INMED PHARMACEUTICALS INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

InMed Pharmaceuticals Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Three and six months ended December 31, 2022






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                           InMed Pharmaceuticals Inc.



                      MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS



                  Three and Six Months Ended December 31, 2022



This discussion and analysis contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and is subject to the safe harbor created by those
sections. For more information, see "Cautionary Note Regarding Forward-Looking
Statements." When reviewing the discussion below, you should keep in mind the
substantial risks and uncertainties that impact our business. In particular, we
encourage you to review the risks and uncertainties described in "Risk Factors"
in our Annual Report on Form 10-K, dated September 23, 2022 and other filings
with the Security and Exchange Commission. These risks and uncertainties could
cause actual results to differ materially from those projected or implied by our
forward-looking statements contained in this report. These forward-looking
statements are made as of the date of this report, and we do not intend, and do
not assume any obligation, to update these forward-looking statements, except as
required by law.



The following discussion and analysis should be read in conjunction with our
unaudited condensed consolidated interim financial statements for the three and
six months ended December 31, 2022, and the related notes thereto, which have
been prepared in accordance with U.S. GAAP. Additionally, the following
discussion and analysis should be read in conjunction with our audited
consolidated financial statements included in our Form 10-K filing. Throughout
this discussion, unless the context specifies or implies otherwise the terms
"InMed," "Company," "we," "us," and "our" refer to InMed Pharmaceuticals Inc.



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




Overview



We are a 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
("Product Candidates"). Together with our subsidiary BayMedica, LLC, we also
have significant know-how in developing proprietary manufacturing approaches to
produce cannabinoids for various market sectors ("Products"). Our know-how
includes traditional approaches such as chemical synthesis and biosynthesis, as
well as a proprietary, integrated manufacturing approach called IntegraSynTM. We
are dedicated to delivering new therapeutic alternatives to patients and
consumers who may benefit from cannabinoid-based products. Our approach
leverages on the several thousand years' history of health benefits attributed
to the Cannabis plant and brings this anecdotal information into the 21st
century by applying tried, tested and true scientific approaches to establish
non-plant-derived (synthetically manufactured), individual cannabinoid compounds
as Product Candidates in important market segments including clinically proven,
FDA-approved medicines and Products that are provided to wholesalers and
end-product manufacturers. While our activities do not involve direct use of
Cannabis nor extracts from the plant, we note that the U.S. Food and Drug
Administration ("FDA") has, to date, not approved any marketing application for
Cannabis for the treatment of any disease or condition and has approved only one
Cannabis-derived and three Cannabis-related drug products. Our ingredients are
synthetically made and, therefore, we have no interaction with the Cannabis
plant. We do not grow nor utilize Cannabis nor its extracts in any of our
Products or Product Candidates; our current pharmaceutical drug Product
Candidates are applied topically (not inhaled nor ingested); and, we do not
utilize THC or CBD, the most common cannabinoid compounds that are typically
extracted from the Cannabis plant, in any of our Products or Product Candidates.
The active pharmaceutical ingredient ("API") under development for our initial
two drug candidates, INM-755 for Epidermolysis bullosa ("EB") and INM-088 for
glaucoma, is cannabinol ("CBN"). Additional uses of both INM-755 and INM-088 are
being explored, as well as the application of novel cannabinoid analogs to treat
diseases including but not limited to neurodegenerative diseases such as
Alzheimer's, Parkinson's, and Huntington's.



                                       23




InMed Pharmaceuticals Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Three and six months ended December 31, 2022






We believe we are positioned to develop multiple pharmaceutical Product
Candidates in diseases which may benefit from medicines based on rare
cannabinoid compounds. Most currently approved cannabinoid therapies are based
specifically on CBD and/or THC and are often delivered orally, which has
limitations and drawbacks, such as side effects (including the intoxicating
effects of THC). Currently, we intend to deliver our rare cannabinoid
pharmaceutical drug candidates through various topical formulations (cream for
dermatology, eye drops for ocular diseases) as a way of enabling treatment of
the specific disease at the site of disease while seeking to minimize systemic
exposure and any related unwanted systemic side effects, including any drug-drug
interactions and any metabolism of the active pharmaceutical ingredient by the
liver. The cannabinoid Products sold through our B2B raw material supply
business are integrated into various product formats by the companies who then
further commercializes such products. We access rare cannabinoids via all
non-extraction approaches, including chemical synthesis, biosynthesis and our
proprietary integrated IntegraSynTM approach, thus negating any interaction with
or exposure to the Cannabis plant.



Since our acquisition of Biogen Sciences Inc., a privately held British Columbia
pharmaceutical company focused on drug discovery and development of cannabinoids
in 2014, our operations have focused on conducting research and development for
our Product Candidates and for our integrated, biosynthesis-based manufacturing
technology, establishing our intellectual property, organizing and staffing our
Company, business planning and capital raising. On October 13, 2021, we acquired
BayMedica, Inc., now named BayMedica, LLC ("BayMedica"). Upon closing of the
transaction, BayMedica became a wholly-owned subsidiary of InMed. To date, we
have funded our operations primarily through the issuance of common shares.



We have incurred significant operating losses since our inception and since the
acquisition of Biogen Science Inc. and we expect to continue to incur
significant operating losses for the foreseeable future. Our ability to generate
product revenue, if ever, that is sufficient to achieve profitability will
depend heavily on the successful development and eventual commercialization of
one or more of our drug candidates and/or the success of our manufacturing
technologies. Our net loss was $5.6 million and $7.3 million for the six months
ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had
an accumulated deficit of $99.1 million, which includes all losses since our
inception in 1981. Our accumulated deficit increased between 2014, when we began
focusing on the development of cannabinoid-derived pharmaceuticals following the
acquisition of Biogen Science Inc., and December 31, 2022 by approximately $70.2
million. We expect our expenses and operating losses will increase substantially
over the next several years in connection with our ongoing activities as we:



? continue to further advance the INM-755 program, our lead drug candidate for

the treatment of EB;

? continue to further advance the INM-088 program, our drug candidate for the

    treatment of glaucoma;




? continue to advance research in the INM-900 series program, using rare

cannabinoids in treating neurodegenerative diseases such as Alzheimer’s,

Huntington’s and Parkinson’s;

? investigate our Product Candidates for additional uses beyond the initial

   indications;



? pursue the discovery of drug targets based on proprietary cannabinoid analogs

for other diseases with high unmet medical needs and the subsequent

development of any resulting new Product Candidates;

? seek regulatory approvals for any Product Candidates that successfully

complete clinical trials;

? scale-up our manufacturing processes and capabilities, or arrange for a third

party to do so on our behalf;

? continue to support our commercial operations at BayMedica

? execute on business development activities, including but not limited to

company mergers/acquisitions and acquisition or in-licensing of externally

developed products and/or technologies;

 ? maintain, expand, enforce, defend and protect our intellectual property;

? continue to further advance the research and development of various

manufacturing technologies;

? build internal infrastructure, including personnel, to meet our milestones; and

? add operational, financial and management information systems and personnel,

    including personnel to support product development and potential future
    commercialization efforts and our operations as a public company.




                                       24




InMed Pharmaceuticals Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Three and six months ended December 31, 2022






As a result of these activities as well as our working capital requirements, we
will need substantial additional funding to support our continuing operations
and pursue our growth strategy. We expect to finance our operations through
product sales, the sale of equity, debt financings or other capital sources,
including collaborations with other companies or other strategic transactions.
We may be unable to raise additional funds or enter into such other agreements
or arrangements when needed on favorable terms, or at all. If we fail to raise
capital or enter into such agreements as and when needed, we may have to
significantly delay, scale back or discontinue the development and
commercialization of one or more of our Products and Product Candidates or grant
rights to external entities to develop and market our Product Candidates, even
if we would otherwise prefer to develop and market such Products and Product
Candidates ourselves.



Because of the numerous risks and uncertainties associated with drug development
and commercial growth, we are unable to predict the timing or amount of
increased expenses and working capital requirements or the timing of when or if
we will be able to achieve or maintain profitability. If we fail to become
profitable or are unable to sustain profitability on a continuing basis, then we
may be unable to continue our operations at planned levels and be forced to
reduce or terminate our operations.



Recent Developments


On November 21, 2022, we closed a $6.0 million private placement. Under the
terms of the private placement, an aggregate of 1,818,185 common shares, or
common share equivalents, and preferred investment options ("PIO") to purchase
up to an aggregate of 3,272,733 common shares, at an effective purchase price of
$3.30 per common share and associated PIO. The PIOs have an exercise price of
$3.044 per share, are exercisable immediately and have a term of seven years.
After deducting the placement agent fees, we received net cash proceeds of
approximately $5.4 million.



Components of Results of Operations



Revenue



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



Cost of Sales


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




Operating Expenses



Research and Development and Patent Expenses

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

? external research and development expenses incurred under agreements with

    contract research organizations, or "CROs", contract development and
    manufacturing organization, or "CDMOs", and consultants;



? salaries, payroll taxes, employee benefits expenses for individuals involved

    in research and development efforts;

  ? research supplies; and

? legal and patent office fees related to patent and intellectual property

    matters.




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



                                       25





InMed Pharmaceuticals Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Three and six months ended December 31, 2022






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


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



? the timing and progress of preclinical and clinical development activities;

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

? our ability to raise additional funds necessary to complete preclinical and

clinical development and commercialization of our Product Candidates, to

further advance the development of our manufacturing technologies, and to

   develop and commercialize additional Products, if any;



? our ability to maintain our current research and development programs and to

    establish new ones;




 ? our ability to establish sales, licensing or collaboration arrangements;

? the progress of the development efforts of parties with whom we may enter into

collaboration arrangements;

? the successful initiation and completion of clinical trials with safety,

tolerability and efficacy profiles that are satisfactory to the FDA or any

comparable foreign regulatory authority;

? the receipt and related terms of regulatory approvals from applicable

    regulatory authorities;



? the availability of materials for use in production of our Products and

    Product Candidates;



? our ability to secure manufacturing supply through relationships with third

parties or establish and operate a manufacturing facility;

? our ability to consistently manufacture our Product Candidates in quantities

sufficient for use in clinical trials;

? our ability to obtain and maintain intellectual property protection and

regulatory exclusivity, both in the United States and internationally;

? our ability to maintain, enforce, defend and protect our rights in our

intellectual property portfolio;

? the commercialization of our Product Candidates, if and when approved, and of

   new Products;



? our ability to obtain and maintain third-party payor coverage and adequate

   reimbursement for our Product Candidates, if approved;




                                       26





InMed Pharmaceuticals Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Three and six months ended December 31, 2022

? the acceptance of our Product Candidates, if approved, by patients, the medical

community and third-party payors;

? competition with other products; and

? a continued acceptable safety profile of our Product Candidates following

receipt of any regulatory approvals.





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



Research and development activities account for a significant portion of our
operating expenses. During the first half of fiscal 2023, research and
development expenses has decreased as our INM-755 program progressed from
preclinical toxicology studies into the relatively less capital intense early
human clinical trials. However, we expect our research and development expenses
to increase significantly in future periods as we continue to implement our
business strategy, which includes advancing our drug candidates and our
manufacturing technologies into and through clinical development, expanding our
research and development efforts, including hiring additional personnel to
support our research and development efforts, ultimately seeking regulatory
approvals for our drug candidates that successfully complete clinical trials,
and further developing selected BayMedica activities. In addition, drug
candidates in later stages of clinical development generally incur higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
Accordingly, although we expect our research and development expenses to
increase as our drug candidates advance into later stages of clinical
development, we do not believe that it is possible, at this time, to accurately
project total program-specific expenses through to commercialization. There are
numerous factors associated with the successful commercialization of any of our
Product Candidates, including future trial design and various regulatory
requirements, many of which cannot be determined with accuracy at this time
based on our stage of development.



General and Administrative Expenses

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

Amortization and Depreciation




Intangible assets are comprised of intellectual property that we acquired in
2014 and 2015 and trade secrets, product formulation knowledge, patents that we
acquired in October 2021. The acquired intellectual property and patents are
amortized on a straight-line basis based on their estimated useful lives.
Equipment and leasehold improvements are depreciated using the straight-line
method based on their estimated useful lives.



                                       27





InMed Pharmaceuticals Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Three and six months ended December 31, 2022

Impairment of Long-Lived Assets




We assess the recoverability of our 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, we then determine 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.



Share-based Payments


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



Other Income


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



Results of Operations



As of the closing of the BayMedica acquisition, the Company aligned into two
operating and reportable segments, InMed Pharmaceuticals (the "InMed" segment)
and BayMedica (the "BayMedica" segment).



Comparison of the three months ended December 31, 2022 and 2021 for InMed
Segment



                                         Three Months Ended
                                            December 31,
                                          2022          2021        Change       % Change
                                           (in thousands)
Operating expenses:
Research and development and patents          587        1,980       (1,393
)          -70 %
General and administrative                  1,090        1,566         (476 )          -30 %
Amortization and depreciation                  26           26            -              0 %
Total operating expenses                    1,703        3,572       (1,869 )          -52 %
Interest and other income                      68            5           63           1260 %
Foreign exchange loss                          20            3           17            567 %
Net loss                               $   (1,615 )   $ (3,564 )   $  1,949            -55 %



Research and Development and Patents Expenses

Research and development and patents expenses decreased by $1.4 million in our
InMed segment, or 70%, for the three months ended December 31, 2022 compared to
the three months ended December 31, 2021. The decrease in research and
development and patents expenses was due to a combination of lower legal fees,
personnel expenses and decreased expenses related to the INM-755 program as we
progressed from preclinical toxicology studies into the relatively less capital
intense early human clinical trials.



                                       28





InMed Pharmaceuticals Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Three and six months ended December 31, 2022

General and administrative expenses

General and administrative expenses decreased by $0.5 million in our InMed
segment, or 30%, for the three months ended December 31, 2022 compared to the
three months ended December 31, 2021. The decrease results primarily from a
combination of changes including lower personnel expenses, stock-based
compensation expenses, accounting fees, investor relation expenses and legal
fees, partially offset by higher consulting fees.



Foreign exchange loss



Foreign exchange loss increased by less than $0.1 million in our InMed segment,
or 567%, for the three months ended December 31, 2022, compared to the three
months ended December 31, 2021, as a consequence of holding non-US denominated
assets and liabilities combined with fluctuations in foreign exchange rates.



Comparison of the three months ended December 31, 2022 and 2021 for BayMedica
Segment



                                         Three Months Ended
                                            December 31,
                                         2022           2021       Change      % Change
                                           (in thousands)
Sales                                  $     470       $   265     $   205            77 %
Cost of sales                                339           154         185           120 %
Gross profit                                 131           111          20            18 %

Operating expenses:
Research and development and patents         265           557        (292
)         -52 %
General and administrative                   375           270         105            39 %
Amortization and depreciation                 23            23           -             0 %
Total operating expenses                     663           850        (187 )         -22 %
Interest and other income                     47            21          26           124 %
Tax expense                                   (3 )           -          (3 )          nm
Net loss                               $    (488 )     $  (718 )   $   230           -32 %




Sales



Sales increased by $0.2 million in our BayMedica segment, or 77%, for the three
months ended December 31, 2022 compared to the three months ended December 31,
2021. The increase in distribution sales results from expanded marketing efforts
to sell inventory on-hand. In addition, we acquired BayMedica on October 13,
2021 so the three months ended December 31, 2021 results were approximately 2
and a half months. BayMedica will continue to evaluate opportunities for
potential structured supply arrangements and collaborations and will consider
other potential strategic alternatives for the commercial business.



Cost of Sales



Cost of goods sold increased by $0.2 million in our BayMedica segment, or 120%,
for the three months ended December 31, 2022 compared to the three months ended
December 31, 2021. The increase in cost of goods sold is a result from the
increase in sales mentioned above.



                                       29





InMed Pharmaceuticals Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Three and six months ended December 31, 2022

Research and Development and Patents Expenses

Research and development and patents expenses decreased by $0.3 million in our
BayMedica segment, or 52%, for the three months ended December 31, 2022 compared
to the three months ended December 31, 2021. The decrease in research and
development and patents expenses was primarily due to lower personnel expenses.



General and administrative expenses




General and administrative expenses increased by $0.1 million in our BayMedica
segment, or 39%, for the three months ended December 31, 2022 compared to the
three months ended December 31, 2021. The increase results primarily from a
combination of changes including higher personnel expenses and sales and
marketing expenses.



Comparison of the six months ended December 31, 2022 and 2021 for InMed Segment



                                         Six Months Ended
                                           December 31,
                                         2022         2021        Change      % Change
                                          (in thousands)
Operating expenses:
Research and development and patents      1,666        3,471       (1,805 )
        -52 %
General and administrative                2,183        2,939         (756 )         -26 %
Amortization and depreciation                53           55           (2 )          -4 %
Total operating expenses                  3,902        6,456       (2,563 )         -40 %
Interest and other income                    96           10           86           860 %
Foreign exchange loss                       (77 )        (81 )          4            -5 %
Net loss                               $ (3,883 )   $ (6,536 )   $  2,653           -41 %



Research and Development and Patents Expenses

Research and development and patents expenses decreased by $1.8 million in our
InMed segment, or 52%, for the six months ended December 31, 2022 compared to
the six months ended December 31, 2021. The decrease in research and development
and patents expenses was due to a combination of lower legal fees, personnel
expenses and decreased expenses related to the INM-755 program as we progressed
from preclinical toxicology studies into the relatively less capital intense
early human clinical trials.


General and administrative expenses

General and administrative expenses decreased by $0.8 million in our InMed
segment, or 26%, for the six months ended December 31, 2022 compared to the six
months ended December 31, 2021. The decrease results primarily from a
combination of changes including lower personnel expenses, insurance fees,
investor relation expenses, accounting fees and stock-based compensation
expenses, partially offset by higher consulting fees.



Foreign exchange loss



Foreign exchange loss decreased by less than $0.1 million in our InMed segment,
or 5%, for the six months ended December 31, 2022, compared to the six months
ended December 31, 2021, as a consequence of holding non-US denominated assets
and liabilities combined with fluctuations in foreign exchange rates.



                                       30




InMed Pharmaceuticals Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Three and six months ended December 31, 2022






Comparison of the six months ended December 31, 2022 and 2021 for BayMedica
Segment



                                         Six Months Ended
                                           December 31,
                                          2022         2021       Change       % Change
                                          (in thousands)
Sales                                  $      791     $  265     $    526            198 %
Cost of sales                                 574        154          420            273 %
Inventory write-down                          577          -          577             nm
Gross (loss) profit                          (360 )      111         (471 )         -424 %

Operating expenses:
Research and development and patents          564        557            7  
           1 %
General and administrative                    842        270          572            212 %
Amortization and depreciation                  45         23           22             96 %
Total operating expenses                    1,451        850          601             71 %
Interest and other income                      92         21           71            338 %
Tax expense                                   (10 )        -          (10 )           nm
Net loss                               $   (1,729 )   $ (718 )   $ (1,011 )          141 %




Sales


Sales increased by $0.5 million in our BayMedica segment, or 198%, for the six
months ended December 31, 2022 compared to the six months ended December 31,
2021. The increase in distribution sales results from expanded marketing efforts
to sell inventory on-hand in the second quarter of fiscal 2023. In addition, we
acquired BayMedica on October 13, 2021 so the six months ended December 31, 2021
results were approximately 2 and a half months. BayMedica will continue to
evaluate opportunities for potential structured supply arrangements and
collaborations and will consider other potential strategic alternatives for
the
commercial business.



Cost of Sales


Cost of goods sold increased by $0.4 million in our BayMedica segment, or 273%,
for the six months ended December 31, 2022 compared to the six months ended
December 31, 2021. The increase in cost of goods sold is a result from the
increase in sales mentioned above.



Inventory Write-Down



The write-down of inventories to net realizable value was $0.6 million in our
BayMedica segment for the six months ended December 31, 2022, with no comparable
expenses in 2021. Contributing factors to the decrease in net realizable value
included lower demand and downward pricing pressure in the first quarter of
fiscal 2023.



                                       31





InMed Pharmaceuticals Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Three and six months ended December 31, 2022

Research and Development and Patents Expenses




Research and development and patents expenses increased by less than $0.1
million in our BayMedica segment, or 1%, for the six months ended December 31,
2022 compared to the six months ended December 31, 2021. The increase in
research and development and patents expenses was due to the inclusion of
BayMedica operating results following the acquisition date on October 13, 2021.
There were no comparable expenses in the first quarter of fiscal 2021.



General and administrative expenses




General and administrative expenses increased by $0.6 million in our BayMedica
segment, or 212%, for the six months ended December 31, 2022 compared to the six
months ended December 31, 2021. The increase in general and administrative
expenses was due to the inclusion of BayMedica operating results following the
acquisition date on October 13, 2021. There were no comparable expenses in
the
first quarter of fiscal 2021.


Liquidity and Capital Resources




Since our inception, we have only generated limited revenue from Product sales,
no sales from any other sources and have incurred significant operating losses
and negative cash flows from our operations. We have only commenced commercial
sales with the acquisition of BayMedica and not yet commercialized any of our
Product Candidates and we do not expect to generate revenue from sales of any
Product Candidates for several years, if at all. We have funded our operations
to date primarily with proceeds from the sale of common shares.



As of December 31, 2022, we had cash, cash equivalents and short-term
investments of $11.5 million.




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



                                                                Six Months Ended       Six Months Ended
                                                                  December 31,           December 31,
(in thousands)                                                        2022                   2021
Net cash used in operating activities                          $           (4,969 )   $           (6,188 )
Net cash (used in) provided by investing activities                          (500 )                   56
Net cash provided by financing activities                                  10,745                 10,049
Net increase in cash and cash equivalents                      $           
5,276     $            3,917




Operating Activities



During the six months ended December 31, 2022, we used cash in operating
activities of $5.0 million, primarily resulting from our net loss of $5.6
million
combined with $0.2 million used in changes in our non-cash working
capital, partially offset by non-cash share-based compensation expenses and
inventory write-down.

During the six months ended December 31, 2021, we used cash in operating
activities of $6.2 million, primarily resulting from our net loss of $7.3
million
combined with $0.6 million used in changes in our non-cash working
capital, partially offset by non-cash share-based compensation expenses.



Investing Activities



During the six months ended December 31, 2022, cash used in investing activities
of $0.5 million resulted from escrow payments made to BayMedica's historical
equity and convertible debt holders.



                                       32





InMed Pharmaceuticals Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Three and six months ended December 31, 2022

During the six months ended December 31, 2021, cash provided by investing
activities of less than $0.1 million resulted from cash acquired from the
acquisition of BayMedica, partially offset by purchases of property and
equipment.




Financing Activities



During the six months ended December 31, 2022, cash provided by financing
activities of $10.7 million consisted of $12.0 million of gross proceeds from
private placements of our common shares, offset by total transaction costs
of
$1.3 million.



During the six months ended December 31, 2021, cash provided by financing
activities of $10.0 million consisted of $12.0 million of gross proceeds from a
private placement of our common shares, offset by transaction costs of $1.3
million and settlement of debt of $0.4 million reflecting the value of loans to
BayMedica as at the date of acquisition and $0.2 million for the repayment of
debt assumed in the BayMedica acquisition.



Funding Requirements



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



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



Through December 31, 2022, we have funded our operations primarily with proceeds
from the sale of common stock. We have incurred recurring losses and negative
cash flows from operations since its inception, including net losses of $5.6
million and $7.3 million for the six months ended December 31, 2022 and 2021,
respectively. In addition, we have an accumulated deficit of $99.1 million as of
December 31, 2022. Our accumulated deficit increased between 2014, when we began
focusing on the development of cannabinoid-derived pharmaceuticals following the
acquisition of Biogen Science Inc., and December 31, 2022 by approximately $70.2
million and we expect to continue to generate operating losses for the
foreseeable future.



As of the issuance date of the condensed consolidated interim financial
statements, we expect our cash and cash equivalents of $11.5 million as of
December 31, 2022 will be sufficient to fund our operating expenses and capital
expenditure requirements into the last quarter of calendar 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. Our future
viability is dependent on our ability to raise additional capital to finance our
operations. In addition, there are a number of uncertainties in estimating our
operating expenses and capital expenditure requirements including the impact of
potential acquisitions.



As a result, we have concluded that there is substantial doubt about our ability
to continue as a going concern within one year after the date that the condensed
consolidated interim financial statements are issued.



                                       33





InMed Pharmaceuticals Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Three and six months ended December 31, 2022

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



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

? the progress, costs and results of our Phase 2 clinical trial for INM-755;

? the scope, progress, results and costs of discovery research, preclinical

development, laboratory testing and clinical trials for our Product Candidates;

? the scope, progress, results and costs of development of our manufacturing

   technologies;



? the number of and development requirements for other Products and Product

   Candidates that we pursue;



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

? our ability to enter into contract manufacturing arrangements for supply of

materials and manufacture of our Products and Product Candidates and the terms

   of such arrangements;



? the impact of any acquired, or in-licensed, externally developed product(s)

   and/or technologies;



? our ability to establish and maintain strategic collaborations, licensing or

other arrangements, including sales arrangements, and the financial terms of

    such arrangements;



? the sales, costs and timing of future commercialization activities, including

product manufacturing, sales, marketing and distribution, for any of our

    Products and for Product Candidates for which we may receive marketing
    approval;



? the costs and timing of preparing, filing and prosecuting patent applications,

maintaining and enforcing our intellectual property and proprietary rights and

    defending any intellectual property- related claims;



? expansion costs of our operational, financial and management systems and

increases to our personnel, including personnel to support our clinical

development, manufacturing and commercialization efforts and our operations as

    a dual listed company; and



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

    portfolio.



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



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



                                       34





InMed Pharmaceuticals Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Three and six months ended December 31, 2022






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



Off-Balance Sheet Arrangements

During the periods presented we did not have, and we do not currently have, any
off-balance sheet arrangements, as defined in the rules and regulations of
the
SEC.


Critical Accounting Policies and Significant Judgments and Estimates

We periodically review our financial reporting and disclosure practices and
accounting policies to ensure that they provide accurate and transparent
information relative to the current economic and business environment. As part
of this process, we have reviewed our selection, application and communication
of critical accounting policies and financial disclosures. Management has
discussed the development and selection of the critical accounting policies with
the Audit Committee of the Board of Directors and the Audit Committee has
reviewed the disclosure relating to critical accounting policies in this
Management's Discussion and Analysis.



This discussion and analysis of our financial condition and results of
operations is based on our condensed consolidated interim financial statements
included as part of this report, which have been prepared in accordance with
U.S. GAAP. The preparation of our condensed consolidated interim financial
statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the revenue and expenses incurred
during the reported periods. We base estimates on our historical experience,
known trends and various other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.



Detailed information about our critical accounting policies and estimates is set
forth in Part II, Item 7 of our Annual Report on Form 10-K for the year ended
June 30, 2022. There have been no significant changes to these policies during
the six months ended December 31, 2022.



Going Concern



Through December 31, 2022, we have funded our operations primarily with proceeds
from the sale of common shares. We have incurred recurring losses and negative
cash flows from operations since our inception, including net losses of $5.6
million and $7.3 million for the six months ended December 31, 2022 and 2021,
respectively. In addition, we have an accumulated deficit of $99.1 million as of
December 31, 2022. Our accumulated deficit increased between 2014, when we began
focusing on the development of cannabinoid-derived pharmaceuticals following the
acquisition of Biogen Science Inc., and June 30, 2022 by approximately $70.2
million and we expect to continue to generate operating losses for the
foreseeable future.



As of the issuance date of the condensed consolidated interim financial
statements, we expect our cash and cash equivalents of $11.5 million as of
December 31, 2022 will be sufficient to fund our operating expenses and capital
expenditure requirements into the last quarter of calendar 2023, depending on
the level and timing of realizing revenues from the BayMedica commercial
operations as well as the level and timing of the Company operating expense. Our
future viability is dependent on our ability to raise additional capital to
finance our operations. In addition, there are a number of uncertainties in
estimating our operating expenses and capital expenditure requirements including
the impact of potential acquisitions.



As a result, we have concluded that there is substantial doubt about our ability
to continue as a going concern within one year after the date that the condensed
consolidated interim financial statements are issued.



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



                                       35

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