with Lipophilic Active Agents and Methods of Use Thereof; (ii) Methods for Formulating Orally Ingestible Compositions Comprising Lipophilic Active Agents; and (iii) Stable Ready-To-Drink Beverage Compositions Comprising Lipophilic Active Agents, all pertaining to Lexaria’s method of improving bioavailability and taste, and the use of the Technology 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.
Lexaria hopes to reduce other common but less healthy administration methods, such as smoking, as it embraces the benefits of its technology for public health. The Company is aggressively pursuing patent protection in national jurisdictions around the world. The Company currently has more than 55 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.
To date, the following patents have been awarded in the United States and Australia:
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
|
10/16/2017
|
US 10,381,440
|
08/13/2019
|
US 10,374,036
|
08/06/2019
|
AUS 2015274698
|
06/15/2017
|
AUS 2017203054
|
08/30/2018
|
AUS 2018202562
|
08/30/2018
|
AUS 2018202583
|
08/30/2018
|
AUS 2018202584
|
01/10/2019
|
AUS 2018220067
|
07/30/2019
|
AUS 2016367036
|
07/30/2019
|
Methods for Formulating Orally Ingestible Compositions Comprising Lipophilic Active Agents
|
AUS 2016367037
|
08/15/2019
|
Stable Ready-to-Drink Beverage Compositions Comprising Lipophilic Active Agents
|
We are seeking additional patent protection for what we believe to be a unique process for the nutritional delivery of certain molecules such as Cannabinoids, Nicotine, NSAIDs, and Vitamins. To achieve sustainable and profitable growth, our Company intends to control the timing and costs of our projects wherever possible. We have filed for patent protection of our Technology for additional compounds such as phosphodiesterase inhibitors, human hormones such as estrogen and testosterone and more. We are investigating other compounds and molecules for potential patent protection pursuit.
During the quarter ended May 31, 2020, and up to the date of this report, we experienced the following significant corporate developments:
On March 4, 2020, the Company announced that it had amended its license agreement with Universal Hemp LLC, a B2B manufacturing company of hemp-derived bulk ingredients to remove the exclusivity rights originally associated with the license and to reduce the aggregate minimum performance fees from $3,750,000 to $132,500.
On March 19, 2020 the Company announced that it had commenced a program to research the benefits of its DehydraTECH Technology in connection with enhancing the delivery of certain antiviral drugs.
On April 21, 2020 the Company announced the filing of a strategic new US patent application under a new patent family “Compositions and Methods for Enhanced Delivery of Antiviral Agents” to utilize its DehydraTECH process in connection with antiviral drugs for the purposes of combatting infectious disease conditions including, but not limited to, the novel coronavirus disease 2019 (“COVID-19”), MERS, SARS, influenza, herpes and AIDS.
On May 4, 2020 the Company entered into material contracts with certain investors for the sale of up to 8,866,211 shares of common stock and warrants to purchase up to 8,866,211 shares of common stock for gross proceeds of $2,039,228. The warrants have a five-year term and are exercisable at $0.35 per share. The financing closed in two tranches on May 6, 2020 and May 11, 2020.
On May 5, 2020, the Company terminated the license issued to a private California-based company for its utilization in certain THC-based beverages which was originally announced on April 24, 2019.
On May 13, 2020, the Company announced that our annual and special shareholder meeting on Tuesday, June 23, 2020, and the details of the virtual meeting.
The emergence of COVID-19 in over 140 countries around the world beginning in January, 2020 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 for the Company’s products and services, and to retail customers throughout North America who might otherwise access the products of the Company’s business to business partners. As a result, the COVID-19 pandemic will almost certainly increase risks of lower revenues and higher losses for the products and services currently offered by the Company. 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 with licensees.
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. We have not had to close operations or locations as our contractors and staff can work remotely and our third-party fulfillment centers 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 to protect contractors and staff. Due to our historically and current geographic diversity of our contractors, we have ongoing experience in remote work and collaboration and our procedures and controls have been built over time to continue uninterrupted by 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 investigating whether there may be any new emerging opportunities related to the COVID-19 crisis related to its patented Technology that has been thoroughly 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 intends to conduct a pilot human pharmacokinetic exploratory study in healthy volunteers of three antiviral drugs that have previously been studied against other coronavirus strains, comparing DehydraTECH formulations to controls without Lexaria’s Technology. It intends to conduct the study at a leading Canadian University where a study design and plan have been submitted for ethics board approval. Pending the successful execution and outcome of this study, additional research may include expanded pharmacokinetic and pharmacodynamic screening, including studies in appropriate coronavirus animal models for efficacy evaluation. If the Technology is proven to increase delivery effectiveness of antiviral drugs, the Company intends to make it available to researchers throughout the world looking to maximize the effectiveness of their own drug investigations.
The Company continues to monitor governmental programs being released to assist with the COVID-19 pandemic.
Subsequent to May 31, 2020,
On June 3, 2020 the Company filed a Form S-1 Registration Statement.
One June 24, 2020 the Company announced the results of the 2020 Annual and Special Meeting held June 23, 2020. The Company held the Meeting whereby there were 47,819,789 shares of the Company represented in person or by proxy at the meeting, constituting 53.38% of the Company’s issued share capital as at May 13, 2020, being the record date of the Meeting. The matters voted upon at the Meeting and the final voting results are set forth below:
Matter Being Voted On
|
For
|
Against
|
Abstain or Withheld
|
Broker
Non-Vote
|
Percent
Approved By
|
To Elect Chris Bunka as a director
|
27,316,752
|
0
|
655,858
|
19,847,179
|
97.66%
|
To Elect John Docherty as a director
|
27,303,792
|
0
|
668,818
|
19,847,179
|
97.61%
|
To Elect Nicholas Baxter as a director
|
27,299,254
|
0
|
673,356
|
19,847,179
|
97.59%
|
To Elect Ted McKechnie as a director
|
27,238,991
|
0
|
733,619
|
19,847,179
|
97.38%
|
To Elect Brian Quigley as a director
|
27,338,170
|
0
|
634,440
|
19,847,179
|
97.73%
|
To Appoint Davidson & Company LLP as Auditors
|
47,364,520
|
0
|
455,269
|
0
|
99.05%
|
To Approve a Reverse Stock Split on a ratio of not less than 2 current shares for one reverse stock split share and not more than 30 current shares for one reverse stock split share
|
43,806,148
|
3,808,046
|
205,594
|
1
|
91.61%
|
To Approve an amendment to the Company’s Bylaws
|
26,579,677
|
1,094,414
|
298,519
|
19,847,179
|
95.02%
|
To ratify the lawful actions of the directors for the past year
|
27,089,295
|
497,896
|
385,419
|
19,847,179
|
96.84%
|
All of the proposals are described in detail in the Company’s proxy statement filed with the Securities Exchange Commission via Edgar and with the BC Securities Commission and Ontario Securities Commission via SEDAR on May 25, 2020.
Research and Development
Lexaria incurred $318,830 (2019 $394,091) in research and development expenditures during the period ending May 31, 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. Ongoing testing plans are proceeding to further define molecular compatibility, absorption rates, timing and viable formats of delivery.
The Company continually focuses on new R&D programs to investigate the potential of additional commercial applications for its Technology. These include, but are not limited to ongoing programs to explore methods to integrate nanoemulsification chemistry techniques together with its technology and to further enhance intestinal bioabsorption rates with its technology, as well as ongoing programs to expand the types and breadth of product form factors into which its technology can be applied. Depending on how many of these tests are undertaken, R&D budgets are expected to vary significantly. It is in our best interests to remain flexible at this early stage of our R&D efforts in order to capitalize on potential novel findings from early-stage tests and thus re-direct research into specific avenues that offer the most reward.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Estimates
Our consolidated financial statements and accompanying notes are prepared in accordance with 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 alternative health products is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured, which typically occurs upon shipment. The Company reports its sales net of the amount of actual sales returns. Sales tax collected from customers is excluded from net sales.
Licensing Revenue from Intellectual Property
We recognize revenue for license fees at a point in time following the transfer of our intellectual property, our patented lipid nutrient infusion technology DehydraTECH for infusing APIs, to the licensee, which typically occurs on delivery of documentation.
Usage Fees from Intellectual Property
We recognize revenue for usage fees when usage of our DehydraTECH intellectual property occurs by licensees infusing an API into one or more of their product lines for sale.
Going Concern
We have suffered recurring losses from operations. The continuation of our Company as a going concern is dependent upon our Company attaining and maintaining profitable operations and/or raising additional capital. The financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our Company discontinue operations. The recurring losses from operations and net capital deficiency raise substantial doubt about the Company’s ability to continue as a going concern.
Results of Operations for our Period Ended May 31, 2020 and May 31, 2019
Our net loss and comprehensive loss and the changes between those periods for the respective items are summarized as follows:
|
|
|
|
|
|
|
|
|
NINE MONTHS ENDED
|
|
|
|
|
|
|
May 31
|
|
|
May 31
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Revenue
|
|
|
250,804
|
|
|
|
97,489
|
|
|
|
153,315
|
|
Consulting fees & employees
|
|
|
2,252,869
|
|
|
|
1,377,482
|
|
|
|
875,387
|
|
Legal and professional
|
|
|
289,614
|
|
|
|
546,710
|
|
|
|
(257,096
|
)
|
Other general and administrative
|
|
|
934,951
|
|
|
|
1,207,791
|
|
|
|
(272,840
|
)
|
Net Loss
|
|
|
(3,312,908
|
)
|
|
|
(3,042,438
|
)
|
|
|
(270,470
|
)
|
Revenue
Product revenues of $119,691 represent almost half of revenues during the period ended May 31, 2020 the majority of which are intermediate products sales that began during the second quarter. Intermediate products we produce are typically a DehydraTECH enabled powder that companies include in their product’s manufacturing process.
Our Licensing revenue of $130,509 continue to reflect delays in usage fee revenues from existing licensees in Canada waiting for product approval from Health Canada on products, other licensees attempting to ramp up their production and the impact of the COVID-19 pandemic on some of our licensees. Licensing revenue was primarily based on expanded licence agreements entered into recognising the IP Territory Licensing fee, and existing licenses generating usage fees. The abilities of our licensees to generate ongoing sales, thereby increasing usage fees are expected to be impacted by the pandemic and may be further delayed as licensees work to address 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 will be of the pandemic 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.
During the period ended May 31, 2020, our revenues were derived within the following categories: $130,509 (May 2019: $90,000) of intellectual property licensing revenue and $119,691 (2019: $7,284) in product revenues (Note 14, 16).
General and Administrative
Our total general and administrative expenses (consisting of consulting & wages, legal & professions, and all other) increased by $345,451 during the period ended May 31, 2020. The increase is comprised of significant reductions in advertising and patent related filings and increases reflected in the additional personnel that started during fiscal 2019, asset amortization and $1,308,103 of non-cash based stock option compensation. We are focusing on cost constraints to preserve cash where possible while executing portions of our business plan.
Interest Expense
Interest expense for the period ended May 31, 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 increased by $821,923, which includes non-cash stock-based compensation for options ($1,173,720), director and advisor fees. Reductions include month to month contracts that were not renewed that ended during our second quarter and reductions to some contracts.
Legal and Professional Fees
Our professional fees decreased by $257,096 during the period primarily due to reduced patent and trademark filings, and fewer other 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
|
|
May 31
|
|
|
August 31
|
|
|
|
2020
|
|
|
2019
|
|
|
|
$
|
|
|
$
|
|
Current assets
|
|
|
2,528,111
|
|
|
|
1,818,829
|
|
Current liabilities
|
|
|
(119,728
|
)
|
|
|
(184,507
|
)
|
Net Working Capital
|
|
|
2,408,383
|
|
|
|
1,634,322
|
|
The Company’s working capital balance increased during the period due to exercises of outstanding options, warrants and the two private placements (Note 12) completed during the period. The Company maintained a positive and relatively strong working capital position throughout the period.
|
|
|
|
|
|
|
Cash Flows
|
|
May 31
2020
$
|
|
|
May 31
2019
$
|
|
Cash flows (used in) provided by operating activities
|
|
|
(1,981,314
|
)
|
|
|
(2,268,946
|
)
|
Cash flows (used in) provided by investing activities
|
|
|
(13,205
|
)
|
|
|
(736,079
|
)
|
Cash flows (used in) provided by financing activities
|
|
|
2,743,383
|
|
|
|
3,273,683
|
|
Increase (decrease) in cash
|
|
|
748,864
|
|
|
|
268,659
|
|
Operating Activities
Net cash used in operating activities was $1,981,314 for the period compared with cash used in operating activities of $2,268,946 during the same period in 2019. This difference was largely due to the decreased costs pertaining to professional fees, research and development, and advertising related to cost containment measures.
Investing Activities
Net cash used in investing activities was $13,205 (2019 $736,079) for the period to support patent filings. This includes reductions to patent filings and capital asset purchases.
Financing Activities
Net cash provided from financing activities was $2,743,383 during the period ended May 31, 2020 from two private placements and option exercise compared to net cash provided of $3,273,683 ($2,273,683 from private placements and exercises and $1,000,000 from the 16.67% acquisition of Lexaria Nicotine by Altria) during the same period in 2019.
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 May 31, 2020 we had $2,034,011 in cash and cash equivalents. We believe our cash resources are sufficient to allow us to continue operations for at least the next seven months from the date of this Quarterly Report.
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.