What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-04-14 compared with 2021-01-14 · 152 added, 88 removed, 174 unchanged (58% of the section changed)

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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.

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In the manufacturing of our intermediate ingredients for Consumer Packaged Goods (“CPG”) companies to use, each raw material, intermediate stage and completed product is assessed for compliance with all applicable regulations.

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and other additional components.

Lexaria hopes to reduce other common but less healthy administration methods, such as smoking, as manufacturers embrace the intended benefits of DehydraTECH for public health.

Lexaria hopes to reduce other common but less healthy administration methods, such as smoking, as manufacturers embrace the benefits of DehydraTECH for public health.

The Company is aggressively pursuing patent protection in national jurisdictions around the world.

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Lexaria is also filing new patent applications for new discoveries that arise from the Company’s R&D programs and, due to the inherent unpredictability of scientific discovery, it is not possible to predict if or how often such new applications might be filed.

As at November 30, 2020, we have identified two reportable operating segments:

As at February 28, 2021, we have identified two reportable operating segments:

Intellectual Property and Products.

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We continue to investigate national and international opportunities to investigate expansions and additions to our intellectual property portfolio.

We plan to perform additional human clinical investigations in early 2021 related to enhanced DehydraTECH formulations of cannabidiol in pre- and mildly-hypertensive middle-aged subjects to gather additional information on blood pressure reduction potential.

Lexaria also plans to conduct during calendar 2021 evaluations of DehydraTECH’s ability to improve the oral delivery characteristics and pharmacological performance of certain antiviral drugs.

We plan to perform additional human clinical investigations in 2021 related to enhanced DehyraTECH formulations of cannabidiol in pre- and mildly-hypertensive middle-aged subjects to gather additional information on blood pressure reduction potential.

The Company also plans to conduct during calendar 2021 evaluations of DehydraTECH’s ability to improve the oral delivery characteristics and pharmacological performance of certain anti-viral drugs.

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;

Our current patent portfolio includes patent family applications or grants pertaining to our method of improving bioavailability and taste, and the use of DehydraTECH as a delivery platform for a wide variety of Active Pharmaceutical Ingredients (“APIs”) including, but not limited to, fat soluble vitamins;

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 intended benefits of DehydraTECH for public health.

The Company 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 safer and effective oral nicotine dosage forms through licensing arrangements with major tobacco companies.

The Company is aggressively pursuing patent protection in jurisdictions around the world.

The Company currently has more than 50 patent applications pending worldwide, with 18 patents granted to date.

The Company currently has over 50 patent applications pending worldwide, with 18 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.

To date, the following patents have been issued in the United States, Australia and Europe:

The Company is also filing new patent applications for new discoveries that arise from the Company’s R&D programs and, due to the inherent unpredictability of scientific discovery, it is not possible to predict if or how often such new applications might be filed.

To date, the following patents have been awarded in the United States, Australia and Europe:

Issued Patent #

Patent Issuance

Patent Certificate Grant Date

Patent Family

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US 10,756,180

AU 2015274698

AU 2017203054

AU 2018202562

AU 2018202583

AU 2018202584

AU 2018220067

AU 2016367036

AUS 2015274698

AUS 2017203054

AUS 2018202562

AUS 2018202583

AUS 2018202584

AUS 2018220067

AUS 2016367036

Methods for Formulating Orally Ingestible Compositions Comprising Lipophilic Active Agents

AU 2016367037

AUS 2016367037

Stable Ready-to-Drink Beverage Compositions Comprising Lipophilic Active Agents

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To achieve sustainable and profitable growth, our Company intends to control the timing and costs of our projects wherever possible.

We have filed for patent protection of DehydraTECH for use with additional compounds such as phosphodiesterase inhibitors, human hormones such as estrogen and testosterone, antivirals and more.

We are investigating other compounds and molecules for potential patent protection.

During the quarter ended November 30, 2020, and up to the date of this report, we experienced the following significant corporate developments:

On September 22, 2020, the Company announced that U.S.

10,756,180 was granted;

it has claims that protect the use of its DehydraTECH technology together with cannabinoids, nicotine, nonsteroidal anti-inflammatory drugs, or vitamins in mix and serve beverage formats.

The patent is entitled “Food and Beverage Compositions Infused With Lipophilic Active Agents and Methods of Use Thereof”.

On November 19, 2020 the Company entered a definitive asset sale agreement through its wholly owned subsidiary Lexaria Canpharm ULC (“CanPharm”), to sell certain non-core, non-pharmaceutical THC-related business assets (the “THC-Related Assets”) for gross proceeds of C$3.85 million.

The buyer of the THC-Related Assets is Lexaria’s long-standing Canadian licensee Hill Street Beverage Company Inc.

(“Hill Street”) (TSXV:

Under the terms of the agreement, Hill Street will pay C$350,000 in cash on closing;

an additional C$2,000,000 payable over time in the form of a promissory note bearing 10% interest per annum;

and C$1,500,000 in common shares of Hill Street equity, issuable in three equal tranches of C$500,000 at closing;

C$500,000 eight months after closing;

and C$500,000 16 months after closing.

We have filed for patent protection of DehydraTECH for additional compounds such as phosphodiesterase inhibitors, human hormones such as estrogen and testosterone, antivirals and more.

We are investigating other compounds and molecules for potential patent protection pursuit.

During the quarter ended February 28, 2021, and up to the date of this report, we experienced the following significant corporate developments:

On December 2, 2020, the Company announced that its DehydraTECH technology significantly improved delivery in study animals of representative drugs from two classes of antiviral therapies (a Protease Inhibitor and a Reverse Transcriptase Inhibitor) under investigation against SARS-CoV-2/COVID-19 and already in use against HIV/AIDS.

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These are the first two of a series of antiviral drugs to be tested using Lexaria’s DehydraTECH technology.

The improved delivery of the antivirals along with the animal’s demonstrated safety and tolerability of the DehydraTECH formulations has led the Company to begin preparations for expanded investigations into antiviral drug delivery enhancement and effectiveness and filing additional patent applications.

AUClast* Delivery &

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Non-nucleoside Reverse Transcriptase Inhibitor

On February 11, 2021, the Company announced the addition of two new human clinical studies to its hypertension research and development program.

The first study, HYPER-H21-2 has been added to the Lexaria hypertension program due to the increasing importance that this work could have on Company’s commercial prospects.

The results of this study will contribute to the understanding of the effectiveness of patented DehydraTECH-processed CBD as a potential novel anti-hypertensive agent through the course of a full day of monitoring, which is expected to be complementary to the shorter-term monitoring in its previously announced HYPER-H21-1 study.

The second study, HYPER-H21-3 is also a double-blinded, placebo controlled, randomized human clinical study that has been added to the Company’s hypertension program to complement the data set the Company intends to build.

Data from this study may demonstrate utility of DehydraTECH-CBD for blood pressure reduction in circumstances where pulmonary edema/hypertension results as occurs, for instance, when people travel to high altitude regions of the world.

Reverse Stock Split

On June 23, 2020, our stockholders approved a reverse stock split within the range of 1-for-2 to 1-for-30 of our issued and outstanding shares of common stock and authorized the Board, in its discretion, to determine the final ratio, effective date, and date of filing of the certificate of amendment to our articles of incorporation in connection with the reverse stock split.

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On January 11, 2021, the Company filed an amendment and restatement of its articles of incorporation, effective 4:30 P.M.

Eastern time, to effectuate a 1-for-30 reverse 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.

Amendment to Bylaws

Effective January 12, 2021, the Company amended its amended and restated bylaws to increase the quorum for holding shareholder meetings from 10% to 33 1/3% of shares issued.

Public Offering and Listing on Nasdaq

On January 12, 2021, the Company conducted an underwritten public offering (the “Offering”) of 1,828,571 shares (the “Initial Shares”) of the Company’s common stock, par value $0.001 per share, at a public offering price of $5.25 per share, less underwriting discounts and commissions.

Each Initial Share was sold with one five-year warrant (each an “Initial Warrant”) to purchase one share of common stock at an exercise price of $6.58.

On January 13, 2021, the representative of the underwriters for the Offering exercised its over-allotment option to purchase an additional 274,285 shares of common stock (the “Option Shares” and, together with the Initial Shares, the “Shares”) at a public offering price of $5.25 per share, less underwriting discounts and commissions.

Each Option Share was sold with one five-year warrant (each an “Option Warrant”) to purchase one share of common stock at an exercise price of $6.58.

The Initial Warrants and Option Warrants are immediately exercisable.

The Offering closed on January 14, 2021.

The Company agreed to pay the underwriters an underwriting discount equal to 8% of the gross proceeds of the offering and a management fee equal to 1% of the gross proceeds of the offering, reimbursement for a non-accountable expense allowance of $50,000, up to $100,000 in legal fees and up to $12,900 for clearing expenses.

Additionally, as partial compensation for the underwriter’s services as underwriter in the Offering, the Company also issued to the underwriter five-year warrants (the “Representative Warrants” and together with the Initial Warrants and Option Warrants, the “Warrants”) to purchase 166,781 shares of common stock with an exercise price of $6.58 per share.

The net proceeds to the Company from the Offering, including proceeds received upon exercise of the over-allotment option and after deducting the underwriting discount and the underwriters’ fees and expenses, were approximately $9,629,490.

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.

Effective as of the opening of market trading on January 12, 2021, the Company’s common stock and the Warrants began trading on the Nasdaq Capital Market under the symbols LEXX and LEXXW, respectively.

The Shares and Warrants were offered by the Company pursuant to a registration statement on Form S-1, as amended (File No.

333-250326), filed with the Securities and Exchange Commission (the “Commission”), which was declared effective by the Commission on January 11, 2021, and a registration statement on Form S-1 (File No.

333-252031) filed with the Commission on January 11, 2021 pursuant to Rule 462(b) and immediately declared effective.

Because certain investors in the Company’s May 2020 financing participated in the Offering, the Company paid 8% of the gross proceeds received from these investors in the Offering to the placement agent for the May 2020 financing and issued to the placement agent restricted warrants to purchase shares of common stock equal to 8% of the shares issued to those investors in the Offering.

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On December 10, 2020 the Company announced that it closed the sale of its non-pharmaceutical THC-related assets (“the Assets”) held within Lexaria Canpharm ULC to Hill Street Beverage Company Inc.

Lexaria received C$350,000 in cash, 6,031,363 restricted common shares of Hill Street at a deemed price of C$0.0829 per share as the first required equity-based payment, a promissory note having a principal amount of C$2,000,000 and bearing interest at the rate of 10% per annum, and a limited license to use the DehydraTECH technology outside of Canada and the US for certain non-pharmaceutical, therapeutic and medicinal products that contain 0.3% or greater THC which are not classified by a national regulator as drug, pharmaceutical or biopharmaceutical product.

Pursuant to the terms of the transaction, Lexaria will receive another C$1,000,000 worth of common shares of Hill Street over a period sixteen months in C$500,000 issuances eight months and sixteen months after the closing date.

Impact of COVID-19

The emergence of COVID-19 beginning in January of 2020, now in over 220 countries and territories around the world, presents significant and unforecastable new risks to the Company and its business plan.

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We are monitoring our licensees and are working with them, where possible, to prevent default and contract terminations.

In some cases we have had to issue termination of contract notices in accordance to provisions within our contracts.

The Company is encountering significant challenges in executing its business plan and normal business operations as a result of COVID-19 and does not have sufficient resources to withstand a protracted term during which most business activities are curtailed.

We have implemented cost containment initiatives to reduce operating expenses and preserve cash that include dismissal of one employee, termination of contracts with two consultants and reduction of compensation payable to certain other consultants as a result of the COVID-19 pandemic.

In some cases, we have issued termination of contract notices in accordance to provisions within our contracts.

As a result of COVID-19, the Company is encountering significant challenges in executing its business plan and normal business operations and does not have sufficient resources to withstand a protracted term during which most business activities are curtailed.

In addition, we have implemented cost containment initiatives to reduce operating expenses and preserve cash such as the dismissal of one employee, termination of contracts with two consultants and reduction of compensation payable to certain other consultants.

The Company currently has six (6) employees and/or independent contractors who dedicate all or a majority of their time to the business of the Company and eight (8) consultants.

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We have not had to close operations or locations as our contractors and staff can work remotely and our third-party facilities continue to operate.

To the date of this report, we have not directly had to quarantine contractors or staff, however we have implemented additional safety precautions and measures for their protection.

To date, we have not directly had to quarantine contractors or staff, however we have implemented additional safety precautions and measures for their protection.

Due to our historic and current geographic diversity of our contractors and employees, we have long established and ongoing experience in remote work and collaboration.

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It is unknown at this time whether there is any such applicability.

On March 19, 2020 the Company announced that it intended to commence a program to conduct tests to research the intended benefits of DehydraTECH in connection with enhancing the delivery of certain antiviral drugs.

On March 19, 2020 the Company announced that it intended to commence a program to conduct tests to research the benefits of DehydraTECH in connection with enhancing the delivery of certain antiviral drugs.

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The tests are intended to include a pilot human pharmacokinetic exploratory study in healthy volunteers of two antiviral drugs that had previously been studied against other coronavirus strains, comparing DehydraTECH formulations to controls without DehydraTECH.

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The Company continues to monitor governmental programs being released to assist with the COVID-19 pandemic.

To date, we have received a CDN$40,000 Canada Emergency Business Account (“CEBA”) for our subsidiary Kelowna Management Services Corp.

This required CDN$30,000 portion of the loan was repaid during February 2021 and we are waiting confirmation for the CDN$10,000 forgivable portion of the loan from the Canadian government.

We have also received $30,732 (CDN$42,076) from the Canada Emergency Wage Subsidy (“CEWS”) program for the employees in our subsidiary KMSC that reduced costs therein.

Subsequent to February 28, 2021

On March 15, 2021, the Company announced progress studies focused on the performance of DehydraTECH CBD as a treatment for hypertension.

The HYPER-A21-1 study dosing is complete and sample analysis is underway in this animal study.

No observed behavioural tolerability issues were noted during or after dosing with results expected in the first half of May.

This study is evaluating the rate of absorption and speed with which various new enhanced DehydraTECH experimental formulations deliver CBD to the bloodstream and brain.

The HYPER-A21-2 study dosing is expected to be completed in this animal study by March 30, with results expected in the first half of June.

This study is also evaluating the rate of absorption and speed with which additional enhanced DehydraTECH formulations deliver CBD to the bloodstream and brain.

The HYPER-H21-1 study has received regulatory importation clearance for the clinical test articles for this human study which have arrived at the European research site.

The volunteer human dosing is targeted for completion by May and final reporting on this study is expected in early September.

This study examines time series blood pressure and heart rate analyses.

Secondary objectives include speed and rate of absorption of the CBD and its main metabolites (pharmacokinetics or “PK” assessments), as well as evaluation of inflammatory markers associated with cardiovascular disease and gold-standard biomarkers of nitric oxide.

The HYPER-H21-2 study has received formal hospital and ethics board approval and test articles have been sent.

Results are anticipated to be reported in late September.

The primary objectives of this study are blood pressure and heart rate evaluation, while the secondary objectives include central arterial stiffness, physical activity and sleep quality.

The HYPER-H21-3 study has received formal hospital and ethics board approval and test articles have been sent.

The primary objective of this study is to evaluate the effect of DehydraTECH CBD on pulmonary vascular function in normotensive individuals exposed to hypoxia.

The magnitude of HPV, blood pressure, heart rate, blood samples and pulmonary gas exchange.

Details will be furnished at a future date on the likely timing of reporting from this study once recruitment has begun.

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Subsequent to November 30, 2020

Lexaria received C$350,000 in cash, 6,031,363 restricted common shares of Hill Street at a deemed price of C$0.0829 per share as the first required equity-based payment, a promissory note having a principal amount of C$2,000,000 and bearing interest at the rate of 10% per annum, and a limited license to use the DehydraTECH technology outside of Canada and the US for certain non-pharmaceutical, therapeutic and medicinal products that contain 0.3% or greater THC and which are not classified by a national regulator as drug, pharmaceutical or biopharmaceutical product.

On January 11, 2021, the Company performed a 1:30 reverse stock split with no fractional shares issued.

The issued and outstanding balance of shares at that time changed from 90,044,312 to 3,001,476 as per shareholder approval at the annual general meeting of the company held June 23, 2020.

On January 12, 2021, the Company began its listing its common shares on the NASDAQ exchange under the symbol LEXX.

On January 14, 2021, the Company closed an underwritten public offering for $11,039,994, issuing 2,102,856 units consisting of one common share and one warrant for $5.25.

Total fees of $1,410,506 were estimated at time of closing.

The warrants issued will trade under the symbol LEXXW.

On March 16, 2021, the Company announced progress in two of its antiviral drug studies in its 2021 applied research and development (R&D) program, comprised of one SARS-CoV-2 infected human cell culture study (VIRAL-C21-3) and one animal research pharmacokinetic study (VIRAL-A20-2).

The VIRAL-A20-2 study has commenced dosing of the animals and is anticipated to be completed by late March.

Results should be reported in or around the second half of May.

The VIRAL-C21-3 study has all contract agreements in place with the third-party laboratory that will be conducting this study, and dosing is expected to commence in April with results anticipated around the first half of June.

On March 24, 2021, the Company announced positive results from its extended stability testing.

The tested beverages maintained their CBD content which was verified at 93.4% of target potency one year after production, evidenced excellent microbial purity over this period, and demonstrated less than 1% variability in CBD potency in fractions sampled from the top, middle and bottom of the beverage formulation without physical mixing or agitation.

Research and Development

During the quarter ended November 30, 2020, Lexaria incurred $192,261 (2019 $107,463) in research and development expenditures during the period ending November 30, 2020.

During the quarter ended February 28, 2021, Lexaria incurred $368,659 (February 2020 $294,020) in research and development expenditures.

Specific R&D programs are in ongoing development and will be tightly related to our financial ability to undertake each research phase for each API.

Due to our expanding portfolio coverage, we are continuing to examine accelerated timetable options for testing, research and development of each API.

The Company’s plans to include in vitro absorption tests of our patented technology of molecules such as:

Vitamin E, Ibuprofen, and Nicotine allowed us to perform testing on Nicotine with positive results.

Our plan to conduct our first ever in vivo absorption tests on CBD also yielded positive results, and in our first preclinical tests of representative drugs from two classes of antiviral therapies we had positive results.

Due to our expanding portfolio coverage, we are continuing to examine accelerated timetable options for testing, research and development (“R&D”) of each API.

The Company’s historic plans to include in vitro and in vi vo absorption tests of our patented technology of molecules such as:

cannabidiol (“CBD”), ibuprofen, and nicotine supplied us knowledge and understanding to perform subsequent testing on Nicotine and CBD with generally positive results, all of which has supported early-stage commercial revenue generation during the most recent six months.

Our work during 2018 wherein we conducted our first ever human clinical absorption tests on CBD also yielded positive results and we discovered that DehydraTECH-processed CBD was effective in lowering human blood pressure, leading to expanded plans to evaluate DehydraTECH-processed CBD during 2021 for potential blood pressure reduction outcomes.

In our first tests of representative drugs from two classes of antiviral therapies we had positive results which we announced in December of 2020.

Ongoing testing plans are proceeding to further define molecular compatibility, absorption rates, timing and viable formats of delivery.

Our R&D is conducted with the goal of further defining DehydraTECH’s value with the goal of commercialization and revenue generation.

The Company continually focuses on new R&D programs to investigate the potential of additional commercial applications for its Technology.

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Depending on how many of these tests are undertaken, R&D budgets are expected to vary significantly.

It is in our best interests to remain flexible at this early stage of our R&D efforts in order to capitalize on potential novel findings from early-stage tests and thus re-direct research into specific avenues that offer the most reward.

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The financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our Company discontinue operations.

The recurring losses from operations and net capital deficiency raise substantial doubt about the Company’s ability to continue as a going concern.

Results of Operations for our Period Ended November 30, 2020 and November 30, 2019

On January 12, 2021 the Company closed an underwritten public offering for net proceeds of $9,471,495 (Note 12).

The net raised proceeds, based on our current research and development programs, are projected to fund the Company’s operations for at least the next twelve months from the date of this Quarterly Report.

Results of Operations for our Period Ended February 28, 2021 and February 29, 2020

Our net loss and comprehensive loss and the changes between those periods for the respective items are summarized as follows:

THREE MONTHS ENDED

SIX MONTHS ENDED

Consulting fees & employees

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Discontinued operations

Product revenues of $164,990 represent more than half of revenues during the period ended November 30, 2020, the majority of which are intermediate product sales to business customers.

Intermediate products we produce are typically a DehydraTECH enabled powder that third party companies include in their product’s manufacturing process.

Our licensing revenue of $130,584 was primarily related to intermediate product sales.

A significant number of our licensees are experiencing suspended business activities in Canada in part from waiting on product approval by Health Canada and the impact of the COVID-19 on markets and consumer spending, however this phenomenon has been mitigated following the sale of our THC-related business division that closed on December 9, 2020.

Product revenues of $231,718 and licensing usage fees of $255,844 represent significant increases in intermediate product sales and related licensing usage fees during period ended February 28, 2021, that almost exclusively consist of sales to business customers.

Intermediate products we produce are typically a DehydraTECH processed powder which easily allows consumer product third party companies to include it in their product’s manufacturing process for their existing products, have simplified and enhanced the adoption of our Technology for manufacturers.

The majority of our revenue was based on one licensee of our intermediate products ramping up their production and product distribution.

A significant number of our licensees are experiencing suspended business activities due to the impact of COVID-19 on markets and consumer spending;

however, this phenomenon was substantially mitigated following the sale of our THC-related business division that closed on December 9, 2020.

The abilities of other licensees to generate ongoing sales, thereby increasing usage fees are expected to continue to be impacted by the pandemic.

We are working with our licensees to assist them and prevent further license terminations.

However, we are not able to determine how severe the long-term impact of the pandemic will be and when recovery of the general economy will translate into increasing licensing or usage revenues.

We have continued interest in our intermediate products but cannot predict how long the pandemic will affect purchasing decisions of retail customers that will affect the consumer product manufacturers that utilize our intermediate products or when recovery of the general economy will translate into increasing licensing or usage revenues.

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Our licensing revenues consist of IP licensing fees for the transfer of the Technology and usage fees that occur over time.

IP licensing fees are due at the signing of definitive agreements for the Technology and can include payments due upon transfer of the Technology and installment payments that are receivable within 12 months (Note 7).

Our intermediate products, which easily allows consumer product manufacturers to add DehydraTECH enabled powder to their existing products, are expected to simplify and enhance the adoption of our Technology for manufacturers.

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The majority of our revenue was primarily based on one licensee of our intermediate products ramping up their production and product distribution.

From the initial introduction of our intermediate products in the second quarter of our fiscal 2020 year, we have experienced substantial growth in intermediate product sales.

During the period ended November 30, 2020, our revenues were derived within the following categories:

During the period ended February 28, 2021, our revenues were derived within the following categories:

$231,718 (2020:

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General and Administrative

Our total general and administrative expenses (consisting of consulting & wages, legal & professions, and all other) decreased by $34,286 during the period ended November 30, 2020.

The decrease is comprised of reductions in consulting expense, travel and wages due to staffing decreases, offset by increases legal filing for patents and research programs being initiated.

We are continuing to focus on cost constraints to preserve cash where possible while executing portions of our business plan.

Our total general and administrative expenses (consisting of consulting & wages, legal & professions, and all other) increased by $134,582 during the period ended February 28, 2021 excluding the gain from the asset sale over the same period last year.

The increase is primarily comprised of increases to outreach programs, patent filings and contracted incentive payments offset by reductions in consulting expense, travel and wages due to staffing decreases.

Interest Expense

Interest expense for the period ended November 30, 2020 was $Nil (2019:

The Company has a C$40,000 noninterest-bearing loan until January 2023 (Note 19).

Interest expense for the period ended February 28, 2021 was $Nil (2019:

The Company has a C$40,000 noninterest-bearing loan until January 2023 (Note 19) that it has repaid the required C$30,000 portion and is awaiting clearance from the Canadian government for the forgivable portion of C$10,000.

Consulting Fees

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Legal and Professional Fees

Our professional fees increased by $196,340 during the period primarily due to increased patent and trademark filings and additional advisory services utilized during the period.

Our professional fees increased by $72,645 during the period primarily compared to the same period in the prior year due to increased patent and trademark filings, the uplist to the Nasdaq Capital Markets, and additional advisory services utilized.

We recognize certain legal fees, tax advice fees, and accounting services all as “Professional Fees.”

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Net Working Capital

The Company’s working capital balance increased significantly during the period due to the underwritten public offering that closed January 12, 2021, and Net Working Capital is now the highest in the Company’s history.

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The Company’s working capital balance decreased during the period due to normal execution of our business plan.

The Company maintained a positive and relatively strong working capital position throughout the period.

Cash flows (used in) provided by operating activities

Cash flows (used in) provided by continuing activities

Cash flows (used in) provided by investing activities

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Operating Activities

Net cash used in operating activities was $818,300 for the period compared with cash used in operating activities of $555,078 during the same period in 2020.

This difference was largely due to the increased costs pertaining to professional fees and research and development.

Net cash used in continuing activities was $1,742,757 for the period compared with cash used in operating activities of $1,308,963 during the same period in 2020.

This difference was largely due to the increased costs pertaining to professional fees, listing on the NASDAQ, outreach programs and other costs related to required filings.

Investing Activities

Net cash used in investing activities was $5,775 (2020 $5,710) for the period to support capitalized patent filings.

Net cash from investing activities was $264,609 (2020 $(5,711)) for the period from the disposition of assets and to support capitalized patent filings.

Financing Activities

Net cash provided from financing activities was $NIL during the period ended November 30, 2020.

Net cash provided from financing activities was $9,448,322 during the period ended February 28, 2021 primarily relating to the underwritten public offering that closed January 12, 2021.

Liquidity and Capital Resources

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Short Term Liquidity

At November 30, 2020 we had $525,341 in cash and cash equivalents.

On January 14, 2021 we closed an underwritten public offering for $11,039,994, issuing 2,102,856 units consisting of one common share and one warrant for $5.25.

Total fees of $1,410,506 were estimated at time of closing.

We believe our cash resources are sufficient to allow us to continue operations for at least the next twelve months from the date of this Quarterly Report.

On January 12, 2021 we closed an underwritten public offering for net proceeds of $9,471,495, issuing 1,828,571 units consisting of one common share and one warrant for $5.25.

On February 28, 2021 we had $9,346,933 in cash and cash equivalents and working capital of $10,559,499.

Based on our current research and development programs, we project cash resources are sufficient to allow us to continue operations for at least the next twelve months from the date of this Quarterly Report.

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This process typically takes many years and potentially millions of dollars for each segment.

We will need to obtain significant funding from existing or new relationships, increasing revenue streams or from other sources of liquidity such as the sale of equity, issuance of debt or other transactions.

If we pursue full commercial exploitation of all applicable market and industry segment opportunities, we will need to obtain significant funding from existing or new relationships, increasing revenue streams or from other sources of liquidity such as the sale of equity, issuance of debt or other transactions.

The exact requirements will vary depending on the results of research programs and the requirements of each industry segment that we pursue.

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These changes to requirements and transactions may impact our liquidity as well as affect our expenses.

Controls and Procedures

Management’s Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial and Accounting Officer) to allow for timely decisions regarding required disclosure.

As of February 28, 2021, the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our CEO, President and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures.

Based on the foregoing, our President, CEO and the CFO concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of February 28, 2021.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting.

Responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures.

The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with US GAAP.

Our management assessed the effectiveness of our internal control over financial reporting as of February 28, 2021.

In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.

Our management has concluded that, as of February 28, 2021, our internal control over financial reporting is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP.

Our management reviewed the results of their assessment with our Board of Directors.

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Inherent limitations on Effectiveness of Controls

Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, regulations, segregation of management duties, scale of organization, and personnel factors.

Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures.

Internal control over financial reporting also can be circumvented by collusion or improper management override.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

During the quarter ended February 28, 2021 our controls and controls processes remained consistent with August 31, 2020.

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended February 28, 2021 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

Our control processes are designed to include remote workers, which we have utilized for many years.

The advent of the COVID-19 pandemic has not materially impacted our internal controls over financial reporting other than increasing requirements for social distancing and some additional remote working requirements for staff.

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PART II—OTHER INFORMATION

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis