UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31,
2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to
__________
Commission File Number: 001-39685
INMED PHARMACEUTICALS INC.
(Exact name of registrant as specified in its charter)
British Columbia, Canada | | 98-1428279 |
(State or other jurisdiction of
incorporation or organization) | | (I.R.S. Employer
Identification No.) |
Suite 310 - 815 W. Hastings Street, Vancouver, B.C. Canada | | V6C 1B4 |
(Address of Principal Executive Offices) | | (Zip Code) |
(604) 669-7207
(Registrant’s telephone number, including
area code)
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Shares, no par value | | INM | | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒ No ☐
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 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act): Yes ☐ No ☒
As of February 13, 2024, the registrant had 6,056,970
common shares, without par value, outstanding.
INDEX
PART I
ITEM 1. CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS.
Unaudited Condensed Consolidated Interim Financial
Statements of
InMed Pharmaceuticals Inc.
For the Three and Six Months Ended December 31,
2023 and 2022
Suite 310 – 815 West Hastings Street
Vancouver, BC, Canada, V6C 1B4
Tel: +1-604-669-7207
InMed Pharmaceuticals Inc.
(Expressed in U.S. Dollars)
December 31, 2023
InMed Pharmaceuticals Inc.
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
Expressed in U.S. Dollars
| |
| |
December 31, | | |
| |
| |
| |
2023 | | |
June 30, | |
| |
Note | |
(unaudited) | | |
2023 | |
| |
| |
$ | | |
$ | |
ASSETS | |
| |
| | | |
| | |
Current | |
| |
| | | |
| | |
Cash and cash equivalents | |
| |
| 9,534,922 | | |
| 8,912,517 | |
Short-term investments | |
| |
| 44,462 | | |
| 44,422 | |
Accounts receivable, net | |
| |
| 372,870 | | |
| 260,399 | |
Inventories | |
3 | |
| 744,839 | | |
| 1,616,356 | |
Prepaids and other current assets | |
| |
| 1,112,977 | | |
| 498,033 | |
Total current assets | |
| |
| 11,810,070 | | |
| 11,331,727 | |
| |
| |
| | | |
| | |
Non-Current | |
| |
| | | |
| | |
Property, equipment and ROU assets, net | |
4 | |
| 1,481,102 | | |
| 723,426 | |
Intangible assets, net | |
5 | |
| 1,864,292 | | |
| 1,946,279 | |
Other assets | |
| |
| 100,000 | | |
| 104,908 | |
Total Assets | |
| |
| 15,255,464 | | |
| 14,106,340 | |
| |
| |
| | | |
| | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| |
| | | |
| | |
Current | |
| |
| | | |
| | |
Accounts payable and accrued liabilities | |
6 | |
| 1,287,623 | | |
| 1,608,735 | |
Current portion of lease obligations | |
9 | |
| 364,190 | | |
| 375,713 | |
Deferred rent | |
| |
| 28,656 | | |
| 16,171 | |
Total current liabilities | |
| |
| 1,680,469 | | |
| 2,000,619 | |
| |
| |
| | | |
| | |
Non-current | |
| |
| | | |
| | |
Lease obligations, net of current portion | |
9 | |
| 802,784 | | |
| 15,994 | |
Total Liabilities | |
| |
| 2,483,253 | | |
| 2,016,613 | |
Commitments and Contingencies (Note 11) | |
| |
| | | |
| | |
| |
| |
| | | |
| | |
Shareholders’ Equity | |
| |
| | | |
| | |
Common shares, no par value, unlimited authorized shares: | |
| |
| | | |
| | |
5,667,970 (June 30, 2023 - 3,328,191) issued and outstanding | |
7 | |
| 79,936,633 | | |
| 77,620,252 | |
Additional paid-in capital | |
7, 8 | |
| 38,122,231 | | |
| 35,741,115 | |
Accumulated deficit | |
| |
| (105,415,222 | ) | |
| (101,400,209 | ) |
Accumulated other comprehensive income | |
| |
| 128,569 | | |
| 128,569 | |
Total Shareholders’ Equity | |
| |
| 12,772,211 | | |
| 12,089,727 | |
Total Liabilities and Shareholders’ Equity | |
| |
| 15,255,464 | | |
| 14,106,340 | |
Related Party Transactions (Note 12) | |
| |
| | | |
| | |
Subsequent Events (Note 13) | |
| |
| | | |
| | |
The accompanying notes form an integral part of
these condensed consolidated interim financial statements.
InMed Pharmaceuticals Inc.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS (unaudited)
Expressed in U.S. Dollars
| |
| |
For the Three Months
Ended | | |
For the Six Months
Ended | |
| |
| |
December 31 | | |
December 31 | |
| |
Note | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| |
| |
| $ | | |
| $ | | |
| $ | | |
| $ | |
| |
| |
| | | |
| | | |
| | | |
| | |
Sales | |
| |
| 1,240,200 | | |
| 469,783 | | |
| 2,142,062 | | |
| 790,571 | |
Cost of sales | |
| |
| 745,584 | | |
| 338,620 | | |
| 1,533,274 | | |
| 573,654 | |
Inventory write-down | |
3 | |
| 170,474 | | |
| - | | |
| 263,404 | | |
| 576,772 | |
Gross profit | |
| |
| 324,142 | | |
| 131,163 | | |
| 345,384 | | |
| (359,855 | ) |
| |
| |
| | | |
| | | |
| | | |
| | |
Operating Expenses | |
| |
| | | |
| | | |
| | | |
| | |
Research and development and patents | |
| |
| 609,791 | | |
| 851,356 | | |
| 1,901,884 | | |
| 2,230,009 | |
General and administrative | |
| |
| 1,363,958 | | |
| 1,464,879 | | |
| 2,662,689 | | |
| 3,025,356 | |
Amortization and depreciation | |
4, 5 | |
| 55,234 | | |
| 49,049 | | |
| 110,066 | | |
| 98,097 | |
Foreign exchange (gain) loss | |
| |
| (59,896 | ) | |
| (20,237 | ) | |
| (11,439 | ) | |
| 76,554 | |
Total operating expenses | |
| |
| 1,969,087 | | |
| 2,345,047 | | |
| 4,663,200 | | |
| 5,430,016 | |
| |
| |
| | | |
| | | |
| | | |
| | |
Other Income (Expense) | |
| |
| | | |
| | | |
| | | |
| | |
Interest and other income | |
| |
| 166,760 | | |
| 115,797 | | |
| 302,803 | | |
| 188,384 | |
Loss before income taxes | |
| |
| (1,478,185 | ) | |
| (2,098,087 | ) | |
| (4,015,013 | ) | |
| (5,601,487 | ) |
| |
| |
| | | |
| | | |
| | | |
| | |
Tax expense | |
| |
| - | | |
| (3,000 | ) | |
| - | | |
| (9,800 | ) |
Net loss for the period | |
| |
| (1,478,185 | ) | |
| (2,101,087 | ) | |
| (4,015,013 | ) | |
| (5,611,287 | ) |
| |
| |
| | | |
| | | |
| | | |
| | |
Net loss per share for the period | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted | |
| |
| (0.19 | ) | |
| (0.91 | ) | |
| (0.71 | ) | |
| (3.54 | ) |
Weighted average outstanding common shares | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted | |
| |
| 7,973,465 | | |
| 2,300,526 | | |
| 5,650,828 | | |
| 1,583,073 | |
The accompanying notes form an integral part of
these condensed consolidated interim financial statements.
InMed Pharmaceuticals Inc.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF SHAREHOLDERS’
EQUITY (unaudited)
Expressed in U.S. Dollars
|
|
| |
| | |
Additional | | |
| | |
Accumulated
Other | |
| |
|
|
Note | |
Common Shares | | |
Paid-in
Capital | | |
Accumulated
Deficit | | |
Comprehensive
Income | |
Total | |
|
|
| |
# | | |
$ | | |
$ | | |
$ | | |
$ | |
$ | |
Balance June 30, 2023 |
|
| | |
| 3,328,191 | | |
| 77,620,252 | | |
| 35,741,115 | | |
| (101,400,209 | ) | |
| 128,569 | |
| 12,089,727 | |
Loss for the period | |
| - | | |
| - | | |
| - | | |
| (2,536,828 | ) | |
| - | |
| (2,536,828 | ) |
Share-based compensation |
| 8 | |
| - | | |
| - | | |
| 25,191 | | |
| - | | |
| - | |
| 25,191 | |
Balance September 30, 2023 |
| | |
| 3,328,191 | | |
| 77,620,252 | | |
| 35,766,306 | | |
| (103,937,037 | ) | |
| 128,569 | |
| 9,578,090 | |
Proceeds from private placement net of issuance costs |
|
7 | |
| 2,339,779 | | |
| 2,316,381 | | |
| 2,337,661 | | |
| - | | |
| - | |
| 4,654,042 | |
Loss for the period |
|
| |
| - | | |
| - | | |
| - | | |
| (1,478,185 | ) | |
| - | |
| (1,478,185 | ) |
Share-based compensation |
| 8 | |
| - | | |
| - | | |
| 18,264 | | |
| - | | |
| - | |
| 18,264 | |
Balance December 31, 2023 |
| | |
| 5,667,970 | | |
| 79,936,633 | | |
| 38,122,231 | | |
| (105,415,222 | ) | |
| 128,569 | |
| 12,772,211 | |
| |
| |
| | |
| | |
Additional | | |
| | |
Accumulated
Other | | |
| |
| |
Note | |
Common Shares | | |
Paid-in
Capital | | |
Accumulated
Deficit | | |
Comprehensive
Income | | |
Total | |
| |
| |
# | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
Balance June 30, 2022 | |
| |
| 650,667 | | |
| 70,718,461 | | |
| 31,684,098 | | |
| (93,452,587 | ) | |
| 128,569 | | |
| 9,078,541 | |
Proceeds from private placement net of issuance costs | |
| |
| 90,000 | | |
| 333,134 | | |
| 4,989,366 | | |
| - | | |
| - | | |
| 5,322,500 | |
Exercise of pre-funded warrants | |
| |
| 168,099 | | |
| 1,619,797 | | |
| (1,619,378 | ) | |
| - | | |
| - | | |
| 419 | |
Loss for the period | |
| |
| - | | |
| - | | |
| - | | |
| (3,510,200 | ) | |
| - | | |
| (3,510,200 | ) |
Share-based compensation | |
| |
| - | | |
| - | | |
| 116,680 | | |
| - | | |
| - | | |
| 116,680 | |
Balance September 30, 2022 | |
| |
| 908,766 | | |
| 72,671,392 | | |
| 35,170,766 | | |
| (96,962,787 | ) | |
| 128,569 | | |
| 11,007,940 | |
Proceeds from private placement net of issuance costs | |
| |
| 150,000 | | |
| 224,659 | | |
| 5,132,848 | | |
| - | | |
| - | | |
| 5,357,507 | |
Exercise of pre-funded warrants | |
| |
| 531,226 | | |
| 1,966,373 | | |
| (1,966,320 | ) | |
| - | | |
| - | | |
| 53 | |
Loss for the period | |
| |
| - | | |
| - | | |
| - | | |
| (2,101,087 | ) | |
| - | | |
| (2,101,087 | ) |
Share-based compensation | |
| |
| - | | |
| - | | |
| 70,638 | | |
| - | | |
| - | | |
| 70,638 | |
Balance December 31, 2022 | |
| |
| 1,589,992 | | |
| 74,862,424 | | |
| 38,407,932 | | |
| (99,063,874 | ) | |
| 128,569 | | |
| 14,335,051 | |
The accompanying notes form an integral part of
these condensed consolidated interim financial statements.
InMed Pharmaceuticals Inc.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (unaudited)
Expressed in U.S. Dollars
| |
Note | | |
2023 | | |
2022 | |
| |
| | |
$ | | |
$ | |
Cash provided by (used in): | |
| | |
| | |
| |
| |
| | |
| | |
| |
Operating Activities | |
| | |
| | |
| |
Net loss | |
| | | |
| (4,015,013 | ) | |
| (5,611,287 | ) |
Items not requiring cash: | |
| | | |
| | | |
| | |
Amortization and depreciation | |
| 4, 5 | | |
| 110,063 | | |
| 98,097 | |
Share-based compensation | |
| 8 | | |
| 43,455 | | |
| 187,318 | |
Amortization of right-of-use assets | |
| | | |
| 191,909 | | |
| 197,767 | |
Interest income received on short-term investments | |
| | | |
| (1,019 | ) | |
| (418 | ) |
Unrealized foreign exchange loss | |
| | | |
| 978 | | |
| 2,167 | |
Inventory write-down | |
| 3 | | |
| 263,404 | | |
| 576,772 | |
Bad debts | |
| | | |
| - | | |
| 25,085 | |
Changes in operating assets and liabilities: | |
| | | |
| | | |
| | |
Inventories | |
| | | |
| 608,113 | | |
| 300,576 | |
Prepaids and other currents assets | |
| | | |
| (614,944 | ) | |
| (29,706 | ) |
Other non-current assets | |
| | | |
| 4,908 | | |
| 5,507 | |
Accounts receivable | |
| | | |
| (112,470 | ) | |
| (18,705 | ) |
Accounts payable and accrued liabilities | |
| | | |
| (321,106 | ) | |
| (508,871 | ) |
Deferred rent | |
| | | |
| 12,485 | | |
| 16,171 | |
Lease obligations | |
| | | |
| (193,109 | ) | |
| (209,112 | ) |
Total cash used in operating activities | |
| | | |
| (4,022,346 | ) | |
| (4,968,639 | ) |
| |
| | | |
| | | |
| | |
Investing Activities | |
| | | |
| | | |
| | |
Payment of acquisition consideration | |
| | | |
| - | | |
| (500,000 | ) |
Sale of short-term investments | |
| | | |
| 21,317 | | |
| - | |
Purchase of short-term investments | |
| | | |
| (21,317 | ) | |
| - | |
Purchase of property and equipment | |
| | | |
| (9,291 | ) | |
| - | |
Total cash used in investing activities | |
| | | |
| (9,291 | ) | |
| (500,000 | ) |
| |
| | | |
| | | |
| | |
Financing Activities | |
| | | |
| | | |
| | |
Proceeds from private placement net of issuance costs | |
| 7 | | |
| 4,654,042 | | |
| 10,744,351 | |
Total cash provided by financing activities | |
| | | |
| 4,654,042 | | |
| 10,744,351 | |
| |
| | | |
| | | |
| | |
Increase in cash during the period | |
| | | |
| 622,405 | | |
| 5,275,712 | |
Cash and cash equivalents beginning of the period | |
| | | |
| 8,912,517 | | |
| 6,176,866 | |
Cash and cash equivalents end of the period | |
| | | |
| 9,534,922 | | |
| 11,452,578 | |
| |
| | | |
| | | |
| | |
SUPPLEMENTARY CASH FLOW INFORMATION: | |
| | | |
| | | |
| | |
Cash Paid During the Year for: | |
| | | |
| | | |
| | |
Income taxes | |
| | | |
$ | - | | |
$ | 9,800 | |
Interest | |
| | | |
$ | - | | |
$ | - | |
| |
| | | |
| | | |
| | |
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | |
| | | |
| | | |
| | |
Fair value of warrant modification recorded as equity issuance costs | |
| | | |
$ | 3,508,749 | | |
$ | - | |
Preferred investment options to its placement agent | |
| | | |
$ | 325,699 | | |
$ | 691,483 | |
Recognition of Right-of-use asset and corresponding operating lease liability | |
| | | |
$ | 968,376 | | |
$ | - | |
The accompanying notes form an integral part of
these condensed consolidated interim financial statements.
InMed Pharmaceuticals Inc.
Notes to the Condensed Consolidated Interim
Financial Statements
1. |
CORPORATE INFORMATION AND CONTINUING OPERATIONS |
Business
InMed Pharmaceuticals
Inc. (“InMed” or the “Company”) was incorporated in the Province of British Columbia on May 19, 1981 under the
Business Corporations Act of British Columbia. InMed is a clinical stage pharmaceutical company developing a pipeline of prescription-based
products, including rare cannabinoids and novel cannabinoid analogs, targeting the treatment of diseases with high unmet medical needs
as well as developing proprietary manufacturing technologies to produce rare cannabinoids for sale in the health and wellness industry.
The Company’s
shares are listed on the Nasdaq Capital Market (“Nasdaq”) under the trading symbol “INM”. InMed’s office
and principal place of business is located at #310 – 815 West Hastings Street, Vancouver, B.C., Canada, V6C 1B4.
Going Concern
In accordance
with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, Disclosure
of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there
are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as
a going concern within one year after the date that the consolidated financial statements are issued.
Through December
31, 2023, the Company has funded its operations primarily with proceeds from the sale of common stock. The Company has incurred recurring
losses and negative cash flows from operations since its inception, including net losses of approximately $4.0 million and $5.6 million
for the six months ended December, 2023 and 2022, respectively. In addition, the Company had an accumulated deficit of approximately $105.4
million as of December 31, 2023. The Company expects to continue to generate operating losses for the foreseeable future.
As of the issuance date of these condensed consolidated interim financial
statements, the Company expects its cash, cash equivalents and short-term investments of $9.5 million as of December 31, 2023, will be
sufficient to fund its operating expenses and capital expenditure requirements into the third quarter of calendar 2024, depending
on the level and timing of realizing BayMedica revenues from the sale of bulk rare cannabinoids in the health and wellness sector as well
as the level and timing of the Company’s operating expenses. The future viability of the Company is dependent on its ability to
raise additional capital to finance its operations. The Company has concluded that there is substantial doubt about its ability to continue
as a going concern within one year after the date that the consolidated financial statements are issued.
The Company expects
to continue to seek additional funding through equity financings, debt financings or other capital sources, including collaborations with
other companies, government contracts or other strategic transactions. The Company may not be able to obtain financing on acceptable terms,
or at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s existing shareholders.
These condensed
consolidated interim financial statements have been prepared on a going concern basis, which assumes that the Company will be able to
meet its commitments, realize its assets and discharge its liabilities in the normal course. These condensed consolidated interim financial
statements do not reflect adjustments to the carrying values of assets and liabilities that would be necessary if the Company was unable
to continue as a going concern and such adjustments could be material.
2. |
SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
These unaudited
condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles as
applied in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange
Commission (“SEC”) for financial information. Accordingly, these financial statements do not include all the information and
footnotes required for complete financial statements and should be read in conjunction with the audited consolidated financial statements
of the Company and the accompanying notes thereto for the fiscal year ended June 30, 2023.
These unaudited
condensed consolidated interim financial statements reflect all adjustments, consisting solely of normal recurring adjustments, which,
in the opinion of management, are necessary for a fair presentation of results for the interim periods presented. The results of operations
for the three months and six months ended December 31, 2023 and 2022 are not necessarily indicative of results that can be expected for
a full year. These unaudited condensed consolidated interim financial statements follow the same significant accounting policies as those
described in the notes to the audited consolidated financial statements of the Company for the fiscal year ended June 30, 2023.
Reclassifications
Certain prior
year amounts in the consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the current
year’s presentation. These reclassifications did not affect the prior period’s total assets, total liabilities, stockholders’
deficit, net loss or net cash used in operating activities. During the three months and six months ended December 31, 2023, we adopted
a change in presentation on our consolidated statements of operations loss in order to include foreign exchange loss in operating expenses.
Prior periods have been revised to reflect this change in the presentation.
Use of Estimates
The preparation
of financial statements in compliance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount
of assets and liabilities as of the balance sheet date, and the corresponding revenues and expenses for the periods reported. It also
requires management to exercise judgment in applying the Company’s accounting policies. In the future, actual experience may differ
from these estimates and assumptions. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates
are significant to these consolidated financial statements are the estimate of useful life of intangible assets, the application of the
going concern assumption, and determining the fair value of share-based payments, income tax provisions, write-down of inventories to
net realizable value, and warrant valuations.
Actual results
could differ from those estimates.
Basis
of Consolidation
These
condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries, including subsidiaries:
InMed Pharmaceutical Ltd., BayMedica, LLC, Biogen Sciences Inc., and Sweetnam Consulting Inc. A subsidiary is an entity that the Company
controls, either directly or indirectly, where control is defined as the power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities. All inter-company transactions and balances including unrealized income and expenses arising
from intercompany transactions are eliminated in preparing these condensed consolidated interim financial statements.
Foreign
Currency
The
functional currency of the Company and its subsidiaries is the U.S. Dollar. These consolidated financial statements are presented in U.S.
Dollars. References to “$” and “US$” are to United States (“U.S.”) dollars and references to “C$”
are to Canadian dollars.
Accounts Receivable
Accounts receivable
are recorded at invoiced amounts, net of any allowance for doubtful accounts. The allowance for doubtful accounts is the Company’s
best estimate of the amount of probable credit losses in existing accounts receivable.
The Company evaluates
the collectability of accounts receivable on a regular basis based upon various factors including the financial condition and payment
history of customers, an overall review of collections experience on other accounts and economic factors or events expected to affect
future collections experience. Expected credit losses on our accounts receivable were $66,775 as of December 31, 2023 and June 30, 2023.
Inventories
Inventories
are initially valued at weighted average cost and subsequently valued at the lower of weighted average cost and net realizable value.
Costs included in inventories are the purchase price of goods and cost of services rendered, freight costs, warehousing costs, purchasing
costs and production and labor costs related to manufacturing.
In determining any valuation
allowances, the Company reviews inventory for obsolete, redundant, and slow-moving goods. As of December 31, 2023 and June 30, 2023, the
Company has $357,224 and $93,820 respectively, as a valuation allowance to reduce weighted average cost to net realizable value.
During the three months ended December 31, 2023 and 2022, the Company recorded an inventory write-down of $170,474 and $0, respectively.
During the six months ended December 31, 2023 and 2022, the Company recorded an inventory write-down of $263,404 and $576,772 respectively.
Cost
of Sales
Cost
of sales consists primarily of the purchase price of goods and cost of services rendered, freight costs, warehousing costs, and purchasing
costs. Cost of sales also includes production and labor costs for the Company’s manufacturing business.
Concentration of Credit Risk
and Other Risks and Uncertainties
At times, cash balances may exceed the Federal Deposit Insurance Corporation
(“FDIC”) or Canadian Deposit Insurance Corporation (“CDIC”) insurable limits. The Company has not experienced
any losses related to these balances. The uninsured cash balance as of December 31, 2023, was $5.1 million. The Company does not believe
it is exposed to significant credit risk on cash and cash equivalents.
The Company’s
customers are primarily concentrated in the United States.
As of December
31, 2023, the Company had three customers with an accounts receivable balance representing 57%, 28% and 11% of total accounts receivable,
respectively. As of June 30, 2023, we had three customers with an accounts receivable balance representing 41%, 30% and 15% of total accounts
receivable.
For the three
months ended December 31, 2023, the Company had two customers that accounted for 51% and 20% of revenue, respectively. For the three months
ended December 31, 2022, the Company had four customers that accounted for 21%, 18%, 15% and 11% of revenue, respectively.
For the six months ended December 31, 2023, the Company had four customers
that accounted for 44%, 14%, 13% and 10% of revenue, respectively. For the six months ended December 31, 2022, the Company had four customers
that accounted for 20%, 17%, 12%, and 10% of revenue, respectively. This change is reflective of the Company’s evolution to a primarily
distributor model in 2023.
Financial Assets and Liabilities
Financial Assets
Financial assets
are initially recognized at fair value, plus transaction costs that are directly attributable to their acquisition or issue and subsequently
carried at amortized cost, using the effective interest rate method, less any impairment losses. No financial assets are or elected to
be carried at fair value through profit or loss or where changes in fair value are recognized in the consolidated statements of operations
and comprehensive loss in other comprehensive loss.
Short-term investments
are subsequently recorded at cost plus accrued interest, which approximates fair value due to short term nature. Accounts receivable are
reported at outstanding amounts, net of provisions for uncollectable amounts.
Financial Liabilities
To determine the
fair value of financial instruments, the Company uses the fair value hierarchy for inputs used to measure the fair value of financial
assets and liabilities. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels: Level
1 (highest priority), Level 2, and Level 3 (lowest priority).
|
Level 1 – |
Unadjusted quoted prices in active markets for identical instruments. |
|
Level 2 – |
Inputs other than quoted prices included within Level 1 are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). |
|
Level 3 – |
Inputs are unobservable and reflect the Company’s assumptions as to what market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available. Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. |
The carrying value
of cash and cash equivalents, short-term investments, accounts receivable, and accounts payable and accrued liabilities, approximate their
carrying values as of December 31, 2023 and June 30, 2023 due to their immediate or short-term maturities.
Earnings (Loss) Per Share
Basic
earnings (loss) per common share (“EPS”) is computed by dividing the net income or loss applicable to common shares of
the Company by the weighted average number of common shares outstanding for the relevant period. The Company has 3,012,049
pre-funded warrants and 932,954 abeyance shares included in the basic earnings (loss) per share. Diluted earnings (loss) per common
share (“Diluted EPS”) is computed by dividing the net income or loss applicable to common shares by the sum of the
weighted average number of common shares issued and outstanding and all additional common shares that would have been outstanding for the three and six months ended December 31, 2023,
if potentially dilutive instruments were converted. If the conversion of outstanding stock options and warrants into common share is
anti-dilutive, then diluted EPS is not presented separately from EPS.
The
following table sets forth the number of potential shares of common stock that have been excluded from diluted net income (loss) per because
their effect was anti-dilutive:
| |
As of December 31, | |
| |
2023 | | |
2022 | |
Options | |
| 72,418 | | |
| 26,813 | |
Warrants | |
| 10,192,044 | | |
| 3,528,643 | |
| |
| 10,264,462 | | |
| 3,555,456 | |
Recent Accounting Pronouncements
The Company has
reviewed recent accounting pronouncements and concluded that they are either not applicable to the Company or that there was no material
impact or no material impact is expected in the consolidated financial statements as a result of future adoption.
Inventories consisted of the following:
| |
December 31, 2023 | | |
June 30, 2023 | |
| |
| | |
| |
Raw materials | |
$ | - | | |
$ | 208,737 | |
Work in process | |
| 186,980 | | |
| 514,113 | |
Finished goods | |
| 557,859 | | |
| 893,506 | |
Inventories | |
$ | 744,839 | | |
$ | 1,616,356 | |
During the three
months ended December 31, 2023 and 2022, the write-down of inventories to net realizable value was $170,474 and $0, respectively. During
the six months ended December 31, 2023 and 2022, the write-down of inventories to net realizable value was $263,404 and $576,772, respectively.
Contributing factors to the decrease in net realizable value included lower demand and downward pricing pressure for certain products.
As of December 31, 2023 and June 30, 2023, the Company has $357,224 and $93,820, respectively, as a valuation allowance to reduce weighted
average cost to new basis.
4. |
PROPERTY, EQUIPMENT AND RIGHT OF USE (‘ROU’) ASSETS, NET |
Property, equipment and ROU assets consisted of
the following:
| |
December 31, 2023 | | |
June 30, 2023 | |
| |
| | |
| |
Right-of-use assets (leases) | |
$ | 2,135,811 | | |
$ | 1,167,436 | |
Equipment | |
| 429,090 | | |
| 440,902 | |
Furnishing | |
| 40,409 | | |
| 40,409 | |
Property and equipment | |
$ | 2,605,310 | | |
$ | 1,648,747 | |
Less: accumulated depreciation and amortization | |
| (1,124,208 | ) | |
| (925,321 | ) |
Property, equipment and ROU assets, net | |
$ | 1,481,102 | | |
$ | 723,426 | |
Depreciation expense
on computer equipment, lab equipment and furnishing for the three months ended December 31, 2023 and 2022, was $14,242 and $8,056, respectively,
and was recorded in general and administrative expenses. Amortization expense related to the right-of-use assets for the three months
ended December 31, 2023 and 2022, was $93,085 and $90,389, respectively, and was recorded in general and administrative expenses.
Depreciation expense on computer equipment, lab equipment and furnishing
for the six months ended December 31, 2023 and 2022, was $28,080 and $16,111, respectively, and was recorded in general and administrative
expenses. Amortization expense related to the right-of-use assets for the six months ended December 31, 2023 and 2022, was $191,909 and
$197,767, respectively, and was recorded in general and administrative expenses
The following table summarizes the Companies intangible
assets:
| |
December 31, 2023 | | |
June 30, 2023 | |
| |
| | |
| |
Intellectual property | |
$ | 1,736,420 | | |
$ | 1,736,420 | |
Patents | |
| 1,191,000 | | |
| 1,191,000 | |
Intangible assets | |
| 2,927,420 | | |
| 2,927,420 | |
Less: accumulated amortization | |
| (1,063,128 | ) | |
| (981,141 | ) |
Intangible assets, net | |
$ | 1,864,292 | | |
$ | 1,946,279 | |
Acquired intellectual
property is recorded at cost and is amortized on a straight-line basis over 18 years. Acquired patents consist of patents related to the
development of cannabinoid analogs. This intangible asset is being amortized over an estimated useful life of 18 years. As of December
31, 2023, the definite-lived intangible assets had a weighted average estimated remaining useful life of approximately 12 years.
Amortization expense
on intangible assets for the three months ended December 31, 2023 and 2022 was $40,993 and $40,993, respectively. Amortization expense
on intangible assets for the six months ended December 31, 2023 and 2022 was $81,986 and $81,986, respectively.
The Company expects amortization
expense to be incurred over the next five years as follows:
Twelve months ending December 31, | |
| |
2024 | |
$ | 158,935 | |
2025 | |
| 158,935 | |
2026 | |
| 158,935 | |
2027 | |
| 158,935 | |
2028 | |
| 158,935 | |
Thereafter | |
| 1,069,617 | |
Total | |
$ | 1,864,292 | |
6. |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
Accounts payable and accrued
liabilities consist of the following:
| |
December 31, 2023 | | |
June 30, 2023 | |
| |
| | |
| |
Trade payables | |
$ | 306,455 | | |
$ | 544,179 | |
Accrued research and development expenses | |
| 356,726 | | |
| 164,587 | |
Inventory related accounts | |
| 101,775 | | |
| - | |
Employee compensation, benefits and related accruals | |
| 422,221 | | |
| 542,305 | |
Accrued general and administrative expenses | |
| 100,446 | | |
| 357,664 | |
Accounts payable and accrued liabilities | |
$ | 1,287,623 | | |
$ | 1,608,735 | |
7. |
SHARE CAPITAL AND RESERVES |
As of December
31, 2023, the Company’s authorized share structure consisted of: (i) an unlimited number of common shares without par value; and
(ii) an unlimited number of preferred shares without par value. No preferred shares were issued and outstanding as of December 31, 2023
and June 30, 2023.
The Company may
issue preferred shares and may, at the time of issuance, determine the rights, preference and limitations pertaining to these shares.
Holders of preferred shares may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding up
of the Company before any payment is made to the holders of common shares.
On October 24, 2023, the Company
entered into a securities purchase agreement with two accredited institutional investors for the sale of 3,012,049 pre-funded warrants
of the Company’s common stock at a purchase price of $0.83 per share. The warrants have an exercise price of $0.0001 and do not
have an expiration date. The pre-funded warrants had a fair value of $1,248,376. In addition, the Company agreed to issue to the purchasers
unregistered preferred investment options to purchase up to an aggregate of 3,012,049 common shares. These preferred investment options
have an exercise price of $0.83 and has a term of 5.5 years from issuance. The preferred investment options had a fair value of $1,251,449.
As of the date of this filing, none of these warrants have been exercised.
Concurrently with the Company’s
entry into the purchase agreement, the Company also entered into an inducement offer letter agreement with the holders of existing preferred
investment options to purchase up to an aggregate of 3,272,733 common shares of the Company issued to the holders on November 21, 2022.
Pursuant to the inducement letter, the holders agreed to exercise for cash their existing preferred investment options to purchase an
aggregate of 3,272,733 common shares of the Company at a reduced exercise price of $0.83 per share in consideration of the Company’s
agreement to issue new unregistered preferred investment options to purchase up to an aggregate of 6,545,466 shares of the Company’s
common shares at an exercise price of $0.83. Due to ownership limitations the accredited institutional investors had 1,796,552 shares
held in abeyance as of the closing of the private placement. The abeyance shares had a fair value of $1,491,138 and the common stock issued
had a fair value of $1,225,230 on the issuance date. As of December 31, 2023, the investors drew down 863,598 abeyance shares. Subsequent
to December 31, 2023, the investors pulled down 389,000 abeyance shares.
The
inducement is considered a warrant modification due to the changing of the terms of the warrants. The modification had a fair value
of $3.5 million using a Black-Scholes model and is recognized as an equity issuance cost in accordance with ASC 718-20-35-3.
On
October 26, 2023, the parties consummated the offerings. The Company received gross proceeds of approximately
$5.2 million from the private placement and paid approximately $560,000
in cash fees relating to this offering. The Company also issued 408,511 warrants to our placement agent. These warrants have an
exercise price of $1.0375 and a term of 5.5 years. The placement agent warrants had a fair value of $325,699 using
a Black-Scholes model and were recorded in as an equity issuance cost.
Common
Stock Warrant
The assumptions used in the Black-Scholes
model to value the new warrants issue during the six months ended December 31, 2023, are set forth in the table below.
| |
2023 | |
Exercise price | |
$ | 0.83 – 1.04 | |
Risk-free interest rate | |
| 4.82 | % |
Volatility | |
| 109 – 111 | % |
Expected life (years) | |
| 5.0 – 5.5 | |
Dividend yield | |
$ | 0 | % |
The
assumptions used in the Black-Scholes model to value the modification of warrants issue during the six months ended December 31, 2023,
are set forth in the table below.
| |
2023 | |
Exercise price | |
$ | 0.83 – 3.04 | |
Risk-free interest rate | |
| 0.56 - 4.82 | % |
Volatility | |
| 109 – 614 | % |
Expected life (years) | |
| 0 – 6.8 | |
Dividend yield | |
$ | 0 | % |
A
summary of the Company’s warrant activity and related information follows:
| |
Number of
Shares
Under
Warrants | | |
Weighted
Average
Exercise
Price | |
Warrants Outstanding at July 1, 2023 | |
| 3,516,529 | | |
$ | 3.83 | |
Warrants Granted | |
| 12,978,075 | | |
| 0.64 | |
Exercised | |
| (3,272,733 | ) | |
| 0.83 | |
Expire/Cancelled | |
| (17,778 | ) | |
| 18.50 | |
Warrants Outstanding at December 31, 2023 | |
| 13,204,093 | | |
$ | 0.87 | |
| |
| | | |
| | |
Warrants Exercisable at December 31, 2023 | |
| 13,204,093 | | |
$ | 0.87 | |
As of December
31, 2023, the warrants exercisable and outstanding have an intrinsic value of $1,252,711 with a weighted average remaining life of 4 years.
On March 24, 2017,
and as amended on November 20, 2020, the Company’s shareholders approved: (i) the adoption of a new stock option plan (the “Plan”)
pursuant to which the Board of Directors may, from time to time, in its discretion and in accordance with regulatory requirements, grant
to directors, officers, employees and consultants of the Company, non-transferable options to purchase common shares, provided that the
number of common shares reserved for issuance will not exceed twenty percent (20%) of the issued and outstanding common shares at the
date the options are granted (on a non-diluted and rolling basis); and (ii) the application of the new stock option plan to all outstanding
stock options of the Company that were granted prior to March 24, 2017 under the terms of the Company’s previous stock option plan.
On December 19, 2023, the board of directors approved the reservation of an additional 700,000 shares of common stock under the Plan.
As of December
31, 2023 and June 30, 2023, there were 223,881 and 51,633 options, respectively, immediately available for future allocation pursuant
to SEC rules. The maximum number of options issuable under the terms of the Plan equates to 20% of the then issued and outstanding shares.
The option price under each option shall not be less than the closing price on the day prior to the date of grant. All options vest upon
terms as set by the Board of Directors, either over time, up to 36 months, or upon the achievement of certain corporate milestones.
Stock options
granted prior to May 2021 were granted with Canadian dollar exercise prices (United States dollar amounts for weighted average exercise
prices and aggregate intrinsic value are calculated using prevailing rates as at June 30, 2022). Commencing in May 2021, stock options
are granted with United States dollar exercise prices.
On December 23,
2023, the Company issued 452,000 options to our employees. The options have an exercise price of $0.37 with a term of 5 years. The options
vest in equal installments monthly over three years.
On December 23,
2023, the Company issued 50,000 options to consultants. The options have an exercise price of $0.37 with a term of 5 years. The options
vest in equal installments monthly over three years.
On December 23,
2023, the Company issued 28,400 options to members of the Company’s board of Directors. The options have an exercise price of $0.37
with a term of 5 years. The options vest December 23, 2024 or immediately prior to the next Annual General Meeting, whichever is sooner.
The assumptions used in the Black-Scholes
model during the six months ended December 31, 2023, are set forth in the table below.
| |
2023 | |
Exercise price | |
$ | 0.37 | |
Risk-free interest rate | |
| 3.95 | % |
Volatility | |
| 203 | % |
Expected life (years) | |
| 3.6 | |
Dividend yield | |
$ | 0 | % |
The following
is a summary of changes in outstanding options from July 1, 2023 to December 31, 2023:
| |
Number | | |
Weighted Average
Exercise Price | |
| |
| | |
| |
Balance at July 1, 2023 | |
| 102,642 | | |
$ | 31.28 | |
Granted | |
| 530,400 | | |
| 0.37 | |
Expired/Forfeited | |
| (1,357 | ) | |
| 419,42 | |
Balance at December 31, 2023 | |
| 631,685 | | |
$ | 4.61 | |
December 31, 2023: | |
| | | |
| | |
Vested and exercisable | |
| 72,418 | | |
$ | 36,40 | |
Unvested | |
| 559,267 | | |
$ | 0.50 | |
|
ii) |
Expenses Arising from Share-based Payment Transactions: |
Total expenses
arising from share-based payment transactions recognized during the three months ended December 31, 2023 and 2022 were $18,264 and $70,638,
respectively, of which $10,136 and $44,042, respectively, was allocated to general and administrative expenses and the remaining $8,128
and $26,596, respectively, was allocated to research and development expenses.
Total expenses
arising from share-based payment transactions recognized during the six months ended December 31, 2023 and 2022 were $43,455 and $187,319,
respectively, of which $25,567 and $109,114, respectively, was allocated to general and administrative expenses and the remaining $17,889
and $78,205, respectively, was allocated to research and development expenses.
Unrecognized compensation
cost at December 31, 2023 related to unvested options was $187,634 which will be recognized over a weighted-average vesting period of
1.5 years.
The Company is committed to minimum lease payments as follows:
Maturity Analysis | |
December 31, 2023 | |
| |
| |
Year 1 | |
$ | 441,004 | |
Year 2 | |
| 361,385 | |
Year 3 | |
| 372,227 | |
Year 4 | |
| 125,292 | |
Year 5 | |
| - | |
More than five years | |
| - | |
Total undiscounted lease liabilities(1) | |
| 1,299,908 | |
Less: imputed interest | |
| (132,934 | ) |
Present value of lease liabilities | |
| 1,166,974 | |
| |
| | |
Less: Current portion of lease liabilities | |
| (364,190 | ) |
Non-current portion of lease liabilities | |
| 802,784 | |
On October 5, 2023, BayMedica amended its lease located at 458 Carlton
Court, Suite C, South San Francisco, California. The Company agreed to extend its lease to May 14, 2027. The Company is obligated to pay
$1,095,104 over the three-year period unless terminated before the end of the period. The Company used an incremental borrowing rate of
6.15% and recognized a right-of-use asset and corresponding operating lease liability of $968,376.
As of the closing of the BayMedica acquisition, the Company aligned
into two operating and reportable segments, the InMed segment and the BayMedica segment. The Company reports segment information based
on the management approach which designates the internal reporting used by the Chief Operating Decision Maker (“CODM”), which
is the Company’s Chief Executive Officer, for making decisions and assessing performance as the source of the Company’s reportable
segments. The CODM allocates resources and assesses the performance of each operating segment based on potential licensing opportunities,
historical and potential future product sales, operating expenses, and operating income (loss) before interest and taxes. The Company
has determined its reportable segments to be InMed and BayMedica based on the information used by the CODM. Other than cash, cash equivalents
and short-term investments (“Unrestricted cash”) balances, the CODM does not regularly review asset information by reportable
segment and, therefore, the Company does not report asset information by reportable segment.
The InMed segment
is largely organized around the research and development of cannabinoid-based pharmaceuticals products and the BayMedica segment is largely
organized around developing proprietary manufacturing technologies to produce rare cannabinoids for sale in the health and wellness industry.
Total assets held in the InMed segment as of December 31, 2023 and June 30, 2023 are $10,214,317 and $9,498,752, respectively. Total assets
as of December 31 and June 30, 2023, held in the BayMedica segment are $5,041,146 and $4,607,588, respectively.
The following
table presents information about the Company’s reportable segments for the three months ended December 31, 2023 and 2022:
| |
For the three months ended | |
| |
December 31, 2023 | | |
December 31, 2022 | |
| |
InMed | | |
BayMedica | | |
Total | | |
InMed | | |
BayMedica | | |
Total | |
| |
| $ | | |
| $ | | |
| $ | | |
| $ | | |
| $ | | |
| $ | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sales | |
| - | | |
| 1,240,200 | | |
| 1,240,200 | | |
| - | | |
| 469,783 | | |
| 469,783 | |
Cost of sales | |
| - | | |
| (745,584 | ) | |
| (745,584 | ) | |
| - | | |
| (338,620 | ) | |
| (338,620 | ) |
Inventory write-down | |
| - | | |
| (170,474 | ) | |
| (170,474 | ) | |
| - | | |
| - | | |
| - | |
Operating expenses | |
| (1,185,676 | ) | |
| (783,411 | ) | |
| (1,969,087 | ) | |
| (1,682,058 | ) | |
| (662,989 | ) | |
| (2,345,047 | ) |
Other income (expense) | |
| 117,661 | | |
| 49,099 | | |
| 166,760 | | |
| 68,480 | | |
| 44,317 | | |
| 112,797 | |
Net loss | |
| (1,068,015 | ) | |
| (410,170 | ) | |
| (1,478,185 | ) | |
| (1,613,578 | ) | |
| (487,509 | ) | |
| (2,101,087 | ) |
Unrestricted cash | |
| 8,226,917 | | |
| 1,308,005 | | |
| 9,534,922 | | |
| 11,262,390 | | |
| 190,188 | | |
| 11,452,578
| |
| |
For the six months ended | |
| |
December 31, 2023 | | |
December 31, 2022 | |
| |
InMed | | |
BayMedica | | |
Total | | |
InMed | | |
BayMedica | | |
Total | |
| |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Sales | |
| - | | |
| 2,142,062 | | |
| 2,142,062 | | |
| - | | |
| 790,571 | | |
| 790,571 | |
Cost of sales | |
| - | | |
| (1,533,274 | ) | |
| (1,533,274 | ) | |
| - | | |
| (573,654 | ) | |
| (573,654 | ) |
Inventory write-down | |
| - | | |
| (263,404 | ) | |
| (263,404 | ) | |
| - | | |
| (576,772 | ) | |
| (576,772 | ) |
Operating expenses | |
| (3,036,815 | ) | |
| (1,626,385 | ) | |
| (4,663,200 | ) | |
| (3,978,798 | ) | |
| (1,451,218 | ) | |
| (5,430,016 | ) |
Other income (expense) | |
| 185,055 | | |
| 117,748 | | |
| 302,803 | | |
| 96,389 | | |
| 82,195 | | |
| 178,584 | |
Net loss | |
| (2,851,760 | ) | |
| (1,163,253 | ) | |
| (4,015,013 | ) | |
| (3,882,409 | ) | |
| (1,728,878 | ) | |
| (5,611,287 | ) |
Unrestricted cash | |
| 8,226,917 | | |
| 1,308,005 | | |
| 9,534,922 | | |
| 11,262,390 | | |
| 190,188 | | |
| 11,452,578
| |
11. |
COMMITMENTS AND CONTINGENCIES |
Pursuant to the
terms of agreements with various contract research organizations, as of December 31, 2023, the Company is committed for contract research
services and materials at a cost of approximately $1.9 million, expected to occur in the following twelve months period.
Pursuant to the
terms of agreements with various vendors, as of December 31, 2023, the Company is committed for contract materials and equipment at a
cost of approximately $0.9 million, expected to occur in the twelve months following December 31, 2023.
Pursuant to the
terms of a May 31, 2017, Technology Assignment Agreement between the Company and the University of British Columbia (“UBC”),
the Company is committed to pay royalties to UBC on certain licensing and royalty revenues received by the Company for biosynthesis of
certain drug products that are covered by the agreement. To date, no payments have been required to be made.
Pursuant to the
terms of a December 13, 2018 Collaborative Research Agreement with UBC in which the Company owns all rights, title and interests in and
to any intellectual property, in addition to funding research at UBC, the Company is committed to make a one-time payment upon filing
of any PCT patent application arising from the research. To date, one such payment has been made to UBC.
Pursuant to the
terms of a November 1, 2018 Contribution Agreement with National Research Council Canada, as represented by its Industrial Research Assistance
Program (NRC-IRAP), under certain circumstances contributions received, including the disposition of the underlying intellectual property
developed in part with NRC-IRAP contributions, may become repayable.
Short-term investments
include guaranteed investment certificates, with one-year terms of $44,462 and $44,422 as of December 31, 2023 and June 30, 2023, respectively,
that are pledged as security for a corporate credit card.
The Company has
entered into certain agreements in the ordinary course of operations that may include indemnification provisions, which are common in
such agreements. In some cases, the maximum amount of potential future indemnification is unlimited; however, the Company currently holds
commercial general liability insurance. This insurance limits the Company’s liability and may enable the Company to recover a portion
of any future amounts paid. Historically, the Company has not made any indemnification payments under such agreements and it believes
that the fair value of these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating
to these obligations for any period presented.
Pursuant to a
technology licensing agreement, the Company is committed to issue, subject to regulatory approval, up to 700 warrants to purchase 700
common shares upon the achievement of certain milestones. The exercise price of the warrants will be equal to the five-day VWAP of the
common shares prior to each milestone achievement and the warrants will be exercisable for a period of three years from the issuance date.
BayMedica LLC,
a wholly-owned subsidiary of the Company, entered into a patent license agreement (“Agreement”) with a third party (the “Licensor”)
in an agreement dated February 15, 2021. The Company is required to make future royalty payments to the Licensor based on net sales of
licensed products, with minimum payments required starting in 2021 to maintain an exclusive license. In December 2021, the Company amended
the License Agreement including the deferral of the 2021 minimum payments to 2022. As of June 30, 2023, the Company has paid $300,000
for the minimum payments under the agreement. On February 10, 2023, BayMedica received a letter from the Licensor alleging a breach of
the Agreement and asserting a right to monies thereunder. On April 6, 2023, BayMedica sent a letter to the Licensor disputing the Licensor’s
interpretation of the Agreement and considering the counterparty’s only remedy under the Agreement to be either (a) the conversion
of an exclusive technology license into a non-exclusive one or (b) to terminate the Agreement. The interpretation of a contract under
Ontario law requires consideration of the surrounding circumstances at the time the contract was negotiated, and BayMedica is of the view
that the text of the Agreement and the surrounding circumstances show that the remedy discussed above reflects the intention of the parties.
To date, the Licensor has not initiated a lawsuit. If a lawsuit is brought alleging a breach of the Agreement, the proceeding will be
subject to final, binding and non-appealable arbitration under the Arbitration Act, 1991 (Ontario) and determined pursuant to Ontario
law. BayMedica intends to vigorously defend its position. At this time, it is not possible to reasonably estimate a potential loss due
to the terms of the Agreement, the nature of the legal theory advanced by the counterparty, and the requirement under Ontario law that
a contract must be interpreted in light of the “surrounding circumstances” at the time the contract was formed. Management
will be better positioned to determine whether it is possible to estimate any potential loss following documentary and oral discovery,
if any.
From time to time,
the Company may be subject to various legal proceedings and claims related to matters arising in the ordinary course of business. The
Company does not believe it is currently subject to any material matters where there is at least a reasonable possibility that a material
loss may be incurred.
On September 19,
2023, the Company received written notice from the listing qualifications department staff of The Nasdaq Capital Market (“Nasdaq”)
notifying it that the average closing bid price of the Company’s common shares over a period of 30 consecutive trading days was
below the minimum $1.00 per share requirement for continued listing on the Nasdaq under Nasdaq Listing Rule 5550(a)(2).
In accordance
with applicable Nasdaq procedures, the Company has a period of 180 calendar days following the receipt of the written notice mentioned
above to cure the deficiency and regain compliance. The notice has no immediate impact on the listing of the Company’s common shares,
which will continue to trade on the Nasdaq subject to the Company’s continued compliance with the other listing requirements of
the Nasdaq. The common shares of the Company will continue to trade under the symbol “INM”. The Company intends to monitor
the closing share price for its common shares and explore available options to regain compliance.
In the event the
Company does not evidence compliance with the minimum bid price requirement during the 180-day grace period, it is expected that Nasdaq
would notify the Company that its common shares are subject to delisting. At such time, the Company may appeal such determination to a
Nasdaq Hearings Panel (the “Panel”) and it is expected that the Company’s securities would continue to be listed and
available to trade on Nasdaq at least pending the completion of the appeal process. There can be no assurance that any such appeal would
be successful or that the Company would be able to evidence compliance with the terms of any extension that may be granted by the Panel.
12. |
RELATED PARTY TRANSACTIONS |
On February 11,
2022, the Board of Directors appointed Janet Grove as a director of the Company. Ms. Grove is a Partner of Norton Rose Fulbright Canada
LLP (“NRF”). During the three months ended December 31, 2023 and 2022, NRF rendered legal services in the amount of $116,951
and $167,768, respectively, to the Company. During the six months ended December 31, 2023 and 2022, NRF rendered legal services in the
amount of $131,154 and $368,666, respectively, to the Company. These transactions were in the normal course of operations and were measured
at the exchange amount which represented the amount of consideration established and agreed to by NRF. No legal services rendered by NRF
were rendered by Ms. Grove directly.
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the consolidated
financial statements were issued. Based upon this review, other than as disclosed in Note 7, the Company did not identify any subsequent
events that would have required adjustment or disclosure in the consolidated financial statements.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This Quarterly Report on Form
10-Q contains “forward-looking statements” within the meaning of United States Private Securities Litigation Reform Act of
1995 and “forward-looking information” within the meaning of applicable Canadian securities law, which are included but are
not limited to statements with respect to InMed Pharmaceuticals Inc.’s (the “Company” or “InMed”) anticipated
results and progress of the Company’s operations, research and development in future periods, plans related to its business strategy,
and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts
of future results, estimates of amounts not yet determinable and assumptions of management. We may, in some cases, use words such as “anticipate”,
“believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”,
“predict”, “project”, “will”, “would”, and similar expressions that convey uncertainty
of future events or outcomes to identify these forward-looking statements. Any statements contained herein that are not statements of
historical facts may be deemed to be forward-looking statements. Forward-looking statements in this Form 10-Q include, but are not limited
to, statements about:
|
● |
The Company’s ability to stem operating losses and the Company’s ability to find further financing to fund operations; |
|
● |
The revenues of BayMedica, LLC (“BayMedica”) and the commercial viability of the products in its portfolio; |
|
● |
Our researching, developing, manufacturing and commercializing cannabinoid-based biopharmaceutical products will treat diseases with high unmet medical needs; |
|
● |
The continued optimization of cannabinoid manufacturing approaches; |
|
● |
Our ability to commercialize and, where required, register products in the pharmaceutical R&D programs (“Product Candidates”) and those targeted to the health and wellness sector (“Products”) in the United States and other jurisdictions; |
|
● |
Our success in initiating discussions with potential partners for licensing various aspects of our Product Candidates; |
|
● |
Our ability to successfully access existing manufacturing capacity via leases with third-parties or to transfer our manufacturing processes to contract manufacturing organizations; |
|
● |
Our belief that our manufacturing approaches that we are developing are robust and effective and will result in high yields of cannabinoids and will be a significant improvement upon existing manufacturing platforms; |
|
● |
The ability of the IntegraSyn approach to introduce a revenue stream to us before the expected commercial approval of our therapeutic programs; |
|
● |
Our ability to successfully scale up our IntegraSyn or other cost-effective approaches so that it will be commercial-scale ready after Phase 2 clinical trials are completed, after which time we may no longer need to source active pharmaceutical ingredients (“APIs”) from API manufacturers; |
|
● |
The success of the key next steps in our manufacturing approaches, including continuing efforts to diversify the number of cannabinoids produced, scaling-up the processes to larger vessels and identifying external vendors to assist in the commercial scale-up of the process; |
|
● |
Our ability to successfully make determinations as to which research and development programs to continue based on several strategic factors; |
|
● |
Our ability to monetize our IntegraSyn manufacturing approach to the broader pharmaceutical industry; |
|
● |
Our ability to continue to outsource the majority of our research and development activities through scientific collaboration agreements and arrangements with various scientific collaborators, academic institutions and their personnel; |
|
● |
The success of work to be conducted under the research and development collaboration between us and various contract development and manufacturing organizations (“CDMOs”); |
|
● |
Our ability to develop our therapies through early human testing; |
|
● |
Our ability to evaluate the financial returns on various commercialization approaches for our Product Candidates, such as a ‘go-it-alone’ commercialization effort, out-licensing to third parties, or co-promotion agreements with strategic collaborators; |
|
● |
Our ability to find a partnership early in the development process for our various programs; |
|
● |
Our ability to explore our manufacturing technologies as processes which may confer certain benefits, either cost, yield, speed, or all of the above, when pursuing specific types of cannabinoids, and filing a provisional patent application for same; |
|
● |
Plans regarding our next steps, options, and targeted benefits of our manufacturing technologies; |
|
● |
Our IntegraSyn or BayMedica derived products being bio-identical to the naturally occurring cannabinoids, and offering superior ease, control and quality of manufacturing when compared to alternative methods; |
|
● |
Our ability to potentially earn revenue from our IntegraSyn approach by (i) becoming a supplier of APIs to the pharmaceutical industry and/or (ii) providing pharmaceutical-grade ingredients to the non-pharmaceutical market; |
|
● |
U.S. Food and Drug Administration (“FDA”) regulatory acceptance of synthesizing rare cannabinoids for potential use in the pharmaceutical industry; |
|
● |
Our ability to successfully prosecute patent applications; |
|
● |
INM-088 being a once-a-day or twice-a-day eye drop medication that will compete with treatment modalities in the medicines category, and with the potential of INM-088 assisting in reducing the high rate of non-adherence with current glaucoma therapies; |
|
● |
Our belief that with a novel delivery system, the reduction of interocular pressure (“IOP”) and/or providing neuroprotection in glaucoma patients by topical (eye drop) application of cannabinoids will hold significant promise as a new therapy; |
|
● |
The potential for any of our patent applications to provide intellectual property protection for us; |
|
● |
Our ability to secure insurance coverage for shipping and storage of Product Candidates, and clinical trial insurance; |
|
● |
Our ability to expand our insurance coverage to include the commercial sale of Products and Product Candidates; |
|
● |
Developing patentable New Chemical Entities (“NCE”) which, if issued, will confer market exclusivity to us for the potential development into pharmaceutical Product Candidates, license, partner or sell to interested external parties; |
|
● |
Our ability to initiate discussions and conclude strategic partnerships to assist with development of certain programs; |
|
● |
Our ability to position ourselves to achieve value-driving, near term milestones for our Product Candidates with limited investment; |
|
● |
Our ability to execute our business strategy; |
|
● |
Our disclosure controls and procedures and internal control over financial reporting |
|
● |
Critical accounting estimates; |
|
● |
Management’s assessment of future plans and operations; |
|
● |
The outlook of our business and the global economic and geopolitical conditions; and |
|
● |
The competitive environment in which we and our business units operate. |
This list is not exhaustive of the factors that may affect our forward-looking
statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the
section heading: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report. Although
we have attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking
statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated,
believed, estimated, or expected. We caution readers not to place undue reliance on any such forward-looking statements, which speak only
as of the date made and are based only on the information available to us at that time. Except as required by law, we disclaim any obligation
to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
InMed Pharmaceuticals Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Three and six months ended December 31, 2023
InMed Pharmaceuticals Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Three and Six Months Ended December 31, 2023
This discussion and analysis
contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities
Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is subject to the
safe harbor created by those sections. For more information, see “Cautionary Note Regarding Forward-Looking Statements.” When
reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that impact our business. In particular,
we encourage you to review the risks and uncertainties described in “Risk Factors” in our Annual Report on Form 10-K, dated
September 23, 2023 and other filings with the Security and Exchange Commission. These risks and uncertainties could cause actual results
to differ materially from those projected or implied by our forward-looking statements contained in this report. These forward-looking
statements are made as of the date of this report, and we do not intend, and do not assume any obligation, to update these forward-looking
statements, except as required by law.
The following discussion
and analysis should be read in conjunction with our unaudited condensed consolidated interim financial statements for the three and six
months ended December 31, 2023, and the related notes thereto, which have been prepared in accordance with U.S. GAAP. Additionally, the
following discussion and analysis should be read in conjunction with our audited consolidated financial statements included in our Form
10-K filing. Throughout this discussion, unless the context specifies or implies otherwise the terms “InMed,” “Company,”
“we,” “us,” and “our” refer to InMed Pharmaceuticals Inc.
All dollar amounts stated herein are in
U.S. dollars unless specified otherwise.
Overview
We are a clinical stage pharmaceutical company developing a pipeline
of prescription-based products, using rare cannabinoids and novel cannabinoid analogs, targeting the treatment of diseases with high unmet
medical needs. Together with our subsidiary, BayMedica, we also have significant know-how in developing proprietary manufacturing approaches
to produce cannabinoids for various market sectors. Our know-how includes traditional approaches such as chemical synthesis and biosynthesis,
as well as a proprietary, integrated manufacturing approach called IntegraSyn. We are dedicated to delivering new therapeutic alternatives
to patients and consumers who may benefit from cannabinoid-based products. Our approach leverages on the several thousand years’
history of health benefits attributed to the Cannabis plant and brings this anecdotal information into the 21st century by applying
tried, tested and true scientific approaches to establish non-plant-derived (synthetically manufactured), individual cannabinoid compounds
as Product Candidates for InMed’s pharmaceutical product development pipeline or specific rare cannabinoid Products sold to end-product
manufacturers by BayMedica. While our activities do not involve direct use of Cannabis nor extracts from the plant, we note that
the FDA has, to date, not approved any marketing application for Cannabis for the treatment of any disease or condition and has
approved only one Cannabis-derived and three Cannabis-related drug products. Our ingredients are synthetically made and,
therefore, we have no interaction with the Cannabis plant. We do not grow nor utilize Cannabis nor its extracts in any of
our Products or Product Candidates; our current pharmaceutical drug Product Candidates are applied topically (not inhaled nor ingested);
and, we do not utilize THC or CBD, the most common cannabinoid compounds that are typically extracted from the Cannabis plant,
in any of our Products or Product Candidates. The API under development for our initial two drug candidates, INM-755 for EB and INM-088
for glaucoma, is CBN and additional uses of both INM-755 and INM-088 are being explored. Our recently launched programs INM-901 and INM-089
utilize novel cannabinoid analogs to treat Alzheimer’s and Age-related Macular Degeneration (“AMD”), respectively.
We believe we are positioned
to develop multiple pharmaceutical Product Candidates in diseases which may benefit from medicines based on rare cannabinoid compounds.
Most currently approved cannabinoid therapies are based specifically on CBD and/or THC and are often delivered orally, which has limitations
and drawbacks, such as side effects (including the intoxicating effects of THC). Currently, we intend to deliver our rare cannabinoid
pharmaceutical Product Candidates through various topical formulations (cream for dermatology, eye drops for ocular diseases) as a way
of enabling treatment of the specific disease at the site of disease while seeking to minimize systemic exposure and any related unwanted
systemic side effects, including any drug-drug interactions and any metabolism of the active pharmaceutical ingredient by the liver. The
cannabinoid Products sold through our B2B raw material supply business are integrated into various product formats by the companies who
then further commercializes such products. We access rare cannabinoids via all non-extraction approaches, including chemical synthesis,
biosynthesis and our proprietary integrated IntegraSyn approach, thus negating any interaction with or exposure to the Cannabis
plant.
Since our acquisition of Biogen
Sciences Inc., a privately held British Columbia pharmaceutical company focused on drug discovery and development of cannabinoids in 2014,
our operations have focused on conducting research and development for our Product Candidates and for our integrated, biosynthesis-based
manufacturing technology, establishing our intellectual property, organizing and staffing our Company, business planning and capital raising.
On October 13, 2021, we acquired BayMedica, Inc., now named BayMedica, LLC. Upon closing of the transaction, BayMedica became a wholly-owned
subsidiary of InMed. To date, we have funded our operations primarily through the issuance of common shares.
We have incurred significant
operating losses since our inception and we expect to continue to incur significant operating losses for the foreseeable future. Our ability
to generate product revenue that is sufficient to achieve profitability will depend heavily on the revenues generated from our products
in the health and wellness sector, on the successful development and eventual commercialization of one or more of our Product Candidates
and/or the success of our manufacturing technologies. Our net loss was $4.0 million and $5.6 million for the six months ended December
31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $105.4 million, which includes all losses since
our inception in 1981. We expect our expenses will remain steady as we:
| ● | seek
partnerships to advance the INM-755 program, our lead drug candidate for the treatment of EB; |
| ● | continue
to further advance research into the role of cannabinoids in treating ocular diseases; |
|
● |
continue to advance research in the INM-901 program, using a cannabinoid analog to target treatment of neurodegenerative diseases such as Alzheimer’s and in the INM-089 program to treat AMD; |
| ● | investigate
our Product Candidates for additional uses beyond their initial target indications; |
| ● | pursue
the discovery of drug targets based on proprietary cannabinoid analogs for other diseases with high unmet medical needs and the subsequent
development of any resulting new Product Candidates; |
| ● | seek
regulatory approvals for any Product Candidates that successfully complete clinical trials; |
| ● | scale-up
our manufacturing processes and capabilities, or arrange for a third party to do so on our behalf; |
| ● | continue
to support our commercial operations and revenue-generating Products at BayMedica; |
| ● | execute
on business development activities, including but not limited to company mergers/acquisitions and acquisition or in-licensing of externally
developed products and/or technologies; |
| ● | maintain,
expand, enforce, defend and protect our intellectual property; |
| ● | continue
to further advance the research and development of various manufacturing technologies; |
| ● | build
internal infrastructure, including personnel, to meet our milestones; and |
| ● | add
operational, financial and management information systems and personnel, including personnel to support product development and potential
future commercialization efforts and our operations as a public company. |
As a result of these activities
as well as our working capital requirements, we will need substantial additional funding to support our continuing operations and pursue
our growth strategy. We expect to finance our operations through product sales, the sale of equity, debt financings or other capital sources,
including collaborations with other companies or other strategic transactions. We may be unable to raise additional funds or enter into
such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements
as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more
of our Products and Product Candidates or grant rights to external entities to develop and market our Product Candidates, even if we would
otherwise prefer to develop and market such Products and Product Candidates ourselves.
Because of the numerous risks
and uncertainties associated with drug development and commercial growth, we are unable to predict the timing or amount of increased expenses
and working capital requirements or the timing of when or if we will be able to achieve or maintain profitability. If we fail to become
profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels
and be forced to reduce or terminate our operations.
Recent Developments
On October 24, 2023, the Company
entered into a securities purchase agreement with two accredited institutional investors for the sale and issuance of an aggregate of
3,012,049 of its common shares (or pre-funded warrants in lieu thereof) at a purchase price of $0.83 per share. In addition, the Company
agreed to issue to the purchasers unregistered preferred investment options to purchase up to an aggregate of 3,012,049 common shares.
Concurrently with the Company’s
entry into the purchase agreement, the Company also entered into an inducement offer letter agreement with the holders of existing preferred
investment options to purchase up to an aggregate of 3,272,733 common shares of the Company issued to the holders on November 21, 2022.
Pursuant to the inducement letter, the holders agreed to exercise for cash their existing preferred investment options to purchase an
aggregate of 3,272,733 common shares of the Company at a reduced exercise price of $0.83 per share in consideration of the Company’s
agreement to issue new unregistered preferred investment options to purchase up to an aggregate of 6,545,466 shares of the Company’s
common shares at an exercise price of $0.83. On October 26, 2023, the parties consummated the Offerings.
Components of Results of Operations
Revenue
Our revenue consists of manufacturing
and distribution sales of bulk rare cannabinoid Products, which are generally recognized at a point in time. We recognize revenue when
control over the products has been transferred to the customer and to which we have a present right to payment.
Cost of Sales
Cost
of sales consist primarily of the purchase price of goods and cost of services rendered, freight costs, warehousing costs, and purchasing
costs. Cost of sales also includes production and labor costs for our manufacturing business.
Operating Expenses
Research and Development and Patent Expenses
Research and development and
patent expenses represent costs incurred by us for the discovery, development, and manufacture of our Products and Product Candidates
and include:
| ● | external
research and development expenses incurred under agreements with contract research organizations, or “CROs”, contract development
and manufacturing organization, or “CDMOs”, and consultants; |
| ● | salaries,
payroll taxes, employee benefits expenses for individuals involved in research and development efforts; |
| ● | legal
and patent office fees related to patent and intellectual property matters. |
We expense research and development
costs as incurred. We recognize expenses for certain development activities, such as preclinical studies and manufacturing, based on an
evaluation of the progress to completion of specific tasks using data or other information provided to us by our vendors. Payments for
these activities are based on the terms of the individual agreements, which may differ from the pattern of expenses incurred. Non-refundable
advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid
expenses. These amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is
no longer expected that the goods will be delivered, or the services rendered.
External costs represent a
significant portion of our research and development expenses, which we track on a program-by-program basis following the nomination of
a development candidate. Our internal research and development expenses consist primarily of personnel-related expenses, including salaries,
benefits and stock-based compensation expense. We do not track our internal research and development expenses on a program-by-program
basis as the resources are deployed across multiple projects.
The successful development
of our Products and Product Candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing, and
estimated costs of the efforts that will be necessary to complete the remainder of the development of our Product Candidates or to develop
and commercialize additional Products. We are also unable to predict when, if ever, material net cash inflows will commence from our Product
Candidates, if approved. This is due to the numerous risks and uncertainties associated with development, including the uncertainty related
to:
| ● | the
timing and progress of preclinical and clinical development activities; |
| ● | the
number and scope of preclinical and clinical programs we decide to pursue; |
| ● | our
ability to raise additional funds necessary to complete preclinical and clinical development and commercialization of our Product Candidates,
to further advance the development of our manufacturing technologies, and to develop and commercialize additional Products, if any; |
| ● | our
ability to maintain our current research and development programs and to establish new ones; |
| ● | our
ability to establish sales, licensing or collaboration arrangements; |
| ● | the
progress of the development efforts of parties with whom we may enter into collaboration arrangements; |
| ● | the
successful initiation and completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the
FDA or any comparable foreign regulatory authority; |
| ● | the
receipt and related terms of regulatory approvals from applicable regulatory authorities; |
| ● | the
availability of materials for use in production of our Products and Product Candidates; |
| ● | our
ability to secure manufacturing supply through relationships with third parties or establish and operate a manufacturing facility; |
| ● | our
ability to consistently manufacture our Product Candidates in quantities sufficient for use in clinical trials; |
| ● | our
ability to obtain and maintain intellectual property protection and regulatory exclusivity, both in the United States and internationally; |
| ● | our
ability to maintain, enforce, defend and protect our rights in our intellectual property portfolio; |
| ● | the
commercialization of our Product Candidates, if and when approved, and of new Products; |
| ● | our
ability to obtain and maintain third-party payor coverage and adequate reimbursement for our Product Candidates, if approved; |
| ● | the
acceptance of our Product Candidates, if approved, by patients, the medical community and third-party payors; |
| ● | competition
with other products; and |
| ● | a
continued acceptable safety profile of our Product Candidates following receipt of any regulatory approvals. |
A change in the outcome of
any of these variables with respect to the development of any of our Products or Product Candidates would significantly change the costs
and timing associated with the development of those Products or Product Candidates.
Research and development activities account for a significant portion
of our operating expenses. Research and development expenses decreased in the three and six months ended December 31, 2023 as compared
to the three and six months ended December 31, 2022, largely due to high start-up costs associated with the multicenter Phase 2 clinical
trial in our INM-755 program during the prior year. However, we expect our research and development expenses to increase significantly
in future periods as we continue to implement our business strategy, which includes advancing our drug candidates and our manufacturing
technologies into and through clinical development, expanding our research and development efforts, including hiring additional personnel
to support our research and development efforts, ultimately seeking regulatory approvals for our drug candidates that successfully complete
clinical trials, and further developing selected R&D and commercial BayMedica activities. In addition, drug candidates in later stages
of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to
the increased size and duration of later-stage clinical trials. Accordingly, although we expect our research and development expenses
to increase as our drug candidates advance into later stages of clinical development, we do not believe that it is possible, at this time,
to accurately project total program-specific expenses through to commercialization. There are numerous factors associated with the successful
commercialization of any of our Product Candidates, including future trial design and various regulatory requirements, many of which cannot
be determined with accuracy at this time based on our stage of development.
General and Administrative Expenses
General and administrative
expenses consist of personnel-related costs, including salaries, benefits and stock-based compensation expense, for our personnel in executive,
finance and accounting, human resources, business operations and other administrative functions, investor relations activities, legal
fees related to corporate matters, fees paid for accounting and tax services, consulting fees and facility-related costs.
Amortization and Depreciation
Intangible assets are comprised
of intellectual property that we acquired in 2014 and 2015 and trade secrets, product formulation knowledge, and patents that we acquired
in October 2021. The acquired intellectual property and patents are amortized on a straight-line basis based on their estimated useful
lives. Equipment and leasehold improvements are depreciated using the straight-line method based on their estimated useful lives.
Share-based Payments
Share-based payments is the
stock-based compensation expense related to our granting of stock options to employees and others. The fair value, at the grant date,
of equity-settled share awards is charged to our loss over the period for which the benefits of employees and others providing similar
services are expected to be received. The vesting components of graded vesting employee awards are measured separately and expensed over
the related tranche’s vesting period. The amount recognized as an expense is adjusted to reflect the number of share options expected
to vest. The fair value of awards is calculated using the Black-Scholes option pricing model, which considers the exercise price, current
market price of the underlying shares, expected life of the award, risk-free interest rate, expected volatility and the dividend yield.
Other Income
Other income consists primarily
of interest income earned on our cash, cash equivalents and short-term investments.
Results of Operations
As of the closing of the BayMedica
acquisition, we aligned into two operating and reportable segments, InMed Pharmaceuticals (the “InMed” segment) and BayMedica
(the “BayMedica” segment).
Comparison of the three months ended
December 31, 2023 and 2022 for InMed Segment
| |
Three months ended | | |
| | |
| |
| |
December
2023 | | |
December
2022 | | |
Change | | |
% Change | |
| |
(in thousands) | | |
| | |
| |
Operating expenses: | |
| | |
| | |
| | |
| |
Research and development and patents | |
$ | 243 | | |
$ | 587 | | |
$ | (344 | ) | |
| (59 | )% |
General and administrative | |
| 976 | | |
| 1,089 | | |
| (113 | ) | |
| (10 | )% |
Amortization and depreciation | |
| 27 | | |
| 26 | | |
| 1 | | |
| 4 | % |
Foreign exchange loss | |
| (60 | ) | |
| (20 | ) | |
| (40 | ) | |
| (200 | )% |
Total operating expenses | |
| 1,186 | | |
| 1,682 | | |
| (496 | ) | |
| (29 | )% |
Interest and other income | |
| 118 | | |
| 68 | | |
| 50 | | |
| 74 | % |
Loss before income taxes | |
| (1,068 | ) | |
| (1,614 | ) | |
| 546 | | |
| (34 | )% |
Tax expense | |
| - | | |
| - | | |
| - | | |
| - | % |
Net loss | |
$ | (1,068 | ) | |
$ | (1,614 | ) | |
$ | 546 | | |
| (34 | )% |
Research and Development and Patents Expenses
Research and development and patents expenses decreased by $0.3 million
in our InMed segment, or 59%, for the three months ended December 31, 2023 compared to the three months ended December 31, 2022. The decrease
in research and development and patents expenses was due to the Company no longer being engaged in clinical trials, lower research supplies,
external contractor fees, and stock-based compensation. However, we expect our research and development expenses to increase significantly
in future periods as we continue to implement our business strategy.
General and administrative expenses
General and administrative
expenses decreased by $0.1 million in our InMed segment, or 10%, for the three months ended December 31, 2023 compared to the three months
ended December 31, 2022. The decrease results primarily from a combination of changes including lower office and admin fees, salaries
and benefits, stock-based compensation expenses, and interest expense on lease obligations. This was offset by an increase in accounting
and legal, investor relations, and consulting fees.
Comparison of the three months ended December
31, 2023 and 2022 for BayMedica Segment
|
|
Three months ended
December 31, |
|
|
|
|
|
|
|
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% Change |
|
|
|
(in thousands) |
|
|
|
|
|
|
|
Sales |
|
$ |
1,240 |
|
|
$ |
470 |
|
|
$ |
770 |
|
|
|
164 |
% |
Cost of sales |
|
|
746 |
|
|
|
339 |
|
|
|
407 |
|
|
|
120 |
% |
Loss on decline in NRV |
|
|
170 |
|
|
|
- |
|
|
|
170 |
|
|
|
- |
% |
Gross profit |
|
|
324 |
|
|
|
131 |
|
|
|
193 |
|
|
|
147 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development and patents |
|
|
367 |
|
|
|
265 |
|
|
|
102 |
|
|
|
38 |
% |
General and administrative |
|
|
388 |
|
|
|
375 |
|
|
|
13 |
|
|
|
3 |
% |
Amortization and depreciation |
|
|
29 |
|
|
|
23 |
|
|
|
6 |
|
|
|
26 |
% |
Total operating expenses |
|
|
784 |
|
|
|
663 |
|
|
|
121 |
|
|
|
18 |
% |
Interest and other income |
|
|
49 |
|
|
|
48 |
|
|
|
1 |
|
|
|
2 |
% |
Tax expense |
|
|
- |
|
|
|
(3 |
) |
|
|
3 |
|
|
|
(100 |
)% |
Net loss |
|
$ |
(411 |
) |
|
$ |
(487 |
) |
|
$ |
76 |
|
|
|
(16 |
)% |
Sales
Sales increased by $0.8 million from an increase in sales volume to
$1.2 million in our BayMedica segment, or 164%, for the three months ended December 31, 2023 compared to the three months ended December
31, 2022. While sales increased year over year, revenue tends to fluctuate from quarter to quarter. The changes in revenue can be attributed
mainly to distributor order patterns. While we are optimistic about the long-term growth potential in the rare cannabinoids sector, we
expect revenue fluctuations to continue in future quarters. BayMedica will continue to evaluate opportunities for potential structured
supply arrangements and collaborations for the commercial business. Sales and marketing efforts will remain focused on products that contribute
highest margins, where BayMedica continues to hold a strong competitive position.
Cost of Sales
Cost of goods sold increased
by $0.4 million in our BayMedica segment, or 120%, for the three months ended December 31, 2023 compared to the three months ended December,
2022. The increase in cost of goods sold is a result from the increase in sales mentioned above.
Inventory Write-Down
The write-down of
inventories to net realizable value was $0.2 million in our BayMedica segment for the three ended December 31, 2023, with expenses
of $0 million for the period ended December 31, 2022. Contributing factors to the decrease in net realizable value included lower
demand, downward pricing pressure, and changes in the manufacturing processes that required the write-down of raw materials.
BayMedica continues to evaluate new manufacturing approaches for certain products to increase its competitive position in the
marketplace.
Research and Development and Patents Expenses
Research and development and
patents expenses increased by $0.1 million in our BayMedica segment, or 38%, for the three months ended December 31, 2023 compared to
the three months ended December 31, 2022. The increase in research and development and patents expenses was primarily due to external
contractor fees and personnel expenses. This was offset by lower research supplies.
Comparison of the six months ended December
31, 2023 and 2022 for InMed Segment
| |
Six months ended | | |
| | |
| |
| |
December 2023 | | |
December 2022 | | |
Change | | |
% Change | |
| |
(in thousands) | | |
| | |
| |
Operating expenses: | |
| | |
| | |
| | |
| |
Research and development and patents | |
$ | 1,260 | | |
$ | 1,666 | | |
$ | (406 | ) | |
| (24 | )% |
General and administrative | |
| 1,735 | | |
| 2,182 | | |
| (447 | ) | |
| (20 | )% |
Amortization and depreciation | |
| 53 | | |
| 53 | | |
| - | | |
| - | % |
Foreign exchange loss | |
| (11 | ) | |
| 77 | | |
| (88 | ) | |
| (114 | )% |
Total operating expenses | |
| 3,037 | | |
| 3,978 | | |
| (941 | ) | |
| (24 | )% |
Interest and other income | |
| 185 | | |
| 96 | | |
| 89 | | |
| 93 | % |
Loss before income taxes | |
| (2,852 | ) | |
| (3,882 | ) | |
| 1,030 | | |
| (27 | )% |
Tax expense | |
| - | | |
| - | | |
| - | | |
| - | % |
Net loss | |
$ | (2,852 | ) | |
$ | (3,882 | ) | |
$ | 1,030 | | |
| (27 | )% |
Research and Development and Patents Expenses
Research and development and patents expenses decreased by $0.4 million
in our InMed segment, or 24%, for the six months ended December 31, 2023 compared to the period ended December 31, 2022. The decrease
in research and development and patents expenses was due to the Company no longer being engaged in clinical trials, lower research supplies,
stock-based compensation expenses, and external contractor fees.
General and administrative expenses
General and administrative
expenses decreased by $0.4 million in our InMed segment, or 20%, for the six months ended December 31, 2023 compared to the six months
ended December 31, 2022. The decrease results primarily from a combination of changes including lower office and admin fees, accounting
and legal fees, stock-based compensation expenses, regulatory fees, consulting fees, and interest expense on lease obligations. This was
offset by an increase in investor relations.
Comparison of the six months ended December
31, 2023 and 2022 for BayMedica Segment
| |
Six months ended December 31, | | |
| | |
| |
| |
2023 | | |
2022 | | |
Change | | |
% Change | |
| |
(in thousands) | | |
| | |
| |
Sales | |
$ | 2,142 | | |
$ | 791 | | |
$ | 1,351 | | |
| 171 | % |
Cost of sales | |
| 1,533 | | |
| 574 | | |
| 959 | | |
| 167 | % |
Loss on decline in NRV | |
| 263 | | |
| 577 | | |
| (314 | ) | |
| (54 | )% |
Gross profit | |
| 346 | | |
| (360 | ) | |
| 706 | | |
| (196 | )% |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Research and development and patents | |
| 642 | | |
| 564 | | |
| 78 | | |
| 14 | % |
General and administrative | |
| 927 | | |
| 842 | | |
| 85 | | |
| 10 | % |
Amortization and depreciation | |
| 57 | | |
| 45 | | |
| 12 | | |
| 27 | % |
Total operating expenses | |
| 1,626 | | |
| 1,451 | | |
| 175 | | |
| 12 | % |
Interest and other income | |
| 118 | | |
| 93 | | |
| 25 | | |
| 27 | % |
Tax expense | |
| - | | |
| (10 | ) | |
| 10 | | |
| (100 | )% |
Net loss | |
$ | (1,162 | ) | |
$ | (1,728 | ) | |
$ | 566 | | |
| (33 | )% |
Sales
Sales increased by $1.3 million from an increase in sales volume to
$2.1 million in our BayMedica segment, or 171%, for the six months ended December 31, 2023 compared to the six months ended December 31,
2022. While sales increased year over year, revenue tends to fluctuate from quarter to quarter. The changes in revenue can be attributed
mainly to distributor order patterns. While we are optimistic about the long-term growth potential in the rare cannabinoids sector, we
expect revenue fluctuations to continue in future quarters. BayMedica will continue to evaluate opportunities for potential structured
supply arrangements and collaborations for the commercial business. Sales and marketing efforts will remain focused on products that contribute
highest margins, where BayMedica continues to hold a strong competitive position.
Cost of Sales
Cost of goods sold increased
by $1.0 million in our BayMedica segment, or 167%, for the six months ended December 31, 2023 compared to the six months ended December,
2022. The increase in cost of goods sold is a result from the increase in sales mentioned above.
Inventory Write-Down
The
write-down of inventories to net realizable value was $0.3 million in our BayMedica segment for the six months ended December 31, 2023,
with expenses of $0.6 million for the six months ended December 31, 2022. Contributing factors to the decrease in net realizable value
included lower demand, downward pricing pressure, and changes in the manufacturing processes that required the write-down of raw materials.
BayMedica continues to evaluate new manufacturing approaches for certain products to increase its competitive position in the marketplace.
Research
and Development and Patents Expenses
Research and development and
patents expenses increased by $0.08 million in our BayMedica segment, or 14%, for the six months ended December 31, 2023 compared to the
six months ended December 31, 2022. The increase in research and development and patents expenses was due to an increase in external contractor
fees and personnel expenses. This was offset by lower research supplies expenses.
General and administrative expenses
General and administrative
expenses increased by $0.09 million in our BayMedica segment, or 10%, for the six months ended December 31, 2023 compared to the six months
ended December 31, 2022. The increase results primarily from a combination of changes including higher accounting and legal fees, and
marketing expenses. This was offset by lower personnel expenses.
Liquidity and Capital Resources
Since our inception, we have
only generated limited revenue from product sales, no sales from any other sources and have incurred significant operating losses and
negative cash flows from our operations. We have only commenced commercial sales with the acquisition of BayMedica and not yet commercialized
any of our Product Candidates and we do not expect to generate revenue from sales of any Product Candidates for several years, if at all.
We have funded our operations to date primarily with proceeds from the sale of common shares.
As of December 31, 2023, we
had cash, cash equivalents and short-term investments of $9.6 million.
The following table summarizes
our cash flows for each of the periods presented:
(in thousands) | |
Period Ended December 31, 2023 | | |
Period Ended December 31, 2022 | |
Net cash (used in) operating activities | |
$ | (4,022 | ) | |
$ | (4,969 | ) |
Net cash (used in) investing activities | |
| (9 | ) | |
| (500 | ) |
Net cash provided by financing activities | |
| 4,653 | | |
| 10,745 | |
Net increase (decrease) in cash and cash equivalents | |
$ | 622 | | |
$ | 5,276 | |
Operating Activities
During the period ended December
31, 2023, we used cash in operating activities of $4.0 million, primarily resulting from our net loss of $4.0 million combined with changes
in working capital and non-cash expenses contributed to net cash used in operating activities.
During the period ended December
31, 2022, we used cash in operating activities of $4.9 million, primarily resulting from our net loss of $5.6 million combined with changes
in working capital and non-cash expenses contributed to net cash used in operating activities.
Financing Activities
During the six months ended
December 31, 2023, cash provided by financing activities of $4.7 million consisted of $5.2 million of gross proceeds from private placements
of our common shares, offset by total transaction costs of $0.5 million.
During the six months ended December 31, 2022, cash provided by financing
activities of $10.7 million consisted of $12.0 million of gross proceeds from private placements of our common shares, offset by total
transaction costs of $1.3 million.
Going Concern
We expect our expenses to
increase substantially in connection with our ongoing research and development activities, particularly as we continue the research and
development of and the clinical trials for our Product Candidates. In addition, we expect to incur additional costs associated with operating
as a US-listed public company and associated with any required investment into BayMedica’s R&D efforts targeting cannabinoid
analogs. As a result, we expect to incur substantial operating losses and negative operating cash flows for the foreseeable future.
In accordance with the Financial
Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about
an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), we have evaluated whether there are conditions and events,
considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date
that the consolidated financial statements are issued.
Through December 31, 2023,
we have funded our operations primarily with proceeds from the sale of common stock. We have incurred recurring losses and negative cash
flows from operations since its inception, including net losses of $4.0 million and $5.6 million for the period ended December 31, 2023
and 2022, respectively. In addition, we have an accumulated deficit of $105.4 million as of December 31, 2023.
As of the issuance date of the consolidated interim financial statements,
we expect our cash, cash equivalents, and short-term investments of $9.5 million as of December 31, 2023, will be sufficient to fund our
operating expenses and capital expenditure requirements into the third quarter of calendar year 2024 depending on the level
and timing of realizing BayMedica revenues from the sale of Products in the Health & Wellness sector as well as the level and timing
of our operating expenses. Our future viability is dependent on our ability to raise additional capital to finance our operations. In
addition, there are a number of uncertainties in estimating our operating expenses and capital expenditure requirements including the
impact of potential acquisitions.
As a result, we have concluded
that there is substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated
financial statements are issued.
We expect to continue to seek
additional funding through equity financings, debt financings or other capital sources, including collaborations with other companies,
government contracts or other strategic transactions. We may not be able to obtain financing on acceptable terms, or at all. The terms
of any financing may adversely affect the holdings or the rights of our existing stockholders.
Our funding requirements and timing
and amount of our operating expenditures will depend largely on:
|
● |
the scope, progress, results and costs of discovery research, preclinical development, laboratory testing and clinical trials for our Product Candidates; |
|
● |
the scope, progress, results and costs of development of our manufacturing technologies; |
|
● |
the number of and development requirements for other Products and Product Candidates that we pursue; |
|
● |
the costs, timing and outcome of regulatory review of our Product Candidates; |
|
● |
our ability to enter into contract manufacturing arrangements for supply of materials and manufacture of our Products and Product Candidates and the terms of such arrangements; |
|
● |
the impact of any acquired, or in-licensed, externally developed product(s) and/or technologies; |
|
● |
our ability to establish and maintain strategic collaborations, licensing or other arrangements, including sales arrangements, and the financial terms of such arrangements; |
|
● |
the sales, costs and timing of future commercialization activities, including product manufacturing, sales, marketing and distribution, for any of our Products and for Product Candidates for which we may receive marketing approval; |
|
● |
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights and defending any intellectual property- related claims; |
|
● |
expansion costs of our operational, financial and management systems and increases to our personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a dual listed company; |
|
● |
the costs to obtain, maintain, expand and protect our intellectual property portfolio; and |
|
● |
the level and timing of realizing revenues from the BayMedica commercial operations. |
A change in the outcome of
any of these, or other variables with respect to the development of any of our Products and Product Candidates, could significantly change
the costs and timing associated with their development. We will need to continue to rely on additional financing to achieve our business
objectives.
In addition to the variables
described above, if and when any of our Product Candidates successfully complete development, we will incur substantial additional costs
associated with regulatory filings, marketing approval, post-marketing requirements, maintaining our intellectual property rights, and
regulatory protection, in addition to other commercial costs. We cannot reasonably estimate these costs at this time.
Until such time, if ever,
as we can generate substantial revenues from either our Products or Product Candidates, we expect to finance our cash needs through a
combination of equity or debt financings and collaboration arrangements. We currently have no credit facility or committed sources of
capital. To the extent that we raise additional capital through the future sale of equity securities, the ownership interests of our shareholders
will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our
existing common shareholders. If we raise additional funds through the issuance of debt securities, these securities could contain covenants
that would restrict our operations. We may require additional capital beyond our currently anticipated amounts, and additional capital
may not be available on reasonable terms, or at all. If we raise additional funds through collaboration arrangements or other strategic
transactions in the future, we may have to relinquish valuable rights to our technologies, future revenue streams, Products or Product
Candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt
financings when needed, we may be required to delay, limit, reduce or terminate development or future commercialization efforts or grant
rights to develop and market Products or Product Candidates that we would otherwise prefer to develop and market ourselves.
Off-Balance Sheet Arrangements
During the periods presented
we did not have, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Critical Accounting
Policies and Significant Judgments and Estimates
Our significant accounting
policies are described in Note 2 of the Financial Statements. The estimates will require us to rely upon assumptions that were highly
uncertain at the time the accounting estimates are made, and changes in them are reasonably likely to occur from period to period. Changes
in estimates used in these and other items could have a material impact on our financial statements in the future. Our estimates will
be based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business prospects.
Actual results may differ significantly from our estimates. For detailed information regarding our critical accounting policies and estimates,
see our financial statements and notes thereto included in this Report and in our Annual Report on Form 10-K for the year ended June 30,
2023. There have been no material changes to our critical accounting policies and estimates from those disclosed in our most recent Annual
Report on Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.
We are a smaller reporting
company as defined by Rule 12b-2 of the Exchange Act and, as such, are not required to provide the information under this Item.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and
procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) are designed to ensure that information required to be
disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time
periods specified in the rules and forms of the SEC and to ensure that information required to be disclosed is accumulated and communicated
to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure. As of December
31, 2023, the Chief Executive Officer and the Interim Chief Financial Officer, with assistance from other members of management, have
reviewed the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
and Exchange Act of 1934). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Based upon the evaluation, they have concluded that, as of December 31, 2023, our disclosure
controls and procedures were not effective at a reasonable assurance level due to a material weakness that existed in our internal controls
over financial reporting, primarily the result around a lack of personnel and inadequate controls around segregation of duties in the
accounting department from employee turnover, as disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.
It should be noted that any
system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness,
and there can be no assurance that any design will succeed in achieving its stated goals.
Changes in Internal Control Over Financial
Reporting
There have been no changes
in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during
our fiscal quarter ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting, except for the items discussed in remediation below.
Remediation
We began implementing a
remediation plan to address the previously reported material weakness in internal control over financial reporting, described in
Part II, Item 9A, “Controls and Procedures” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.
Remediation measures include adding additional resources to our finance function, retaining the services of outside consultants, and
establishing additional review procedures over the accounting for complex and non-routine transactions. The material weakness will
not be considered remediated, until the applicable controls operate for a sufficient period of time and management has concluded,
through testing, that these controls are operating effectively. We currently anticipate that the remediation of this material
weakness should be completed by the end of our fiscal year. Notwithstanding the material weakness, we believe the financial
statements in this report fairly present, in all material respects, our financial position, results of operations, and cash flows
for the periods presented in conformity with U.S. GAAP.
PART II
ITEM 1. LEGAL PROCEEDINGS.
We are not presently involved
in any active legal proceedings that we believe to be material to the Company. However, from time to time, we may be subject to various
pending or threatened legal actions and proceedings, including those that arise in the ordinary course of our business, including the
license matter discussed in Note 11 of the Financial Statements.
ITEM 1A. RISK FACTORS.
As a smaller reporting company
as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations
and therefore are not required to provide the information requested by this item. For a discussion of our potential risks and uncertainties,
please review the risks and uncertainties described in “Risk Factors” in our Form 10-K dated September 29, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURE.
None
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
Exhibits
The following exhibits are filed as part of this
report:
SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
INMED PHARMACEUTICALS INC. |
|
(Registrant) |
|
|
Dated: February 13, 2024 |
By: |
/s/ Jonathan Tegge |
|
|
Interim Chief Financial Officer |
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I, Eric A. Adams, certify that:
Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Eric A. Adams, the President and Chief Executive Officer
of InMed Pharmaceuticals Inc. (the “Company”), hereby certify that, to my knowledge:
Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Jonathan Tegge, the Chief Financial Officer of InMed Pharmaceuticals
Inc. (the “Company”), hereby certify that, to my knowledge: