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As filed with the Securities and Exchange Commission on December
17, 2021
Registration No. 333-238915
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective Amendment No. 3
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LEXARIA BIOSCIENCE
CORP.
|
(Exact name of registrant as specified in its charter)
|
Nevada
|
|
2000
|
|
20-2000871
|
(State or other jurisdiction of
incorporation or organization)
|
|
(Primary Standard Industrial
Classification Code Number)
|
|
(I.R.S. Employer
Identification Number)
|
#100 – 740 McCurdy Road
Kelowna, British Columbia V1X 2P7
Telephone:
1-250-765-6424
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive
offices)
Christopher Bunka
Lexaria Bioscience Corp.
#100 – 740 McCurdy Road
Kelowna, British Columbia V1X 2P7
1-250-765-6424
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Gregory Sichenzia, Esq.
Avital Perlman, Esq.
Sichenzia Ross Ference LLP
1185 Avenue of the Americas
New York, NY 10036
Telephone: (212) 930-9700
Approximate date of commencement of proposed sale to the
public: From time to time after the effective date of this
registration statement, as determined by market and other
conditions.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933 check the following box: ☒
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering: ☐
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering: ☐
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering: ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth 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 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 7(a)(2)(B) of the Securities
Act ☐
The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall
become effective on such date as the Securities and Exchange
Commission, acting pursuant to said section 8(a), may
determine.
Explanatory Note:
This Post-Effective Amendment No. 3 to the Registration
Statement on Form S-1 (File No. 333- 238915) (as amended by the
Post-Effective Amendment No. 2 declared effective on March 3, 2021,
the “Registration Statement”) of Lexaria Bioscience Corp. (the
“Company”) is being filed pursuant to the undertakings in Item 17
of the Registration Statement to update and supplement the
information contained in the Registration Statement as originally
declared effective by the U.S. Securities and Exchange Commission
(the “SEC”) on June 11, 2020, to (i) include the information
contained in the Company’s Annual Report on Form 10-K for the
fiscal year ended August 31, 2021 that was filed with the SEC on
November 29, 2021 and (ii) to update certain other information in
the Registration Statement. This Post-Effective Amendment No. 3 is
also being filed to deregister an aggregate of 49,483 shares of the
Company’s common stock that either have been sold under the
Registration Statement, underlie expired warrants, whose holders
failed to provide confirmation of ownership or for which the
Company otherwise has no obligation to maintain the effectiveness
of the Registration Statement. For this reason, this Post-Effective
Amendment No. 3 only includes 434,085 shares of the Company’s
common stock registered under the Registration
Statement.
All share and per share information in this Post-Effective
Amendment No. 3 has been adjusted to reflect a one-for-thirty
reverse stock split of the Company’s common stock, which was
effective at 4:30 P.M Eastern time on January 11,
2021.
No additional securities are being registered under this
Post-Effective Amendment No. 3. All applicable registration fees
were paid at the time of the original filing of the Registration
Statement.
The information in this preliminary
prospectus is not complete and may be changed. We may not sell
these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
Subject to completion.
Dated December 17, 2021.
PRELIMINARY
PROSPECTUS
434,085 SHARES OF COMMON STOCK
This prospectus relates to the offering and resale by the selling
stockholders identified herein of up to 434,085 shares of common
stock issued or issuable to such selling stockholders, including
352,763 shares of common stock issuable upon the exercise of
outstanding warrants. The selling stockholders acquired their
shares of common stock and warrants from us in November 2019 and
May 2020 as part of private placements of common stock and
warrants. Please see “Description of Private Placements” beginning
on page 57 of this prospectus.
We will not receive any proceeds from the sale of shares of common
stock by the selling stockholders. Upon the cash exercise of the
warrants however, we will receive the exercise price of such
warrants, for an aggregate of approximately $5,162,943.
The selling stockholders may sell all or a portion of the shares of
common stock beneficially owned by them and offered hereby from
time to time directly or through one or more underwriters,
broker-dealers or agents. Please see the section entitled “Plan Of
Distribution” on page 67 of this prospectus for more
information. For a list of the selling stockholders, see the
section entitled “Selling Stockholders” on page 58 of this
prospectus. We will bear all fees and expenses incident to our
obligation to register the shares of common stock.
Our common stock and our tradeable warrants (whose shares of
underlying common stock are not being offered for resale herein)
are listed on the Nasdaq Capital Market, or “Nasdaq” under the
symbols “LEXX” and “LEXXW,” respectively, and commenced trading on
Nasdaq on January 12, 2021. Our common stock previously traded on
the over-the-counter market and was quoted on the OTCQX market
under the symbol “LXRP.” On December 16, 2021, the last reported
sale price of our common stock on Nasdaq was $4.53 per share.
We may amend or supplement this prospectus from time to time by
filing amendments or supplements as required. You should read the
entire prospectus and any amendments or supplements carefully
before you make your investment decision.
Investing in our securities involves risks. You should
carefully read the “Risk Factors” beginning on page 5
of this prospectus before investing.
We may amend or supplement this prospectus from time to
time by filing amendments or supplements as required. You should
read the entire prospectus and any amendments or supplements
carefully before you make your investment decision.
Neither the Securities and Exchange Commission nor any
other regulatory commission has approved or disapproved of these
securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is December __, 2021.
TABLE OF CONTENTS
ABOUT THIS
PROSPECTUS
You should rely only on the information contained in this
prospectus or contained in any prospectus supplement or free
writing prospectus filed with the Securities and Exchange
Commission (the “SEC”). Neither we nor the selling stockholders
have authorized anyone to provide you with additional information
or information different from that contained in this prospectus
filed with the SEC. The selling stockholders are offering to sell,
and seeking offers to buy, shares of our common stock only in
jurisdictions where offers and sales are permitted. The information
contained in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this
prospectus or of any sale of shares of our common stock. Our
business, financial condition, results of operations and prospects
may have changed since that date.
For investors outside the United States: Neither we nor the selling
stockholders have done anything that would permit this offering or
possession or distribution of this prospectus in any jurisdiction
where action for that purpose is required, other than in the United
States. Persons outside the United States who come into possession
of this prospectus must inform themselves about, and observe any
restrictions relating to, the offering of the shares of common
stock and the distribution of this prospectus outside the United
States.
As used in this prospectus, unless otherwise designated, the terms
“we,” “us,” “our,” the “Company,” “Lexaria” and “our Company” refer
to Lexaria Bioscience Corp., a Nevada corporation, and its
subsidiaries.
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.
Lexaria Bioscience Corp., the Lexaria logo and other trademarks or
service marks of Lexaria appearing in this prospectus are the
property of Lexaria or its subsidiaries. Trade names, trademarks
and service marks of other companies appearing in this prospectus
are the property of their respective holders.
PROSPECTUS
SUMMARY
This summary highlights information contained elsewhere in this
prospectus. Before making an investment decision, you should read
the entire prospectus carefully, including the sections entitled
“Risk Factors,” beginning on page 5 and “Special Note
Regarding Forward-Looking Statements,” beginning on page 17.
Business Overview
General and Historical Overview of Our
Business
Lexaria is a biotechnology company seeking to enhance the
bioavailability of a broad variety of active pharmaceutical
ingredients (“APIs”) with its DehydraTECHTM drug
delivery technology. DehydraTECH combines lipophilic APIs with
specific fatty acid and carrier compounds thereby improving the way
APIs enter the bloodstream while increasing the effectiveness of
fat-soluble active molecules allowing lowering overall dosing and
promoting healthier oral ingestion methods. DehydraTECH can be used
with a wide variety of APIs encompassing fat-soluble vitamins,
non-steroidal anti-inflammatory drugs (“NSAIDs”) pain medications,
hormones, phosphodiesterase inhibitors, antivirals, nicotine and
its analogs, and all cannabinoids including tetrahydrocannabinol
(“THC”) for a variety of therapeutic indications, including
hypertension, SARS-CoV-2/COVID-19 and HIV/AIDS. The Company’s
technology applies to a host of different ingestible or topically
administered product formats including foods, beverages, oral
suspensions, tablets, capsules, creams, lotions, and skin
patches.
Lexaria began filing patents for DehydraTECH in 2014 with two
initial US provisional patent application filings by the original
inventors Poppy’s Teas LLC, which Lexaria acquired by way of
exclusive, worldwide license rights and controlling interest in the
founding company. We have since increased the number of patent
applications to approximately 60 with 23 patents granted worldwide
to date. In addition to the US patent filings, the Company has also
pursued international patent protection through filings under the
Patent Cooperation Treaty, followed by national filings in over 40
jurisdictions of highest commercial potential thereunder. Our
patent family includes intellectual property addressing the
manufacturing and processing methods used to combine the long chain
fatty acids with active pharmaceutical ingredients.
Lexaria’s patent applications developed from its Research and
Development programs (“R&D”) currently include fat-soluble
versions of vitamins, NSAIDs, nicotine, cannabinoids, hormones,
phosphodiesterase inhibitors, and antivirals. 2018 animal studies
demonstrated a propensity for DehydraTECH technology to elevate the
quantity of drug delivered across the blood-brain-barrier. This
expanded our patent applications and opened possibilities for
improved delivery of certain central nervous system-targeted drugs
that require additional R&D.
In a human clinical study performed in 2018 and published in 2019
in a peer reviewed medical journal, Advances in Therapy titled
“Examination of a New Delivery Approach for Oral Cannabidiol in
Healthy Subjects: A Randomized, Double-Blinded, Placebo-Controlled
Pharmacokinetics Study” available on the PubMed.gov website with
the identification of PMID: 31512143, Lexaria demonstrated that its
technology delivered higher volumes of cannabidiol into the human
circulatory system and did so more quickly than a
concentration-matched positive control. This same study also
demonstrated a statistically significant reduction in human blood
pressure from the DehydraTECH processed cannabidiol, versus no
statistical reduction in human blood pressure from the positive
control.
We operate a Health Canada-licensed laboratory in Canada to conduct
basic research and formulation operations, and typically outsource
virtually all analytical work to independent third-party
laboratories located in Canada, the USA, and Europe. Such
third-party evaluation provides independent confirmation of the
effects of our technology and processes.
Lexaria’s formulation and process-oriented operations are primarily
conducted in its own laboratory and validated through third-party
testing, in preparation for partnering with industry leaders for
adoption into their consumer products and/or drugs. Other than for
R&D purposes, Lexaria does not produce, manufacture, market or
distribute drugs.
Although we have experimented with consumer product development in
the past, those activities occupy a declining amount of our
corporate time. We first began selling trial amounts of ViPova
branded black tea fortified with hemp oil and utilizing our
technology, in January 2015 and added additional flavours over
time.
We also began offering our first coffee and hot chocolate also
fortified with full spectrum hemp oil, and also under the ViPova
brand. Beginning in January 2021 we discontinued sales of consumer
products, but offering a variety of self-made beverages to
consumers helped us to establish the ViPova brand and helped us to
develop final consumer product formulations and understand consumer
needs
Generating meaningful revenue from consumer product sales was
challenging and we were unable to achieve widespread retail
distribution. We continue to be open to the possibility of
generating sales from international markets, in those locations
where hemp oil fortified foods are permissible by law.
ViPova branded products are owned by our wholly owned PoViva Corp.
subsidiary. Lexaria Energy, TurboCBD and ChrgD+ branded
products are owned 100% by Lexaria Bioscience Corp.
Through our product development we have communicated to the
industry the versatility of our technology in specific CPG formats
and we believe this strategy has been successful in assisting us in
technology licensing discussions with potential new clients. We
believe the range of products available and under development are
sufficient to prepare for revenue growth and potentially profitable
long-term operations if we are able to generate sufficient business
clientele demand.
Our business strategy contains an element that we believe will be
more impactful to future corporate growth that involves the further
development and out-licensing of our intellectual property of
molecule delivery that enhances bioactivity or absorption. We have
no plans to offer for sale any products containing THC in
quantities higher than 0.3%. We have discontinued all direct
business activities related to non-FDA-approved uses of THC,
including our former business practice of licensing our technology
to businesses that were legally state-licensed to offer THC
products. We also plan to license our technology to other companies
for the delivery of molecules other than THC or cannabinoids, such
as nicotine which we have licensed to Altria Ventures Inc., an
indirect wholly owned subsidiary of Altria Group, Inc. Our October
31, 2017, announcement of the USPTO Notice of Allowance for our
first patent granted and the subsequent granted patents of our
technology in the US and in many other countries around the world
related to new molecule groups, along with our ongoing patent
filing and grants, may enhance our ability to successfully pursue
our licensing initiatives during fiscal 2022.
We continue to communicate the benefits of our technology to
potential licensing partners; i.e. with higher absorption levels a
manufacturer could perhaps infuse smaller amounts of active
molecules into a product, potentially reducing their manufacturing
input costs; to provide higher bioavailability with the dosing
limits being imposed or contemplated in many jurisdictions; to
infuse beverages while masking the flavor and smell of the active
molecules; and to reduce delivery times to the bloodstream. We
believe these to be meaningful competitive advantages that may lead
to the potential to generate licensing revenue, and will pursue
these opportunities within the cannabinoids, nicotine, and other
bioactive molecular markets both within the USA and also
internationally, in those locations where they are legal and
regulated by government.
Subject to budgetary availability, we also plan to conduct
additional in vitro and in vivo studies testing the absorption of
many API’s - CBD, NSAIDs, vitamins, PDE5 inhibitors, antiviral
drugs, nicotine, and others- to substantiate the effectiveness of
our technology. More than simply satisfying scientific curiosity,
successful tests could lead to increased awareness and acceptance
of our technology as a meaningful method by which to deliver some
or all of the named molecules more effectively than their current
delivery methods. Therefore, absorption tests could become an
important element leading towards higher rates of acceptance of our
technology licensing initiatives.
We will pursue technology licensing opportunities as a method of
generating highly profitable revenue streams over long periods of
time. In addition, while nine of our US patents and eight of our
Australian patents have been granted to date, we now have received
granted patents in the European Union, Japan, India and Mexico, and
have multiple other applications filed in the US and around the
world. It is not possible to forecast with certainty when, or if,
our remaining patents pending will become granted patents. But if
our remaining patent applications do become granted patents, our
ability to generate meaningful license revenue from our
intellectual property may increase from multiple jurisdictions
outside of the US.
We will continue to pursue our remaining patents pending as
vigorously as we are able, since the successful granting of more of
those applications could lead to material increases in shareholder
value. We are pursuing patent protection in more than 40 countries
around the world.
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. Patents have been filed specifically for the
use of DehydraTECH with cannabinoids for the treatment of heart
disease.
We plan to perform additional human clinical investigations in late
calendar 2021 and throughout 2022 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
fiscal 2022, evaluations of DehydraTECH’s ability to improve the
oral delivery characteristics and pharmacological performance of
certain other APIs. 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 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 23
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.
Impact of COVID-19
As the repercussions of COVID-19 reverberate around the world, the
effects on Lexaria’s operations have been relatively minor. We have
experienced some difficulty in recruiting R&D and
administrative staff but as of the date of this prospectus we have
filled these positions and expect to accelerate our in-house
research efforts throughout 2022. We have also experienced some
delay in getting test results of our R&D programs due to
supply-chain factors that could be attributed to the virus. Supply
chain issues have also had some, but not significant, impact on
securing ingredients for our B2B production. As the world re-opens,
we will expect to increase spending on travel as we seek out
commercial partners and further our advertising and investor
relations efforts.
Corporate Information
Our common stock and tradeable warrants are traded on Nasdaq under
the symbols “LEXX” and “LEXXW”, respectively.
Our principal executive offices are located at #100 – 740 McCurdy
Road, Kelowna, British Columbia V1X 2P7, and our telephone number
is +1 (250) 765-6424. We have administrative functions located in
Phoenix, Arizona. Our main corporate website is located at
www.lexariabioscience.com. The information on our website is not
incorporated by reference into this prospectus.
Due to the implementation of British Columbia Instrument 51-509 on
September 30, 2008, by the British Columbia Securities Commission
(“BCSC”), we are considered a British Columbia based reporting
issuer. As such, we are required to file certain information and
documents at www.sedar.com.
THE OFFERING
Issuer
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Lexaria Bioscience Corp.
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Securities Offered by the Selling Stockholders
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434,085 shares of our common stock, including 352,763 shares
issuable upon the exercise of warrants.
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Trading Market
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The common stock offered in this prospectus is traded on the Nasdaq
Capital Market under the symbol “LEXX” and on the CSE under the
symbol “LXX”.
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Common Stock Outstanding Before this Offering
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5,950,998 shares1
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Common Stock Outstanding After this Offering
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6,303,761 shares2
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Use of Proceeds
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We will not receive any of the proceeds from the sale of the shares
of our common stock being offered for sale by the selling
stockholders. Upon the exercise of the warrants for an aggregate of
352,763 shares of common stock by payment of cash however, we will
receive the exercise price of the warrants, or an aggregate of
approximately $5,162,943.
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Plan of Distribution
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The selling stockholders may sell all or a portion of the shares of
common stock beneficially owned by them and offered hereby from
time to time directly or through one or more underwriters,
broker-dealers or agents. Registration of the common stock covered
by this prospectus does not mean, however, that such shares
necessarily will be offered or sold. See “Plan of
Distribution.”
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Risk Factors
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Please read “Risk Factors” and other information included
in this prospectus for a discussion of factors you should carefully
consider before deciding to invest in the securities offered in
this prospectus.
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1 The number of shares of common stock shown above to be
outstanding before this offering is based on 5,950,998 shares
outstanding as of December 17, 2021, and excludes as of December
17, 2021:
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2,421,983 shares of common stock issuable upon the exercise of
outstanding warrants; and
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284,636 shares of common stock issuable upon the exercise of
outstanding stock options.
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2 The number of shares of common stock shown above to be
outstanding after this offering is based on 5,950,998 shares
outstanding as of December 17, 2021 and assumes the exercise of the
warrants held by the selling stockholders into 352,763 shares of
common stock.
RISK
FACTORS
An investment in our securities involves a high degree of risk.
You should consider carefully the following information about these
risks, together with the other information contained in this
prospectus, including the matters addressed in the section entitled
“Special Note Regarding Forward-Looking Statements,” beginning on
page __ of this prospectus, before making an investment
decision. Our business, prospects, financial condition, and results
of operations may be materially and adversely affected as a result
of any of the following risks. The value of our securities could
decline as a result of any of these risks. You could lose all or
part of your investment in our securities. Some of the statements
in “Risk Factors” are forward-looking statements. The following
risk factors are not the only risk factors facing our Company.
Additional risks and uncertainties not presently known to us or
that we currently deem immaterial may also affect our business,
prospects, financial condition, and results of operations and it is
not possible to predict all risk factors, nor can we assess the
impact of all factors on us or the extent to which any factor or
combination of factors may cause actual results to differ
materially from those contained in or implied by any
forward-looking statements.
Summary of Risk Factors
The following table summarizes the material risk factors associated
with our Company which are more fully described below:
A.
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Risks Associated with our Business and Industry
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(i)
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Business operations
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(ii)
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Protection of intellectual property and litigation
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(iii)
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Reliance on third party providers
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(iv)
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COVID-19
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B.
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Risks Associated with our Financial Condition
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(i)
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Historical net losses and reliance on licensing
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(ii)
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Additional funding requirements for R&D activities
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(iii)
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Additional Funding Requirements for Business Plan
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C.
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Risks Associated with Current Regulatory Environments
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(i)
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Conducting clinical trials
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(ii)
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Regulatory and development approvals for pharmaceutical
products
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(iii)
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Controlled substances
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D.
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Risks Associated with Securities Markets and Ownership of our
Common Stock
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(i)
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Pricing volatility of common stock and warrants
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(ii)
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Strategic transactions
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(iii)
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Payment of dividends and dilution
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(iv)
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Smaller reporting company compliance
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E.
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General Risks
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A. Risks Associated with our Business and
Industry
(i) Risks related to our
business operations
We face substantial competition, which may result in
others discovering, developing and/or commercializing technology or
products similar to ours before or more successfully than we might
do.
Lexaria operates in the intensely competitive biotechnology
industry. Investment in this sector involves a high degree of
risk.
Our commercial and/or licensing opportunities may be reduced or
potentially eliminated if our competitors develop and commercialize
products utilizing a similar technology that compete directly with
those incorporating DehydraTECH. Significant delays in the
development of our product candidates could allow competitors to
bring products to market before us which may impair the ability to
commercialize our product candidates. This could result in reduced
sales and increased pricing pressure on our technology which in
turn would reduce our ability to generate meaningful revenues and
could have a negative impact on our results of operations.
Our competitors might also develop drugs that are more effective,
more widely used and less expensive than ours, and they may also be
more successful in manufacturing and marketing their products.
Competitors could acquire regulatory approval of their products
before we are able to obtain patent protection or other
intellectual property rights, limiting our ability to license our
respective patents and/or develop or commercialize a product
candidate. These appreciable advantages could render our product
candidates non-competitive or obsolete before we can recover the
expenses of research, development, and commercialization.
Our competition includes pharmaceutical and biotechnology
companies, educational institutions, and research foundations, many
of which have substantially greater capital resources, research and
development staffs and facilities and greater marketing experience
than Lexaria. They may be able to respond more rapidly to new
regulations and/or devote greater resources to the development and
promotion of their business model. These third parties compete with
us in recruiting and retaining qualified scientific and management
personnel, establishing clinical trial sites and patient
registration for clinical trials, as well as in acquiring
technologies and technology licenses complementary to our programs
or potentially advantageous to our business.
Early-stage companies may also prove to be significant competitors,
particularly through collaborative arrangements with large and
established companies. Mergers and acquisitions in the
pharmaceutical and biotechnology industries may result in even more
resources being concentrated among a smaller number of our
competitors and could increase their ability to rapidly gain market
share.
As a result of these factors, management cannot be certain that the
Company will be able to compete against current or future
competitors or that competitive pressure will not seriously harm
its business.
Our failure to protect our intellectual property may
have a material adverse effect on our ability to develop and
licence DehydraTECH
Because patents involve complex legal and factual questions, the
issuance, scope, validity, and enforceability of patents cannot be
predicted with certainty. Some of our patent pending applications
may not be granted as patents. Even if patents are issued, they may
not be issued with claims of sufficient breadth to protect
DehydraTECH technology or may not provide us with competitive
advantage against competitors with similar products or
technologies. Issued patents may be challenged, invalidated, or
circumvented. If patents issued to us are invalidated or found to
be unenforceable, we could lose the ability to exclude others from
making, using, or selling the inventions claimed. Moreover, an
issued patent does not give us the automatic right to use the
patented technology or commercialize a product using the
technology. Third parties may have blocking patents that could be
used to prevent us from developing our products, selling our
products, or commercializing our DehydraTECH technology. Others may
also independently develop products or technologies similar to
those that we have developed or may reverse engineer or discover
our trade secrets through proper means.
Results of earlier studies may not be predictive of
future results and planned or ongoing studies may not establish an
adequate efficacy profile for DehydraTECH-enabled
products.
The results of studies and trials of DehydraTECH conducted to date
and future studies incorporating other APIs may not be predictive
of the results of subsequent trials. Studies published to date on
DehydraTECH have demonstrated positive results through oral and
topical delivery methods of API payloads. These results may not be
replicated in subsequent studies or trials that incorporate the
same or other API payloads.
Licensees subject to significant regulatory requirements and
testing protocols, such as those required by the US Food and Drug
Administration (FDA), and comparable foreign regulators, must
successfully complete multi-phase testing and the results of our
studies may not be reflected in the outcome of the testing
performed related to their products. A number of companies in the
biopharmaceutical industry have suffered significant setbacks in
advanced clinical trials due to lack of efficacy or adverse safety
profiles, notwithstanding promising results in earlier studies, and
we cannot be certain that our licensees will not face similar
setbacks.
Intellectual Property and Technology development
involves a lengthy and expensive process, with an uncertain
outcome. We may incur additional costs or experience delays in
completing, or ultimately be unable to complete, all of the
research and development for all industry
segments.
We may experience delays in initiating or completing our planned
studies or trials in the future, and we may experience numerous
unforeseen events during, or as a result of, any future studies or
trials that we conduct that could delay or prevent our ability to
conduct the research, including:
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regulators or institutional review boards (“IRBs”), or ethics
committees may not authorize us or our investigators to commence a
study or trial at a prospective trial site and/or additional
governmental regulatory authority authorizations may be required
from time-to-time to do so for which there is no assurance that we
will be able to satisfy their approval conditions in a timely
fashion if at all, whether due to financial or other unforeseen
constraints;
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we may experience delays in reaching, or fail to reach, agreement
on acceptable terms with prospective trial sites and prospective
contract research organizations (“CROs”), the terms of which can be
subject to extensive negotiation and may vary significantly among
different CROs and trial sites;
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we may experience delays in recruiting, or be unable to recruit, a
sufficient number of suitable participants to participate in our
studies or trials;
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the participants and sites who participate in our studies or trials
may not comply with required protocols rendering the results
insufficient or uninterpretable;
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studies or trials of various APIs may produce negative or
inconclusive results, and we may decide, or regulators may require
us, to conduct additional studies or trials or we may decide to
abandon development programs related to those APIs;
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the number of participants required for studies or trials of an API
may be larger than we anticipate, enrollment in these studies or
trials may be slower than we anticipate or participants may drop
out or fail to return for follow-up at a higher rate than we
anticipate;
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our third-party contractors may fail to comply with regulatory or
legal requirements or meet their contractual obligations to us in a
timely manner, or at all, or may deviate from the protocol or drop
out, which may require that we find new contractors to perform the
work;
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we may elect to, or regulators or IRBs or ethics committees may
require that we or our investigators, suspend or terminate our
research for various reasons, including noncompliance with
regulatory requirements or a finding that the participants are
being exposed to unacceptable health risk;
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the cost of studies or trials of an API may be greater than we
anticipate;
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any changes in regulatory requirements and guidance that require
amending or submitting new protocols;
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regulators may require us to submit additional data or impose other
requirements before permitting us to initiate a study or trial.
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We could encounter delays if a study or trial is suspended or
terminated by us or by the IRBs of the institutions in which they
are being conducted. Such authorities may impose such a suspension
or termination due to a number of factors, including changes in
governmental regulations or administrative actions or lack of
adequate funding to continue the study or trial. Further, the IRB
may disagree with our design or may change the requirements for
approval even after it has reviewed and commented on the
design.
Our research and development costs will also increase if we
experience delays in testing or regulatory approvals. We do not
know whether any of our studies or trials will begin as planned,
will need to be restructured or will be completed on schedule, or
at all. Any delays in our development programs may significantly
harm our business, prospects, financial condition, and results of
operations.
(ii) Risks related to
protection of intellectual property and litigation
If we are unable to obtain and maintain sufficient
patent protection, or if the scope of the patent protection is not
sufficiently broad, our competitors could develop technology
similar to ours.
Our success depends in large part on our ability to obtain and
maintain patent protection in the United States and other countries
with respect to our intellectual property. If we do not adequately
protect or enforce our intellectual property, competitors may be
able to erode or negate any competitive advantage we may have,
which could harm our business and ability to achieve profitability.
To protect our intellectual property, we file patent applications
in the United States and abroad. The patent application and
approval process is expensive, complex and time-consuming. We may
not be able to effectively enforce our intellectual property rights
throughout the world. Filing, prosecuting, and defending patents in
all countries throughout the world would be prohibitively
expensive. Our ability to protect and enforce our intellectual
property rights may be adversely affected by unforeseen changes in
foreign intellectual property laws. Additionally, the patent laws
of some foreign countries do not provide protection to the same
extent as the laws of the United States. This could make it
difficult for us to stop the infringement of our patents or the
misappropriation of our intellectual property rights. Legal actions
to enforce our patent rights in foreign jurisdictions could result
in substantial costs and divert our efforts and resources from
other aspects of our business. While we intend to protect our
intellectual property, we cannot ensure that we will be able to
initiate or maintain legal efforts in all jurisdictions.
(iii) Risks related to our
reliance on third party providers
We have relied, and will rely in the future, on third
parties to conduct, supervise, and monitor our R&D programs. If
third party performance is unsatisfactory, including failing to
meet deadlines for the completion of contracts or failing to comply
with regulatory requirements our research programs may be delayed
or could fail to develop required data.
We do not have the ability to conduct our studies or pre-clinical
trials independently and thus rely on third parties to conduct,
supervise, and monitor our R&D programs. While we have, or
expect to have, agreements governing the activities of such third
parties, we will have limited influence and control over their
actual performance and activities. Third-party service providers
are not our employees, and except for remedies available to us
under contract with such third parties, we cannot control whether
or not they devote sufficient time, skill and resources to our
programs. We remain responsible for ensuring that each of our
programs are conducted in accordance with the applicable protocol,
legal, regulatory, and scientific standards, and our reliance on
third parties will not relieve us of our regulatory
responsibilities. We remain responsible for ensuring that each of
our trials is conducted in accordance with the general
investigational plan and protocols for that trial.
If these third parties do not successfully carry out their
contractual duties, meet expected deadlines or conduct our R&D
programs or preclinical studies in accordance with our stated
protocols or regulatory requirements, or if the quality or accuracy
of the data they obtain is compromised due to the failure to adhere
to our protocols, regulatory requirements or for other reasons we
or other third-party collaborators may be subject to regulatory
enforcement or other legal actions. Resultant data generated in our
preclinical programs may be deemed unreliable and our studies and
trials may need to be repeated, extended, delayed, or terminated.
We may be delayed in or unable to obtain marketing approvals for
our product candidates or to successfully commercialize our product
candidates. As a result, our results of operations and the
commercial prospects for our product candidates would be harmed,
our costs could increase and our ability to generate revenues could
be delayed.
Agreements with third parties conducting or otherwise assisting
with our R&D might terminate for a variety of reasons,
including a failure to perform by the third parties. If any of our
relationships with these third parties terminate, we may not be
able to enter into arrangements with alternative providers or to do
so on commercially reasonable terms. Switching or adding additional
third parties involve increased management time and focus and
additional cost. With a transition to a new third party and
alternative arrangements there will be delays in our research
programs and this will adversely affect our business. We intend to
manage our relationships with third parties carefully and
respectfully but there can be no assurance that we will not
encounter challenges or delays in the future or that these delays
or challenges will not have a material adverse impact on our
business, financial condition and prospects, and results of
operations.
We rely upon third parties for the manufacture of our
B2B products. If those third parties do not perform satisfactorily,
including failing to meet deadlines for the completion of such
contract or failing to manufacture goods to the exact
specifications of our customers, it could lead to our B2B customers
dissatisfaction and could harm our reputation and cause loss of
revenues.
We rely and expect that we will rely on third party suppliers and
manufacturers to provide us with the materials and services to
manufacture our DehydraTECH compounds for our B2B customers. While
we do have in-house expertise and capacity to manufacture using
DehydraTECH, we do not own or lease manufacturing facilities. To
the extent we are unable to successfully manage the performance of
third-party service providers, our business may be adversely
affected. If these third parties do not successfully carry out
their contractual duties or obligations or meet expected deadlines,
or if the quality or accuracy of the product they produce is
compromised due to the failure to adhere to our protocols,
regulatory requirements or for other reasons, our relationship with
our B2B customers may be critically affected and may result in the
loss of revenue. Demand for our services may be adversely affected
if consumers lose confidence in the quality of our services or the
industry’s practices. Adverse publicity may discourage businesses
from contracting our services and could have a material adverse
effect on our financial condition and results of operations.
The FDA, or equivalent regulatory authority, governs the
manufacturing process for product candidates in pre-clinical and
clinical trials and will inspect the facilities at which the
product is manufactured. Approval of the product will not occur
unless the manufacturing facilities are in compliance with the
FDA’s current good manufacturing practice (“cGMP”) regulations, or
equivalent foreign authority. If our suppliers or manufacturers do
not comply with the FDA or foreign regulations for our product
candidates, we may experience delays in timing or supply, be forced
to manufacture our product candidates ourselves or seek to enter
contract with another supplier or manufacturer. If we are required
to switch suppliers or manufacturers, we will be required to verify
that the new supplier or manufacturer maintains facilities and
processes in line with cGMP regulations, which may result in
delays, additional expenses, and may have a material adverse effect
on our ability to complete the development of our product
candidates.
(iv) Risks related to the
effects of COVID-19
The outbreak of the coronavirus (COVID-19) has evolved into a
global pandemic. The extent to which the virus impacts our business
and operating results will depend on future developments that are
highly uncertain and cannot be accurately predicted, including new
information that may emerge concerning the virus, its variants, and
the actions to contain the coronavirus or treat its impact, among
others.
With the continued spread of the virus, our business operations
could be interrupted or delayed. It is possible that our R&D
programs could be adversely affected by the pandemic. In some of
our programs, particularly our human studies, participant
recruitment and enrollment, participant dosing, distribution of
results, study monitoring and data analysis may be paused or
delayed due to the effects that the pandemic has in different
countries, regions, states, provinces, or localities. If the virus
continues to spread, some participants and clinical investigators
may not be able to comply with clinical trial protocols. For
example, travel restrictions, lock-down quarantines or other
limitations that might limit our ability to conduct our R&D
programs. We currently utilize third parties to conduct our R&D
programs and to produce products for our B2B customers. These
relationships could be adversely impacted by restrictions resulting
from the virus outbreak. It is possible that our supply chain may
be disrupted, limiting our ability to manufacture products for our
R&D operations or for our B2B customers.
The spread of COVID-19 and its variants, has caused a broad impact
globally, including restrictions on travel and quarantine policies
put into place by businesses and governments, and it may have a
material economic effect on our business. While the potential
economic impact brought by and the duration of the pandemic may be
difficult to assess or predict, it has already caused, and is
likely to result in further significant disruption of global
financial markets, which may reduce our ability to access capital
either on favorable terms or at all. In addition, inflation,
stagflation, recession or other sustained adverse economic events
resulting from the spread of the virus could materially and
adversely affect our business and the market for or value of our
common stock.
B. Risks Associated
with our Financial Condition
(i) Risks related to
historical net losses and reliance on licensing
Our Company has little operating history and an
evolving business model, which raises doubt about our ability to
achieve profitability or obtain financing.
Our Company has no significant history of operations and our
business model is still evolving and is subject to change. Our
revenues are dependent upon licensing DehydraTECH and on those
licensees generating usages fees by successfully selling products
utilizing DehydraTECH. Without increased market acceptance of our
technologies, we may not generate meaningful revenue. Our licensees
may also be subject to regulatory approval of their products that
utilize DehydraTECH, which may not occur before they can bring
their products to market and we generate usage licensing revenues
from them.
Our Company’s ability to continue as a going concern is dependent
upon our ability to obtain adequate financing for our research and
development and our operational requirements and/or to reach
profitable levels of operations. In that regard we have no proven
history of performance, earnings, or success. Our revenues are
primarily generated from out-licensing of DehydraTECH technology.
There can be no assurance that we will achieve significant revenues
or profitable operations or will generate adequate funds to
continue our intellectual property development. Many factors, such
as competition, patent protection, appropriate regulatory
approvals, availability of personnel, and market acceptance of our
services can influence the revenue and profitability potential. As
a result, we may experience material fluctuations in future
operating results on a quarterly and annual basis which could
materially affect our business, financial condition, and operating
results. Although we exercise due consideration in the development
of our technology, we cannot be certain that our overall business
model within any particular sector will ever come to fruition, and
if they do, will not decline over time. We may not recover all or
any portion of our capital investment in our research and
technology development, marketing, or other aspects of the
business.
(ii) Risks related to
additional funding requirements for R&D activities
The longer-term growth of our business depends on our
ability to expand our portfolio of patents and industry segments
where DehydraTECH is demonstrably applicable, which may require
substantial financial resources and may ultimately be
unsuccessful.
The longer-term growth of our business depends upon our ability to
expand our patent portfolio of applicable APIs and molecules and
delivery methods. We may also be required to evidence that
DehydraTECH’s demonstrated efficacy also works with other APIs and
molecules prior to acceptance and adoption within those segments.
The R&D programs required to develop the evidence may require
substantial financial resources and may ultimately be
unsuccessful.
(iii) Risks related to
additional funding requirements for business plan
Without additional financing to develop our business
plan, our business may fail.
Because we have generated only minimal revenue from our business
and cannot anticipate when we will be able to generate meaningful
revenue from our business, we will need to raise additional funds
to conduct and grow our business. We anticipate that we will need
to raise further financing. We do not currently have any
arrangements for financing and we can provide no assurance to
investors that we will be able to find such financing if required.
The most likely source of future funds presently available to us is
through the sale of equity capital. Any sale of share capital will
result in dilution to existing security-holders.
C. Risk Associated with Current Regulatory
Environments
(i) Risks related to
conducting clinical trials
Our product candidates are in an early stage of
development and may fail or experience significant delays or may
never advance to the clinical stage, which may materially and
adversely impact our business.
All of our R&D programs are in the early, pre-application stage
of preclinical development and our future success heavily depends
on the successful development of our DehydraTECH product
candidates, which may never occur. These product candidates could
be delayed, not advance into the clinic, or unexpectedly fail at
any stage of development. Before we can commence clinical trials
for a product candidate, we must conduct extensive preclinical and
other non-clinical tests in order to support an investigational new
drug (“IND”) application, including IND-enabling good laboratory
practice toxicology studies, in the United States or their
equivalents with regulatory authorities in other jurisdictions.
Preclinical studies and clinical trials are expensive, difficult to
design and can take many years. There is no assurance that we will
be able to successfully develop our product candidates, and we may
focus our efforts and resources on product candidates that may
prove to be unsuccessful.
We cannot be certain of the outcome of preclinical testing and
clinical studies and results from these studies may not predict the
results that will be obtained in later phase trials of our product
candidates. Even if we are able to complete our preclinical studies
and planned clinical trials in line with our projected timelines,
results from such studies and trials may be not replicated in
subsequent preclinical studies or clinical trial results.
Additionally, such studies may be delayed due to events beyond our
control including as a result of natural disasters of any kind. As
a result, we cannot guarantee that we will be able to submit INDs,
or similar applications, within our projected timelines, if at all,
or that the FDA, or similar regulatory authorities, will allow us
to commence clinical trials.
Pharmaceutical products incorporating DehydraTECH has
never been approved for the treatment of disease.
In order to commercialize a product that utilizes DehydraTECH for
the treatment of any disease, we and/or our commercial partner must
obtain regulatory approvals for such product for treatment of a
particular indication. Satisfying regulatory requirements is an
expensive process that typically takes many years and involves
compliance with requirements covering R&D, testing,
manufacturing, quality control, labeling, and promotion of drugs
for human use. To obtain necessary regulatory approvals, a licensee
must, among other requirements, complete clinical trials
demonstrating that their product is safe and effective for a
particular indication. There can be no assurance that any product
enhanced by DehydraTECH will be proven to be safe and effective,
that the clinical trials will demonstrate the necessary safety and
effectiveness of the product candidates, or that we will be
successful in obtaining regulatory approval for any treatment
developed, even if such safety and effectiveness are
demonstrated.
Any delays or difficulties encountered in such clinical trials may
delay or preclude regulatory approval from the United States Food
and Drug Administration (the “FDA”) or from international
regulatory organizations. Any delay or preclusion of regulatory
approval would be expected to delay or preclude the
commercialization of their product that utilizes DehydraTECH.
Examples of delays or difficulties that may be encountered during
clinical trials include without limitation the following:
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clinical trials may not yield
sufficiently conclusive results for regulatory agencies to approve
the use of DehydraTECH; |
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DehydraTECH enhanced formulations
may fail to be more effective than current therapies, or to be
effective at all; |
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DehydraTECH enhanced formulations
may have adverse side effects, which could cause them to be delayed
or precluded from receiving regulatory approval or otherwise expose
us to significant commercial and legal risks; |
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it may take longer than expected to
determine whether or not a treatment is effective; |
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patients involved in the clinical
trials may suffer severe adverse side effects even up to death,
whether as a result of treatment with DehydraTECH enhanced
formulations, the withholding of such treatment, or other reasons
whether within or outside of our control; |
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failure to be able to enroll a
sufficient number of patients in the clinical trials; |
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patients enrolled in the clinical
trials may not have the characteristics necessary to obtain
regulatory approval for a particular indication or patient
population; |
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failure to obtain and/or maintain,
any required governmental approvals; |
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if approval for commercialization
is granted, it is possible the authorized use will be more limited
than is necessary for commercial success, or that approval may be
conditioned on completion of further clinical trials or other
activities, which will cause a substantial increase in costs; |
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if granted, approval may be
withdrawn or limited if problems with DehydraTECH enhanced
formulations emerge or are suggested by the data arising from their
use or if there is a change in law or regulation. |
Any success achieved at a given stage of the clinical trials does
not guarantee that the future achievement of success at any
subsequent stage, including without limitation, final FDA
approval.
Delays or rejections in the regulatory approval process because of
additional government regulation resulting from future legislation
or administrative action, or from changes in the policies of the
FDA or other regulatory bodies during the period of product
development, clinical trials, or regulatory review may occur.
Failure to comply with applicable regulatory requirements may
result in criminal prosecution, civil penalties, recall or seizure
of products, total or partial suspension of production, or an
injunction preventing certain activity, as well as other regulatory
action against our product candidates or us.
We currently have no commercial pharmaceutical products and
therefore generate no revenue from pharmaceutical products and may
never be able to develop marketable pharmaceutical products. We
have no experience in filing the applications necessary to obtain
marketing approval and expect that we will need to rely on CROs and
regulatory consultants to assist us with this process. Regulatory
approval also requires the submission about the product
manufacturing process and inspection of the manufacturing
facilities, to the relevant regulatory authority.
Our success is dependent on our, or our licensee’s, ability to
successfully navigate the risks and obstacles associated with
obtaining FDA clearance for any DehydraTECH enhanced formulated
product
(ii) Risks related to
regulatory and development approvals for pharmaceutical
products
Pharmaceutical products using DehydraTECH with CBD as
an API have never been approved for the treatment of any
disease.
Some of the pharmaceutical product candidates that we intend to
develop may contain CBD and/or THC. To date the FDA has approved
only limited use of cannabinoids for the treatment of any disease
or condition. The FDA has approved one cannabinoid-derived drug
product for the treatment of seizures associated with
Lennox-Gastaut syndrome and Dravet syndrome and three synthetic
cannabinoid-related drug products for the treatment of nausea and
vomiting caused by cancer chemotherapy. While we expect any product
candidates that we develop will be regulated as a new drug under
the Federal Food, Drug, and Cosmetic Act, the FDA could decide to
regulate them or any other products incorporating DehydraTECH under
a different regulatory regime. The lack of policies, practices or
guidelines may hinder or slow review by the FDA of any regulatory
filings that we may submit. Moreover, the FDA may respond to these
submissions by defining requirements that we may not have
anticipated.
(iii) Risks related to
controlled substances
Hemp-based CBD can be confused with marijuana-based CBD
which remains illegal under federal law.
In conjunction with the enactment of the Agriculture Improvement
Act of 2018 (the “Farm Bill”), the FDA released a statement about
the status of CBD as a nutritional supplement, and the agency’s
actions in the short term with regards to CBD will guide the
industry. The regulation of CBD products is currently in constant
flux and any difficulties in compliance with future government
regulation could increase our operating costs and adversely impact
our results of operations in future periods. Furthermore,
violations of these laws, or alleged violations, could disrupt our
business or the business of our licensees and result in a material
adverse effect on our operations. We cannot predict the nature of
any future laws, regulations, interpretations, or applications, and
it is possible that regulations may be enacted in the future that
will be directly applicable to our business.
In addition, the interstate shipment of hemp-derived CBD from one
state to another is legal only where both states have laws and
regulations that allow for the production and sale of such products
and that qualify under the Farm Bill. Therefore, the marketing and
sale of DehydraTECH products containing hemp-derived CBD is limited
by such factors and is restricted to such states. A repeal or
adverse amendment of laws and regulations that are now favorable to
the distribution, marketing, and sale of finished products our
licensees intend to sell could significantly limit, restrict or
prevent us from generating revenue related to DehydraTECH
technology-enabled products that contain hemp-derived CBD. Any such
repeal or adverse amendment of now favorable laws and regulations
could have an adverse impact on our business plan with respect to
such revenues
Controlled substance legislation differs between
counties, states and countries and legislation in certain countries
may restrict or limit our ability to develop and commercialize
products using DehydraTECH.
We currently have licensees who produce hemp-derived CBD products.
The Farm Bill delegates the authority to the states to regulate and
limit the production of hemp and hemp-derived products within their
territories. Although many states have adopted laws and regulations
that allow for the production and sale of hemp and hemp-derived
products under certain circumstances, no assurance can be given
that such state laws may not be repealed or amended such that our
intended products containing hemp-derived CBD would once again be
deemed illegal under the laws of one or more states now permitting
such products, which in turn would render such intended products
illegal in those states under federal law even if the federal law
is unchanged. In the event of either repeal of federal or of state
laws and regulations, or of amendments thereto that are averse to
our or our licensee’s products, we may be adversely impacted with
respect to DehydraTECH-enabled CBD product revenue or
royalties.
Although Lexaria does not sell any marijuana or
marijuana-based CBD, under its discontinued business operations,
its former licensee’s products could be treated as being illegal
under federal or state authorities.
Lexaria has discontinued business operations which had ancillary
involvement exposure via out-licensing of its intellectual property
to licensees that may utilize DehydraTECH in the production of
products that contain contents which are locally or state approved
but federally controlled. Where licensee’s products contain
controlled contents any revenue streams from such licensee’s may be
interrupted by regulatory involvement in their business.
D. Risks Associated with Securities Markets and Ownership
of our Common Stock
(i) Risks related to
pricing volatility of common stock and warrants
The trading price of the shares of our common stock
could be highly volatile and as such investors could incur
substantial losses.
Prospects for companies in the biotechnology industry may be
regarded generally as uncertain given the nature of the industry
and, accordingly, investments in biotechnology companies should be
regarded as speculative. We have experienced erratic share-price
and trading volume movement of our common stock which could be
influenced by any number of factors which include the Risk Factors
discussed in this section of the Report on 10-K and many others. In
general, trading stocks on any market and particularly in stocks of
bioscience companies can be characterized by wide fluctuations in
trading prices, due to many factors that may be unrelated to the
operating performance or business prospects of any particular
company.
We have warrants that are listed on the Nasdaq pursuant to our
January 2021 underwritten offering but they do not confer any
rights of common stock ownership on their holders, such as voting
rights or the right to receive dividends, but rather merely
represent the right to acquire shares of common stock at a fixed
price. Upon exercise of a warrant, a holder will be entitled to
exercise the rights of a common stockholder as to the security
exercised only as to matters for which the record date occurs after
the exercise. Although the warrants from the Company’s underwritten
offering are currently trading on Nasdaq, there can be no assurance
that there will be an active trading market for the warrants.
Without an active trading market, the liquidity of the warrants
will be limited.
(ii) Risks related to
strategic transactions
Our by-laws do not contain anti-takeover provisions,
which could result in a change of our management, directors and
directors if there is a take-over of our company.
We do not currently have a shareholder rights plan or any
anti-takeover provisions in our by-laws. Without any anti-takeover
provisions, there is no deterrent for a take-over of our Company,
which may result in a change in our management and/or
directors.
(iii) Risks related to
non-payment of dividends and dilution
Because we do not intend to pay any dividends on our
shares, investors seeking dividend income or liquidity should not
purchase our shares.
We have not declared or paid any dividends on our shares since
inception, and do not anticipate paying any such dividends for the
foreseeable future. We presently do not anticipate that we will pay
dividends on any of our common stock in the foreseeable future. If
payment of dividends does occur at some point in the future, it
would be contingent upon our revenues and earnings, if any, capital
requirements, and general financial condition. The payment of any
common stock dividends will be within the discretion of our Board
of directors. We presently intend to retain all earnings to
implement our business plan; accordingly, we do not anticipate the
declaration of any dividends for common stock in the foreseeable
future. Investors seeking dividend income or liquidity should not
invest in our shares.
Because we can issue additional shares, purchasers of
our shares may incur immediate dilution and may experience further
dilution.
We are authorized to issue up to 220,000,000 shares. The board of
directors of our Company has the authority to approve additional
share issuances, and to determine the rights, preferences, and
privileges of such shares, without consent of any of our
stockholders. Consequently, our stockholders may experience more
dilution in their ownership of our Company in the future.
(iv) Risks related to
smaller reporting company compliance
We are a “smaller reporting company” under the SEC’s
disclosure rules and have elected to comply with the reduced
disclosure requirements applicable to smaller reporting
companies.
We are a “smaller reporting company” under the SEC’s disclosure
rules, meaning that we have either:
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a public float of less than $250
million; or |
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annual revenues of less than $100
million during the most recently completed fiscal year; and no
public float; or a public float of less than $700 million. |
As a smaller reporting company, we are permitted to comply with
scaled-back disclosure obligations in our SEC filings compared to
other issuers, including with respect to disclosure obligations
regarding executive compensation in our periodic reports and proxy
statements. We have elected to adopt the accommodations available
to smaller reporting companies. Until we cease to be a smaller
reporting company, the scaled-back disclosure in our SEC filings
will result in less information about our company being available
than for other public companies. If investors consider our common
shares less attractive as a result of our election to use the
scaled-back disclosure permitted for smaller reporting companies,
there may be a less active trading market for our common shares and
our share price may be more volatile.
We are also a non-accelerated filer under the Securities Exchange
Act of 1934, as amended, or the Exchange Act, and we are not
required to comply with the auditor attestation requirements of
Section 404(b) of the Sarbanes-Oxley Act of 2002. Therefore, our
internal controls over financial reporting will not receive the
level of review provided by the process relating to the auditor
attestation included in annual reports of issuers that are subject
to the auditor attestation requirements. In addition, we cannot
predict if investors will find our common shares less attractive
because we are not required to comply with the auditor attestation
requirements. If some investors find our common shares less
attractive as a result, there may be a less active trading market
for our common shares and trading price for our common shares may
be negatively affected.
Operating as a public company, we incur increased costs
and our management is required to devote substantial time to new
compliance initiatives and corporate governance
practices.
As a public company we have incurred, and will continue to incur,
significant legal, accounting, and other fees related to our
compliance measures under the listing requirements of SEC, Nasdaq,
the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), the Dodd-Frank
Wall Street Reform, British Columbia Securities Commission, Ontario
Securities Commission, FINRA and other applicable securities rules
and regulations. Our management devotes a substantial amount of
time towards maintaining compliance with these requirements
including establishment and maintenance of effective disclosure and
financial controls and corporate governance practices. These
requirements increase our legal and financial compliance costs and
make some activities more time-consuming and costly. These rules
and regulations are often subject to varying interpretations, in
many cases due to their lack of specificity, and, as a result,
their application in practice may evolve over time as new guidance
is provided by regulatory and governing bodies. This could result
in continuing uncertainty regarding compliance matters and higher
costs necessitated by ongoing revisions to disclosure and
governance practices. The increased costs could impact our results
of operations, and may require us to reduce costs in other areas of
our business or increase the prices of our products or services. We
cannot predict or estimate the amount or timing of additional costs
we may incur to respond to these requirements. The impact of these
requirements and other requirements could also make it more
difficult for us to attract and retain qualified persons to serve
on our Board of directors, our board committees, or as executive
officers.
E. General Risks
Obtaining and maintaining patent protection depends on
compliance with various procedural, document submission, fee
payment and other requirements imposed by governmental patent
agencies, and our patent protection could be reduced or eliminated
for non-compliance with these requirements.
The USPTO and various foreign governmental patent agencies require
compliance with their procedural, documentary, fee payment and
other provisions during the patent application process. Periodic
maintenance fees on issued patents often must be paid to the USPTO
and foreign patent agencies over the lifetime of each patent. While
an unintentional lapse can in many cases be cured by payment of a
late fee or by other means in accordance with the applicable rules,
there are situations in which noncompliance can result in
abandonment or lapse of the patent or patent application, resulting
in partial or complete loss of patent rights in the relevant
jurisdiction. Non-compliance events that could result in
abandonment or lapse of a patent or patent application include, but
are not limited to, failure to respond to official actions within
prescribed time limits, non-payment of fees and failure to properly
legalize and submit formal documents. If we fail to maintain the
patents and patent applications covering our intellectual property,
we may not be able to stop a competitor from utilizing our
Technology, which would have a material adverse effect on our
business.
We face risks related to our collection and use of
data, disruptions or failures of our information technology systems
or breaches of information security that could adversely affect our
business and operations.
Our internal computer systems and those of our CROs and other
contractors and consultants are vulnerable to damage from computer
viruses, unauthorized CRO access, telecommunication and electrical
failures, and natural disasters. If such an event were to occur and
cause interruptions in our operations, it could result in a
material disruption of our R&D programs. We depend on digital
technologies for the successful operation of our business,
including corporate email communications to and from employees,
licensees, consultants and third-party providers, collection, use
and retention of investor data, security systems with respect to
our Health Canada licensed laboratory and maintenance of
confidential information.
As part of our business model, we collect, retain, and transmit
confidential information over public networks. We have enterprise
class and industry comparable security measures in place to protect
both our physical facilities and digital systems from attacks.
Despite these efforts, however, we may be vulnerable to targeted or
random personal data or security breaches, acts of vandalism,
computer malware, misplaced or lost data, programming and/or human
errors, or other similar events. Awareness and sensitivity to
personal data breaches and cyber security threats is at an all-time
high. Any misappropriation of confidential or personal information
gathered, stored or used by us, be it intentional or accidental,
could have a material impact on the operation of our business,
including severely damaging our reputation and our relationships
with our licensees, employees and investors. We may incur further
significant costs implementing additional security measures to
protect against new or enhanced data security or privacy threats,
or to comply with current and new international, federal, and state
laws governing the unauthorized disclosure of confidential and
personal information which are continuously being enacted and
proposed. We could also experience loss of revenues resulting from
unauthorized use of proprietary information including our
intellectual property. We could also face sizable fines,
significant breach containment and notification costs to
supervisory authorities and the affected data subjects, and
increased litigation as a result of cyber security or personal data
breaches.
If we are unable to hire and retain qualified
personnel, we may not be able to implement our business plan
successfully.
In developing DehydraTECH, we rely upon our employees, consultants,
contractors, and collaborators. Our current business prospects are
dependent on the principal members of our executive team, the loss
of whose services could make it difficult for us to manage our
business successfully and achieve our business objectives. Our
ability to identify, attract, integrate, and retain additional
qualified key personnel is critical to our success. Competition for
skilled research, product development, regulatory and technical
personnel is intense, and we may not be able to recruit and retain
the personnel we need. The loss of the services of any key
research, product development, regulatory and technical personnel,
or our inability to hire new personnel with the requisite skills,
could restrict our ability to carry out our R&D programs and/or
develop our product candidates. Because we are a smaller reporting
entity, the loss of any key personnel could result in more severe
disruption to our operations than it would to a larger company,
since of necessity each person in a small company carries
relatively greater duties responsibilities than that person would
in a larger company.
We may be subject to claims that our employees,
consultants, or independent contractors have wrongfully used or
disclosed alleged trade secrets.
We employ, and may employ in the future, individuals who were
previously employed at other biotechnology or pharmaceutical
companies, including our competitors or potential competitors which
is common in the biotechnology and pharmaceutical industries.
Although we have policies that dissuade our employees, consultants
and independent contractors in the use of any proprietary
information or know-how of their previous employers in their
employment with us, we could be subject to claims that the Company
or our employees, consultants or independent contractors have
inadvertently or otherwise used or disclosed trade secrets or other
proprietary information of their former employers. Litigation may
be necessary to defend against these claims and the failure to
defend against such claims, could result in the loss of valuable
intellectual property rights or personnel in addition to suffering
monetary damages. Even if we are successful in defending against
these claims, litigation could result in substantial costs and be a
distraction to management and which could adversely impact our
business.
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements.
Forward-looking statements give our current expectations or
forecasts of future events. You can identify these statements by
the fact that they do not relate strictly to historical or current
facts. Forward-looking statements involve risks and uncertainties
and include statements regarding, among other things, our projected
revenue growth and profitability, our growth strategies and
opportunity, anticipated trends in our market and our anticipated
needs for working capital. They are generally identifiable by use
of the words “may,” “will,” “should,” “anticipate,” “estimate,”
“plans,” “potential,” “projects,” “continuing,” “ongoing,”
“expects,” “management believes,” “we believe,” “we intend” or the
negative of these words or other variations on these words or
comparable terminology. These statements may be found under the
sections entitled “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and “Business,” as
well as in this prospectus generally. In particular, these include
statements relating to future actions, prospective products, market
acceptance, future performance or results of current and
anticipated products, sales efforts, expenses, and the outcome of
contingencies such as legal proceedings and financial results.
Examples of forward-looking statements in this prospectus include,
but are not limited to, our expectations regarding our business
strategy, business prospects, operating results, operating
expenses, working capital, liquidity and capital expenditure
requirements. Important assumptions relating to the forward-looking
statements include, among others, assumptions regarding demand for
our products, the cost, terms and availability of components,
pricing levels, the timing and cost of capital expenditures,
competitive conditions and general economic conditions. These
statements are based on our management’s expectations, beliefs and
assumptions concerning future events affecting us, which in turn
are based on currently available information. These assumptions
could prove inaccurate. Although we believe that the estimates and
projections reflected in the forward-looking statements are
reasonable, our expectations may prove to be incorrect.
Important factors that could cause actual results to differ
materially from the results and events anticipated or implied by
such forward-looking statements include, but are not limited
to:
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changes in the market acceptance of our products;
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increased levels of competition;
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changes in political, economic or regulatory conditions generally
and in the markets in which we operate;
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our relationships with our key customers;
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our ability to retain and attract senior management and other key
employees;
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our ability to quickly and effectively respond to new technological
developments;
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our ability to protect our trade secrets or other proprietary
rights, operate without infringing upon the proprietary rights of
others and prevent others from infringing on the proprietary rights
of the Company; and
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other risks, including those described in the “Risk Factors”
discussion of this prospectus
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We operate in a very competitive and rapidly changing environment.
New risks emerge from time to time. It is not possible for us to
predict all of those risks, nor can we assess the impact of all of
those risks on our business or the extent to which any factor may
cause actual results to differ materially from those contained in
any forward-looking statement. The forward-looking statements in
this prospectus are based on assumptions management believes are
reasonable. However, due to the uncertainties associated with
forward-looking statements, you should not place undue reliance on
any forward-looking statements. Further, forward-looking statements
speak only as of the date they are made, and unless required by
law, we expressly disclaim any obligation or undertaking to
publicly update any of them in light of new information, future
events, or otherwise.
USE OF
PROCEEDS
We will not receive any of the proceeds from the sale of the shares
of our common stock being offered for sale by the selling
stockholders. Upon the exercise of the warrants for an aggregate of
352,763 shares of common stock assuming all payments are made by
cash and there is no reliance on cashless exercise provisions
however, we will receive the exercise price of the warrants, or an
aggregate of approximately $5,162,943. We will bear all fees and
expenses incident to our obligation to register the shares of
common stock. Brokerage fees, commissions and similar expenses, if
any, attributable to the sale of shares offered hereby will be
borne by the applicable selling stockholders.
MARKET PRICE AND
DIVIDENDS
Market Price for our Common Stock
Our common stock was quoted on the OTCBB and its predecessors under
the symbol “LXRA” and then, subsequent to June 2009, under the
symbol “LXRP”. On January 4, 2018, the Company’s shares of common
stock commenced quotation on the OTCQX. On January 12, 2021, the
Company’s shares of common stock ceased trading on the OTCQX and
commenced trading on Nasdaq under the symbol “LEXX.” Our common
stock traded on the Canadian Stock Exchange or its predecessors
from October 2009 through July 2021 under the symbol “LXX.”
Holders
As of December 17, 2021 there were approximately 48 stockholders of
record holding 5,950,998 shares of our common stock. This number
does not include an indeterminate number of stockholders whose
shares are held by brokers in street name. The holders of our
common stock are entitled to one vote for each share held of record
on all matters submitted to a vote of stockholders. Holders of our
common stock have no preemptive rights and no right to convert
their common stock into any other securities. There are no
redemption or sinking fund provisions applicable to our common
stock.
Dividend Policy
We have never paid any cash dividends on our common stock and do
not anticipate paying any cash dividends on our common stock in the
foreseeable future. We intend to retain future earnings to fund
ongoing operations and future capital requirements of our business.
Any future determination to pay cash dividends will be at the
discretion of our Board and will be dependent upon our financial
condition, results of operations, capital requirements and such
other factors as our Board deems relevant. Our ability to pay cash
dividends is subject to limitations imposed by state law.
OUR
BUSINESS
General and Historical Overview of Our
Business
Lexaria is a biotechnology company seeking to enhance the
bioavailability of a broad variety of active pharmaceutical
ingredients (“APIs”) with its DehydraTECHTM drug
delivery technology. DehydraTECH combines lipophilic APIs with
specific fatty acid and carrier compounds thereby improving the way
APIs enter the bloodstream while increasing the effectiveness of
fat-soluble active molecules allowing lowering overall dosing and
promoting healthier oral ingestion methods. DehydraTECH can be used
with a wide variety of APIs encompassing fat-soluble vitamins,
non-steroidal anti-inflammatory drugs (“NSAIDs”) pain medications,
hormones, phosphodiesterase inhibitors, antivirals, nicotine and
its analogs, and all cannabinoids including tetrahydrocannabinol
(“THC”) for a variety of therapeutic indications, including
hypertension, SARS-CoV-2/COVID-19 and HIV/AIDS. The Company’s
technology applies to a host of different ingestible or topically
administered product formats including foods, beverages, oral
suspensions, tablets, capsules, creams, lotions, and skin
patches.
Lexaria began filing patents for DehydraTECH in 2014 with two
initial US provisional patent application filings by the original
inventors Poppy’s Teas LLC, which Lexaria acquired by way of
exclusive, worldwide license rights and controlling interest in the
founding company. We have since increased the number of patent
applications to approximately 60 with 23 patents granted worldwide
to date. In addition to the US patent filings, the Company has also
pursued international patent protection through filings under the
Patent Cooperation Treaty, followed by national filings in over 40
jurisdictions of highest commercial potential thereunder. Our
patent family includes intellectual property addressing the
manufacturing and processing methods used to combine the long chain
fatty acids with active pharmaceutical ingredients.
Lexaria’s patent applications developed from its Research and
Development programs (“R&D”) currently include fat-soluble
versions of vitamins, NSAIDs, nicotine, cannabinoids, hormones,
phosphodiesterase inhibitors, and antivirals. 2018 animal studies
demonstrated a propensity for DehydraTECH technology to elevate the
quantity of drug delivered across the blood-brain-barrier. This
expanded our patent applications and opened possibilities for
improved delivery of certain central nervous system-targeted drugs
that require additional R&D.
In a human clinical study performed in 2018 and published in 2019
in a peer reviewed medical journal, Advances in Therapy titled
“Examination of a New Delivery Approach for Oral Cannabidiol in
Healthy Subjects: A Randomized, Double-Blinded, Placebo-Controlled
Pharmacokinetics Study” available on the PubMed.gov website with
the identification of PMID: 31512143, Lexaria demonstrated that its
technology delivered higher volumes of cannabidiol into the human
circulatory system and did so more quickly than a
concentration-matched positive control. This same study also
demonstrated a statistically significant reduction in human blood
pressure from the DehydraTECH processed cannabidiol, versus no
statistical reduction in human blood pressure from the positive
control.
We operate a Health Canada-licensed laboratory in Canada to conduct
basic research and formulation operations, and typically outsource
virtually all analytical work to independent third-party
laboratories located in Canada, the USA, and Europe. Such
third-party evaluation provides independent confirmation of the
effects of our technology and processes.
Lexaria’s formulation and process-oriented operations are primarily
conducted in its own laboratory and validated through third-party
testing, in preparation for partnering with industry leaders for
adoption into their consumer products and/or drugs. Other than for
R&D purposes, Lexaria does not produce, manufacture, market or
distribute drugs.
Although we have experimented with consumer product development in
the past, those activities occupy a declining amount of our
corporate time. We first began selling trial amounts of ViPova
branded black tea fortified with hemp oil and utilizing our
technology, in January 2015 and added additional flavours over
time.
We also began offering our first coffee and hot chocolate also
fortified with full spectrum hemp oil, and also under the ViPova
brand. Beginning in January 2021 we discontinued sales of consumer
products, but offering a variety of self-made beverages to
consumers helped us to establish the ViPova brand and helped us to
develop final consumer product formulations and understand consumer
needs
Generating meaningful revenue from consumer product sales was
challenging and we were unable to achieve widespread retail
distribution. We continue to be open to the possibility of
generating sales from international markets, in those locations
where hemp oil fortified foods are permissible by law.
ViPova branded products are owned by our wholly owned PoViva Corp.
subsidiary. Lexaria Energy, TurboCBD and ChrgD+ branded
products are owned 100% by Lexaria Bioscience Corp.
Through our product development we have communicated to the
industry the versatility of our technology in specific CPG formats
and we believe this strategy has been successful in assisting us in
technology licensing discussions with potential new clients. We
believe the range of products available and under development are
sufficient to prepare for revenue growth and potentially profitable
long-term operations if we are able to generate sufficient business
clientele demand.
Our business strategy contains an element that we believe will be
more impactful to future corporate growth that involves the further
development and out-licensing of our intellectual property of
molecule delivery that enhances bioactivity or absorption. We have
no plans to offer for sale any products containing THC in
quantities higher than 0.3%. We have discontinued all direct
business activities related to non-FDA-approved uses of THC,
including our former business practice of licensing our technology
to businesses that were legally state-licensed to offer THC
products. We also plan to license our technology to other companies
for the delivery of molecules other than THC or cannabinoids, such
as nicotine which we have licensed to Altria Ventures Inc., an
indirect wholly owned subsidiary of Altria Group, Inc. Our October
31, 2017, announcement of the USPTO Notice of Allowance for our
first patent granted and the subsequent granted patents of our
technology in the US and in many other countries around the world
related to new molecule groups, along with our ongoing patent
filing and grants, may enhance our ability to successfully pursue
our licensing initiatives during fiscal 2022.
We continue to communicate the benefits of our technology to
potential licensing partners; i.e. with higher absorption levels a
manufacturer could perhaps infuse smaller amounts of active
molecules into a product, potentially reducing their manufacturing
input costs; to provide higher bioavailability with the dosing
limits being imposed or contemplated in many jurisdictions; to
infuse beverages while masking the flavor and smell of the active
molecules; and to reduce delivery times to the bloodstream. We
believe these to be meaningful competitive advantages that may lead
to the potential to generate licensing revenue, and will pursue
these opportunities within the cannabinoids, nicotine, and other
bioactive molecular markets both within the USA and also
internationally, in those locations where they are legal and
regulated by government.
Subject to budgetary availability, we also plan to conduct
additional in vitro and in vivo studies testing the absorption of
many API’s – CBD, NSAIDs, vitamins, PDE5 inhibitors, antiviral
drugs, nicotine, and others– to substantiate the effectiveness of
our technology. More than simply satisfying scientific curiosity,
successful tests could lead to increased awareness and acceptance
of our technology as a meaningful method by which to deliver some
or all of the named molecules more effectively than their current
delivery methods. Therefore, absorption tests could become an
important element leading towards higher rates of acceptance of our
technology licensing initiatives.
We will pursue technology licensing opportunities as a method of
generating highly profitable revenue streams over long periods of
time. In addition, while nine of our US patents and eight of our
Australian patents have been granted to date, we now have received
granted patents in the European Union, Japan, India and Mexico, and
have multiple other applications filed in the US and around the
world. It is not possible to forecast with certainty when, or if,
our remaining patents pending will become granted patents. But if
our remaining patent applications do become granted patents, our
ability to generate meaningful license revenue from our
intellectual property may increase from multiple jurisdictions
outside of the US.
We will continue to pursue our remaining patents pending as
vigorously as we are able, since the successful granting of more of
those applications could lead to material increases in shareholder
value. We are pursuing patent protection in more than 40 countries
around the world.
Available Information
The address of our principal executive office and research
laboratory is #100–740 McCurdy Road, Kelowna, British Columbia,
Canada V1X 2P7.
Our common stock is quoted on the Nasdaq under the symbol “LEXX”.
We file annual, quarterly, and current reports, proxy statements
and other information with the U.S. Securities Exchange Commission
(the “SEC”). These filings are available to the public on the
Internet at the SEC’s website at http://www.sec.gov.
Our corporate website is located at www.lexariabioscience.com (this
website address is not intended to function as a hyperlink and
the information contained on our website is not intended to be a
part of this Report). We make available free of charge on
https://www.lexariabioscience.com/investors/regulatory-filings/ our
annual, quarterly, and current reports, and amendments to those
reports if any, as soon as reasonably practical after we
electronically file such material with, or furnish it to, the SEC.
We may from time to time provide important disclosures to investors
by posting them in the Investor Relations section of our
website.
We maintain our registered agent’s office and our U.S. business
office at Nevada Agency and Transfer Company, 50 West Liberty,
Suite 880, Reno, Nevada 89501. Our telephone number is (755)
322-0626.
Lexaria Bioscience Corp. is a British Columbia based reporting
issuer in Canada and as such, we are required to file certain
information and documents at www.sedar.com.
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. Patents have been filed specifically for the
use of DehydraTECH with cannabinoids for the treatment of heart
disease.
We plan to perform additional human clinical investigations in late
calendar 2021 and throughout 2022 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
fiscal 2022, evaluations of DehydraTECH’s ability to improve the
oral delivery characteristics and pharmacological performance of
certain other APIs. 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 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 23
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.
During the past fiscal year, the Company experienced the
following significant corporate developments:
During the past fiscal year, the Company was granted an aggregate
of four new patents in the following jurisdictions, Europe, India
and Japan.
On December 9, 2020, CanPharm completed a disposition to Hill
Street Beverage Company Inc. (“Hill Street”) of its use and
licensing rights to use its DehydraTECH technology specifically in
association with non-pharmaceutical products containing cannabis
molecules that contain 0.3% or greater THC.
On January 11, 2021, Lexaria effected a reverse stock split that
was conducted on a 1-for-30 basis on the Company’s issued share
capital and on any outstanding warrants and options, whereby the
exercise prices of such outstanding convertible securities were
adjusted accordingly.
On January 12, 2021, Lexaria became a Nasdaq listed company and
announced the pricing of a public offer of 1,828,571 units, with
each unit comprising one share of common stock and one warrant to
purchase one share of common stock at $5.25 per unit. The warrants
issued pursuant to this public offering were listed on the Nasdaq
under the symbol LEXXW and have an exercise price of $6.58 per
share. They are immediately exercisable, and expire five years from
issuance date. The underwriter was granted 30-day option to
purchase up to an additional 274,285 shares of common stock and/or
warrants to purchase up to the same amount of common stock, which
option was exercised in full by H.C. Wainwright & Co. who acted
as sole book-running manager for the offer. Gross proceeds of
$11.04 million were ultimately received from the offering and
Lexaria also issued five-year warrants to H.C. Wainwright & Co.
entitling them to purchase up to 166,781 shares of common stock
with an exercise price of $6.58 per share. Pursuant to certain tail
rights held by Bradley Woods & Co. Lexaria paid Bradley Woods
$316,999.62 and issued Bradley Woods five-year warrants to purchase
60,385 shares of common stock at an exercise price of $6.58 per
share.
On January 14, 2021, Mr. Al Reese, Jr., was appointed to Lexaria’s
board of directors. With the appointment of Mr. Reese Jr. Lexaria
established a fully independent audit and finance committee and
comply with the financial expert requirements of the Nasdaq.
On March 24, 2021, Lexaria announced results from a shelf-stability
study. DehydraTECH CBD beverages demonstrated 93.4% of target CBD
potency a year after production. The beverages also exhibited zero
microbial growth over the period. Furthermore, the samples had
intra-beverage variance less than 1% in CBD potency across various
fractions (top, middle, and bottom) without mixing or agitation,
indicating a very stable emulsion.
On April 15, 2021, Lexaria announced the appointment of Gregory
Downey as Chief Financial Officer, to replace outgoing Allan
Spissinger whose contract ended on May 31, 2021.
During the spring of 2021, Lexaria commenced its human clinical
study HYPER-H21-1 of DehydraTECH CBD, which is intended to validate
DehydraTECH CBD’s effect on hypertension, and is a randomized,
double-blind, controlled study expected to enroll 24 subjects with
symptoms of either pre-hypertension or mild hypertension. A single
300 mg dose of DehydraTECH 2.0 CBD formulation will be compared
against a non-DehydraTECH control of matched concentration. Time
series blood pressure and heart rate analyses are primary
objectives of the study. Secondary objectives include
pharmacokinetic speed and rate of absorption of CBD and main
metabolites as well as assessment of inflammatory markers of
cardiovascular disease and nitric oxide biomarkers.
On July 5, 2021, the Company announced that it would, effective on
market close July 7, 2021, voluntarily delist from the Canadian
Securities Exchange (“CSE”) since an overwhelming majority of
trading has moved to the Nasdaq resulting in saving management
time, effort, and fees.
On June 7, 2021, Lexaria provided an update on HYPER-H21-1
progress, stating that 24 volunteers, ranging in age between 45 to
65, were dosed and the treatment was well tolerated with no serious
adverse events or side effects observed or reported. The early
results of this study were disclosed in July 2021 noting a
difference between the DehydraTECH-CBD formulation and the control
arm at the 20-minute mark was statistically significant at the 2.5%
level.
Lexaria commenced a subsequent human trial study, designated as
HYPER-H21-2, and completed its patient dosing in late July 2021.
Initial results from the trial were disclosed subsequent to the
year end. HYPER-H21-2 evaluated 16 volunteers who were pre or
mildly hypertensive and received three separate doses of 150mg
DehydraTECH 2.0 CBD versus placebo. HYPER-H21-2 concentrated on
monitoring blood pressure reduction continuously over 24 hours and
studying central arterial stiffness, physical activity and sleep
quality.
The Company experienced the following significant corporate
developments subsequent to August 31, 2021
Subsequent to the August 31, 2021 fiscal year, Lexaria was granted
an additional two patents, one in Japan and our first in
Mexico.
On September 7, 2021, Lexaria announced partial results from its
human clinical study HYPER-H21-2 which evaluated DehydraTECH
processed CBD in a 24-hour study of volunteers with mild to
moderate hypertension. At selected times during the 24-hour study,
volunteers with mild to moderate hypertension averaged as much as a
20 mmHg (i.e., 23%) decrease in blood pressure relative to placebo
and over the 24-hour ambulatory monitoring period, volunteers
averaged a significant reduction of 7.0% (p < 0.001) in systolic
pressure with DehydraTECH-CBD relative to placebo.
On September 8, 2021, Lexaria announced that it had commenced the
process for preparing an Investigational New Drug application for
the purposes of filing same with the Food and Drug Administration
with respect to registering its DehydraTECH-processed CBD as a
pharmaceutical treatment for hypertension.
On October 5, 2021, Lexaria announced results from its oral
nicotine absorption study NIC-A21-1 which revealed that
DehydraTECH-nicotine delivered via the oral pouch product format
required only 2 to 4 minutes to deliver nicotine levels in blood
plasma comparable to levels achieved at 45 minutes with
concentration-matched controls. DehydraTECH-nicotine also reached
statistically significant peak blood plasma levels up to 10-fold
higher overall than controls (p=0.004) while still clearing from
blood virtually as quickly as the controls.
On October 13, 2021, Lexaria announced the that its oral
tetrahydrocannabinol (“THC”) absorption study THC-A21-1 revealed
that DehydraTECH-THC delivered, via oral ingestion, required only
15 minutes to deliver THC levels in blood plasma comparable to
levels achieved at 45 minutes with concentration-matched
controls.
During the study DehydraTECH-THC delivered more THC into the
bloodstream than the industry standard medium chain triglyceride
(“MCT” or “coconut oil”) based control formulation from the
2-minute mark onwards, then dropped rapidly to the same level as
the MCT control by the 6-hour mark.
On November 1, 2021, Lexaria commenced its first animal study
EPIL-A21-1 to determine if DehydraTECH-CBD evidences superior
treatment of seizure activity when compared to generic cannabidiol
and Epidiolex and subsequently announced the following new research
studies for the 2022 year:
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HYPER-H21-4: This 6-week efficacy study of approximately 60
volunteers who suffer from hypertension, will provide extensive
data to Lexaria on how DehydraTECH-CBD treats hypertension and may
provide additional long-term health benefits, including its effects
on 24-hour ambulatory blood pressure; arterial stiffness and
autonomic balance; brain structure and function through brain
magnetic resonance imaging; blood biomarkers (including lipids such
as cholesterol and more); renal, hepatic, sleep quality / daytime
sleepiness / sleep disorders; actigraphy, geriatric depression
scale, perceived stress, and Beck anxiety inventory.
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HOR-A22-1: This PK study will evaluate the ability of DehydraTECH
to enhance the delivery characteristics of estrogen. Estrogen helps
to control the menstrual cycle but also controls cholesterol and
protects bone health.
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DEM-A22-1: This efficacy study will evaluate DehydraTECH-CBD with
and without nicotine for the potential treatment of dementia.
Alzheimer’s disease is the most common form of dementia and
accounts for at least 60% of all cases, and nicotine is already
showing promising results related to Alzheimer’s treatment.
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RHEUM-A22-1: This efficacy study will focus on the ability of
DehydraTECH-CBD to potentially affect treatment of rheumatoid
disease. Given CBD’s postulated efficacy related to inflammation,
Lexaria will explore a possible role for CBD in this area of
investigation. Rheumatic diseases are autoimmune and inflammatory
diseases that cause the immune system to attack joints, bones,
muscles, and organs.
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Science and Technology
Lexaria is a drug delivery R&D company focused on developing
and out licensing DehydraTECH for improved consumer experiences,
rapidity, and delivery of bioactive compounds in oral and topical
products. 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.
In 2014, the Company acquired the IP that formed our first patent
application that was filed in the same year. From that first patent
application, due to ongoing R&D investigation and work by
Company management, we now have approximately 50 patent
applications pending around the world, with 23 allowed/patents
granted. All of our applications and allowed/granted patents relate
to DehydraTECH and its enhancement of certain characteristics of
oral ingredient and drug delivery. Additional early-stage
investigation has been conducted of topically-administered products
such as patches, creams and lotions.
The Company developed a variety of demonstration products beginning
in 2015 to demonstrate the potential uses for DehydraTECH to both
consumers and potential licensees. These included teas, coffee, and
protein energy bars – all utilizing DehydraTECH for the more
palatable and efficient delivery of cannabinoids. 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 production of our intermediate products for product
manufacturers to use, each raw material, intermediate stage and
completed product is assessed for compliance with all applicable
regulations, and to ensure that the inputs and the finished
products meet all applicable legal and quality standards including
and as it relates to content; molds and mildews; heavy metals; and
additional components.
The US Federal Government, through the US Department of Health and
Human Services, owns US Patent #6630507, which among other things,
claims that
“Cannabinoids have been found to have antioxidant properties,
unrelated to NMDA receptor antagonism. This new found property
makes cannabinoids useful in the treatment and prophylaxis of wide
variety of oxidation associated diseases, such as ischemic,
age-related, inflammatory and autoimmune diseases. The cannabinoids
are found to have particular application as neuroprotectants, for
example in limiting neurological damage following ischemic insults,
such as stroke and trauma, or in the treatment of neurodegenerative
diseases, such as Alzheimer’s disease, Parkinson’s disease and HIV
dementia.”
For reference, cannabinoids are compounds that affect cannabinoid
receptors located on many human cells. CB1 receptors are widely
found within the human brain; and CB2 receptors are found with the
human immune system and have been linked to anti-inflammatory and
other responses.
Over one hundred different cannabinoids have been isolated from the
cannabis plant, most of which do not have psychoactive properties.
One that does have psychoactive properties is THC. Endocannabinoids
are produced naturally in the human body while phyto cannabinoids
are produced in several plant species, most abundantly in the
cannabis plant.
Cannabidiol (“CBD”) is one of the major phyto cannabinoid and is
not psychoactive, often comprising more than 35% of the extracts
from the cannabis plant resin. CBD occurs naturally in other plant
species beyond cannabis. For example, the most widely acknowledged
alternative source of phyto cannabinoid is in the better understood
Echinacea species, in widespread use as a dietary supplement. Most
phyto cannabinoids are virtually insoluble in water but are soluble
in lipids and alcohol. The World Anti Doping Agency (“WADA”) has
exempted CBD from its 2018 list of banned substances.
In the U.S., the 2018 Farm Bill permits hemp cultivation and allows
the transport of hemp-derived products across state lines, within a
tightly regulated framework. Primary among these, the plant must
contain less than 0.3% THC, and state departments of agriculture
must submit their plans to license and regulate hemp to the
Secretary of the USDA, or otherwise comply with a federally run
hemp program. Legislative reform regarding CBD from hemp is
continually evolving.
Status of Operations
Most of Lexaria’s revenues are generated from third party
businesses either licensing the intellectual property associated
with DehydraTECH for incorporation into their products or
purchasing DehydraTECH infused intermediate product as a raw
material for use within their own products.
Intellectual Property
Since our first patent filing in 2014 for DehydraTECH, we have
increased the number of patent applications to approximately 50 and
to date have been allowed/granted 23 patents worldwide as of the
date of this filing.
The substance of the patents center on the use of DehydraTECH in a
variety of products including those that are ingested or topically
administered such as CBD, food, beverage, patches, creams, lotions
et cetera. Patents have been filed (and granted in both Australia
and the EU) specifically for the use of DehydraTECH with
cannabinoids for the treatment of heart disease. The pending and
granted patents also cover the manufacturing and processing methods
used to combine fatty acids with active pharmaceutical ingredients.
This includes heating and drying methods and use of excipients and
substrates. Below we summarize Lexaria’s allowed/granted
patents.
Issued/Allowed Patent #
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Patent Family
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US 9,474,725 B1
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Food and Beverage Compositions Infused with Lipophilic Active
Agents and Methods of Use Thereof
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US 9,839,612 B2
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US 9,972,680 B2
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US 9,974,739 B2
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US 10,084,044 B2
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US 10,103,225 B2
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US 10,381,440
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US 10,374,036
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US 10,756,180
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AU 2015274698
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AU 2017203054
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AU 2018202562
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AU 2018202583
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AU 2018202584
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AU 2018220067
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EP 3164141
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JP 6920197
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AU 2016367036
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Methods for Formulating Orally Ingestible Compositions Comprising
Lipophilic Active Agents
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JP 6963507
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MX 011399
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AU 2016367037
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Stable Ready-to-Drink Beverage Compositions Comprising Lipophilic
Active Agents
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IN 365864
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JP 6917310
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On June 11, 2015, Lexaria initiated the simultaneous filing of a
U.S. utility patent application and an international patent
application under the Patent Cooperation Treaty (PCT) procedure,
both through the U.S. Patent and Trademark Office (“USPTO”). These
applications follow the Company’s 2014 and 2015 family of
provisional patent application filings in the U.S. and serve two
additional broad purposes:
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Lexaria is seeking protection of its intellectual property under
international treaties. To this end Lexaria has filed for PCT
patent application protection. There are 148 countries that are
signatories to the Patent Cooperation Treaty, including such major
markets as Canada, China, India, much of Europe and the Middle
East, the United Kingdom and Japan among others.
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Lexaria has demonstrated that its lipid infusion technology has
applications beyond the delivery of just cannabinoids. Based on
further formulation testing, Lexaria has included additional
lipophilic molecules that may be delivered via oral administration
utilizing its technology, widely encompassing three major market
opportunities for the Company: Nicotine; NSAIDs; and Vitamins.
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In December 2015, the Company filed two further provisional patent
applications in the U.S. These new applications served to further
broaden the variety and applicability of base compounds that can be
used when formulating DehydraTECH. The first of these applications
identify compounds like edible starches (e.g., tapioca starch) that
are commonly used in oral and pharmaceutical products today and
could, therefore, serve as a base for formulating and incorporating
DehydraTECH into a wide variety of products. The second of these
applications identify emulsifier compounds like gum arabic that are
commonly used in beverage products today in order to facilitate
similar flexibility for formulating DehydraTECH in shelf-stable
beverages.
On October 26, 2016, the USPTO issued U.S Patent No. 9474725, Food
and Beverage Compositions Infused with Lipophilic Active Agents and
Methods of Use Thereof, pertaining to our method of improving
bioavailability and taste of certain cannabinoid lipophilic active
agents in food products. This was the Company’s first patent
granted and has a publish date of October 27, 2016 (June 15, 2017,
in Australia No. 2015274698) and protects DehydraTECH for twenty
years. Additional patent grants include, but are not limited to the
use of DehydraTECH as a delivery platform, “composition of matter”
claims that protect the specific combination of substances which
enable improved taste and bio absorption properties, that protect
processes for making specific compositions of matter for enhanced
cannabinoid delivery utilizing DehydraTECH. Of note, Lexaria has
received issuance of patents in its second and third patent
families representing the first time the Company has been granted
claims for use of DehydraTECH in connection with the treatment of
specific diseases and medical conditions affecting humans, which
the Company believes will prove to be of significance to the
pharmaceutical industry sector as it further develops and
grows.
International Patent Protection
Lexaria first began work in the fields of enhanced delivery of
active ingredients and drugs in 2014 focusing our efforts on
R&D within the U.S. and Canadian marketplaces with our
demonstration products to licence DehydraTECH to product
manufacturers. Our pursuit and development of our technology has
expanded our potential area of impact, both geographically and by
sector. Because of the applicability of DehydraTECH to many market
sectors across the globe, we have taken the necessary steps to
protect that intellectual property internationally.
Additional Molecules
Lexaria does not intend to create or produce consumer products
ourselves, rather, our business plan is to encourage existing
participants within these sectors to license and utilize
DehydraTECH to enable enhanced performance of their products across
a wide range of lipophilic bioactive molecules of interest to us
including and beyond CBD. Some of these additional lipophilic
bioactive molecules of interest are summarized below, and
additional molecules of interest are continually being
evaluated.
Antivirals.
Viruses and bacteria cause the most common infectious diseases in
the world today. Vaccines can offer protection against contracting
viral and bacterial infections, whereas antiviral drugs and
antibiotics respectively are required as treatments to combat
disease if vaccination or other protective measures are inadequate
or are not available. Early research findings have shown that some
known antiviral drugs like remdesivir, interferon beta-1b,
lopinavir, ritonavir and ribavirin among others, evaluated alone
and in combination treatment regimens, may have utility against
COVID-19 caused by infection with the novel coronavirus. Most of
the antiviral drugs currently available are used to treat
infections caused by HIV, herpes viruses, hepatitis B and C
viruses, and influenza A and B viruses, and are therefore being
repurposed to evaluate prospective utility against COVID-19. While
a host of antiviral drugs exist or are under development today as
treatments for COVID-19 and other infectious disease conditions,
many of them are hindered by poor water solubility which, in turn,
results in their poor absorption and uptake by the body if taken
orally, frequently limiting their overall therapeutic
effectiveness. To attempt to overcome this, oral antiviral
medications often have to be given at high doses which can result
in a variety of unwanted side effects including diarrhea, headache,
nausea, vomiting, stomach upset, drowsiness, dizziness, vision
changes, difficulty breathing and other bodily dysfunctions.
Alternatively, in some cases it is necessary to administer
antiviral medications by way of needle injection for easier access
to the bloodstream circumventing the gastrointestinal absorption
limitations as is the case with, for instance, remdesivir, as
mentioned above. However, injectable administration requires
involvement of a medical practitioner which may not be easily
accessible for the masses, usually increases cost of a medicine and
often means that the product format isn’t as stable or requires
special storage and handling considerations relative to oral
medications.
Nicotine.
More than 99% of all nicotine consumed worldwide is delivered
through smoking cigarettes. Approximately 6,000,000 deaths per
year, worldwide, are attributed primarily to the delivery of
nicotine through the act of smoking according to the Centers for
Disease Control and Prevention, which also estimates that over $170
billion per year is spent just in the U.S. on direct medical care
costs for adult smokers. 69% of U.S. adult smokers want to quit
smoking and 43% of U.S. adult smokers have attempted to quit in any
twelve-month period.
Worldwide, legal retail cigarette sales were worth US$814 billion
in 2018 with illegal sales thought to represent another 11.2% of
the global market (bat.com) with over 5.3 trillion cigarettes sold
to more than 1 billion smokers.
Non-steroidal anti-inflammatories.
NSAIDs are the second-largest category of pain management treatment
options in the world and are used both for pain management and for
treatment of inflammation. The anti-inflammatory therapeutic market
is expected to generate $106.1 billion in 2020, globally
(alliedmarketresearch.com). Incurable inflammatory autoimmune
diseases included arthritis, asthma, and chronic obstructive
pulmonary disease (COPD). The U.S. makes up over one-half of the
global market. The opioids market (such as morphine) forms the
largest single pain management sector but are known to be
associated with serious dependence and tolerance issues.
Some of the most commonly known NSAIDs are ASA (Aspirin), Ibuprofen
(Advil, Motrin), and Acetaminophen (Tylenol - Acetaminophen is not
accepted by all persons to be an NSAID). Although NSAIDs are
generally a safe and effective treatment method for pain, they have
been associated with a number of gastrointestinal problems
including dyspepsia and gastric bleeding and certain adverse
effects on human kidneys.
On August 11, 2015, Lexaria signed a license agreement with PoViva
Tea LLC for $10,000, granting Lexaria a 35-year non-exclusive
worldwide license to unencumbered use of PoViva Tea LLC’s IP
Rights, including rights of resale. This license agreement ensures
Lexaria has full access to the underlying infusion technology. On
January 14, 2019, this agreement was updated whereby PoViva Corp.
(formerly PoViva Tea LLC) granted Lexaria an exclusive license to
use DehydraTECH technology for a period of time ending 25 years
after the date of the last patent granted to PoViva Corp.
Scientific testing and validation
CBD and Other Cannabinoid Programs
Our experimentation with, and validation of DehydraTECH technology
has been ongoing since 2015. On August 24, 2015, the Company
announced achievements in enhanced gastro-intestinal absorption of
CBD utilizing DehydraTECH. The third-party testing was conducted in
two phases of in vitro tests beginning in June and completed in
August 2015.
The independent laboratory results delivered average CBD
permeability of 499% of baseline permeability, compared to CBD
permeability without DehydraTECH, exceeding Company expectations.
This was assessed in a strictly controlled, in vitro experiment
using a human intestinal tissue model.
The tests also showed 325% of baseline gastro-intestinal
permeability of CBD comparing Lexaria’s CBD-fortified ViPova black
tea to a second control of CBD and black tea combined, without
Lexaria’s patented formulation enhancements. This confirmed that
the specialized processing undertaken by Lexaria during its
manufacturing process together with its formulation enhancements,
does indeed significantly improve absorption levels.
The bioavailability of CBD (or of THC) varies greatly by delivery
method. Smoking typically delivers cannabinoids at an average
bioavailability rate of 30% (Huestis (2007) Chem. Biodiverse.
4:1770–1804; McGilveray (2005) Pain Res. Manag. 10 Suppl. A:15A –
22A). By comparison, orally consumed cannabis edibles typically
deliver cannabinoids at an average bioavailability rate of only 5%
(Karschner et al. (2011) Clin. Chem. 57:66–75).
During January 2015, Lexaria conducted a study of nitric oxide
levels in humans, as a biomarker for absorption of CBD, with the
expectation that it would provide additional evidence of the
efficient absorption of CBD from DehydraTECH -enhanced oral
products enhanced with hemp oil, by demonstrating the elevation of
nitric oxide in the human body in response to oral ingestion.
The study data from human subjects demonstrated significant
elevation of systemic nitric oxide levels as a surrogate biomarker
for CBD bio absorption in response to ingestion of Lexaria’s oral
delivery. This provided clinical support for the CBD
bioavailability enhancing properties of DehydraTECH, on the premise
that bioavailable CBD is known to elevate levels of the
endocannabinoid anandamide in the human body which, in turn,
stimulates release of nitric oxide in the vascular system.
In August of 2018 we released the results from our randomized,
placebo-controlled, double-blind European human clinical study that
evaluated a DehydraTECH-CBD hemp oil capsule developed by Lexaria.
The degree and speed of CBD absorption into blood plasma and
potential cardiovascular and cognitive performance enhancement in
12 healthy male volunteers was studied.
Key metabolic and hemodynamic performance findings linked to
bioavailability enhancements were revealed in the study as released
in February 2019, which compared a 90 mg dose of Lexaria’s
DehydraTECH enhanced TurboCBD capsules to a 90 mg dose without
DehydraTECH (the “positive control”) as well as a placebo, as
follows:
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Analysis of mean arterial blood pressure (MAP) at peak blood levels
of CBD achieved with Lexaria’s TurboCBD demonstrated a significant
reduction in MAP compared to placebo (95% CI; p=0.027). This
finding was not observed with the dose-matched positive control
formulation for which there was no significant decrease in MAP
compared to placebo (95% CI; p=0.625);
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Cerebral perfusion was also analysed by an index of conductance in
the middle cerebral artery (MCA). The findings revealed that
Lexaria’s TurboCBD caused the greatest increase in MCA conductance
relative to both the positive control formulation and placebo (95%
CI; p=0.017 and P=0.002 respectively);
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Finally, over the six-hour study, analysis of the total area under
the curve (AUC) demonstrated that Lexaria’s DehydraTECH enhanced
TurboCBD capsules resulted in a notable trend for higher levels of
CBD in the bloodstream overall than the positive control
formulation with total AUC of 10,865 ± 6,322 observed with
Lexaria’s formulation compared to 7,115 ± 2,978 observed with the
positive control (95% CI; p=0.096).
These results corroborate and confirm other in vitro and
in vivo studies that evaluated DehydraTECH. Although this
study evaluated absorption only of CBD and its metabolites, Lexaria
believes nearly identical bioavailability enhancement results would
be achieved with other cannabinoids.
During March of 2019 we also launched an in vivo research
program to test Lexaria-designed DehydraTECH enhancements
(“Enhanced DehydraTECH”) comprised of eleven separate animal
studies and released initial results during May 2019 demonstrating
measurable quantities of cannabidiol into blood in as little as 2
minutes. In the first animal study results it announced, Lexaria
compared its standard DehydraTECH formulation that combined
cannabinoids with long-chain fatty acids (“LCFA”) using Lexaria’s
patented dehydration processing technique to a
concentration-matched formulation utilizing coconut oil which is a
commonly used MCT oil in the cannabis edibles industry, with some
key findings noted:
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At 2 minutes DehydraTECH’s LCFA formulation delivered measurable
CBD in blood, compared to no measurable CBD in blood until 6
minutes and onwards for the MCT oil formulation.
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At 60 minutes DehydraTECH’s LCFA formulation achieved a CBD blood
concentration level of 319% more than the MCT oil formulation.
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Over the entire 60-minute study, the area under the curve (AUC)
(total quantity of CBD delivered) for the Lexaria DehydraTECH LCFA
formulation was 389% more than the MCT oil formulation
(p<0.0011).
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Lexaria also tested for brain tissue concentrations to quantify
8-hour CBD delivery from the DehydraTECH-enabled LCFA formulation
compared to the MCT oil formulation and DehydraTECH’s LCFA
formulation outperformed the MCT oil formulation by 246%.
The Company released additional results from its March 2019
research program wherein animal testing proved that Enhanced
DehydraTECH delivered 1,137% more CBD into animal brain tissue
following oral ingestion than certain existing industry
formulations. Delivery of CBD into the brain was reported 8 hours
after dosing, as follows:
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The Lexaria DehydraTECH LCFA formulation without nanotech achieved
an average brain tissue accumulation level that was 246% higher
than the average for those animals that received the MCT oil
formulation (p=0.0013).
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The Lexaria DehydraTECH LCFA formulation with nanotech achieved an
average brain tissue accumulation level that was 1,137% higher than
the average for those animals that received the MCT oil formulation
(p=0.0178).
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Further results demonstrated that Enhanced DehydraTECH led to 811%
more CBD delivery into blood than generic industry MCT coconut-oil
formulations (p=0.00008); and 110% more CBD into blood than
DehydraTECH in its traditional format (p=0.02).
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Enhanced DehydraTECH delivered roughly twice as much CBD to animal
blood at all measured time points in the study from the 15-minute
mark onwards, compared to traditional DehydraTECH; and during the
same time points from 717% to 1098% more CBD than the generic
industry MCT coconut oil formulations.
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Enhanced DehydraTECH delivered 1,937% more CBD into animal brain
tissue after 8 hours compared to generic industry MCT coconut oil
formulations; and 487% more than traditional DehydraTECH. Both
traditional DehydraTECH and Enhanced DehydraTECH delivered maximum
blood concentration levels prior to the 60-minute end-of-test, with
levels tapering off thereafter.
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During 2021, we also commenced further DehydraTECH formulation
enhancement and performance optimization work. In May of 2021, we
announced findings from Study HYPER-A21-1 that included three new
“DehydraTECH 2.0” CBD formulation variations. All three new
DehydraTECH 2.0 formulations delivered improved performance when
compared to both Lexaria’s original DehydraTECH and
Enhanced-DehydraTECH concentration-matched formulations, as well as
to a MCT oil-based control formulation representative of standard
industry practices. These three DehydraTECH 2.0 formulations
delivered between 1,068% and 2,178% more CBD during the study
period than the standard MCT control formulation, and they also
were up to 123% more effective than Lexaria’s original Enhanced
DehydraTECH formulation. The three new DehydraTECH 2.0 formulations
also delivered between 907%-1,737% more CBD into brain tissue than
the MCT oil-based control formulation, similar to the up to 1,937%
increase over the MCT oil based control formulation determined
previously for Lexaria’s original Enhanced DehydraTECH
formulations.
Also during 2021, further DehydraTECH 2.0 formulation work was
reported later in May from Study HYPER-A21-2. One of the
DehydraTECH 2.0 formulations tested in this study produced the
strongest absorption enhancement results Lexaria has ever recorded,
at 2,708% more CBD into bloodstream during the study period than
the representative industry standard MCT control formulation.
Based on our many successes in enhancing CBD absorption in animals,
and pursuant to our initial success in reducing blood pressure in
our 2018 clinical study, Lexaria progressed to more advanced
clinical studies later in 2021.
In July of 2021, we reported findings from Study HYPER-H21-1, in
which human blood pressure was reduced across both male and female
volunteers and was most pronounced with DehydraTECH-CBD in the
first 10-50 minutes of the study. Blood pressure reduction from
baseline was greatest when measured via systolic pressure. In a
subset of volunteers who were Stage 2 hypertensive, peak systolic
blood pressure reductions from baseline were observed of as much as
approximately 13 mmHg by the 50-minute time point with
DehydraTECH-CBD, and systolic BP remained depressed throughout
almost the entire 3-hour duration of the study. There was also a
tendency for a greater reduction in relative diastolic pressure
from baseline with DehydraTECH-CBD than the concentration matched,
generic CBD control tested in this study. This was most notable in
the initial 10 to20 minute period post-dosing evidencing
statistical significance at the 20-minute timepoint (p=0.025). As
well, there was a tendency for relative Mean Arterial Pressure
(“MAP”) to be reduced greater from baseline with the
DehydraTECH-CBD than the concentration matched, generic CBD
control; again, most notably in the initial 20 minutes post-dosing.
By comparison, in Lexaria’s 2018 human clinical study, 120 minutes
were required to achieve the same level of MAP reduction,
demonstrating superior rapidity of onset of the CBD formulation
used in Study HYPER-H21-1 relatively speaking. Lexaria was also
pleased that its DehydraTECH-CBD was well tolerated by all
subjects, with no serious adverse events or side effects observed
or reported.
In September of 2021, we reported findings from Study HYPER-H21-2,
in which human blood pressure was significantly reduced using
DehydraTECH-CBD through the course of a 24 ambulatory study design.
At selected times during the 24-hour study, volunteers with mild to
moderate hypertension averaged as much as a 20 mmHg (i.e., 23%)
decrease in BP relative to placebo. Over the 24-hour ambulatory
monitoring period, volunteers averaged a significant reduction of
7.0% (p < 0.001) in systolic pressure, a significant reduction
of 5.3% (p < 0.001) in MAP and a significant reduction of 3.5%
in diastolic pressure relative to an increase in diastolic pressure
(-0.8 vs. +2.7; p<0.001) from baseline with DehydraTECH-CBD
relative to placebo. Also, of note, DehydraTECH-CBD triggered its
most significant effects upon blood pressure attenuation through
the overnight period while subjects slept and in the early morning
period. This observation could have tremendous value
therapeutically as these periods of the day are most often
associated with cardiac stress and infarct events in hypertensive
patients when people rise suddenly from and/or become increasingly
active relative to the supine/sleeping state.
At the time of this filing, Lexaria has reported that it is
pursuing two additional clinical studies that will also investigate
the safety and effectiveness of DehydraTECH-CBD for hypertension
(i.e., Studies HYPER-H21-3 and HYPER-H21-4). In addition, Lexaria
has reported that it has also formally begun the process toward
preparation and filing of an Investigational New Drug (“IND”)
application with the Food and Drug Administration (“FDA”) with its
DehydraTECH-CBD as a prospective registered pharmaceutical
treatment for hypertension.
Beyond Lexaria’s hypertension pursuits with DehydraTECH-CBD, it
also announced in November of 2021 that it has commenced important
new investigational work (Study EPIL-A21-1) exploring whether
DehydraTECH-CBD evidences superior ability to inhibit seizure
activity compared to both generic CBD and the world’s only licenced
pharmaceutical CBD formulation for treating seizure disorders,
Epidiolex. And, looking forward to 2022, Lexaria has also announced
that it is expecting to conduct additional animal studies to
evaluate the potential benefits of DehydraTECH-CBD for other
disease conditions of interest, including dementia via Study
DEM-A22-1, rheumatoid conditions via Study RHEUM-A22-1 and diabetes
via Study DIAB-A22-1.
We have also completed our first study evaluating DehydraTECH used
in a topical cream formulation for absorption of CBD through human
skin. Results proved significant increases in both speed and
quantity of CBD absorption through skin when compared to control
formulations. The absorption study was performed on human skin at a
California-based laboratory that specializes in Franz diffusion
cell skin permeability testing. DehydraTECH was used together with
a sophisticated oil-in-water emulsion formulation design and
compared to a series of matching oil-in-water emulsion formulations
prepared with the same CBD inputs, with and without DehydraTECH and
with and without two leading skin penetration enhancers currently
used in the skin products industry. Several factors were measured,
including the time required to detect CBD skin penetration and
quantity, and peak amounts of CBD absorbed into and through the
skin, at multiple testing intervals over a 48-hour duration.
Lexaria’s DehydraTECH-enabled topical formulation, absent either of
the commercial penetration enhancers, was the fastest acting for
absorption into the epidermis, dermis or through the skin into the
systemic fraction representing permeation into the underlying
circulatory system.
Furthermore, Lexaria’s DehydraTECH-enabled topical formulation
without the addition of either of the commercial penetration
enhancers, demonstrated the highest overall average quantity of CBD
delivered through the skin and into the representative systemic
fraction of all the formulations tested, with as much as a 225%
increase in CBD permeability when compared to the highest
performing commercial penetration enhancer formulation assessed and
almost a 1,900% increase in CBD permeability when compared to a
control formulation that was devoid of both DehydraTECH or any
commercial penetration enhancers. The commercial skin penetration
enhancers only demonstrated performance that was on par or superior
to the DehydraTECH-enabled formulations tested in so far as total
CBD absorption into the shallow epidermis or dermis was
concerned.
Finally, beyond CBD, we also conducted investigative work with
another cannabinoid compound, THC, during 2021. In Study THC-A21-1,
we demonstrated that DehydraTECH-THC delivered via oral ingestion
required only 15 minutes to deliver THC levels in blood plasma
comparable to levels achieved at 45 minutes with
concentration-matched controls. During the study DehydraTECH-THC
delivered more THC into bloodstream than the industry standard MCT
based control formulation from the 2-minute mark onwards, then
dropped rapidly to the same level as the MCT control by the 6-hour
mark. These data may be of significance to prospective
pharmaceutical applications for DehydraTECH-THC based therapeutics,
pending further pursuit in this area.
Nicotine Programs
We have also completed ingestible nicotine in vivo (animal)
absorption study work. In a study reported in April of 2018,
DehydraTECH delivered the following major nicotine absorption
performance improvements: 1,160% faster delivery of equivalent peak
quantities of nicotine to the bloodstream than achieved with
controls (within 15 min vs. 2.9 hours), 148% gain in the quantity
of peak nicotine delivery to the bloodstream relative to controls,
560% higher brain levels of nicotine where nicotine effects are
focused, compared to controls, lower urine levels of nicotine
excreted than controls, for enhanced nicotine activity and
bioavailability over the course of the study, lower quantities of
key liver metabolites in the bloodstream than controls as
hypothesized, suggesting bypass of first pass liver metabolism.
The study was designed to principally assess the relative
ingestible nicotine absorption performance of DehydraTECH -powered
formulations compared to concentration-matched control formulations
that lacked any form of delivery enabling technology in rats.
The DehydraTECH formulations generally achieved faster absorption,
higher peak absorption, and higher overall quantities of nicotine,
on average, in the blood than the concentration-matched control
formulations at both the 1mg and 10 mg/Kg doses tested.
Furthermore, as previously reported, there were no obvious signs of
gastrointestinal distress such as vomiting or diarrhea indicating
that the animals appeared to tolerate the treatment well.
Nicotine blood levels were evaluated multiple times over a period
of 8 hours after dosing. In the 10mg/Kg dosing arm, the control
formulation required nearly 3 hours to reach similar levels of
blood absorption that the DehydraTECH formulation reached in only
15 minutes. Furthermore, the DehydraTECH formulation went on
thereafter to demonstrate peak plasma levels that were 148% of
those achieved by the control formulation. If replicated in human
studies, these findings are suggestive that DehydraTECH could prove
more effective in elevating blood nicotine levels through edible
formats much more quickly and substantially than previously
theorized, potentially making ingestible nicotine preparations a
viable alternative to today’s available product formats while also
leading to a more rapid nicotine craving satiation.
Analysis of the liver metabolites revealed, as expected, that
overall levels in the blood of two of the three metabolites studied
were higher in the control group than in the DehydraTECH
formulation group at the 10 mg/Kg dose. The study also revealed
that the DehydraTECH formulation at the 10 mg/Kg level achieved up
to 5.6-times as much nicotine upon analysis of the rat brain tissue
than was recovered with the matching control formulation. These
findings together perhaps suggest prolongation of nicotine
effectiveness with the DehydraTECH formulation which may also be
beneficial in humans to control cravings over an extended
time-period from a single edible nicotine dose.
Following the above study, additional study work was reported in
August of 2018 by way of a follow-up third-party in vivo
statistically significant study, including two groups of 20
animals. This study further demonstrated delivery of nicotine in
edible form at each of the 2, 4, 6, 8 and 10-minute intervals
post-dosing, with 90.2% greater delivery than the
concentration-matched control formulation by the 10-minute mark
(95% CI; p=0.044), and significantly greater absorption levels than
the control formulation at all subsequent time points in the study.
Speed of onset is a key attribute for oral drug administration, and
it is of particular importance for the consideration of
non-inhalation nicotine delivery formats.
Key highlights of the follow-up study were as follows:
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Peak Level: 79% improvement in peak blood levels (maximum
concentration or “Cmax”) at 394 ng/mL using Lexaria’s DehydraTECH
technology vs. 220 ng/mL with the control (95% CI; p=0.0257);
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Total Quantity: 94% improvement in total quantity of nicotine
delivered (area under the curve or “AUC”) to the blood during the
60-minute course of the study, at 266 hr•ng/mL versus 137 hr•ng/mL
(95% CI; p=0.0086);
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Rapidity: Lexaria’s technology delivered nicotine into the blood
stream by the first time interval of blood sampling at the 2-minute
mark. On average, Lexaria’s technology delivered 203 ng/mL to the
blood in aggregate of the 2, 4, 6, 8, 10, 12 and 15-minute time
points, compared to only 120 ng/mL in aggregate over the same
period by the control, an improvement of 70% (95% CI;
p=0.0004).
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Thereafter, during 2021, we also pursued study work in animals to
investigate the pharmacokinetic performance of certain DehydraTECH
2.0 nicotine formulations specifically via the oral
buccal/sublingual route of administration instead of the oral
ingestible route of administration investigated previously. In
October of 2021, we reported upon Study NIC-A21-1 conducted in male
beagle dogs, which demonstrated that DehydraTECH nicotine delivered
via the oral pouch product format required only 2 to 4 minutes to
deliver nicotine levels in blood plasma comparable to levels
achieved at 45 minutes with concentration-matched controls.
DehydraTECH-nicotine also reached statistically significant peak
blood plasma levels up to 10-fold higher overall than controls
(p=0.004) while still clearing from blood virtually as quickly as
the controls. Two nicotine formats were investigated in Study
NIC-A21-1, namely nicotine benzoate and nicotine polacrilex. In the
study, the generic nicotine benzoate pouch required approximately
45 minutes to reach its peak delivery rate whereas the DehydraTECH
nicotine benzoate pouch reached peak delivery rates at both 8
minutes and again at 30 minutes. In fact, just 4 minutes after the
pouch was placed in the mouth, the DehydraTECH-nicotine had reached
a higher delivery level than the generic achieved at any point
during the study. Similarly, the generic nicotine polacrilex pouch
also required approximately 45 minutes to reach its very subdued
peak delivery rate while the DehydraTECH nicotine polacrilex pouch
achieved a comparable level in just 2 minutes. The DehydraTECH
nicotine polacrilex pouch delivered over 10 times the nicotine
level in blood plasma at peak than the generic version.
Antiviral Drug Programs
During March of 2020, we also announced that we were commencing a
program to study the prospective benefits of Lexaria’s DehydraTECH
drug delivery platform for enhancing delivery and effectiveness of
certain antiviral drugs in the fight against coronavirus disease
COVID-19. We commenced this work initially reporting upon improved
delivery in an animal study conducted with the antiviral drugs
darunavir and efavirenz, with which we reported significant
enhancements in drug delivery announced in December of 2020 in
Study VIRAL-A20-1. Thereafter, we progressed to further study work
with other drugs with antiviral properties including remdesivir and
ebastine, where we demonstrated improved drug delivery in animal
testing in Study VIRAL-A20-2, as well as effective inhibition of
the SARS-CoV-2 virus that is responsible for COVID-19 in in vitro
testing via Study VIRAL-C21-3 reported in June of 2021. Finally, we
also reported significant improvements in drug delivery in animal
using another compound with antiviral properties, colchicine, in
Study VIRAL-A20-3, announced in July of 2021.
Technology out-licensing
Pursuant to the disposition of assets of CanPharm, all of the
Company’s licenses associated with THC molecules for
non-pharmaceutical purposes were assigned to Hill Street. As part
of an asset purchase agreement entered into between CanPharm and
Hill Street, on November 18, 2020, Lexaria Hemp Corp. (“Hempco”)
entered into a 10-year license agreement with Hill Street to
license DehydraTECH with respect to multiple products infused with
CBD, replacing all previous agreements between the parties.
On January 15, 2019, the Company announced that its wholly owned
subsidiary Lexaria Nicotine granted a license to use the
DehydraTECH for oral nicotine delivery forms on an exclusive basis
in the United States and a non-exclusive global basis to Altria
Ventures Inc., an indirect wholly owned subsidiary of Altria Group,
Inc. (“Altria”). During fiscal 2021, Altria relinquished their
exclusive rights and retain non-exclusive rights within the
U.S.
On July 11, 2019, the Company announced that it entered a
definitive 5-year agreement, via its subsidiary Hempco, to license
DehydraTECH to Universal Hemp LLC, for the production of infused
powder substrates for inclusion in finished goods. This license was
subsequently terminated on August 30, 2021.
On December 27, 2019, the Company, via Hempco entered into a
10-year US exclusive license agreement with Boldt Runners
Corporation (“Boldt Runners”) for the use of DehydraTECH in
connection with manufacturing CBD infused oral pouch products.
Subsequent to the year ended August 31, 2021, Boldt Runners
relinquished their exclusive rights and maintain non-exclusive
rights.
Subsequent to the year end, on September 16, 2021, Hempco entered
into a 10-year license with GlobalCanna Inc. for the use of
DehydraTECH in multiple CBD infused products in the country of
Canada.
The continuation of our business interests in these sectors is
dependent upon obtaining further financing, a successful program of
development, and, ultimately, achieving a profitable level of
operations. The issuance of additional equity securities by us
could result in a significant dilution in the equity interests of
our current stockholders. Obtaining commercial loans, assuming
those loans would be available, will increase our liabilities and
future cash commitments.
We are not yet profitable and have not yet demonstrated our ability
to generate significant revenues from our business plan. We will
require additional corporate funds if our existing capital is not
sufficient to support the Company until potential future
profitability is reached. There are no assurances that we will be
able to obtain further funds required for our long-term operations.
We expect to require additional operating capital during our fiscal
2021 year. There can be no assurance that additional financing will
be available to us when needed or, if available, that it can be
obtained on commercially reasonable terms. If we are not able to
obtain the additional financing on a timely basis, we will be
unable to conduct our operations as planned, and we will not be
able to meet our other longer-term obligations as they become due.
In such event, we could be forced to scale down or perhaps even
cease our operations. There is uncertainty as to whether we can
obtain additional long-term financing if we do in fact require
it.
We hired two additional staff members during fiscal 2021 to enhance
operations in our office and licenced laboratory space. We
currently have eight staff members and do not anticipate hiring
large numbers of new staff members during fiscal 2022. We expect to
be able to utilize contracted third parties for our R&D testing
programs, instead focusing our capital on higher value-added
aspects of our research and development, and scientific test
planning.
Our Company relies on the business experience of our existing
management, on the technical abilities of consulting experts, and
on the technical and operational abilities of its operating partner
companies to evaluate business opportunities.
Competition
The biopharmaceutical industry is characterized by intense
competition and rapid innovation. Our competitors may be able to
develop other drug delivery platforms that are able to achieve
similar or better results than DehydraTECH. Our potential
competitors include major multinational pharmaceutical companies,
established biotechnology companies, specialty pharmaceutical
companies, universities, and other research institutions. Many of
our competitors have substantially greater financial, technical,
and other resources, such as larger research and development staff
and experienced marketing and manufacturing organizations and
well-established sales forces. Smaller or early-stage companies may
also prove to be significant competitors, particularly as they
develop novel approaches to oral or topical drug delivery that our
DehydraTECH is also focused on. Established pharmaceutical
companies may also invest heavily to accelerate discovery and
development of novel therapeutics or to in-license novel
therapeutics that could make the product candidates that are can be
delivered using DehydraTECH obsolete. Mergers and acquisitions in
the biotechnology and pharmaceutical industries may result in even
more resources being concentrated in our competitors. Competition
may increase further as a result of advances in the commercial
applicability of technologies and greater availability of capital
for investment in these industries. Our competitors, either alone
or with collaborative partners, may succeed in developing,
acquiring, or licensing API delivery technologies that are more
effective, safer, more easily commercialized or less costly than
our DehydraTECH proprietary technology or secure patent protection
that we may need for the enhancement of our DehydraTECH. We believe
the key competitive factors that will affect the development and
commercial success of any DehydraTECH enhanced product candidates
are efficacy, safety, tolerability, reliability, convenience of
use, price, and reimbursement. We face competition from segments of
the pharmaceutical, biotechnology and other related markets that
pursue the development of API delivery platforms which may be more
effective or cost efficient than our DehydraTECH. We anticipate
that we will continue to face intense and increasing competition as
new advanced API delivery technologies become available. There can
be no assurance that our competitors are not currently developing,
or will not in the future develop, technology that is equally or
more effective or is more economically attractive than any of our
current or any enhanced versions of DehydraTECH.
Competition in alternative health sectors and in consumer products
in the U.S. is fierce. We expect to encounter competitive threats
from existing participants in the sector and new entrants with
competing technologies. Although PoViva Corp. has filed patent
applications to protect intellectual property, there is no
assurance that patents beyond those already issued will be granted
nor that other firms may not file superior patents pending. Food
supplements, organic foods, and health food markets are all well
established and the Company and/or its licensees will face many
challenges within these markets. Lexaria is also aware of various
competing technologies that exist in the marketplace that claim to
also enhance the bio absorption of bioactive molecules as Lexaria
has demonstrated through repeated in vitro and in
vivo scientific testing with DehydraTECH. By and large, these
technologies are mostly forms of nanotechnology that generally
claim to enable the formation of microencapsulated microemulsions
of active ingredients. These technologies can enable exceptional
water solubility of ingredients and can impart improved intestinal
bio absorption as a result, but do not necessarily offer the
breadth of performance and value enhancing benefits that Lexaria’s
DehydraTECH technology offers to its licensees.
Competition in nicotine, alternative nicotine delivery and nicotine
cessation sectors in the U.S. is comprised of long-established
entities, brands, and new technologies competing to create less
harmful options. The sectors are complicated by the significant
historical empirical data of older products or technologies versus
the more limited published supporting data regarding the effects of
new products or technologies. Due to the size of the sectors we
expect to encounter competitive threats from existing participants
and unknown new entrants. There is no assurance that other
technologies already deployed, or in development, will not form the
basis of product formats that competitors or consumers choose to
utilize. It is also possible that historic delivery methods that
have been in use and the familiarity with them may prevent adoption
of products utilizing DehydraTECH in alternative delivery formats.
Competing technologies or products may utilize known delivery
formats or entirely new and unforecastable formats. Lexaria has
demonstrated through scientific testing that DehydraTECH delivers
nicotine rapidly and effectively through oral delivery. We believe
that if we can educate and influence consumers to adopt a
food-grade edible product format, and if US regulatory bodies
authorize such formats, we may be able to offer a competitively
successful new product format that utilize DehydraTECH.
While we are an early adopter providing technology to the
cannabinoid sector, there are reports of large numbers of public
companies that have claimed to be involved in the sector in some
fashion, and an unknown number of private companies. Our current
strategies may prove to be ineffective as the sector grows and
matures, and if so, we will have to adapt quickly to changing
sectoral circumstances. Accordingly, the Company intends to
aggressively pursue technology out-licensing opportunities not only
within the cannabinoids sector where it is already active, but also
across other sectors where DehydraTECH is patent allowed and/or
pending, include opportunities in the vitamin and supplements
sector, the pain relief sector, and the nicotine products sector.
During the year ended August 31, 2021 the Company sold the rights
to DehydraTECH using THC and no longer involved in this market
segment.
Lexaria believes that DehydraTECH offers a host of benefits beyond
what competing technologies can offer, including superior oral
palatability, a more appealing and all-natural ingredient
compositional profile from an oral product and beverage formulation
perspective, more predictable time of delivery into bloodstream and
certain target tissues, and superior scalability and cost
effectiveness from a manufacturing perspective. Lexaria believes
that DehydraTECH is, therefore, significantly distinguished from
competing technologies in these respects, and has a view of growing
the breadth and number of licensees that will adopt DehydraTECH
into their product offerings going forward. Lexaria believes that
these competitive advantages together with its wealth of scientific
data showing noteworthy bio absorption enhancements with
DehydraTECH constitute a compelling value proposition for its
prospective licensees, and it intends to continue to pursue license
arrangements in the multiple bioactive ingredient sectors
identified in its issued and pending patent applications.
Compliance with Government Regulation
Thirty-nine states in the U.S. have passed some form of legislation
related to that state’s permission to grow, cultivate, sell, or use
marijuana and/or CBD either for medical purposes or for
recreational or “adult use” purposes, or both (disa.com). The
various state legislation is not necessarily harmonious with one
another. It is most often not legal to transport cannabis-related
products across state lines.
Lexaria does not “touch the plant” or culture, manufacture,
process, handle or sell cannabis in any location within the U.S.
Lexaria does conduct research and development on cannabis
ingredients legally in Canada, in a federally licensed laboratory
in compliance with all federal and local Canadian laws. We comply
with U.S. federal law that provides for certain exemptions for
agricultural hemp and certain by-products to be manufactured and
sold in the U.S. DehydraTECH is only licensed to those companies
that have met and comply with state regulations for the sale or
distribution of cannabis related products in the licensed territory
where they operate. Lexaria does not currently manufacture or sell
any CBD or THC-related consumer products.
Lexaria’s position is that, just as a telephone company provides
communications services, and an electric company provides
electrical power, our provision of technological services to a
state-legal cannabis company is in compliance with laws and
required regulations. Lexaria disposed of its assets that were
related to the provision of technology to THC-related companies in
December of 2020.
DehydraTECH also has applications in completely separate sectors
such as vitamins, CBD for applications under pursuit for medical
applications registered with the FDA, NSAIDs, and nicotine. We have
no products nor operations in any of these sectors today, although
we have commenced formulation development for research and
validation purposes in each of these areas. We have a formal
relationship with the largest cigarette company in the U.S., the
Altria Group, and have conducted R&D with that company related
to the possible development of nicotine oral products. We do not
know whether the Altria Group will utilize DehydraTECH within any
oral nicotine product category. If we enter any of these sectors at
any time, we will be exposed to and of necessity will have to
comply with, all local, state, and federal regulations in each of
those sectors. As a result of the possibility of Lexaria being
involved in a number of disparate business sectors, compliance with
government regulations could require significant resources and
expertise from our Company.
The U.S. Farm Bill, which passed in December 2018, and the
ambiguity regarding the incorporation of CBD into ingested and
topical products has had significant impacts on the industry
segments that we operate and potentially changes some of the
regulatory compliance risks that may affect our business. The bill
includes lifting restrictions on advertising, marketing, banking,
and other financial services as well as allowing interstate
commerce for hemp and hemp-derived CBD, removing barriers for
intellectual property protections under federal law such as patents
and trademarks, as well as several other measures that may
positively impact these industry segments overall. The impact the
Bill may have on other regulatory bodies and their regulations will
require ongoing monitoring to determine the outcome and timing of
any revisions.
Employees and Contractors
We utilize employees, sub-contractors and consultants for the
company’s intellectual property development and licensing, and
business operations. We have six employees and may add research
personnel during the next 12-month period to expand our internal
R&D capacity. None of our employees is represented by a labor
union and we consider our employee relations to be good. We also
engage with consultants to serve our needs.
The Company has an agreement with CAB Financial Services Ltd.,
wholly owned by Chris Bunka, for a 3-year term management contract
as Chief Executive Officer effective January 1, 2019. The Company,
as of the date of this Form-10K, is negotiating a contract
agreement with Mr. Bunka to take effect January 1, 2022.
The Company has engaged Mr. John Docherty for a 3-year term
effective January 1, 2019 as its President. The Company, as of the
date of this Form-10K, is negotiating a contract agreement with Mr.
Docherty to take effect January 1, 2022.
Both of the Chief Executive Officer and the President of the
Company are entitled to the following performance incentives:
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a performance bonus equal to 50% of the annual compensation may be
payable upon the completion of certain performance criteria as
determined by the board of directors of Lexaria;
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compensation equal to 2% of the consideration received by the
Company from the sale of a subsidiary, excluding certain
circumstances;
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certain compensation to be paid upon a change of control excluding
certain circumstances; and
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participation in the Company’s approved equity incentive plan.
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Our business plan contemplates increases in the number of employees
and other personnel over the next 12-month period to enhance
operational, sales and our in-house R&D capacity dependent upon
adequate funding. When beneficial to do so we will continue to
outsource contract employment or engagements as needed. It is not
possible to accurately project potential needs into the future
based on circumstances that may or may not occur.
Research and Development
Lexaria incurred $1,262,895 (2020 - $387,074) in research and
development expenditures during the period ending August 31, 2021.
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.
The Company’s in vitro absorption test of DehydraTECH
enhanced nicotine molecules and its in vivo absorption
tests on DehydraTECH enhanced CBD molecules yielded positive
results. Ongoing testing plans are proceeding to (i) conduct in
vitro absorption tests with DehydraTECH enhanced ibuprofen;
and (ii) further define molecular compatibility, absorption rates,
timing, and viable formats of delivery.
The Company continually focuses on new R&D programs to
investigate potential additional commercial applications for the
incorporation of DehydraTECH. These include, but are not limited
to, ongoing programs to explore methods to integrate
nanoemulsification chemistry techniques together with DehydraTECH
that have demonstrated positive results to date, programs to
further enhance intestinal bio absorption rates with DehydraTECH,
as well as ongoing programs to expand the types and breadth of
product form factors into which DehydraTECH 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.
Subsidiaries
Lexaria has its wholly owned subsidiaries; Lexaria CanPharm ULC,
Lexaria CanPharm Holding Corp., PoViva Corp., Lexaria Hemp Corp.,
Kelowna Management Services Corp. and Lexaria Pharmaceutical Corp.,
and our majority owned subsidiary Lexaria Nicotine LLC. On January
15, 2019, the Company announced the initial investment of
$1,000,000 from Altria Ventures Inc., an indirect wholly owned
subsidiary of Altria Group, Inc., for a 16.667% equity interest
along with certain other rights in Lexaria Nicotine LLC.
DESCRIPTION OF
PROPERTY
Our executive offices and research lab are located in a leased
facility in Kelowna, British Columbia Canada, consisting of
approximately 2,250 square feet of office space to accommodate our
finance and administrative functions as well as approximately 1,000
square feet of laboratory space accommodating our in-house research
and development. The lease for our Kelowna offices commenced in
November 2019 and is scheduled to expire November 2023. Subject to
the terms and conditions of the lease, we may extend the term of
the lease for another five years. Our facilities are in excellent
condition and adequate for their current use.
LEGAL
PROCEEDINGS
We know of no other 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.
MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Our financial statements are prepared in accordance with
accounting principles generally accepted in the United States
(“GAAP”). These accounting principles require us to make certain
estimates, judgments and assumptions. We believe that the
estimates, judgments and assumptions upon which we rely are
reasonable based upon information available to us at the time that
these estimates, judgments and assumptions are made. These
estimates, judgments and assumptions can affect the reported
amounts of assets and liabilities as of the date of the financial
statements as well as the reported amounts of revenues and expenses
during the periods presented. Our financial statements would be
affected to the extent there are material differences between these
estimates and actual results. In many cases, the accounting
treatment of a particular transaction is specifically dictated by
GAAP and does not require management’s judgment in its application.
There are also areas in which management’s judgment in selecting
any available alternative would not produce a materially different
result. The following discussion should be read in conjunction with
our financial statements and notes thereto appearing elsewhere in
this Registration Statement on Form S-1.
The following management’s discussion and analysis of financial
condition and results of operations (“MD&A”) is provided to
enhance the readers understanding of our results of operations and
financial condition for the year ended August 31, 2021, and in
comparison, to the year ended August 31, 2020.
Executive Summary
Lexaria’s patented technology DehydraTECH improves the delivery of
bioactive compounds while promoting healthy ingestion methods,
lowers overall dosing, and is highly effective in active molecule
delivery available in a range of formats from oral ingestible to
oral buccal/sublingual to topical products. DehydraTECH
substantially improves the rapidity and quantity of API transport
to the blood plasma and brain using the body’s natural process for
distributing fatty acids via the oral route. This technology
extends across many categories beyond the primary pharmaceutical
focus of the Company from foods and beverages to cosmetic products
and nutraceuticals.
Lexaria is advancing a several R&D activities in both
preclinical and clinical programs. Currently, our program is
investigating cannabidiol (CBD) for the reduction of hypertension
with three human clinical trials during calendar 2021, and one
human clinical trial planned during calendar 2022. Other programs
include nicotine for oral pouches and nicotine replacement therapy,
antivirals and related compounds for COVID-19 and other viral
diseases, PDE5 inhibitors, NSAIDS, hormones, and others. From time
to time the Company will engage in contract R&D for third
parties who are interested in in evaluating DehydraTECH in their
products.
Evaluate the financial condition and operating
performance
Fiscal 2021 was highlighted by the intensified direction of our
research and development programs as we scale up our research based
on the continued confirmatory results from our ongoing programs.
During the year ended August 31, 2021, we completed ten studies and
initiated a further seven. These programs have been supported by
the capital infusion as Lexaria raised approximately $15m in
funding during the year which has enabled the active work programs
of 2021 and supports significant advance in the fields of heart
disease and hypertension, oral nicotine, and antiviral
research.
We consider advancing our applied R&D studies as a vital step
towards our goal of establishing commercial relationships with
potential industry partners who can utilizes DehydraTECH within our
existing or new product lines. We continue to conduct additional in
vitro and in-vivo studies testing the absorption of some or all of
the molecules named within our patent applications – CBD, NSAIDs,
vitamins, PDE5 inhibitors, nicotine and anti-viral drugs – to
further substantiate the effectiveness of DehydraTECH. Successful
tests are expected to increase awareness and acceptance of
DehydraTECH as a meaningful method by which to deliver some or all
of the named molecules more effectively than current delivery
methods avail. Therefore, absorption tests are an important element
leading towards higher rates of acceptance and implementation of
our technology licensing initiatives.
We will pursue technology licensing opportunities as a method of
generating highly profitable revenue streams over long periods of
time. In addition, while nine of our US patents and eight of our
Australian patents have been granted to date, we have multiple
other applications filed in the US and around the world. It is not
possible to forecast with certainty when, or if, our remaining
patents pending will become granted patents. But if our remaining
patent applications do become granted patents, our ability to
generate meaningful license revenue from our intellectual property
may increase in a short period of time.
Lexaria is debt free and expects its current cash reserves to meet
all its needs for the twelve months following the release of this
report. As such the budget for applied R&D during fiscal 2022
is fully funded. The Company plans to seek strategic corporate
business partners for many of its specific drug investigations
after sufficient data has been generated which, if successful,
could generate any combination of up-front milestone and/or royalty
payments to the Company.
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.
We expect to devote an increasing proportion of our resources and
focus towards pharmaceutical applications and launched operations
in this division during the 2022 fiscal year. Our past R&D in
other sectors has contributed greatly to our understanding of
DehydraTECH and has encouraged us to attempt to reach more
lucrative commercial applications in the pharmaceutical sector
We continue to communicate the benefits of DehydraTECH to potential
licensing partners, i.e. with higher absorption levels a
manufacturer could perhaps infuse smaller amounts of active
molecules into a product, thus reducing their manufacturing input
costs, to provide higher bioavailability with the dosing limits
being imposed or contemplated in many jurisdictions, to infuse
consumer products while masking the flavor and smell of the active
molecules, and predictable delivery times. We believe these to be
meaningful competitive advantages that may lead to the potential to
generate licensing revenue, and will pursue these opportunities
within the cannabinoids, nicotine and other bioactive molecular
markets both within the USA and also internationally, in those
locations where they are legal and regulated by government.
Asset Sale
On December 9, 2020, Lexaria CanPharm ULC (“CanPharm”) completed a
disposition (the “Disposition”) of its use and licensing rights to
use its DehydraTECH technology (the “Assets”) specifically in
association with non-pharmaceutical products containing cannabis
molecules that contain 0.3% or greater THC. The purpose of the
Disposition was to remove the Company’s association with cannabis
as it remains a Schedule 1 Drug and thereby eliminating any such
regulatory restrictions cannabis products may create. The
Disposition assisted the Company in obtaining a listing on the
Nasdaq Capital Market (“Nasdaq”) on January 12, 2021. As a result
of the Disposition, CanPharm assigned to the purchaser Hill Street
license agreements with three existing non-related party
licensees.
In consideration for the Assets, Hill Street provided CanPharm with
C$350,000 cash, a promissory note bearing a principal amount of
C$2,000,000 and bearing an interest rate of 10% (the “Note”) and
C$1,500,000 in shares of Hill Street, issuable in three tranches by
April 9, 2022. The repayment of the Note does not have a fixed
maturity date and is based on quarterly installments equal to 5% of
the gross sales realized by Hill Street of DehydraTECH enabled
products. Due to the uncertainty pertaining to the settlement of
the Note, management concluded that the note had $NIL value at the
time of the sale and was recorded as such. Some of the factors
considered in the $Nil valuation of the Note were that the legal
sales of THC products in the US and Canada have little or no
history which made the expectant quarterly payments very difficult
to forecast. Further, Hill Street had no experience selling THC
products and at the time of the sale was not licenced to produce
and sell such products. Therefore, the Company considered risk of
default high and the collectability of the Note as highly doubtful.
Since the date of sale Hill Street has repaid $4,854 in the
year-ended August 31, 2021. Subsequent to fiscal 2021, the Company
has received a further $6,632 payment toward the balance of the
Note. These amounts are considered interest income when
received.
Reverse Stock Split
On January 11, 2021, the Company filed an amendment and restatement
of its articles of incorporation to effectuate a 1-for-30 reverse
stock split of the issued and outstanding shares of common stock of
the Company. The purpose of the reverse stock split was to meet
Nasdaq’s minimum stock price requirement. The reverse stock split
did not change the number of authorized shares of common stock,
which remains at 220,000,000 shares. All warrants, options, share
and per share information in this Report gives retroactive effect
to the 1-for-30 reverse stock split.
Public Offering
On January 14, 2021, the Company closed an underwritten public
offering with the issuance of 2,102,856 shares of the Company’s
common stock price of $5.25 per share with an equivalent number of
five-year warrant at an exercise price of $6.58. Additionally,
227,161 Representative Warrants were issued as partial
consideration to the underwriters of the offering that have a
five-year term at an exercise price of $6.58. Net of fees and
disbursements, the Company received net proceeds of $9,471,497. The
Company plans to use approximately $3,700,000 of the net proceeds
for research and development studies and the patent and legal costs
associated thereto, with the remaining net proceeds to be used for
general working capital purposes.
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
January 12, 2021.
The Company, trading under the symbol “LXX”, voluntary delisted
from the Canadian Securities Exchanges (“CSE”) effective after the
closing of trading on Wednesday, July 7, 2021. The overwhelming
majority of trading has moved to Nasdaq and by delisting from the
CSE the Company expects to realize savings in fees and managerial
time and effort that had been required to maintain a dual
listing.
Results of Operations for our Year Ended August 31,
2021
Our net loss from operations for the year ended August 31, 2021,
was $5,686,852 (2020 - $4,084,613). The changes between these
periods for the respective items are summarized as follows:
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August
31
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August
31
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2021
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2020
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Change
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$
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$ |
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$
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Revenue
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722,738 |
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384,543 |
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338,195 |
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Research &
development
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1,262,895 |
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|
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387,074 |
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|
|
875,821 |
|
Consulting fees &
employees
|
|
|
2,627,765 |
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|
2,594,359 |
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|
|
33,406 |
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Legal and professional
|
|
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703,407 |
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|
450,494 |
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|
|
252,913 |
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General and
administrative
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1,640,177 |
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917,958 |
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722,182 |
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Net operating
loss
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(5,686,852 |
) |
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(4,084,613 |
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(1,602,222 |
) |
Revenue
Lexaria’s business operations include technology licensing
agreements wherein corporate licensees implement DehydraTECH under
license within our facilities under royalty agreements and also
includes corporate clients that purchase pre-processed DehydraTECH
CBD-powders manufactures at a Lexaria -contracted GMP-certified
food facility for shipment back to the client for integration into
their final product formats. Fees payable to the Company contain a
mixture of both manufacturing charges as well as royalty and
trademark fees.
The primary source of revenues for the Company are derived from
Lexaria Hemp where sales of B2B processing of intermediary product
saw an increase of approximately 153% (2021 - $383,179, 2020 –
$151,634) in the year and contributed approximately 53% of the 2021
annual revenues.
Lexaria developed a line of demonstration oral-delivered products
that were utilized to show the efficacy of DehydraTECH and enabled
the ability of manufacturers to incorporate the technology into
their product lines. We earlier offered these products for sale to
consumers through our web-based sales platform. During the
year-ended August 31, 2021 we discontinued these direct-to-consumer
demonstration products and closed our web sales platform in order
to intensify our efforts on B2B production.
During the year the Company sold the underlying assets of its
THC-related business to Hill Street, a Canadian company that is now
producing and selling THC infused products using the DehydraTECH
technology in Canada with planned expansion into the US. Lexaria’s
gross revenues from this discontinued operation were $3,000 in
fiscal 2021, and $69,750 in fiscal 2020.
Licensing revenues, particularly usage fees, increased more than
40% in the year ended August 31, 2021 (2021 $334,974 – 2020
$232,909) and correspond in part to the increased B2B product
sales. Licensing revenues generally deliver much higher gross
profit margins than do product revenues. During the year ended
August 31, 2021, the Company also generated $86,921 (2020- $Nil)
from R&D contracts.
During the year ended August 31, 2021, the Company renegotiated a
contract with one of our existing licensees who held an exclusive
territorial use of our DehydraTECH technology. Due in part to
logistical constraints, the customer has agreed to relinquish
territorial exclusivity and has continued to use our technology
under licence. Revenues of $101,000 were conceded by the Company in
the revision of terms.
In fiscal 2022 the Company expects to derive increased revenues
from technology licensing to third parties as market demand for
Hemp based products increase and supply chain logistics improve.
The expansion of our intellectual property portfolio and conducting
supportive R&D will jointly contribute to strengthening revenue
prospects.
Research and Development
Research and development costs are expensed as incurred and account
for a significant portion of our operational expenses. With
proceeds from our underwritten public offering in January of 2021,
we were able to direct additional expenditures to the increased
focus on studies pertaining to hypertension and anti-viral drugs.
We plan to continue to invest in our R&D programs for the
foreseeable future and we expect these expenses will increase in
2022 compared to 2021. Our R&D programs will continue to be
directed at four core business segments; heart disease including
hypertension, reduced-risk non-combusted nicotine, improve
antiviral drug delivery and CBD from hemp. Of significant note, we
are in the late stage planning of an initiation of Investigational
New Drug (“IND”) trials for DehydraTECH in the US during fiscal
2022. Preclinical and clinical development is inherently
unpredictable as is regulatory approval and commercialization,
therefore we are unable to estimate with any certainty the costs we
will incur and the timelines required in our continued development
and commercialization efforts. Any successful development and
completion of clinical trials as well a regulatory approval and
commercialization are uncertain and may not result in approved
products. Completion dates and completion costs can vary
significantly for each future product candidate and are difficult
to predict. Lexaria and our commercial partners will continue to
explore multiple R&D programs directed toward further
evaluation, development, and commercialization of our DehydraTECH
technology.
General and Administrative
General and administrative expense consists primarily of consulting
fees and personnel in executive, accounting, and other
administrative functions as well as advertising and marketing,
investor relations and stock-based compensation expense. General
and administrative expense also includes corporate facility costs,
including rent and utilities, insurance premiums, legal fees
related to corporate matters, and fees for auditing, accounting,
and other consulting services.
Our general and administrative expenses saw an overall increase of
$988,645 during the year ended August 31, 2021, from $3,982,704 for
the prior year ended August 31, 2020. In effort to bring the
results of the Company’s R&D programs to the attention of
various industry sectors and to the scientific and investment
communities, the Company accelerated its advertising, promotion,
and investor relations programs. Lexaria participated in 5 virtual
investor conferences during the year and issues press releases on a
regular basis designed to provide continuous disclosure. This
marketing outreach program resulted in increased spending of
$441,114 for a total in the year ended August 31, 2021, of $829,668
($388,554 – August 31, 2020). Licensing, filing, and regulatory
fees increased by $135,229 due to additional fees for SEC filings
corresponding to our listing on the Nasdaq exchange in January
2021.
Included in general and administration expenses in the year ended
August 31, 2021, is a cumulative unrealized net-loss on marketable
securities of $166,255. The unrealized loss is attributable to
shares received as a part of the sale of assets in the year.
Management has concluded that the loss is likely temporary in
nature based on our evaluation of available information.
Our consulting fees, included in general and administrative
expenses, decreased by $24,575 in the year ended August 31, 2021,
primarily due to the higher non-cash payments for services included
in fiscal 2020 derived from the granting of options. Our executive
compensation is typically categorized under consultant fees and
costs excluding non-cash share-based payments associated with those
agreements comprise a significant portion of our expenditures on
consulting fees.
Included in general and administration expenses, legal and
professional fees saw an increase of $148,270 to $703,407 during
the year primarily related to securities, patent, and trademark
related filings and other advisory services. Accounting and
auditing fees also increased by approximately 75% ($58,295) year
over year. We recognize certain accounting and professional tax
advisory services as “Professional Fees”. During fiscal 2021
Lexaria was granted three additional patents in the US, India and
in Japan. We have over 50 patents pending internationally. Although
we endeavour to minimize expenses, when possible, we consider that
increased costs related to patent and trademark work reflects
positive progress in attempting to build the value of our
intellectual property portfolio, and in executing our business
plan.
Corporate general and administrative expenses are expected to
increase moderately in fiscal 2022 as compared to 2021 as a result
of higher human resource, regulatory, legal and investor relations
costs and the potential impact of inflation.
Liquidity and Capital Resources
Since Lexaria’s entry into the bioscience sector in 2015 and
through to August 31, 2021, we have accumulated a $23.5m deficit
despite generating total gross revenues of $1.9m. We have used the
issuance of common shares to raise the required capital to fund our
expenditures. Since fiscal 2014, we have raised an aggregate of
$25.3 m to fund our operations, of which $16.1 m was from the sale
of our common stock, $8.8 m from warrants and $0.4 m were proceeds
from the exercise of stock options. We may offer additional
securities for sale during our fiscal year 2022 or thereafter in
response to market conditions or other circumstances if we believe
such a plan of financing is required to advance the Company’s
business plans and is in the best interests of our stockholders.
There is no certainty that equity or debt financing will be
available in the future or that it will be at acceptable terms and
at this time, it is not possible to predict the outcome of these
matters.
We have incurred significant net losses of approximately $4.2 m and
$4.1 m for the two years ended August 31, 2021, and August 31,
2020, respectively. We expect to continue to incur significant
operational expenses and net losses in the upcoming 12 months and
beyond. Our net losses may fluctuate significantly from quarter to
quarter and year to year, depending on the stage and complexity of
our R&D studies and related expenditures, the receipt of
additional payments on the licencing of our technology, if any, and
the receipt of payments under any current or future collaborations
we may enter into.
The Company has evaluated whether there are conditions or events,
considered in the aggregate, that raise substantial doubt about the
Company’s ability to continue as a going concern. As of August 31,
2021, the Company had cash and cash equivalents of approximately
$10.9 m to settle $153,276 of current liabilities and thus the
Company believes this will enable the Company to fund its operating
and R&D expenses requirements through at least one year from
the issuance date of this report. The Company does not anticipate
making any material capital expenditures in the fiscal 2022 as we
believe our facilities and equipment held at the year ended August
31, 2021, are sufficient for at least twelve months proceeding the
date of filing this report.
|
|
August 31
|
|
|
August 31
|
|
Working Capital
|
|
2021
|
|
|
2020
|
|
|
|
$
|
|
|
$
|
|
Current assets
|
|
|
12,442,940
|
|
|
|
1,925,961
|
|
Current liabilities
|
|
|
(153,276
|
)
|
|
|
(225,917
|
)
|
Net Working Capital
|
|
|
12,289,664
|
|
|
|
1,700,044
|
|
The Company’s working capital balance increased substantially
during the year ended August 31, 2021, due to the cash infusion
from the sale of assets ($273,373), the net proceeds of an
underwritten public offering ($9,471,497) and the exercise of
warrants issued with the shares of the underwritten public offering
($4,015,043). The Company maintained a positive and strong working
capital position throughout the year despite a healthy increase in
expenditures, particularly in our R&D programs.
Cash Flows
|
|
August 31
|
|
|
August 31
|
|
|
|
2021
|
|
|
2020
|
|
|
|
$
|
|
|
$ |
|
Cash flows (used in) provided by operating activities
|
|
|
(3,997,590 |
) |
|
|
(2,628,450 |
) |
Cash flows (used in) provided by investing activities
|
|
|
193,880 |
|
|
|
(26,843 |
) |
Cash flows (used in) provided by financing activities
|
|
|
13,427,758 |
|
|
|
2,663,895 |
|
Cash flows (used in) provided by discontinued operations
|
|
|
3,000 |
|
|
|
(34,816 |
) |
Increase in cash
|
|
|
9,624,048 |
|
|
|
8,602 |
|
Operating Activities
Net cash used in operating activities was $3,997,590 for the year
ended August 31, 2021, compared with $2,628,450 during the same
period in 2020. The increase in cash used in operating activities
during fiscal 2021 was primarily driven by increased research and
development programs and office and administrative expenditures,
particularly on increased advertising and investor relations
activities.
Investing Activities
Net cash provided by investing activities was $193,880 (2020
($26,843)) for the year ended August 31, 2021, is due to the cash
proceeds received on the sale of assets and further investment in
our US patent portfolio.
Financing Activities
Net cash provided from financing activities was $13,427,758 during
the year ended August 31, 2021, compared to $2,663,895 during the
same period in 2020. During the year ended August 31, 2021, cash
provided by financing activities was primarily driven by the
issuance of common stock supplemented by the exercise of warrants
related to underwritten public offering.
COVID-19
As the repercussions of COVID-19 reverberate around the world, the
effects on Lexaria’s operations have been relatively minor. We have
experienced some difficulty in recruiting R&D and
administrative staff but as of the date of this report we have
filled these positions and expect to accelerate our in-house
research efforts throughout 2022. We have also experienced some
delay in getting test results of our R&D programs due to
supply-chain factors that could be attributed to the virus. Supply
chain issues have also had some, but not significant, impact on
securing ingredients for our B2B production. As the world re-opens,
we will expect to increase spending on travel as we seek out
commercial partners and further our advertising and investor
relations efforts.
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 Policies and
Estimates
The discussion and analysis of our financial condition and results
of operations are based upon our consolidated financial statements,
which have been prepared in accordance with the 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 aspects of our financial
statements are critical to an understanding of our financial
statements as more particularly described in Note 2 to our audited
annual consolidated financial statements included herein.
While our significant accounting policies are described in more
detail in the notes to the consolidated financial statements
appearing elsewhere in this report, we believe that the following
accounting policies and estimates are those most critical to the
preparation of our consolidated financial statements:
Stock-based compensation
We account for our stock-based compensation awards in accordance
with the FASB ASC Topic 718, Compensation—Stock
Compensation (“ASC 718”). ASC 718 requires all stock-based
payments to employees, including grants of employee stock options
and modifications to existing agreements, to be recognized in the
consolidated statements of operations and comprehensive loss based
on their fair values. We use the Black-Scholes option-pricing model
to determine the fair value of options granted.
Compensation expense related to our stock-based awards to
employees, executives and directors have service-based vesting
conditions and are recognized on a straight-line basis based on the
grant date fair value over the associated service period of the
award, generally the vesting term. The vesting terms of each grant
is determined by the board of directors and typically have a 5-year
contractual term.
The fair value estimation of options requires the input of
subjective assumptions, including expected life of the option,
stock price volatility, the risk-free interest rate, and expected
dividends. The assumptions used in our Black-Scholes option-pricing
model represent our best estimates involving numerous variables,
uncertainties, assumptions, and the application judgment. They are
inherently subjective. If any assumptions change, our stock-based
compensation expense could be materially different in the
future.
MANAGEMENT
All directors of our Company hold office until the next annual
meeting of the security holders or until their successors have been
elected and qualified. The officers of our Company are appointed by
our Board and hold office until their death, resignation or removal
from office. Our directors and executive officers and their ages,
positions held, and duration as such, are as follows:
Name
|
|
Position Held with our Company
|
|
Age
|
|
Date First Elected
Or Appointed
|
|
Date of
Resignation
|
Christopher Bunka
|
|
Chairman, Chief Executive Officer, and Director
|
|
60
|
|
Oct. 26, 2006
|
|
-
|
John Docherty
|
|
President and Director
|
|
52
|
|
Apr. 15, 2015
|
|
-
|
Gregory Downey
|
|
Chief Financial Officer
|
|
61
|
|
Apr. 15, 2021
|
|
-
|
Nicholas Baxter
|
|
Director
|
|
67
|
|
Jul. 8, 2011
|
|
-
|
Ted McKechnie
|
|
Director
|
|
74
|
|
Sept. 16, 2015
|
|
-
|
Al
Reese, Jr.
|
|
Director
|
|
72
|
|
Jan 14, 2021
|
|
-
|
Allan Spissinger
|
|
Former Chief Financial Officer
|
|
52
|
|
Jun. 1, 2017
|
|
Apr. 15, 2021
|
Brian Quigley
|
|
Former Director
|
|
48
|
|
Aug. 14, 2019
|
|
Jun. 21, 2021
|
Business Experience
The following is a brief account of the business and education
experience of each current director and executive officer during
the past five years, indicating each person’s principal occupation
during the period.
Mr. Christopher Bunka – Chairman, Chief Executive
Officer and Director
Mr. Bunka has been Chairman of the Board and CEO since 2006 and was
primarily responsible for the corporate pivot from older business
activities to bioscience. Mr. Bunka is a serial entrepreneur and
has been involved in several private and public companies since the
late 1980’s. He was well known for more than a decade as a
part-time business commentator in print and radio, as well as an
author. He has extensive experience in the capital markets,
corporate governance, project acquisition and corporate finance. He
is a named inventor on some of Lexaria’s pending patents.
Since 1988, Mr. Bunka has been the CEO of CAB Financial Services
Ltd., a private holding company located in Kelowna, Canada. He is a
venture capitalist and corporate consultant.
Mr. John Docherty – President and
Director
Mr. Docherty was appointed President of Lexaria effective April 15,
2015. Prior to Lexaria Mr. Docherty was former President and Chief
Operating Officer of Helix BioPharma Corp. (TSX: HBP), where he led
the company’s pharmaceutical development programs for its plant and
recombinantly derived therapeutic protein product candidates.
Mr. Docherty is a senior operations and management executive with
over 20 years experience in the pharmaceutical and
biopharmaceutical sectors. He has worked with large multinational
companies and emerging, private and publicly held start-ups. At
Helix, Mr. Docherty was also instrumental in the areas of
investor/stakeholder relations, capital raising, capital markets
development, strategic partnering, regulatory authority
interactions and media relations, and he also served as a
management member of its board of directors. Prior to this, Mr.
Docherty was President and a board member of PharmaDerm
Laboratories Ltd., a Canadian drug delivery company that developed
unique microencapsulation formulation technologies for use with a
range of active compounds.
Mr. Docherty has also held positions with companies such as Astra
Pharma Inc., Nu-Pharm Inc. and PriceWaterhouseCoopers’ former
global pharmaceutical industry consulting practice. He is a named
inventor on issued and pending patents and he has a M.Sc. in
pharmacology and a B.Sc. in Toxicology from the University of
Toronto.
He has served as a director of Lexaria since April 29, 2016.
Mr. Gregory Downey – Chief Financial
Officer
Mr. Downey joined the Company in January 2019 as Controller and
accepted the position of Chief Financial Officer in April 2021. Mr.
Downey brings over 35 years of diverse financial experience in the
mining, oil and gas, manufacturing, construction, and public
sectors as well as providing business advisory and financial
accounting services to many mid-sized organizations. In addition,
Mr. Downey has a wide range of executive corporate experience
having acted as the Chief Financial Officer and director of various
public companies.
Mr. Downey obtained his Certified Management Accountant (CMA)
designation in 1992 and is a member of the Chartered Professional
Accountants (CPA) of British Columbia. He holds a diploma in
Business Administration from the Southern Alberta Institute of
Technology.
Mr. Nicholas Baxter - Director
Mr. Baxter was appointed as a member on the board of directors of
Lexaria Corp. in 2009. Mr. Baxter received a Bachelor of Science
(Honours) from the University of Liverpool in 1975, and has worked
on oil & gas projects in many areas of the world. Since the
1980’s, he has worked with companies in the public markets both in
the U.K. and in Canada. Mr. Baxter brings extensive real-world
experience as a board member.
Mr. Ted McKechnie – Director
Mr. McKechnie is a well-recognized thought leader in the Canadian
food industry. In the past, Mr. McKechnie was president of Maple
Leaf Foods, an owner and senior executive at Humpty Dumpty Snack
Foods and a senior leader at Pepsi Co. After a distinguished career
as an executive and marketer specializing in food manufacturing, he
now focuses on moving the Canadian food sector into the future.
Aside from being the chairman of Food Starter’s board, Mr.
McKechnie is also the Chairman/CEO of The Davies Group and William
Davies Consulting Inc. Mr. McKechnie is also a chairman of the
board for Advanced Technology For Food Manufacturing, serves on the
Board Of Governors for St Jerome’s University. Mr. McKechnie is
often called upon by think tanks, the government and industry
leaders to offer insights on how to grow the food sector and add
more value to the Canadian economy.
Mr. Al Reese Jr. - Director
Mr. Reese has over 40 years experience in public and private
businesses including as CFO of a formerly Nasdaq-listed energy
company where he arranged finance transactions totaling over $10
billion dollars during his 20-year tenure. Mr. Reese was a Director
and Chairman of the Audit Committee of a community bank in Texas
for ten years until such time as it was acquired by a larger
banking group in 2018 and currently serves as an Independent
Director and Chairman of the Audit Committee for a privately held
insurance company headquartered in The Woodlands, Texas. He has
directed over 50 acquisitions and financings from as small as a few
hundred thousand dollars to multibillion dollar transactions in
both the domestic and international arenas. He has directed or
participated in numerous due diligence examinations, both domestic
and foreign and has held the responsibility for integrating the
finance, accounting and managerial practices for acquisitions and
dispositions in both domestic and foreign operations in both public
and private companies.
Mr. Reese is a Certified Public Accountant (1974), and received his
Bachelor of Business Administration degree from Texas A&M
University in 1971, and his MBA from University of Houston in
1977.
Family Relationships
There are no family relationships among any of our officers or
directors.
Involvement in Certain Legal Proceedings
None of our directors, executive officers, promoters or control
persons has been involved in any of the following events during the
past five years:
|
1)
|
A petition under the Federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal agent
or similar officer was appointed by a court for the business or
property of such person, or any partnership in which he was a
general partner at or within two years before the time of such
filing, or any corporation or business association of which he was
an executive officer at or within two years before the time of such
filing;
|
|
|
|
|
2)
|
A conviction in a criminal proceeding or is a named subject of a
pending criminal proceeding (excluding traffic violations and other
minor offenses);
|
|
|
|
|
3)
|
The subject of any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from, or
otherwise limiting, the following activities:
|
|
i.
|
Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
Commodity Futures Trading Commission, or an associated person of
any of the foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and
loan association or insurance company, or engaging in or continuing
any conduct or practice in connection with such activity
|
|
|
|
|
ii.
|
Engaging in any type of business practice; or
|
|
|
|
|
iii.
|
Engaging in any activity in connection with the purchase or sale of
any security or commodity or in connection with any violation of
Federal or State securities laws or Federal commodities laws;
|
|
4)
|
Such person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any Federal or
State authority barring, suspending or otherwise limiting for more
than 60 days the right of such person to engage in any activity
described in paragraph (f)(3)(i) of this section, or to be
associated with persons engaged in any such activity;
|
|
|
|
|
5)
|
Found by a court of competent jurisdiction in a civil action or by
the SEC to have violated any Federal or State securities law, and
the judgment in such civil action or finding by the SEC has not
been subsequently reversed, suspended, or vacated;
|
|
|
|
|
6)
|
Found by a court of competent jurisdiction in a civil action or by
the Commodity Futures Trading Commission to have violated any
Federal commodities law, and the judgment in such civil action or
finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended or vacated;
|
|
7)
|
The subject of, or a party to, any Federal or State judicial or
administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of:
|
|
i.
|
Any Federal or State securities or commodities law or regulation;
or
|
|
|
|
|
ii.
|
Any law or regulation respecting financial institutions or
insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil
money penalty or temporary or permanent cease-and-desist order, or
removal or prohibition order; or
|
|
|
|
|
iii.
|
Any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or
|
|
8)
|
The subject of, or a party to, any sanction or order, not
subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act
(15 U.S.C. 78c(a)(26))), any registered entity (as defined in
Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C.
1(a)(29))), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or
persons associated with a member.
|
Code of Ethics
We adopted a Code of Ethics applicable to our senior financial
officers and certain other finance executives, which is a “code of
ethics” as defined by applicable rules of the SEC. Our Code of
Ethics is attached as an exhibit to our Form SB-2 filed on
September 20, 2007. If we make any amendments to our Code of Ethics
other than technical, administrative, or other non-substantive
amendments, or grant any waivers, including implicit waivers, from
a provision of our Code of Ethics to our Chief Executive Officer,
Chief Financial Officer, or certain other finance executives, we
will disclose the nature of the amendment or waiver, its effective
date and to whom it applies in a Current Report on Form 8-K filed
with the SEC.
Board and Committee Meetings
Our board of directors held six (6) formal meetings and several
informal meetings during the year ended August 31, 2021. All
proceedings of the board of directors taken at a formal meeting
were evidenced by way of minutes taken at such meetings. All other
matters approved by the board of directors outside of any formal
meeting were evidenced by resolutions consented to by all the
directors. Such resolutions consented to in writing by the
directors entitled to vote on that resolution at a meeting of the
directors are, according to the Nevada General Corporate Law and
our Bylaws, as valid and effective as if they had been passed at a
meeting of the directors duly called and held.
Nomination Process
As of August 31, 2021, the Company had an active Governance and
Nominating Committee. If shareholders wish to recommend candidates
for our board of directors, they may do so by sending
communications to the Governance and Nominating Committee at the
address on the cover of this annual report.
Audit and Finance Committee and Audit Committee Financial
Expert
The audit and finance committee is governed by the audit and
finance committee charter, the most recent version having been
adopted on December 8, 2020. Our audit and finance committee is
currently composed of Mr. Al Reese, Jr., Mr. Ted McKechnie, and Mr.
Nicholas Baxter. Mr. Reese, a CPA, qualifies as an “audit committee
financial expert” as defined in Item 407(d)(5)(ii) of Regulation
S-K, and is “independent” as the term is used in Item 7(d)(3)(iv)
of Schedule 14A under the Securities Exchange Act of 1934, as
amended. Prior to Mr. Reese’s appointment in January 2021, Mr.
Bunka acted as a member of the audit and finance committee and was
not “independent” pursuant to Nasdaq independence standards as he
is actively involved in the daily management of the Company as
CEO.
It is not the duty of our audit and finance committee to determine
that our financial statements are complete and accurate and in
accordance with generally accepted accounting principles. Our
management is responsible for preparing our financial statements,
and our independent registered public accounting firm is
responsible for auditing those financial statements. Our audit and
finance committee does, however, consult with management and our
independent registered public accounting firm prior to the
presentation of financial statements to shareholders and, as
appropriate, initiates inquiries into various aspects of our
financial affairs. In addition, our audit and finance committee is
responsible for retaining, evaluating and, if appropriate,
recommending the termination of our independent registered public
accounting firm and approving professional services provided by
them.
Compensation Committee
The Company created a compensation committee on July 2, 2020, the
members of which are Mr. Baxter, and Mr. McKechnie, with both
Directors being “independent” pursuant to Nasdaq independence
standards. The compensation committee operates under a written
charter and its purpose is to review, consider, research, and
recommend compensation for the Company’s executive management,
taking into consideration achieved milestones, the compensation
issued by companies of similar size and the overall financial
health of the Company. The committee is also responsible for
approving and reviewing employment agreements and benefits
agreements as well as any executive compensation information
incorporated into the Company’s periodic reports.
Governance and Nominating Committee
The governance and nominating committee operate pursuant to a
written charter created on December 8, 2020, and subsequently
adopted by the Board of directors. The current members of the
committee are Mr. Reese Jr. and Mr. Baxter, both of whom are
independent directors of the Company. The purpose of the committee
is to assist the Board of directors with fulfilling its
responsibilities by: (i) being satisfied that corporate governance
guidelines are adopted, disclosed and applied including director
qualification standards, director responsibilities, director access
to management and independent advisors, director compensation,
director orientation and continuing education, and annual
performance evaluation of the Board; (ii) identifying individuals
qualified to become new Board members and recommending to the Board
the nominees for each annual meeting of shareholders of the
Corporation; and (iii) such other matters delegated to the
committee by the Board. A copy of the Governance & Nominating
Committee charter can be downloaded from the Company’s website
under our Investors/Governance/Governance Documents tab.
The Board of directors has a critical role in guiding our strategic
direction and overseeing the management of our business, and
accordingly, we seek to attract and retain highly qualified
directors who have sufficient time to engage in the activities of
the Board of directors and to understand and enhance their
knowledge of our industry and business plans. In evaluating the
suitability of individual candidates, the governance and nominating
committee and Board of directors may take into account many
factors, including: relevant education, experience and expertise;
knowledge of the Company and the issues facing the Company; whether
the candidate will strengthen the Board, as a whole, and remedy any
perceived deficiencies in the specific criteria; moral and ethical
character; diversity of expertise and experience in substantive
matters pertaining to our business relative to other board members;
diversity of background and perspective, including, but not limited
to, with respect to age, gender, race, place of residence and
specialized experience; and any other relevant qualifications,
attributes or skills. The core competencies of directors should
address accounting or finance experience, market familiarity,
business or management experience, industry knowledge,
customer-base experience or perspective, crisis response,
leadership, and/or strategic planning. The Board of directors and
governance and nominating committee evaluate each individual in the
context of the Board as a whole, with the objective of assembling a
group that can best perpetuate the success of the business and
represent stockholder interests through the exercise of sound
judgment using its diversity of experience in these various
areas.
EXECUTIVE
COMPENSATION
The particulars of the compensation paid to the following
persons:
|
a)
|
our principal executive officer;
|
|
|
|
|
b)
|
each of our two most highly compensated executive officers who were
serving as executive officers at the end of the years ended August
31, 2021, and August 31, 2020, and
|
|
|
|
|
c)
|
up to two additional individuals for whom disclosure would have
been provided under (b) but for the fact that the individual was
not serving as our executive officer at the end of the years ended
August 31, 2021, and August 31, 2020,
|
who we will collectively refer to as the named executive officers
of our Company, are set out in the following summary compensation
table, except that no disclosure is provided for any named
executive officer, other than our principal executive officers,
whose total compensation did not exceed $100,000 for the respective
fiscal year:
SUMMARY COMPENSATION TABLE
|
Name and Principal
Position
|
|
Year
|
|
Salary
$
|
|
|
Bonus
$
|
|
|
Stock Awards
$
|
|
|
Option Awards(5)
$
|
|
|
Non-Equity Incentive Plan
Compensation
$
|
|
|
Non-Qualified Deferred
Compensation Earnings
$
|
|
|
All Other Compensation
$
|
|
|
Total
$
|
|
Christopher Bunka (1)
|
|
2021
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
119,630 |
|
|
|
- |
|
|
|
- |
|
|
|
374,486 |
|
|
|
494,116 |
|
Chairman, Chief Executive Officer & Director
|
|
2020
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
153,065 |
|
|
|
- |
|
|
|
- |
|
|
|
300,802 |
|
|
|
453,867 |
|
John Docherty (2)
|
|
2021
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
83,419 |
|
|
|
- |
|
|
|
- |
|
|
|
326,855 |
|
|
|
410,274 |
|
President & Director
|
|
2020
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
275,614 |
|
|
|
- |
|
|
|
- |
|
|
|
242,521 |
|
|
|
518,135 |
|
Greg Downey (3)
|
|
2021
|
|
|
84,688 |
|
|
|
- |
|
|
|
- |
|
|
|
34,844 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
119,352 |
|
Chief Financial Officer
|
|
2020
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Allan Spissinger (4)
|
|
2021
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
109,579 |
|
|
|
109,579 |
|
former Chief Financial Officer
|
|
2020
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
143,886 |
|
|
|
- |
|
|
|
- |
|
|
|
121,664 |
|
|
|
265,550 |
|
(1)
|
Mr. Bunka was appointed as Chairman, President, Chief Executive
Officer, and director on October 26, 2006. We pay Mr. Bunka a
consulting fee through CAB Financial Services Ltd., where he is
also the Chief Executive Officer.
|
(2)
|
Mr. Docherty became President on April 15, 2015, and a director on
April 29, 2016. We pay Mr. Docherty a consulting fee through his
wholly owned company Docherty Management Ltd.
|
(3)
|
Mr. Downey became Chief Financial Officer on April 15, 2021, and is
considered an employee of the Company.
|
(4)
|
Mr. Spissinger became Chief Financial Officer on June 1, 2018. Mr.
Spissinger was replaced as CFO effective April 15, 2021, and
remained with the company until the end of his contract on May 31,
2021. We paid Mr. Spissinger a consulting fee through his wholly
owned company M&E Services Ltd.
|
(5)
|
The fair value of the stock options awarded was estimated using the
Black-Scholes option pricing model.
|
Consulting and Employment Agreements
Mr. Chris Bunka, CEO
The Company negotiated a 3-year term renewable management contract
with Mr. Bunka effective January 1, 2019. The base annual
compensation payable is C$350,000 per year with an annual increase
of 1.25 times the annual Canadian inflation rate. A performance
bonus equal to 50% of the annual compensation may be payable upon
the completion of certain performance criteria as determined by the
board of directors and he is also entitled to participate in the
Company’s approved stock option plan.
Mr. Bunka is entitled to compensation equal to 2% of the
consideration received by the Company from the sale of a
subsidiary, excluding certain circumstances. Upon the occurrence of
a change of control, subject to certain exemptions, Mr. Bunka will
also be entitled to a lump payment of twenty-three times his
monthly fee. The termination clause of Mr. Bunka contract states
that three (3) months notice must be given for terminating his
contract without cause. Given such notice, the Company would be
liable for a termination break fee payment equal to fifteen (15)
times his monthly fee.
As at the date of this report, the compensation committee is in
negotiations with Mr. Bunka for the renewal of his existing
contracts.
Mr. John Docherty, President
The Company has an agreement with Docherty Management Limited,
solely owned by Mr. John Docherty for a 3-year term renewable
management contract for C$300,000 per year, effective January 1,
2019, with an annual increase of 1.25 times the annual Canadian
inflation rate. A performance bonus equal to 50% of the annual
compensation may be payable upon the completion of certain
performance criteria as determined by the board of directors and he
is also entitled to participate in the Company’s approved stock
option plan. An annual professional development allowance of
C$15,000 is also available to Mr. Docherty.
The contracts for the services of the President also include the
following performance incentives: entitlement to compensation equal
to 2% of the consideration received by the Company from the sale of
a subsidiary, excluding certain circumstances. Upon the occurrence
of a change of control, subject to certain exemptions, Mr. Docherty
will also be entitled to a lump payment of twelve (12) times his
monthly fee. The contract specifies that termination without cause
would result in eight (8) months pay in lieu of notice.
As at the date of this report, the compensation committee is in
negotiations with Mr. Docherty for the renewal of his existing
contract.
Mr. Greg Downey, CFO
On April 15, 2021, the Company entered into an employment contract
with Mr. Downey as Chief Financial Officer with annual compensation
of C$144,000 with a 10% annual increase. A performance bonus equal
to 50% of the annual compensation may be payable upon the
completion of certain performance criteria as determined by the
board of directors and he is also entitled to participate in the
Company’s approved stock option plan. An annual professional
development allowance of C$5,000 is also available to Mr.
Downey.
Mr. Downey is eligible for incentive compensation of 1% of the
consideration received by the Company from the sale of a subsidiary
excluding certain circumstances. Upon the occurrence of a change of
control, Mr. Downey will also be entitled to a lump payment of
sixteen (16) times his monthly salary.
The contract specifies that termination without cause clause would
result in eight (8) months pay in lieu of notice.
Grants of Plan-Based Awards Table
During the fiscal year ended August 31, 2021, Lexaria issued the
following plan-based awards to our named executive officers:
Compensation Securities
|
|
Executive Officer
|
|
Type of
compensation security
|
|
Number of
compensation securities,
number of
underlying
securities, and percentage of class
|
|
|
Date of
issue or
grant
|
|
Issue,
conversion or exercise
price
$
|
|
|
Closing
price of
security or
underlying
security on
date of
grant
$
|
|
|
Closing
price of
security or
underlying
security at
year end
$
|
|
|
Expiry
date
|
|
Chris Bunka, CEO
|
|
Stock Options
|
|
|
26,000 |
|
|
04/25/2021
|
|
|
5.83 |
|
|
|
5.33 |
|
|
|
6.22 |
|
|
04/25/2026
|
|
John Docherty, President
|
|
Stock Options
|
|
|
18,000 |
|
|
04/25/2021
|
|
|
5.31 |
|
|
|
5.33 |
|
|
|
6.22 |
|
|
04/25/2026
|
|
Greg Downey,
|
|
Stock Options
|
|
|
12,000 |
|
|
04/15/2021
|
|
|
5.04 |
|
|
|
5.07 |
|
|
|
6.22 |
|
|
04/15/2026
|
|
CFO
|
|
|
|
|
10,000 |
|
|
04/25/2021
|
|
|
5.31 |
|
|
|
5.33 |
|
|
|
|
|
|
04/25/2026
|
|
Outstanding Equity Awards at Fiscal Year End
The particulars of unexercised options, stock that has not vested
and equity incentive plan awards for our named executive officers
are set out in the following table:
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
|
|
|
|
|
|
|
|
OPTION AWARDS
|
|
STOCK AWARDS
|
|
Executive Officer
|
|
Number of Securities Underlying
Unexercised
Options
Exercisable
(#)
|
|
|
Number of Securities Underlying Unexercised Options
Unexercisable
(#)
|
|
|
Equity Incentive Plan Awards: Number of Securities
Underlying Unexercised Unearned Options
(#)
|
|
|
Option Exercise Price
$
|
|
|
Option Expiration Date
|
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
|
|
Market Value of Shares or Units of Stock That Have Not
Vested
$
|
|
|
Equity Incentive Plan Awards: Number of Unearned Shares,
Units or Other Rights That Have Not Vested
(#)
|
|
|
Equity Incentive Plan Awards: Market or Payout Value of
Unearned Shares, Units or Other Rights That Have Not
Vested
(#)
|
|
Christopher Bunka
|
|
|
26,000 |
|
|
|
- |
|
|
|
- |
|
|
$ |
5.83 |
|
|
04/23/2026
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
23,334 |
|
|
|
- |
|
|
|
- |
|
|
$ |
7.08 |
|
|
06/08/2026
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
John Docherty
|
|
|
13,334 |
|
|
|
- |
|
|
|
- |
|
|
$ |
9.60 |
|
|
04/23/2025
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
18,000 |
|
|
|
- |
|
|
|
- |
|
|
$ |
5.31 |
|
|
04/23/2026
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
18,334 |
|
|
|
- |
|
|
|
- |
|
|
$ |
7.08 |
|
|
06/08/2026
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Greg Downey
|
|
|
12,000 |
|
|
|
8,000 |
|
|
|
- |
|
|
$ |
5.04 |
|
|
04/24/2026
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
5,000 |
|
|
|
5,000 |
|
|
|
- |
|
|
$ |
5.31 |
|
|
04/25/2026
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
8,000 |
|
|
|
- |
|
|
|
- |
|
|
$ |
7.08 |
|
|
06/08/2026
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Option Exercises
No options were exercised by any named executive officer during our
fiscal year ended August 31, 2021.
Compensation of Directors
As of August 31, 2021, three of our directors are compensated for
their services. In their capacity as independent directors each
receives $30,000 per year paid quarterly in advance. Additionally,
directors are paid nominal amounts for their services on the audit
and finance, compensation, and the governance and nominating
committees and for acting as chair of such committees.
During the year ended August 31, 2021, three of our directors were
granted an aggregate of 6,400 stock options with a fair value
calculated at $75,540 and included in consulting expense.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers.
We have no material bonus or profit-sharing plans pursuant to which
cash or non-cash compensation is or may be paid to our directors or
executive officers, except that stock options may be granted at the
discretion of the board of directors or a committee thereof.
Indebtedness of Directors, Senior Officers, Executive
Officers and Other Management
None of our directors or executive officers or any associate or
affiliate of our company during the last two fiscal years is or has
been indebted to our Company by way of guarantee, support
agreement, letter of credit or other similar agreement or
understanding currently outstanding.
Compensation Committee Interlocks and Insider
Participation
No member of the Compensation Committee is, or was during fiscal
2021, an officer or employee of the Company or any of its
subsidiaries or was formerly an officer of the Company or any of
its subsidiaries. No member of the Compensation Committee is, or
was during fiscal 2021, an executive officer of another company
whose board of directors has a comparable committee on which one of
the Company’s executive officers serves.
Board Diversity
The Company and its management are highly supportive of the recent
initiatives taken by the Securities and Exchange Commission and the
Nasdaq Group to encourage diversity within the board of directors
of reporting companies. Lexaria annually reviews its board
composition and evaluates areas of expertise that would provide
additional benefits to the Company and its shareholders. As the
Company transitions its technology towards pharmaceutical
applications, should the Company feel it is beneficial to expand
its board, the Company will endeavour to engage individuals who
will be able to enhance the board with their expertise in this
industry sector and who also will enrich the board with their
diverse perspectives.
Compensation Committee Report
Our Compensation Committee has reviewed and discussed the Executive
Compensation for the year ended August 31, 2021, with management.
Based on the reviews and discussions our Compensation Committee
recommended to our Board of directors that the Executive
Compensation discussed above to be included in our filing of our
annual report on Form 10-K for the year ended August 31, 2021.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 17, 2021, certain
information with respect to the beneficial ownership of our common
shares by each shareholder known by us to be the beneficial owner
of more than 5% of our common shares, as well as by each of our
current directors and executive officers as a group. Each person
has sole voting and investment power with respect to the shares of
common stock, except as otherwise indicated. Beneficial ownership
consists of a direct interest in the shares of common stock, except
as otherwise indicated.
Name and Address of Beneficial Owner
|
|
Amount and Nature of Beneficial Ownership
|
|
|
Percentage
of Class
|
|
Christopher Bunka; Kelowna BC, Canada
|
|
|
545,455
|
(1)
|
|
|
9.17
|
%
|
John Docherty; Toronto, ON, Canada
|
|
|
103,743
|
(2)
|
|
|
1.74
|
%
|
Greg Downey; Kelowna, BC, Canada *
|
|
|
26,883
|
(3)
|
|
|
0.45
|
%
|
Ted McKechnie; Toronto, ON, Canada *
|
|
|
19,691
|
(4)
|
|
|
0.33
|
%
|
Nicholas Baxter; Aberdeenshire, UK *
|
|
|
17,500
|
(5)
|
|
|
0.29
|
%
|
Al Reese Jr., Houston, TX, USA *
|
|
|
4,137
|
(6)
|
|
|
0.07
|
%
|
Directors and Executive Officers as a Group (6
persons)
|
|
|
717,539
|
|
|
|
12.05
|
%
|
*
|
Less than 1% beneficial ownership
|
(1)
|
Chairman, director and CEO Chris Bunka directly held 273,543 shares
and a further 215,912 shares held in C.A.B. Financial Services.
Also included in his holdings are 23,333 warrants exercisable at
$10.50 and 26,000 options exercisable at $5.83 and 23,334 at
$7.08.
|
(2)
|
President and Director John Docherty holdings include 13,334
options exercisable at $9.60, 18,000 at $5.31, and 18,334 at
$7.08.
|
(3)
|
CFO Greg Downey holdings include 12,000 options exercisable at
$5.04, 5,000 at $5.31, and 8,000 at $7.08.
|
(4)
|
Director Ted McKechnie holdings includes 1,500 options exercisable
at $5.31 and 5,000 at $7.08.
|
(5)
|
Director Nicholas Baxter holdings includes 1,500 options
exercisable at $5.31 and 5,000 at $7.08.
|
(6)
|
Director Al Reese Jr. holdings include Includes 3,400 options
exercisable at $4.80.
|
RELATED PARTY
TRANSACTIONS
Except as disclosed herein, no director, executive officer,
shareholder holding at least 5% of shares of our common stock, or
any family member thereof, had any material interest, direct or
indirect, in any transaction, or proposed transaction since the
year ended August 31, 2021, in which the amount involved in the
transaction exceeded or exceeds the lesser of $120,000 or one
percent of the average of our total assets at the yearend for the
last three completed fiscal years.
Director Independence
We currently act with five directors, consisting of Mr. Christopher
Bunka, Mr. John Docherty, Mr. Nicholas Baxter, Mr. Ted McKechnie,
and Mr. Al Reese Jr. We have determined that Mr. Baxter, Mr.
McKechnie, and Mr. Reese are “independent directors” as defined in
Nasdaq Marketplace Rule 4200(a)(15).
Currently our audit and finance committee consists of our Mr.
Baxter, Mr. McKechnie, and Mr. Reese, who qualifies as an “audit
committee financial expert” as defined in Item 407(d)(5)(ii) of
Regulation S-K.
From inception to present date, we believe that the members of our
audit committee and the board of directors have been and are
collectively capable of analyzing and evaluating our financial
statements and understanding internal controls and procedures for
financial reporting.
We appointed a compensation committee on July 2, 2020, which
currently consists of the following independent directors: Mr.
McKechnie, and Mr. Baxter. During fiscal year ended August 31,
2021, the compensation committee held one meeting to determine
bonus compensation payable to the named executive officers in
connection with the successful completion of certain performance
milestones and the disposition of assets of CanPharm.
We appointed a governance and nominating committee on December 8,
2020 which currently consists of the following independent
directors: Mr. Reese Jr. and Mr. Baxter. To date no meetings have
been held by this committee.
DESCRIPTION OF
CAPITAL STOCK
The rights of our stockholders are be governed by Nevada law,
Articles of Incorporation and Bylaws, as amended. The following
briefly summarizes the material terms of our common stock and
preferred stock. We urge you to read the applicable provisions of
Nevada Corporation Law, our Articles of Incorporation and our
Bylaws.
Authorized Capital Stock
Our authorized capital stock consists of 220,000,000 shares of
common stock, par value $0.001 per share. As of December 17, 2021,
there were 5,950,998 shares of our common stock outstanding.
Common Stock
We are authorized to issue up to a total of 220,000,000 shares of
common stock, par value $0.001 per share. Holders of our common
stock are entitled to one vote for each share held on all matters
submitted to a vote of our stockholders. Holders of our common
stock have no cumulative voting rights. Further, holders of our
common stock have no preemptive or conversion rights or other
subscription rights. Upon our liquidation, dissolution or
winding-up, holders of our common stock are entitled to share in
all assets remaining after payment of all liabilities and the
liquidation preferences of any of our outstanding shares of
preferred stock. Subject to preferences that may be applicable to
any outstanding shares of preferred stock, holders of our common
stock are entitled to receive dividends, if any, as may be declared
from time to time by our Board out of our assets which are legally
available. Such dividends, if any, are payable in cash, in property
or in shares of capital stock.
Holders of shares of our common stock are entitled to cast at least
33.33% of the total votes entitled to be cast by the holders of all
of our outstanding capital stock, present in person or by proxy,
are necessary to constitute a quorum at any meeting. If a quorum is
present, an action by stockholders entitled to vote on a matter is
approved if the number of votes cast in favor of the action exceeds
the number of votes cast in opposition to the action. The vote of
33.33% of our stock held by shareholders present in person or
represented by proxy and entitled to vote at the Meeting will be
sufficient to elect Directors or to approve a proposal.
Warrants
On January 12, 2021, Lexaria became a Nasdaq listed company and
announced the pricing of a public offer of 1,828,571 units, with
each unit comprising one share of common stock and one warrant to
purchase one share of common stock at $5.25 per unit. The warrants
issued pursuant to this public offering were listed on the Nasdaq
under the symbol LEXXW and have an exercise price of $6.58 per
share. They are immediately exercisable, and expire five years from
issuance date. The underwriter was granted 30-day option to
purchase up to an additional 274,285 shares of common stock and/or
warrants to purchase up to the same amount of common stock, which
option was exercised in full by H.C. Wainwright & Co. who acted
as sole book-running manager for the offer. Gross proceeds of
$11.04 million were ultimately received from the offering and
Lexaria also issued five-year warrants to H.C. Wainwright & Co.
entitling them to purchase up to 166,781 shares of common stock
with an exercise price of $6.58 per share. Pursuant to certain tail
rights held by Bradley Woods & Co. Lexaria paid Bradley Woods
$316,999.62 and issued Bradley Woods five-year warrants to purchase
60,385 shares of common stock at an exercise price of $6.58 per
share. There were 610,189 warrants at a strike price of $6.58
exercised during the year ended August 31, 2021.
In May 2020, the Company issued five-year warrants to purchase an
aggregate of 295,550 shares of common stock at an exercise price of
$10.50 per share. The Company is registering for resale in this
registration statement all of the shares of common stock issuable
upon exercise of these warrants.
In November 2019, the Company issued two-year warrants, which were
subsequently extended to five-year warrants, to purchase an
aggregate of 60,798 shares of common stock at an exercise price of
$36.00 per share. The Company is registering for resale in this
registration statement 57,213 shares of common stock issuable upon
exercise of these warrants.
Anti-Takeover Provisions of Nevada State Law
Certain anti-takeover provisions of Nevada law could have the
effect of delaying or preventing a third-party from acquiring us,
even if the acquisition arguably could benefit our
stockholders.
Nevada’s “combinations with interested stockholders” statutes, NRS
78.411 through 78.444, inclusive, prohibit specified types of
business “combinations” between certain Nevada corporations and any
person deemed to be an “interested stockholder” for two years after
such person first becomes an “interested stockholder” unless the
corporation’s board of directors approves the combination, or the
transaction by which such person becomes an “interested
stockholder”, in advance, or unless the combination is approved by
the board of directors and sixty percent of the corporation’s
voting power not beneficially owned by the interested stockholder,
its affiliates and associates. Further, in the absence of prior
approval certain restrictions may apply even after such two year
period. However, these statutes do not apply to any combination of
a corporation and an interested stockholder after the expiration of
four years after the person first became an interested stockholder.
For purposes of these statutes, an “interested stockholder” is any
person who is (1) the beneficial owner, directly or indirectly, of
ten percent or more of the voting power of the outstanding voting
shares of the corporation, or (2) an affiliate or associate of the
corporation and at any time within the two previous years was the
beneficial owner, directly or indirectly, of ten percent or more of
the voting power of the then outstanding shares of the corporation.
The definition of the term “combination” is sufficiently broad to
cover most significant transactions between a corporation and an
“interested stockholder.” These statutes generally apply to Nevada
corporations with 200 or more stockholders of record. However, a
Nevada corporation may elect in its articles of incorporation not
to be governed by these particular laws, but if such election is
not made in the corporation’s original articles of incorporation,
the amendment (1) must be approved by the affirmative vote of the
holders of stock representing a majority of the outstanding voting
power of the corporation not beneficially owned by interested
stockholders or their affiliates and associates, and (2) is not
effective until 18 months after the vote approving the amendment
and does not apply to any combination with a person who first
became an interested stockholder on or before the effective date of
the amendment. We have made such an election in our original
articles of incorporation.
Nevada’s “acquisition of controlling interest” statutes, NRS 78.378
through 78.379, inclusive, contain provisions governing the
acquisition of a controlling interest in certain Nevada
corporations. These “control share” laws provide generally that any
person that acquires a “controlling interest” in certain Nevada
corporations may be denied voting rights, unless a majority of the
disinterested stockholders of the corporation elects to restore
such voting rights. Absent such provision in our bylaws, these laws
would apply to us as of a particular date if we were to have 200 or
more stockholders of record (at least 100 of whom have addresses in
Nevada appearing on our stock ledger at all times during the 90
days immediately preceding that date) and do business in the State
of Nevada directly or through an affiliated corporation, unless our
articles of incorporation or bylaws in effect on the tenth day
after the acquisition of a controlling interest provide otherwise.
These laws provide that a person acquires a “controlling interest”
whenever a person acquires shares of a subject corporation that,
but for the application of these provisions of the NRS, would
enable that person to exercise (1) one fifth or more, but less than
one third, (2) one third or more, but less than a majority or (3) a
majority or more, of all of the voting power of the corporation in
the election of directors. Once an acquirer crosses one of these
thresholds, shares which it acquired in the transaction taking it
over the threshold and within the 90 days immediately preceding the
date when the acquiring person acquired or offered to acquire a
controlling interest become “control shares” to which the voting
restrictions described above apply.
Nevada law also provides that directors may resist a change or
potential change in control if the directors determine that the
change is opposed to, or not in the best interests of, the
corporation. The existence of the foregoing provisions and other
potential anti-takeover measures could limit the price that
investors might be willing to pay in the future for shares of our
common stock. They could also deter potential acquirers of our
Company, thereby reducing the likelihood that you could receive a
premium for your common stock in an acquisition.
Anti-Takeover Effects of Our Articles of Incorporation and
Bylaws
The following provisions of our articles of incorporation and
bylaws could have the effect of delaying or discouraging another
party from acquiring control of us and could encourage persons
seeking to acquire control of us to first negotiate with our
Board:
|
·
|
no cumulative voting in the election of directors, which limits the
ability of minority stockholders to elect director candidates;
|
|
|
|
|
·
|
the right of our Board to elect a director to fill a vacancy
created by the expansion of the Board or the resignation, death or
removal of a director, with our stockholders only allowed to fill
such a vacancy if not filled by the Board;
|
|
|
|
|
·
|
the ability of our Board to alter our bylaws without obtaining
shareholder approval; and
|
|
|
|
|
·
|
the requirement that a special meeting of stockholders may be
called only by either (i) the Chairman; (ii) the President; (iii)
Vice President, or (iv) at least two members of our Board, which
may delay the ability of our stockholders to force consideration of
a proposal or to take action, including the removal of
directors
|
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is
Computershare Trust Company of Canada.
Stock Market Listing
On January 12, 2021, our common stock ceased trading on the OTCQX,
and our common stock and warrants commenced trading on Nasdaq under
the symbols “LEXX” and “LEXXW”, respectively. Our common stock was
voluntarily delisted from the CSE at market close on July 8, 2021,
prior to delisting, the Company’s common stock traded under the
symbol “LXX”.
Indemnification of Directors and Officers
The NRS empower us to indemnify our directors and officers against
expenses relating to certain actions, suits or proceedings as
provided for therein. In order for such indemnification to be
available, the applicable director or officer must not have acted
in a manner that constituted a breach of his or her fiduciary
duties and involved intentional misconduct, fraud or a knowing
violation of law, or must have acted in good faith and reasonably
believed that his or her conduct was in, or not opposed to, our
best interests. In the event of a criminal action, the applicable
director or officer must not have had reasonable cause to believe
his or her conduct was unlawful.
Pursuant to our articles, we may indemnify each of our present and
future directors, officers, employees or agents who becomes a party
or is threatened to be made a party to any suit or proceeding,
whether pending, completed or merely threatened, and whether said
suit or proceeding is civil, criminal, administrative,
investigative, or otherwise, except an action by or in the right of
the Company, by reason of the fact that he is or was a director,
officer, employee, or agent of the Company, or is or was serving at
the request of the Company as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or
other enterprise, against expenses, including, but not limited to,
attorneys’ fees, judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with the
action, suit, proceeding or settlement, provided such person acted
in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interest of the Company, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful.
The expenses of directors, officers, employees or agents of the
Company incurred in defending a civil or criminal action, suit, or
proceeding may be paid by the Company as they are incurred and in
advance of the final disposition of the action, suit, or
proceeding, if and only if the director, officer, employee or agent
undertakes to repay said expenses to the Company if it is
ultimately determined by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, that he is not entitled to be
indemnified by the corporation.
No indemnification shall be applied, and any advancement of
expenses to or on behalf of any director, officer, employee or
agent must be returned to the Company, if a final adjudication
establishes that the person’s acts or omissions involved a breach
of any fiduciary duties, where applicable, intentional misconduct,
fraud or a knowing violation of the law which was material to the
cause of action.
The NRS further provides that a corporation may purchase and
maintain insurance or make other financial arrangements on behalf
of any person who is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
for any liability asserted against him and liability and expenses
incurred by him in his capacity as a director, officer, employee or
agent, or arising out of his status as such, whether or not the
corporation has the authority to indemnify him against such
liability and expenses. We have secured a directors’ and officers’
liability insurance policy. We expect that we will continue to
maintain such a policy.
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities
Insofar as indemnification for liabilities under the Securities Act
may be permitted to officers, directors or persons controlling the
Company pursuant to the foregoing provisions, the Company has been
informed that is it is the opinion of the SEC that such
indemnification is against public policy as expressed in such
Securities Act and is, therefore, unenforceable.
DESCRIPTION
OF PRIVATE PLACEMENTS
May 2020 Private Placement
On May 4, 2020, the Company entered into securities purchase
agreements with certain investors for the sale of up to 295,550
shares of common stock and warrants to purchase up to 295,550
shares of common stock for gross proceeds of $2,039,228. The
financing closed in two tranches on May 6, 2020 and May 11, 2020.
The warrants have a five year term and are exercisable at $10.50
per share, subject to adjustment as set forth in the warrants for
stock splits, stock dividends, recapitalizations and the like. The
investors may exercise the warrants on a cashless basis if the
shares of common stock underlying the warrants are not then
registered pursuant to an effective registration statement. Each
investor has contractually agreed to restrict its ability to
exercise the warrants such that the number of shares of the
Company’s common stock held by the investor and its affiliates
after such exercise does not exceed 4.99% of the Company’s then
issued and outstanding shares of common stock.
Additionally, pursuant to the purchase agreements, until the 18
month anniversary of the Resale Date, in the event of a subsequent
financing by the Company, investors that invested at least $115,000
shall have the right to participate up to an aggregate of 50% of
the subsequent financing. Additionally, pursuant to the purchase
agreements, the Company may not effect a subsequent financing until
90 days following the Resale Date unless the Company has received
the written consent and approval by investors who had purchased at
least 50.1% of the shares sold in the May 2020 offering. Resale
Date is defined in the purchase agreements as the later of (i)
September 7, 2020 or (ii) the earlier of (a) the date that this
registration statement is declared effective and (b) all of the
shares and warrant shares may be resold pursuant to Rule 144
without any volume or manner-of-sale restrictions.
In connection with the purchase agreements, the Company entered
into a registration rights agreement with the investors. Pursuant
to the registration rights agreement, the Company is required to
file the registration statement of which this prospectus forms a
part to register for resale of the common stock and shares of
common stock underlying the warrants, within 30 days of signing,
and to have such registration statement declared effective within
60 days after signing in the event the registration statement is
not reviewed by the SEC, or 120 days of signing in the event the
registration statement is reviewed by the SEC. The Company will be
obligated to pay liquidated damages to the investors if the Company
fails to file the registration statement when required, fails to
cause the registration statement to be declared effective by the
SEC when required, fails to maintain the effectiveness of the
registration statement or, in certain circumstances, or if the
Company fails to timely file its periodic reports under the
Exchange Act.
In conjunction with the purchase agreements, all officers and
directors of the Company entered into lock-up agreements pursuant
to which they agreed to not sell their shares of common stock or
common stock equivalents in the Company until 90 days after the
Resale Date and all investors have entered into lock-up agreements
pursuant to which they have agreed not to sell the shares or shares
of common stock underlying the warrants through the later of the
effective date of the registration statement of which this
prospectus forms a part or September 6, 2020.
As compensation for placement agent services, the Company paid
Bradley Woods & Co. Ltd. (“BWC”) a cash fee of approximately
$151,623 at the final closing and, subject to certain exceptions,
will pay to 8% of the proceeds received from the cash exercise, if
any, of the warrants issued to the investors. The Company also
issued to BWC and its designees warrants to purchase up to 21,640
shares of common stock. The Company agreed to reimburse BWC’s legal
fees up to $25,000.
November 2019 Private Placement
On November 13, 2019, the Company closed the first tranche of a
non-brokered private placement financing resulting in the issuance
of 51,814 units at a price of $13.50 per unit with each unit being
comprised of one common share and one share purchase warrant for
gross proceeds of $699,410.25. The warrants are exercisable for a
period of five years at an exercise price of $36.00 per share until
November 13, 2024.
On November 28, 2019, the Company closed the second tranche of a
non-brokered private placement financing resulting in the issuance
of 8,984 units at a price of $13.50 per unit with each unit being
comprised of one common share and one share purchase warrant for
gross proceeds of $121,275. The warrants are exercisable for a
period of five years at an exercise price of $36.00 per share until
November 28, 2024. In connection with the issuance of the units,
the Company also paid to certain finders an aggregate of $3,937.50
and issued an aggregate of 292 warrants exercisable until November
13, 2021 at an exercise price of $36.00. The Company is registering
for resale in this registration statement 57,213 of the shares of
common stock issuable upon exercise of the warrants issued in
November 2019.
SELLING
STOCKHOLDERS
The shares of common stock being offered by the selling
stockholders are those previously issued to the selling
stockholders, and those issuable to the selling stockholders, upon
the exercise of certain warrants issued in November 2019 and May
2020. For additional information regarding the issuances of the
shares of common stock and warrants to the selling stockholders,
see “Recent Developments” above. We are registering the shares of
common stock in order to permit the selling stockholders to offer
the shares for resale from time to time. Except for the ownership
of the shares of common stock and the warrants or in the footnotes
to the table below, the selling stockholders have not had any
material relationship with us within the past three years.
The table below lists the selling stockholders and other
information regarding the beneficial ownership of the shares of
common stock by each of the selling stockholders. The second column
lists the number of shares of common stock beneficially owned by
each Selling Stockholder, based on its ownership of the shares of
common stock and warrants, as of December 17, 2021, assuming
exercise of the warrants held by the selling stockholders on that
date, without regard to any limitations on exercises.
The third column lists the shares of common stock being offered by
this prospectus by the selling stockholders.
This prospectus generally covers the resale of the sum of (i) the
number of shares of common stock issued to the selling stockholders
pursuant to securities purchase agreements and (ii) the maximum
number of shares of common stock issuable upon exercise of the
related warrants, determined as if such outstanding warrants were
exercised in full as of the trading day immediately preceding the
date this registration statement was initially filed with the SEC,
each as of the trading day immediately preceding the applicable
date of determination and all subject to adjustment as provided in
the registration right agreement, without regard to any limitations
on the exercise of the warrants. The fourth column assumes the sale
of all of the shares offered by the selling stockholders pursuant
to this prospectus.
Under the terms of the warrants issued in May 2020, a Selling
Stockholder may not exercise the warrants to the extent such
exercise would cause such Selling Stockholder, together with its
affiliates and attribution parties, to beneficially own a number of
shares of common stock which would exceed 4.99% of our then
outstanding common stock following such exercise, excluding for
purposes of such determination shares of common stock issuable upon
exercise of the warrants which have not been exercised. The number
of shares in the second column does not reflect this limitation.
The selling stockholders may sell all, some or none of their shares
in this offering. See “Plan of Distribution.
Name of Selling
Stockholder
|
|
Number of Shares
of Common Stock Owned Prior to Offering
|
|
|
Maximum Number
of Shares of Common Stock to be Sold Pursuant to this
Prospectus
|
|
|
Number of Shares
of Common Stock Owned After Offering
|
|
|
Percentage of
Common Stock Owned After the Offering
|
|
Empery Asset Master, Ltd. (1)
|
|
|
105,387
|
(2)
|
|
|
23,320
|
(3)
|
|
|
82,067
|
(4)
|
|
|
*
|
%
|
Empery Tax Efficient, LP (5)
|
|
|
21,577
|
(6)
|
|
|
6,699
|
(7)
|
|
|
14,878
|
(8)
|
|
|
*
|
|
Empery Tax Efficient III, LP (9)
|
|
|
42,603
|
(10)
|
|
|
6,215
|
(11)
|
|
|
36,388
|
(12)
|
|
|
*
|
|
CVI Investments, Inc. (13)
|
|
|
16,667
|
(14)
|
|
|
16,667
|
(14)
|
|
|
-
|
|
|
|
-
|
|
Anson Investments Master Fund LP (15)
|
|
|
33,334
|
(16)
|
|
|
33,334
|
(17)
|
|
|
-
|
(18)
|
|
|
-
|
|
Richard Molinsky (19)
|
|
|
5,000
|
(20)
|
|
|
5,000
|
(20)
|
|
|
-
|
|
|
|
-
|
|
Scott A. Sampson Trust #2 (21)
|
|
|
43,479
|
(22)
|
|
|
43,479
|
(22)
|
|
|
-
|
|
|
|
-
|
|
Brio Capital Master Fund, Ltd. (23)
|
|
|
205,143
|
(24)
|
|
|
16,667
|
(25)
|
|
|
188,476
|
(26)
|
|
|
3.0
|
%
|
L1 Capital Global Opportunities Master Fund
(27)
|
|
|
159,001
|
(28)
|
|
|
33,334
|
(29)
|
|
|
125,667
|
(30)
|
|
|
2.0
|
%
|
Intracoastal Capital, LLC (31)
|
|
|
63,412
|
(32)
|
|
|
10,870
|
(33)
|
|
|
52,543
|
(34)
|
|
|
-
|
|
Iroquois Capital Investment Group LLC
(35)
|
|
|
42,029
|
(36)
|
|
|
42,029
|
(36)
|
|
|
-
|
|
|
|
-
|
|
Proactive Capital Partners, L.P. (37)
|
|
|
15,864
|
(38)
|
|
|
15,864
|
(38)
|
|
|
-
|
|
|
|
-
|
|
Gregory Castaldo (39)
|
|
|
16,667
|
(40)
|
|
|
16,667
|
(40)
|
|
|
-
|
|
|
|
-
|
|
Newtown Road 130 Holdings LLC (41)
|
|
|
10,000
|
(42)
|
|
|
10,000
|
(42)
|
|
|
-
|
|
|
|
-
|
|
Michael A. Silverman (43)
|
|
|
3,334
|
(44)
|
|
|
3,334
|
(44)
|
|
|
-
|
|
|
|
-
|
|
The Special Equities Opportunity Fund
LLC+ (45)
|
|
|
16,667
|
(46)
|
|
|
16,667
|
(46)
|
|
|
-
|
|
|
|
-
|
|
C.A.B. Financial Services Ltd. (47)
|
|
|
560,456
|
(48)
|
|
|
13,334
|
(49)
|
|
|
547,122
|
(50)
|
|
|
8.68
|
%
|
Jack Ross (51)
|
|
|
2,499
|
(52)
|
|
|
1,667
|
(52)
|
|
|
832
|
(52)
|
|
|
-
|
|
PI Financial Corp. ITF Kristin Hamilton
(53)
|
|
|
43,833
|
(54)
|
|
|
8,333
|
(55)
|
|
|
35,500
|
(56)
|
|
|
*
|
|
Keith Spinelli (57)
|
|
|
24,001
|
(58)
|
|
|
24,001
|
(58)
|
|
|
-
|
|
|
|
-
|
|
Susan Baxter (59)
|
|
|
54,549
|
(60)
|
|
|
10,146
|
(61)
|
|
|
44,403
|
(62)
|
|
|
*
|
|
Scotia Capital ITF 1068606 Ontario Inc.
(63)
|
|
|
834
|
(64)
|
|
|
834
|
(64)
|
|
|
|
|
|
|
-
|
|
(65)
|
|
|
-
|
(66)
|
|
|
-
|
(66)
|
|
|
-
|
|
|
|
-
|
|
(67)
|
|
|
-
|
(68)
|
|
|
-
|
(69)
|
|
|
-
|
(70)
|
|
|
-
|
|
(71)
|
|
|
-
|
(72)
|
|
|
-
|
(73)
|
|
|
-
|
(74)
|
|
|
-
|
|
PI Financial Corp. ITF Dig Media Inc (75)
|
|
|
2,027
|
(76)
|
|
|
2,027
|
(76)
|
|
|
-
|
|
|
|
-
|
|
Elizabeth Cyna (77)
|
|
|
4,267
|
(78)
|
|
|
4,267
|
(78)
|
|
|
|
|
|
|
|
|
(79)
|
|
|
-
|
(80)
|
|
|
-
|
(81)
|
|
|
-
|
(82)
|
|
|
*
|
|
(83)
|
|
|
-
|
(84)
|
|
|
-
|
(84)
|
|
|
-
|
|
|
|
-
|
|
GS Venture Partners LLC (85)
|
|
|
40,167
|
(86)
|
|
|
16,000
|
(87)
|
|
|
24,167
|
(88)
|
|
|
*
|
|
Hans Birker (89)
|
|
|
2,000
|
(90)
|
|
|
2,000
|
(90)
|
|
|
-
|
|
|
|
-
|
|
(91)
|
|
|
-
|
(92)
|
|
|
-
|
(92)
|
|
|
-
|
|
|
|
-
|
|
Jeff D Friesen 2015 Trust (93)
|
|
|
37,038
|
(94)
|
|
|
37,038
|
(94)
|
|
|
-
|
|
|
|
-
|
|
(95)
|
|
|
-
|
(96)
|
|
|
-
|
(96)
|
|
|
-
|
|
|
|
-
|
|
Kingsbrook Opportunities Master Fund LP
(97)
|
|
|
17,400
|
(98)
|
|
|
7,400
|
(99)
|
|
|
10,000
|
(100)
|
|
|
-
|
|
Lawrence Cyna (101)
|
|
|
5,200
|
(102)
|
|
|
5,200
|
(102)
|
|
|
-
|
|
|
|
-
|
|
Fidelity Clearing Canada ITF Lukas Frankowski
(103)
|
|
|
1,334
|
(104)
|
|
|
1,334
|
(104)
|
|
|
-
|
|
|
|
-
|
|
(105)
|
|
|
-
|
(106)
|
|
|
-
|
(106)
|
|
|
-
|
|
|
|
-
|
|
Scotia Capital in Trust for Peter Volpe
(107)
|
|
|
3,334
|
(108)
|
|
|
3,334
|
(108)
|
|
|
-
|
|
|
|
-
|
|
(109)
|
|
|
-
|
(110)
|
|
|
-
|
(111)
|
|
|
-
|
(112)
|
|
|
*
|
|
(113)
|
|
|
-
|
(114)
|
|
|
-
|
(114)
|
|
|
-
|
|
|
|
-
|
|
Thomas K. Brozowski (115)
|
|
|
29,227
|
(116)
|
|
|
5,186
|
(117)
|
|
|
24,041
|
(118)
|
|
|
*
|
|
(119)
|
|
|
-
|
(120)
|
|
|
-
|
(120)
|
|
|
-
|
|
|
|
-
|
|
(121)
|
|
|
-
|
(122)
|
|
|
-
|
(122)
|
|
|
-
|
|
|
|
-
|
|
(123)
|
|
|
-
|
(124)
|
|
|
-
|
(124)
|
|
|
-
|
|
|
|
-
|
|
Vanessa Carle (125)
|
|
|
27,634
|
(126)
|
|
|
134
|
(127)
|
|
|
27,500
|
(128)
|
|
|
*
|
|
Zenon 401k Trust (129)
|
|
|
8,912
|
(130)
|
|
|
3,704
|
(130)
|
|
|
5,208
|
|
|
|
*
|
|
+
|
Referenced selling stockholder is affiliated with The Special
Equities Group, LLC a division of Bradley Woods & Co. Ltd., 150
E.58th St., 28th Floor, New York, NY 10155, a registered broker
dealer, and the placement agent for the May 2020 private placement.
The address of such selling stockholder is c/o The Special Equities
Group, LLC a division of Bradley Woods & Co. Ltd., 150 E.58th
St., 28th Floor, New York, NY 10155.
|
(1)
|
Empery Asset Management LP, the authorized agent of Empery Asset
Master Ltd. (“EAM”), has discretionary authority to vote and
dispose of the securities held by EAM and may be deemed to be the
beneficial owner of these securities. Martin Hoe and Ryan Lane, in
their capacity as investment managers of Empery Asset Management
LP, may also be deemed to have investment discretion and voting
power over the securities held by EAM. EAM, Mr. Hoe and Mr. Lane
each disclaim any beneficial ownership of these securities. The
business address for each of EAM, Empery Asset Management LP and
Messrs. Hoe and Lane is c/o Empery Asset Management, LP, 1
Rockefeller Plaza, Suite 1205, New York, NY 10020.
|
(2)
|
Represents 105,387 shares of common stock issuable upon exercise of
warrants.
|
|
|
(3)
|
Represents 23,320 shares of common stock issuable upon exercise of
warrants.
|
|
|
(4)
|
Represents 82,067 shares of common stock issuable upon exercise of
warrants
|
(5)
|
Empery Asset Management LP, the authorized agent of Empery Tax
Efficient, LP (“ETE”), has discretionary authority to vote and
dispose of the securities held by ETE and may be deemed to be the
beneficial owner of these securities. Martin Hoe and Ryan Lane, in
their capacity as investment managers of Empery Asset Management
LP, may also be deemed to have investment discretion and voting
power over the securities held by ETE. ETE, Mr. Hoe and Mr. Lane
each disclaim any beneficial ownership of these securities. The
business address for each of ETE, Empery Asset Management LP and
Messrs. Hoe and Lane is c/o Empery Asset Management, LP, 1
Rockefeller Plaza, Suite 1205, New York, NY 10020.
|
(6)
|
Represents 21,577 shares of common stock issuable upon exercise of
warrants.
|
|
|
(7)
|
Represents 6,699 shares of common stock issuable upon exercise of
warrants.
|
|
|
(8)
|
Represents 14,878 shares of common stock issuable upon exercise of
warrants.
|
(9)
|
Empery Asset Management LP, the authorized agent of Empery Tax
Efficient III, LP (“ETE III”), has discretionary authority to vote
and dispose of the securities held by ETE III and may be deemed to
be the beneficial owner of these shares. Martin Hoe and Ryan Lane,
in their capacity as investment managers of Empery Asset Management
LP, may also be deemed to have investment discretion and voting
power over the securities held by ETE III. ETE III, Mr. Hoe and Mr.
Lane each disclaim any beneficial ownership of these securities.
The business address for each of ETE III, Empery Asset Management
LP and Messrs. Hoe and Lane is c/o Empery Asset Management, LP, 1
Rockefeller Plaza, Suite 1205, New York, NY 10020.
|
(10)
|
Represents 42,603 shares of common stock issuable upon exercise of
warrants.
|
|
|
(11)
|
Represents 6,215 shares of common stock issuable upon exercise of
warrants.
|
|
|
(12)
|
Represents 36,388 shares of common stock issuable upon exercise of
warrants.
|
(13)
|
Heights Capital Management, Inc., the authorized agent of CVI
Investments, Inc. (“CVI”), has discretionary authority to vote and
dispose of the shares held by CVI and may be deemed to be the
beneficial owner of these shares. Martin Kobinger, in his capacity
as Investment Manager of Heights Capital Management, Inc., may also
be deemed to have investment discretion and voting power over the
shares held by CVI. Mr. Kobinger disclaims any such beneficial
ownership of the shares. CVI is affiliated with one or more FINRA
members, none of whom are currently expected to participate in this
offering.
|
(14)
|
Represents 16,667 shares of common stock issuable upon exercise of
warrants.
|
(15)
|
Anson Advisors Inc., or AA, and Anson Funds Management LP, or AFM,
the co-investment advisers of Anson Investments Master Fund LP, or
Anson, hold voting and dispositive power over the securities held
by Anson. Bruce Winson is the managing member of Anson Management
GP LLC, or AM, which is the general partner of AFM. Moez Kassam and
Amin Nathoo are directors of AA. Mr. Winson, Mr. Kassam and Mr.
Nathoo each disclaim beneficial ownership of these securities
except to the extent of their pecuniary interest therein. The
principal business address of Anson is Walkers Corporate Limited,
Cayman Corporate Centre, 27 Hospital Road, George Town, Grand
Cayman KY1-9008, Cayman Islands.
|
(16)
|
Represents 33,334 shares of common stock issuable upon exercise of
warrants.
|
|
|
(17)
|
Represents 33,334 shares of common stock issuable upon exercise of
warrants.
|
|
|
(18)
|
Reserved.
|
(19)
|
The address for Richard Molinsky is 51 Lord’s Highway East, Weston,
CT 06883.
|
(20)
|
Represents 5,000 shares of common stock issuable upon exercise of
warrants.
|
(21)
|
The address of Scott A. Sampson Trust #2 is 6938A N. Santa Monica
Blvd. Fox Point, WI 53217. Ann Mandelman has voting and dispositive
power over the securities held by Scott A. Sampson Trust #2.
|
(22)
|
Represents (i) 21,739 shares of common stock and (ii) 21,740 shares
of common stock issuable upon exercise of warrants
|
(23)
|
The address of Brio Capital Master Fund Ltd is 100 Merrick Road,
Suite 401W, Rockville Centre, NY 11570-4800. Shaye Hirsch, Director
of Brio Capital Master Fund Ltd, may be deemed to have voting and
investment power over these securities.
|
(24)
|
Represents 205,143 shares of common stock issuable upon exercise of
warrants.
|
|
|
(25)
|
Represents 16,667 shares of common stock issuable upon exercise of
warrants.
|
|
|
(26)
|
Represents 188,476 shares of common stock issuable upon exercise of
warrants.
|
(27)
|
The address of L1 Capital Global Opportunities Master Fund, or L1,
is 161A Shedden Road, 1 Artillery Court, PO Box 10085, Grand Cayman
KY1-1001. Cayman Islands. David Feldman has voting and dispositive
power over the securities held by L1.
|
(28)
|
Represents 159,001 shares of common stock issuable upon exercise of
warrants.
|
|
|
(29)
|
Represents 33,334 shares of common stock issuable upon exercise of
warrants.
|
|
|
(30)
|
Represents 125,667 shares of common stock issuable upon exercise of
warrants.
|
(31)
|
The address for Intracoastal Capital LLC is 245 Palm Trail, Delray
Beach, FL 33483. Mitchell P. Kopin (“Mr. Kopin”) and Daniel B.
Asher (“Mr. Asher”), each of whom are managers of Intracoastal
Capital LLC (“Intracoastal”), have shared voting control and
investment discretion over the securities reported herein that are
held by Intracoastal. As a result, each of Mr. Kopin and Mr. Asher
may be deemed to have beneficial ownership (as determined under
Section 13(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) of the securities reported herein that are
held by Intracoastal.
|
(32)
|
Represents 63,412
shares of common stock issuable upon exercise of warrants.
|
|
|
(33)
|
Represents 10,870 shares of common stock
issuable upon exercise of warrants.
|
|
|
(34)
|
Represents 52,543 shares of common stock
issuable upon exercise of warrants.
|
(35)
|
The address of Iroquois Capital Investment Group LLC is c/o
Iroquois Capital Management LLC, 125 Park Avenue, 25th Fl., New
York NY 10017. Iroquois Capital Management LLC has voting and
dispositive power over the securities reported herein.
|
(36)
|
Represents 42,029 shares of common stock issuable upon exercise of
warrants.
|
(37)
|
The address of Proactive Capital Partners, LP is 150 East 58th
Street, 20th Floor, New York, NY 10155. Jeffrey Ramson, Manager of
Proactive Capital Partners, LP, may be deemed to have voting and
investment power over these securities.
|
(38)
|
Represents (i) 7,932 shares of common stock and (ii) 7,932 shares
of common stock issuable upon exercise of warrants.
|
(39)
|
The address of Gregory Castaldo is 3776 Steven James Drive, Garnet
Valley, PA 19060.
|
(40)
|
Represents 16,667 shares of common stock issuable upon exercise of
Warrants.
|
(41)
|
The address of Newtown Road 130 Holdings LLC is c/o Bender Lane
Advisory, 4 Tower Place, Suite 1001, Albany, NY. John P. Gutfreund,
Manager of Newtown Road 130 Holdings LLC, may be deemed to have
voting and investment power over these securities.
|
(42)
|
Represents 10,000 shares of common stock issuable upon exercise of
warrants.
|
(43)
|
The address of Michael A. Silverman is c/o Katalyst Securities LLC,
630 Third Avenue, 5th Floor, New York, NY 10017.
|
(44)
|
Represents 3,334 shares of common stock issuable upon exercise of
warrants.
|
(45)
|
The address of The Special Equities Opportunity Fund LLC is 135
Sycamore Drive, Roslyn, NY 11576. Jonathan Schechter and Joseph
Reda have shared voting and dispositive power over the securities
held by The Special Equities Opportunity Fund LLC. The Special
Equities Opportunity Fund LLC is an affiliate of the placement
agent for our May 2020 offering. The securities registered for
resale herein were purchased in the May 2020 offering and were not
issued as compensation for services.
|
(46)
|
Represents 16,667 shares of common stock issuable upon exercise of
warrants.
|
(47)
|
The address of C.A.B. Financial Services Ltd. is #100 – 740 McCurdy
Road, Kelowna, British Columbia V1X 2P7. Christopher Bunka, our
Chief Executive Officer, has voting and investment power over these
securities.
|
(48)
|
Represents (i) 6,667 shares of common stock issuable upon exercise
of warrants held in the name of C.A.B. Financial Services, (ii)
215,912 shares held in the name of C.A.B. Financial Services, (iii)
273,543 shares held directly by Christopher Bunka and (iv) options
to purchase an aggregate of 23,334 shares held in the name of
Christopher Bunka.
|
(49)
|
Represents (i) 6,667 shares of common stock and (ii) 6,667 shares
of common stock issuable upon exercise of warrants.
|
|
|
(50)
|
Represents (i) 215,912 shares held in the name of C.A.B. Financial
Services, (ii) 273,543 shares held directly by Christopher Bunka
and (iii) options to purchase an aggregate of 64,334 shares held in
the name of Christopher Bunka.
|
(51)
|
The address of Jack Ross is #410-14100 Riverport Way, Richmond, BC
V6W 1M3.
|
|
|
(52)
|
Represents (i) 1,665 shares of common stock and (ii) 834 shares of
common stock issuable upon exercise of warrants of which 1,667 are
being offered for sale with the selling stockholder holding 832
shares after the offering
|
|
|
(53)
|
The address of PI Financial Corp ITF Kristin Hamilton is 1708
Dolphin Avenue, #406 Suite 907. Kristin Hamilton has voting and
dispositive power over the securities held by PI Financial Corp ITF
Kristin Hamilton. Kristin Hamilton is the Company’s Office
Manager.
|
|
|
(54)
|
Represents (i) 4,666 shares of common stock, (ii) 4,167 shares of
common stock issuable upon exercise of warrants and (iii) options
to purchase an aggregate of 35,000 shares.
|
(55)
|
Represents (i) 4,166 shares of common stock and (ii) 4,167 shares
of common stock issuable upon exercise of warrants.
|
|
|
(56)
|
Represents (i) 500 shares of common stock and (ii) options to
purchase an aggregate of 20,000 shares of common stock.
|
|
|
(57)
|
The address of Keith Spinelli is 909 Berkshire Drive, Westbury, NY
11590.
|
|
|
(58)
|
Represents (i) 12,000 shares of common stock and (ii) 12,001 shares
of common stock issuable upon exercise of warrants.
|
|
|
(59)
|
The address of Susan Baxter is 37H King’s Gate, Aberdeen, AB15 4EL,
U.K.
|
|
|
(60)
|
Represents (i) 49,476 shares of common stock and (ii) 5,073 shares
of common stock issuable upon exercise of warrants.
|
|
|
(61)
|
Represents (i) 5,073 shares of common stock and (ii) 5,073 shares
of common stock issuable upon exercise of warrants
|
|
|
(62)
|
Represents 44,403 shares of common stock.
|
|
|
(63)
|
The address of Scotia Capital ITF 1068606 Ontario Inc. is 40 King
St. W, 49th Floor, Toronto, ON, M5H 1H1. Allan Newman and Greg
Newman have shared voting and dispositive power over the securities
held by Scotia Capital ITF 1068606 Ontario Inc.
|
(64)
|
Represents 834 shares of common stock issuable upon exercise of
warrants.
|
|
|
(65)
|
Reserved.
|
|
|
(66)
|
Reserved.
|
|
|
(67)
|
Reserved.
|
|
|
(68)
|
Reserved.
|
|
|
(69)
|
Reserved.
|
(70)
|
Reserved.
|
|
|
(71)
|
Reserved.
|
|
|
(72)
|
Reserved.
|
|
|
(73)
|
Reserved.
|
|
|
(74)
|
Reserved.
|
|
|
(75)
|
The address of PI Financial Corp. ITF Dig Media Inc is 1200-736
Granville St, Vancouver, BC V6Z 1G3. Mike Rodger has voting and
dispositive power over the securities held by Dig Media Inc.
|
|
|
(76)
|
Represents 2,027 shares of common stock issuable upon exercise of
warrants.
|
|
|
(77)
|
The address of Elizabeth Cyna is 26 Chiltern Hill Rd, Toronto, ON
M6C 3B3.
|
|
|
(78)
|
Represents (i) 2,133 shares of common stock and (ii) 2,134 shares
of common stock issuable upon exercise of warrants.
|
|
|
(79)
|
Reserved.
|
|
|
(80)
|
Reserved.
|
|
|
(81)
|
Reserved.
|
|
|
(82)
|
Reserved.
|
|
|
(83)
|
Reserved.
|
(84)
|
Reserved.
|
|
|
(85)
|
The address of GS Venture Partners LLC is 1095 Park Avenue, Suite
4D New York, NY 10128. Gregg Smith has voting and dispositive power
over the securities held by GS Venture Partners LLC.
|
|
|
(86)
|
Represents (i) 8,000 shares of common stock and (ii) 8,000 shares
of common stock issuable upon exercise of warrants as well as (iii)
7,500 shares of common stock issuable upon exercise of warrants and
registered in the principal’s name and; (iv) 16,667 shares of
common stock issuable upon exercise of options and registered in
the principal’s name.
|
(87)
|
Represents (i) 8,000 shares of commons stock and (ii) 8,000 shares
of common stock issuable upon exercise of warrants.
|
|
|
(88)
|
Represents 7,500 shares of common stock issuable upon exercise of
warrants and 16,667 shares of common stock issuable upon exercise
of options by the principal.
|
|
|
(89)
|
The address of Hans Birker is 409 Cadder Avenue, Kelowna, BC V1Y
5N2.
|
|
|
(90)
|
Represents (i) 1,000 shares of common stock and (ii) 1,000 shares
of common stock issuable upon exercise of warrants.
|
|
|
(91)
|
Reserved.
|
|
|
(92)
|
Reserved.
|
|
|
(93)
|
The address of Jeff D Friesen 2015 Trust is 1060 Campanile, Newport
Beach, CA 92660. Jeff Daryl Friesen has voting and dispositive
power over the securities held by Jeff D Friesen 2015 Trust.
|
|
|
(94)
|
Represents (i) 18,519 shares of common stock and (ii) 18,519 shares
of common stock issuable upon exercise of warrants.
|
|
|
(95)
|
Reserved.
|
|
|
(96)
|
Reserved.
|
|
|
(97)
|
The address of Kingsbrook Opportunities Master Fund LP is 689 Fifth
Avenue, 12th Floor, New York, NY 10022. Kingsbrook
Partners LP (“Kingsbrook Partners”) is the investment manager of
Kingsbrook Opportunities Master Fund LP (“Kingsbrook
Opportunities”) and consequently has voting control and investment
discretion over securities held by Kingsbrook Opportunities.
Kingsbrook Opportunities GP LLC (“Opportunities GP”) is the general
partner of Kingsbrook Opportunities and may be considered the
beneficial owner of any securities deemed to be beneficially owned
by Kingsbrook Opportunities. KB GP LLC (“GP LLC”) is the general
partner of Kings brook Partners and may be considered the
beneficial owner of any securities deemed to be beneficially owned
by Kingsbrook Partners. Ari J. Storch, Adam J. Chill and Scott M.
Wallace are the sole managing members of Opportunities GP and GP
LLC and as a result may be considered beneficial owners of any
securities deemed beneficially owned by Opportunities GP and GP
LLC. Each of Kingsbrook Partners, Opportunities GP, GP LLC and
Messrs. Storch, Chill and Wallace disclaim beneficial ownership of
these securities.
|
|
|
(98)
|
Represents 17,400 shares of common stock issuable upon exercise of
warrants.
|
|
|
(99)
|
Represents 7,400 shares of common stock issuable upon exercise of
warrants.
|
|
|
(100)
|
Represents 10,000 shares of common stock issuable upon exercise of
warrants.
|
|
|
(101)
|
The address of Lawrence Cyna is 26 Chiltern Hill Rd, Toronto, ON
M6C 3B3.
|
|
|
(102)
|
Represents (i) 2,600 shares of common stock and (ii) 2,600 shares
of common stock issuable upon exercise of warrants.
|
(103)
|
The address of Fidelity Clearing Canada ITF Lukas Frankowski is
3183 25th Sideroad, Milton, ON N0B 2K0. Lukas Frankowski
has voting and dispositive power over the securities held by
Fidelity Clearing Canada ITF Lukas Frankowski.
|
|
|
(104)
|
Represents 1,334 shares of common stock issuable upon exercise of
warrants.
|
(105)
|
Reserved.
|
|
|
(106)
|
Reserved.
|
|
|
(107)
|
The address of Scotia Capital in Trust for Peter Volpe is 40 King
St. West – Scotia Plaza – 49th Floor, Toronto, ON, M5H 3Y2. Peter
Volpe has voting and dispositive power over the securities held by
Scotia Capital in Trust for Peter Volpe.
|
|
|
(108)
|
Represents 3,334 shares of common stock issuable upon exercise of
warrants.
|
|
|
(109)
|
Reserved.
|
|
|
(110)
|
Reserved.
|
|
|
(111)
|
Reserved.
|
|
|
(112)
|
Reserved.
|
|
|
(113)
|
Reserved.
|
|
|
(114)
|
Reserved.
|
|
|
(115)
|
The address of Thomas K. Brozowski is 2556 McCrea Road, Thousand
Oaks, CA 91362.
|
|
|
(116)
|
Represents (i) 13,260 shares of common stock and (ii) 15,967 shares
of common stock issuable upon exercise of warrants.
|
|
|
(117)
|
Represents (i) 2,593 shares of common stock and (ii) 2,593 shares
of common stock issuable upon exercise of warrants.
|
|
|
(118)
|
Represents (i) 10,667 shares of common stock and (ii) 13,374 shares
of common stock issuable upon exercise of warrants.
|
(119)
|
Reserved.
|
|
|
(120)
|
Reserved.
|
|
|
(121)
|
Reserved.
|
|
|
(122)
|
Reserved.
|
|
|
(123)
|
Reserved.
|
|
|
(124)
|
Reserved.
|
|
|
(125)
|
The address of Vanessa Carle is 9551 Winview Road, Lake Country, BC
V4V 1M1. Vanessa Carle is the Head of Legal Department.
|
(126)
|
Represents (i) 67 shares of common stock (ii) 67 shares of common
stock issuable upon exercise of warrants and (iii) 27,500 shares of
common stock issuable upon exercise of options.
|
|
|
(127)
|
Represents (i) 67 shares of common stock and (ii) 67 shares of
common stock issuable upon exercise of warrants.
|
|
|
(128)
|
Represents 27,500 shares of common stock issuable upon exercise of
options.
|
|
|
(129)
|
The address of Zenon 401k Trust is 12 Robinhood Road, White Plains,
NY10605. Andrew Dowicz has voting and dispositive power over the
securities held by Zenon 401k Trust.
|
|
|
(130)
|
Represents 3,704 shares of common stock issuable upon exercise of
warrants.
|
PLAN OF
DISTRIBUTION
Each selling stockholder and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of
their securities covered hereby on the principal trading market or
any other U.S. stock exchange, market or trading facility on which
the securities are traded or in private transactions. These sales
may be at fixed or negotiated prices. A selling stockholder may use
any one or more of the following methods when selling
securities:
|
·
|
ordinary brokerage transactions and transactions in which the
broker‑dealer solicits purchasers;
|
|
|
|
|
·
|
block trades in which the broker‑dealer will attempt to sell the
securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
|
|
|
|
|
·
|
purchases by a broker‑dealer a principal and resale by the
broker‑dealer for its account;
|
|
|
|
|
·
|
an exchange distribution in accordance with the rules of the
applicable exchange;
|
|
|
|
|
·
|
privately negotiated transactions;
|
|
|
|
|
·
|
settlement of short sales;
|
|
|
|
|
·
|
in transactions through broker‑dealers that agree with the selling
stockholders to sell a specified number of such securities at a
stipulated price per security;
|
|
|
|
|
·
|
through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
|
|
|
|
|
·
|
a combination of any such methods of sale; or
|
|
|
|
|
·
|
any other method permitted pursuant to applicable law.
|
The selling stockholders may also sell securities under Rule 144 or
any other exemption from registration under the Securities Act of
1933, if available, rather than under this prospectus.
Broker‑dealers engaged by the selling stockholders may arrange for
other brokers‑dealers to participate in sales. Broker‑dealers may
receive commissions or discounts from the selling stockholders (or,
if any broker‑dealer acts as agent for the purchaser of securities,
from the purchaser) in amounts to be negotiated, but, except as set
forth in a supplement to this prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in
compliance with FINRA Rule 2440; and in the case of a principal
transaction a markup or markdown in compliance with FINRA
IM-2440.
In connection with the sale of the securities or interests therein,
the selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn
engage in short sales of the securities in the course of hedging
the positions they assume. The selling stockholders may also sell
securities short and deliver these securities to close out their
short positions, or loan or pledge the securities to broker-dealers
that in turn may sell these securities. The selling stockholders
may also enter into option or other transactions with
broker-dealers or other financial institutions or create one or
more derivative securities which require the delivery to such
broker-dealer or other financial institution of securities offered
by this prospectus, which securities such broker-dealer or other
financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction).
The selling stockholders and any broker-dealers or agents that are
involved in selling the securities may be deemed to be
“underwriters” within the meaning of the Securities Act in
connection with such sales. In such event, any commissions received
by such broker-dealers or agents and any profit on the resale of
the securities purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each Selling
Stockholder has informed the Company that it does not have any
written or oral agreement or understanding, directly or indirectly,
with any person to distribute the securities.
The Company is required to pay certain fees and expenses incurred
by the Company incident to the registration of the securities. The
Company has agreed to indemnify the selling stockholders against
certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
We agreed to keep this prospectus effective until the earlier of
(i) the date on which the securities may be resold by the selling
stockholders without registration and without regard to any volume
or manner-of-sale limitations by reason of Rule 144, without the
requirement for the Company to be in compliance with the current
public information under Rule 144 under the Securities Act or any
other rule of similar effect or (ii) all of the securities have
been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale
securities will be sold only through registered or licensed brokers
or dealers if required under applicable state securities laws. In
addition, in certain states, the resale securities covered hereby
may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the resale securities may not
simultaneously engage in market making activities with respect to
the common stock for the applicable restricted period, as defined
in Regulation M, prior to the commencement of the distribution. In
addition, the selling stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of
purchases and sales of the common stock by the selling stockholders
or any other person. We will make copies of this prospectus
available to the selling stockholders and have informed them of the
need to deliver a copy of this prospectus to each purchaser at or
prior to the time of the sale (including by compliance with Rule
172 under the Securities Act).
LEGAL
MATTERS
The validity of the common stock being offered by this prospectus
has been passed upon for us by Sichenzia Ross Ference LLP, New
York, New York.
EXPERTS
The audited consolidated financial statements of the Company and
its subsidiaries, as of and for the years ended August 31, 2021 and
2020 included in this prospectus have been so included in reliance
upon the report of Davidson & Company LLP, independent
registered public accountants, upon the authority of said firm as
experts in accounting and auditing.
WHERE YOU
CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the
SEC. The SEC maintains an internet site that contains reports,
proxy and information statements and other information regarding
Lexaria Bioscience Corp. and other issuers that file electronically
with the SEC. The address of the SEC internet site is www.sec.gov.
In addition, we make available on or through our Internet site
copies of these reports as soon as reasonably practicable after we
electronically file or furnish them to the SEC. Our Internet site
can be found at www.lexariabioscience.com
You should rely only on the information contained in this
prospectus. We have not authorized anyone to provide you with
different information. Therefore, if anyone gives you different or
additional information, you should not rely on it. The information
contained in this prospectus is correct as of its date. It may not
continue to be correct after this date.

Report of Independent Registered Public Accounting Firm
To the Shareholders and Directors of
Lexaria Bioscience Corp.
Opinion on the Consolidated Financial
Statements
We have audited the accompanying consolidated balance sheets of
Lexaria Bioscience Corp. (the “Company”) as of
August 31, 2021 and 2020, and the related consolidated
statements of operations and comprehensive loss, cash flows, and
stockholders’ equity for each of the two years in the period ended
August 31, 2021, and the related notes (collectively referred to as
the “financial statements”). In our opinion, the financial
statements present fairly, in all material respects, the financial
position of the Company as of August 31, 2021 and 2020, and the
results of its operations and its cash flows for each of the three
years in the period ended August 31, 2021, in conformity with
accounting principles generally accepted in the United States of
America.
Basis for Opinion
These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) ("PCAOB") and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising
from the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee
and that: (1) relate to accounts or disclosures that are material
to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the
financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or
disclosures to which they relate.
We have not identified any critical audit matters for the years
ended August 31, 2021 and 2020.
We have served as the Company’s auditor since 2016.
|
|
/s/
DAVIDSON & COMPANY LLP |
|
|
|
|
|
Vancouver, Canada |
|
Chartered Professional Accountants |
|
|
|
|
|
November 26, 2021 |
|
|
|


LEXARIA BIOSCIENCE CORP.
|
CONSOLIDATED BALANCE SHEET
|
(Expressed in U.S. Dollars)
|
|
|
|
August 31
|
|
|
August 31
|
|
|
|
2021
|
|
|
2020
|
|
ASSETS |
|
|
|
|
|
|
Current |
|
|
|
|
|
|
Cash |
|
$ |
10,917,797 |
|
|
$ |
1,293,749 |
|
Marketable
securities |
|
|
833,841 |
|
|
|
19,321 |
|
Accounts
receivable |
|
|
342,401 |
|
|
|
313,925 |
|
Inventory |
|
|
29,648 |
|
|
|
116,871 |
|
Prepaid expenses
and deposit |
|
|
319,253 |
|
|
|
182,095 |
|
Total Current
Assets |
|
|
12,442,940 |
|
|
|
1,925,961 |
|
|
|
|
|
|
|
|
|
|
Non-current assets,
net |
|
|
|
|
|
|
|
|
Right-of-use
assets |
|
|
91,041 |
|
|
|
126,920 |
|
Intellectual
property |
|
|
364,623 |
|
|
|
292,000 |
|
Property and
equipment |
|
|
368,213 |
|
|
|
483,357 |
|
Total Non-current
Assets |
|
|
823,877 |
|
|
|
902,277 |
|
TOTAL ASSETS |
|
$ |
13,266,817 |
|
|
$ |
2,828,238 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities |
|
$ |
100,723 |
|
|
$ |
86,920 |
|
Deferred
revenue |
|
|
- |
|
|
|
44,255 |
|
Due to related
party |
|
|
5,223 |
|
|
|
58,704 |
|
Loan payable |
|
|
7,926 |
|
|
|
- |
|
Lease
liabilities |
|
|
39,404 |
|
|
|
36,038 |
|
Total Current
Liabilities |
|
|
153,276 |
|
|
|
225,917 |
|
|
|
|
|
|
|
|
|
|
Long Term |
|
|
|
|
|
|
|
|
Lease liabilities
- long term |
|
|
49,989 |
|
|
|
89,393 |
|
Loan payable |
|
|
- |
|
|
|
30,670 |
|
Total Long Term
Liabilities |
|
|
49,989 |
|
|
|
120,063 |
|
TOTAL
LIABILITIES |
|
|
203,265 |
|
|
|
345,980 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY |
|
|
|
|
|
|
|
|
Share capital |
|
|
|
|
|
|
|
|
Authorized: |
|
|
|
|
|
|
|
|
220,000,000
common voting shares with a par value of $0.001 per share |
|
|
|
|
|
|
|
|
Issued and
outstanding: 5,726,699 common shares at August 31, 2021 |
|
|
|
|
|
|
|
|
and 3,001,476
common shares at August 31, 2020 |
|
|
5,727 |
|
|
|
3,001 |
|
Additional paid-in
capital |
|
|
45,089,114 |
|
|
|
30,324,398 |
|
Deficit |
|
|
(31,829,204 |
) |
|
|
(27,802,198 |
) |
Equity attributable to
shareholders of the Company |
|
|
13,265,637 |
|
|
|
2,525,201 |
|
Non-Controlling
Interest |
|
|
(202,085 |
) |
|
|
(42,943 |
) |
Total Stockholders'
Equity |
|
|
13,063,552 |
|
|
|
2,482,258 |
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
$ |
13,266,817 |
|
|
$ |
2,828,238 |
|
The accompanying notes are an integral party of these consolidated
financial statements.

LEXARIA BIOSCIENCE CORP.
|
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
|
(Expressed in U.S. Dollars except number of
shares)
|
|
|
|
|
|
|
August 31
|
|
|
August 31
|
|
|
|
2021
|
|
|
2020
|
|
Revenue |
|
$ |
722,738 |
|
|
$ |
314,793 |
|
Cost of goods
sold |
|
|
175,346 |
|
|
|
99,378 |
|
Gross profit |
|
|
547,392 |
|
|
|
215,415 |
|
|
|
|
|
|
|
|
|
|
Operating
Expenses |
|
|
|
|
|
|
|
|
Research and
development |
|
|
1,262,895 |
|
|
|
387,074 |
|
General and
administrative |
|
|
4,971,349 |
|
|
|
3,977,138 |
|
Total operating
expenses |
|
|
6,234,244 |
|
|
|
4,364,212 |
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
|
|
(5,686,852 |
) |
|
|
(4,148,797 |
) |
|
|
|
|
|
|
|
|
|
Gain on disposal
of assets |
|
|
1,522,704 |
|
|
|
- |
|
Discontinued
operations |
|
|
(22,000 |
) |
|
|
64,184 |
|
|
|
|
|
|
|
|
|
|
Net loss and comprehensive
loss for the year |
|
$ |
(4,186,148 |
) |
|
$ |
(4,084,613 |
) |
Net loss and comprehensive
loss attributable to: |
|
|
|
|
|
|
|
|
Common
shareholders |
|
$ |
(4,027,006 |
) |
|
$ |
(3,933,996 |
) |
Non-controlling interest |
|
$ |
(159,142 |
) |
|
$ |
(150,617 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted loss per
share |
|
$ |
(0.95 |
) |
|
$ |
(1.47 |
) |
Basic and diluted earnings (loss) per
share from discontinued
operations
|
|
$
|
(0.01
|
)
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding |
|
|
|
|
|
|
|
|
- Basic and
diluted |
|
|
4,391,446 |
|
|
|
2,773,376 |
|
The accompanying notes are an integral part of these consolidated
financial statements.

LEXARIA BIOSCIENCE CORP.
|
CONSOLIDATED STATEMENT OF CASH FLOWS
|
(Expressed in U.S. Dollars)
|
|
|
|
|
|
|
August 31
|
|
|
August 31
|
|
|
|
2021
|
|
|
2020
|
|
Cash flows used in
operating activities |
|
|
|
|
|
|
Net loss and comprehensive loss |
|
$ |
(4,186,148 |
) |
|
$ |
(4,084,613 |
) |
Adjustments to
reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Stock based
compensation |
|
|
410,007 |
|
|
|
1,139,270 |
|
Depreciation and
amortization |
|
|
111,718 |
|
|
|
112,750 |
|
Inventory
write-off |
|
|
2,482 |
|
|
|
8,240 |
|
Bad debt |
|
|
50,500 |
|
|
|
50,000 |
|
Amortization on
right of use asset |
|
|
35,879 |
|
|
|
33,342 |
|
Realized loss on
disposal of marketable securities |
|
|
- |
|
|
|
18,198 |
|
Unrealized loss
on marketable securities |
|
|
166,255 |
|
|
|
19,893 |
|
Gain on asset
disposal |
|
|
(1,522,704 |
) |
|
|
- |
|
Common shares
issued for services |
|
|
85,000 |
|
|
|
100,000 |
|
Warrants issued
for services |
|
|
785,895 |
|
|
|
168,833 |
|
Lease accretion
|
|
|
7,912
|
|
|
|
9,665
|
|
Change in working
capital |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
189,580 |
|
|
|
(90,780 |
) |
Inventory |
|
|
95,037 |
|
|
|
4,213 |
|
Prepaid expenses
and deposits |
|
|
(137,158 |
) |
|
|
(113,168 |
) |
Accounts payable
and accrued liabilities |
|
|
13,803 |
|
|
|
(49,491 |
) |
Due to related
parties |
|
|
(53,481 |
) |
|
|
10,608 |
|
Deferred
revenue |
|
|
(44,255 |
) |
|
|
44,255 |
|
Net cash used in operating
activities |
|
$ |
(3,989,678 |
) |
|
$ |
(2,618,785 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from (used in)
investing activities |
|
|
|
|
|
|
|
|
Sale of
marketable securities |
|
|
- |
|
|
|
6,802 |
|
Intellectual
property |
|
|
(79,493 |
) |
|
|
(33,645 |
) |
Asset
disposition |
|
|
273,373 |
|
|
|
- |
|
Net cash from (used in)
investing activities |
|
$ |
193,880 |
|
|
$ |
(26,843 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities |
|
|
|
|
|
|
|
|
Long term
loan |
|
|
(22,744 |
) |
|
|
30,670 |
|
Lease payments
|
|
|
(43,950
|
)
|
|
|
(44,496
|
)
|
Proceeds from
issuance of equity |
|
|
9,471,497 |
|
|
|
2,668,056 |
|
Proceeds from
warrant exercises |
|
|
4,015,043 |
|
|
|
- |
|
Net cash from financing
activities |
|
$ |
13,419,846 |
|
|
$ |
2,654,230 |
|
|
|
|
|
|
|
|
|
|
Increase in
cash |
|
|
9,624,048 |
|
|
|
8,602 |
|
Cash, beginning of
year |
|
|
1,293,749 |
|
|
|
1,285,147 |
|
Cash, end of
year |
|
$ |
10,917,797 |
|
|
$ |
1,293,749 |
|
|
|
|
|
|
|
|
|
|
Supplemental information of
cash flows: |
|
|
|
|
|
|
|
|
Income taxes paid
in cash |
|
$ |
(16,297 |
) |
|
$ |
(12,978 |
) |
Marketable
securities received on amounts receivable |
|
$ |
893,493 |
|
|
$ |
- |
|
The accompanying notes are an integral part of these consolidated
financial statements.

LEXARIA BIOSCIENCE CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY
(Expressed in U.S. Dollars except number of
shares)
|
|
SHARES
|
|
|
AMOUNT
$
|
|
|
ADDITIONAL PAID-IN CAPITAL $
|
|
|
DEFICIT
$
|
|
|
NCI
$
|
|
|
TOTAL STOCKHOLDERS’
EQUITY
$
|
|
Balance August 31, 2019
|
|
|
2,626,237 |
|
|
|
2,626 |
|
|
|
26,248,614 |
|
|
|
(23,868,202 |
) |
|
|
107,674 |
|
|
|
2,490,712 |
|
Shares issued for services
|
|
|
11,574 |
|
|
|
12 |
|
|
|
99,988 |
|
|
|
- |
|
|
|
- |
|
|
|
100,000 |
|
Stock based compensation
|
|
|
- |
|
|
|
- |
|
|
|
1,139,270 |
|
|
|
- |
|
|
|
- |
|
|
|
1,139,270 |
|
Warrants issued for services
|
|
|
- |
|
|
|
- |
|
|
|
168,883 |
|
|
|
- |
|
|
|
- |
|
|
|
168,833 |
|
Exercise of stock options
|
|
|
7,333 |
|
|
|
8 |
|
|
|
30,022 |
|
|
|
- |
|
|
|
- |
|
|
|
30,030 |
|
Private Placements
|
|
|
356,332 |
|
|
|
355 |
|
|
|
2,637,671 |
|
|
|
- |
|
|
|
- |
|
|
|
2,638,026 |
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,933,996 |
) |
|
|
- |
|
|
|
(3,933,996 |
) |
Non-controlling interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(150,617 |
) |
|
|
(150,617 |
) |
Balance August 31, 2020
|
|
|
3,001,476 |
|
|
|
3,001 |
|
|
|
30,324,398 |
|
|
|
(27,802,198 |
) |
|
|
(42,943 |
) |
|
|
2,482,258 |
|
Shares issued for services
|
|
|
12,178 |
|
|
|
12 |
|
|
|
84,988 |
|
|
|
- |
|
|
|
- |
|
|
|
85,000 |
|
Stock based compensation
|
|
|
- |
|
|
|
- |
|
|
|
410,007 |
|
|
|
- |
|
|
|
- |
|
|
|
410,007 |
|
Warrants issued for services
|
|
|
- |
|
|
|
- |
|
|
|
785,895 |
|
|
|
- |
|
|
|
- |
|
|
|
785,895 |
|
Exercise of warrants
|
|
|
610,189 |
|
|
|
610 |
|
|
|
4,014,433 |
|
|
|
- |
|
|
|
- |
|
|
|
4,015,043 |
|
Private placement
|
|
|
2,102,856 |
|
|
|
2,104 |
|
|
|
9,469,393 |
|
|
|
- |
|
|
|
- |
|
|
|
9,471,497 |
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,027,006 |
) |
|
|
- |
|
|
|
(4,027,006 |
) |
Non-controlling interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|