DEF: InMed Pharmaceuticals Seeks Shareholder Approval for Potential Share Issuance Under Standby Equity Purchase Agreement

InMed Pharmaceuticals is seeking shareholder approval to potentially issue 20% or more of its common shares under a Standby Equity Purchase Agreement (SEPA) with YA II PN, Ltd. (Yorkville), as required by Nasdaq Listing Rules.

Summary

• InMed Pharmaceuticals is holding a special meeting on June 13, 2025, to seek shareholder approval for the potential issuance of 20% or more of its common shares under a Standby Equity Purchase Agreement (SEPA) with Yorkville.
• The SEPA, entered into on December 13, 2024, allows InMed to sell up to $10 million of common shares to Yorkville over 36 months.
• As of April 29, 2025, InMed has sold $2,455,636 in common shares under the SEPA at an average price of $5.94, leaving $7,544,363 available for issuance.
• The company needs shareholder approval under Nasdaq Listing Rules 5635(b) and 5635(d) because the potential issuance could exceed 20% of the outstanding shares.
• If approved, InMed will have more flexibility to access capital for general corporate purposes, including funding working capital, capital expenditures, and business development.
• Failure to obtain approval may limit InMed's ability to utilize the SEPA and could force the company to seek less advantageous financing options.
• The Board of Directors unanimously recommends a vote FOR the approval of the proposed resolution.

Sentiment

Score: 7

Explanation: The document is primarily informational, outlining a proposed corporate action. The tone is neutral, presenting both the benefits and potential drawbacks of the SEPA. The Board's recommendation to vote FOR the proposal suggests a positive outlook from management's perspective.

Positives

• The SEPA provides InMed with a flexible and reliable source of capital.
• The company controls the timing and amount of any sales of common shares to Yorkville.
• The SEPA can be terminated by InMed with five business days' notice, provided there are no outstanding Advance Notices.
• The Board of Directors believes the SEPA is in the best interests of the company and its shareholders.
• Shareholder approval will provide InMed with greater flexibility to access capital for various corporate purposes.

Negatives

• Issuance of common shares under the SEPA will dilute existing shareholders' ownership.
• The exact magnitude of the dilutive effect cannot be conclusively determined.
• Failure to obtain shareholder approval may limit InMed's ability to utilize the SEPA and could force the company to seek less advantageous financing options.

Risks

• The price of InMed's common shares is subject to market fluctuations, which could affect the number of shares issued under the SEPA.
• The company's ability to utilize the SEPA depends on market conditions and management's assessment of funding needs.
• Failure to obtain shareholder approval could impair InMed's working capital and ability to fund its operations and business development.

Future Outlook

The company anticipates that the SEPA will provide a reliable source of capital for general corporate purposes, including funding working capital, capital expenditures, operating expenses, and business development opportunities.

Management Comments

• Our Board has determined that the SEPA and our ability to issue the Common Shares thereunder in excess of the SEPA Exchange Cap are in the best interests of the Company and its shareholders because the ability to sell Common Shares to Yorkville provides us with a reliable source of capital for general corporate purposes.
• The Board unanimously recommends a vote FOR the approval of the proposed resolution.

Industry Context

Standby Equity Purchase Agreements (SEPAs) are a relatively common financing tool for small-cap and micro-cap companies, particularly in the biotech and pharmaceutical sectors, as they provide access to capital without the need for traditional debt financing or public offerings. These agreements allow companies to draw down funds as needed, offering flexibility but also potentially leading to dilution for existing shareholders.

Comparison to Industry Standards

• Similar to InMed, companies like Aeterna Zentaris and Evofem Biosciences have utilized equity purchase agreements to secure funding.
• These agreements typically involve a commitment from an investor to purchase shares at a discount to the market price, providing the company with a predictable source of capital.
• The discount rate in InMed's SEPA (97% of the lowest daily VWAP) is within the typical range for such agreements.
• The potential dilution from the SEPA is a common concern for shareholders, as seen in other companies utilizing similar financing methods.

Stakeholder Impact

• Shareholders may experience dilution of their ownership if the proposal is approved and Common Shares are issued under the SEPA.
• The company's employees and other stakeholders may benefit from the increased financial flexibility provided by the SEPA.
• The company's ability to fund its operations and business development could be affected by the outcome of the shareholder vote.

Next Steps

• Shareholders will vote on Proposal 1 at the special meeting on June 13, 2025.
• If approved, InMed will have the ability to issue Common Shares in excess of the SEPA Exchange Cap to Yorkville under the terms of the SEPA.
• The company will continue to assess its capital needs and market conditions to determine the timing and amount of any sales of Common Shares to Yorkville.

Key Dates

Keywords

SEPA, Standby Equity Purchase Agreement, Share Issuance, Yorkville, Nasdaq Listing Rules, Shareholder Approval, Dilution, Capital, InMed Pharmaceuticals, Proxy Statement