| SIGNIFICANT ACCOUNTING POLICIES | 2. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation These unaudited condensed consolidated interim financial statements
have been prepared in accordance with generally accepted accounting principles as applied in the United States (“U.S. GAAP”)
and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for financial information.
Accordingly, these financial statements do not include all the information and footnotes required for complete financial statements and
should be read in conjunction with the audited consolidated financial statements of the Company and the accompanying notes thereto for
the fiscal These unaudited condensed consolidated interim financial statements
reflect all adjustments, consisting solely of normal recurring adjustments, which, in the opinion of management, are necessary for a fair
presentation of results for the interim periods presented. The results of operations for the three months ended September 30, 2023 and
2022 are not necessarily indicative of results that can be expected for a full year. These unaudited condensed consolidated interim financial
statements follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements
of the Company for the fiscal Reclassifications Certain prior year amounts in the consolidated financial statements
and the notes thereto have been reclassified where necessary to conform to the current year’s presentation. These reclassifications
did not affect the prior period’s total assets, total liabilities, stockholders’ deficit, net loss or net cash used in operating
activities. During the three months ended September 30, 2023, we adopted a change in presentation on our consolidated statements of operations
loss in order to include foreign exchange loss in operating expenses. Prior periods have been revised to reflect this change in the presentation. Use of Estimates The preparation
of financial statements in compliance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount
of assets and liabilities as of the balance sheet date, and the corresponding revenues and expenses for the periods reported. It also
requires management to exercise judgment in applying the Company’s accounting policies. In the future, actual experience may differ
from these estimates and assumptions. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates
are significant to these consolidated financial statements are the estimate of useful life of intangible assets, the application of the
going concern assumption, determining the fair value of share-based payments, income tax provisions, write-down of inventories to net
realizable value, and warrant valuations. Actual results
could differ from those estimates. Basis
of Consolidation These
condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries, including subsidiaries:
InMed Pharmaceutical Ltd., BayMedica, LLC, Biogen Sciences Inc., and Sweetnam Consulting Inc. A subsidiary is an entity that the Company
controls, either directly or indirectly, where control is defined as the power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities. All inter-company transactions and balances including unrealized income and expenses arising
from intercompany transactions are eliminated in preparing these condensed consolidated interim financial statements. Foreign
Currency The
functional currency of the Company and its subsidiaries is the U.S. Dollar. These consolidated financial statements are presented in U.S.
Dollars. References to “$” and “US$” are to United States (“U.S.”) dollars and references to “C$”
are to Canadian dollars. Accounts Receivable Accounts receivable
are recorded at invoiced amounts, net of any allowance for doubtful accounts. The allowance for doubtful accounts is the Company’s
best estimate of the amount of probable credit losses in existing accounts receivable. The Company evaluates
the collectability of accounts receivable on a regular basis based upon various factors including the financial condition and payment
history of customers, an overall review of collections experience on other accounts and economic factors or events expected to affect
future collections experience. Expected credit losses on our accounts receivable were $66,775 as of September 30, 2023 and June 30, 2023. Inventories Inventories
are initially valued at weighted average cost and subsequently valued at the lower of weighted average cost and net realizable value.
Costs included in inventories are the purchase price of goods and cost of services rendered, freight costs, warehousing costs, purchasing
costs, and production and labor costs related to manufacturing. In
determining any valuation allowances, the Company reviews inventory for obsolete, redundant, and slow-moving goods. As of September 30,
2023 and June 30, 2023, the Company has $186,750 and $93,820 respectively, as a valuation allowance to reduce weighted average
cost to net realizable value. During the three months ended September 30, 2023 and 2022, the Company recorded an inventory write-down
of $92,930 and $576,772 respectively. Cost
of Sales Cost
of sales consists primarily of the purchase price of goods and cost of services rendered, freight costs, warehousing costs, and purchasing
costs. Cost of sales also includes production and labor costs for the Company’s manufacturing business. Concentration of Credit Risk
and Other Risks and Uncertainties At times, cash balances may exceed the Federal Deposit Insurance Corporation
(“FDIC”) or Canadian Deposit Insurance Corporation (CDIC) insurable limits. The Company has not experienced any losses related
to these balances. The uninsured cash balance as of September 30, 2023, was $2.9 million. The Company does not believe it is exposed to
significant credit risk on cash and cash equivalents. The Company’s
customers are primarily concentrated in the United States. As of September 30,
2023, the Company had three customers with an accounts receivable balance representing 35%, 22% and 11% of total accounts receivable,
respectively. As of June 30, 2023, we had three customers with an accounts receivable balance representing 41%, 30% and 15% of total accounts
receivable. For the three
months ended September 30, 2023, the Company had three customers that accounted for 34%, 20% and 11% of revenue, respectively. For the
three months ended September 30, 2022, the Company had three customers that accounted for 43%, 22% and 12% of revenue, respectively. Financial Assets and Liabilities Financial Assets Financial assets
are initially recognized at fair value, plus transaction costs that are directly attributable to their acquisition or issue and subsequently
carried at amortized cost, using the effective interest rate method, less any impairment losses. No financial assets are or elected to
be carried at fair value through profit or loss or where changes in fair value are recognized in the consolidated statements of operations
and comprehensive loss in other comprehensive loss. Short-term investments
are subsequently recorded at cost plus accrued interest, which approximates fair value due to short term nature. Accounts receivable are
reported at outstanding amounts, net of provisions for uncollectable amounts. Financial Liabilities To determine the fair value of financial instruments, the Company uses
the fair value hierarchy for inputs used to measure the fair value of financial assets and liabilities. This hierarchy prioritizes the
inputs to valuation techniques used to measure fair value into three levels: Level 1 (highest priority), Level 2, and Level 3 (lowest
priority).
Level 1 – Unadjusted quoted prices in active markets for identical instruments.
Level 2 – Inputs other than quoted prices included within Level 1 are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 – Inputs are unobservable and reflect the Company’s assumptions as to what market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available. Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The carrying value
of cash and cash equivalents, short-term investments, accounts receivable, and accounts payable and accrued liabilities, approximate their
carrying values as at September 30, 2023 and June 30, 2023 due to their immediate or short-term maturities. Earnings (Loss) Per Share Basic earnings
(loss) per common share (“EPS”) is computed by dividing the net income or loss applicable to common shares of the Company
by the weighted average number of common shares outstanding for the relevant period. Diluted earnings (loss) per common share (“Diluted
EPS”) is computed by dividing the net income or loss applicable to common shares by the sum of the weighted average number of common
shares issued and outstanding and all additional common shares that would have been outstanding, if potentially dilutive instruments were
converted. If the conversion of outstanding stock options and warrants into common share is anti-dilutive, then Diluted EPS is not presented
separately from EPS. The
following table sets forth the number of potential shares of common stock that have been excluded from diluted net income (loss) per because
their effect was anti-dilutive:
As of September 30,
2023 2022
Options 102,133 53,466
Warrants 3,516,529 1,520,218
3,618,662 1,573,684 Recent Accounting Pronouncements
The Company has
reviewed recent accounting pronouncements and concluded that they are either not applicable to the Company or that there was no material
impact or no material impact is expected in the consolidated financial statements as a result of future adoption. |
