InMed Pharmaceuticals Inc.

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

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

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

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

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

On June 1, 2026, the Arbitrator issued an award on preliminary motions brought by BayMedica, striking significant portions of the Licensor’s claims, including claims for damages, declaratory relief and specific performance relating to BayMedica’s alleged breaches of its sublicensee, royalty reporting and commercialization obligations under the Agreement on the basis that it was plain and obvious such claims cannot succeed. The Arbitrator also denied the Licensor leave to amend. As a result, the arbitration will continue on a significantly narrowed basis, with the sole remaining substantive claim being the Licensor’s allegation that BayMedica is required to make annual minimum payments irrespective of royalties generated from sales of licensed products, which the Arbitrator declined to dismiss as statute-barred.

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