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 September 30, 2022

☐ 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 310 - 815 W. Hastings Street,

Vancouver, B.C.

Canada

V6C 1B4

(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 ☒

As of November 14, 2022, the registrant had 936,761 common shares, without par value, outstanding.

INDEX

	Page
PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS	1

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	23

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	35

ITEM 4. CONTROLS AND PROCEDURES	35

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS	36

ITEM 1A. RISK FACTORS	36

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	36

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	36

ITEM 4. MINE SAFETY DISCLOSURE	36

ITEM 5. OTHER INFORMATION	36

ITEM 6. EXHIBITS	36

SIGNATURES	37

PART I

ITEM 1. CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS.

Unaudited Condensed Consolidated Interim Financial Statements of

InMed Pharmaceuticals Inc.

For the Three Months Ended September 30, 2022 and 2021

Suite 310 – 815 West Hastings Street

Vancouver, BC, Canada, V6C 1B4

Tel: +1-604-669-7207

InMed Pharmaceuticals Inc.

(Expressed in U.S. Dollars)

September 30, 2022

INDEX		Page

Financial Statements (Unaudited)

●	Condensed Consolidated Interim Balance Sheets	3
●	Condensed Consolidated Interim Statements of Operations and Comprehensive Loss	4
●	Condensed Consolidated Interim Statements of Shareholders’ Equity	5
●	Condensed Consolidated Interim Statements of Cash Flows	6
●	Notes to the Condensed Consolidated Interim Financial Statements	7-19

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

InMed Pharmaceuticals Inc.

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (unaudited)
As at September 30, 2022 and June 30, 2022

Expressed in U.S. Dollars

			September 30,			June 30,
	Note		2022			2022
			$			$
ASSETS
Current
Cash and cash equivalents				9,350,427			6,176,866
Short-term investments				42,125			44,804
Accounts receivable				15,169			88,027
Inventories		4		1,778,523			2,490,854
Prepaids and other assets				356,665			797,225
Total current assets				11,542,909			9,597,776

Non-Current
Property, equipment and ROU assets, net		5		802,369			904,252
Intangible assets, net		6		2,067,922			2,108,915
Other assets				171,130			176,637
Total Assets				14,584,330			12,787,580

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities		7		2,362,190			2,415,265
Current portion of lease obligations		10		404,163			404,276
Deferred revenue				15,700			-
Acquisition consideration payable				500,000			500,000
Total current liabilities				3,282,053			3,319,541

Non-current
Lease obligations		10		294,337			389,498
Total Liabilities				3,576,390			3,709,039

Shareholders’ Equity
Common shares, no par value, unlimited authorized shares:
908,766 (June 30, 2022 - 650,667) issued and outstanding		8		72,671,392			70,718,461
Additional paid-in capital		8, 9		35,170,766			31,684,098
Accumulated deficit				(96,962,787	)		(93,452,587	)
Accumulated other comprehensive income				128,569			128,569
Total Shareholders’ Equity				11,007,940			9,078,541
Total Liabilities and Shareholders’ Equity				14,584,330			12,787,580

Going Concern (Note 1)

Commitments and Contingencies (Note 14)

Related Party Transactions (Note 16)

Subsequent Events (Note 17)

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

InMed Pharmaceuticals Inc.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited)

For the three months ended September 30, 2022 and 2021

Expressed in U.S. Dollars

			Three Months Ended
			September 30
	Note		2022			2021
			$			$

Sales				320,788			-
Cost of sales				235,034			-
Inventory write-down		4		576,772			-
Gross loss				(491,018	)		-

Operating Expenses
Research and development and patents				1,378,653			1,491,252
General and administrative				1,560,477			1,372,867
Amortization and depreciation		5, 6		49,048			28,532
Total operating expenses				2,988,178			2,892,651

Other Income (Expense)
Interest and other income				72,587			5,148
Foreign exchange loss				(96,791	)		(84,112	)
Loss before income taxes				(3,503,400	)		(2,971,615	)

Tax expense				(6,800	)		-
Net loss for the period				(3,510,200	)		(2,971,615	)

Net loss per share for the period
Basic and diluted		11		(4.06	)		(6.17	)
Weighted average outstanding common shares
Basic and diluted		11		865,619			481,902

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

InMed Pharmaceuticals Inc.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)
For the three months ended September 30, 2022 and 2021

Expressed in U.S. Dollars

														Accumulated
								Additional						Other
								Paid-in			Accumulated			Comprehensive
	Note		Common Shares					Capital			Deficit			Income		Total
			#		$			$			$			$		$
Balance June 30, 2021				322,028		60,587,417			21,513,051			(74,852,470	)		128,569		7,376,567
Private placement				35,600		1,459,051			10,540,635			-			-		11,999,686
Share issuance costs				-		(247,336	)		(1,786,831	)		-			-		(2,034,167	)
Agents’ warrants				-		-			739,920			-			-		739,920
Exercise of pre-funded warrants				55,453		1,887,592			(1,887,453	)		-			-		139
Loss for the period				-		-			-			(2,971,615	)		-		(2,971,615	)
Share-based compensation		9		-		-			111,142			-			-		111,142
Balance September 30, 2021				413,081		63,686,724			29,230,464			(77,824,085	)		128,569		15,221,672

														Accumulated
								Additional						Other
								Paid-in			Accumulated			Comprehensive
	Note		Common Shares					Capital			Deficit			Income		Total
			#		$			$			$			$		$
Balance June 30, 2022				650,667		70,718,461			31,684,098			(93,452,587	)		128,569		9,078,541
Private placement		8		90,000		410,376			5,589,570			-			-		5,999,946
Share issuance costs		8		-		(77,242	)		(1,052,101	)		-			-		(1,129,343	)
Agents’ investment options				-		-			451,897			-			-		451,897
Exercise of pre-funded warrants		8		168,099		1,619,797			(1,619,378	)		-			-		419
Loss for the period				-		-			-			(3,510,200	)		-		(3,510,200	)
Share-based compensation		9		-		-			116,680			-			-		116,680
Balance September 30, 2022				908,766		72,671,392			35,170,766			(96,962,787	)		128,569		11,007,940

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

InMed Pharmaceuticals Inc.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (unaudited)

For the three months ended September 30, 2022 and 2021

Expressed in U.S. Dollars

	Note		2022			2021
			$			$
Cash provided by (used in):

Operating Activities
Net loss for the period				(3,510,200	)		(2,971,615	)
Items not requiring cash:
Amortization and depreciation		5, 6		49,048			28,532
Share-based compensation		9		116,680			111,142
Amortization of right-of-use assets				99,460			25,906
Interest income received on short-term investments				(120	)		(23	)
Unrealized foreign exchange loss				2,796			1,262
Inventory write-down		4		576,772			-
Payments on lease obligations				(100,903	)		(17,411	)
Changes in non-cash working capital:
Inventories				135,559			-
Prepaids and other assets				440,560			634,410
Other non-current assets				5,507			6,030
Accounts receivable				72,858			(2,923	)
Accounts payable and accrued liabilities				(159,260	)		(469,227	)
Deferred revenue				15,700			-
Total cash used in operating activities				(2,255,543	)		(2,653,917	)

Investing Activities
Short-term loan				-			(250,000	)
Total cash used in investing activities				-			(250,000	)

Financing Activities
Shares issued for cash		8		6,000,365			11,999,825
Share issuance costs		8		(571,261	)		(1,115,129	)
Total cash provided by financing activities				5,429,104			10,884,696
Increase (decrease) in cash during the period				3,173,561			7,980,779
Cash and cash equivalents beginning of the period				6,176,866			7,363,126
Cash and cash equivalents end of the period				9,350,427			15,343,905

See Note 13 for Non-Cash Transactions

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

INMED PHARMACEUTICALS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED September 30, 2022 AND 2021

(Expressed in U.S. Dollars)

1.	CORPORATE INFORMATION AND CONTINUING OPERATIONS

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 clinical stage pharmaceutical company developing a pipeline of prescription-based products, including rare cannabinoids and novel cannabinoid analogs, targeting the treatment of diseases with high unmet medical needs. The Company also has significant know-how in developing proprietary manufacturing approaches to produce cannabinoids for various market sectors.

The Company’s shares are listed on the Nasdaq Capital Market (“Nasdaq”) under the trading symbol “INM”. InMed’s corporate office and principal place of business is located at #310 – 815 West Hastings Street, Vancouver, B.C., Canada, V6C 1B4.

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 consolidated financial statements are issued.

Through September 30, 2022, the Company has funded its operations primarily with proceeds from the sale of common stock. The Company has incurred recurring losses and negative cash flows from operations since its inception, including net losses of $3.5 million and $3.0 million for the three months ended September 30, 2022 and 2021, respectively. In addition, the Company had an accumulated deficit of $97.0 million as of September 30, 2022 (June 30, 2022 - $93.5 million). The Company expects to continue to generate operating losses for the foreseeable future.

As of the issuance date of these condensed consolidated interim financial statements, the Company expects its cash and cash equivalents of $9.4 million as of September 30, 2022 will be sufficient to fund its operating expenses and capital expenditure requirements into the second half of fiscal 2023, and possibly into the first quarter of fiscal 2024 (being the third calendar quarter of 2023), depending on the level and timing of realizing revenues from the sale of BayMedica inventory as well as the level and timing of the Company operating expenses. The future viability of the Company is dependent on its ability to raise additional capital to finance its operations. As a result of the recurring losses and requirement for cash in fiscal 2023 or the beginning of fiscal 2024, 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 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.

These condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes that the Company will be able to meet its commitments, realize its assets and discharge its liabilities in the normal course. These condensed consolidated interim financial statements do not reflect adjustments to the carrying values of assets and liabilities that would be necessary if the Company was unable to continue as a going concern and such adjustments could be material.

INMED PHARMACEUTICALS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED September 30, 2022 AND 2021

(Expressed in U.S. Dollars)

2.	SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles as applied in the United States (“US GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for financial information. Accordingly, these financial statements do not include all the information and footnotes required for complete financial statements and should be read in conjunction with the audited consolidated financial statements of the Company and the accompanying notes thereto for the year ended June 30, 2022.

These unaudited condensed consolidated interim financial statements reflect all adjustments, consisting solely of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods presented. The results of operations for the three months ended September 30, 2022 and 2021 are not necessarily indicative of results that can be expected for a full year. These unaudited condensed consolidated interim financial statements follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements of the Company for the year ended June 30, 2022.

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

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 estimate of useful life of intangible assets, the application of the going concern assumption, and determining the fair value of share-based payments and warrants.

COVID-19 Impacts

The full extent to which the COVID-19 pandemic may directly or indirectly impact the Company’s business, results of operations and financial condition, including expenses, research and development costs and employee-related amounts, will depend on future developments that are evolving and highly uncertain, such as the duration and severity of outbreaks, including potential future waves or cycles, and the effectiveness of actions taken to contain and treat COVID-19. The Company considered the potential impact of COVID-19 when making certain estimates and judgments relating to the preparation of these consolidated financial statements. While there was no material impact to the Company’s condensed consolidated interim financial statements as of and for the three months ended September 30, 2022, the Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in a material impact to the Company’s consolidated financial statements in future reporting periods.

INMED PHARMACEUTICALS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED September 30, 2022 AND 2021

(Expressed in U.S. Dollars)

2.	SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Recent Accounting Pronouncements Not Yet Adopted

The Company has reviewed recent accounting pronouncements and concluded that they are either not applicable to the Company or that there was no material impact or no material impact is expected in the consolidated financial statements as a result of future adoption.

3.	CUSTOMER CONCENTRATION

The Company had three customers during the three months ended September 30, 2022, which individually generated 10% or more of the Company’s sales. These customers accounted for 78% of the Company’s sales for the three months ended September 30, 2022. There were no outstanding amounts receivable from these customers as at September 30, 2022.

4.	INVENTORIES

Inventories consisted of the following:

	September 30, 2022		June 30, 2022
	$		$

Raw materials		292,577		292,577
Work in process		1,210,261		1,724,851
Finished goods		275,685		473,426
Inventories		1,778,523		2,490,854

During the three months ended September 30, 2022, inventory expensed to cost of goods sold was $235,034 (2021 - $Nil).

During the three months ended September 30, 2022, the write-down of inventories to net realizable value was $576,772 (2021 - $Nil). Contributing factors to the decrease in net realizable value included lower demand and downward pricing pressure.

5.	PROPERTY, EQUIPMENT AND ROU ASSETS, NET

Property, equipment and ROU assets consisted of the following:

	September 30, 2022			June 30, 2022
	$			$

Right-of-Use Assets (leases)		1,167,436			1,167,436
Equipment		212,877			212,877
Leasehold Improvements		40,409			40,409
Property and equipment		1,420,722			1,420,722
Less: accumulated depreciation and amortization		(618,353	)		(516,470	)
Property, equipment and ROU assets, net		802,369			904,252

Depreciation expense on property, equipment and leasehold improvements for the three months ended September 30, 2022, was $8,055 (2021 - $4,217). Amortization expense related to the right-of-use assets for the three months ended September 30, 2022, was $90,244 (2021 - $21,343) and was recorded in general and administrative expenses.

INMED PHARMACEUTICALS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED September 30, 2022 AND 2021

(Expressed in U.S. Dollars)

6.	INTANGIBLE ASSETS

	September 30, 2022			June 30, 2022
	$			$

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 depreciation		(859,498	)		(818,505	)
Intangible assets, net		2,067,922			2,108,915

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 September 30, 2022, the definite-lived intangible assets had a weighted average estimated remaining useful life of approximately 13 years.

Amortization expense on intangible assets for the three months ended September 30, 2022 was $40,993 (2021 - $24,315). The Company expects amortization expense to be incurred over the next five years as follows:

	$

2023		155,778
2024		155,778
2025		155,778
2026		155,778
2027		155,778
		778,890

7.	ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of the following:

	September 30, 2022		June 30, 2022
	$		$

Trade payables		1,096,212		1,166,068
Accrued research and development expenses		956,429		839,638
Employee compensation, benefits and related accruals		249,593		139,120
Accrued general and administrative expenses		59,956		270,439
Accounts payable and accrued liabilities		2,362,190		2,415,265

INMED PHARMACEUTICALS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED September 30, 2022 AND 2021

(Expressed in U.S. Dollars)

8.	SHARE CAPITAL AND RESERVES

Authorized

As at September 30, 2022, the Company’s authorized share structure consisted of: (i) an unlimited number of common shares without par value; and (ii) an unlimited number of preferred shares without par value. No preferred shares were issued and outstanding as at September 30, 2022 and June 30, 2022.

The Company may issue preferred shares and may, at the time of issuance, determine the rights, preference 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.

Common Shares

During the three months ended September 30, 2022, the Company completed the following:

September 2022 Private Placement Offering:

Transaction Description

Number

Issue Price

Total

Shares Issued

90,000

8.680

781,200

Pre-funded Warrants Issued

601,245

8.6799

5,218,746

Gross Proceeds

5,999,946

Allocated to Additional Paid-in Capital

(5,589,570

)

410,376

Share Issuance Costs

(77,242

)

On September 13, 2022, the Company closed a private placement of its common shares and issued an aggregate of 90,000 common shares and 601,245 pre-funded warrants, for gross proceeds of $5,999,946. The pre-funded warrants were determined to be common stock equivalents. Each common share and each pre-funded warrant were sold in the offering with an investment option to purchase a common share. Transaction costs were allocated proportionally between common shares and investment options with $77,242 allocated to common shares and the balance of $1,052,101 allocated to additional paid-in capital and recorded as a component of shareholders’ equity in the consolidated balance sheet. As at September 30, 2022, there were 601,245 pre-funded warrants outstanding.

INMED PHARMACEUTICALS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED September 30, 2022 AND 2021

(Expressed in U.S. Dollars)

8.	SHARE CAPITAL AND RESERVES (cont’d)

Share Purchase Warrants

The following is a summary of changes in share purchase warrants from July 1, 2022 to September 30, 2022:

	Number			Weighted Average Share Price		Aggregate Intrinsic Value
Balance as at June 30, 2022		244,767		$	41.99		-
Cancelled		(179,231	)	$	18.50		-
Balance as at September 30, 2022		65,536		$	106.23		-

The total intrinsic value of warrants exercised during the three months ended September 30, 2022 was $Nil (2021 - $Nil).

Agents’ Warrants

The following is a summary of changes in agents’ warrants from July 1, 2022 to September 30, 2022:

	Number		Weighted Average Share Price		Aggregate Intrinsic Value
Balance as at June 30, 2022		12,109	$	92.91		-
Balance as at September 30, 2022		12,109	$	92.91		-

Preferred Investment Options

On September 13, 2022, 1,382,490 preferred investment options were issued with an exercise price of $8.44 per share, were immediately exercisable upon issuance, and expire 7 years following the date of issuance.

	Number			Weighted Average Share Price		Aggregate Intrinsic Value
Balance as at June 30, 2022		233,100		$	18.50		-
Granted		1,382,490		$	8.44		-
Cancelled		(233,100	)	$	18.50		-
Balance as at September 30, 2022		1,382,490		$	8.44		-

INMED PHARMACEUTICALS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED September 30, 2022 AND 2021

(Expressed in U.S. Dollars)

8.	SHARE CAPITAL AND RESERVES (cont’d)

Agents’ Investment Options

On September 13, 2022, 44,931 preferred investment options were issued for services with an exercise price of $10.85 per share, were immediately exercisable upon issuance, and expire approximately 7 years following the date of issuance.

	Number		Weighted Average Share Price		Aggregate Intrinsic Value
Balance as at June 30, 2022		15,152	$	26.81		-
Granted		44,931	$	10.85		-
Balance as at September 30, 2022		60,083	$	14.88		-

9.	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 Board of Directors may, from time to time, in its discretion and in accordance with 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 new stock option 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.

As at September 30, 2022, there were 20,300 (June 30, 2022 – 18,163) options available for future allocation pursuant to SEC rules and 20% of the issued and outstanding shares according to the terms of the Plan. 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.

Stock options granted prior to May 2021 were granted with Canadian dollar exercise prices (United States dollar amounts for weighted average exercise prices and aggregate intrinsic value are calculated using prevailing rates as at June 30, 2022). Commencing in May 2021, stock options are granted with United States dollar exercise prices.

INMED PHARMACEUTICALS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED September 30, 2022 AND 2021

(Expressed in U.S. Dollars)

9.	SHARE-BASED PAYMENTS (cont’d)

Option Plan Details (cont’d)

The following is a summary of changes in outstanding options from July 1, 2022 to September 30, 2022:

	Number			Weighted Average Exercise Price $
Balance as at June 30, 2022		55,603			128.59
Granted		560			9.75
Expired/Forfeited		(2,697	)		46.62
Balance as at September 30, 2022		53,466			124.74

September 30, 2022:
Vested and exercisable		26,531			212.33
Unvested		26,935			38.46

Fair Value of Options Issued During the Period

Weighted Average Fair Value at Grant Date of Options Granted:

The weighted average fair value at grant date of options granted during the three months ended September 30, 2022, was $6.00 per option (year ended June 30, 2022 - $21.04). Assumptions used for options granted during the three months ended September 30, 2022 included a weighted average risk-free interest rate of 3.59% (year ended June 30, 2022 – 1.17%), weighted average expected life of 3.3 years calculated using the Simplified Method for directors, officers and employees, weighted average volatility factor of 91.61% (year ended June 30, 2022 – 97.15%), weighted average dividend yield of 0% (year ended June 30, 2022 – 0%) and a 5% forfeiture rate (year ended June 30, 2022 – 5%).

ii)

Expenses Arising from Share-based Payment Transactions:

Total expenses arising from share-based payment transactions recognized during the three months ended September 30, 2022, were $116,681 (2021 - $111,142). $65,072 was allocated to general and administrative expenses (2021 - $81,009) and the remaining $51,609 was allocated to research and development expenses (2021 - $30,133). Unrecognized compensation cost at September 30, 2022 related to unvested options was $154,239 which will be recognized over a weighted-average vesting period of 0.8 years.

INMED PHARMACEUTICALS INC.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED September 30, 2022 AND 2021

(Expressed in U.S. Dollars)

10.

LEASE OBLIGATIONS

The Company is committed to minimum lease payments as follows:

Maturity Analysis	September 30, 2022
	$

Less than one year		338,135
One to five years		200,655
More than five years		-
Total undiscounted lease liabilities⁽¹⁾		538,790

⁽¹⁾	Excludes estimated variable operating costs of $92,964 and $57,274 on an annual basis through to April 30, 2024 and August 31, 2024, respectively.

11.

BASIC AND DILUTED LOSS PER SHARE

Basic loss per share amounts are calculated by dividing the net loss for the period by the weighted average number of ordinary shares outstanding during the period. The pre-funded warrants were determined to be common stock equivalents and have been included in the weighted average number of shares outstanding for calculation of the basic earnings per share number. As the outstanding stock options and warrants are anti-dilutive, they are excluded from the weighted average number of common shares in the table below.

	Three Months Ended
	September 30,
	2022			2021
	$			$

Net loss for the period		(3,510,200	)		(2,971,615	)
Basic and diluted loss per share		(4.06	)		(6.17	)
Weighted average number of common shares - basic and diluted		865,619			481,902

12.

SEGMENT INFORMATION

The following table presents information about the Company’s reportable segments for the three months ended September 30, 2022 and 2021:

	Three Months Ended September 30,
	2022									2021
	InMed			BayMedica			Total			InMed			BayMedica		Total
	$			$			$			$			$		$

Sales		-			320,788			320,788			-			-		-
Operating expenses		2,268,831			1,562,157			3,830,988			2,971,615			-		2,971,615
Net loss		(2,268,831	)		(1,241,369	)		(3,510,200	)		(2,971,615	)		-		(2,971,615	)
Unrestricted cash		9,227,828			122,599

SEC Form 10-Q filed by InMed Pharmaceuticals Inc.