UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-39685

INMED PHARMACEUTICALS INC.

(Exact name of registrant as specified in its charter)

British Columbia, Canada		98-1428279
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Suite 1445 - 885 W. Georgia Street,

Vancouver, B.C.

Canada

V6C 3E8

(Address of Principal Executive Offices)

(Zip Code)

(604) 669-7207

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Shares, no par value		INM		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes ☐ No ☒

On February 9, 2026, there were 2,919,186 shares of the registrant’s common shares, no par value (the “Common Shares”), outstanding.

InMed Pharmaceuticals Inc.

INDEX

		Page
PART I – FINANCIAL INFORMATION		1

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS		1

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		19

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		29

ITEM 4. CONTROLS AND PROCEDURES		29

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS		30

ITEM 1A. RISK FACTORS		30

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		31

ITEM 3. DEFAULTS UPON SENIOR SECURITIES		31

ITEM 4. MINE SAFETY DISCLOSURE		31

ITEM 5. OTHER INFORMATION		31

ITEM 6. EXHIBITS		31

SIGNATURES		32

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of applicable Canadian securities law, which include but are not limited to statements with respect to the Company’s anticipated results and progress of the Company’s operations, research and development in future periods, plans related to its business strategy, and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. We may, in some cases, use words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “will”, “would”, and similar expressions that convey uncertainty of future events or outcomes to identify these forward-looking statements. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Some of the important risks and uncertainties that could materially affect forward-looking statements are described further under IA. “Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2025, which was originally filed with the SEC on September 23, 2025 (the “2025 Annual Report”), Item 1A. “Risk Factors” in this Quarterly Report and Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report, and include, but are not limited to, the following:

●

Our ability to stem operating losses and our ability to obtain additional financing to fund our operations;

●

The revenues of BayMedica, LLC (“BayMedica”) and the commercial viability of its product portfolio, as well as the potential material adverse impact of recent legislation in the United States on BayMedica’s commercial business and its inventory of rare, non-intoxicating cannabinoids;

●

Our ability to effectively research, develop, manufacture and commercialize pharmaceutical drug candidates that will treat diseases with high unmet medical needs;

●

The continued optimization of key, proprietary manufacturing approaches and technologies;

●

Our ability to commercialize and, where required, register products in the pharmaceutical R&D programs (“Product Candidates”) and those targeted to the health and wellness sector (“Products”) in the United States and other jurisdictions;

●

Our success in initiating discussions with potential partners for licensing various aspects of our Product Candidates;

●

Our ability to successfully access existing manufacturing capacity via leases with third-parties or to transfer our manufacturing processes to contract manufacturing organizations;

●

Our belief that manufacturing approaches that we are developing are robust and effective and will result in commercially viable yields of cannabinoids and will be a significant improvement upon existing manufacturing platforms;

●

Our ability to successfully scale up our IntegraSyn approach to cannabinoid manufacturing. We have created genetically engineered microbes that produce proprietary enzymes, which are then used to optimize subsequent biotransformation reactions or other cost-effective manufacturing approaches so that it may be a potential manufacturing method in the future which could reduce the need to source active pharmaceutical ingredients (“APIs”) from third-party API manufacturers;

●

The success of the key next steps in our manufacturing approaches, including continuing efforts to diversify the number of products produced, scaling-up the processes to larger vessels and identifying external vendors to assist in the commercial scale-up of the process;

●

Our ability to successfully make determinations as to which research and development programs to continue based on several strategic factors;

●

Our ability to continue to outsource the majority of our research and development activities through scientific collaboration agreements and arrangements with various scientific collaborators, academic institutions and their personnel;

●

The success of work to be conducted under the research and development collaboration between us and various contract development and manufacturing organizations (“CDMOs”);

●

Our ability to develop our therapies through early human testing;

●

Our ability to evaluate the financial returns on various commercialization approaches for our Product Candidates, such as a ‘go-it-alone’ commercialization effort, out-licensing to third parties, or co-promotion agreements with strategic collaborators;

●

Our ability to find a partnership early in the development process for our various programs;

●

Our ability to explore our manufacturing technologies as processes which may confer certain benefits, including cost, yield, speed, or all the above, when pursuing specific types of molecules, and filing a provisional patent application for same;

●

Plans regarding our next steps, options, and targeted benefits of our manufacturing technologies;

●

Our Products being bio-identical to the naturally occurring molecules, and offering superior ease, control and quality of manufacturing when compared to alternative methods;

●

U.S. Food and Drug Administration (“FDA”) regulatory acceptance of Product Candidates for potential use in the pharmaceutical industry;

●

Our ability to successfully file, prosecute and defend patent applications;

●

The potential for any of our patent applications to provide intellectual property protection for us;

●

The termination or renegotiation of our supplier, technology and other material contracts, including the invoking of force majeure or termination clauses, and actual or threatened claims of our failure to comply with any obligations set forth under such contracts;

●

The adequacy of, or gaps in, insurance coverage upon the occurrence of a catastrophic or other material adverse event, as well as our ability to (i) expand our insurance coverage to include the commercial sale of Products and Product Candidates and (ii) secure insurance coverage for shipping and storage of Product Candidates, and clinical trial insurance;

●

Developing patentable New Chemical Entities (“NCE”) which, if issued, will confer market exclusivity to us for the potential development into pharmaceutical Product Candidates, license, partner or sell to interested external parties;

●

Our ability to initiate discussions and conclude strategic partnerships to assist with development of certain programs;

●

Our ability to position ourselves to achieve value-driving, near term milestones for our Product Candidates with limited investment;

●

Our ability to effectively execute our business strategy;

iii

●

The sufficiency of our internal controls, including any exposure arising from the failure to (i) establish and maintain effective internal control over financial reporting in accordance with applicable regulatory requirements, and (ii) fully remediate any material weakness identified with respect to such internal controls;

●

Epidemics, pandemics, global health crises, or other public health events and concerns, and the effectiveness of associated vaccinations and treatments;

●

Consolidation of our competitors and suppliers;

●

Effects of new products and new technology on the market, including with respect to automation and the use of artificial intelligence;

●

The impact of geopolitical, global, regional or local economic and financial market risks and challenges, applicability of foreign laws, including foreign labor and employment laws, foreign tax and customs regimes, and foreign currency exchange rate risk;

●

Political disturbances, geopolitical instability and tensions, or terrorist attacks, and associated changes in global trade policies and economic sanctions, including, but not limited to, in connection with (i) global trade tensions; (ii) the Russo-Ukrainian war and (iii) any impact, effect, damage, destruction and/or bodily harm directly or indirectly relating to the ongoing hostilities in the Middle East;

●

The outcome of any legal proceedings, disputes, claims and administrative proceedings that arise in the ordinary course of our business activities, including our ongoing matter with a third party licensor; and

●

Our failure to satisfy any applicable listing standards, including compliance with the minimum bid price rule, and the actual or threatened delisting of our securities by Nasdaq.

This list is not exhaustive of the factors, events, conditions and circumstances that may affect the forward-looking statements contained in this Quarterly Report. Although we have attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated, or expected. Moreover, new risks regularly emerge, and it is not possible for our management to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements, which differences could be material. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made and are based only on the information available to us at that time. Except as required by law, we disclaim any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. We qualify all of our forward-looking statements by these cautionary statements.

PART I

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

Unaudited Condensed Consolidated Financial Statements of

InMed Pharmaceuticals Inc.

For the Three and Six Months Ended December 31, 2025 and 2024

InMed Pharmaceuticals Inc.

(Expressed in U.S. Dollars)

December 31, 2025

INDEX		Page
Financial Statements

●	Condensed Consolidated Balance Sheets as of December 31, 2025 (unaudited) and June 30, 2025	3
●	Condensed Consolidated Statements of Operations for the Three and Six months Ended December 31, 2025 and 2024 (unaudited)	4
●	Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six months Ended December 31, 2025 and 2024 (unaudited)	5
●	Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2025 and 2024 (unaudited)	6
●	Notes to the Condensed Consolidated Financial Statements	7-18

InMed Pharmaceuticals Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

Expressed in U.S. Dollars

	December 31,			June 30,
	2025			2025
	Unaudited $			$
ASSETS
Current
Cash and cash equivalents		6,954,834			11,075,871
Short-term investments		42,675			43,384
Accounts receivable, net		182,967			465,104
Inventories, net		947,898			961,173
Prepaids and other current assets		660,280			321,747
Total current assets		8,788,654			12,867,279

Non-Current
Property, equipment and ROU assets, net		764,254			992,199
Intangible assets, net		1,538,576			1,620,562
Other assets		100,000			100,000
Total Assets		11,191,484			15,580,040

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities		1,071,871			1,404,283
Current portion of lease obligations		408,122			435,507
Total current liabilities		1,479,993			1,839,790

Non-current
Lease obligations, net of current portion		123,827			305,755
Total Liabilities		1,603,820			2,145,545
Commitments and Contingencies (Note 10)

Shareholders’ Equity
Common shares, no par value, unlimited authorized shares: 2,804,186 and 2,002,186 as of December 31, 2025 and June 30, 2025, respectively, issued and outstanding		92,046,396			91,221,174
Additional paid-in capital		38,405,713			39,322,644
Accumulated deficit		(120,993,014	)		(117,237,892	)
Accumulated other comprehensive income		128,569			128,569
Total Shareholders’ Equity		9,587,664			13,434,495
Total Liabilities and Shareholders’ Equity		11,191,484			15,580,040

The accompanying notes form an integral part of these condensed consolidated financial statements.

InMed Pharmaceuticals Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Expressed in U.S. Dollars

	For the Three Months Ended						For the Six Months Ended
	December 31,						December 31,
	2025			2024			2025			2024
	$			$			$			$
Sales		820,188			1,111,707			1,940,309			2,376,345
Cost of sales		635,994			650,813			1,352,956			1,422,038
Gross profit		184,194			460,894			587,353			954,307

Operating Expenses
Research and development		630,636			895,176			1,212,248			1,595,321
General and administrative		1,621,095			1,718,774			3,153,110			3,211,735
Amortization and depreciation		53,201			53,202			106,403			107,781
Foreign exchange loss (gain)		(18,136	)		47,753			38,858			28,443
Total operating expenses		2,286,796			2,714,905			4,510,619			4,943,280

Other Income (Expense)
Interest and other income		74,379			30,536			168,144			87,630
Finance expense		-			(351,549	)		-			(351,549	)
Loss before income taxes		(2,028,223	)		(2,575,024	)		(3,755,122	)		(4,252,892	)

Tax expense		-			-			-			-
Net loss for the period		(2,028,223	)		(2,575,024	)		(3,755,122	)		(4,252,892	)

Net loss per share for the period
Basic and diluted		(0.51	)		(3.64	)		(0.95	)		(6.43	)
Weighted average outstanding common shares
Basic and diluted		3,954,549			706,546			3,954,549			661,052

The accompanying notes form an integral part of these condensed consolidated financial statements.

InMed Pharmaceuticals Inc.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

For the Three and Six Months Ended December 31, 2025 and 2024

Expressed in U.S. Dollars

	Common Shares					Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income		Total
	#		$			$			$			$		$
Balance July 1, 2025		2,002,186		91,221,174			39,322,644			(117,237,892	)		128,569		13,434,495
Share issuance costs		-		(137,178	)		-			-			-		(137,178	)
Exercise of pre-funded warrants		602,000		722,400			(722,400	)		-			-		-
Loss for the period		-		-			-			(1,726,899	)		-		(1,726,899	)
Share-based compensation		-		-			20,205			-			-		20,205
Balance September 30, 2025		2,604,186		91,806,396			38,620,449			(118,964,791	)		128,569		11,590,623
Exercise of pre-funded warrants		200,000		240,000			(240,000	)		-			-		-
Loss for the period		-		-			-			(2,028,223	)		-		(2,028,223	)
Share-based compensation		-		-			25,264			-			-		25,264
Balance December 31, 2025		2,804,186		92,046,396			38,405,713			(120,993,014	)		128,569		9,587,664

	Common Shares					Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income		Total
	#		$			$			$			$		$
Balance July 1, 2024		445,908		82,784,400			35,368,899			(109,075,759	)		128,569		9,206,109
Private placement		186,361		1,030,063			-			-			-		1,030,063
Share issuance costs		-		(191,824	)		-			-			-		(191,824	)
Exercise of pre-funded warrants		34,700		576,034			(576,034	)		-			-		-
Loss for the period		-		-			-			(1,677,868	)		-		(1,677,868	)
Share-based compensation		-		-			28,964			-			-		28,964
Balance September 30, 2024		666,969		84,198,673			34,821,829			(110,753,627	)		128,569		8,395,444
Private Placement		57,183		396,153			-			-			-		396,153
Share issuance costs		-		(57,632	)		-			-			-		(57,632	)
Loss for the period		-		-			-			(2,575,024	)		-		(2,575,024	)
Share-based compensation		-		-			23,159			-			-		23,159
Balance December 31, 2024		724,152		84,537,194			34,844,988			(113,328,651	)		128,569		6,182,100

The accompanying notes form an integral part of these condensed consolidated financial statements.

InMed Pharmaceuticals Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the Six Months Ended December 31, 2025 and 2024

Expressed in U.S. Dollars

	For the Six Months Ended December 31,
	2025			2024
	$			$
Cash provided by (used in):

Operating Activities
Net loss		(3,755,122	)		(4,252,892	)
Items not requiring cash:
Amortization and depreciation		106,403			107,782
Share-based compensation		45,469			52,123
Amortization of right-of-use assets		208,296			166,277
Inventory write-down		70,000			-
Interest income received on short-term investments		(774	)		(874	)
Unrealized foreign exchange loss		3,250			20,338
Changes in operating assets and liabilities:
Inventories		(56,725	)		140,968
Prepaids and other currents assets		(337,050	)		(166,237	)
Accounts receivable		282,137			90,269
Accounts payable and accrued liabilities		(332,414	)		(282,778	)
Lease obligations		(217,329	)		(203,924	)
Total cash used in operating activities		(3,983,859	)		(4,328,948	)

Investing Activities
Sale of short-term investments		25,156			24,002
Purchase of short-term investments		(25,156	)		(24,002	)
Total cash used in investing activities		-			-

Financing Activities
Proceeds from the private placement		-			1,426,216
Share issuance costs		(137,178	)		(249,456	)
Total cash (used in) provided by financing activities		(137,178	)		1,176,760
Decrease in cash and cash equivalents during the period		(4,121,037	)		(3,152,188	)
Cash and cash equivalents beginning of the period		11,075,871			6,571,610
Cash and cash equivalents end of the period		6,954,834			3,419,422

SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid during the period for:		-			-
Income taxes	$	-		$	-
Interest	$	-		$	-

SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Recognition of Right-of-use asset and corresponding operating lease	$	-		$	187,223

The accompanying notes form an integral part of these condensed consolidated financial statements.

InMed Pharmaceuticals Inc.

Notes to the Condensed Consolidated Financial Statements

1.	CORPORATE INFORMATION AND CONTINUING OPERATIONS

Business

InMed Pharmaceuticals Inc. (“InMed” or the “Company”) was incorporated in the Province of British Columbia on May 19, 1981 under the Business Corporations Act of British Columbia. InMed is a pharmaceutical drug development company with a pipeline of proprietary small molecule drug candidates targeting the treatment of diseases with high unmet medical needs as well as developing proprietary manufacturing approaches to produce and sell bulk rare cannabinoids as ingredients for various market sectors.

The Company’s shares are listed on the Nasdaq Capital Market (“Nasdaq”) under the trading symbol “INM”. InMed’s office and principal place of business is located at Suite 1445, 885 West Georgia Street, Vancouver, B.C., Canada, V6C 3E8.

Going Concern

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), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued.

Through December 31, 2025, the Company has funded its operations primarily with proceeds from the sale of the Company’s common shares. The Company has incurred recurring losses and negative cash flows from operations since its inception, including net losses of approximately $3.8 million and $4.3 million for each of the six months ended December 31, 2025 and 2024. In addition, the Company had an accumulated deficit of approximately $121.0 million as of December 31, 2025. The Company expects to continue to generate operating losses for the foreseeable future.

As of the issuance date of these condensed consolidated quarterly financial statements, the Company expects its cash, cash equivalents and short-term investments of approximately $7.0 million as of December 31, 2025 will be sufficient to fund its operating expenses and capital expenditure requirements into the fourth quarter of calendar 2026, depending on the level and timing of realizing BayMedica revenues from the sale of bulk rare cannabinoids in the health & wellness sector as well as the level and timing of the Company’s 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 condensed consolidated financial statements are issued.

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

In connection with the Company’s assessment of going concern considerations in accordance with Subtopic 205-40, management has determined that the Company’s liquidity condition raises substantial doubt about the Company’s ability to continue as a going concern, which is considered to be for a period of one year from the issuance of these financial statements. These condensed consolidated financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts of classification of liabilities that might result from the outcome of this uncertainty. Such adjustments could be material.

2.	SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles as applied in the United States (“US GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for financial information.

These unaudited condensed consolidated financial statements reflect all adjustments, consisting solely of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods presented. The results of operations for the three and six months ended December 31, 2025 and 2024 are not necessarily indicative of results that can be expected for a full year. These unaudited condensed consolidated 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 year ended June 30, 2025.

Reclassifications

Certain prior year amounts in the condensed 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, shareholders’ equity, net loss or net cash used in operating activities. During the three and six months ended December 31, 2024, the Company reclassed certain prior year costs from research and development to general and administrative.

Use of Estimates

The preparation of financial statements in compliance with US GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the balance sheet date, and the corresponding revenues and expenses for the periods reported. It also requires management to exercise judgment in applying the Company’s accounting policies. In the future, actual experience may differ from these estimates and assumptions. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to these consolidated financial statements are the application of the going concern assumptions, determining the fair value of share-based payments, income tax provisions, write-down of inventories to net realizable value, warrant valuations, and the assumptions used in the determination of research & development accruals.

Actual results could differ significantly from those estimates.

Basis of Consolidation

These condensed consolidated financial statements include the accounts of the Company and its subsidiaries, InMed Pharmaceutical Ltd.; BayMedica, LLC; Biogen Sciences Inc.; and Sweetnam Consulting Inc. Biogen Sciences Inc. and Sweetnam Consulting Inc. are inactive subsidiaries. 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 financial statements.

Foreign Currency

The functional currency of the Company and its subsidiaries is the U.S. Dollar. These condensed 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.

Cash and Cash Equivalents

Cash and cash equivalents include cash-on-hand, demand deposits with financial institutions and other short-term, highly liquid investments with original maturities of three months or less when acquired that are readily convertible to known amounts of cash and subject to an insignificant risk of change in value. As of December 31, 2025 and June 30, 2025, the Company held $4.6 million and $4.5 million, respectively, of cash equivalents in a money market fund that is considered Level 1 in the financial instrument’s hierarchy due to the readily available quoted prices in active markets for identical instruments.

Short-term Investments

Short-term investments include fixed and variable rate guaranteed investment certificates, with terms greater than three months and less than twelve months. Due to the short-term nature of these investments the fair value of the investments approximates the current value. Guaranteed investment certificates are convertible to known amounts of cash and are subject to an insignificant risk of change in value.

Accounts Receivable

Accounts receivable are recorded at invoiced amounts, net of any credit losses. The provision for credit losses 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. During the six months ended December 31, 2025 and 2024, the Company's allowance for credit losses was immaterial.

Concentration of Credit Risk and Other Risks and Uncertainties

At times, cash balances may exceed the Federal Deposit Insurance Corporation or Canadian Deposit Insurance Corporation limits. The Company has not experienced any losses related to these balances. The uninsured cash balance as of December 31, 2025, was $3.9 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.

Concentration of customers

The following table summarizes the information about the Company’s concentration of customers:

	Customer A			Customer B			Customer C			Customer D			Customer E			Customer F			Customer G
Three Months Ended December 31, 2025
Revenues, customer concentration risk		30	%		22	%		*			10	%		*			12	%		19	%

Three Months Ended December 31, 2024
Revenues, customer concentration risk		34	%		33	%		13	%		*			*			*			*

Six months December 31, 2025
Revenues, customer concentration risk		27	%		29	%		*			11	%		*			9	%		19	%

Six months December 31, 2024
Revenues, customer concentration risk		28	%		25	%		17	%		*			12	%		*			*

As of December 31, 2025
Accounts receivable, customer concentration risk		20	%		*			*			11			*			37	%		32	%

Less than 10%.

Impairment of Long-Lived Assets

The Company assesses the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset or assets. If carrying value exceeds the sum of undiscounted cash flows, the Company then determines the fair value of the underlying asset. Any impairment to be recognized is measured as the amount by which the carrying amount of the asset group exceeds the estimated fair value of the asset group. Assets classified as held for sale are reported at the lower of the carrying amount or fair value, less costs to sell.

Fair Value Measurements

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 condensed 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 credit losses.

Financial Liabilities

To determine the fair value of financial instruments, the Company uses the fair value hierarchy for inputs used to measure 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 that 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 December 31, 2025.

Revenue Recognition

The Company recognizes revenue when the Company satisfies the performance obligations under the terms of a contract and control of its products and services is transferred to its customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those products and services. ASC 606, Revenue from Contracts with Customers defines a five-step process to recognize revenue that requires judgment and estimates, including identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract, and recognizing revenue when or as the performance obligation is satisfied.

Revenue consists of manufacturing and distribution sales of bulk rare cannabinoids, which are recognized at a point in time. The Company recognizes revenue when control over the products has been transferred to the customer and the Company has a present right to payment. Sales and other taxes that are required to be remitted to regulatory authorities are recorded as liabilities and excluded from sales. Limited rights of return for claims of damaged or non-compliant products, exist with the Company’s customers.

The Company has elected the practical expedient that allows it to recognize the incremental costs of obtaining a contract as an expense, when incurred, if the amortization period of the asset that the Company otherwise would have recognized is one year or less.

Revenues within the scope of ASC 606 do not include material amounts of variable consideration. Customer payments are generally due in advance of when control is transferred to the customer. Some of our larger customers are eligible for payment terms up to ‘net 30 days’.

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. As of December 31, 2025 and 2024, the Company has 1,150,363 and nil respectively, pre-funded warrants included in the basic earnings (loss) per share. 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 Common Shares that have been excluded from diluted net income (loss) per because their effect was anti-dilutive:

	As of December 31,
	2025		2024
Options		196,561		62,416
Warrants		2,588,847		509,580
		2,785,408		571,996

Share-based Payments

The Company follows the requirements of FASB ASC 718-10-10, Share-Based Payments with regards to stock-based compensation issued to employees and non-employees. The Company has agreements and arrangements that call for stock to be awarded to the employees and consultants at various times as compensation and periodic bonuses. The expense for this stock-based compensation is equal to the fair value of the stock price on the day the stock was awarded multiplied by the number of shares awarded. The Company has a relatively low forfeiture rate of stock-based compensation and forfeitures are recognized as they occur.

The valuation methodology used to determine the fair value of the options issued during the period is the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including the volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the options. Risk-free interest rates are calculated based on continuously compounded risk-free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common Shares and does not intend to pay dividends on its Common Shares in the foreseeable future. The expected forfeiture rate is estimated based on management’s best assessment.

Estimated volatility is a measure of the amount by which InMed’s stock price is expected to fluctuate each year during the expected life of the award. The Company’s calculation of estimated volatility is based on historical stock prices over a period equal to the expected life of the awards.

Segment reporting

The Company’s operations consist of two operating and reportable segments, the Pharma segment and the Commercial segment.

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 these condensed consolidated financial statements as a result of future adoption.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements, which clarifies various topics in the Accounting Standards Codification to improve consistency and address technical corrections. Key improvements include clarifying the calculation of diluted earnings per share (EPS) when a loss from continuing operations exists. The amendments in this update are effective for the Company beginning January 1, 2027 , with early adoption permitted. The Company is assessing the impact of adopting this standard.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow Scope Improvements. This update clarifies the applicability of interim reporting guidance and the form and content of interim financial statements. It also establishes a disclosure principle requiring an entity to disclose material events and changes occurring since the end of the last annual reporting period. ASU 2025-11 is effective for the Company for interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is assessing the impact of adopting this standard.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments — Credit Losses, which provides a practical expedient for estimating expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under Topic 606, Revenue from Contracts with Customers. ASU 2025-05 is effective for annual periods beginning after December 15, 2025 and interim periods within those annual reporting periods and should be applied prospectively, with early adoption permitted. The Company is assessing the impact of adopting this standard.

In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting Comprehensive Income - Expense Disaggregation Disclosures, which requires disclosure, in the notes to financial statements, of specified information about certain costs and expenses. The amendments in this update improve financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. This ASU should be applied on a prospective basis, with retrospective application permitted. The amendments in this update are effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the future effect the adoption of this ASU will have on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disclosure of specific categories meeting a quantitative threshold within the income tax rate reconciliation, as well as disaggregation of income taxes paid by jurisdiction. This ASU, which can be applied either prospectively or retrospectively, is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company has adopted this accounting pronouncement.

INVENTORIES

Inventories consisted of the following:

	December 31, 2025		June 30, 2025
	$		$

Raw materials		-		258,300
Work in process		569,262		26,695
Finished goods		378,636		676,178
Inventories		947,898		961,173

As of December 31, 2025 and June 30, 2025, the Company has an inventory write-down, due to obsolescence, of $208,737. As of December 31, 2025 and June 30, 2025, the Company has $70,000 and $nil respectively, as a valuation allowance to reduce weighted average cost to net realizable value. The total inventory reserve at December 31, 2025 and June 30, 2025 was $278,737 and $208,737, respectively.

During the three and six months ended December 31, 2025, the Company recorded an inventory write-down of $70,000 due to the net realizable value. During the three and six months ended December 31, 2024, the Company recorded an inventory write-down of $nil due to the net realizable value.

INTANGIBLE ASSETS

The following table summarizes the Company’s intangible assets:

	December 31, 2025			June 30, 2025
	$			$

Intellectual property		1,736,420			1,736,420
Patents		1,191,000			1,191,000
Intangible assets		2,927,420			2,927,420
Less: accumulated amortization		(1,388,844	)		(1,306,858	)
Intangible assets, net		1,538,576			1,620,562

Acquired intellectual property is recorded at cost and is amortized on a straight-line basis over 18 years. Acquired patents consist of patents related to the development of cannabinoid analogs. This intangible asset is being amortized over an estimated useful life of 18 years. As at December 31, 2025, the definite-lived intangible assets had a weighted average estimated remaining useful life of approximately 11 years. There was no impairment loss during the three and six months ended December 31, 2025 and 2024.

Amortization expense on intangible assets for the three months ended December 31, 2025 and 2024 was approximately $41,000 and $41,000 respectively. Amortization expense on intangible assets for the six months ended December 31, 2025 and 2024 was approximately $82,000 and $82,000 respectively. The Company expects amortization expense to be incurred over the next five years as follows:

Year ending June 30,	$

2026 (remaining)		81,373
2027		162,746
2028		162,746
2029		162,746
2030		162,746
Thereafter		806,219
Total		1,538,576

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of the following:

	December 31, 2025		June 30, 2025
	$		$

Trade payables		166,752		370,142
Accrued research and development expenses		65,869		73,143
Inventory related accruals		207,403		735
Employee compensation, benefits and related accruals		376,656		490,405
Accrued general and administrative expenses		255,191		469,858
Accounts payable and accrued liabilities		1,071,871		1,404,283

SHARE CAPITAL AND RESERVES

Authorized

As of December 31, 2025, the Company’s authorized share structure consisted of an unlimited number of: (i) Common Shares; and (ii) preferred shares without par value (the “Preferred Shares”). No Preferred Shares were issued and outstanding as of December 31, 2025 and June 30, 2025.

The Company may, from time to time, issue Preferred Shares and may, at the time of issuance, determine the rights, preferences and limitations pertaining to these shares. Holders of preferred shares may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding up of the Company before any payment is made to the holders of Common Shares.

Private Placement

On June 25, 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with the selling shareholder, for the sale and issuance of an aggregate of 1,952,363 common shares (or pre-funded warrants in lieu thereof) at a purchase price of $2.561 per share (or pre-funded warrant in lieu thereof). In addition, the Company agreed to issue the selling shareholder short-term preferred investment options to purchase up to an aggregate of 1,952,363 common shares at an exercise price of $2.436 per share. The foregoing transaction is referred to herein as the Private Placement. On June 26, 2025, the parties consummated the Private Placement. The terms of the Purchase Agreement provided the selling shareholder the option of purchasing the pre-funded warrants in lieu of common shares in such manner as to result in the same aggregate purchase price being paid by the Selling Shareholder to the Company. The Company received gross proceeds of approximately $5.0 million and paid approximately $0.6 million in transaction costs.

The pre-funded warrants have an exercise price of $0.0001 per pre-funded warrant and can be exercised at any time from the date and time of issuance until the pre-funded warrants are exercised in full. The pre-funded warrants had an aggregate relative fair value of $2.9 million at the time of issuance. As of December 31, 2025, 802,000 pre-funded warrants have been exercised since the consummation of the Private Placement.

The preferred investment options issued to the selling shareholder in the Private Placement have an exercise price of $2.436 per share, became exercisable immediately upon issuance and will expire eighteen months from the effective date of the Resale Registration Statement of August 1, 2025. The preferred investment options had an aggregate relative fair value of $2.0 million at the time of their issuance. There were no preferred investment options exercised from the Private Placement as of December 31, 2025.

Concurrently with the Purchase Agreement, the Company and the selling shareholder entered into an Amendment Letter, dated June 24, 2025, or the Existing Investment Option Amendment, to amend 199,115 preferred investment options issued to the selling shareholder on October 24, 2023, or the Existing Investment Options (see below), with an exercise price of $16.60, pursuant to which the Existing Investment Options were amended to be exercisable for 199,115 common shares at a reduced exercise price of $2.436 per share in consideration for the selling shareholder’s participation in the Private Placement and the payment by the selling shareholder to the Company of cash consideration of $0.125 per Existing Investment Option for total cash payment to the Company of $25,000. The expiration date remains April 26, 2029. The inducement contemplated by the Existing Investment Option Amendment is considered a warrant modification due to the changing of the terms of the warrants. The modification had a fair value of $0.1 million as of the date of the Inducement, using a Black-Scholes model, and is recognized as an equity issuance cost in accordance with ASC 718-20-35-3. There were no 2025 Existing Preferred Investment Options exercised as of December 31, 2025.

Standby Equity Purchase Agreement (the “SEPA”)

On December 13, 2024, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, LTD (the “Investor”) to sell up to $10 million in the aggregate of the Company’s Common Shares at any time during the 36-month period following the effective date of the SEPA. During the six months ended December 31, 2025, there were no Common Shares issued under the SEPA. The Company issued 1,208,336 Common Shares for gross proceeds of approximately $6.2 million during the year ended June 30, 2025. This amount has been offset by commitment fees and other SEPA related fees of $0.4 million, since, at the inception of the arrangement, the fees exceeded the fair value of the asset recognized. The SEPA was precluded from equity treatment in accordance with ASC 815-40-25 as the SEPA was not deemed fixed according to the accounting standard.

Under the terms of the SEPA, the Company paid the Investor a one-time structuring fee in the amount of $25,000 in December 2024 and a commitment fee of $0.3 million (an amount equal to 2.50% of the commitment amount), which was paid in cash in equal quarterly installments effective December 2024.

Common Share Warrants

A summary of the Company’s warrant activity and related information for the periods covered were as follows:

	Number of Shares Under Warrants			Weighted Average Exercise Price
Balance as at July 1, 2025		4,541,210		$	3.90
Warrants Granted		-			-
Exercised		(802,000	)		-
Expired/Cancelled		-			-
Warrants Outstanding at December 31, 2025		3,739,210			51.02

Warrants Exercisable at December 31, 2025		3,739,210			51.02

As of December 31, 2025 and June 30, 2025, the warrants exercisable and outstanding have an intrinsic value of $1,368,817 and $8,102,467, respectively, with a weighted average remaining life of 1 year and 2 years, respectively.

7.	SHARE-BASED PAYMENTS

Option Plan Details

On March 24, 2017, and as amended on November 20, 2020, the Company’s shareholders approved: (i) the adoption of a new stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may, from time to time, in its discretion and in accordance with applicable regulatory requirements, grant to directors, officers, employees and consultants of the Company, non-transferable options to purchase Common Shares, provided that the number of Common Shares reserved for issuance will not exceed twenty percent (20%) of the issued and outstanding Common Shares at the date the options are granted (on a non-diluted and rolling basis); and (ii) the application of the Plan to all outstanding stock options of the Company that were granted prior to March 24, 2017 under the terms of the Company’s previous stock option plan. On December 8, 2025 and December 18, 2024, the Company’s Board of Directors approved the reservation of an additional 300,000 and 60,000Common Shares under the Plan, respectively.

As of December 31, 2025 and June 30, 2025, there were 206,127 and 41,278 stock options immediately available for future allocation pursuant to applicable regulatory requirements. The maximum number of options issuable under the terms of the Plan equates to 20% of the then issued and outstanding shares. The option price under each option shall not be less than the closing price on the day prior to the date of grant. All options vest upon terms as set by the Board of Directors, either over time, up to 36 months, or upon the achievement of certain corporate milestones.

The following is a summary of changes in outstanding options from July 1, 2025 to December 31, 2025:

	Number			Weighted Average Exercise Price
Balance at July 1, 2025		61,410		$	32.53
Granted		138,150			1.33
Expired/Forfeited		(2,999	)		244.11
Balance at December 31, 2025		196,561		$	7.35
December 31, 2025:
Vested and exercisable		32,657		$	34.47
Unvested		163,904		$	1.95

Total expenses arising from share-based payment transactions recognized during the three months ended December 31, 2025 and 2024 were $25,564 and $23,159, respectively, of which $16,829 and $13,974, respectively, was allocated to general and administrative expenses, $8,139 and $9,035, respectively, was allocated to research and development expenses, and $296 and $150, respectively, was allocated to Cost of Goods Sold.

Total expenses arising from share-based payment transactions recognized during the six months ended December 31, 2025 and 2024 were $45,469 and $52,123, respectively, of which $29,418 and $31,539, respectively, was allocated to general and administrative expenses, $15,464 and $20,215, respectively, was allocated to research and development expenses, and $586 and $369, respectively, was allocated to Cost of Goods Sold.

Unrecognized compensation cost at December 31, 2025 related to unvested options was $161,372 which will be recognized over a weighted-average vesting period of approximately 1.4 years.

LEASE OBLIGATIONS

The Company is committed to minimum lease payments as follows:

Maturity Analysis	December 31, 2025
	$

Year 1		426,097
Year 2		125,292
Year 3		-
Year 4		-
Year 5		-
More than five years		-
Total undiscounted lease liabilities		551,389
Less: imputed interest		(19,440	)
Present value of lease liabilities		531,949

Less: Current portion of lease liabilities		(408,122	)
Non-current portion of lease liabilities		123,827

On July 29, 2024, the Company entered into a lease agreement for office space in Vancouver, British Columbia. This office occupies approximately 2,243 square feet with a monthly basic rental rate and operating charges of an estimated C$12,296 for the two-year term of the agreement. The Company used an incremental borrowing rate of 7% and recognized a ROU asset and corresponding operating lease liability of $205,201.

On October 5, 2023, BayMedica amended its lease located in South San Francisco, California, in order to extend its lease to May 14, 2027. The Company is obligated to pay $1,295,759 over the three-year period unless terminated before the end of the period. The Company used an incremental borrowing rate of 6.15% and recognized a ROU asset and corresponding operating lease liability of $953,935. The Company can terminate the lease with three months’ written notice and a payment of $187,938.

SEGMENT INFORMATION

The Company reports segment information based on the management approach, which designates the internal reporting used by the Chief Operating Decision Maker (“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 ‘Pharma’ and ‘Commercial’ based on the information used by the CODM. Other than cash, cash equivalents and short-term investments (“Unrestricted cash”) balances, the CODM does not regularly review asset information by reportable segment and, therefore, the Company does not report asset information by reportable segment.

The Pharma segment is largely organized around the research and development of small molecule pharmaceuticals drug candidates and the Commercial segment is largely organized around manufacturing technologies to produce and commercialize bulk rare cannabinoids for sale as ingredients in the health and wellness industry. Total assets held in the Pharma segment as of December 31, 2025 and June 30, 2025 were $9.7 million and $13.7 million, respectively. Total assets as of December 31, 2025 and June 30, 2025, held in the Commercial segment were $1.7 million and $1.9 million, respectively.

The following table presents information about the Company’s reportable segments for the three months ended December 31, 2025 and 2024:

	Three Months Ended December 31,
	2025									2024
	Pharma			Commercial			Total			Pharma			Commercial			Total
	$			$			$			$			$			$

Sales		-			820,188			820,188			-			1,111,707			1,111,707
Cost of sales		-			(635,994	)		(635,994	)		-			(650,813	)		(650,813	)
Research and development		(624,644	)		(5,992	)		(630,636	)		(890,513	)		(4,663	)		(895,176	)
General and Administrative		(1,323,249	)		(297,846	)		(1,621,095	)		(1,358,877	)		(359,897	)		(1,718,774	)
Amortization and depreciation		(52,602	)		(599	)		(53,201	)		(52,603	)		(599	)		(53,202	)
Foreign exchange gain (loss)		18,136			-			18,136			(47,753	)		-			(47,753	)
Interest and other income		74,379			-			74,379			30,536			-			30,536
Finance expense		-			-			-			(351,549	)		-			(351,549	)
Net Income (Loss)		(1,907,980	)		(120,243	)		(2,028,223	)		(2,670,759	)		95,735			(2,575,024	)

The following table presents information about the Company’s reportable segments for the six months ended December 31, 2025 and 2024:

	Six Months Ended December 31,
	2025									2024
	Pharma			Commercial			Total			Pharma			Commercial			Total
	$			$			$			$			$			$

Sales		-			1,940,309			1,940,309			-			2,376,345			2,376,345
Cost of sales		-			(1,352,956	)		(1,352,956	)		-			(1,422,038	)		(1,422,038	)
Research and development		(1,200,102	)		(12,146	)		(1,212,248	)		(1,582,352	)		(12,969	)		(1,595,321	)
General and Administrative		(2,562,307	)		(590,803	)		(3,153,110	)		(2,668,093	)		(543,642	)		(3,211,735	)
Amortization and depreciation		(105,205	)		(1,198	)		(106,403	)		(106,583	)		(1,198	)		(107,781	)
Foreign exchange gain (loss)		(38,858	)		-			(38,858	)		(28,443	)		-			(28,443	)
Interest and other income		168,144			-			168,144			87,630			-			87,630
Finance expense		-			-			-			(351,549	)		-			(351,549	)
Net Income (Loss)		(3,738,328	)		(16,794	)		(3,755,122	)		(4,649,390	)		396,498			(4,252,892	)
Cash and Cash Equivalents		6,739,445			215,389			6,954,834			4,346,193			1,236,846			5,583,039

10.

COMMITMENTS AND CONTINGENCIES

Pursuant to the terms of agreements with various contract research organizations, as of December 31, 2025, the Company is committed for contract research services and materials at a cost of approximately $0.4 million, expected to occur in the twelve months following period.

Pursuant to the terms of agreements with various vendors, as of June 30, 2025, the Company is committed for contract materials and equipment at a cost of approximately $0.6 million, expected to occur in the twelve months following December 31, 2025.

Pursuant to the terms of a certain Technology Assignment Agreement, dated as of May 31, 2017 (the “Technology Agreement”), between the Company and the University of British Columbia (“UBC”), the Company is committed to pay royalties to UBC on certain licensing and royalty revenues received by the Company for biosynthesis of certain drug products that are covered by the Technology Agreement. To date, no payments have been required to be made.

Pursuant to the terms of a certain Collaborative Research Agreement, dated as of December 13, 2018, between the Company and UBC, pursuant to which the Company owns all rights, title and interests in and to any intellectual property, in addition to funding research at UBC, the Company is committed to make a one-time payment upon filing of any PCT patent application arising from the research. To date, one such payment has been made to UBC.

Pursuant to the terms of a certain Contribution Agreement, dated as of November 1, 2018, between the Company and National Research Council Canada, as represented by its Industrial Research Assistance Program (“NRC-IRAP”), under certain circumstances contributions received, including the disposition of the underlying intellectual property developed in part with NRC-IRAP contributions, may become repayable. As of December 31, 2025, there have been no triggering events to cause a repayment.

Short-term investments include guaranteed investment certificates, with one year terms, of $42,675 and $43,384 as of December 31, 2025 and June 30, 2025, respectively, that are pledged as security for a corporate credit card.

In addition to the foregoing, the Company has entered into certain agreements in the ordinary course of operations that may include indemnification provisions, which are common in such agreements. In some cases, the maximum amount of potential future indemnification is unlimited; however, the Company currently holds commercial general liability insurance. This insurance may limit the Company’s overall liability and may enable the Company to recover a portion of any future amounts paid. Historically, the Company has not made any indemnification payments under such agreements, and it believes that the fair value of these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating to these obligations for any period presented.

BayMedica entered into a technology license agreement (“Agreement”) with a third party (the “Licensor”) on February 15, 2021. Under the Agreement, BayMedica agreed to license a proprietary process in the United States where the Licensor has a pending U.S. patent application in exchange for certain annual royalty payments contingent on the net sales of products made using the licensed process. The royalty payments were to be made for the period beginning on the first commercial sale of the licensed product and ending on the later of the expiration of the Licensor’s patent rights or ten years after the first commercial sale of such licensed product.

On April 29, 2025, BayMedica received a letter from the Licensor of its intention to commence arbitration proceedings pursuant to the Agreement together with a Notice of Arbitration (the “Patent License Matter”). The Patent License Matter will be subject to final, binding and non-appealable arbitration under the Arbitration Act, 1991 (Ontario) and determined pursuant to Ontario law.

In its Notice of Arbitration, the Licensor takes the position that the annual royalty payments are not simply required to maintain an exclusive license with respect to the proprietary process, but rather function as guaranteed annual minimum payments that BayMedica must make for the duration of the Agreement regardless of net sales. On the basis of this theory, and this theory alone, the Licensor seeks relief against BayMedica including (a) approximately US $3.4M in annual payments for 2022 through 2024 and (b) a declaration that BayMedica is liable to pay certain annual minimum payments of approximately $2.3M for the remainder of the term of the Agreement. BayMedica disputes the amount owing and to be paid over the duration of the agreement. BayMedica vehemently contests the Licensor’s interpretation of the Agreement and its position in the Patent License Matter, and intends to take all necessary steps to vigorously defend the Patent License Matter.

On January 16, 2026, the Licensor delivered an Amended Notice of Arbitration alleging that BayMedica breached several obligations under the Agreement, including, among other things, failing to ensure sublicensee compliance with reporting obligations under the Agreement, and failing to remit required royalties. On this basis, the Licensor seeks an unspecified quantum of damages for BayMedica’s alleged breach of the Agreement, seeks a declaration that BayMedica has failed to comply with its obligations under the Agreement, including its reporting requirements and requirements in respect of its alleged sublicensees, and an Order for specific performance requiring it to comply with those obligations. BayMedica disputes the amended allegations and denies breaching the Agreement as alleged.

While the Company is not able to predict the outcome of the Patent License Matter, an unfavorable outcome to BayMedica would have a material adverse impact on the Company’s business and financial condition and on BayMedica’s ability to continue operations.

11.

SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date of the filing of these unaudited condensed consolidated financial statements and determined that there have been no events that have occurred that would require adjustments to our disclosures in the condensed consolidated financial statements except for the matters described in Note 10 – Commitments and Contingencies and below.

On January 23, 2026, the Company sold 115,000 common shares, under the SEPA, for gross proceeds of $120,898.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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 “Cautionary Statement 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 2025 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. These forward-looking statements are made as of the date of this Quarterly Report, and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by law.

The following discussion and analysis should be read in conjunction with our audited consolidated financial statements for the year ended June 30, 2025, and the related notes thereto, which have been prepared in accordance with U.S. GAAP. Additionally, the following discussion and analysis should be read in conjunction with our audited consolidated financial statements included in our 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.

All dollar amounts stated herein are in U.S. dollars unless specified otherwise.

Overview

We are a pharmaceutical drug development company with 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 our wholly owned subsidiary, BayMedica, LLC, or 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.

We have sought to focus on the research and development of preferential signaling ligands of CB1 and CB2, and have produced a library of novel, proprietary drug candidates, or Product Candidates. These Product Candidates are patentable new chemical entities, or NCEs, for pharmaceutical development, aimed at targeting diverse clinical indications. Our current potential pharmaceutical pipeline consists of three programs, with drug candidates targeting Alzheimer’s disease, dry Age-Related Macular Degeneration, or dry AMD, and Epidermolysis Bullosa, or EB.

Our 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, or PPAR, signaling pathway. Across multiple preclinical studies, INM-901’s primary mechanism of action is the reduction of neuroinflammation, with statistically significant effects demonstrated in both ex vivo and in vivo models. Additionally, INM-901 targets several other mechanisms of action offering a unique treatment approach targeting several biological pathways associated with Alzheimer’s disease.

Outcomes from our ocular research, based on the proprietary small molecule INM-089, indicate potentially promising neuroprotective effects in the back of the eye, which may lead to the preservation of retinal function. Neuroprotection in dry AMD remains an unmet medical need and a new treatment option may help solve this multifactorial disease.

We have completed a Phase 2 clinical trial of INM-755 (cannabinol) cream studying its safety and efficacy in treating symptoms related to 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. We are also pursuing strategic partnership opportunities for INM-755 in EB and other itch-related skin conditions.

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, we have 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 uses. 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.

Recent Developments

Standby Equity Purchase Agreement (‘SEPA’) Update

At the Company’s 2025 Annual General and Special Meeting, the shareholders voted to approve the potential issuance of 20% or more of the Company’s common shares issued and outstanding as of December 13, 2024, pursuant to the Standby Equity Purchase Agreement with YA II PN, Ltd., as amended on June 13, 2025, pursuant to Nasdaq Listing Rules 5635(d) and 5635(b).

Update on BayMedica’s Commercial Business

Recently, U.S. congressional legislation H.R. 5371, the “Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026” (the “Act”) was signed into law. The Act, in its current form and without further amendment, will have a material negative impact on BayMedica, a subsidiary of the Company. Specifically, certain aspects of BayMedica’s commercial business and its inventory of rare, non-intoxicating cannabinoids would be prohibited under the Act if it comes into force on November 12, 2026, in its current form.

It is unknown to the Company whether the sections of the Act that would impact BayMedica will ultimately go into effect on November 12, 2026, or at all, or if those sections will be replaced, impacted or amended by subsequent acts of U.S. policymakers. The Company supports a balanced, science-based regulatory approach that promotes consumer safety while preserving responsible access to non-intoxicating cannabinoid products.

BayMedica is evaluating alternative options but has not set a timetable for the conclusion of its evaluation, nor has it made any definitive decisions related to any potential alternative options at this time. In the meantime, BayMedica is continuing to sell its inventory of rare, non-intoxicating cannabinoids. Without timely, meaningful changes to the Act, we would need to write-off any inventory that BayMedica is unable to sell prior to the Act becoming effective and take other actions, which could include divesting BayMedica’s commercial business, if possible, pivoting to other manufacturing techniques, if commercially viable, or discontinuing BayMedica’s commercial business, all of which would have a material adverse effect on our business, results of operations and financial condition.

INM-901 Program Updates

December 2025 – InMed announced the successful completion of pharmacokinetic studies in large animal models for its Alzheimer’s disease candidate INM-901. This marked the first preclinical study in which the oral formulation of INM-901 was administered in large animals. The results provide additional data in guiding decisions in the design of a human Phase 1 clinical trial program. In parallel, InMed has completed additional chemistry, manufacturing, and controls development to scale the INM-901 manufacturing process in preparation for Investigational New Drug enabling studies and regulatory interaction with the Food and Drug Administration (“FDA”).

Components of Results of Operations

Revenue

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

Cost of Sales

Cost of sales consist primarily of the purchase price of goods and cost of services rendered, freight costs, warehousing costs, and purchasing costs. Cost of sales also includes production and labor costs for our manufacturing business.

Operating Expenses

Research and Development Expenses

Research and development expenses represent costs incurred by us for the discovery, development, and manufacture of our Products and Product Candidates and include:

●

external research and development expenses incurred under agreements with contract research organizations, CDMOs and consultants;

●

salaries, payroll taxes, employee benefits expenses for individuals involved in research and development efforts;

●

research supplies; and

●

legal and patent office fees related to patent and intellectual property matters.

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

External costs represent a significant portion of our research and development expenses, which we track on a program-by-program basis following the nomination of a development candidate. Our internal research and development expenses consist primarily of personnel-related expenses, including salaries, benefits and stock-based compensation expense. We do not track our internal research and development expenses on a program-by-program basis as the resources are deployed across multiple projects.

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

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the timing and progress of preclinical and clinical development activities;

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the number and scope of preclinical and clinical programs we decide to pursue;

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our ability to raise additional funds necessary to complete preclinical and clinical development and commercialization of our Product Candidates, to further advance the development of our manufacturing technologies, and to develop and commercialize additional Products, if any;

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our ability to maintain our current research and development programs and to establish new ones;

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our ability to establish sales, licensing or collaboration arrangements;

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the progress of the development efforts of parties with whom we may enter into collaboration arrangements;

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the successful initiation and completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;

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the receipt and related terms of regulatory approvals from applicable regulatory authorities;

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the availability of materials for use in production of our Products and Product Candidates;

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our ability to secure manufacturing supply through relationships with third parties or establish and operate a manufacturing facility;

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our ability to consistently manufacture our Product Candidates in quantities sufficient for use in clinical trials;

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our ability to obtain and maintain intellectual property protection and regulatory exclusivity, both in the United States and internationally;

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our ability to maintain, enforce, defend and protect our rights in our intellectual property portfolio;

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the commercialization of our Product Candidates, if and when approved, and of new Products;

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our ability to obtain and maintain third-party payor coverage and adequate reimbursement for our Product Candidates, if approved;

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the acceptance of our Product Candidates, if approved, by patients, the medical community and third-party payors;

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competition with other products; and

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a continued acceptable safety profile of our Product Candidates following receipt of any regulatory approvals.

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

General and Administrative Expenses

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

Amortization and Depreciation

Intangible assets are comprised of intellectual property that we acquired in 2014 and 2015 and trade secrets, product formulation knowledge, 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.

Share-based Payments

Share-based payments is the stock-based compensation expense related to our granting of stock options to employees and others. The fair value, at the grant date, of equity-settled share awards is charged to our loss over the period for which the benefits of employees and others providing similar services are expected to be received. The vesting components of graded vesting employee awards are measured separately and expensed over the related tranche’s vesting period. The amount recognized as an expense is adjusted to reflect the number of share options expected to vest. The fair value of awards is calculated using the Black-Scholes option pricing model, which considers the exercise price, current market price of the underlying shares, expected life of the award, risk-free interest rate, expected volatility and the dividend yield.

Other Income

Other income consists primarily of interest income earned on our cash, cash equivalents and short-term investments.

Results of Operations

We have 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 our Chief Executive Officer and the senior management team, for making decisions and assessing performance as the source of our 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. We have determined our reportable segments to be InMed Pharmaceuticals (“Pharma”) and BayMedica Commercial (“Commercial”) based on the information used by the CODM.

Comparison of the Three Months Ended December 31, 2025 and 2024 for the Pharma Segment

	Three Months Ended December 31,
	2025			2024			Change			% Change
	(in thousands)
Operating expenses:
Research and development		625			891			(266	)		(30	)%
General and administrative		1,323			1,358			(35	)		(3	)%
Amortization and depreciation		52			53			(1	)		(2	)%
Foreign exchange gain (loss)		(18	)		48			(66	)		(138	)%
Total operating expenses		1,982			2,350			(368	)		(16	)%
Interest and other income		74			31			43			139	%
Finance expense		-			(352	)		352			(100	)%
Net loss	$	(1,908	)	$	(2,671	)	$	763			(29	)%

Research and Development Expenses

Research and development expenses decreased by $0.3 million in our Pharma segment, or 30%, for the three months ended December 31, 2025 as compared to the three months ended December 31, 2024. The decrease in research and development expenses was primarily due to a decrease in external contractors and research supplies, offset by an increase in personnel compensation. However, we expect our research and development expenses to increase significantly in future periods as we continue to implement our business strategy.

General and Administrative Expenses

General and administrative expenses decreased by $0.04 million in our Pharma segment, or 3%, for the three months ended December 31, 2025 as compared to the three months ended December 31, 2024. The decrease is primarily due to lower professional fees and investor relations fees. We anticipate general and administrative expenses to remain consistent in future periods.

Finance Expense

Finance expenses decreased by $352,000 in our InMed Pharma segment, for the three months ended December 31, 2025, as compared to the three months ended December 31, 2024. The decrease in finance expenses resulted from the one-time nonrecurring fees relating to instituting the SEPA in December 2024.

Comparison of the Three Months Ended December 31, 2025 and 2024 for the Commercial Segment

	Three Months Ended December 31,
	2025			2024		Change			% Change
	(in thousands)
Sales	$	820		$	1,112	$	(292	)		(26	)%
Cost of sales		636			651		(15	)		(2	)%
Gross profit		184			461		(277	)		(60	)%

Operating expenses:
Research and development		6			5		1			20	%
General and administrative		298			360		(62	)		(17	)%
Amortization and depreciation		1			1		-			-	%
Total operating expenses		305			366		(61	)		(17	)%
Net (loss) income	$	(121	)	$	95	$	(216	)		(227	)%

Sales

Sales decreased by $0.3 million in our Commercial segment, or 26%, for the three months ended December 31, 2025 as compared to the three months ended December 31, 2024. The decline in sales is due to the uncertainty around the synthetic cannabinoid market arising from the changes in the Act , also the Company has lowered the sales price to attract more customers. The Commercial segment 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 the highest margins, where the Commercial segment continues to hold a strong competitive position.

Cost of Sales

Cost of goods sold decreased by less than $0.01 million in our Commercial segment, or 2%, for the three months ended December 31, 2025, as compared to the three months ended December 31, 2024. The decrease in cost of goods sold is primarily the result of the Company lowering its supply chain costs and a decrease in sales offset by a write-down of inventory to net realizable value during the three months ended December 31, 2025.

General and Administrative Expenses

General and administrative expenses decreased by less than $0.1 million in our Commercial segment, or 17%, for the three months ended December 31, 2025 as compared to the three months ended December 31, 2024. The decrease results primarily due to lower professional fees and marketing fees.

Comparison of the Six Months Ended December 31, 2025 and 2024 for the Pharma Segment

	Six Months Ended December 31,
	2025			2024			$ Change			% Change
	(in thousands)
Operating expenses:
Research and development		1,200			1,582			(382	)		(24	)%
General and administrative		2,562			2,668			(106	)		(4	)%
Amortization and depreciation		105			107			(2	)		(2	)%
Foreign exchange loss		39			28			11			39	%
Total operating expenses		3,906			4,385			(479	)		(11	)%
Interest and other income		168			88			80			91	%
Finance expense		-			(352	)		352			(100	)%
Net loss	$	(3,738	)	$	(4,649	)	$	911			(20	)%

Research and Development Expenses

Research and development expenses decreased by $0.4 million in our Pharma segment, or 24%, for the six months ended December 31, 2025 as compared to the six months ended December 31, 2024. The decrease in research and development expenses was primarily due to a decrease in external contractors and research supplies, offset by an increase in personnel compensation. However, we expect our research and development expenses to increase significantly in future periods as we continue to implement our business strategy.

General and Administrative Expenses

General and administrative expenses decreased by $0.1 million in our Pharma segment, or 4%, for the six months ended December 31, 2025 as compared to the six months ended December 31, 2024. The decrease is primarily due to lower professional fees and investor relations fees.

Interest and Other Income

Interest and other income increased by less than $0.1 million in our Pharma segment, or 65% for the six months ended December 31, 2025, as compared to the six months ended December 31, 2024. The increase primarily results from the increase in our average cash on hand during the current year.

Finance Expense

Finance expenses decreased by $0.3 million in our InMed Pharma segment, or 100% for the six months ended December 31, 2025, as compared to the six months ended December 31, 2024. The decrease in finance expenses resulted from the fees incurred pursuant to the SEPA in December 2024.

Comparison of the Six Months Ended December 31, 2025 and 2024 for the Commercial Segment

	Six Months Ended December 31,
	2025			2024		Change			% Change
	(in thousands)
Sales	$	1,940		$	2,376	$	(436	)		(18	)%
Cost of sales		1,353			1,422		(69	)		(5	)%
Gross profit		587			954		(367	)		(38	)%

Operating expenses:
Research and development		12			13		(1	)		(8	)%
General and administrative		591			544		47			9	%
Amortization and depreciation		1			1		-			-	%
Total operating expenses		604			558		46			8	%
Net (loss) income	$	(17	)	$	396	$	413	)		(104	)%

Sales

Sales decreased by $0.4 million in our Commercial segment, or 18%, for the six months ended December 31, 2025 as compared to the three months ended December 31, 2024. The decline in sales is due to uncertainty around the synthetic cannabinoid market from the Act, also the Company has lowered the sales price to attract more customers. The Commercial segment 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 the highest margins, where the Commercial segment continues to hold a strong competitive position.

Cost of Sales

Cost of goods sold decreased by less than $0.1 million in our Commercial segment, or 5%, for the six months ended December 31, 2025 as compared to the six months ended December 31, 2024. The decrease in cost of goods sold is primarily the result of lower sales, along with lower supply chain costs, offset by a write-down of inventory to net realizable value during the six months ended December 31, 2025.

General and administrative expenses

General and administrative expenses increased by less than $0.1 million in our Commercial segment, or 9%, for the six months ended December 31, 2025 as compared to the six months ended December 31, 2024. The increase results primarily due to higher salaries, employee benefits and office expenses.

Liquidity and Capital Resources

Since our inception, we have generated revenue from BayMedica product sales and no sales from any other sources and have incurred significant operating losses and 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 Common Shares.

As of December 31, 2025, we had cash, cash equivalents and short-term investments of $7.0 million.

The following table summarizes our cash flows for each of the periods presented:

(in thousands)	Six Months Ended December 31, 2025			Six Months Ended December 31, 2025
Net cash used in operating activities	$	(3,984	)	$	(4,329	)
Net cash (used in) provided by financing activities		(137	)		1,177
Net increase (decrease) in cash and cash equivalents	$	(4,121	)	$	(3,152	)

Operating Activities

During the six months ended December 31, 2025, we used cash in operating activities of $4.0 million, primarily resulting from our net loss of $3.8 million combined with $0.4 million used in changes in our non-cash working capital, partially offset by non-cash share-based compensation expenses.

During the six months ended December 31, 2024, we used cash in operating activities of $4.3 million, primarily resulting from our net loss of $4.3 million combined with a $0.3 million decrease in changes in our non-cash working capital, partially offset by non-cash share-based compensation expenses and inventory write-down.

Investing Activities

During the six months ended December 31, 2025 and 2024, cash used in investing activities was $nil, respectively.

Financing Activities

During the six months ended December 31, 2025, cash used in financing activities of $0.1 million from share issuance costs.

During the six months ended December 31, 2024, cash provided by financing activities of $1.2 million consisted of $1.4 million in gross proceeds derived from the Amended ATM Agreement, offset by total transaction costs of $250,000.

Funding Requirements

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

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

Through December 31, 2025, 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 $3.8 million. In addition, we have an accumulated deficit of $121.0 million as of December 31, 2025.

As of the issuance date of these condensed consolidated financial statements, we expect our cash, cash equivalents and short-term investments of approximately $7.0 million as of December 31, 2025 will be sufficient to fund our operating expenses and capital expenditure requirements into the fourth quarter of calendar 2026, depending on the level and timing of realizing BayMedica revenues from the sale of bulk rare cannabinoids in the health & wellness sector as well as the level and timing of our operating expenses. Our future viability is dependent on our ability to raise additional capital to finance its operations. We have concluded that there is substantial doubt about our ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued.

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

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

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the scope, progress, results and costs of discovery research, preclinical development, laboratory testing and clinical trials for our Product Candidates;

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the scope, progress, results and costs of development of our manufacturing technologies;

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the number of and development requirements for other Products and Product Candidates that we pursue;

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the costs, timing and outcome of regulatory review of our Product Candidates;

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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;

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the impact of any acquired, or in-licensed, externally developed product(s) and/or technologies;

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our ability to establish and maintain strategic collaborations, licensing or other arrangements, including sales arrangements, and the financial terms of such arrangements;

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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;

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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;

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expansion costs of our operational, financial and management systems and increases to our personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a dual listed company;

●

the costs to obtain, maintain, expand and protect our intellectual property portfolio; and

●

the level and timing of realizing revenues from the BayMedica commercial operations.

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

In addition to the variables described above, if and when any of our Product Candidates successfully complete development, we will incur substantial additional costs associated with regulatory filings, marketing approval, post-marketing requirements, maintaining our intellectual property rights, and regulatory protection, in addition to other commercial costs. We cannot reasonably estimate these costs at this time.

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

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 promulgated by the SEC.

Critical Accounting Estimates and Accounting Policies

Our significant accounting policies are described in Note 2 of the Unaudited condensed consolidated 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 2025 Annual Report. There have been no material changes to our critical accounting policies and estimates from those disclosed in our 2025 Annual Report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and, as such, are not required to provide the information under this Item.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2025. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to its management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2025, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three-month period ended December 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may be subject to various legal proceedings, claims and administrative proceedings that arise in the ordinary course of our business activities. Although the results of the litigation and claims cannot be predicted with certainty, as of the date of this Quarterly Report, with the exception of the Patent License Matter discussed below in which BayMedica, our wholly-owned subsidiary, is involved, we do not believe we are party to any claim, proceeding or litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business. Regardless of the outcomes, however, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

On February 15, 2021, BayMedica entered into an exclusive technology license agreement (the “Agreement”) with a third party (the “Licensor”) pursuant to which it agreed to license a proprietary process in the United States where the Licensor has a pending U.S. patent application in exchange for certain annual royalty payments contingent on the net sales of products made using the licensed process. The royalty payments were to be made for the period beginning on the first commercial sale of the licensed product and ending on the later of the expiration of the Licensor’s patent rights or ten years after the first commercial sale of such licensed product. On April 29, 2025, BayMedica received a letter from the Licensor stating its intention to commence arbitration proceedings pursuant the Agreement, together with a Notice of Arbitration (the “Patent License Matter”). Such arbitration proceedings will be subject to final, binding and non-appealable arbitration under the Arbitration Act, 1991 (Ontario) and determined pursuant to Ontario law. In its Notice of Arbitration, the Licensor takes the position that the annual royalty payments are meant to function as guaranteed annual minimum payments required to be made for the duration of the Agreement regardless of net sales. The Licensor seeks relief against BayMedica including (a) approximately $3.4M in annual payments for the years 2022 through 2024 and (b) a declaration that BayMedica is liable to pay certain guaranteed annual minimum payments of approximately $2.3M for the remainder of the term of the Agreement. BayMedica disputes the amount owing and to be paid over the duration of the agreement. BayMedica vehemently contests the Licensor’s interpretation of the Agreement and its position in the Patent License Matter and intends to take all necessary steps to vigorously defend the Patent License Matter.

Pursuant to Terms of Appointment dated November 12, 2025, BayMedica and the Licensor have appointed an Arbitrator of the Patent License Matter (the “Arbitrator”). On November 13, 2025, BayMedica delivered a Response to Notice of Arbitration. BayMedica disputes the Licensor’s interpretation of the Agreement and denies breaching the Agreement as alleged. BayMedica also asserts that the Licensor’s allegations are statute-barred pursuant to the Limitations Act, 2002.

On November 13, 2025, BayMedica also delivered a Notice of Motion, seeking a summary dismissal of the Patent License Matter on the basis that, among other things, the Licensor’s claim is statute-barred. Pursuant to a Procedural Order dated December 31, 2025, the Arbitrator held that, among other things, BayMedica’s motion shall be heard preliminarily, and has been scheduled for May 6, 2026.

On January 16, 2026, the Licensor delivered an Amended Notice of Arbitration alleging that BayMedica breached several obligations under the Agreement, including, among other things, failing to ensure sublicensee compliance with reporting obligations under the Agreement, and failing to remit required royalties. On this basis, the Licensor seeks an unspecified quantum of damages for BayMedica’s alleged breach of the Agreement, seeks a declaration that BayMedica has failed to comply with its obligations under the Agreement, including its reporting requirements and requirements of its alleged sublicensees, and an Order for specific performance requiring it to comply with those obligations. BayMedica disputes the amended allegations and denies breaching the Agreement as alleged.

While we are not able to predict the outcome of the Patent License Matter, an unfavorable outcome to BayMedica would have a material adverse impact on the Company’s business and financial condition and on BayMedica’s ability to continue operations.

ITEM 1A. RISK FACTORS.

The adoption of H.R. 5371, the “Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans, and Extensions Act, 2026” could materially impact the operations of the Company’s subsidiary, BayMedica.

BayMedica is evaluating alternative options, but has not set a timetable for the conclusion of its evaluation, nor has it made any definitive decisions related to any potential alternative options at this time. In the meantime, BayMedica is continuing to sell its inventory of rare, non-intoxicating cannabinoids. Without timely, meaningful changes to the Act, we would need to write-off any inventory that BayMedica is unable to sell prior to the Act becoming effective and take other actions, which could include divesting BayMedica’s commercial business, if possible, pivoting to other manufacturing techniques, if commercially viable, or discontinuing BayMedica’s commercial business, all of which would have a material adverse effect on our business, results of operations and financial condition.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION.

Rule 10b5-1 Plan and Non-Rule 10b5-1 Trading Arrangement Adoptions, Terminations, and Modifications

During the three months ended December 31, 2025, none of our directors or “officers” (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

ITEM 6. EXHIBITS.

Exhibits

The following exhibits are filed as part of this report:

Exhibit Number		Description
31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended

32.1*		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		Inline XBRL Instance Document.

101.SCH*		Inline XBRL Taxonomy Extension Schema Document.

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	INMED PHARMACEUTICALS INC.
	(Registrant)

Dated: February 11, 2026	By:	/s/ Netta Jagpal
		Chief Financial Officer

SEC Form 10-Q filed by InMed Pharmaceuticals Inc.