Lexaria Bioscience Corp 10-Q for FY2021 Q3

Lexaria Bioscience Corp. (LEXX)

10-Q 2021-07-15 For: 2021-05-31

Added on April 09, 2026

About this 10-Q

Lexaria Bioscience Corp filed this 10-Q on July 15, 2021, covering the quarter ended May 31, 2021 (FY2021 Q3).

Headline figures

Quarter ended May 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $204.06K; up 460.2% from $36.42K a year earlier
Net loss: $2.57M; compared with a net loss of $1.39M a year earlier

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Nevada		20-2000871
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)

#100 - 740 McCurdy Road, Kelowna BC Canada		V1X 2P7
(Address of principal executive offices)		(Zip Code)

Title of Each Class		Name of Each Exchange On Which Registered
N/A		N/A

Title of Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.001	LEXX	NASDAQ
Warrants	LEXXW	NASDAQ

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

PART I-FINANCIAL INFORMATION		3

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Controls and Procedures	29

PART II-OTHER INFORMATION		30

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Exhibits	30

LEXARIA BIOSCIENCE CORP.
CONSOLIDATED BALANCE SHEET
(Expressed in U.S. Dollars)
	May 31			August 31
	2021			2020
ASSETS	(Unaudited)			(Audited)
Current
Cash	$	8,108,512		$	1,293,749
Marketable securities (Note 21)		400,744			19,321
Accounts receivable (Note 9)		954,097			208,925
Inventory (Note 10)		51,738			116,871
Prepaid expenses and deposit (Note 20)		170,439			182,095
Current assets from discontinued operations (Note 22)		-			105,250
Total Current Assets		9,685,560			1,926,211

Non-current assets, net
Lease right of use (Note 19)		100,256			126,920
Intellectual property (Note 11)		366,340			292,000
Property & equipment (Note 12)		395,397			483,357
Total Non-current Assets		861,993			902,277
TOTAL ASSETS	$	10,547,553		$	2,828,488

LIABILITIES
Current
Accounts payable and accrued liabilities (Note 13)	$	173,901		$	86,920
Deferred revenue		-			44,255
Due to a related party (Note 17)		1,324			58,704
Loan payable		7,507			-
Lease payable (Note 19)		38,485			36,038
Current liabilities from discontinued operations (Note 22)		-			250
Total Current Liabilities		221,217			226,167

Long Term
Lease payable (Note 19)		60,164			89,393
Loan payable		-			30,670
Total Long Term Liabilities		60,164			120,063
TOTAL LIABILITIES		281,381			346,230

STOCKHOLDERS' EQUITY
Share Capital (Note 14) Authorized: 220,000,000 common voting shares with a par value of $0.001 per share Issued and outstanding: 5,104,332 common shares at May 31, 2021 and 3,001,476 common shares at August 31, 2020		5,104			3,001
Additional paid-in capital (Notes 14, 15)		40,989,692			30,324,398
Deficit		(30,651,112	)		(27,802,198	)
Equity attributable to shareholders of the Company		10,343,684			2,525,201
Non-controlling Interest		(77,512	)		(42,943	)
Total Stockholders' Equity		10,266,172			2,482,258
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	10,547,553		$	2,828,488

LEXARIA BIOSCIENCE CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in U.S. Dollars)
	NINE MONTHS ENDED
	May 31			May 31
	2021			2020
	(Unaudited)			(Unaudited)
Cash flows used in operating activities
Net loss and comprehensive loss	$	(2,861,483	)	$	(3,286,033	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation		410,007			1,139,270
Depreciation and amortization		83,788			83,875
Inventory write-off		2,482			8,240
Bad debt expense		37,000			25,000
Noncash right of use lease expense		26,664			-
Gain on asset disposal		(1,522,704	)		-
Realized loss on disposal of investment		-			18,198
Unrealized loss on marketable securities		86,810			20,937
Warrants issued for services		785,895			168,833
Change in working capital
Accounts receivable		(1,106	)		(30,815	)
Inventory		71,976			(13,396	)
Prepaid expenses and deposits		11,656			(20,013	)
Accounts payable and accrued liabilities		86,981			(81,284	)
Due to related parties		(57,380	)		(18,501	)
Operating lease liability		(26,782	)		-
Deferred revenue		(44,255	)		6,250
Net cash (used in) by operating activities	$	(2,910,451	)	$	(1,979,439	)

Cash flows used in investing activities
Sale of marketable securities		-			6,802
Intellectual property		(79,493	)		(20,007	)
Disposal of assets		273,375			-
Net cash provided by (used in) investing activities	$	193,882		$	(13,205	)

Cash flows from financing activities
Repayment of loan payable		(23,163	)		28,756
Proceeds from issuance of equity		9,471,495			2,714,627
Net cash from financing Activities	$	9,448,332		$	2,743,383

Net cash from discontinued operations	$	83,000		$	(1,875	)

Net change in cash for the period		6,814,763			748,864
Cash at beginning of period		1,293,749			1,285,147
Cash at end of period	$	8,108,512		$	2,034,011

Supplemental information of cash flows:
Income taxes paid in cash	$	3,540		$	(10,459	)
Non-cash consideration on asset disposal	$	1,171,599		$	-

	COMMON STOCK				ADDITIONAL PAID-IN									TOTAL STOCKHOLDERS'
	SHARES		AMOUNT		CAPITAL			DEFICIT			NCI			EQUITY
			$		$			$			$			$
Balance As At August 31, 2019		2,626,236		2,626		26,248,614			(23,868,202	)		107,674			2,490,712
Stock based compensation		-		-		162,414			-			-			162,414
Warrants issued for services		-		-		70,752			-			-			70,752
Private placement		60,792		61		815,959									816,020
Net loss		-		-		-			(907,313	)		-			(907,313	)
Non-controlling interest		-		-		-			-			(17,450	)		(17,450	)
Balance As At November 30, 2019		2,687,028		2,687		27,297,739			(24,775,515	)		90,224			2,615,135
Stock based compensation		-		-		294,293			-			-			294,293
Exercise of stock options		3,667		4		10,996			-			-			11,000
Net loss		-		-		-			(950,344	)		-			(950,344	)
Non-controlling interest		-		-		-			-			(47,148	)		(47,148	)
Balance As At February 29, 2020		2,690,695		2,691		27,603,028			(25,725,859	)		43,076			1,922,936
Stock based compensation		-		-		682,563			-			-			682,563
Warrants issued for services		-		-		98,081			-			-			98,081
Private placement		295,540		296		1,887,310			-			-			1,887,606
Net loss		-		-		-			(1,361,381	)		-			(1,361,381	)
Non-controlling interest		-		-		-			-			(29,272	)		(29,272	)
Balance As At May 31, 2020		2,986,235		2,986		30,270,983			(27,087,240	)		13,804			3,200,533
Exercise of stock options		3,667		4		19,026			-			-			19,030
Shares issued for service		11,574		12		99,988			-			-			100,000
Private placement		-		-		(65,600	)		-			-			(65,600	)
Net loss		-		-		-			(714,958	)		-			(714,958	)
Non-controlling interest		-		-		-			-			(56,747	)		(56,747	)
Balance As At August 31, 2020		3,001,476		3,001		30,324,398			(27,802,198	)		(42,943	)		2,482,258
Stock based compensation		-		-		48,887			-			-			48,887
Net loss		-		-		-			(696,028	)		-			(696,028	)
Non-controlling interest		-		-		-			-			(14,093	)		(14,093	)
Balance As At November 30, 2020		3,001,476		3,001		30,373,285			(28,498,226	)		(57,036	)		1,821,024
Stock based compensation		-		-		17,154			-			-			17,154
Brokered placement		2,102,856		2,103		9,469,392			-			-			9,471,495
Net Income		-		-		-			404,111			-			404,111
Non-controlling interest		-		-		-			-			(10,921	)		(10,921	)
Balance As At February 28, 2021		5,104,332		5,104		39,859,831			(28,094,115	)		(67,957	)		11,702,863
Stock based compensation		-		-		343,966			-			-			343,966
Warrants issued for services		-		-		785,895			-			-			785,985
Net loss		-		-		-			(2,556,997	)		-			(2,378,420	)
Non-controlling interest		-		-		-			-			(9,555	)		(9,555	)
Balance As At May 28, 2021		5,104,332		5,104		40,989,692			(30,651,112	)		(77,512	)		10,266,172


3.	COVID-19

	The emergence of the COVID-19 pandemic in January of 2020 continues to present uncertainty and unforecastable new risks to the Company and its business plan. Restrictions on national and international travel and required business closures present challenges in carrying out normal business activities related to corporate finance efforts and the pursuit of new customers throughout North America who might otherwise access the retail products of our licensees. As a result, the pandemic has increased the risk of lower revenues and higher losses. We have made modifications to our normal operations including requiring team members to work remotely on a rotational basis. To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel. At this time, these measures will continue in force for the near term. We will continue to actively monitor the rapidly evolving situation related to COVID-19 and may take further actions that alter our operations, including those that may be required by federal, state, provincial, or local authorities, or that we determine are in the best interests of our employees and other third parties with which we do business. We do not know when, or if, it will become practical to relax or eliminate some or all these measures entirely.


4.	Significant Accounting Policies

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

5.	Basis of Consolidation

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


6.	Basis of Presentation

	The Company’s unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States generally accepted accounting principles (US GAAP) have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of results for a full year or any subsequent period. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated annual financial statements and notes thereto included in our annual report filed on Form 10-K for the year ended August 31, 2020.


7.	Estimates and Judgments

	The preparation of financial statements in conformity with U.S GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Some of the Company’s accounting policies require us to make subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. These accounting policies involve critical accounting estimates because they are particularly dependent on estimates and assumptions made by management about matters that are highly uncertain at the time the accounting estimates are made. Although we have used our best estimates based on facts and circumstances available to us at the time, different estimates reasonably could have been used. Changes in the accounting estimates used by the Company are reasonably likely to occur from time to time, which may have a material effect on the presentation of financial condition and results of operations. The Company reviews these estimates, judgments, and assumptions periodically and reflect the effects of revisions in the period in which they are deemed to be necessary. Although we believe that these estimates are reasonable actual results could differ. In preparing these unaudited interim consolidated financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the audited consolidated financial statements for the year ended August 31, 2020, with the addition of discontinued operations. (Note 22)

8.	Recent Accounting Guidance

	In June 2016, the FASB issued a new standard to replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans and other financial instruments, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects probable losses. Credit losses relating to available for sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. In November 2019 FASB issued ASU No 201910 revised the effective date based on updated criteria with the effective date for fiscal years beginning after December 15, 2022. Application of the amendments is through a cumulative effect adjustment to deficit as of the effective date. The Company is currently assessing the impact of the standard on its consolidated financial statements.

11.	Intellectual Property

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


9.	Accounts and Other Receivables

	May 31		August 31
	2021		2020
		$		$
Raw materials		51,738		51,404
Work in progress		-		15,705
Finished goods		-		49,762
		51,738		116,871

Issued Patent #	Patent Certificate Grant Date	Patent Family
US 9,474,725 B1	10/25/2016	Food and Beverage Compositions Infused With Lipophilic Active Agents and Methods of Use Thereof
US 9,839,612 B2	12/12/2017
US 9,972,680 B2	05/15/2018
US 9,974,739 B2	05/22/2018
US 10,084,044 B2	09/25/2018
US 10,103,225 B2	10/16/2018
US 10,381,440	08/13/2019
US 10,374,036	08/06/2019
US 10,756,180	08/25/2020

	As at May 31, 2021 the Company held ten non-capitalized patents outside the US. See Note 23.

	A continuity schedule for capitalized patents is presented below:

Nine Months Ended May 31, 2021	Cost		Period Amortization			Disposal			Accumulated Amortization			Net Balance May 31, 2021
		$		$			$			$			$
Leasehold improvements		259,981		(40,528	)		-			(127,138	)		132,843
Computers		63,964		(14,761	)		-			(46,630	)		17,334
Furniture fixtures & equipment		34,220		(4,813	)		(3,094	)		(14,816	)		16,310
Lab equipment		291,235		(27,858	)		-			(62,325	)		228,910
		649,400		(87,960	)		(3,094	)		(250,909	)		395,397

Year Ended August 31, 2020	Cost		Period Amortization			Accumulated Amortization			Net Balance August 31, 2020
		$		$			$			$
Leasehold improvements		259,981		(53,268	)		(86,610	)		173,371
Computers		63,964		(19,681	)		(31,869	)		32,095
Furniture fixtures & equipment		34,220		(7,036	)		(13,097	)		21,123
Lab equipment		291,235		(27,921	)		(34,467	)		256,768
		649,400		(107,906	)		(166,043	)		483,357

	Number of Warrants			Weighted Average Exercise Price $
Balance August 31, 2019		94,177			41.40
Cancelled/expired		(25,000	)		44.90
Issued		402,431			12.74
Balance August 31, 2020		471,608			16.77
Cancelled/expired		(44,161	)		67.50
Issued		2,630,017			6.58
Balance May 31, 2021		3,057,464			7.87

# of Warrants		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price $
	25,000	0.36 years		4.20
	292	0.45 years		36.00
	7,500	1.43 years		24.00
	300,000	2.88 years		9.00
	51,814	3.46 years		36.00
	8,984	3.50 years		36.00
	16,667	3.79 years		9.00
	317,190	3.93 years		10.50
	2,330,017	4.63 years		6.58
	3,057,464	4.32 years		7.85

	May 31 2021

Expected volatility		103	%
Risk-free interest rate		0.16	%
Expected life	3 years
Dividend yield		0	%
Estimated fair value per warrant	$	2.62

Quantity		Exercise Price $		Life (Years)
	12,000		5.04		5
	43,500		5.31		5
	26,000		5.88		5
	81,500		5.22

	Options			Weighted Average Exercise Price $		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value $
Balance August 31, 2019		166,767			21.30
Cancelled/expired		(149,437	)		29.51
Exercised		(7,333	)		4.09
Granted		161,600			11.66
Balance August 31, 2020		171,604			11.17
Cancelled		(114,935	)		10.85
Granted		84,900			5.41
Balance May 31, 2021 (Outstanding)		141,569			7.98		4.44		56,827
Balance May 31, 2021 (Exercisable)		128,569			8.27		4.39		44,657

May 31 2021 $		May 31 2020 $
Product sales	360,558		119,709
Licensing revenue	326,474		130,509
Freight revenue	100		586
Interest revenue	4,585		-
Income from continuing operations	691,717		250,804


17.	Related Party Transactions

	Due to related parties: Related party transactions are recorded at the exchange amount established and agreed to between the related parties. As at May 31, 2021, $1,324 (August 31, 2020 - $58,704) was payable to and included in due to related parties.


18.	Segment Information

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

	IP Licensing $			Products $			Corporate $			Consolidated Total $
Revenue		326,474			360,658			4,585			691,717
Cost of goods sold		-			(155,037	)		-			(155,037	)
Operating expenses		914,485			(402,846	)		(3,909,802	)		(3,398,163	)
Discontinued operations		(22,000	)		-			-			(22,000	)
Segment income(loss)		1,218,959			(197,225	)		(3,905,217	)		(2,883,483	)
Total assets		709,155			51,738			9,786,659			10,547,553

Capital Asset by Region	Cost US		Disposal US		Net Balance US		Cost Canada		Net Balance Canada		Total Net Balance
Nine Months Ended May 31, 2021	$		$		$		$		$		$
Leasehold Improvements		-		-		-		259,981		132,843		132,843
Computers		-		-		-		63,964		17,334		17,334
Furniture Fixtures Equipment		3,094		3,094		-		31,126		16,309		16,310
Lab Equipment		98,050		-		71,899		193,185		157,010		228,910
		101,144		3,094		71,899		548,256		323,496		395,397

19.	Commitments, Significant Contracts and Contingencies

	*Right of Use Assets - Operating Lease*

	The Corporate office and R&D lab space located in Kelowna, British Columbia, Canada is leased until November 15, 2023, with a five-year renewal option. In addition to minimum lease payments, the lease requires us to pay property taxes and operating costs which are subject to annual adjustments.

Right of use assets - operating leases:	$
February 28, 2021		109,306
Amortization		(9,050	)
Total right of use assets		100,256
Liabilities:
February 28, 2021		107,738
Lease payments		(10,987	)
Interest accretion		1,898
Total lease liabilities		98,649

Operating lease cost as at May 31, 2021
Operating cash flows for lease	10,948
Remaining lease term (years)	2.42
Discount rate	7.25	%

2021	10,987
2022	44,599
2023	44,816
2024	7,469
Thereafter	-
Total lease payments	107,871
Less: imputed interest	(9,222	)
Present value of operating lease liabilities	98,649
Less: current obligations under leases	(38,485	)
Total	60,164

20.	Prepaid Expenses and Deposit

	Prepaid expenses consist of the following at May 31, 2021 and August 31, 2020:

21.	Marketable Securities

	The components of Marketable Securities were as follows:

Gain on asset disposal
Book value of assets sold	$	-
Cash consideration		273,373
Shares received		468,264
Shares receivable		781,067
Promissory note		-
	$	1,522,704

23.	Subsequent Events

	On June 8, 2021, the Company announced the issuance of 87,935 stock options at $7.08 for a period of five years. The Options were issued pursuant to the Company’s registered Incentive Equity Plan and bear a four-month restrictive hold period pursuant to the policies of the Canadian Securities Exchange (“CSE”).