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.
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 May 15, 2023, the registrant had 3,328,191
common shares, without par value, outstanding.
PART I
ITEM 1. CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS.
Unaudited Condensed Consolidated Interim Financial
Statements of
InMed Pharmaceuticals Inc.
For the Three and Nine Months Ended March 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)
March 31, 2023
InMed Pharmaceuticals Inc.
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
As
of March 31, 2023 (unaudited) and June 30, 2022
Expressed in U.S. Dollars
| |
| | |
March 31, | | |
June 30, | |
| |
Note | | |
2023 | | |
2022 | |
| |
| | |
| | |
| |
ASSETS | |
| | |
$ | | |
$ | |
Current | |
| | |
| | |
| |
Cash and cash equivalents | |
| | | |
| 9,604,057 | | |
| 6,176,866 | |
Short-term investments | |
| | | |
| 43,055 | | |
| 44,804 | |
Accounts receivable, net | |
| | | |
| 170,299 | | |
| 88,027 | |
Inventories | |
| 4 | | |
| 1,329,931 | | |
| 2,490,854 | |
Prepaids and other current assets | |
| | | |
| 695,203 | | |
| 797,225 | |
Total current assets | |
| | | |
| 11,842,545 | | |
| 9,597,776 | |
| |
| | | |
| | | |
| | |
Non-Current | |
| | | |
| | | |
| | |
Property, equipment and ROU assets, net | |
| 5 | | |
| 753,241 | | |
| 904,252 | |
Intangible assets, net | |
| 6 | | |
| 1,986,826 | | |
| 2,108,915 | |
Other assets | |
| | | |
| 147,489 | | |
| 176,637 | |
Total Assets | |
| | | |
| 14,730,101 | | |
| 12,787,580 | |
| |
| | | |
| | | |
| | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| | | |
| | | |
| | |
Current | |
| | | |
| | | |
| | |
Accounts payable and accrued liabilities | |
| 7 | | |
| 1,829,924 | | |
| 2,415,265 | |
Current portion of lease obligations | |
| 10 | | |
| 423,574 | | |
| 404,276 | |
Deferred rent | |
| | | |
| 16,171 | | |
| - | |
Acquisition consideration payable | |
| | | |
| - | | |
| 500,000 | |
Total current liabilities | |
| | | |
| 2,269,669 | | |
| 3,319,541 | |
| |
| | | |
| | | |
| | |
Non-current | |
| | | |
| | | |
| | |
Lease obligations, net of current portion | |
| 10 | | |
| 72,794 | | |
| 389,498 | |
Total Liabilities | |
| | | |
| 2,342,463 | | |
| 3,709,039 | |
Commitments and Contingencies (Note 14) | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Shareholders’ Equity | |
| | | |
| | | |
| | |
Common shares, no par value, unlimited authorized shares: | |
| | | |
| | | |
| | |
3,328,191 (June 30, 2022 - 650,667) issued and outstanding | |
| 8 | | |
| 77,620,252 | | |
| 70,718,461 | |
Additional paid-in capital | |
| 8, 9 | | |
| 35,700,635 | | |
| 31,684,098 | |
Accumulated deficit | |
| | | |
| (101,061,818 | ) | |
| (93,452,587 | ) |
Accumulated other comprehensive income | |
| | | |
| 128,569 | | |
| 128,569 | |
Total Shareholders’ Equity | |
| | | |
| 12,387,638 | | |
| 9,078,541 | |
Total Liabilities and Shareholders’ Equity | |
| | | |
| 14,730,101 | | |
| 12,787,580 | |
Related Party Transactions (Note 16) | |
| | | |
| | | |
| | |
The accompanying notes form an integral part of these condensed consolidated
interim financial statements.
InMed Pharmaceuticals Inc.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS (unaudited)
For the three and nine months ended March 31, 2023 and 2022
Expressed in U.S. Dollars
| |
| | |
Three Months Ended | | |
Nine Months Ended | |
| |
| | |
March 31 | | |
March 31 | |
| |
Note | | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| |
| | |
| | |
| | |
| | |
| |
Sales | |
| | | |
| 1,033,925 | | |
| 309,585 | | |
| 1,824,496 | | |
| 574,677 | |
Cost of sales | |
| | | |
| 841,414 | | |
| 127,308 | | |
| 1,415,068 | | |
| 280,845 | |
Inventory write-down | |
| 4 | | |
| - | | |
| - | | |
| 576,772 | | |
| - | |
Gross profit (loss) | |
| | | |
| 192,511 | | |
| 182,277 | | |
| (167,344 | ) | |
| 293,832 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Operating Expenses | |
| | | |
| | | |
| | | |
| | | |
| | |
Research and development and patents | |
| | | |
| 878,303 | | |
| 1,753,545 | | |
| 3,108,312 | | |
| 5,781,867 | |
General and administrative | |
| | | |
| 1,412,727 | | |
| 1,915,017 | | |
| 4,438,083 | | |
| 5,124,670 | |
Amortization and depreciation | |
| 5, 6 | | |
| 50,689 | | |
| 53,340 | | |
| 148,786 | | |
| 131,669 | |
Total operating expenses | |
| | | |
| 2,341,719 | | |
| 3,721,902 | | |
| 7,695,181 | | |
| 11,038,206 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Other Income (Expense) | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest and other income | |
| | | |
| 155,497 | | |
| 30,964 | | |
| 343,881 | | |
| 62,389 | |
Foreign exchange gain (loss) | |
| | | |
| (2,733 | ) | |
| 32,996 | | |
| (79,287 | ) | |
| (48,109 | ) |
Loss before income taxes | |
| | | |
| (1,996,444 | ) | |
| (3,475,665 | ) | |
| (7,597,931 | ) | |
| (10,730,094 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Tax expense | |
| | | |
| (1,500 | ) | |
| - | | |
| (11,300 | ) | |
| - | |
Net loss for the period | |
| | | |
| (1,997,944 | ) | |
| (3,475,665 | ) | |
| (7,609,231 | ) | |
| (10,730,094 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss per share for the period Basic and diluted | |
| 11 | | |
| (0.60 | ) | |
| (6.14 | ) | |
| (3.53 | ) | |
| (20.13 | ) |
Weighted average outstanding common shares Basic and diluted | |
| 11 | | |
| 3,328,191 | | |
| 566,062 | | |
| 2,156,283 | | |
| 533,070 | |
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)
For the three and nine months ended March 31, 2023 and 2022
Expressed in U.S. Dollars
| |
| | |
| | |
| | |
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 | |
Activity for the six months to December 31, 2022 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Private placement | |
| 8 | | |
| 240,000 | | |
| 673,748 | | |
| 11,326,042 | | |
| - | | |
| - | | |
| 11,999,790 | |
Share issuance costs | |
| 8 | | |
| - | | |
| (115,955 | ) | |
| (1,895,311 | ) | |
| - | | |
| - | | |
| (2,011,266 | ) |
Agents’ investment options | |
| | | |
| - | | |
| - | | |
| 691,483 | | |
| - | | |
| - | | |
| 691,483 | |
Exercise of pre-funded warrants | |
| 8 | | |
| 699,325 | | |
| 3,586,170 | | |
| (3,585,698 | ) | |
| - | | |
| - | | |
| 472 | |
Loss for the period | |
| | | |
| - | | |
| - | | |
| - | | |
| (5,611,287 | ) | |
| - | | |
| (5,611,287 | ) |
Share-based compensation | |
| 9 | | |
| - | | |
| - | | |
| 187,318 | | |
| - | | |
| - | | |
| 187,318 | |
Balance December 31, 2022 | |
| | | |
| 1,589,992 | | |
| 74,862,424 | | |
| 38,407,932 | | |
| (99,063,874 | ) | |
| 128,569 | | |
| 14,335,051 | |
Activity for the three months to March 31, 2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Exercise of pre-funded warrants | |
| 8 | | |
| 1,738,199 | | |
| 2,757,828 | | |
| (2,757,654 | ) | |
| - | | |
| - | | |
| 174 | |
Loss for the period | |
| | | |
| - | | |
| - | | |
| - | | |
| (1,997,944 | ) | |
| - | | |
| (1,997,944 | ) |
Share-based compensation | |
| 9 | | |
| - | | |
| - | | |
| 50,357 | | |
| - | | |
| - | | |
| 50,357 | |
Balance March 31, 2023 | |
| | | |
| 3,328,191 | | |
| 77,620,252 | | |
| 35,700,635 | | |
| (101,061,818 | ) | |
| 128,569 | | |
| 12,387,638 | |
| |
| | |
| | |
| | |
Additional | | |
| | |
Accumulated
Other | | |
| |
| |
Note | | |
Common Shares | | |
Paid-in
Capital | | |
Accumulated
Deficit | | |
Comprehensive
Income | | |
Total | |
| |
| | |
# | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
Balance
June 30, 2021 | |
| | | |
| 322,028 | | |
| 60,587,417 | | |
| 21,513,051 | | |
| (74,852,470 | ) | |
| 128,569 | | |
| 7,376,567 | |
Activity for the six months to December 31, 2021 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Private placement | |
| 10 | | |
| 35,600 | | |
| 1,459,051 | | |
| 10,540,635 | | |
| - | | |
| - | | |
| 11,999,686 | |
Share issuance costs | |
| 10 | | |
| - | | |
| (247,336 | ) | |
| (1,786,831 | ) | |
| - | | |
| - | | |
| (2,034,167 | ) |
Agents’ warrants | |
| | | |
| - | | |
| - | | |
| 739,920 | | |
| - | | |
| - | | |
| 739,920 | |
Exercise of pre-funded warrants | |
| 10 | | |
| 125,853 | | |
| 4,283,969 | | |
| (4,283,654 | ) | |
| - | | |
| - | | |
| 315 | |
Acquisition of BayMedica | |
| 7 | | |
| 82,000 | | |
| 3,013,500 | | |
| - | | |
| - | | |
| - | | |
| 3,013,500 | |
Loss for the period | |
| | | |
| - | | |
| - | | |
| - | | |
| (7,254,429 | ) | |
| - | | |
| (7,254,429 | ) |
Share-based compensation | |
| 11 | | |
| - | | |
| - | | |
| 325,921 | | |
| - | | |
| - | | |
| 325,921 | |
Balance December 31, 2021 | |
| | | |
| 565,481 | | |
| 69,096,601 | | |
| 27,049,042 | | |
| (82,106,899 | ) | |
| 128,569 | | |
| 14,167,313 | |
Activity for the three months to March 31, 2022 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Cashless exercise of warrants | |
| 10 | | |
| 5,873 | | |
| 728,730 | | |
| (728,730 | ) | |
| - | | |
| - | | |
| - | |
Loss for the period | |
| | | |
| - | | |
| - | | |
| - | | |
| (3,475,665 | ) | |
| - | | |
| (3,475,665 | ) |
Share-based compensation | |
| 11 | | |
| - | | |
| - | | |
| 195,085 | | |
| - | | |
| - | | |
| 195,085 | |
Balance March 31, 2022 | |
| | | |
| 571,354 | | |
| 69,825,331 | | |
| 26,515,397 | | |
| (85,582,564 | ) | |
| 128,569 | | |
| 10,886,733 | |
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)
For the nine months ended March 31, 2023 and 2022
Expressed in U.S. Dollars
| |
Note | | |
2023 | | |
2022 | |
Cash provided by (used in): | |
| | |
$ | | |
$ | |
| |
| | |
| | |
| |
Operating Activities | |
| | |
| | |
| |
Net loss | |
| | | |
| (7,609,231 | ) | |
| (10,730,094 | ) |
Items not requiring cash: | |
| | | |
| | | |
| | |
Amortization and depreciation | |
| 5, 6 | | |
| 148,786 | | |
| 131,669 | |
Share-based compensation | |
| 9 | | |
| 237,675 | | |
| 521,006 | |
Amortization of right-of-use assets | |
| | | |
| 296,239 | | |
| 226,061 | |
Loss on disposal of assets | |
| | | |
| - | | |
| 11,355 | |
Change in value of short-term investments | |
| | | |
| (392 | ) | |
| 46 | |
Unrealized foreign exchange loss | |
| | | |
| 2,138 | | |
| 312 | |
Inventory write-down | |
| 4 | | |
| 576,772 | | |
| - | |
Bad debts | |
| | | |
| 25,085 | | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | | |
| | |
Inventories | |
| | | |
| 584,151 | | |
| (933,260 | ) |
Prepaids and other currents assets | |
| | | |
| 102,022 | | |
| (323,653 | ) |
Other non-current assets | |
| | | |
| 5,507 | | |
| 6,580 | |
Accounts receivable | |
| | | |
| (107,357 | ) | |
| (22,535 | ) |
Accounts payable and accrued liabilities | |
| | | |
| (585,341 | ) | |
| (195,125 | ) |
Deferred rent | |
| | | |
| 16,171 | | |
| 3,760 | |
Lease obligations | |
| | | |
| (317,490 | ) | |
| (232,633 | ) |
Total cash used in operating activities | |
| | | |
| (6,625,265 | ) | |
| (11,536,511 | ) |
| |
| | | |
| | | |
| | |
Investing Activities | |
| | | |
| | | |
| | |
Cash acquired from acquisition of BayMedica | |
| | | |
| - | | |
| 91,566 | |
Payment of acquisition consideration payable | |
| | | |
| (500,000 | ) | |
| - | |
Payment of deposit on equipment | |
| | | |
| (128,198 | ) | |
| - | |
Purchase of property and equipment | |
| | | |
| - | | |
| (39,108 | ) |
Total cash (used in) provided by investing activities | |
| | | |
| (628,198 | ) | |
| 52,458 | |
| |
| | | |
| | | |
| | |
Financing Activities | |
| | | |
| | | |
| | |
Shares issued for cash | |
| 8 | | |
| 12,000,436 | | |
| 12,000,001 | |
Share issuance costs | |
| 8 | | |
| (1,319,782 | ) | |
| (1,294,247 | ) |
Repayment of debt | |
| | | |
| - | | |
| (261,514 | ) |
Settlement of debt upon acquisition of subsidiary | |
| | | |
| - | | |
| (425,000 | ) |
Total cash provided by financing activities | |
| | | |
| 10,680,654 | | |
| 10,019,240 | |
Increase (decrease) in cash during the period | |
| | | |
| 3,427,191 | | |
| (1,464,813 | ) |
Cash and cash equivalents beginning of the period | |
| | | |
| 6,176,866 | | |
| 7,363,126 | |
Cash and cash equivalents end of the period | |
| | | |
| 9,604,057 | | |
| 5,898,313 | |
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
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 AND 2022
(Expressed in U.S. Dollars)
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.
Through March 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 $7.6 million and $10.7 million for the nine months
ended March 31, 2023 and 2022, respectively. In addition, the Company had an accumulated deficit of approximately $101.1 million at March
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 and cash equivalents of $9.6 million as of March 31, 2023 will
be sufficient to fund its operating expenses and capital expenditure requirements into the first
quarter of calendar 2024, and possibly into the second quarter of calendar 2024 , depending on the level and timing of realizing
BayMedica revenues from the sale of bulk rare cannabinoids in the health & wellness sector as well as the level and timing of the
Company operating expenses. The future viability of the Company is dependent on its ability to raise additional capital to finance its
operations. As a result of the recurring losses and requirement for cash in the first quarter of calendar 2024 or the second quarter of
calendar 2024, 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.
INMED PHARMACEUTICALS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 AND 2022
(Expressed in U.S. Dollars)
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 (“US 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 year ended June 30, 2022.
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
and nine months ended March 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 year ended June 30, 2022.
The functional currency
of the Company and its subsidiaries is the U.S. Dollar. These condensed consolidated interim 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.
Use of Estimates
The preparation of financial statements
in compliance with US 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 and warrants.
INMED PHARMACEUTICALS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 AND 2022
(Expressed in U.S. Dollars)
| 2. | SIGNIFICANT ACCOUNTING POLICIES (cont’d) |
Recent Accounting Pronouncements
Not Yet Adopted
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.
The Company’s 4 largest customers,
represent 22%, 21%, 17% and 11%, totaling approximately 72% of our sales during the three months ended March 31, 2023. The Company’s
3 largest customers, represent 17%, 15% and 14%, totaling approximately 46% of its sales during the nine months ended March 31, 2023.
As of March 31, 2023, 3 customers represented 29%, 20% and 12%, totaling 61% of total gross outstanding accounts receivable.
The Company’s 2 largest customers,
represent 38% and 35%, totaling approximately 73% of our sales during the three months ended March 31, 2022. The Company’s 3 largest
customers, represent 28%, 20% and 17%, totaling approximately 65% of our sales during the nine months ended March 31, 2022.
Inventories consisted of the following:
| |
March 31, 2023 | | |
June 30, 2022 | |
| |
$ | | |
$ | |
| |
| | |
| |
Raw materials | |
| 387,071 | | |
| 292,577 | |
Work in process | |
| 548,593 | | |
| 1,724,851 | |
Finished goods | |
| 394,267 | | |
| 473,426 | |
Inventories | |
| 1,329,931 | | |
| 2,490,854 | |
During the nine months ended March 31, 2023, the write-down of inventories
to net realizable value was $576,772 (2021 - $Nil). Contributing factors to the decrease in net realizable value included lower demand
and downward pricing pressure for certain products.
5. | PROPERTY, EQUIPMENT AND ROU ASSETS, NET |
Property, equipment and ROU assets consisted of
the following:
| |
March 31, 2023 | | |
June 30, 2022 | |
| |
$ | | |
$ | |
| |
| | |
| |
Right-of-Use Assets (leases) | |
| 1,167,436 | | |
| 1,167,436 | |
Equipment | |
| 364,716 | | |
| 212,877 | |
Leasehold Improvements | |
| 40,409 | | |
| 40,409 | |
Property and equipment | |
| 1,572,561 | | |
| 1,420,722 | |
Less: accumulated depreciation and amortization | |
| (819,320 | ) | |
| (516,470 | ) |
Property, equipment and ROU assets, net | |
| 753,241 | | |
| 904,252 | |
INMED PHARMACEUTICALS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 AND 2022
(Expressed in U.S. Dollars)
5. | PROPERTY, EQUIPMENT AND ROU ASSETS, NET (cont’d) |
Depreciation expense on property, equipment
and leasehold improvements for the three and nine months ended March 31, 2023, was $10,586 and $26,697 (2022 - $7,908 and $18,371). Amortization
expense related to the right-of-use assets for the three and nine months ended March 31, 2023, was $91,935 and $272,568 (2022 - $89,450
and $199,058) and was recorded in general and administrative expenses.
| |
March 31, 2023 | | |
June 30, 2022 | |
| |
$ | | |
$ | |
| |
| | |
| |
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 depreciation | |
| (940,594 | ) | |
| (818,505 | ) |
Intangible assets, net | |
| 1,986,826 | | |
| 2,108,915 | |
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.
At March 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 and nine months ended March 31, 2023 was $40,103 and $122,089 (2022 - $45,430 and $113,296). The Company expects
amortization expense to be incurred over the next five years as follows:
| |
$ | |
| |
| |
2023 (remaining) | |
| 39,230 | |
2024 | |
| 156,920 | |
2025 | |
| 156,920 | |
2026 | |
| 156,920 | |
2027 | |
| 156,920 | |
Thereafter | |
| 1,319,916 | |
| |
| 1,986,826 | |
INMED PHARMACEUTICALS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 AND 2022
(Expressed in U.S. Dollars)
7. | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
Accounts payable and accrued
liabilities consist of the following:
| |
March
31,
2023 | | |
June
30,
2022 | |
| |
$ | | |
$ | |
| |
| | |
| |
Trade payables | |
| 737,501 | | |
| 1,166,068 | |
Accrued research and development expenses | |
| 322,050 | | |
| 839,638 | |
Employee compensation, benefits and related accruals | |
| 692,636 | | |
| 139,120 | |
Accrued general and administrative expenses | |
| 77,737 | | |
| 270,439 | |
Accounts payable and accrued liabilities | |
| 1,829,924 | | |
| 2,415,265 | |
8. | SHARE CAPITAL AND RESERVES |
On September 7, 2022, the Company effected
a one-for-25 reverse stock split of its issued and outstanding common shares. Accordingly, all common share, stock option, per common
share and warrant amounts for all periods presented in the condensed consolidated interim financial statements and notes thereto have
been adjusted retrospectively to reflect this reverse stock split.
As of March 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 March 31, 2023 and June 30, 2022.
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.
During the period ended March 31,
2023, the Company completed the following:
September 2022 Private Placement Offering:
Transaction
Description | |
Number | | |
Issue
Price | | |
Total | |
Shares Issued | |
| 90,000 | | |
$ | 8.680 | | |
$ | 781,200 | |
Pre-funded Warrants Issued | |
| 601,245 | | |
$ | 8.6799 | | |
| 5,218,746 | |
Gross Proceeds | |
| | | |
| | | |
$ | 5,999,946 | |
Allocated to Additional Paid-in Capital | |
| | | |
| | | |
| (5,589,570 | ) |
| |
| | | |
| | | |
$ | 410,376 | |
Share Issuance Costs | |
| | | |
| | | |
$ | (77,242 | ) |
INMED PHARMACEUTICALS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 AND 2022
(Expressed in U.S. Dollars)
8. | SHARE CAPITAL AND RESERVES (cont’d) |
On September 13, 2022, the Company
closed a private placement of its common shares and issued an aggregate of 90,000 common shares and 601,245 pre-funded warrants, for
gross proceeds of $5,999,946. The pre-funded warrants were determined to be common stock equivalents. Each common share and each pre-funded
warrant were sold in the offering with an investment option to purchase a common share. Transaction costs were allocated proportionally
between common shares and investment options with $77,242 allocated to common shares and the balance of $1,052,101 allocated to additional
paid-in capital and recorded as a component of shareholders’ equity in the consolidated balance sheet. As of March 31, 2023, there
were no pre-funded warrants outstanding.
November 2022 Private Placement Offering:
Transaction
Description | |
Number | | |
Issue
Price | | |
Total | |
Shares Issued | |
| 150,000 | | |
$ | 3.300 | | |
$ | 495,000 | |
Pre-funded Warrants Issued | |
| 1,668,185 | | |
$ | 3.2999 | | |
| 5,504,844 | |
Gross Proceeds | |
| | | |
| | | |
$ | 5,999,844 | |
Allocated to Additional Paid-in Capital | |
| | | |
| | | |
| (5,736,472 | ) |
| |
| | | |
| | | |
$ | 263,372 | |
Share Issuance Costs | |
| | | |
| | | |
$ | (38,713 | ) |
On November 21, 2022, the Company
closed a private placement of its common shares and issued an aggregate of 150,000 common shares and 1,668,185 pre-funded warrants, for
gross proceeds of $5,999,844. The pre-funded warrants were determined to be common stock equivalents. Each common share and each pre-funded
warrant were sold in the offering with an investment option to purchase a common share. Transaction costs were allocated proportionally
between common shares and investment options with $38,713 allocated to common shares and the balance of $843,210 allocated to additional
paid-in capital and recorded as a component of shareholders’ equity in the consolidated balance sheet. As of March 31, 2023, there
were no pre-funded warrants outstanding.
| c) | Share Purchase Warrants |
The following is a summary of changes
in share purchase warrants from July 1, 2022 to March 31, 2023:
| |
Number | | |
Weighted Average Share Price | | |
Aggregate
Intrinsic Value | |
Balance at July 1, 2022 | |
| 244,767 | | |
$ | 41.99 | | |
| - | |
Cancelled | |
| (179,231 | ) | |
$ | 18.50 | | |
| - | |
Expired/Forfeited | |
| (12,114 | ) | |
$ | 11.25 | | |
| - | |
Balance at March 31, 2023 | |
| 53,422 | | |
$ | 127.75 | | |
| - | |
The following is a summary of changes
in agents’ warrants from July 1, 2022 to March 31, 2023:
| |
Number | | |
Weighted Average Share Price | | |
Aggregate
Intrinsic Value | |
Balance at July 1, 2022 | |
| 12,109 | | |
$ | 92.91 | | |
| - | |
Balance at March 31, 2023 | |
| 12,109 | | |
$ | 92.91 | | |
| - | |
INMED PHARMACEUTICALS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 AND 2022
(Expressed in U.S. Dollars)
8. | SHARE CAPITAL AND RESERVES (cont’d) |
| e) | Preferred Investment Options |
On September 13, 2022, the Company
closed a private placement of its common shares and 1,382,490 preferred investment options were issued with an exercise price of $8.44
per share, were immediately exercisable upon issuance, and expire 7 years following the date of issuance. The fair value of preferred
investment options was calculated using the Black-Scholes option pricing model and was determined to be $10.91 per option. Assumptions
used included a weighted average risk-free interest rate of 3.12%, expected term of 7 years, weighted average volatility factor of 114.42%
and a weighted average dividend yield of 0%. The allocated value of the investment options was recorded in additional paid-in capital.
On November 21, 2022, these preferred investment options were surrendered to the Company for cancellation.
On November 21, 2022, the Company
closed a private placement of its common shares and 3,272,733 preferred investment options were issued with an exercise price of $3.044
per share, were immediately exercisable upon issuance, and expire 7 years following the date of issuance. The fair value of preferred
investment options was calculated using the Black-Scholes option pricing model and was determined to be $2.278 per option. Assumptions
used included a weighted average risk-free interest rate of 2.92%, expected term of 7 years, weighted average volatility factor of 116.52%
and a weighted average dividend yield of 0%. The allocated value of these investment options was recorded in additional paid-in capital.
| |
Number | | |
Weighted Average Share Price | | |
Aggregate
Intrinsic Value | |
Balance at July 1, 2022 | |
| 233,100 | | |
$ | 18.50 | | |
| - | |
Granted | |
| 4,655,223 | | |
$ | 4.65 | | |
| - | |
Cancelled | |
| (1,615,590 | ) | |
$ | 9.89 | | |
| - | |
Balance at March 31, 2023 | |
| 3,272,733 | | |
$ | 3.044 | | |
| - | |
| f) | Agents’ Investment Options |
On September 13, 2022, the Company
closed a private placement of its common shares and 44,931 preferred investment options were issued for services with an exercise price
of $10.85 per share, were immediately exercisable upon issuance, and expire approximately 7 years following the date of issuance. The
fair value of agents’ investment options was calculated using the Black-Scholes option pricing model and was determined to be $10.06
per option. Assumptions used included a weighted average risk-free interest rate of 3.24%, expected term of 5 years, weighted average
volatility factor of 116.88% and a weighted average dividend yield of 0%. The allocated value of these agents’ investment options
was recorded in additional paid-in capital.
On November 21, 2022, the Company
closed a private placement of its common shares and 118,182 preferred investment options were issued for services with an exercise price
of $4.125 per share, were immediately exercisable upon issuance, and expire approximately 7 years following the date of issuance. The
fair value of agents’ investment options was calculated using the Black-Scholes option pricing model and was determined to be $2.03
per option. Assumptions used included a weighted average risk-free interest rate of 3.18%, expected term of 5 years, weighted average
volatility factor of 117.97% and a weighted average dividend yield of 0%. The allocated value of these agents’ investment options
was recorded in additional paid-in capital.
| |
Number | | |
Weighted Average Share Price | | |
Aggregate
Intrinsic Value | |
Balance at July 1, 2022 | |
| 15,152 | | |
$ | 26.81 | | |
| - | |
Granted | |
| 163,113 | | |
$ | 5.98 | | |
| - | |
Balance at March 31, 2023 | |
| 178,265 | | |
$ | 7.75 | | |
| - | |
INMED PHARMACEUTICALS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 AND 2022
(Expressed in U.S. Dollars)
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.
As of March 31, 2023, there were 43,404
(June 30, 2022 – 18,163) options available for future allocation pursuant to SEC rules and 20% of the issued and outstanding shares
according to the terms of the Plan. 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.
The following is a summary of changes
in outstanding options from July 1, 2022 to March 31, 2023:
| |
Number | | |
Weighted Average
Exercise Price
$ | |
| |
| | |
| |
Balance at July 1, 2022 | |
| 55,603 | | |
| 128.59 | |
Granted | |
| 61,720 | | |
| 1.85 | |
Expired/Forfeited | |
| (6,961 | ) | |
| 238.00 | |
Balance at March 31, 2023 | |
| 110,362 | | |
| 48.20 | |
| |
| | | |
| | |
March 31, 2023: | |
| | | |
| | |
Vested and exercisable | |
| 38,839 | | |
| 123.77 | |
Unvested | |
| 71,523 | | |
| 7.16 | |
INMED PHARMACEUTICALS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 AND 2022
(Expressed in U.S. Dollars)
9. | SHARE-BASED PAYMENTS (cont’d) |
| b) | Fair Value of Options Issued During the Period |
| i) | Weighted Average Fair
Value at Grant Date of Options Granted: |
The weighted average fair value at grant
date of options granted during the nine months ended March 31, 2023, was $1.37 per option (year ended June 30, 2022 - $21.04). Assumptions
used for options granted during the nine months ended March 31, 2023 included a weighted average risk-free interest rate of 3.74% (year
ended June 30, 2022 – 1.17%), weighted average expected life of 3.3 years calculated using the Simplified Method for directors,
officers and employees, weighted average volatility factor of 122.98% (year ended June 30, 2022 – 97.15%), weighted average dividend
yield of 0% (year ended June 30, 2022 – 0%) and a 5% forfeiture rate (year ended June 30, 2022 – 5%).
| ii) | Expenses Arising from
Share-based Payment Transactions: |
Total expenses arising from share-based
payment transactions recognized during the three months ended March 31, 2023, were $50,357 (2022 - $195,085). $28,442 was allocated to
general and administrative expenses (2022 - $103,401) and the remaining $21,915 was allocated to research and development expenses (2022
- $91,684). Total expenses arising from share-based payment transactions recognized during the nine months ended March 31, 2023, were
$187,318 (2022 - $521,006). $137,555 was allocated to general and administrative expenses (2022 - $307,885) and the remaining $100,120
was allocated to research and development expenses (2022 - $213,121). Unrecognized compensation cost at March 31, 2023 related to unvested
options was $101,420 which will be recognized over a weighted-average vesting period of 3.9 years.
The Company is committed to minimum
lease payments as follows:
Maturity Analysis | |
March 31,
2023 | |
| |
$ | |
| |
| |
Less than one year | |
| 437,425 | |
One to five years | |
| 63,951 | |
More than five years | |
| - | |
Total undiscounted lease liabilities(1) | |
| 501,376 | |
Less: imputed interest | |
| (5,008 | ) |
Present value of lease liabilities | |
| 496,368 | |
| |
| | |
Less: Current portion of lease liabilities | |
| (423,574 | ) |
Non-current portion of lease liabilities | |
| 72,794 | |
(1) Excludes estimated variable operating costs of $92,964
and $58,004 on an annual basis through to April 30, 2024 and August 31, 2024, respectively.
INMED PHARMACEUTICALS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 AND 2022
(Expressed in U.S. Dollars)
11. | BASIC AND DILUTED LOSS PER SHARE |
Basic loss per share
amounts are calculated by dividing the net loss for the period by the weighted average number of ordinary shares outstanding during the
period. The pre-funded warrants were determined to be common stock equivalents and have been included in the weighted average number
of shares outstanding for calculation of the basic earnings per share number. As of March 31, 2023, the outstanding stock options of
110,362 and warrants of 3,516,529 are anti-dilutive (2022 – 56,382 and 257,698 respectively) and are excluded from the weighted
average number of common shares.
The following table
presents information about the Company’s reportable segments for the three and nine months ended March 31, 2023 and 2022:
| |
Three Months Ended March 31, | |
| |
2023 | | |
2022 | |
| |
InMed | | |
BayMedica | | |
Total | | |
InMed | | |
BayMedica | | |
Total | |
| |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Sales | |
| - | | |
| 1,033,925 | | |
| 1,033,925 | | |
| - | | |
| 309,585 | | |
| 309,585 | |
Cost of sales | |
| - | | |
| (841,414 | ) | |
| (841,414 | ) | |
| - | | |
| (127,308 | ) | |
| (127,308 | ) |
Operating expenses | |
| (1,711,010 | ) | |
| (630,709 | ) | |
| (2,341,719 | ) | |
| (2,977,705 | ) | |
| (744,197 | ) | |
| (3,721,902 | ) |
Other income | |
| 104,093 | | |
| 47,171 | | |
| 151,264 | | |
| 36,745 | | |
| 27,215 | | |
| 63,960 | |
Net loss | |
| (1,606,917 | ) | |
| (391,027 | ) | |
| (1,997,944 | ) | |
| (2,940,960 | ) | |
| (534,705 | ) | |
| (3,475,665 | ) |
Unrestricted cash | |
| 9,441,977 | | |
| 162,080 | | |
| 9,604,057 | | |
| 5,386,206 | | |
| 512,107 | | |
| 5,898,313 | |
| |
Nine Months Ended March 31, | |
| |
2023 | | |
2022 | |
| |
InMed | | |
BayMedica | | |
Total | | |
InMed | | |
BayMedica | | |
Total | |
| |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Sales | |
| - | | |
| 1,824,496 | | |
| 1,824,496 | | |
| - | | |
| 574,677 | | |
| 574,677 | |
Cost of sales | |
| - | | |
| (1,415,068 | ) | |
| (1,415,068 | ) | |
| - | | |
| (280,845 | ) | |
| (280,845 | ) |
Inventory write-down | |
| - | | |
| (576,772 | ) | |
| (576,772 | ) | |
| - | | |
| - | | |
| - | |
Operating expenses | |
| (5,613,299 | ) | |
| (2,081,882 | ) | |
| (7,695,181 | ) | |
| (9,443,083 | ) | |
| (1,595,123 | ) | |
| (11,038,206 | ) |
Other income (expense) | |
| 123,973 | | |
| 129,321 | | |
| 253,294 | | |
| (34,358 | ) | |
| 48,638 | | |
| 14,280 | |
Net loss | |
| (5,489,326 | ) | |
| (2,119,905 | ) | |
| (7,609,231 | ) | |
| (9,477,441 | ) | |
| (1,252,653 | ) | |
| (10,730,094 | ) |
Unrestricted cash | |
| 9,441,977 | | |
| 162,080 | | |
| 9,604,057 | | |
| 5,386,206 | | |
| 512,107 | | |
| 5,898,313 | |
INMED PHARMACEUTICALS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 AND 2022
(Expressed in U.S. Dollars)
Investing and financing
activities that do not have a direct impact on cash flows are excluded from the statements of cash flows. During the nine months ended
March 31, 2023, the following transactions were excluded from the statement of cash flows:
| i) | On September 13, 2022, the Company issued 44,931 preferred investment options to its placement agent. The fair value of these investment options was $451,897 and was included in share issuance costs related to the September 2022 private placement. |
| ii) | On November 21, 2022, the Company issued 118,182 preferred investment options to its placement agent. The fair value of these investment options was $239,587 and was included in share issuance costs related to the November 2022 private placement. |
During the nine months
ended March 31, 2022, the following transactions were excluded from the statement of cash flows:
| i) | On July 2, 2021, the Company issued warrants to its placement agent. The fair value of these warrants was $739,920 and was included in share issuance costs related to the July 2021 private placement. |
| ii) | On October 13, 2021, the Company issued 2,050,000 common shares to BayMedica’s equity and convertible debt holders, pursuant to the acquisition of BayMedica. The fair value of these common shares was $3,013,500 and was included in the total consideration for the acquisition of BayMedica. |
| iii) | On March 22 and 23, 2022, a total of 14,760 warrants were exercised on
a cashless basis resulting in the issuance of 5,873 common shares. |
14. | COMMITMENTS AND CONTINGENCIES |
Pursuant to the terms of agreements
with various contract research organizations, as of March 31, 2023, the Company is committed for contract research services and materials
at a cost of approximately $2,169,023, expected to occur in the twelve months following March 31, 2023.
Pursuant to the terms of agreements
with various vendors, as of March 31, 2023, the Company is committed for contract materials and equipment at a cost of approximately
$445,259, expected to occur in the twelve months following March 31, 2023.
INMED PHARMACEUTICALS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 AND 2022
(Expressed in U.S. Dollars)
14. | COMMITMENTS AND CONTINGENCIES (cont’d) |
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 $43,055 (June 30, 2022 - $44,676) 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 for issuance date.
BayMedica LLC (“BayMedica”),
a wholly-owned indirect subsidiary of the Company, entered into a patent license agreement (“Agreement”) with a third party
(the “Licensor”) in an agreement dated February 15, 2021. BayMedica is required to make future royalty payments to the Licensor
based on net sales of licensed products to maintain an exclusive license. In December 2021, BayMedica amended the Agreement including
the deferral of the 2021 payments to 2022. As of March 31, 2023, BayMedica 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. On May 3, 2023, BayMedica
received a further letter from the Licensor demanding payment of $950,209 and stated that it will commence legal proceedings to recover
same. 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.
INMED PHARMACEUTICALS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 AND 2022
(Expressed in U.S. Dollars)
15. | FINANCIAL RISK MANAGEMENT |
The Company’s financial instruments
consist of cash and cash equivalents, short-term investments, accounts receivable and accounts payable and accrued liabilities.
The fair values of short-term investments,
accounts receivable, and accounts payable and accrued liabilities approximate their carrying values because of the short-term nature
of these instruments. Cash and cash equivalents are measured at fair value using Level 1 inputs.
Market risk is the risk that the
fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices are comprised
of four types of risk: foreign currency risk, interest rate risk, commodity price risk and equity price risk. The Company does not currently
have significant commodity price risk or equity price risk.
Foreign Currency Risk:
Foreign currency risk is the risk
that the future cash flows or fair value of the Company’s financial instruments that are denominated in a currency that is not
the Company’s functional currency (U.S. dollar) will fluctuate due to changes in foreign exchange rates. Portions of the Company’s
cash and cash equivalents and accounts payable and accrued liabilities are denominated in Canadian dollars.
Accordingly, the Company is exposed
to fluctuations in exchange rates, primarily against the Canadian dollar.
As of March 31, 2023, the Company
has a net excess of Canadian dollar denominated cash and cash equivalents in excess of Canadian dollar denominated accounts payable and
accrued liabilities of C$1,969,113 which is equivalent to US$1,454,977 at the March 31, 2023 exchange rate. The Canadian dollar financial
assets generally result from holding Canadian dollar cash to settle anticipated near-term accounts payable and accrued liabilities denominated
in Canadian dollars. The Canadian dollar financial liabilities generally result from purchases of supplies and services from suppliers
in Canada.
Each increase (decrease) of 1% in
the Canadian dollar in relation to the U.S. dollar results in a gain (loss), with a corresponding effect on cash flows, of $14,550 based
on the March 31, 2023 net Canadian dollar assets (liabilities) position. During the nine months ended March 31, 2023, the Company recorded
foreign exchange loss of $86,214 (2022 – $35,228) related to Canadian dollars.
Interest Rate Risk:
Interest rate risk is the risk that
future cash flows will fluctuate as a result of changes in market interest rates. As at March 31, 2023, holdings of cash and cash equivalents
of $8,795,454 (June 30, 2022 - $5,087,615) are subject to floating interest rates. The balance of the Company’s cash holdings of
$808,603 (June 30, 2022 - $1,089,251) are non-interest bearing.
As of March 31, 2023, the Company
held variable rate guaranteed investment certificates, with one-year terms, of $43,055 (June 30, 2022 - $44,676).
The Company’s current policy
is to invest excess cash in guaranteed investment certificates or interest-bearing accounts of major Canadian chartered banks or credit
unions with comparable credit ratings. The Company regularly monitors compliance to its cash management policy.
INMED PHARMACEUTICALS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 AND 2022
(Expressed in U.S. Dollars)
15. | FINANCIAL RISK MANAGEMENT (cont’d) |
Credit risk is the risk of financial
loss to the Company if a customer or a counter party to a financial instrument fails to meet its contractual obligations. Financial instruments
which are potentially subject to credit risk for the Company consist primarily of cash and cash equivalents, short-term investments and
loan receivable. Cash and cash equivalents and short-term investments are maintained with financial institutions of reputable credit
and may be redeemed upon demand. In the normal course of business, the Company does not provide third party loans.
The carrying amount of financial
assets represents the maximum credit exposure. Credit risk exposure is limited through maintaining cash and cash equivalents and short-term
investments with high-credit quality financial institutions and management considers this risk to be minimal for all cash and cash equivalents
and short-term investments assets based on changes that are reasonably possible at each reporting date.
Liquidity risk is the risk that the
Company will not be able to meet its financial obligations as they become due. The Company’s policy is to ensure that it has sufficient
cash to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or
risking damage to the Company’s reputation. A key risk in managing liquidity is the degree of uncertainty in the cash flow projections.
If future cash flows are fairly uncertain, the liquidity risk increases. As at March 31, 2023, the Company has cash and cash equivalents
and short-term investments of $9,647,112 (June 30, 2022 - $6,221,670), current liabilities of $2,269,669 (June 30, 2022 - $3,181,316)
and a working capital surplus of $9,572,876 (June 30, 2022 - $6,416,460).
16. | 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”).
From February 11, 2022 to March 31, 2023, NRF rendered legal services in the amount of $580,761 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.
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:
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Our ability to pursue the discovery through to commercialization of Product Candidates and Products that will treat diseases with high unmet medical needs; |
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The continued optimization of cannabinoid manufacturing approaches; |
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Our success in initiating discussions with potential partners for licensing various aspects of our Product Candidates; |
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Our ability to commercialize and, where required, register Product Candidates and Products in the United States and other jurisdictions; |
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Our ability to successfully access existing manufacturing capacity via leases with third-parties or to transfer our manufacturing processes to a contract manufacturing organizations; |
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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; |
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Our belief that that INM-755 offers specific advantages and will prove to provide the extensive relief symptomology with the added potential of addressing the underlying disease in EB; |
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The structure and timing of future INM-755 studies including that we will complete patient enrollment into our Phase II study in EB in 2022; |
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The ability of the IntegraSynTM approach to introduce a revenue stream to us before the expected commercial approval of our therapeutic programs; |
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Our ability to successfully scale up our IntegraSynTM or other cost effective approaches so that it will be commercial-scale ready after Phase II clinical trials are completed, after which time we may no longer need to source APIs from API manufacturers; |
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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; |
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Our ability to successfully make determinations as to which research and development programs to continue based on several strategic factors; |
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Our ability to monetize our IntegraSynTM manufacturing approach to the broader pharmaceutical industry; |
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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; |
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The success of work to be conducted under the research and development collaboration between us and various contract development and manufacturing organizations (“CDMOs”); |
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Our ability to develop our therapies through early human testing; |
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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; |
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Our ability to oversee clinical trials for INM-755 in EB and building the requisite internal commercialization infrastructure to self-market the product to EB clinics; |
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Our ability to find a partnership early in the development process for INM-088 in glaucoma; |
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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; |
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Plans regarding our next steps, options, and targeted benefits of our manufacturing technologies; |
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Our IntegraSynTM 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 |
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Our ability to potentially earn revenue from our IntegraSynTM approach by (i) becoming a supplier of APIs to the pharmaceutical industry and/or (ii) providing pharmaceutical-grade ingredients to the non-pharmaceutical market; |
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Our plans to work closely with regulatory authorities and clinical experts in developing the clinical program for INM-755; |
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Our ability to successfully prosecute patent applications; |
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Our ability to complete formulation development and scale-up, conduct additional preclinical studies, and initiate and complete IND/CTA-enabling toxicology studies in calendar year 2023 for INM-088; |
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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; |
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Our belief that with a novel delivery system, the reduction of IOP and/or providing neuroprotection in glaucoma patients by topical (eye drop) application of cannabinoids will hold significant promise as a new therapy; |
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The potential for any of our patent applications to provide intellectual property protection for us; |
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Our ability to secure insurance coverage for shipping and storage of Product Candidates, and clinical trial insurance; |
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Our ability to expand our insurance coverage to include the commercial sale of Products and Product Candidates; |
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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; |
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Our ability to initiate discussions and conclude strategic partnerships to assist with development of certain programs; |
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Our ability to position ourselves to achieve value-driving, near term milestones for our Product Candidates with limited investment; |
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Our ability to execute our business strategy; |
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Critical accounting estimates; |
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Management’s assessment of future plans and operations; |
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The outlook of our business and the global economic and geopolitical conditions; and |
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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 nine months ended March 31, 2023
InMed Pharmaceuticals
Inc.
MANAGEMENT’S DISCUSSION
AND ANALYSIS
OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
Three and Nine Months
Ended March 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, 2022 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 nine months ended March
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, including rare cannabinoids and novel cannabinoid analogs, targeting the treatment
of diseases with high unmet medical needs (“Product Candidates”). Together with our subsidiary BayMedica, LLC, we also have
significant know-how in developing proprietary manufacturing approaches to produce cannabinoids for various market sectors (“Products”).
Our know-how includes traditional approaches such as chemical synthesis and biosynthesis, as well as a proprietary, integrated manufacturing
approach called IntegraSynTM. 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, LLC.
While our activities do not involve direct use of Cannabis nor extracts from the plant, we note that the U.S. Food and Drug Administration
(“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 active pharmaceutical ingredient (“API”) under development for
our initial two drug candidates, INM-755 for Epidermolysis bullosa (“EB”) and INM-088 for glaucoma, is cannabinol (“CBN”).
Additional uses of both INM-755 and INM-088 are being explored, as well as the application of novel cannabinoid analogs to treat diseases
including but not limited to neurodegenerative diseases such as Alzheimer’s, Parkinson’s, and Huntington’s.
InMed Pharmaceuticals Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Three and nine months ended March 31, 2023
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 IntegraSynTM 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 (“BayMedica”). 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 since the acquisition of Biogen Science Inc. 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 $7.6 million and $10.7
million for the nine months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, we had an accumulated deficit of $101.1
million, which includes all losses since our inception in 1981. Our accumulated deficit increased between 2014, when we began focusing
on the development of cannabinoid-derived pharmaceuticals following the acquisition of Biogen Science Inc., and March 31, 2023 by approximately
$72.2 million. We expect our expenses and operating losses will increase substantially over the next several years in connection with
our ongoing activities as we:
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continue to further advance
the INM-755 program, our lead drug candidate for the treatment of EB; |
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continue
to further advance the INM-088 program, our drug candidate for the treatment of glaucoma; |
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continue
to advance research in the INM-900 series program, using cannabinoid analogs in treating neurodegenerative diseases such as Alzheimer’s,
Huntington’s and Parkinson’s; |
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investigate
our Product Candidates for additional uses beyond their initial target indications; |
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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; |
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seek regulatory
approvals for any Product Candidates that successfully complete clinical trials; |
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scale-up our manufacturing processes and
capabilities, or arrange for a third party to do so on our behalf;
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continue to support our commercial operations
and revenue-generating Products at BayMedica;
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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; |
InMed Pharmaceuticals Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Three and nine months ended March 31, 2023
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maintain, expand, enforce, defend and protect
our intellectual property;
|
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continue to further advance the research
and development of various manufacturing technologies;
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build
internal infrastructure, including personnel, to meet our milestones; and |
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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
During the three months ended March 31, 2023, a licensor
has alleged a breach of an agreement. This issue is discussed in Note 14 of the Financial Statements.
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. The Company recognizes revenue when control
over the products have been transferred to the customer and the Company has 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:
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external
research and development expenses incurred under agreements with contract research organizations, or “CROs”, contract
development and manufacturing organization, or “CDMOs”, and consultants; |
InMed Pharmaceuticals Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Three and nine months ended March 31, 2023
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salaries, payroll taxes, employee benefits expenses for individuals involved in research and development efforts; |
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research supplies; and |
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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:
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the
timing and progress of preclinical and clinical development activities; |
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the number and scope of preclinical and clinical
programs we decide to pursue;
|
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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; |
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our
ability to maintain our current research and development programs and to establish new ones; |
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our ability to establish sales, licensing
or collaboration arrangements;
|
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the progress
of the development efforts of parties with whom we may enter into collaboration arrangements; |
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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; |
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the
receipt and related terms of regulatory approvals from applicable regulatory authorities; |
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the
availability of materials for use in production of our Products and Product Candidates; |
InMed Pharmaceuticals Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Three and nine months ended March 31, 2023
| ● | 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 fiscal 2023 as compared to fiscal 2022, largely due to high start-up costs associated with the multicentre Phase
II clinical trial in our INM-755 program during fiscal 2022. 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, 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.
Impairment of Long-Lived Assets
We assess the recoverability of our long-lived assets whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived
asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by
the asset or assets. If carrying value exceeds the sum of undiscounted cash flows, we then determine the fair value of the underlying
asset. Any impairment to be recognized is measured as the amount by which the carrying amount of the asset group exceeds the estimated
fair value of the asset group. Assets classified as held for sale are reported at the lower of the carrying amount or fair value, less
costs to sell.
InMed Pharmaceuticals Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Three and nine months ended March 31, 2023
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,
the Company aligned into two operating and reportable segments, InMed Pharmaceuticals (the “InMed” segment) and BayMedica
(the “BayMedica” segment).
Comparison of the three months ended March
31, 2023 and 2022 for InMed Segment
| |
Three
Months Ended
March
31, | | |
| | |
| |
| |
2023 | | |
2022 | | |
Change | | |
% Change | |
| |
(in thousands) | | |
| | |
| |
Operating expenses: | |
| | |
| | |
| | |
| |
Research and development and patents | |
| 713 | | |
| 1,386 | | |
| (673 | ) | |
| -49 | % |
General and administrative | |
| 972 | | |
| 1,566 | | |
| (594 | ) | |
| -38 | % |
Amortization and depreciation | |
| 26 | | |
| 26 | | |
| - | | |
| 0 | % |
Total operating expenses | |
| 1,711 | | |
| 2,978 | | |
| (1,267 | ) | |
| -43 | % |
Interest and other income | |
| 107 | | |
| 4 | | |
| 103 | | |
| 2575 | % |
Foreign exchange (loss) gain | |
| (3 | ) | |
| 33 | | |
| (36 | ) | |
| (109 | )% |
Net loss | |
$ | (1,607 | ) | |
$ | (2,941 | ) | |
$ | 1,334 | | |
| -45 | % |
Research and Development and Patents Expenses
Research and development and patents expenses
decreased by $0.7 million in our InMed segment, or 49%, for the three months ended March 31, 2023 compared to the three months ended
March 31, 2022. The decrease in research and development and patents expenses was due to a combination of lower personnel expenses, legal
fees and decreased expenses related to the INM-755 program as a result of high start-up costs associated with the multicentre Phase II
clinical trial during fiscal 2022.
General and administrative expenses
General and administrative expenses decreased
by $0.6 million in our InMed segment, or 38%, for the three months ended March 31, 2023 compared to the three months ended March 31,
2022. The decrease results primarily from a combination of changes including lower investor relation expenses, stock-based compensation
expenses, personnel expenses and legal fees.
Foreign exchange loss
Foreign exchange loss increased by less than
$0.1 million in our InMed segment, or 109%, for the three months ended March 31, 2023, compared to the three months ended March 31, 2022,
as a consequence of holding non-US denominated assets and liabilities combined with fluctuations in foreign exchange rates.
InMed Pharmaceuticals Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Three and nine months ended March 31, 2023
Comparison of the three months ended March
31, 2023 and 2022 for BayMedica Segment
| |
Three
Months Ended
March
31, | | |
| | |
| |
| |
2023 | | |
2022 | | |
Change | | |
% Change | |
| |
(in thousands) | | |
| | |
| |
Sales | |
$ | 1,034 | | |
$ | 310 | | |
$ | 724 | | |
| 234 | % |
Cost of sales | |
| 841 | | |
| 127 | | |
| 714 | | |
| 562 | % |
Gross profit | |
| 193 | | |
| 183 | | |
| 10 | | |
| 5 | % |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Research and development and patents | |
| 165 | | |
| 368 | | |
| (203 | ) | |
| -55 | % |
General and administrative | |
| 441 | | |
| 349 | | |
| 92 | | |
| 26 | % |
Amortization and depreciation | |
| 25 | | |
| 28 | | |
| (3 | ) | |
| -11 | % |
Total operating expenses | |
| 631 | | |
| 745 | | |
| (114 | ) | |
| -15 | % |
Interest and other income | |
| 49 | | |
| 27 | | |
| 22 | | |
| 81 | % |
Tax expense | |
| (2 | ) | |
| - | | |
| (2 | ) | |
| nm | |
Net loss | |
$ | (391 | ) | |
$ | (535 | ) | |
$ | 144 | | |
| -27 | % |
Sales
Sales increased by $0.7 million in our BayMedica
segment, or 234%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. Additionally, BayMedica
has now realized two consecutive quarters of material revenue growth, with increases of 46% and 120% in Q2 and Q3 2023, respectfully.
Although there is no assurances this growth will continue in future quarters, this recent trend is encouraging. The increase in distribution
sales results from expanded marketing efforts and increased demand in certain cannabinoid Products. 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 $0.7 million
in our BayMedica segment, or 562%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The increase
in cost of goods sold is a result from the increase in sales mentioned above.
Gross Profit
Gross profit margin was adversely affected by certain products in the
portfolio, which, due to downward pricing pressure, resulted in inventory sell-through at a significantly reduced price point and reduced
margin. As sales and marketing efforts continue to focus on products that contribute high margins, we envisage our overall gross profit
and gross profit margins improving over the coming quarters.
Research and Development and Patents Expenses
Research and development and patents expenses
decreased by $0.2 million in our BayMedica segment, or 55%, for the three months ended March 31, 2023 compared to the three months ended
March 31, 2022. The decrease in research and development and patents expenses was primarily due to lower personnel expenses.
InMed Pharmaceuticals Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Three and nine months ended March 31, 2023
General and administrative expenses
General and administrative expenses increased
by less than $0.1 million in our BayMedica segment, or 26%, for the three months ended March 31, 2023 compared to the three months ended
March 31, 2022. The increase results primarily from a combination of changes including higher personnel expenses, accounting fees, legal
fees and sales and marketing expenses.
Comparison of the nine months ended March
31, 2023 and 2022 for InMed Segment
| |
Nine Months Ended
March 31, | | |
| | |
| |
| |
2023 | | |
2022 | | |
Change | | |
% Change | |
| |
(in thousands) | | |
| | |
| |
Operating expenses: | |
| | |
| | |
| | |
| |
Research and development and patents | |
| 2,379 | | |
| 4,857 | | |
| (2,478 | ) | |
| -51 | % |
General and administrative | |
| 3,156 | | |
| 4,505 | | |
| (1,349 | ) | |
| -30 | % |
Amortization and depreciation | |
| 78 | | |
| 81 | | |
| (3 | ) | |
| -4 | % |
Total operating expenses | |
| 5,613 | | |
| 9,443 | | |
| (3,830 | ) | |
| -41 | % |
Interest and other income | |
| 203 | | |
| 14 | | |
| 189 | | |
| 1,350 | % |
Foreign exchange loss | |
| (79 | ) | |
| (48 | ) | |
| (31 | ) | |
| 65 | % |
Net loss | |
$ | (5,489 | ) | |
$ | (9,477 | ) | |
$ | 3,988 | | |
| -42 | % |
Research and Development and Patents Expenses
Research and development and patents expenses
decreased by $2.5 million in our InMed segment, or 51%, for the nine months ended March 31, 2023 compared to the nine months ended March
31, 2022. The decrease in research and development and patents expenses was due to a combination of lower legal fees, personnel expenses
and decreased expenses related to the INM-755 program as a result of high start-up costs associated with the multicentre Phase II clinical
trial during fiscal 2022.
General and administrative expenses
General and administrative expenses decreased
by $1.3 million in our InMed segment, or 30%, for the nine months ended March 31, 2023 compared to the nine months ended March 31, 2022.
The decrease results primarily from a combination of changes including lower personnel expenses, insurance fees, investor relation expenses,
accounting fees, legal fees and stock-based compensation expenses, partially offset by higher consulting fees.
Foreign exchange loss
Foreign exchange loss increased by less than
$0.1 million in our InMed segment, or 65%, for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022,
as a consequence of holding non-US denominated assets and liabilities combined with fluctuations in foreign exchange rates.
InMed Pharmaceuticals Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Three and nine months ended March 31, 2023
Comparison of the nine months ended March
31, 2023 and 2022 for BayMedica Segment
| |
Nine
Months Ended
March
31, | | |
| | |
| |
| |
2023 | | |
2022 | | |
Change | | |
% Change | |
| |
(in thousands) | | |
| | |
| |
Sales | |
$ | 1,824 | | |
$ | 575 | | |
$ | 1,249 | | |
| 217 | % |
Cost of sales | |
| 1,415 | | |
| 281 | | |
| 1,134 | | |
| 404 | % |
Inventory write-down | |
| 577 | | |
| - | | |
| 577 | | |
| nm | |
Gross (loss) profit | |
| (168 | ) | |
| 294 | | |
| (462 | ) | |
| -157 | % |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Research and development and patents | |
| 729 | | |
| 925 | | |
| (196 | ) | |
| -21 | % |
General and administrative | |
| 1,283 | | |
| 619 | | |
| 664 | | |
| 107 | % |
Amortization and depreciation | |
| 70 | | |
| 51 | | |
| 19 | | |
| 37 | % |
Total operating expenses | |
| 2,082 | | |
| 1,595 | | |
| 487 | | |
| 31 | % |
Interest and other income | |
| 141 | | |
| 49 | | |
| 92 | | |
| 188 | % |
Tax expense | |
| (11 | ) | |
| - | | |
| (11 | ) | |
| nm | |
Net loss | |
$ | (2,120 | ) | |
$ | (1,252 | ) | |
$ | (868 | ) | |
| 69 | % |
Sales
Sales increased by $1.2 million in our BayMedica
segment, or 217%, for the nine months ended March 31, 2023 compared to the nine months ended March 31, 2022. Additionally, BayMedica
has now realized two consecutive quarters of material revenue growth, with increases of 46% and 120% in Q2 and Q3 2023, respectfully.
Although there is no assurances this growth will continue in future quarters, this recent trend is encouraging. The increase in distribution
sales results from expanded marketing efforts and increased demand in certain cannabinoid Products. In addition, we acquired BayMedica
on October 13, 2021 so the nine months ended March 31, 2022 results were partially pro-rated. 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 $1.1 million
in our BayMedica segment, or 404%, for the nine months ended March 31, 2023 compared to the nine months ended March 31, 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 $0.6 million in our BayMedica segment for the nine months ended March 31, 2023, with no comparable expenses in 2022. Contributing
factors to the decrease in net realizable value included lower demand and downward pricing pressure in the first quarter of fiscal 2023.
BayMedica continues to evaluate new manufacturing approaches for certain Products to increase competitive position in the marketplace.
Gross Profit
Gross profit margin was adversely affected by
certain products in the portfolio, which, due to downward pricing pressure, resulted in inventory sell-through at a significantly reduced
price point and reduced margin. As sales and marketing efforts continue to focus on products that contribute high margins, we envisage
our overall gross profit and gross profit margins improving over the coming quarters.
Research and Development and Patents Expenses
Research and development and patents expenses
decreased by $0.2 million in our BayMedica segment, or 21%, for the nine months ended March 31, 2023 compared to the nine months ended
March 31, 2022. The decrease in research and development and patents expenses was primarily due to lower personnel expenses.
General and administrative expenses
General and administrative expenses increased
by $0.7 million in our BayMedica segment, or 107%, for the nine months ended March 31, 2023 compared to the nine months ended March 31,
2022. The increase in general and administrative expenses was due to the inclusion of BayMedica operating results following the acquisition
date on October 13, 2021. There were no comparable expenses in the first quarter of fiscal 2022.
InMed Pharmaceuticals Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Three and nine months ended March 31, 2023
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 March 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) | |
Nine Months Ended March 31, 2023 | | |
Nine Months Ended March 31, 2022 | |
Net cash used in operating activities | |
$ | (6,625 | ) | |
$ | (11,536 | ) |
Net cash (used in) provided by investing activities | |
| (628 | ) | |
| 52 | |
Net cash provided by financing activities | |
| 10,680 | | |
| 10,019 | |
Net increase (decrease) in cash and cash equivalents | |
$ | 3,427 | | |
$ | (1,465 | ) |
Operating Activities
During the nine months ended March 31, 2023,
we used cash in operating activities of $6.6 million, primarily resulting from our net loss of $7.6 million combined with $0.3 million
used in changes in our non-cash working capital, partially offset by non-cash share-based compensation expenses and inventory write-down.
During the nine months ended March 31, 2022,
we used cash in operating activities of $11.5 million, primarily resulting from our net loss of $10.7 million combined with $1.7 million
used in changes in our non-cash working capital, partially offset by non-cash share-based compensation expenses.
Investing Activities
During the nine months ended March 31, 2023,
cash used in investing activities of $0.6 million resulted from escrow payments made to BayMedica’s historical equity and convertible
debt holders and payment of deposit on equipment.
During the nine months ended March 31, 2022,
cash provided by investing activities of less than $0.1 million resulted from cash acquired from the acquisition of BayMedica, partially
offset by purchases of property and equipment.
Financing Activities
During the nine months ended March 31, 2023,
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.
During the nine months ended March 31, 2022,
cash provided by financing activities of $10.0 million consisted of $12.0 million of gross proceeds from a private placement of our common
shares, offset by transaction costs of $1.3 million and settlement of debt of $0.4 million reflecting the value of loans to BayMedica
as at the date of acquisition and $0.2 million for the repayment of debt assumed in the BayMedica acquisition.
InMed Pharmaceuticals Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Three and nine months ended March 31, 2023
Funding Requirements
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 the Company’s ability to continue as a going concern within one year after the date
that the condensed consolidated interim financial statements are issued.
Through March 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 $7.6 million and $10.7 million for the nine months ended March 31, 2023 and 2022, respectively.
In addition, we have an accumulated deficit of $101.1 million as of March 31, 2023. Our accumulated deficit increased between 2014, when
we began focusing on the development of cannabinoid-derived pharmaceuticals following the acquisition of Biogen Science Inc., and March
31, 2023 by approximately $72.2 million and we expect to continue to generate operating losses for the foreseeable future.
As of the issuance date of the condensed consolidated
interim financial statements, we expect our cash and cash equivalents of $9.6 million as of March 31, 2023 will be sufficient to fund
our operating expenses and capital expenditure requirements into the first quarter of calendar 2024, and possibly into the second quarter
of calendar 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 the Company 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 condensed consolidated interim
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
progress, costs and results of our Phase 2 clinical trial for INM-755; |
| ● | 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; |
InMed Pharmaceuticals Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Three and nine months ended March 31, 2023
|
● |
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.
InMed Pharmaceuticals Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Three and nine months ended March 31, 2023
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
We periodically review our financial reporting
and disclosure practices and accounting policies to ensure that they provide accurate and transparent information relative to the current
economic and business environment. As part of this process, we have reviewed our selection, application and communication of critical
accounting policies and financial disclosures. Management has discussed the development and selection of the critical accounting policies
with the Audit Committee of the Board of Directors and the Audit Committee has reviewed the disclosure relating to critical accounting
policies in this Management’s Discussion and Analysis.
This discussion and analysis of our financial
condition and results of operations is based on our condensed consolidated interim financial statements included as part of this report,
which have been prepared in accordance with U.S. GAAP. The preparation of our condensed consolidated interim financial statements requires
us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the revenue and expenses incurred
during the reported periods. We base estimates on our historical experience, known trends and various other factors that we believe are
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities
that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Detailed information about our critical accounting
policies and estimates is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the year ended June 30, 2022. There have
been no significant changes to these policies during the nine months ended March 31, 2023.
Going Concern
Through March 31, 2023, we have funded our operations
primarily with proceeds from the sale of common shares. We have incurred recurring losses and negative cash flows from operations since
our inception, including net losses of $7.6 million and $10.7 million for the nine months ended March 31, 2023 and 2022, respectively.
In addition, we have an accumulated deficit of $101.1 million as of March 31, 2023. Our accumulated deficit increased between 2014, when
we began focusing on the development of cannabinoid-derived pharmaceuticals following the acquisition of Biogen Science Inc., and June
30, 2022 by approximately $72.2 million and we expect to continue to generate operating losses for the foreseeable future.
As
of the issuance date of the condensed consolidated interim financial statements, we expect our cash and cash equivalents of $9.6 million
as of March 31, 2023 will be sufficient to fund our operating expenses and capital expenditure requirements into the first quarter of
calendar 2024, and possibly into the second quarter of calendar 2024 ,
depending on the level and timing of realizing revenues from the BayMedica commercial operations as well as the level and timing of the
Company operating expense. 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 condensed consolidated interim
financial statements are issued.
We expect 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 shareholders.
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 March 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 March 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 of inadequate resources required to respond to financial reporting matters other than in the normal course of business,
as disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022.
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 March 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, 2022. 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 expect that the remediation of this material weakness will be completed prior to the end of fiscal year 2023. 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.