InMed Pharmaceuticals Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Financial Statements of InMed Pharmaceuticals Inc. For the Years Ended June 30, 2025 and 2024 F- 1 InMed Pharmaceuticals Inc. (Expressed in U.S. Dollars) June 30, 2025 INDEX Page Consolidated Financial Statements ● Report of Independent Registered Public Accounting Firm (PCAOB Firm ID 199 ) F-3 ● Report of Independent Registered Public Accounting Firm (PCAOB Firm ID 688) F-4 ● Consolidated Balance Sheets F-5 ● Consolidated Statements of Operations F-6 ● Consolidated Statements of Shareholders’ Equity F-7 ● Consolidated Statements of Cash Flows F-8 ● Notes to the Consolidated Financial Statements F-9 F- 2 Report of Independent Registered Public Accounting Firm   To the Stockholders and Board of Directors of InMed Pharmaceuticals Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of InMed Pharmaceuticals Inc. (the “Company”) as of June 30, 2025, the related consolidated statements of operations, changes in shareholders’ equity and cash flows for the year ended June 30, 2025 , and the related notes (collectively referred to as the “financial statements”). In our opinion, , the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2025, and the results of its operations and its cash flows for the year ended June 30, 2025, in conformity with accounting principles generally accepted in the United States of America. Explanatory Paragraph – Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ CBIZ CPAs P.C. CBIZ CPAs P.C. We have served as the Company’s auditor since 2025 New York, NY September 22, 2025 F- 3 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of InMed Pharmaceuticals Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of InMed Pharmaceuticals Inc. (the “Company”) as of June 30, 2024, the related consolidated statements of operations, changes in shareholders’ equity and cash flows for the year ended June 30, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2024, and the results of its operations and its cash flows for the year ended June 30, 2024, in conformity with accounting principles generally accepted in the United States of America. Explanatory Paragraph – Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has incurred recurring losses and negative cash flows and has an accumulated deficit that raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit s . We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ Marcum LLP Marcum LLP We have served as the Company’s auditor from 2023 through 2025. New York, NY September 27, 2024, except for the effects of Note 14, Reverse Stock Split, as to which the date is July 31, 2025 F- 4 InMed Pharmaceuticals Inc. CONSOLIDATED BALANCE SHEETS Expressed in U.S. Dollars June 30, June 30, 2025 2024 $ $ ASSETS Current Cash and cash equivalents 11,075,871 6,571,610 Short-term investments 43,384 43,064 Accounts receivable (less provision for credit losses of $ 2,424 and $ nil as of June 30, 2025 and 2024, respectively) 465,104 352,838 Inventories, net 961,173 1,244,324 Prepaids and other current assets 321,747 477,749 Total current assets 12,867,279 8,689,585 Non-Current Property, equipment and ROU assets, net 992,199 1,249,999 Intangible assets, net 1,620,562 1,783,198 Other assets 100,000 100,000 Total Assets 15,580,040 11,822,782 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities 1,404,283 1,654,011 Current portion of lease obligations 435,507 317,797 Total current liabilities 1,839,790 1,971,808 Non-current Lease obligations, net of current portion 305,755 644,865 Total Liabilities 2,145,545 2,616,673 Commitments and Contingencies (Note 12) Shareholders’ Equity Common shares, no par value, unlimited authorized shares: 2,002,186 and 445,908 as of June 30, 2025 and 2024, respectively, issued and outstanding 91,221,174 82,784,400 Additional paid-in capital 39,322,644 35,368,899 Accumulated deficit ( 117,237,892 ) ( 109,075,759 ) Accumulated other comprehensive income 128,569 128,569 Total Shareholders’ Equity 13,434,495 9,206,109 Total Liabilities and Shareholders’ Equity 15,580,040 11,822,782 Related Party Transactions (Note 13) The accompanying notes form an integral part of these consolidated financial statements. F- 5 InMed Pharmaceuticals Inc. CONSOLIDATED STATEMENTS OF OPERATIONS Expressed in U.S. Dollars For the Year Ended June 30, 2025 2024 $ $ Sales 4,942,633 4,597,730 Cost of sales 3,236,047 3,496,817 Gross profit 1,706,586 1,100,913 Operating Expenses Research and development 2,853,920 3,217,517 General and administrative 6,557,822 5,798,226 Amortization and depreciation 212,839 219,600 Foreign Exchange Loss 28,471 61,921 Total operating expenses 9,653,052 9,297,264 Other Income (Expense) Interest and other income 155,882 527,901 Finance expense ( 371,549 ) - Loss before income tax expense ( 8,162,133 ) ( 7,668,450 ) Income tax expense - ( 7,100 ) Net loss for the year ( 8,162,133 ) ( 7,675,550 ) Net loss per share for the year Basic and diluted ( 8.36 ) ( 20.14 ) Weighted average outstanding common shares Basic and diluted 975,985 381,053 The accompanying notes form an integral part of these consolidated financial statements. F- 6 InMed Pharmaceuticals Inc. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY For the years ended June 30, 2025 and 2024 Expressed in U.S. Dollars 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 Proceeds from ATM (Note 8) 313,242 1,905,583 - - - 1,905,583 Proceeds from SEPA (Note 8) 1,208,336 6,224,716 - - - 6,224,716 Proceeds from Private Placement - - 5,024,891 - - 5,024,891 Share issuance costs - ( 269,559 ) ( 614,419 ) - - ( 883,978 ) Exercise of pre-funded warrants 34,700 576,034 ( 576,034 ) - - - Loss for the period - - - ( 8,162,133 ) - ( 8,162,133 ) Share-based compensation - - 119,307 - - 119,307 Balance June 30, 2025 2,002,186 91,221,174 39,322,644 ( 117,237,892 ) 128,569 13,434,495 Common Shares Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total # $ $ $ $ $ Balance July 1, 2023 166,370 77,620,252 35,741,115 ( 101,400,209 ) 128,569 12,089,727 Proceeds from Private Placement 163,637 3,240,006 1,976,187 - - 5,216,193 Share issuance costs - - ( 562,151 ) - - ( 562,151 ) Exercise of pre-funded warrants 115,901 1,924,142 ( 1,923,967 ) - - 175 Loss for the period - - - ( 7,675,550 ) - ( 7,675,550 ) Share-based compensation - - 137,715 - - 137,715 Balance June 30, 2024 445,908 82,784,400 35,368,899 ( 109,075,759 ) 128,569 9,206,109 The accompanying notes form an integral part of these consolidated financial statements. F- 7 InMed Pharmaceuticals Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended June 30, 2025 and 2024 Expressed in U.S. Dollars 2025 2024 $ $ Cash provided by (used in): Operating Activities Net loss ( 8,162,133 ) ( 7,675,550 ) Items not requiring cash: Amortization and depreciation 212,839 219,600 Share-based compensation 119,307 137,714 Amortization of right-of-use assets 321,885 384,918 Interest income received on short-term investments ( 34 ) ( 1,250 ) Unrealized foreign exchange loss 75,928 12,262 Inventory write-down - 305,812 Credit losses 2,424 - Changes in operating assets and liabilities: Inventories 283,151 66,220 Prepaids and other currents assets 173,980 20,284 Other non-current assets - 4,908 Accounts receivable ( 114,690 ) ( 92,439 ) Accounts payable and accrued liabilities ( 249,728 ) 45,282 Deferred rent - ( 16,171 ) Lease obligations ( 429,880 ) ( 397,422 ) Total cash used in operating activities ( 7,766,951 ) ( 6,985,832 ) Investing Activities Purchase of property and equipment - ( 9,293 ) Sale of short-term investments 42,270 42,082 Purchase of short-term investments ( 42,270 ) ( 42,082 ) Total cash used in investing activities - ( 9,293 ) Financing Activities Proceeds from the exercise of pre-funded warrants - 175 Proceeds from the private placement 8,130,299 5,216,194 Proceeds from the sale of pre-funded warrants 5,024,891 - Share issuance costs ( 883,978 ) ( 562,151 ) Total cash provided by financing activities 12,271,212 4,654,218 Increase (decrease) in cash and cash equivalents during the year 4,504,261 ( 2,340,907 ) Cash and cash equivalents beginning of the year 6,571,610 8,912,517 Cash and cash equivalents end of the year 11,075,871 6,571,610 SUPPLEMENTARY CASH FLOW INFORMATION: Cash Paid During the Year for: Income taxes $ - $ 7,100 Interest $ - $ - SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Preferred investment options to its placement agent $ 281,810 $ 325,699 Fair value of warrant modification recorded as equity issuance costs $ 116,482 $ 3,508,749 Recognition of Right-of-use asset and corresponding operating lease $ 187,223 $ 968,376 The accompanying notes form an integral part of these consolidated financial statements. F- 8 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 consolidated financial statements are issued. Through June 30, 2025, the Company has funded its operations primarily with proceeds from the sale of Common Shares. The Company has incurred recurring losses and negative cash flows from operations since its inception, including net losses of approximately $ 8.2 million and $ 7.7 million for the years ended June 30, 2025 and 2024, respectively. In addition, the Company had an accumulated deficit of approximately $ 117.2 million as of June 30, 2025. The Company expects to continue to generate operating losses for the foreseeable future. As of the issuance date of these consolidated annual financial statements, the Company expects its cash, cash equivalents and short-term investments of $ 11.1 million as of June 30, 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 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 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. F- 9 2. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation These 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. On November 14, 2024, the Company effected a reverse stock split of the Company’s issued and outstanding Common Shares, by a ratio of 20-to-1 (the “Reverse Stock Split”). Accordingly, all Common Shares, stock options, warrants, as well as per share information, for all periods presented in the consolidated financial statements and notes thereto have been adjusted retrospectively to reflect this Reverse Stock Split. Reclassifications Certain prior year amounts in the consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the current year’s presentation. These reclassifications did not affect the prior period’s total assets, total liabilities, shareholders’ equity, net loss or net cash used in operating activities. During the year ended June 30, 2024, the Company reclassed 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 from those estimates. Basis of Consolidation These 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 consolidated financial statements. Foreign Currency The functional currency of the Company and its subsidiaries is the U.S. Dollar. These consolidated financial statements are presented in U.S. Dollars. References to “$” and “US$” are to United States (“U.S.”) dollars and references to “C$” are to Canadian dollars. F- 10 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 June 30, 2025 and 2024, the Company held $ 4,479,809 and $ 1,939,482 , respectively, of cash equivalents in a money market fund that is considered Level 1 in the financial instruments 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. Changes in the allowance for expected credit losses for trade accounts receivable are presented in the table below: Years Ended June 30, 2025 and 2024 Balance as of July 1, 2023 $ 66,775 Provision — Write-offs ( 66,775 ) Balance as of June 30, 2024 — Provision 2,424 Balance as of June 30, 2025 $ 2,424 Concentration of Credit Risk and Other Risks and Uncertainties At times, cash balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) or Canadian Deposit Insurance Corporation (“CDIC”) insurable limits. The Company has not experienced any losses related to these balances. The uninsured cash balance as of June 30, 2025, was $ 8.0 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. F- 11 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 Twelve Months Ended June 30, 2025 Revenues, customer concentration risk 26 % 32 % * * * * * Twelve Months Ended June 30, 2024 Revenues, customer concentration risk 10 % 18 % 34 % 14 % 12 % * * As of June 30, 2025 Accounts receivable, customer concentration risk 45 % 12 % * 10 % * 15 % 13 % As of June 30, 2024 Accounts receivable, customer concentration risk 32 % 20 % 15 % 15 % 14 % * * * Less than 10%. Deferred Offering Costs The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After the consummation of equity or debt financings, these related costs are recorded in shareholders’ equity or liabilities as a reduction of proceeds generated as a result of the offering. If the planned financing is abandoned, the deferred offering costs are thereafter expensed as a charge to other income (expense) in the consolidated statement of operations. As of June 30, 2025 and 2024, the Company recorded $ nil and $ 106,299 in deferred offering costs, respectively. During the year ended June 30, 2025 and 2024 the Company expensed $ 20,000 and $ nil , respectively. Inventories Inventories are initially valued at weighted average cost and subsequently valued at the lower of weighted average cost and net realizable value. Costs included in inventories are the purchase price of goods and cost of services rendered, freight costs, warehousing costs, purchasing costs and production and labor costs related to manufacturing. In determining any valuation allowances, the Company reviews inventory for obsolete, redundant, and slow-moving goods. As of June 30, 2025 and 2024, the Company has $ nil and $ 103,434 , respectively, as a valuation allowance to reduce weighted average cost to net realizable value. During the year ended June 30, 2025 and 2024, the Company recorded an inventory write-down due to net realizable value of $ nil and $ 103,136 respectively, and recorded an inventory write-down due to obsolescence of $ nil and $ 208,737 , respectively. F- 12 Property, Equipment and ROU Assets, Net Computer equipment, lab equipment and furnishings are recorded at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of computer equipment, lab equipment and furnishings comprise their purchase price. The computer equipment, lab equipment and furnishings are reviewed at least once per year for impairment. Equipment and furniture are depreciated using the straight-line method based on their estimated useful lives as follows: ● Computer equipment — 5 years ● Lab equipment — 6 - 10 years Computer equipment and lab equipment, acquired or disposed of during the year, are depreciated proportionately for the period they are in use. The right-of-use assets are initially measured based on the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, less any lease incentives received. The assets are amortized to the earlier of the end of the useful life of the right-of-use asset or the lease term using the straight-line method as this most closely reflects the expected pattern of consumption of the future economic benefits. The lease term includes periods covered by an option to extend if the Company is reasonably certain to exercise that option. In addition, the right-of-use assets are periodically reduced by impairment losses, if any, and adjusted for certain re-measurements of the lease liability (see Note 2 Lease (i)). Intangible Assets, Net Intangible assets are comprised of acquired intellectual property, which consists of certain patents and technical know-how. The intellectual property is recorded at cost and is amortized on a straight-line basis over an estimated useful life of 18 years net of any accumulated impairment losses. There is no impairment loss during the years ended June 30, 2025 and 2024. 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 consolidated statements of operations and comprehensive loss in other comprehensive loss. F- 13 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 June 30, 2025 and 2024 due to their immediate or short-term maturities. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. At June 30, 2025, and June 30, 2024, the Company had a full valuation allowance against its deferred tax assets. Per FASB ASC 740-10, disclosure is not required of an uncertain tax position unless it is considered probable that a claim will be asserted and there is a more-likely-than-not possibility that the outcome will be unfavorable. Using this guidance, as of June 30, 2025, and 2024, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company’s 2025, 2024, 2023, and 2022 United States and Canadian tax returns remain subject to examination by their respective taxing authorities. None of the Company’s tax returns are currently under examination. 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. F- 14 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’. Cost of Sales Cost of sales consists primarily of the purchase price of goods and cost of services rendered, freight costs, warehousing costs, and purchasing costs. Cost of sales also includes production and labor costs for the Company’s manufacturing business. Shipping and Handling The Company records freight billed to customers within Net sales. Shipping and handling costs associated with inbound freight and goods shipped to customers are recorded in cost of sales. Other shipping and handling costs, such as for quality assurance, are recorded in operating expenses. 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 June 30, 2025 and 2024, the Company has 1,952,363 and 34,700 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 shares of common stock that have been excluded from diluted net loss per share because their effect was anti-dilutive: Year ended June 30, 2025 2024 Options 61,410 33,722 Warrants 2,588,847 509,580 2,650,257 543,302 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. F- 15 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 Stock and does not intend to pay dividends on its Common Stock 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. Research and Development Costs The Company conducts research and development programs and incurs costs related to these activities, including research and development personnel compensation, services provided by contract research organizations and lab supplies. Research and development costs are expensed in the periods in which they are incurred. Patents and Intellectual Property Costs The costs of filing for patents and of prosecuting and maintaining intellectual property rights are expensed as incurred due to the uncertainty surrounding the drug development process and the uncertainty of future benefits. Patents and intellectual property acquired from third parties for approved products or where there are alternative future uses are capitalized and amortized over the remaining life of the patent. Segment reporting The Company’s operations consist of two operating and reportable segments, the InMed Pharma segment and the BayMedica Commercial segment. The InMed Pharma segment is largely organized around the research and development of small molecule pharmaceuticals drug candidates and the BayMedica 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 (See Note 11). Leases At inception of a contract, the Company assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The lease liability is initially measured as the present value of future lease payments excluding payments made at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate. The lease liability is measured at amortized cost using the effective interest method. It is re-measured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension, or termination option. When the lease liability is re-measured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to nil. The Company has lease arrangements that include both lease and non-lease components. The Company accounts for each separate lease component and its associated non-lease components as a single lease component for all of its asset classes. F- 16 The Company has elected to apply the practical expedient to exclude initial direct costs such as annual operating costs from the measurement of the right-of-use asset at the date of initial application. The Company has elected to apply the practical expedient not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less. The lease payments associated with these leases is recognized as an expense on a straight-line basis over the lease term. 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 consolidated financial statements as a result of future adoption. 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 is currently evaluating the impact of this ASU and expects to include updated income tax disclosures in its fiscal year 2026. In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which enhances reportable segment disclosure requirements primarily through expanded disclosures around significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company has adopted this accounting pronouncement. 3. INVENTORIES Inventories consisted of the following: June 30, 2025 June 30, 2024 $ $ Raw materials 258,300 372,695 Work in process 26,695 30,817 Finished goods 676,178 840,812 Inventories 961,173 1,244,324 In determining any valuation allowances, the Company reviews inventory for obsolete, redundant, and slow-moving goods. During the year ended June 30, 2025 and 2024, the write-down of inventories to net realizable value was $0 and $ 9,614 respectively. Contributing factors to the decrease in net realizable value included lower demand and downward pricing pressure for certain products. As of June 30, 2025 and 2024, the Company has $0 and $ 103,434 respectively as a valuation allowance to reduce weighted average cost to new basis. 4. PROPERTY, EQUIPMENT AND ROU ASSETS, NET Property, equipment and ROU assets consisted of the following: June 30, 2025 June 30, 2024 $ $ Right-of-Use Assets (leases) 1,901,468 2,135,811 Equipment 429,091 429,090 Furnishing - 40,409 Property and equipment 2,330,559 2,605,310 Less: accumulated depreciation and amortization ( 1,338,360 ) ( 1,355,311 ) Property, equipment and ROU assets, net 992,199 1,249,999 F- 17 Depreciation expense on computer equipment, lab equipment and furnishing for the year ended June 30, 2025 and 2024, was $ 50,204 and $ 47,742 respectively and was recorded in general and administrative expenses. Amortization expense related to the right-of-use assets for the year ended June 30, 2025 and 2024, was $ 321,885 and $ 384,918 respectively and was recorded in general and administrative expenses. 5. INTANGIBLE ASSETS The following table summarizes the Company’s intangible assets: June 30, 2025 June 30, 2024 $ $ 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 ( 1,306,858 ) ( 1,144,222 ) Intangible assets, net 1,620,562 1,783,198 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 June 30, 2025, the definite-lived intangible assets had a weighted average estimated remaining useful life of approximately 11 years. Amortization expense on intangible assets for the year ended June 30, 2025 and 2024 was $ 162,636 and $ 171,858 respectively. The Company expects amortization expense to be incurred over the next five years as follows: Twelve months ending June 30, $ 2026 162,746 2027 162,746 2028 162,746 2029 162,746 2030 162,746 Thereafter 806,832 Total 1,620,562 6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities consist of the following: June 30, 2025 June 30, 2024 $ $ Trade payables 370,142 626,190 Accrued research and development expenses 73,143 242,066 Inventory related accruals 735 41,004 Employee compensation, benefits and related accruals 490,405 488,278 Accrued general and administrative expenses 469,858 256,473 Accounts payable and accrued liabilities 1,404,283 1,654,011 F- 18 7. SHARE CAPITAL AND RESERVES Authorized As of June 30, 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 June 30, 2025 and 2024. 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 Offering 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 $ 0.5 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 terms of the pre-funded warrants preclude a holder thereof from exercising such holder’s pre-funded warrants, and us from giving effect to such exercise, if after giving effect to the issuance of common shares upon such exercise, the holder (together with the holder’s affiliates and any other persons acting as a group together with the holder or any of the holder’s affiliates) would beneficially own in excess of 9.99 % of the number of common shares outstanding immediately after giving effect to the issuance of common shares upon such exercise. The pre-funded warrants had a relative fair value of $ 2.9 million at the time of issuance. There were no pre-funded warrants exercised from this Private Placement as of June 30, 2025. 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 a relative fair value of $ 2.0 million at the time of their issuance. There were no preferred investment options exercised from this Private Placement as of June 30, 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 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 June 30, 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 (the “Effective Date”). The total number of Common Shares under the terms of the SEPA is limited to a number equivalent to 19.99 % of the outstanding Common Shares as of the Effective Date unless certain pricing conditions are met, which could have the effect of limiting the total proceeds made available to the Company under the SEPA. In addition, the issuance of our Common Shares under the SEPA is subject to further limitations, including that the Common Shares beneficially owned by the Investor and its affiliates will not exceed 9.99 % in the aggregate of our Common Shares issued and outstanding. The Common Shares issued and sold to the Investor will be priced at 97 % of the Market Price (as defined in the SEPA) during a specified three-day pricing period.) The Company reserves the right to set a minimum acceptable price for the Common Share issuances made under the SEPA. During the year ended June 30, 2025, the Company issued 1,208,336 Common Shares for gross proceeds of approximately $ 6.2 million. 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. F- 19 Under the terms of the SEPA, the Company paid the Investor a one-time structuring fee in the amount of $ 25,000 and the Company is also obligated to pay a commitment fee in an amount equal to 2.50 % of the commitment amount (or $ 0.3 million), 25 % of which was paid in December 2024. The remaining 75 % of the commitment fee shall be paid in three equal quarterly installments beginning on the three-month anniversary of the Effective Date, with each such installment to be paid at the Company’s option either in cash or by the issuance to the Investor of such number of Common Shares that is equal to such portion of the deferred fee divided by the lowest daily VWAP of the Common Shares during the consecutive trading days immediately prior to the date of such installment at the Effective Date. On June 13, 2025, the Company and the Investor entered into a certain amendment to Standby Equity Purchase Agreement, or the SEPA Amendment. Pursuant to the SEPA Amendment, we may, from time to time, suspend, in our sole discretion, the use of the registration statement related to the common shares under the SEPA by providing written notice to the Investor in the event that we determine in good faith that such suspension is necessary: (A) to delay the disclosure of material nonpublic information concerning us, the disclosure of which at the time is not, in our good faith opinion, in our best interest; or (B) to amend or supplement the registration statement or prospectus so that the registration statement or prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or a Black Out Period. During any such Black Out Period, the Investor has agreed not to sell any common shares pursuant to the registration statement, but it may sell common shares pursuant to an exemption from the registration requirements under U.S. securities laws subject to compliance with all applicable laws. Further, pursuant to the SEPA Amendment, we agreed to not impose any Black Out Period that is more restrictive (including, without limitation, as to duration) than the comparable restrictions that we may impose on transfers of our equity securities by our directors and senior executive officers. In addition, we shall not deliver any advance notice during any Black Out Period. If the public announcement of such material, nonpublic information is made during a Black Out Period, the Black Out Period shall terminate immediately after such announcement, and we shall be obligated to immediately notify the Investor of the termination of the Black Out Period. Amended At-the-Market Offering Agreement (‘ATM Amendment’) On June 27, 2024, the Company entered into an amendment (the “ATM Amendment”) to its At-the-Market Offering Agreement, dated April 7, 2022 (the “Original ATM Agreement” and together with the ATM Amendment, the “Amended ATM Agreement”), pursuant to which the Company may offer and sell Common Shares, from time to time, in “at the market” offerings through the Agent. The ATM Amendment amends the Original ATM Agreement to reflect, among other provisions, updates to certain sales settlement provisions and reimbursement terms, and to supplement the representations being made by the Company to the Agent. During the year ended June 30, 2025, the Company issued 313,242 Common Shares for gross proceeds of approximately $ 1.9 million. This amount has been offset by financing fees of approximately $ 0.3 million. The Company’s Registration Statement on Form S-3 which was previously filed with the SEC in connection with the transactions contemplated by the Amended ATM Agreement expired on February 10, 2025. On October 24, 2023, the Company entered into a securities purchase agreement (the “2023 Securities Purchase Agreement”) with two accredited institutional investors (the “Accredited Institutional Investors”) for the sale (the “2023 Private Placement”) of 150,602 pre-funded warrants of the Company’s common shares at a purchase price of $ 16.60 per share. The pre-funded warrants have an exercise price of $ 0.0001 and do not have an expiration date. The pre-funded warrants had a fair value of $ 1.2 million at the time of issuance. In addition, the Company agreed, as part of the 2023 Private Placement, to issue to the purchasers unregistered preferred investment options to purchase up to an aggregate of 199,114 common shares. These preferred investment options have an exercise price of $ 16.60 and have a term of 5.5 years from issuance. The preferred investment options had a fair value of $ 1.3 million at the time of their issuance (see 2025 Inducement Offer Letter above). Concurrently with the Company’s entry into the 2023 Securities Purchase Agreement, the Company also entered into an inducement offer letter agreement (the “Inducement Offer Letter”) with the holders of existing preferred investment options (the “Existing Holders”) to purchase up to an aggregate of 163,636 common shares issued to the Existing Holders on November 21, 2022. Pursuant to the Inducement Offer Letter, the Existing Holders agreed to exercise for cash their existing preferred investment options to purchase an aggregate of 163,636 common shares (at a reduced exercise price of $ 16.60 per share) in consideration of the Company’s agreement to issue new unregistered preferred investment options to purchase up to an aggregate of 327,273 shares of the Company’s common shares at an exercise price of $ 16.60 per share). Due to ownership limitations, the Accredited Institutional Investors had 89,827 common shares held in abeyance as of the closing of the 2023 Private Placement. The abeyance shares had a fair value of $1.5 million and the common shares issued had a fair value of $ 1.2 million on their respective issuance date. As of June 30, 2025, the Accredited Institutional Investors had drawn down 89,827 abeyance shares. F- 20 The inducement contemplated by the Inducement Offer Letter (the “Inducement”) is considered a warrant modification due to the changing of the terms of the warrants. The modification had a fair value of $ 3.5 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. On October 26, 2023, the parties consummated the 2023 Private Placement and the other transactions contemplated by the 2023 Securities Purchase Agreement. In connection with such transactions, the Company (i) received gross proceeds of approximately $ 5.2 million and paid approximately $ 0.6 million in cash fees and (ii) issued 20,425 warrants to our placement agent. These warrants have an exercise price of $ 20.750 and a term of 5.5 years. The placement agent warrants had a fair value of $ 326,000 as of the date of their issuance, using a Black-Scholes model and were recorded as an equity issuance cost. Common Share Warrants The assumptions used in the Black-Scholes model to value the new warrants issued during the years ended June 30, 2025 and 2024, are set forth in the table immediately below. June 30, 2025 Exercise price $ 2.44 - 3.20 Risk-free interest rate 3.68 % Volatility 142 % Expected life (years) 1.5 Dividend yield $ 0 % June 30, 2024 Exercise price $ 16.60 – 20.80 Risk-free interest rate 4.82 % Volatility 109 – 111 % Expected life (years) 5.0 – 5.5 Dividend yield $ 0 % The assumptions used in the Black-Scholes model to value the modification of warrants issued during the year ended June 30, 2025 and 2024, are set forth in the table immediately below. June 30, 2025 Exercise price $ 2.44 - 16.60 Risk-free interest rate 3.68 % Volatility 133 % Expected life (years) 3.83 Dividend yield $ - % June 30, 2024 Exercise price $ 16.60 – 60.80 Risk-free interest rate 0.56 – 4.82 % Volatility 109 – 614 % Expected life (years) 0 – 6.8 Dividend yield $ 0 % F- 21 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, 2023 175,802 $ 107.40 Granted 648,904 12.80 Exercised ( 279,538 ) 9.80 Expired/Cancelled ( 888 ) 370.00 Balance as at June 30, 2024 544,280 21.20 Warrants Granted 4,031,630 1.28 Exercised ( 34,700 ) - Expired/Cancelled - - Warrants Outstanding at June 30, 2025 4,541,210 $ 3.90 Warrants Exercisable at June 30, 2025 4,541,210 $ 3.90 As of June 30, 2025 and 2024, the warrants exercisable and outstanding have an intrinsic value of $ 8,102,467 and $ 184,539 respectively with a weighted average remaining life of 2 years and 4 years respectively. 8. SHARE-BASED PAYMENTS a) 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 twent y 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 18, 2024 and December 19, 2023, the Company’s Board of Directors approved the reservation of an additional 60,000 and 35,000 Common Shares under the Plan, respectively. As of June 30, 2025 and June 30, 2024, there were 41,278 and 8,966 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. On December 20, 2024, the Company granted 28,700 stock options to its employees and external directors. The options have an exercise price of $ 4.14 with a term of five years . The options vest in equal installments monthly over three years. On February 20, 2024, the Company issued 2,500 options to its employees pursuant to the Plan. The options have an exercise price of $ 7.40 with a term of five years . The options vest in equal installments monthly over three years. On December 23, 2023, the Company issued 25,111 options to its employees and consultants pursuant to the Plan. The options have an exercise price of $ 7.40 with a term of 5 years . The options vest in equal installments monthly over three years. On December 23, 2023, the Company additionally issued 1,420 options to members of the Company’s Board of Directors pursuant to the Plan. The options have an exercise price of $ 7.40 with a term of five years . The options vest on the earlier of (i) December 23, 2024 or (ii) immediately prior to the next Annual General Meeting. F- 22 On December 16, 2023, the Company additionally issued 168 options to members of the Company’s Board of Directors pursuant to the Plan. The options have an exercise price of $ 26.40 with a term of five years . The options vest on the earlier of (i) December 16, 2023 or (ii) immediately prior to the next Annual General Meeting. The assumptions used in the Black-Scholes model during the years ended June 30, 2025 and 2024, are set forth in the table immediately below: June 30, 2025 Exercise price $ 4.14 Risk-free interest rate 4.28 % Volatility 125 % Expected life (years) 3.6 Dividend yield $ 0 % June 30, 2024 Exercise price 7.40 Risk-free interest rate 3.95 - 4.30 % Volatility 116 - 203 % Expected life (years) 3.5 - 3.6 Dividend yield $ 0 % The following is a summary of changes in outstanding options from July 1, 2023 to June 30, 2025: Number Weighted Average Exercise Price Balance as at July 1, 2023 5,132 $ 625.60 Granted 29,020 7.40 Expired/Forfeited ( 430 ) 3,286.80 Balance as at June 30, 2024 33,722 $ 56.69 Granted 28,700 4.14 Expired/Forfeited ( 1,012 ) 70.43 Balance as at June 30, 2025 61,410 32.53 June 30, 2024: Vested and exercisable 5,646 $ 298.00 Unvested 28,076 $ 8.00 June 30, 2025: Vested and exercisable 23,844 $ 75.35 Unvested 37,566 $ 5.34 Total expenses arising from share-based payment transactions recognized during the years ended June 30, 2025 and 2024 were $ 119,307 and $ 137,714 , respectively, of which $ 71,280 and $ 80,513 , respectively, was allocated to general and administrative expenses, $ 46,637 and $ 56,408 , respectively, was allocated to research and development expenses, and $ 1,391 and $ 793 , respectively, was allocated to Cost of Goods sold. Unrecognized compensation cost at June 30, 2025 related to unvested options was $ 72,549 which will be recognized over a weighted-average vesting period of approximately 1.22 years. F- 23 9. LEASE OBLIGATIONS The Company is committed to minimum lease payments as follows: Maturity Analysis June 30, 2025 $ Year 1 475,087 Year 2 313,230 Year 3 - Year 4 - Year 5 - More than five years - Total undiscounted lease liabilities 788,317 Less: imputed interest ( 47,055 ) Present value of lease liabilities 741,262 Less: Current portion of lease liabilities ( 435,507 ) Non-current portion of lease liabilities 305,755 On July 29, 2024, the Company entered into a lease agreement for new 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 an 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 . 10. INCOME TAXES The following is a reconciliation of income taxes calculated at the combined Canadian federal and provincial income statutory corporate tax rate of 27.0 % to the tax expense: 2025 2024 $ $ US net income (loss) before taxes 423,063 ( 1,756,965 ) Canada net income (loss) before taxes ( 8,585,196 ) ( 5,911,485 ) Net income (loss) before taxes ( 8,162,133 ) ( 7,668,450 ) Income tax expense (recovery) at the statutory rate ( 2,229,159 ) ( 1,966,981 ) Increase (reduction) in income taxes resulting from: Change in valuation allowance 4,167,827 1,625,998 State taxes 76,974 ( 21,942 ) Permanent differences 34,335 39,252 True up to the return 2,982 ( 303,595 ) State Rate Change 8,086 2,949 Foreign exchange differences ( 1,589,832 ) 618,907 Share issuance cost capitalized in equity ( 492,446 ) ( 123,415 ) Other 21,233 135,927 Income tax expense - 7,100 As of June 30, 2025, the Company has non-capital loss carry-forwards of approximately $ 89.2 million (June 30, 2024 - $ 72.7 million) available to offset future taxable income in Canada. These non-capital loss carryforwards begin to expire in 2026. As of June 30, 2025, the Company has US Federal net operating losses of $ 5.4 million and state net operating losses of $ 2.7 million. As of June 30, 2024, the Company has US Federal net operating losses of $ 7.5 million and state net operating losses of $ 3.7 million. The US Federal NOLs have an indefinite carryforward period, and the state NOLs begin to expire in 2042. F- 24 Deferred tax assets and liabilities are as follows: 2025 2024 $ $ Non-capital losses 25,463,223 21,501,476 Financing costs 733,014 861,867 Accrued expenses 61,845 12,831 Intangible assets, net 496,440 146,193 Tax credits 221,406 241,270 Lease liability 108,525 164,288 27,084,453 22,927,925 Intangible assets, net ( 57,977 ) - Property and equipment, net ( 98,627 ) ( 116,231 ) Lease obligations ( 106,029 ) ( 157,701 ) ( 262,633 ) ( 273,932 ) Net deferred tax asset 26,821,820 22,653,993 Valuation allowance ( 26,821,820 ) ( 22,653,993 ) - - A full valuation allowance has been applied against the net deferred tax assets because it is more likely than not that future taxable income will not be available against which the Company can utilize the benefits therefrom. The Company recognizes tax benefits from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from any such position would be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. It is the Company’s policy to recognize interest and penalties accrued on any uncertain tax benefits as a component of income tax expense. The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and Canada. The Company’s U.S. Federal and State tax returns for the years 2021 through 2024 remain subject to examination by their respective taxing authorities. The Company is subject to taxation at the federal, state, and local levels in the United States and Canada. 11. 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 ‘InMed Pharma’ and ‘BayMedica 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 InMed Pharma segment is largely organized around the research and development of small molecule pharmaceuticals drug candidates and the BayMedica 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 ‘InMed Pharma’ segment as of June 30, 2025 and 2024 were $ 13.7 million and $ 9.2 million, respectively. Total assets as of June 30, 2025 and 2024, held in the BayMedica Commercial segment were $ 1.9 million and $ 2.6 million, respectively. F- 25 The following table presents information about the Company’s reportable segments for the years ended June 30, 2025 and 2024: Year Ended June 30, 2025 2024 InMed BayMedica Total InMed BayMedica Total $ $ $ $ $ $ Sales - 4,942,633 4,942,633 - 4,597,730 4,597,730 Cost of sales - ( 3,236,047 ) ( 3,236,047 ) - ( 3,496,817 ) ( 3,496,817 ) Operating expenses ( 8,474,641 ) ( 1,178,411 ) ( 9,653,052 ) ( 8,400,411 ) ( 896,853 ) ( 9,297,264 ) Other income (expense) 155,882 - 155,882 532,782 ( 4,881 ) 527,901 Finance Expense ( 371,549 ) - ( 371,549 ) - - - (Loss) income before income taxes ( 8,690,308 ) 528,175 ( 8,162,133 ) ( 7,867,629 ) 199,179 ( 7,668,450 ) Unrestricted cash 10,684,376 391,495 11,075,871 5,669,113 902,497 6,571,610 12. COMMITMENTS AND CONTINGENCIES Pursuant to the terms of agreements with various contract research organizations, as of June 30, 2025, the Company is committed for contract research services and materials at a cost of approximately $ 0.2 million, expected to occur in the twelve months following period. Pursuant to the terms of agreements with various vendors, as of June 30, 2024, the Company is committed for contract materials and equipment at a cost of approximately $ 0.1 million, expected to occur in the twelve months following June 30, 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 June 30, 2024, there have been no triggering events to cause a repayment. Short-term investments include guaranteed investment certificates, with one year terms, of $ 43,384 and $ 43,064 as of June 30, 2025 and 2024 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. F- 26 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 it 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 $ 3.4 M in annual payments for 2022 through 2024 and (b) a declaration that BayMedica is liable to pay certain annual minimum payments of approximately $ 2.3 M 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. While we are not able to predict the outcome of the Patent License Matter with any certainty, 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. 13. RELATED PARTY TRANSACTIONS On February 11, 2022, the Board of Directors appointed Janet Grove as a director of the Company, a position she held until February 10, 2025, at which time the Company’s Board of Directors (the “Board”), upon the outcome of the Nominating & Governance Committee’s determination and recommendation, elected to accept her resignation from the Board. Ms. Grove is a Partner of Norton Rose Fulbright Canada LLP (“NRFC”). During the period from July 1, 2024 to February 10, 2025, NRFC and Norton Rose Fulbright US LLP (“NRFUS” and together with NRFC, “NRF”) rendered legal services in the amount of $ 316,977 to the Company. During the twelve months ended June 30, 2024, NRF rendered legal services in the amount of $ 226,793 , to the Company. These transactions were in the normal course of operations and were measured at the exchange amount which represented the amount of consideration established and agreed to by NRF. No legal services rendered by NRF were provided by Ms. Grove directly. 14. SUBSEQUENT EVENTS The Company has evaluated subsequent events through the date of the filing of this Annual Report on Form 10-K and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements except for the matters described below. The One Big Beautiful Bill Act (‘OBBBA’), passed by the House of Representatives in May 2025 and signed into law on July 4, 2025 by President Trump, marks a pivotal shift in tax treatment for research and development (R&D) expenses. Effective for tax years beginning after December 31, 2024, the bill reverses the Tax Cuts and Jobs Act’s requirement to capitalize and amortize domestic R&D costs over five years , restoring full immediate expensing. Businesses can also deduct unamortized expenses from prior years in 2025. The Company is currently evaluating the impact of the OBBBA. Subsequent to June 30, 2025, 382,000 Pre-Funded Warrants have been exercised under the 2025 Securities Purchase Agreement. F- 27 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Please refer to “Item 4.01 - Changes in Registrant's Certifying Accountant" in our Current Report on Form 8-K, filed with the SEC on June 13, 2025.