InMed Pharmaceuticals Inc

Previous wording

This discussion and analysis contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is subject to the safe harbor created by those sections. For more information, see “Cautionary Note Regarding Forward-Looking Statements.” When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that impact our business. In particular, we encourage you to review the risks and uncertainties described in “Risk Factors” in the 2023 Annual Report, and other filings we make from time to time with the SEC. These risks and uncertainties could cause actual results to differ materially from those projected or implied by our forward-looking statements contained in this report. These forward-looking statements are made as of the date of this report, and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by law.

Current wording

This discussion and analysis contains certain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and is subject to the safe harbor created by those sections. For more information, see “Special Note Regarding Forward-Looking Statements.” When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that impact our business. In particular, we strongly encourage you to review the risks and uncertainties described in “Risk Factors” in the 2024 Annual Report, the “Risk Factors” identified in Item 1A. of this Quarterly Report, and other filings we make from time to time with the SEC. These risks and uncertainties could cause actual results to differ materially from those projected or implied by our forward-looking statements contained in this Quarterly Report on Form 10-Q. These forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q, and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by law.

Previous wording

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements for the three and nine months ended March 31, 2024, and the related notes thereto, which have been prepared in accordance with U.S. GAAP. Additionally, the following discussion and analysis should be read in conjunction with our audited consolidated financial statements included in the 2023 Annual Report. Throughout this discussion, unless the context specifies or implies otherwise the terms “InMed,” “Company,” “we,” “us,” and “our” refer to InMed Pharmaceuticals Inc.

Current wording

The following discussion and analysis should be read in conjunction with our audited consolidated financial statements for the year ended June 30, 2024, and the related notes thereto, which have been prepared in accordance with U.S. GAAP. Additionally, the following discussion and analysis should be read in conjunction with our audited consolidated financial statements included in this Annual Report. Throughout this discussion, unless the context specifies or implies otherwise the terms “InMed,” “Company,” “we,” “us,” and “our” refer to InMed Pharmaceuticals Inc.

Previous wording

We are a clinical stage pharmaceutical company developing a pipeline of proprietary small molecule drug candidates that are preferential signaling ligands of the endogenous cannabinoid 1 (“CB1”) and cannabinoid 2 (“CB2”) receptors as well as other receptor targets linked to human disease. CB1 and CB2 receptors are each part of the endocannabinoid system that is found throughout the human body and is responsible for many homeostatic functions. CB1 receptors are primarily located in the brain and central nervous system, while CB2 receptors are involved in modulating neuroinflammation and immune responses. Our research efforts target the treatment of diseases with high unmet medical needs. Together with our wholly-owned subsidiary, BayMedica, we also have significant know-how in developing proprietary manufacturing approaches to produce and sell bulk rare cannabinoids as ingredients for various market sectors.

Current wording

We are a pharmaceutical company developing a pipeline of proprietary small molecule drug candidates that are preferential signaling ligands of the endogenous CB1 and CB2 receptors as well as other receptor targets linked to human disease. CB1 and CB2 receptors are each part of the endocannabinoid system that is found throughout the human body and is responsible for many homeostatic functions. CB1 receptors are primarily located in the brain and central nervous system, while CB2 receptors are involved in modulating neuroinflammation and immune responses. Our research efforts target the treatment of diseases with high unmet medical needs. Together with BayMedica, we also have significant know-how in developing proprietary manufacturing approaches to produce and sell bulk rare cannabinoids as ingredients for various market sectors.

Previous wording

InMed has sought to focus on the research and development of preferential signaling ligands of CB1/CB2 and has produced a library of novel, proprietary drug candidates. These candidates are patentable new chemical entities (“NCEs”) for pharmaceutical development, aimed at targeting diverse clinical indications. Our current pharmaceutical pipeline consists of three programs, with drug candidates targeting Alzheimer’s disease, dry age-related macular degeneration, and Epidermolysis Bullosa. InMed’s INM-901 is a proprietary drug candidate being developed as a potential treatment for Alzheimer’s disease. INM-901 has multiple potential mechanisms of action as a preferential signaling agonist for both CB1 and CB2 receptors, as well as impacting the peroxisome proliferator-activated receptor (“PPAR”) signaling pathway. Combined, these mechanisms of action may offer a unique treatment approach targeting several biological pathways associated with Alzheimer’s disease. Our ocular research, based on a proprietary small molecule, INM-089 indicates potentially promising neuroprotective effects in the back of the eye, which may lead to the preservation of the retinal function. Neuroprotection in dry Aged-related Macular Degeneration (“dry AMD”) remains an unmet medical need and a new treatment option may help solve this multifactorial disease.

Current wording

InMed has sought to focus on the research and development of preferential signaling ligands of CB1 and CB2, and has produced a library of novel, proprietary drug candidates (“Product Candidates”). These Product Candidates are patentable new chemical entities (“NCEs”) for pharmaceutical development, aimed at targeting diverse clinical indications. Our current pharmaceutical pipeline consists of three programs, with drug candidates targeting Alzheimer’s disease, dry age-related macular degeneration, and Epidermolysis Bullosa. InMed’s INM-901 is a proprietary small molecule, disease modifying drug candidate being developed as a potential treatment for Alzheimer’s disease. INM-901 has multiple potential mechanisms of action as a preferential signaling agonist for both CB1 and CB2 receptors, as well as impacting the peroxisome proliferator-activated receptor (“PPAR”) signaling pathway. Combined, these mechanisms of action may offer a unique treatment approach targeting several biological pathways associated with Alzheimer’s disease. Our ocular research, based on the proprietary small molecule INM-089, indicates potentially promising neuroprotective effects in the back of the eye, which may lead to the preservation of the retinal function. Neuroprotection in dry Aged-related Macular Degeneration (“dry AMD”) remains an unmet medical need and a new treatment option may help solve this multifactorial disease.

Previous wording

InMed has also completed a Phase 2 clinical trial of INM-755 (cannabinol) cream studying its safety and efficacy in Epidermolysis Bullosa (“EB”). Results from the Phase 2 clinical trial showed a positive indication of enhanced anti-itch activity for INM-755 cannabinol cream versus the control cream alone in an exploratory clinical evaluation. The results for non-wound itch were not statistically significant in this small trial due, in part, to the clinically important anti-itch effect of the underlying control cream.

Current wording

InMed has also completed a Phase 2 clinical trial of INM-755 (cannabinol) cream studying its safety and efficacy in treating symptoms related to Epidermolysis Bullosa (“EB”). Results from the Phase 2 clinical trial showed a positive indication of enhanced anti-itch activity for INM-755 cream versus the control cream alone in an exploratory clinical evaluation. The Company is also pursuing strategic partnership opportunities for INM-755 in epidermolysis bullosa and other itch-related skin conditions.

Previous wording

Together with our wholly-owned subsidiary BayMedica, our manufacturing capabilities include traditional approaches such as chemical synthesis and biosynthesis, as well as a proprietary, integrated manufacturing approach called IntegraSyn. With multiple manufacturing approaches, InMed has sought to maintain enhanced flexibility to select the most cost-effective method to deliver high quality, pure cannabinoids fit for their intended use. BayMedica’s commercial business specializes in the B2B supply of bulk rare cannabinoids as raw materials for the Health and Wellness sector that are bioidentical to those found in nature.

Current wording

Together with BayMedica, our manufacturing capabilities include traditional approaches such as chemical synthesis and biosynthesis, as well as a proprietary, integrated manufacturing approach called IntegraSyn. With multiple manufacturing approaches, InMed has sought to maintain enhanced flexibility to select the most cost-effective method to deliver high quality, high purity Products and Product Candidates fit for their intended use. BayMedica’s commercial business specializes in the B2B commercialization of bulk rare, non-intoxicating cannabinoids as raw materials for the Health and Wellness sector that are bioidentical to those found in nature.

Previous wording

On March 19, 2024, the Company received written notification from the Listing Qualifications Department of Nasdaq that the Company has been granted an additional 180-day compliance period, or until September 16, 2024 (the “Extended Compliance Period”), to regain compliance with Nasdaq’s minimum bid price requirement for the continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Rule”). Nasdaq’s determination is based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market, with the exception of the bid price requirement, and the Company’s written notice of its intention to consider all available options to regain compliance during the Extended Compliance Period, including, if necessary, effecting a reverse stock split. If at any time prior to September 16, 2024, the closing bid price of the Company’s listed shares on Nasdaq (the “Listed Shares”) is at least $1.00 per share for at least a minimum of 10 consecutive business days, the Company will regain compliance with the Minimum Bid Price Rule and this matter will be closed. If the Company does not regain compliance with the Minimum Bid Price Rule during the Extended Compliance Period, Nasdaq will provide written notification to the Company that the Listed Shares will be delisted. At that time, the Company may appeal the relevant delisting determination to a hearings panel (the “Hearings Panel”) pursuant to the procedures set forth in the Nasdaq Listing Rules. However, if the Company does appeal Nasdaq’s delisting determination to the Hearings Panel, there can be no assurance that such appeal would be successful.

Current wording

As previously reported by the Company, on March 19, 2024, the Company received written notification from the Listing Qualifications Department of Nasdaq that the Company has been granted an additional 180-day compliance period, or until September 16, 2024 (the “Extended Compliance Period”), to regain compliance with Nasdaq’s minimum bid price requirement for the continued listing on Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Rule”). Nasdaq’s determination was based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on Nasdaq, with the exception of the bid price requirement, and the Company’s written notice of its intention to consider all available options to regain compliance during the Extended Compliance Period, including, if necessary, effecting a reverse stock split. The Company was unable to regain compliance during the Extended Compliance Period and, on September 17, 2024, the Company received an additional notification from the Listing Qualifications Department stating that due to the deficiency, the Company’s securities would be delisted from Nasdaq on September 26, 2024, unless the Company appealed Nasdaq’s determination to a Hearings Panel (the “Panel”). A hearing request would stay the suspension of the Company’s securities pending the Panel’s discussion. On September 17, 2024, the Company submitted the hearing request to appeal (the “Appeal Request”) Nasdaq’s determination before the Panel. On October 31, 2024, a hearing was held before the Panel regarding the Company’s request for (i) continued listing on Nasdaq and (ii) additional time to regain compliance with the Minimum Bid Price Rule. On November 1, 2024, the Panel issued its determination (the “Panel Determination Letter”) to the Company, granting the Company’s request for the continued listing of the Common Shares on Nasdaq, but subject to the Company’s evidencing compliance with the Minimum Bid Price Rule for ten consecutive trading days as of December 2, 2024 (the “Requisite Compliance Date”), and of other conditions stipulated by the Panel Determination Letter. In order to regain compliance with the Minimum Bid Price Rule before the Requisite Compliance Date, the Company effected the Reverse Stock Split of the Common Shares at a ratio of 20-to-1. Trading of the Common Shares on Nasdaq on a split-adjusted basis began as of November 14, 2024. As a result of the Reverse Stock Split, every twenty shares of Common Shares were combined into one Common Share, and the total number of Common Shares outstanding were reduced from approximately 14,361,550 shares to approximately 718,032 shares. No fractional shares were issued if, as a result of the Reverse Stock Split, a registered shareholder would otherwise become entitled to a fractional share. Instead, shareholders who otherwise were entitled to receive fractional shares because they held a …

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Previous wording

Our revenue consists of manufacturing and distribution sales of rare cannabinoid products, which are generally recognized at a point in time. We recognize revenue when control over the products has been transferred to the customer and to which we have a present right to payment.

Current wording

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.

Previous wording

We expense research and development costs as incurred. We recognize expenses for certain development activities, such as preclinical studies and manufacturing, based on an evaluation of the progress to completion of specific tasks using data or other information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of expenses historically incurred. Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. These amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered.

Current wording

We expense research and development costs as incurred. We recognize expenses for certain development activities, such as preclinical studies and manufacturing, based on an evaluation of the progress to completion of specific tasks using data or other information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of expenses incurred. Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. These amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered.

Previous wording

The successful development of our Products and Product Candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be needed to complete the remainder of the development of our Product Candidates or to develop and commercialize additional Products. We are also unable to predict when, if ever, material net cash inflows will commence from our Product Candidates, if approved. This is due to the numerous risks and uncertainties associated with the development of our products, including the uncertainties related to:

Current wording

The successful development of our Products and Product Candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the remainder of the development of our Product Candidates or to develop and commercialize additional Products. We are also unable to predict when, if ever, material net cash inflows will commence from our Product Candidates, if approved. This is due to the numerous risks and uncertainties associated with development, including the uncertainty related to:

Previous wording

A change in the outcome of any of these variables with respect to the development of any of our Products or Product Candidates could significantly and materially change the costs and timing associated with the development of those Products or Product Candidates.

Current wording

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.

Previous wording

Research and development activities account for a significant portion of our operating expenses. Research and development expenses decreased in the three and nine months ended March 31, 2024 as compared to the three and nine months ended March 31, 2023, largely due to high start-up costs associated with the multicenter Phase 2 clinical trial in our INM-755 program during the prior year. However, we expect our research and development expenses to increase significantly in future periods as we continue to implement our business strategy, which includes advancing our drug candidates and our manufacturing technologies into and through clinical development, expanding our research and development efforts, including hiring additional personnel to support our research and development efforts, ultimately seeking regulatory approvals for our drug candidates that successfully complete clinical trials, and further developing selected R&D and commercial BayMedica activities. In addition, drug candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Accordingly, although we expect our research and development expenses to increase as our drug candidates advance into later stages of clinical development, we do not believe that it is possible, at this time, to accurately project total program-specific expenses through to commercialization. There are numerous factors associated with the successful commercialization of any of our Product Candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development.

Current wording

Research and development activities account for a significant portion of our operating expenses. Research and development expenses decreased in our three months ended September 30, 2024, as compared to our three months ended September 30, 2023, largely due to high costs associated with our INM-755 program during the prior year. However, we expect our research and development expenses to increase significantly in future periods as we continue to implement our business strategy, which includes advancing our drug candidates and our manufacturing technologies into and through clinical development, expanding our research and development efforts, including hiring additional personnel to support our research and development efforts, ultimately seeking regulatory approvals for our drug candidates that successfully complete clinical trials, and further developing selected research and development and commercial BayMedica activities. In addition, drug candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Accordingly, although we expect our research and development expenses to increase as our drug candidates advance into later stages of clinical development, we do not believe that it is possible, at this time, to accurately project total program-specific expenses through to commercialization. There are numerous factors associated with the successful commercialization of any of our Product Candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development.

Previous wording

General and administrative expenses consist of (i) personnel-related costs, including salaries, benefits and stock-based compensation expense, for our personnel in executive, finance and accounting, human resources, business operations and other administrative functions, (ii) investor relations activities, (iii) legal fees related to corporate matters, (iv) fees paid for accounting and tax services, (v) consulting fees and (vi) facility-related costs.

Current wording

General and administrative expenses consist of personnel-related costs, including salaries, benefits and stock-based compensation expense, for our personnel in executive, finance and accounting, human resources, business operations and other administrative functions, investor relations activities, legal fees related to corporate matters, fees paid for accounting and tax services, consulting fees and facility-related costs.

Previous wording

Intangible assets are comprised of intellectual property that we acquired in May of 2014 and trade secrets, product formulation knowledge, and patents that we acquired in October 2021. The acquired intellectual property and patents are amortized on a straight-line basis based on their estimated useful lives. Equipment and leasehold improvements are depreciated using the straight-line method based on their estimated useful lives.

Current wording

Intangible assets are comprised of intellectual property that we acquired in 2014 and 2015 and trade secrets, product formulation knowledge, patents that we acquired in October 2021. The acquired intellectual property and patents are amortized on a straight-line basis based on their estimated useful lives. Equipment and leasehold improvements are depreciated using the straight-line method based on their estimated useful lives.

Previous wording

The Company has two operating and reportable segments based on the management approach which designates the internal reporting used by the Chief Operating Decision Maker (“CODM”), which is the Company’s Chief Executive Officer and the senior management team, for making decisions and assessing performance as the source of the Company’s reportable segments. The CODM allocates resources and assesses the performance of each operating segment based on potential licensing opportunities, historical and potential future product sales, operating expenses, and operating income (loss) before interest and taxes. The Company has determined its reportable segments to be InMed Pharmaceuticals (‘InMed Pharma’) and BayMedica Commercial based on the information used by the CODM.

Current wording

The Company has two operating and reportable segments based on the management approach which designates the internal reporting used by the CODM, the Company’s Chief Executive Officer and the senior management team, for making decisions and assessing performance as the source of the Company’s reportable segments. The CODM allocates resources and assesses the performance of each operating segment based on potential licensing opportunities, historical and potential future product sales, operating expenses, and operating income (loss) before interest and taxes. The Company has determined its reportable segments to be ‘InMed Pharma’ and ‘BayMedica Commercial’ based on the information used by the CODM.

Previous wording

Research and development and patents expenses decreased by $0.3 million in the InMed Pharma segment, or 29%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The decrease in research and development and patents expenses was due to the Company no longer being engaged in clinical trials resulting in lower research supplies and external contractor fees, as well as lower personnel costs. However, we expect our research and development expenses to increase significantly in future periods as we continue to implement our business strategy.

Current wording

Research and development and patents expenses decreased by $508,000 in our ‘InMed Pharma’ segment, or 40%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The decrease in research and development and patents expenses was due primarily to a decrease in external contractors, patent fees, and compensation. This was offset by an increase in research supplies. However, we expect our research and development expenses to increase significantly in future periods as we move closer towards clinical trials which will result in higher costs related studies, drug supplies, and increased regulatory requirements, as we continue to implement our business strategy.

Previous wording

Comparison of the three months ended March 31, 2024 and 2023 for the InMed Pharma Segment

Current wording

Comparison of the three months ended September 30, 2024 and 2023 for the ‘BayMedica Commercial’ Segment

Previous wording

Sales increased by $0.1 million, or 13%, to $1.2 million in the BayMedica Commercial segment for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. While sales increased year over year, revenue tends to fluctuate from quarter to quarter. The changes in revenue can be attributed mainly to distributor order patterns. While we are generally optimistic about the long-term growth potential in the rare cannabinoids sector, we expect revenue fluctuations to continue in future quarters. BayMedica Commercial 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 higher margins, where BayMedica Commercial continues to hold a strong competitive position.* *

Current wording

Sales increased by $363,000 in our ‘BayMedica Commercial’ segment, or 40%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The increase in 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.

Previous wording

Cost of goods sold increased by $0.04 million, or 5%, to $0.9 million in our BayMedica Commercial segment for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase in cost of goods sold is the direct result of an increase in BayMedica Commercial sales.

Current wording

Cost of goods sold decreased by $110,000 in our ‘BayMedica Commercial’ segment, or 12%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The decrease in cost of goods sold is primarily the result of decrease in write-down of inventories to net realizable value.

Previous wording

Since our inception, we have only generated limited revenue from product sales, no sales from any other sources and have incurred significant operating losses and negative cash flows from our operations. We have only commenced commercial sales with the acquisition of BayMedica and have not yet commercialized any of our Product Candidates and we do not expect to generate revenue from sales of any Product Candidates for several years, if at all. We have funded our operations to date primarily with proceeds from the sale of our common shares.

Current wording

Since our inception, we have incurred significant operating losses, generated limited revenue from product sales, and no sales from any other sources, and have negative cash flows from our operations. We have not yet commercialized any of our Product Candidates and we do not expect to generate revenue from sales of any Product Candidates for several years, if at all. We have funded our operations to date primarily with proceeds from the sale of our Common Shares.

Previous wording

As of March 31, 2024, we had cash, cash equivalents and short-term investments of $7.6 million.

Current wording

As of September 30, 2024, we had cash, cash equivalents and short-term investments of $5.6 million.

Previous wording

During the nine months ended March 31, 2023 we used cash in operating activities of $6.6 million, primarily resulting from our net loss of $7.6 million combined with changes in working capital and non-cash expenses contributed to net cash used in operating activities.

Current wording

During the three months ended September 30, 2024, we used cash in operating activities of $1.8 million, primarily resulting from our net loss of $1.7 million combined with $328,000 used in changes in our non-cash working capital, partially offset by non-cash share-based compensation expenses and inventory write-down.

Previous wording

During the nine months ended March 31, 2024, we used cash in operating activities of $5.9 million, primarily resulting from our net loss of $5.7 million combined with changes in working capital and non-cash expenses contributed to net cash used in operating activities.

Current wording

During the three months ended September 30, 2023, we used cash in operating activities of $2.2 million, primarily resulting from our net loss of $2.5 million combined with changes in our working capital and non-cash expenses contributed to net cash used in operating activities.

Previous wording

During the nine months ended March 31, 2024, cash provided by investing activities of less than $0.01 million resulted from the purchases of property and equipment.

Current wording

During the three months ended September 30, 2024, cash used in investing activities of $0 resulted from the purchases and sale of short-term investments.

Previous wording

During the nine months ended March 31, 2023, cash used in investing activities of $0.6 million resulted from escrow payments made to BayMedica’s historical equity and convertible debt holders, and the payment of a deposit on equipment.

Current wording

During the three months ended September 30, 2023, cash used in investing activities of $0.

Previous wording

During the nine months ended March 31, 2024, cash provided by financing activities of $4.7 million consisted of $5.2 million in gross proceeds derived from the 2023 Private Placement, offset by total transaction costs of $0.5 million.

Current wording

During the three months ended September 30, 2024, cash provided by financing activities of $838,000 consisted of $1.0 million in gross proceeds derived from the ATM, offset by total transaction costs of $192,000.

Previous wording

We expect our expenses to increase substantially in connection with our ongoing research and development activities, particularly as we continue the research and development of and the clinical trials for our Product Candidates. In addition, we expect to incur additional costs associated with operating as a US-listed public company and associated with any required investment into the Company’s research and development efforts targeting small molecule drug candidates. As a result, we expect to incur substantial operating losses and negative operating cash flows for the foreseeable future.

Current wording

We expect our expenses to increase substantially in connection with our ongoing research and development activities, particularly as we continue the research and development of and the clinical trials for our Product Candidates. In addition, we expect to incur additional costs associated with operating as a US-listed public company and associated with any required investment into BayMedica’s research and development efforts targeting cannabinoid analogs. As a result, we expect to incur substantial operating losses and negative operating cash flows for the foreseeable future.

Previous wording

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), we have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

Current wording

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 unaudited condensed consolidated financial statements are issued.

Previous wording

Through March 31, 2024, we have funded our operations primarily with proceeds from the sale of our common shares. We have incurred recurring losses and negative cash flows from operations since its inception, including net losses of $5.7 million for the nine months ended March 31, 2024. In addition, we have an accumulated deficit of $107.1 million as of March 31, 2024.

Current wording

Through September 30, 2024, we funded our operations primarily with proceeds from the sale of our Common Shares. We have incurred recurring losses and negative cash flows from operations since its inception, including net losses of $1.7 million and $2.5 million for the three months ended September 30, 2024 and 2023, respectively. In addition, we have an accumulated deficit of $110.8 million as of September 30, 2024.

Previous wording

As of the issuance date of the condensed consolidated financial statements, we expect our cash, cash equivalents, and short-term investments of $7.6 million as of March 31, 2024, will be sufficient to fund our operating expenses and capital expenditure requirements into the fourth quarter of calendar year 2024 depending on the level and timing of realizing BayMedica revenues from the sale of Products in the Health & Wellness sector as well as the level and timing of our operating expenses. Our future viability is dependent on our ability to raise additional capital to finance our operations. In addition, there are a number of uncertainties in estimating our operating expenses and capital expenditure requirements, including the impact of potential acquisitions.

Current wording

As of the issuance date of the consolidated annual financial statements, the Company expects its cash, cash equivalents and short-term investments of $5.6 million as of September 30, 2024 will be sufficient to fund its operating expenses and capital expenditure requirements through the end of the first quarter of calendar 2025, depending on the level and timing of realizing BayMedica revenues from the sale of bulk rare cannabinoids in the health and wellness sector, as well as the level and timing of Company operating expenses. The future viability of the Company is dependent on its ability to raise additional capital to finance its operations. The Company has concluded that there is substantial doubt about its ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are issued.

Previous wording

We expect to continue to seek additional funding through equity financings, debt financings or other capital sources, including collaborations with other companies, government contracts or other strategic transactions. We may not be able to obtain financing on acceptable terms, if at all. The terms of any financing may materially and adversely affect the holdings or the rights of our existing equityholders.

Current wording

We expect to continue to seek additional funding through equity financings, debt financings or other capital sources, including collaborations with other companies, government contracts or other strategic transactions. We may not be able to obtain financing on acceptable terms, or at all. The terms of any financing may adversely affect the holdings or the rights of our existing shareholders.

Previous wording

Our funding requirements, and the timing and amount of our operating expenditures will depend largely on:

Current wording

Our funding requirements and timing and amount of our operating expenditures will depend largely on:

Previous wording

A change in the outcome of any of these, or other variables with respect to the development of any of our Products and Product Candidates, could significantly and materially change the costs and timing associated with their development. We anticipate that we will need to continue to rely on additional financings to achieve our business objectives.

Current wording

A change in the outcome of any of these, or other variables with respect to the development of any of our Products and Product Candidates, could significantly change the costs and timing associated with their development. We will need to continue to rely on additional financing to achieve our business objectives.

Previous wording

In addition to the variables described immediately 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 and safeguarding our intellectual property rights, and regulatory protection, in addition to other commercial-related costs. We cannot reasonably estimate these costs at this time.

Current wording

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.

Previous wording

Until such time, if ever, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements. We currently have no credit facility or committed sources of capital. To the extent that we raise additional capital through the future sale of our equity securities, the equity of our common shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that could materially and adversely affect the rights of our existing common shareholders. If we raise additional funds through the issuance of debt securities, these securities could contain covenants that would restrict our operations. We may require additional capital beyond our currently anticipated amounts, and additional capital may not be available on reasonable terms, or at all. If we raise additional funds through collaboration arrangements or other strategic transactions in the future, we may have to relinquish valuable rights to our technologies, future revenue streams, Products or Product Candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, if at all, we may be required to materially 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.

Current wording

Until such time, if ever, as we can generate substantial revenues from either our Products or Product Candidates, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements. We currently have no credit facility or committed sources of capital. To the extent that we raise additional capital through the future sale of equity securities, the ownership interests of our shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common shareholders. If we raise additional funds through the issuance of debt securities, these securities could contain covenants that would restrict our operations. We may require additional capital beyond our currently anticipated amounts, and additional capital may not be available on reasonable terms, or at all. If we raise additional funds through collaboration arrangements or other strategic transactions in the future, we may have to relinquish valuable rights to our technologies, future revenue streams, Products or Product Candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate development or future commercialization efforts or grant rights to develop and market Products or Product Candidates that we would otherwise prefer to develop and market ourselves.

Previous wording

During the periods presented in this Quarterly Report, we did not have, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations promulgated by the SEC.

Current wording

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 promulgated by the SEC.

Previous wording

Our significant accounting policies are described in Note 2 of the unaudited condensed consolidated financial statements included in this Quarterly Report. The estimates will require us to rely upon assumptions that were highly uncertain at the time the accounting estimates are made, and changes in them are reasonably likely to occur from period to period. Changes in estimates used in these and other items could have a material impact on our financial statements in the future. Our estimates will be based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business prospects. Actual results may differ significantly from our estimates. For detailed information regarding our critical accounting policies and estimates, see our financial statements and notes thereto included in this Quarterly Report and in the 2023 Annual Report. There have been no material changes to our critical accounting policies and estimates from those disclosed in the 2023 Annual Report.

Current wording

Our significant accounting policies are described in Note 2 of the Financial Statements. The estimates will require us to rely upon assumptions that were highly uncertain at the time the accounting estimates are made, and changes in them are reasonably likely to occur from period to period. Changes in estimates used in these and other items could have a material impact on our financial statements in the future. Our estimates will be based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business prospects. Actual results may differ significantly from our estimates. For detailed information regarding our critical accounting policies and estimates, see our financial statements and notes thereto included in this Report and in our 2024 Annual Report. There have been no material changes to our critical accounting policies and estimates from those disclosed in our 2024 Annual Report.