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What changed in InMed Pharmaceuticals Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of InMed Pharmaceuticals Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+182 added−194 removedSource: 10-K (2023-09-29) vs 10-K (2022-09-23)

Top changes in InMed Pharmaceuticals Inc.'s 2023 10-K

182 paragraphs added · 194 removed · 146 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

84 edited+24 added−12 removed274 unchanged
Biggest changeRegulatory Framework for (non-THC) Cannabinoid Related products is rapidly evolving and changes could delay or prevent commercialization and result in materially adverse effects on our business. ● The COVID-19 coronavirus could adversely impact our business, including several key activities that are critical to our success. ● The market prices for our common shares are volatile and will fluctuate. ● Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies or Product Candidates. ● If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common shares. ● In connection with the audit of our financial statements as of and for the years ended June 30, 2022 and 2021, material weaknesses in our internal control over financial reporting were identified and we may identify additional material weaknesses in the future. ● We have incurred, and will continue to incur, increased costs as a result of operating as a public company, and our management has been required, and will continue to be required, to devote substantial time to new compliance initiatives. ● We have incurred significant losses since our inception, we anticipate that we will continue to incur losses in the future, we currently have limited commercial revenue and we may never become profitable ● We may become subject to claims or become involved in lawsuits related to intellectual property. ● We rely heavily on contract manufacturers over whom we have limited control and our existing collaboration agreements and any that we may enter into in the future may not be successful. ● We are dependent upon our key personnel to achieve our business objectives. ● Our insurance may be insufficient to cover losses that may occur as a result of our operations. 46 Risk Factors Investing in our common shares involves a high degree of risk.
Biggest changeForeign Corrupt Practices Act, or “FCPA”, the Canadian Corruption of Foreign Public Officials Act, or “CFPOA”, and other global anti-corruption and anti-bribery laws could subject us to penalties and other adverse consequences. ● Recent federal legislation and actions by state and local governments may permit reimportation of drugs from/to foreign countries where the drugs are sold at lower prices than in the country of origination, which could materially adversely affect our business and financial condition. ● We are dependent upon our key personnel to achieve our business objectives. ● Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could subject us to significant liability and harm our reputation. 45 ● Our insurance may be insufficient to cover losses that may occur as a result of our operations. ● There may be changes in laws, regulations and guidelines which are detrimental to our business. ● If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected. ● Our proprietary information, or that of our customers, suppliers and business partners, may be lost or we may suffer security breaches. ● We expect to face intense competition, often from companies with greater resources and experience than we have. ● If we receive regulatory approvals, we intend to market our Product Candidates in multiple jurisdictions where we have limited or no operating experience and may be subject to increased business and economic risks that could affect our financial results. ● Controlled substance legislation may differ in other jurisdictions and could restrict our ability to market our products internationally, which would result in increased business and economic risks that could affect our financial results. ● Product liability lawsuits against us could cause us to incur substantial liabilities. ● Failure to protect our information technology infrastructure against cyber-based attacks, network security breaches, service interruptions, or data corruption could significantly disrupt our operations and adversely affect our business and operating results. ● Our failure to comply with data protection laws and regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results. ● The COVID-19 coronavirus could adversely impact our business, including several key activities that are critical to our success. ● The market prices for our common shares are volatile and will fluctuate. ● Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies or Product Candidates. ● Future offerings of debt or equity securities may rank senior to common shares. ● Future sales of common shares by officers and directors may negatively impact the market price for our common shares. ● We do not currently pay dividends on our common shares and have no intention to pay dividends on our common shares for the foreseeable future. ● We are exposed to risks related to currency exchange rates. ● For as long as we are an “emerging growth company” we intend to take advantage of reduced disclosure and governance requirements applicable to emerging growth companies, which could result in our common shares being less attractive to investors and could make it more difficult for us to raise capital as and when we need it. ● If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common shares. ● Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud. 46 ● Deficiencies in disclosure controls and procedures and internal control over financial reporting could result in a material misstatement in our financial statements. ● In connection with the audit of our financial statements as of and for the years ended June 30, 2023 and 2022, a significant deficiency and a material weakness, respectively in our internal control over financial reporting were identified and we may identify additional material weaknesses in the future. ● We have incurred, and will continue to incur, increased costs as a result of operating as a public company, and our management has been required, and will continue to be required, to devote substantial time to new compliance initiatives. ● Future sales and issuances of our common shares or rights to purchase common shares pursuant to our equity incentive plan could result in additional dilution of the percentage ownership of our shareholders and may cause our share price to fall. ● Provisions in our corporate charter documents and certain Canadian laws could delay or deter a change of control. ● If securities or industry analysts publish inaccurate or unfavorable research about our business, our share price and trading volume may decline. ● We are incorporated in Canada, with our assets and officers primarily located in Canada, with the result that it may be difficult for investors to enforce judgments obtained against us or some of our officers. ● Our operating losses have raised substantial doubt regarding our ability to continue as a going concern. ● We have incurred significant losses since our inception, we anticipate that we will continue to incur losses in the future. ● We will require additional capital to fund our operations and if we fail to obtain necessary financing, we will not be able to complete the development and commercialization of our Product Candidates. ● We currently have limited commercial revenue and may never become profitable. ● Changes in tax laws and unanticipated tax liabilities could adversely affect our effective income tax rate and ability to achieve profitability. ● Our ability to use our net operating loss carryforwards and other tax attributes may be limited. ● Changes to accounting standards may adversely impact the manner in which we report our financial position and operating results. ● There is currently general economic uncertainty in the global markets. ● Our success is largely dependent upon our patents, proprietary technology, and other intellectual property. ● Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements. ● We may become subject to claims or become involved in lawsuits related to intellectual property. ● We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful and have a material adverse effect on the success of our business. ● If we are not able to adequately prevent disclosure of trade secrets and other proprietary information, the value of our technology and products could be significantly diminished. ● We may not be able to protect our intellectual property rights throughout the world. ● Patent terms may be inadequate to protect our competitive position on our Product Candidates for an adequate amount of time. ● Intellectual property rights do not necessarily address all potential threats to our competitive advantage. ● We rely heavily on contract manufacturers over whom we have limited control and our existing collaboration agreements and any that we may enter into in the future may not be successful. ● Our existing collaboration agreements and any that we may enter into in the future may not be successful. 47 Risk Factors Investing in our common shares involves a high degree of risk.
Health Insurance Portability and Accountability Act, or “HIPPA”, as amended by the Health Information Technology for Economic and Clinical Health Act, or “HITECH Act”, among other things, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services; ● the U.S. federal Physician Payment Sunshine Act, being implemented as the Open Payments Program, requires applicable manufacturers of covered drugs, devices, biologics and medical supplies to report annually to HHS information related to payments and other transfers of value to physicians and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members; 53 ● analogous state laws and regulations, such as state anti-kickback laws, false claims laws and privacy and security of health information laws, may apply to sales or marketing arrangements, claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, or health information; and ● certain state laws require pharmaceutical companies to adopt codes of conduct consistent with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; restrict certain marketing-related activities including the provision of gifts, meals, or other items to certain health care providers; and/or require drug manufacturers to report information related to payments and other transfers of value to physicians and certain other healthcare providers or marketing expenditures.
Health Insurance Portability and Accountability Act, or “HIPPA”, as amended by the Health Information Technology for Economic and Clinical Health Act, or “HITECH Act”, among other things, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services; ● the U.S. federal Physician Payment Sunshine Act, being implemented as the Open Payments Program, requires applicable manufacturers of covered drugs, devices, biologics and medical supplies to report annually to HHS information related to payments and other transfers of value to physicians and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members; ● analogous state laws and regulations, such as state anti-kickback laws, false claims laws and privacy and security of health information laws, may apply to sales or marketing arrangements, claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, or health information; and ● certain state laws require pharmaceutical companies to adopt codes of conduct consistent with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; restrict certain marketing-related activities including the provision of gifts, meals, or other items to certain health care providers; and/or require drug manufacturers to report information related to payments and other transfers of value to physicians and certain other healthcare providers or marketing expenditures.
Restrictions under applicable federal and state healthcare laws and regulations that may affect our ability to operate include the following: ● the U.S. federal healthcare Anti-Kickback Statute impacts our marketing practices, educational programs, pricing policies and relationships with healthcare providers or other entities, by prohibiting, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid; ● federal civil and criminal false claims laws and civil monetary penalty laws impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment of government funds (including through reimbursement by Medicare or Medicaid or other federal health care programs), which has been applied to impermissible promotion of pharmaceutical products for off-label uses, or making a false statement or record to avoid, decrease or conceal an obligation to pay money to the federal government; ● the U.S.
Restrictions under applicable federal and state healthcare laws and regulations that may affect our ability to operate include the following: ● the U.S. federal healthcare Anti-Kickback Statute impacts our marketing practices, educational programs, pricing policies and relationships with healthcare providers or other entities, by prohibiting, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid; 55 ● federal civil and criminal false claims laws and civil monetary penalty laws impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment of government funds (including through reimbursement by Medicare or Medicaid or other federal health care programs), which has been applied to impermissible promotion of pharmaceutical products for off-label uses, or making a false statement or record to avoid, decrease or conceal an obligation to pay money to the federal government; ● the U.S.
The commencement and completion of clinical trials for our products may be delayed for a number of reasons, including delays related, but not limited, to: ● failure by regulatory authorities to grant permission to proceed or placing the clinical trial on hold; ● import/export and research restrictions for cannabinoid-based pharmaceuticals may delay or prevent clinical trials in various geographical jurisdictions; ● patients failing to enroll or remain in our trials at the rate we expect; 48 ● suspension or termination of clinical trials by regulators for many reasons, including concerns about patient safety or failure of our contract manufacturers to comply with current good manufacturing practice, or “cGMP”, requirements; ● any changes to our manufacturing process that may be necessary or desired; ● delays or failure to obtain clinical supply from contract manufacturers of our products necessary to conduct clinical trials; ● Product Candidates demonstrating a lack of safety or efficacy during clinical trials; ● patients choosing an alternative treatment for the indications for which we are developing any of our Product Candidates or participating in competing clinical trials and/or scheduling conflicts with participating clinicians; ● patients failing to complete clinical trials due to dissatisfaction with the treatment, side effects or other reasons; ● reports of clinical testing on similar technologies and products raising safety and/or efficacy concerns; ● clinical investigators not performing our clinical trials on their anticipated schedule, dropping out of a trial, or employing methods not consistent with the clinical trial protocol, regulatory requirements or other third parties not performing data collection and analysis in a timely or accurate manner; ● failure of our CROs, to satisfy their contractual duties or meet expected deadlines; ● inspections of clinical trial sites by regulatory authorities or Institutional Review Boards, or “IRBs”, or ethics committees finding regulatory violations that require us to undertake corrective action, resulting in suspension or termination of one or more sites or the imposition of a clinical hold on the entire study; ● one or more IRBs or ethics committees rejecting, suspending or terminating the study at an investigational site, precluding enrollment of additional subjects, or withdrawing its approval of the trial; or ● failure to reach agreement on acceptable terms with prospective clinical trial sites.
The commencement and completion of clinical trials for our products may be delayed for a number of reasons, including delays related, but not limited, to: ● failure by regulatory authorities to grant permission to proceed or placing the clinical trial on hold; ● import/export and research restrictions for cannabinoid-based pharmaceuticals may delay or prevent clinical trials in various geographical jurisdictions; ● patients failing to enroll or remain in our trials at the rate we expect; ● suspension or termination of clinical trials by regulators for many reasons, including concerns about patient safety or failure of our contract manufacturers to comply with current good manufacturing practice, or “cGMP”, requirements; ● any changes to our manufacturing process that may be necessary or desired; 50 ● delays or failure to obtain clinical supply from contract manufacturers of our products necessary to conduct clinical trials; ● Product Candidates demonstrating a lack of safety or efficacy during clinical trials; ● patients choosing an alternative treatment for the indications for which we are developing any of our Product Candidates or participating in competing clinical trials and/or scheduling conflicts with participating clinicians; ● patients failing to complete clinical trials due to dissatisfaction with the treatment, side effects or other reasons; ● reports of clinical testing on similar technologies and products raising safety and/or efficacy concerns; ● clinical investigators not performing our clinical trials on their anticipated schedule, dropping out of a trial, or employing methods not consistent with the clinical trial protocol, regulatory requirements or other third parties not performing data collection and analysis in a timely or accurate manner; ● failure of our CROs, to satisfy their contractual duties or meet expected deadlines; ● inspections of clinical trial sites by regulatory authorities or Institutional Review Boards, or “IRBs”, or ethics committees finding regulatory violations that require us to undertake corrective action, resulting in suspension or termination of one or more sites or the imposition of a clinical hold on the entire study; ● one or more IRBs or ethics committees rejecting, suspending or terminating the study at an investigational site, precluding enrollment of additional subjects, or withdrawing its approval of the trial; or ● failure to reach agreement on acceptable terms with prospective clinical trial sites.
The key risks and challenges associated with the development of the IntegraSyn TM process include: failure to continue optimization and development of the process manufacturing steps from the current scale while maintaining the same or greater output of the selected cannabinoid; equipment and techniques may not be able to be scaled up using existing commercial processing equipment; supply of the key starting materials for the process may not be secured to ensure stability and security of commercial supply; and, failure of the large scale process to consistently produce the selected cannabinoid within set specifications and meeting the process parameters and in process controls to enable the manufacturing process to be validated for GMP commercial production of an API, among others.
The key risks and challenges associated with the development of the IntegraSyn process include: failure to continue optimization and development of the process manufacturing steps from the current scale while maintaining the same or greater output of the selected cannabinoid; equipment and techniques may not be able to be scaled up using existing commercial processing equipment; supply of the key starting materials for the process may not be secured to ensure stability and security of commercial supply; and, failure of the large scale process to consistently produce the selected cannabinoid within set specifications and meeting the process parameters and in process controls to enable the manufacturing process to be validated for GMP commercial production of an API, among others.
Our ability to generate revenue and become profitable depends upon a number of additional factors, including our ability to: ● successfully complete development activities, including the remaining preclinical studies and ongoing and planned clinical trials for our Product Candidates; ● in-license or acquire in the future, Product Candidates and other potential lines of business that we may develop; ● complete and submit NDAs to the FDA and Marketing Authorization Applications, or “MAAs”, to the EMA, and obtain regulatory approval for indications for which there is a commercial market; ● complete and submit applications to, and obtain regulatory approval from, other foreign regulatory authorities; ● manufacture any approved products in commercial quantities and on commercially reasonable terms; ● develop a commercial organization, or find suitable partners, to market, sell and distribute approved products in the markets in which we have retained commercialization rights; ● achieve acceptance among patients, clinicians and advocacy groups for any products we develop; ● obtain coverage and adequate reimbursement from third parties, including government payors; and ● set a commercially viable price for any products for which we may receive approval. 65 We are unable to predict the timing or amount of increased expenses, or when or if we will be able to achieve or maintain profitability.
Our ability to generate revenue and become profitable depends upon a number of additional factors, including our ability to: ● successfully complete development activities, including the remaining preclinical studies and ongoing and planned clinical trials for our Product Candidates; ● in-license or acquire in the future, Product Candidates and other potential lines of business that we may develop; ● complete and submit NDAs to the FDA and Marketing Authorization Applications, or “MAAs”, to the EMA, and obtain regulatory approval for indications for which there is a commercial market; ● complete and submit applications to, and obtain regulatory approval from, other foreign regulatory authorities; ● manufacture any approved products in commercial quantities and on commercially reasonable terms; ● develop a commercial organization, or find suitable partners, to market, sell and distribute approved products in the markets in which we have retained commercialization rights; ● achieve acceptance among patients, clinicians and advocacy groups for any products we develop; ● obtain coverage and adequate reimbursement from third parties, including government payors; and ● set a commercially viable price for any products for which we may receive approval. 69 We are unable to predict the timing or amount of increased expenses, or when or if we will be able to achieve or maintain profitability.
For example: ● others may be able to make compounds that are the same as or similar to our Product Candidates but that are not covered by the claims of the patents that we own; ● we might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own; ● we might not have been the first to file patent applications covering certain of our inventions; ● others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; ● it is possible that our pending patent applications will not lead to issued patents; ● issued patents that we own may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges; ● our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; or ● the patents of others may have an adverse effect on our business. 69 Risks Related to our Third Parties We rely heavily on contract manufacturers over whom we have limited control.
For example: ● others may be able to make compounds that are the same as or similar to our Product Candidates but that are not covered by the claims of the patents that we own; ● we might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own; ● we might not have been the first to file patent applications covering certain of our inventions; ● others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; ● it is possible that our pending patent applications will not lead to issued patents; ● issued patents that we own may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges; ● our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; or ● the patents of others may have an adverse effect on our business. 75 Risks Related to our Third Parties We rely heavily on contract manufacturers over whom we have limited control.
The factors that affect our ability to enroll patients are largely uncontrollable and include, but are not limited to, the following: ● size and nature of the patient population; ● inclusion and exclusion criteria for the trial; ● design of the study protocol; ● competition with other companies for clinical sites or patients; ● the perceived risks and benefits of the product candidate under study; ● the patient referral practices of physicians; and ● the number, availability, location and accessibility of clinical trial sites.
The factors that affect our ability to enroll patients are largely uncontrollable and include, but are not limited to, the following: ● size and nature of the patient population; ● inclusion and exclusion criteria for the trial; ● design of the study protocol; 49 ● competition with other companies for clinical sites or patients; ● the perceived risks and benefits of the product candidate under study; ● the patient referral practices of physicians; and ● the number, availability, location and accessibility of clinical trial sites.
However, for as long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of the exemption permitting us not to comply with the independent registered public accounting firm attestation requirement. Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management efforts.
However, for as long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of the exemption permitting us not to comply with the independent registered public accounting firm attestation requirement. 64 Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management efforts.
Failing to accomplish these or other criteria for the IntegraSyn TM manufacturing process with a CDMO may mean that we are not able to produce certain cannabinoids in a cost-effective manner. This could result in us not being able to successfully commercialize or utilize our APIs in our Product Candidates, if any, that may obtain regulatory approval.
Failing to accomplish these or other criteria for the IntegraSyn manufacturing process with a CDMO may mean that we are not able to produce certain cannabinoids in a cost-effective manner. This could result in us not being able to successfully commercialize or utilize our APIs in our Product Candidates, if any, that may obtain regulatory approval.
Additionally, we have no products for commercial sale or licensed for commercial sale, nor do we expect to have any such products for the next several years. Many potential pharmaceuticals products never reach the stage of clinical testing and even those that do have only a small chance of successfully completing clinical development and gaining regulatory approval.
Additionally, we have no products for commercial sale or licensed for commercial sale, nor do we expect to have any such products for the next several years. 48 Many potential pharmaceuticals products never reach the stage of clinical testing and even those that do have only a small chance of successfully completing clinical development and gaining regulatory approval.
If we determine that an ownership change has occurred and our ability to use our NOL carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations. Changes to accounting standards may adversely impact the manner in which we report our financial position and operating results.
If we determine that an ownership change has occurred and our ability to use our NOL carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations. 70 Changes to accounting standards may adversely impact the manner in which we report our financial position and operating results.
In that case, the trading price of our common shares could decline, and you may lose all or part of your investment. Risks Related to our Business and Industry Our IntegraSyn TM manufacturing approach may prove unsuccessful in achieving yields and/or cost levels required to be economically competitive with alternative methods of manufacturing.
In that case, the trading price of our common shares could decline, and you may lose all or part of your investment. Risks Related to our Business and Industry Our IntegraSyn manufacturing approach may prove unsuccessful in achieving yields and/or cost levels required to be economically competitive with alternative methods of manufacturing.
Future equity incentive grants under our stock option plan may result in material dilution to our shareholders and may have an adverse effect on the market price of our common shares. 62 Provisions in our corporate charter documents and certain Canadian laws could delay or deter a change of control.
Future equity incentive grants under our stock option plan may result in material dilution to our shareholders and may have an adverse effect on the market price of our common shares. Provisions in our corporate charter documents and certain Canadian laws could delay or deter a change of control.
If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case. Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case. 74 Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
If any physicians or other healthcare providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Failure to comply with the U.S.
If any physicians or other healthcare providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. 56 Failure to comply with the U.S.
To raise capital, we may sell substantial amounts of common shares or securities convertible into or exchangeable for common shares. These future issuances of common shares or common share-related securities, together with the exercise of outstanding options and any additional shares issued in connection with acquisitions, if any, may result in material dilution to our investors.
To raise capital, we may sell substantial amounts of common shares or securities convertible into or exchangeable for common shares. These future issuances of common shares or common share-related securities to purchase common shares, together with the exercise of outstanding options and any additional shares issued in connection with acquisitions, if any, may result in material dilution to our investors.
In addition, regardless of merit or eventual outcome, product liability claims may result in, among other things: ● withdrawal of patients from our clinical trials; ● substantial monetary awards to patients or other claimants; ● decreased demand for our Product Candidates following marketing approval, if obtained; ● damage to our reputation and exposure to adverse publicity; ● increased FDA warnings on product labels or increased warnings imposed by the EMA or other regulatory authorities; ● litigation costs; ● distraction of management’s attention from our primary business; ● loss of revenue; and ● the inability to successfully commercialize our Product Candidates, if approved. 57 Our current clinical trial liability insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer.
In addition, regardless of merit or eventual outcome, product liability claims may result in, among other things: ● withdrawal of patients from our clinical trials; ● substantial monetary awards to patients or other claimants; ● decreased demand for our Product Candidates following marketing approval, if obtained; ● damage to our reputation and exposure to adverse publicity; ● increased FDA warnings on product labels or increased warnings imposed by the EMA or other regulatory authorities; ● litigation costs; ● distraction of management’s attention from our primary business; ● loss of revenue; and ● the inability to successfully commercialize our Product Candidates, if approved. 60 Our current clinical trial liability insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer.
Any of the foregoing could prevent or delay a change of control and may deprive or limit strategic opportunities for our shareholders to sell their shares. If securities or industry analysts publish inaccurate or unfavorable research about our business, our share price and trading volume may decline.
Any of the foregoing could prevent or delay a change of control and may deprive or limit strategic opportunities for our shareholders to sell their shares. 66 If securities or industry analysts publish inaccurate or unfavorable research about our business, our share price and trading volume may decline.
Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies or Product Candidates. We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements.
Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies or Product Candidates. We will seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements.
Our ability to manage our operations and future growth will require us to continue to improve our operational, financial and management controls, reporting systems and procedures. 47 If we have difficulty enrolling patients in clinical trials, the completion of the trials may be delayed or cancelled.
Our ability to manage our operations and future growth will require us to continue to improve our operational, financial and management controls, reporting systems and procedures. If we have difficulty enrolling patients in clinical trials, the completion of the trials may be delayed or cancelled.
We have not generated, and do not expect to generate, any product revenue for the foreseeable future, and we expect to continue to incur significant operating losses for the foreseeable future due to the cost of research and development, preclinical studies and clinical trials and the regulatory approval process for our Product Candidates.
We have not generated, and do not expect to generate, any revenue from Product Candidates for the foreseeable future, and we expect to continue to incur significant operating losses for the foreseeable future due to the cost of research and development, preclinical studies and clinical trials and the regulatory approval process for our Product Candidates.
There is no guarantee that we will be successful in scaling up our IntegraSyn TM manufacturing process for cannabinoids, or successfully complete any required bridging studies, or be able to successfully transfer our IntegraSyn TM manufacturing process to a CDMO.
There is no guarantee that we will be successful in scaling up our IntegraSyn manufacturing process for cannabinoids, or successfully complete any required bridging studies, or be able to successfully transfer our IntegraSyn manufacturing process to a CDMO.
If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting once that firm begins its audits of internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common shares could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC, or other regulatory authorities.
If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness in our internal control over financial reporting once that firm begins its audits of internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common shares could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC, or other regulatory authorities.
Given the early-stage of development of the IntegraSyn TM program and the risks inherent in research and development, it is too early to project the commercial viability of cannabinoids produced via this process.
Given the early-stage of development of the IntegraSyn program and the risks inherent in research and development, it is too early to project the commercial viability of cannabinoids produced via this process.
We may also deem it advisable to refocus our clinical development programs based on clinical trial results. 49 The regulatory approval processes of the FDA, HC, the EMA and other comparable foreign regulatory authorities are lengthy, time-consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our Product Candidates, our business will be substantially harmed.
We may also deem it advisable to refocus our clinical development programs based on clinical trial results. 51 The regulatory approval processes of the FDA, HC, the EMA and other comparable foreign regulatory authorities are lengthy, time-consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our Product Candidates, our business will be substantially harmed.
Particularly in the United States but also in other jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our Product Candidates, restrict or regulate post-approval activities or affect our ability to profitably sell any Product Candidates for which we obtain marketing approval.
Particularly in the United States but also in other jurisdictions, there have been a number of legislative and regulatory changes and proposed changes in recent years regarding the healthcare system that could prevent or delay marketing approval of our Product Candidates, restrict or regulate post-approval activities or affect our ability to profitably sell any Product Candidates for which we obtain marketing approval.
If we are unable to compete successfully, our commercial opportunities will be reduced and our business, results of operations and financial conditions may be materially harmed. 56 If we receive regulatory approvals, we intend to market our Product Candidates in multiple jurisdictions where we have limited or no operating experience and may be subject to increased business and economic risks that could affect our financial results.
If we are unable to compete successfully, our commercial opportunities will be reduced and our business, results of operations and financial conditions may be materially harmed. 59 If we receive regulatory approvals, we intend to market our Product Candidates in multiple jurisdictions where we have limited or no operating experience and may be subject to increased business and economic risks that could affect our financial results.
Any party with whom we or they have executed such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. 68 Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable.
Any party with whom we or they have executed such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. 73 Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable.
In addition, while we have experienced management and expect to contract out many of the activities related to conducting these programs, we are a small company with less than 20 employees and, therefore, have limited internal resources both to conduct preclinical studies and clinical trials and to monitor third-party providers.
In addition, while we have experienced management and expect to contract out many of the activities related to conducting these programs, we are a small company with less than 15 employees and, therefore, have limited internal resources both to conduct preclinical studies and clinical trials and to monitor third-party providers.
Substantially all of our losses have resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations. 63 We expect to continue to incur significant expenses and operating losses for the foreseeable future.
Substantially all of our losses have resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations. 67 We expect to continue to incur significant expenses and operating losses for the foreseeable future.
In addition to the limited revenues from our BayMedica commercial business, our ability to generate revenue and become profitable depends upon our ability to obtain regulatory approval for, and successfully commercialize, our Product Candidates that we may develop, in-license or acquire in the future.
In addition to the limited revenues from our BayMedica Products, our ability to generate revenue and become profitable depends upon our ability to obtain regulatory approval for, and successfully commercialize, our Product Candidates that we may develop, in-license or acquire in the future.
As of our last fiscal year end, we had non-capital loss, or “NOL”, carry-forwards of approximately $62.9 million available to offset future taxable income in Canada and the United States. These NOL carry-forwards begin to expire in 2026. Our NOL carryforwards could expire unused and be unavailable to offset future income tax liabilities.
As of our last fiscal year end, we had non-capital loss, or “NOL”, carry-forwards of approximately $71.6 million available to offset future taxable income in Canada and the United States. These NOL carry-forwards begin to expire in 2026. Our NOL carryforwards could expire unused and be unavailable to offset future income tax liabilities.
Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to: ● the initiation, progress, timing, costs and results of preclinical studies and clinical trials for our Product Candidates; ● any change in the clinical development plans or target indications for these Product Candidates; ● the number and characteristics of Product Candidates that we develop or may in-license; ● the terms of any collaboration agreements we may choose to execute; ● the outcome, timing and cost of meeting regulatory requirements established by the Drug Enforcement Administration, or “DEA”, the FDA, the European Medicines Agency, or “EMA”, Health Canada, or “HC”, or other comparable foreign regulatory authorities; ● Th2.0e cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights; ● the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us; ● the effect of competing product and market developments; ● the costs and timing of the implementation of commercial scale manufacturing activities; and ● the cost of establishing, or outsourcing, sales, marketing and distribution capabilities for any Product Candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own. 64 We cannot be certain that additional funding will be available on acceptable terms, or at all.
Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to: ● the initiation, progress, timing, costs and results of preclinical studies and clinical trials for our Product Candidates; ● any change in the clinical development plans or target indications for these Product Candidates; ● the number and characteristics of Product Candidates that we develop or may in-license; ● the terms of any collaboration agreements we may choose to execute; ● the outcome, timing and cost of meeting regulatory requirements established by the Drug Enforcement Administration, or “DEA”, the FDA, the European Medicines Agency, or “EMA”, Health Canada, or “HC”, or other comparable foreign regulatory authorities; ● The cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights; ● the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us; ● the effect of competing product and market developments; 68 ● the costs and timing of the implementation of commercial scale manufacturing activities; and ● the cost of establishing, or outsourcing, sales, marketing and distribution capabilities for any Product Candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own.
This is intended to be an interim step to enable us to proceed with developing our formulation, execute preclinical toxicology studies and progress through Phase I and II clinical trials, after which time we anticipate that we will have been able to successfully scale-up our IntegraSyn TM manufacturing approach so that it will be GMP- ready at pharmaceutical grade.
This is intended to be an interim step to enable us to proceed with developing our formulation, execute preclinical toxicology studies and progress through Phase 1 and 2 clinical trials, after which time we anticipate that we will have been able to successfully scale-up our IntegraSyn manufacturing approach so that it will be GMP- ready at pharmaceutical grade.
Our failure to correct these material weaknesses or our failure to discover and address any other control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and make related regulatory filings on a timely basis.
Our failure to correct this material weakness or our failure to discover and address any other control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and make related regulatory filings on a timely basis.
In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services, or “CMS”, an agency within the HHS, as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare. Private payors tend to follow CMS to a substantial degree.
In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services, or “CMS”, an agency within the HHS, as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare.
In connection with the preparation and audits of our financial statements as of and for the years ended June 30, 2022 and 2021, material weaknesses (as defined under the Exchange Act and by the auditing standards of the U.S. Public Company Accounting Oversight Board, or “PCAOB”), were identified in our internal control over financial reporting.
In connection with the preparation and audits of our financial statements as of and for the years ended June 30, 2023 and 2022, a material weakness, (as defined under the Exchange Act and by the auditing standards of the U.S. Public Company Accounting Oversight Board, or “PCAOB”), was identified in our internal control over financial reporting.
We expect that the Affordable Care Act, as well as other healthcare reform measures that have been and may be adopted in the future, may result in more rigorous coverage criteria, new payment methodologies and in additional downward pressure on the price that we receive for any approved product, and could seriously harm our future revenue.
Healthcare reform measures that have been and may be adopted in the future may result in more rigorous coverage criteria, new payment methodologies and in additional downward pressure on the price that we receive for any approved product, and could seriously harm our future revenue.
A claim or series of claims brought against us alleging a failure to comply with these laws, or changes in the way in which these laws are implemented, could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results and could cause our share price to decline and, if we are unsuccessful in defending such a claim or claims and the resulting judgments exceed our insurance coverage, our financial condition, results of operations, business and prospects could be materially adversely affected. 58 The COVID-19 coronavirus could adversely impact our business, including several key activities that are critical to our success.
A claim or series of claims brought against us alleging a failure to comply with these laws, or changes in the way in which these laws are implemented, could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results and could cause our share price to decline and, if we are unsuccessful in defending such a claim or claims and the resulting judgments exceed our insurance coverage, our financial condition, results of operations, business and prospects could be materially adversely affected.
Because our decision to issue debt or equity securities in any future offering or otherwise incur indebtedness will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings or financings, any of which could reduce the market price of our common shares and dilute their value.
Because our decision to issue debt or equity securities in any future offering or otherwise incur indebtedness will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings or financings, any of which could reduce the market price of our common shares and dilute their value. 63 Future sales of common shares by officers and directors may negatively impact the market price for our common shares.
ITEM 1A. RISK FACTORS Summary of Risk Factors The following is a summary of material risks that could affect our business.
ITEM 1A. RISK FACTORS Summary of Risk Factors The following is a summary of material risks that could affect the Company.
The intended use of a drug product by a physician can also affect pricing. For example, CMS could initiate a National Coverage Determination administrative procedure, by which the agency determines which uses of a therapeutic product would and would not be reimbursable under Medicare.
Private payors tend to follow CMS to a substantial degree. 54 The intended use of a drug product by a physician can also affect pricing. For example, CMS could initiate a National Coverage Determination administrative procedure, by which the agency determines which uses of a therapeutic product would and would not be reimbursable under Medicare.
If we were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if we were to incur such liability at a time when we were not able to obtain liability insurance, our business, results of operations and financial condition could be materially adversely affected. 55 There may be changes in laws, regulations and guidelines which are detrimental to our business.
If we were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if we were to incur such liability at a time when we were not able to obtain liability insurance, our business, results of operations and financial condition could be materially adversely affected.
Foreign Corrupt Practices Act, or “FCPA”, the Canadian Corruption of Foreign Public Officials Act, or “CFPOA”, and other global anti-corruption and anti-bribery laws could subject us to penalties and other adverse consequences The FCPA and the CFPOA, as well as any other applicable domestic or foreign anti-corruption or anti-bribery laws to which we are or may become subject generally prohibit corporations and individuals from engaging in certain activities to obtain or retain business or to influence a person working in an official capacity and requires companies to maintain accurate books and records and internal controls, including at foreign-controlled subsidiaries.
The FCPA and the CFPOA, as well as any other applicable domestic or foreign anti-corruption or anti-bribery laws to which we are or may become subject generally prohibit corporations and individuals from engaging in certain activities to obtain or retain business or to influence a person working in an official capacity and requires companies to maintain accurate books and records and internal controls, including at foreign-controlled subsidiaries.
We may take advantage of these reporting exemptions until we are no longer an emerging growth company. 60 If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common shares.
If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common shares.
We have begun taking measures, and plan to continue to take measures, to remediate these material weaknesses. However, the implementation of these measures may not fully address these material weaknesses in our internal control over financial reporting, and, if so, we would not be able to conclude that they have been fully remedied.
However, the implementation of these measures may not fully address this material weakness in our internal control over financial reporting, and, if so, we would not be able to conclude that they have been fully remedied.
Our common shares and any other securities that we may offer from time to time should only be purchased by persons who can afford to lose all of their investment. 70
Our common shares and any other securities that we may offer from time to time should only be purchased by persons who can afford to lose all of their investment. 76 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Our operations are subject to a variety of laws, regulations and guidelines relating to pharmacology, cannabinoids and drug delivery, as well as laws and regulations relating to health and safety, the conduct of operations, and the protection of the environment.
There may be changes in laws, regulations and guidelines which are detrimental to our business. Our operations are subject to a variety of laws, regulations and guidelines relating to pharmacology, cannabinoids and drug delivery, as well as laws and regulations relating to health and safety, the conduct of operations, and the protection of the environment.
Because of the specialized scientific and managerial nature of our business, we rely heavily on our ability to attract and retain qualified scientific, technical and managerial personnel. The competition for qualified personnel in our field is intense.
Our success will depend largely on our continuing ability to attract, develop and retain skilled employees and consultants in our business. Because of the specialized scientific and managerial nature of our business, we rely heavily on our ability to attract and retain qualified scientific, technical and managerial personnel. The competition for qualified personnel in our field is intense.
In light of the identified material weaknesses, it is possible that, had we performed a formal assessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal control over financial reporting in accordance with PCAOB standards, additional control deficiencies may have been identified.
In light of the identified material weakness, it is possible that, had we performed a formal assessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal control over financial reporting in accordance with PCAOB standards, additional control deficiencies may have been identified. 65 We have begun taking measures, and plan to continue to take measures, to remediate this material weakness.
In addition, if the governments of Canada or the United States were to enact or amend laws relating to our industry, it may decrease the size of, or eliminate entirely, the market for our Product Candidates, may introduce significant new competition into the market and may otherwise potentially materially and adversely affect our business, results of operations and financial condition.
In addition, if the governments of Canada or the United States were to enact or amend laws relating to our industry, it may decrease the size of, or eliminate entirely, the market for our Product Candidates, may introduce significant new competition into the market and may otherwise potentially materially and adversely affect our business, results of operations and financial condition. 58 If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.
As at June 30, 2022, we had approximately $6.2 million in cash, cash equivalents and short-term investments, which, combined with the net proceeds from the September 2022 private placement, we currently estimate funds our operations into the second half of fiscal 2023, and possibly into the first quarter of fiscal 2024 (being the third calendar quarter of 2023), depending on the level and timing of realizing revenues from the sale of BayMedica inventory as well as the level and timing of the Company operating expenses.
As of June 30, 2023, we had approximately $9.0 million in cash, cash equivalents and short-term investments, which, we currently estimate funds our operations into the second half of fiscal 2024, and possibly into the third quarter of fiscal 2024 (being the second calendar quarter of 2024), depending on the level and timing of realizing revenues from the sale of BayMedica inventory as well as the level and timing of the Company’s operating expenses.
In seeking to protect our inventions using patents it is important to note that we have no assurance that: ● patent applications will result in the issuance of patents; ● additional proprietary products developed will be patentable; ● patents issued will provide adequate protection or any competitive advantages; ● patents issued will not be successfully challenged by third parties; ● commercial exploitation of our inventions does not infringe the patents or intellectual property of others; or ● we will be able to obtain any extensions of the patent term.
In seeking to protect our inventions using patents it is important to note that we have no assurance that: ● patent applications will result in the issuance of patents; ● additional proprietary products developed will be patentable; ● patents issued will provide adequate protection or any competitive advantages; ● patents issued will not be successfully challenged by third parties; ● commercial exploitation of our inventions does not infringe the patents or intellectual property of others; or ● we will be able to obtain any extensions of the patent term. 71 A number of pharmaceutical, biotechnology and medical device companies and research and academic institutions have developed technologies, filed patent applications or received patents on various technologies that may be related to our business.
We are dependent upon our key personnel to achieve our business objectives. We depend on key personnel, the loss of any of whom could harm our business. Our future performance and development will depend to a significant extent on the efforts and abilities of its executive officers, key employees, and consultants.
We depend on key personnel, the loss of any of whom could harm our business. Our future performance and development will depend to a significant extent on the efforts and abilities of its executive officers, key employees, and consultants. The loss of the services of one or more of these individuals could harm our business.
Furthermore, if our Product Candidates are classified as “controlled substances”, they may be subject to import/export and research restrictions that could delay or prevent the development of our products in various geographical jurisdictions.
Furthermore, if our Product Candidates are classified as “controlled substances”, they may be subject to import/export and research restrictions that could delay or prevent the development of our products in various geographical jurisdictions. The successful commercialization of our Product Candidates may require permits or approvals from regulatory bodies, such as the DEA, that regulate controlled substances.
There are ongoing projects conducted by the Financial Accounting Standards Board in the United States that are expected to result in new pronouncements that continue to evolve, which could adversely impact the manner in which we report our financial position and operating results. 66 Risks Related to our Intellectual Property Our success is largely dependent upon our patents, proprietary technology, and other intellectual property.
There are ongoing projects conducted by the Financial Accounting Standards Board in the United States that are expected to result in new pronouncements that continue to evolve, which could adversely impact the manner in which we report our financial position and operating results.
To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals. 50 Any of these factors, many of which are beyond our control, could increase development costs, jeopardize our ability to obtain regulatory approval for and successfully market our Product Candidates and generate product revenue.
To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.
Any investigations, actions or sanctions or other previously mentioned harm could have a material negative effect on our business, operating results and financial condition. 54 Recent federal legislation and actions by state and local governments may permit reimportation of drugs from/to foreign countries where the drugs are sold at lower prices than in the country of origination, which could materially adversely affect our business and financial condition.
Recent federal legislation and actions by state and local governments may permit reimportation of drugs from/to foreign countries where the drugs are sold at lower prices than in the country of origination, which could materially adversely affect our business and financial condition.
As our Product Candidates progress toward clinical trials and, ultimately, commercialization, the possibility of a patent infringement claim against us increases. We attempt to ensure that our Product Candidates and the methods we employ to manufacture them, as well as the methods for their uses we intend to promote, do not infringe other parties’ patents and other proprietary rights.
We attempt to ensure that our Product Candidates and the methods we employ to manufacture them, as well as the methods for their uses we intend to promote, do not infringe other parties’ patents and other proprietary rights.
Deficiencies in internal controls over financial reporting which may occur could result in material misstatements of our results of operations, restatements of financial statements, other required remediations, a decline in the price of our common shares, or otherwise materially adversely affect our business, reputation, results of operations, financial condition or liquidity. 61 In connection with the audit of our financial statements as of and for the years ended June 30, 2022 and 2021, material weaknesses in our internal control over financial reporting were identified and we may identify additional material weaknesses in the future.
Deficiencies in internal controls over financial reporting which may occur could result in material misstatements of our results of operations, restatements of financial statements, other required remediations, a decline in the price of our common shares, or otherwise materially adversely affect our business, reputation, results of operations, financial condition or liquidity.
If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected. The research and development that we carry out either directly or through third-parties involves, and may in the future involve, the use of potentially hazardous materials and chemicals. Our operations may produce hazardous waste products.
The research and development that we carry out either directly or through third-parties involves, and may in the future involve, the use of potentially hazardous materials and chemicals. Our operations may produce hazardous waste products.
The aforementioned examples and lists of various authorities that may currently, or in the future, affect our ability to conduct research on or import or export our Product Candidates and/or API, should not be construed as exhaustive or comprehensive in any way.
The aforementioned examples and lists of various authorities that may currently, or in the future, affect our ability to conduct research on or import or export our Product Candidates and/or API, should not be construed as exhaustive or comprehensive in any way. 53 Healthcare legislation, including potentially unfavorable pricing regulations or other healthcare reform initiatives, may increase the difficulty and cost for us to obtain marketing approval of and commercialize our Product Candidates.
If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our Product Candidates or grant licenses on terms that are not favorable to us. 59 Future offerings of debt or equity securities may rank senior to common shares.
If we were to default on such indebtedness, we could lose such assets and intellectual property. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our Product Candidates or grant licenses on terms that are not favorable to us.
Proponents of drug reimportation, including certain state legislatures, may attempt to pass legislation that would directly allow reimportation under certain circumstances. Legislation or regulations allowing the reimportation of drugs, if enacted, could decrease the price we receive for any products that we may develop, including our Product Candidates, and adversely affect our future revenues and prospects for profitability.
Legislation or regulations allowing the reimportation of drugs, if enacted, could decrease the price we receive for any products that we may develop, including our Product Candidates, and adversely affect our future revenues and prospects for profitability. 57 We are dependent upon our key personnel to achieve our business objectives.
The global outbreak of COVID-19 continues to rapidly evolve. As a result, businesses have closed and limits have been placed on travel.
The COVID-19 coronavirus could adversely impact our business, including several key activities that are critical to our success. The global outbreak of COVID-19 continues to rapidly evolve. As a result, businesses have closed and limits have been placed on travel.
Ultimately, we plan to submit NDAs for our Product Candidates to the FDA and other regulatory authorities upon completion of all requisite clinical trials. As an example, although the FDA may accept data from clinical trials conducted outside the United States, acceptance of such study data by the FDA is subject to certain conditions.
As an example, although the FDA may accept data from clinical trials conducted outside the United States, acceptance of such study data by the FDA is subject to certain conditions.
Moreover, we may have to participate in derivation proceedings, inter partes review proceedings, post-grant review proceedings, or opposition proceedings in the various jurisdictions around the world.
Further, there may be uncertainty as to whether we may be able to successfully defend any challenge to our patent portfolio. Moreover, we may have to participate in derivation proceedings, inter partes review proceedings, post-grant review proceedings, or opposition proceedings in the various jurisdictions around the world.
The Medicare Modernization Act, including its cost reduction initiatives, could decrease the coverage available for any of our approved products. Furthermore, private payors often follow Medicare in setting their own coverage policies. Therefore, any reduction in coverage that results from the Medicare Modernization Act may result in a similar reduction from private payors.
Furthermore, private payors often follow Medicare in setting their own coverage policies. Therefore, any reduction in coverage that results from the Medicare Modernization Act may result in a similar reduction from private payors. There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products.
No prediction can be made as to the effect, if any, such future sales of common shares may have on the market price of the common shares prevailing from time to time.
Subject to compliance with applicable securities laws, our directors and officers and their affiliates may sell some or all of their common shares in the future. No prediction can be made as to the effect, if any, such future sales of common shares may have on the market price of the common shares prevailing from time to time.
It is also possible that these technologies, applications or patents may preclude us from obtaining patent protection for our inventions. Further, there may be uncertainty as to whether we may be able to successfully defend any challenge to our patent portfolio.
Some of these technologies, applications or patents could limit the scope of the patents, if any, that we may be able to obtain. It is also possible that these technologies, applications or patents may preclude us from obtaining patent protection for our inventions.
If the COVID-19 outbreak continues to spread, we may need to limit operations or implement other limitations on our activities. There is a risk that countries or regions outside the United States and Canada may be less effective at vaccinations and containing COVID-19, in which case the risks described herein could be elevated significantly.
There is a risk that countries or regions outside the United States and Canada may be less effective at vaccinations and containing COVID-19, in which case the risks described herein could be elevated significantly. 62 Risks Related to our Securities The market prices for our common shares are volatile and will fluctuate.
EU Member States, Australia and other countries have also adopted data protection laws and regulations, which impose significant compliance obligations. For example, the collection and use of personal data in the EU is governed by the provisions of the General Data Protection Regulation, or “GDPR”.
For example, the collection and use of personal data in the EU is governed by the provisions of the General Data Protection Regulation, or “GDPR”.
If we fail to maintain the patents and patent applications covering our Product Candidates, our competitors might be able to enter the market, which would have a material adverse effect on our business. 67 We may become subject to claims by third parties asserting that we or our employees have misappropriated their intellectual property or claiming ownership of what we regard as our own intellectual property.
If we fail to maintain the patents and patent applications covering our Product Candidates, our competitors might be able to enter the market, which would have a material adverse effect on our business.
We intend to conduct clinical trials for our Product Candidates in several international jurisdictions, and acceptance by all regulatory authorities for such “international” data is not certain. We intend to conduct clinical trials for our Product Candidates both inside and outside the United States. To date, all of our clinical development has been conducted outside of the United States.
We intend to conduct clinical trials for our Product Candidates both inside and outside the United States. To date, all of our clinical development has been conducted outside of the United States. Ultimately, we plan to submit NDAs for our Product Candidates to the FDA and other regulatory authorities upon completion of all requisite clinical trials.
Numerous laws, including data breach notification laws, health information privacy laws and consumer protection laws, govern the collection, use and disclosure of health-related and other personal information. In addition, we may obtain health information from third parties (e.g., healthcare providers who prescribe our products) that are subject to privacy and security requirements under HIPAA regulations.
In addition, we may obtain health information from third parties (e.g., healthcare providers who prescribe our products) that are subject to privacy and security requirements under HIPAA regulations. 61 EU Member States, Australia and other countries have also adopted data protection laws and regulations, which impose significant compliance obligations.
A finding of infringement could prevent us from commercializing our Product Candidates or force us to cease some of our business operations, which could materially harm our business. Any claims by third parties that we have misappropriated their confidential information or trade secrets could have a similar negative impact on our business.
A finding of infringement could prevent us from commercializing our Product Candidates or force us to cease some of our business operations, which could materially harm our business.
The successful commercialization of our Product Candidates may require permits or approvals from regulatory bodies, such as the DEA, that regulate controlled substances. 51 Research restrictions, product shipment delays or prohibitions could have a material adverse effect on our business, results of operations and financial condition.
Research restrictions, product shipment delays or prohibitions could have a material adverse effect on our business, results of operations and financial condition. Research on and the shipment, import and export of our Product Candidates and the API used in our Product Candidates will require research permits, import and export licenses by many different authorities.
If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our Product Candidates.
If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our Product Candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment.
Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment. 52 In the United States, the Medicare Modernization Act, established the Medicare Part D program and provided authority for limiting the number of drugs that will be covered in any therapeutic class thereunder.
In the United States, the Medicare Modernization Act, established the Medicare Part D program and provided authority for limiting the number of drugs that will be covered in any therapeutic class thereunder. The Medicare Modernization Act, including its cost reduction initiatives, could decrease the coverage available for any of our approved products.

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Item 2. Properties

Properties — owned and leased real estate

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Added
In conjunction with the acquisition of BayMedica, the Company acquired a facility lease agreement for approximately 7,000 square feet of office space in South San Francisco, California. The lease is set to expire in April 2024.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRegardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. However, as of the date of this Annual Form on 10-K, we are not involved in any material pending legal or governmental proceedings.
Biggest changeRegardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. However, as of the date of this Annual Form on 10-K, we are not involved in any material pending legal or governmental proceedings. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 77 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The Company’s shares are listed on the on the Nasdaq Capital Market (“Nasdaq”) under the trading symbol “INM”). There were approximately 3,729 holders of record of our common stock as of September 19, 2022.
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The Company’s shares are listed on the on the Nasdaq Capital Market (“Nasdaq”) under the trading symbol “INM”). There were approximately 770 holders of record of our common stock as of September 20, 2023.
On September 19, 2022, the last reported sales price per share of our common stock was $7.80 per share. Unregistered Sales of Equity Securities None. Repurchases of Equity Securities None.
On September 20, 2022, the last reported sales price per share of our common stock was $0.81 per share. Unregistered Sales of Equity Securities None. Repurchases of Equity Securities None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeComparison of the year ended June 30, 2022 and 2021 for BayMedica Segment Year Ended June 30, 2022 2021 Change % Change (in thousands) Sales $ 1,089 $ - $ 1,089 nm Cost of sales 546 - 546 nm Gross profit 544 - 544 nm Operating expenses: Research and development and patents 1,296 - 1,296 nm General and administrative 961 - 961 nm Amortization and depreciation 79 - 79 nm Impairment of intangible assets and goodwill 3,473 - 3,473 nm Total operating expenses 5,809 - 5,809 nm Interest and other income 76 - 76 nm Net loss $ (5,189 ) $ - $ (5,189 ) nm 80 Sales, Cost of Sales and Gross Profit We realized sales of $1.1 million in our BayMedica segment for the year ended June 30, 2022, the result of manufacturing and distribution sales of bulk rare cannabinoid Products following the acquisition of BayMedica in October 2021.
Biggest changeForeign exchange loss increased by less than $0.1 million in our InMed segment, or 59%, for the year ended June 30, 2023, compared to the year ended June 30, 2022, as a consequence of holding non-US denominated assets and liabilities combined with fluctuations in foreign exchange rates. 84 Comparison of the year ended June 30, 2023 and 2022 for BayMedica Segment Year Ended June 30, 2023 2022 Change % Change (in thousands) Sales $ 4,136 $ 1,089 $ 3,047 280 % Cost of sales 2,424 546 1,878 344 % Loss on decline in NRV 309 - 309 100 % Gross profit 1,403 544 860 158 % Operating expenses: Research and development and patents 868 1,296 (429 ) (33 )% General and administrative 1,825 961 864 90 % Amortization and depreciation 98 79 19 24 % Impairment of intangible assets and goodwill - 3,473 (3,473 ) (100 )% Total operating expenses 2,791 5,809 (3,018 ) (52 )% Interest and other income 189 76 111 142 % Tax expense (13 ) - (13 ) nm Net loss $ (1,212 ) $ (5,189 ) $ 3,977 (77 )% Sales Sales increased by $3.0 million in our BayMedica segment, or 280%, for the year ended June 30, 2023 compared to the year ended June 30, 2022.
Investing Activities During the year ended June 30, 2022, cash used in investing activities of $0.7 million resulted from escrow payments made to BayMedica’s historical equity and convertible debt holders, settlement of loan receivable from BayMedica and purchases of property and equipment, partially offset by cash acquired from the acquisition of BayMedica.
During the year ended June 30, 2022, cash used in investing activities of $0.7 million resulted from escrow payments made to BayMedica’s historical equity and convertible debt holders, settlement of loan receivable from BayMedica and purchases of property and equipment, partially offset by cash acquired from the acquisition of BayMedica .
Financing Activities During the year ended June 30, 2022, cash provided by financing activities of $15.1 million consisted of $12.0 million of gross proceeds from a private placement of our common shares and $5.0 million of gross proceeds from a registered direct offering and concurrent private placement of our common shares, offset by total transaction costs of $1.8 million and $0.3 million for the repayment of debt assumed in the BayMedica acquisition.
During the year ended June 30, 2022, cash provided by financing activities of $15.1 million consisted of $12.0 million of gross proceeds from a private placement of our common shares and $5.0 million of gross proceeds from a registered direct offering and concurrent private placement of our common shares, offset by total transaction costs of $1.8 million and $0.3 million for the repayment of debt assumed in the BayMedica acquisition.
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.
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.
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.
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.
Currently, we intend to deliver our rare cannabinoid pharmaceutical drug 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.
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.
Transaction costs that are incurred in connection with a business combination, other than costs associated with the issuance of debt or equity securities, are expensed as incurred. 86 As part of our acquisition of BayMedica Inc, on October 13, 2021, goodwill, trade secrets, product formulation knowledge, patents, trademarks, Technology and In-Process Research and Development Intangible (“IPR&D”) intangible assets were recognized.
Transaction costs that are incurred in connection with a business combination, other than costs associated with the issuance of debt or equity securities, are expensed as incurred. As part of our acquisition of BayMedica Inc, on October 13, 2021, goodwill, trade secrets, product formulation knowledge, patents, trademarks, Technology and In-Process Research and Development Intangible (“IPR&D”) intangible assets were recognized.
Our know-how includes traditional approaches such as chemical synthesis and biosynthesis, as well as a proprietary, integrated manufacturing approach called IntegraSyn TM . We are dedicated to delivering new therapeutic alternatives to patients and consumers who may benefit from cannabinoid-based products.
Our know-how includes traditional approaches such as chemical synthesis and biosynthesis, as well as a proprietary, integrated manufacturing approach called IntegraSyn. We are dedicated to delivering new therapeutic alternatives to patients and consumers who may benefit from cannabinoid-based products.
These policies are considered by management to be essential to understanding the processes and reasoning that go into the preparation of our financial statements and the uncertainties that could have a bearing on its financial results.
These policies are considered by management to be essential to understanding the processes and reasoning that go into the preparation of our consolidated financial statements and the uncertainties that could have a bearing on its financial results.
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 plan to access rare cannabinoids via all non-extraction approaches, including chemical synthesis, biosynthesis and our proprietary integrated IntegraSyn TM approach, thus negating any interaction with or exposure to the Cannabis plant.
The cannabinoid Products sold through our B2B raw material supply business are integrated into various product formats by the companies who then further commercializes such products. We access rare cannabinoids via all non-extraction approaches, including chemical synthesis, biosynthesis and our proprietary integrated IntegraSyn approach, thus negating any interaction with or exposure to the Cannabis plant.
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. 73 We believe we are positioned to develop multiple pharmaceutical Product Candidates in diseases which may benefit from medicines based on rare cannabinoid compounds.
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. 79 We believe we are positioned to develop multiple pharmaceutical Product Candidates in diseases which may benefit from medicines based on rare cannabinoid compounds.
The following discussion and analysis should be read in conjunction with our audited consolidated financial statements for the year ended June 30, 2022, and the related notes thereto, which have been prepared in accordance with U.S. GAAP, included in our Form 10-K filing.
The following discussion and analysis should be read in conjunction with our audited consolidated financial statements for the year ended June 30, 2023, and the related notes thereto, which have been prepared in accordance with U.S. GAAP, included in our Form 10-K filing.
Amortization and Depreciation Intangible assets are comprised of intellectual property that we acquired in 2014 and 2015 and trade secrets, product formulation knowledge, patents and trademarks that we acquired in October 2021. The acquired intellectual property, patents and trademark are amortized on a straight-line basis based on their estimated useful lives.
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.
Refer to Note 6 of our consolidated financial statements. Business Combination Business combinations are accounted for using the acquisition method. The fair value of total purchase consideration is allocated to the fair values of identifiable tangible and intangible assets acquired and liabilities assumed, with the remaining amount being classified as goodwill.
Refer to Note 5 of our consolidated financial statements. 89 Business Combination Business combinations are accounted for using the acquisition method. The fair value of total purchase consideration is allocated to the fair values of identifiable tangible and intangible assets acquired and liabilities assumed, with the remaining amount being classified as goodwill.
This is due to the numerous risks and uncertainties associated with development, including the uncertainty related to: ● the timing and progress of preclinical and clinical development activities; ● the number and scope of preclinical and clinical programs we decide to pursue; ● our ability to raise additional funds necessary to complete preclinical and clinical development and commercialization of our Product Candidates, to further advance the development of our manufacturing technologies, and to develop and commercialize additional Products, if any; ● our ability to maintain our current research and development programs and to establish new ones; ● our ability to establish sales, licensing or collaboration arrangements; ● the progress of the development efforts of parties with whom we may enter into collaboration arrangements; ● the successful initiation and completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority; ● the receipt and related terms of regulatory approvals from applicable regulatory authorities; ● the availability of materials for use in production of our Products and Product Candidates; ● our ability to secure manufacturing supply through relationships with third parties or establish and operate a manufacturing facility; ● our ability to consistently manufacture our Product Candidates in quantities sufficient for use in clinical trials; ● our ability to obtain and maintain intellectual property protection and regulatory exclusivity, both in the United States and internationally; ● our ability to maintain, enforce, defend and protect our rights in our intellectual property portfolio; ● the commercialization of our Product Candidates, if and when approved, and of new Products; ● our ability to obtain and maintain third-party payor coverage and adequate reimbursement for our Product Candidates, if approved; ● the acceptance of our Product Candidates, if approved, by patients, the medical community and third-party payors; ● competition with other products; and ● a continued acceptable safety profile of our Product Candidates following receipt of any regulatory approvals.
This is due to the numerous risks and uncertainties associated with development, including the uncertainty related to: ● the timing and progress of preclinical and clinical development activities; ● the number and scope of preclinical and clinical programs we decide to pursue; ● our ability to raise additional funds necessary to complete preclinical and clinical development and commercialization of our Product Candidates, to further advance the development of our manufacturing technologies, and to develop and commercialize additional Products, if any; ● our ability to maintain our current research and development programs and to establish new ones; ● our ability to establish sales, licensing or collaboration arrangements; ● the progress of the development efforts of parties with whom we may enter into collaboration arrangements; ● the successful initiation and completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority; ● the receipt and related terms of regulatory approvals from applicable regulatory authorities; ● the availability of materials for use in production of our Products and Product Candidates; ● our ability to secure manufacturing supply through relationships with third parties or establish and operate a manufacturing facility; ● our ability to consistently manufacture our Product Candidates in quantities sufficient for use in clinical trials; ● our ability to obtain and maintain intellectual property protection and regulatory exclusivity, both in the United States and internationally; ● our ability to maintain, enforce, defend and protect our rights in our intellectual property portfolio; ● the commercialization of our Product Candidates, if and when approved, and of new Products; ● our ability to obtain and maintain third-party payor coverage and adequate reimbursement for our Product Candidates, if approved; ● the acceptance of our Product Candidates, if approved, by patients, the medical community and third-party payors; ● competition with other products; and ● a continued acceptable safety profile of our Product Candidates following receipt of any regulatory approvals. 82 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.
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”).
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. Together with our subsidiary, BayMedica, we also have significant know-how in developing proprietary manufacturing approaches to produce cannabinoids for various market sectors.
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 BayMedica activities.
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.
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; ● 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; 83 ● the costs, timing and outcome of regulatory review of our Product Candidates; ● our ability to enter into contract manufacturing arrangements for supply of materials and manufacture of our Products and Product Candidates and the terms of such arrangements; ● the impact of any acquired, or in-licensed, externally developed product(s) and/or technologies; ● our ability to establish and maintain strategic collaborations, licensing or other arrangements, including sales arrangements, and the financial terms of such arrangements; ● the sales, costs and timing of future commercialization activities, including product manufacturing, sales, marketing and distribution, for any of our Products and for Product Candidates for which we may receive marketing approval; ● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights and defending any intellectual property- related claims; ● expansion costs of our operational, financial and management systems and increases to our personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a dual listed company; and ● the costs to obtain, maintain, expand and protect our intellectual property portfolio.
Our funding requirements and timing and amount of our operating expenditures will depend largely on: ● the scope, progress, results and costs of discovery research, preclinical development, laboratory testing and clinical trials for our Product Candidates; ● the scope, progress, results and costs of development of our manufacturing technologies; ● the number of and development requirements for other Products and Product Candidates that we pursue; ● the costs, timing and outcome of regulatory review of our Product Candidates; ● our ability to enter into contract manufacturing arrangements for supply of materials and manufacture of our Products and Product Candidates and the terms of such arrangements; ● the impact of any acquired, or in-licensed, externally developed product(s) and/or technologies; ● our ability to establish and maintain strategic collaborations, licensing or other arrangements, including sales arrangements, and the financial terms of such arrangements; ● the sales, costs and timing of future commercialization activities, including product manufacturing, sales, marketing and distribution, for any of our Products and for Product Candidates for which we may receive marketing approval; ● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights and defending any intellectual property- related claims; ● expansion costs of our operational, financial and management systems and increases to our personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a dual listed company; ● the costs to obtain, maintain, expand and protect our intellectual property portfolio; and ● the level and timing of realizing revenues from the BayMedica commercial operations.
The full details of our accounting policies are presented in Note 2 of our audited consolidated financial statements for the year ended June 30, 2022.
The full details of our accounting policies are presented in Note 2 of our audited consolidated financial statements for the year ended June 30, 2023.
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 and limited Product revenues.
On October 13, 2021, we acquired BayMedica, Inc., now named BayMedica, LLC. Upon closing of the transaction, BayMedica became a wholly-owned subsidiary of InMed. To date, we have funded our operations primarily through the issuance of common shares.
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.
While our activities do not involve direct use of Cannabis nor extracts from the plant, we note that the FDA has, to date, not approved any marketing application for Cannabis for the treatment of any disease or condition and has approved only one Cannabis -derived and three Cannabis -related drug products.
The amount of expenses recognized in a period related to service agreements is based on estimates of the work performed using an accrual basis of accounting. These estimates are based on services provided and goods delivered, contractual terms and experience with similar contracts.
The amount of expenses recognized in a period related to service agreements is based on estimates of the work performed using an accrual basis of accounting. These estimates are based on services provided and goods delivered, contractual terms and experience with similar contracts. We monitor these factors and adjust our estimates accordingly.
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.
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.
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.
We cannot reasonably estimate these costs at this time. 87 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.
Going Concern Through June 30, 2022, 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 $18.6 million and $10.2 million for the year ended June 30, 2022 and 2021, respectively.
Going Concern Through June 30, 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 $7.9 million and $18.6 million for the years ended June 30, 2023 and 2022, respectively.
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 consolidated financial statements are issued. 82 Through June 30, 2022, we have funded our operations primarily with proceeds from the sale of common stock.
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 consolidated financial statements are issued.
We expect our expenses and operating losses will increase substantially over the next several years in connection with our ongoing activities as we: ● continue to further advance the research and development of various manufacturing technologies; ● continue to further advance the INM-755 program, our lead drug candidate for the treatment of EB; ● continue to further advance the INM-088 program, our drug candidate for the treatment of glaucoma; ● investigate our Product Candidates for additional uses beyond the initial indications; ● pursue the discovery of drug targets based on proprietary cannabinoid analogs for other diseases with high unmet medical needs and the subsequent development of any resulting new Product Candidates; ● seek regulatory approvals for any Product Candidates that successfully complete clinical trials; ● scale-up our manufacturing processes and capabilities, or arrange for a third party to do so on our behalf; ● execute on business development activities, including but not limited to company mergers/acquisitions and acquisition or in-licensing of externally developed products and/or technologies; ● maintain, expand, enforce, defend and protect our intellectual property; ● build internal infrastructure, including personnel, to meet our milestones; and ● add operational, financial and management information systems and personnel, including personnel to support product development and potential future commercialization efforts and our operations as a public company. 74 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 our expenses will remain steady as we: ● seek partnerships to advance the INM-755 program, our lead drug candidate for the treatment of EB; ● continue to further advance research into the role of cannabinoids in treating ocular diseases; ● continue to advance research in the INM-900 series program, using cannabinoid analogs in treating neurodegenerative diseases such as Alzheimer’s, Huntington’s and Parkinson’s; ● investigate our Product Candidates for additional uses beyond their initial target indications; ● pursue the discovery of drug targets based on proprietary cannabinoid analogs for other diseases with high unmet medical needs and the subsequent development of any resulting new Product Candidates; ● seek regulatory approvals for any Product Candidates that successfully complete clinical trials; ● scale-up our manufacturing processes and capabilities, or arrange for a third party to do so on our behalf; ● continue to support our commercial operations and revenue-generating Products at BayMedica; ● execute on business development activities, including but not limited to company mergers/acquisitions and acquisition or in-licensing of externally developed products and/or technologies; ● maintain, expand, enforce, defend and protect our intellectual property; ● continue to further advance the research and development of various manufacturing technologies; ● build internal infrastructure, including personnel, to meet our milestones; and ● add operational, financial and management information systems and personnel, including personnel to support product development and potential future commercialization efforts and our operations as a public company. 80 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 do not track our internal research and development expenses on a program-by-program basis as the resources are deployed across multiple projects. 76 The successful development of our Products and Product Candidates is highly uncertain.
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.
The corresponding accrued entitlement is recorded in contributed surplus. The amount recognized as an expense is adjusted to reflect the number of share options expected to vest.
The amount recognized as an expense is adjusted to reflect the number of share options expected to vest.
We monitor these factors and adjust our estimates accordingly. 85 Share-based payments : The fair value, at the grant date, of equity share awards is charged to income or loss over the period for which the benefits of employees and others providing similar services are expected to be received, generally the vesting period.
Share-based payments : The fair value, at the grant date, of equity share awards is charged to income or loss over the period for which the benefits of employees and others providing similar services are expected to be received, generally the vesting period. The corresponding accrued entitlement is recorded in contributed surplus.
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.
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.
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 in important market segments including clinically proven, FDA-approved medicines and Products that are provided to wholesalers and end-product manufacturers.
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.
The following table summarizes our cash flows for each of the periods presented: (in thousands) Year Ended June 30, 2022 Year Ended June 30, 2021 Net cash used in operating activities $ (15,584 ) $ (9,791 ) Net cash used in investing activities (673 ) (2 ) Net cash provided by financing activities 15,071 10,855 Effects of foreign exchange on cash and cash equivalents - 495 Net increase (decrease) in cash and cash equivalents $ (1,186 ) $ 1,557 81 Operating Activities During the year ended June 30, 2022, we used cash in operating activities of $15.6 million, primarily resulting from our net loss of $18.6 million combined with $2.7 million used in changes in our non-cash working capital, partially offset by non-cash share-based compensation expenses, impairment of intangible assets and goodwill and warrant modification expense related to the change in fair value of warrants that were re-priced during the year.
During the year ended June 30, 2022, we used cash in operating activities of $15.9 million, primarily resulting from our net loss of $18.6 million combined with $2.7 million used in changes in our non-cash working capital, partially offset by non-cash share-based compensation expenses, impairment of intangible assets and goodwill and warrant modification expense related to the change in fair value of warrants that were re-priced during the year.
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. 84 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.
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.
During the year ended June 30, 2021, cash provided by financing activities of $10.9 million consisted of $8.0 million of gross proceeds from our initial public offering and $4.5 million of gross proceeds from a private placement of our common shares, offset by total transaction costs of $1.6 million.
Financing Activities During the year ended June 30, 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.
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).
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).
The significant accounting policies that we believe to be most critical in fully understanding and evaluating our financial results are research and development costs and share based payments.
The significant accounting policies that we believe to be most critical in fully understanding and evaluating our financial results are research and development costs and share based payments. 88 Research & Development and Patents costs : Research and development and patents costs is a critical accounting estimate due to the magnitude and nature of the assumptions that are required to calculate third-party accrued and prepaid research and development expenses.
If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations. Recent Developments On July 2, 2021, we closed a $12.0 million private placement.
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 We completed our Phase 2 trial on INM-755 in April of 2023, and we have released preliminary results in June 2023.
As of the issuance date of the consolidated financial statements, we expect our cash and cash equivalents of $6.2 million as of June 30, 2022, combined with the approximate $5.4 million of net proceeds from a private placement which closed on September 13, 2022, will be sufficient to fund our operating expenses and capital expenditure requirements into the second half of fiscal 2023, and possibly into the first quarter of fiscal 2024 (being the third calendar quarter of 2023), depending on the level and timing of realizing revenues from the sale of BayMedica inventory as well as the level and timing of the Company operating expenses.
As of the issuance date of the consolidated financial statements, we expect our cash and cash equivalents and short-term investments of $9.0 million as of June 30, 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 year 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.
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.
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. 83 Other Income Other income consists primarily of interest income earned on our cash, cash equivalents and short-term investments.
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”).
The API under development for our initial two drug candidates, INM-755 for EB and INM-088 for glaucoma, is CBN.
We have incurred recurring losses and negative cash flows from operations since its inception, including net losses of $18.6 million and $10.2 million for the year ended June 30, 2022 and 2021, respectively. In addition, we have an accumulated deficit of $93.5 million as of June 30, 2022.
Through June 30, 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 $7.9 million and $18.6 million for the year ended June 30, 2023 and 2022, respectively.
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.
Cost of sales also includes production and labor costs for our manufacturing business.
Comparison of the year ended June 30, 2022 and 2021 for InMed Segment Year Ended June 30, 2022 2021 Change % Change (in thousands) Operating expenses: Research and development and patents 5,986 5,338 648 12 % General and administrative 5,906 4,479 1,427 32 % Amortization and depreciation 107 121 (14 ) -12 % Total operating expenses 11,999 9,938 2,061 21 % Interest and other income 20 16 4 25 % Finance expense - (360 ) 360 -100 % Unrealized gain on derivative warrants liability - 243 (243 ) -100 % Warrant modification expense (1,314 ) - (1,314 ) nm Foreign exchange loss (118 ) (164 ) 46 -28 % Net loss $ (13,411 ) $ (10,203 ) $ (3,208 ) 31 % Research and Development and Patents Expenses Research and development and patents expenses increased by $0.6 million in our InMed segment, or 12%, for the year ended June 30, 2022 compared to the year ended June 30, 2021.
Comparison of the year ended June 30, 2023 and 2022 for InMed Segment Year Ended June 30, 2023 2022 Change % Change (in thousands) Operating expenses: Research and development and patents 2,864 5,986 (3,122 ) (52 )% General and administrative 4,022 5,906 (1,884 ) (32 )% Amortization and depreciation 105 107 (2 ) (2 )% Total operating expenses 6,991 11,999 (5,008 ) (42 )% Interest and other income 303 20 283 1,415 % Warrant modification expense - (1,314 ) 1,314 (100 )% Foreign exchange (loss) gain (48 ) (118 ) 70 (59 )% Net loss $ (6,736 ) $ (13,411 ) $ 6,675 (50 )% Research and Development and Patents Expenses Research and development and patents expenses decreased by $3.1 million in our InMed segment, or 52%, for the year ended June 30, 2023 compared to the year ended June 30, 2022.
As a result, we recorded a goodwill and intangible impairment loss. There were no comparable expenses in 2021. 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.
The increase results primarily from a combination of changes including higher personnel expenses, accounting fees, legal fees and sales and marketing expenses. Liquidity and Capital Resources Since our inception, we have only generated limited revenue from product sales, no sales from any other sources and have incurred significant operating losses and negative cash flows from our operations.
Our ability to generate product revenue, if ever, that is sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our drug candidates and/or the success of our manufacturing technologies. Our net loss was $18.6 million and $10.2 million for the year ended June 30, 2022 and 2021, respectively.
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.
As of the issuance date of the consolidated financial statements, we expect our cash and cash equivalents of $6.2 million as of June 30, 2022, combined with the approximate $5.4 million of net proceeds from a private placement which closed on September 13, 2022, will be sufficient to fund our operating expenses and capital expenditure requirements into the second half of fiscal 2023, and possibly into the first quarter of fiscal 2024 (being the third calendar quarter of 2023), depending on the level and timing of realizing revenues from the sale of BayMedica inventory as well as the level and timing of the Company operating expenses.
In addition, we have an accumulated deficit of $101.4 million as of June 30, 2023. 86 As of the issuance date of the consolidated interim financial statements, we expect our cash and cash, cash equivalents and short-term investments of $9.0 million as of June 30, 2023 will be sufficient to fund our operating expenses and capital expenditure requirements into the first quarter of calendar year 2024. depending on the level and timing of realizing BayMedica revenues from the sale of Products in the Health & Wellness sector as well as the level and timing of the Company operating expenses.
We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all.
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.
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.
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. 81 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.
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.
We anticipate publishing the full data from the study in the second quarter of fiscal 2024. 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.
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 as outlined in Note 6 to the consolidated financial statements.
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.
During the year ended June 30, 2021, we used cash in investing activities of less than $0.1 million, resulting from the purchase of property and equipment.
Investing Activities During the year ended June 30, 2023, cash used in investing activities of $0.7 million resulted from escrow payments made to BayMedica’s historical equity and convertible debt holders and purchase of property and equipment.
The increase in research and development and patents expenses was primarily due to increased activities related to the INM-755 Phase 2 clinical trials. 79 General and administrative expenses General and administrative expenses increased by $1.4 million in our InMed segment, or 32%, for the year ended June 30, 2022 compared to the year ended June 30, 2021.
Research and Development and Patents Expenses Research and development and patents expenses decreased by $0.4 million in our BayMedica segment, or 33%, for the year ended June 30, 2023 compared to the year ended June 30, 2022. The decrease in research and development and patents expenses was primarily due to lower personnel expenses and external consultants.
To make the transition we plan to focus sales efforts on reducing inventory and decreasing other commercial manufacturing R&D efforts in BayMedica. As a result, as of June 30, 2022, the Company determined that intangibles assets of BayMedica that were associated with manufacturing and commercialization of our health and wellness products were impaired.
Due to the impairment indicators discussed in Note 5 of our consolidated financial statements, as of June 30, 2022, the Company determined that intangibles assets of BayMedica that were associated with manufacturing and commercialization of our health and wellness products were impaired during the year ended June 30, 2022.
During the year ended June 30, 2021, we used cash in operating activities of $9.8 million, primarily resulting from our net loss of $10.2 million combined with $0.5 million used in changes in our non-cash working capital, partially offset by non-cash share-based compensation expenses, financing expenses allocated to warrants and changes in the valuation of the derivative warrants liability.
As of June 30, 2023, we had cash, cash equivalents and short-term investments of $9.0 million. 85 The following table summarizes our cash flows for each of the periods presented: (in thousands) Year Ended June 30, 2023 Year Ended June 30, 2022 Net cash (used in) operating activities $ (7,283 ) $ (15,584 ) Net cash (used in) investing activities (662 ) (673 ) Net cash provided by financing activities 10,680 15,071 Net increase (decrease) in cash and cash equivalents $ 2,735 $ (1,186 ) Operating Activities During the year ended June 30, 2023, we used cash in operating activities of $7.3 million, primarily resulting from our net loss of $7.9 million combined with $0.6 million used in changes in our non-cash working capital, partially offset by non-cash share-based compensation expenses and inventory write-down.
The increase in research and development and patents expenses was due to the inclusion of BayMedica operating results following the acquisition date. There were no comparable expenses in 2021. General and administrative expenses General and administrative expenses were $1.0 million in our BayMedica segment for the year ended June 30, 2022.
This was offset by an increase in research supplies. General and administrative expenses General and administrative expenses increased by $0.9 million in our BayMedica segment, or 90%, for the year ended June 30, 2023 compared to the year ended June 30, 2022.
As of June 30, 2022, we had an accumulated deficit of $93.5 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 June 30, 2022 by approximately $64.6 million.
Our net loss was $8.0 million and $18.6 million for the year ended June 30, 2023 and 2022, respectively. As of June 30, 2023, we had an accumulated deficit of $101.4 million, which includes all losses since our inception in 1981.
Accordingly, we realized cost of goods sold of $0.5 million in our BayMedica segment for the year ended June 30, 2022, with no comparable expenses in 2021, resulting in a gross profit of $0.5 million for the period.
The increase in cost of goods sold is a result from the increase in sales mentioned above Our cost of sales percentage fluctuates based on the Products mix sold. Inventory Write-Down The write-down of inventories to net realizable value was $0.3 million in our BayMedica segment for the year ended June 30, 2023, with no comparable expenses in 2022.
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. 77 Research and development activities account for a significant portion of our operating expenses.
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 multicenter Phase 2 clinical trial in our INM-755 program during fiscal 2022.
Removed
Until such time as we can generate significant revenue, if ever, 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.
Added
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.
Removed
After deducting the placement agent fees and estimated offering expenses payable by the Company, we received net proceeds of approximately $11.0 million.
Added
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.
Removed
On September 30, 2021, we announced that we commenced our Phase 2 clinical trial of INM-755 (cannabinol) cream in the treatment of Epidermolysis Bullosa (“EB”) marking the first time cannabinol has advanced to a Phase 2 Clinical trial to be studied as a therapeutic option to treat a disease. On October 13, 2021, we completed the acquisition of BayMedica Inc.
Added
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 multicenter Phase 2 clinical trial during fiscal 2022.
Removed
(“BayMedica”), a private company based in the U.S. that specializes in the manufacturing and commercialization of rare cannabinoids.
Added
General and administrative expenses General and administrative expenses decreased by $1.9 million in our InMed segment, or 32%, for the year ended June 30, 2023 compared to the year ended June 30, 2022. The decrease results primarily from a combination of changes including lower office and admin fees, investor relation expenses, stock-based compensation expenses, personnel expenses, accounting, and legal fees.
Removed
We acquired 100% of BayMedica in exchange for 82,000 common shares issued to BayMedica’s equity and convertible debt holders, subject to a six-month contractual hold period and $1 million to be held in escrow, subject to reduction for certain post-closing adjustments or satisfaction of indemnification claims under the definitive agreement in the six- and twelve-month periods following the closing.
Added
Foreign exchange loss The Company’s functional currency is US dollar and our foreign exchange loss is predominantly due to transactions with foreign currency.
Removed
On April 13, 2022, $300,457 of escrow payments were made to BayMedica’s historical equity and convertible debt holders reflecting $199,543 of post-closing reductions from the escrow. The remaining $500,000 escrow payment, subject to any additional post-closing adjustments, is payable on the twelve-month anniversary following the closing.
Added
BayMedica has now realized three consecutive quarters of revenue growth, with increases of 46%, 100%, and 123% in Q2, Q3, and Q4 of fiscal year 2023, respectively. While we expect revenue fluctuations based on distributor order patterns, there are no assurances that this growth will continue in future quarters. However, the recent trend of increased sales is encouraging.
Removed
We announced the launch of B2B sales of the rare cannabinoid Products cannabicitran (“CBT”), cannabidivarin (“CBDV”), and tetrahydrocannabivarin (“THCV”) on January 19, 2022, on April 21, 2022, and on June 9, 2022, respectively.
Added
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.
Removed
On April 7, 2022, we filed a prospectus supplement to our S-3 universal shelf filing to incorporate an At- The-Market-Offering Agreement following which the Company sold 10,759 common shares under the agreement for proceeds of $0.1 million, net of issuance costs.
Added
Cost of Sales Cost of goods sold increased by $1.9 million in our BayMedica segment, or 344%, for the year ended June 30, 2023 compared to the year ended June 30, 2022.
Removed
On June 6, 2022, we closed a $5.5 million registered direct offering and concurrent private placement of our common shares. After deducting the placement agent fees and transaction costs, we received net proceeds of approximately $4.5 million. 75 On September 13, 2022, we closed a $6.0 million private placement.
Added
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.
Removed
Under the terms of the private placement, an aggregate of 691,245 common shares, or common share equivalents, and investment options to purchase up to an aggregate of 1,382,490 common shares, at an effective purchase price of $8.68 per common share and associated investment options.
Added
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.
Removed
The warrants have an exercise price of $8.44 per share, are exercisable immediately and have a term of seven years. After deducting the placement agent fees, we received net proceeds of approximately $5.4 million.

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