Sometimes I can’t even. For a few years now, Lexaria Bioscience (LXX.C) has crept around in the background of the Canadian bongosphere. It had a chequered start, partnering up with dumbasses, and then separating, announcing one business direction, then another.
But yesterday Lexaria came out with a news release that was a special flavour of bullshit, and I think it’s time to call them on it.
Lexaria has entered its first ever Private Label agreement. Under the terms of the agreement, Lexaria will cause a certain new line of cannabidiol/herbal products powered by its patent-allowed technology to be manufactured under the Timeless Herbal Care Limited (“Timeless”) brand name for Timeless to market and distribute across the USA, Canada, and Jamaica. The Timeless brand with Lexaria’s enhancements will offer Timeless’ consumer base improved taste and bioavailability for hard-to-absorb molecules. By utilizing Lexaria’s protected technology the products will be unique in a sector where tangible benefits are highly sought after.
So they’re producing a line of ‘products’ for Timeless with some special tech. What is the tech?
Lexaria doesn’t say.
Okay then, what are the products?
Again, Lexaria doesn’t say.
So I dug in. According to the Timeless Herbal website, which is as detail-free as Lexaria’s press release, they sell vape pens. Oh, good, because that’s an industry just crying out for new blood.
They also apparently sell a tonic made from fruit wine and hen weed. Because, science.
Timeless also has a lot of words on its website that appear confused.
For many people the consequences of living with pain is unimaginable. Medical Marijuana can relief pain. Whether we look at the United States Government Patent or the thousands of research articles the conclusion is the same. Despite the serious documented evidence that opiates have tremendous side effects doctors continue to write these prescriptions.
To which I say, “sockpuppet hooray briefcase taco.”
So we’ve established Timeless is rinky dink. Let’s move on to the agreement Lexaria has with them. The deal itself is a frothy mix of promise and hedged bets.
Lexaria will earn a pre-defined premium to costs on all raw ingredient sourcing and manufacturing, and will further earn a pre-defined royalty rate on all gross product sales revenues earned by Timeless in all three countries. The agreement is for an initial term of 5 years.
Although not certain, there is an expectation that the Timeless products private-labelled from Lexaria could be offered for sale in up to one thousand locations across the USA within a reasonable period.
Although not certain, there is an expectation that Charlize Theron will hunt me down, seduce me, and have several of my children within a reasonable period.
Let’s get to a very big chink in Lexaria’s armour here.. the deal covers three countries – the United States, Canada, and Jamaica. But Timeless is based in Jamaica, and there exists no laws that would ever allow a Jamaican weed company to sell a weed-based product exported from that country in Canada and the US.
So the deal, realistically, is for the Jamaican market, which is like saying you’ve done a huge deal that encompasses the entirety of Moose Jaw.
Lexaria expects to earn a minimum of $921,000 from Timeless on the sale of products assuming it enters all three nations.
And if it doesn’t, and is instead restricted to Jamaica (Population 2.7m, average income $5.2k), it’ll earn roughly the cash equivalent of a box of Hamburger Helper.
The definitive agreement also includes access fees to be paid by Timeless to Lexaria on a per nation basis. In the cases of the USA and Jamaica, these fees will be paid on an in kind basis through Timeless executing certain deliverables for Lexaria that includes execution of clinical testing in patients with chronic conditions who receives products with Lexaria’s technology at a major medical center. All total, these fees are expected to have additional value to Lexaria of more than $300,000 in cash and in kind.
Wait! Not only is the deal unlikely to generate significant cash, now we’re being told it won’t generate any, as the Timeless crowd will just take their royalties and spend them on ‘research.’
Presumably the sort of research that says fruit wine and hen weed will cure cancer.
Readers are cautioned that the clinical plans are currently in the preliminary design stages and will, like any other clinical testing in patients with chronic conditions, likely take an as yet undetermined period of many months to complete and report.
Translation: We’ve given ourselves two years before we have to admit the deal came to nothing.
Lexaria believes that the Timeless business network that spans three countries can deliver meaningful value to its stakeholders.
It spans three countries! Let me guess – the Canadian part of that ‘network’ is a shared office on Howe Street? Is the American HQ a post office box in Boca Raton?
Let’s be charitable and say the company truly believes the Jamaicans are cutting edge and going to really do something great, and I don’t know what I’m talking about and investors will all be drowning in cash and…
Readers are cautioned much of the financial compensation for Lexaria under these agreements is dependent upon the success of the Licensee in selling products enhanced with Lexaria’s technology.
— Chris Parry
FULL DISCLOSURE: I hold no Lexaria stock. Because it’s rubbish. To be still farting about with bullshit filler news releases like this in 2016, while actual weed companies are showing rapidly growing stock prices and patient numbers and real products, is ridiculous. It’s embarrassing. It would generate a whole lot more respect if the above news release had simply said, “A company in Jamaica wants to use our tech to create products and will pay us something if that ever happens. In other news, Bob from Accounting really loves tacos.”Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.