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CCIM: I asked a group of investors for a couple of questions that they have. Their first question – what is the significance of the Ambarii joint venture?
LXX: The Ambarii joint venture is progressing slowly, but the concept of utilizing the DehydraTECHTM delivery methodology into a mouth-melt form factor is an excellent demonstration of the versatility of Lexaria’s tech. Since edibles legislation within Canada has not yet been finalized, this JV with Canadian partners is looking to introduce the product into other international markets and we have to be patient while those markets develop. Lexaria has already collaborated with our partners to build the product and we know it works – now we have to get those international markets opened to receive it.
CCIM: Their second question gets to the heart of your business model. Why would a licensed producer be interested in your tech if the assumption is they will provide the “commodity” to another company for further processing (into an edible or beverage)?
LXX: Lexaria’s business model is built on tech transfer: we literally co-develop specific formulations and recipes in edibles products in cooperation with our licensed partners. Each recipe is different and many edibles are targeted at different audiences. For example a manufacturer selling a baked edible (cookie, brownie, etc) to a medical consumer may be doing an injustice if that edible uses traditional cannabis oils baked in an oven at 350 degrees – heating the cannabidiol (CBD) too much. On the other hand that same product for a recreational consumer may be perfectly suited to their needs. Edibles – outstanding, high-performance, fast acting and pleasant tasting edibles – are very, very difficult to make consistently. Since we work so closely with our partners, it isn’t that we sell them a bucket of powder to mix into their products. Instead we help to co-develop outstanding products that are best of class. It’s in our partner’s own best interests to guard this knowledge from outsiders the best they can. As well, we generally provide some level of semi-exclusivity in each market: we will NOT license our tech to everyone who wants it – we only license to the top several firms in any geographical zone ensuring scarcity and value.
CCIM: Somewhat related and conjectural, we have accepted for the most part that we are entering a period of M&A … what risk is there to a company with a license for your tech should Lexaria be acquired by a rival?