Incannex Healthcare Inc

Previous wording

We receive tax incentives from the Australian government for R&D activities. Subject to certain exclusions, the Australian Government tax incentives provide benefits for eligible R&D activities. Entities are entitled to either (i) a 43.5% refundable tax offset for eligible companies with an aggregated turnover of less than A$20 million per annum or (ii) a non-refundable 38.5% tax offset for all other eligible companies. Our aggregated turnover is less than $3 million and not be controlled by one or more income tax exempt entities, we anticipate being entitled to a claim of 43.5% refundable tax offset for costs relating to eligible R&D activities during the year.

Current wording

We receive tax incentives from the Australian government for R&D activities. Subject to certain exclusions, the Australian Government tax incentives provide benefits for eligible R&D activities. Entities are entitled to either (i) a 48.5% refundable tax offset for eligible companies with an aggregated turnover of less than A$20 million per annum or (ii) a non-refundable 38.5% tax offset for all other eligible companies. Our aggregated turnover is less than $3 million and not be controlled by one or more income tax exempt entities, we anticipate being entitled to a claim of 48.5% refundable tax offset for costs relating to eligible R&D activities during the year.

Previous wording

Comparison of the Three and Six Months Ended December 31, 2023 and 2022

Current wording

Comparison of the Three and Nine Months Ended March 31, 2024 and 2023

Previous wording

Research and development expenses increased by $1.1 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022. The increase was primarily due to increases in expenses related to clinical research and product development for our clinical trials.

Current wording

Research and development expenses increased by $1.6 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily due to increases in expenses related to clinical research and product development for our clinical trials.

Previous wording

Research and development expenses increased by $2.3 million for the six months ended December 31, 2023 compared to the six months ended December 31, 2022. The increase was primarily due to due to the commencement of a Bioequivalence/Bioavailability clinical trial investigating IHL-42X in healthy volunteers, a Phase 2 clinical trial investigating IHL-675A in patients with Rheumatoid arthritis, and a Phase 2/3 clinical trial investigating IHL-42X in patients with obstructive sleep apnea.

Current wording

Research and development expenses increased by $3.9 million for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. The increase was primarily due to due to the commencement of a Bioequivalence/Bioavailability clinical trial investigating IHL-42X in healthy volunteers, a Phase 2 clinical trial investigating IHL-675A in patients with Rheumatoid arthritis, and a Phase 2/3 clinical trial investigating IHL-42X in patients with obstructive sleep apnea.

Previous wording

Acquisition of in-process research and development expense was recorded exclusively in the six months period ended December 31, 2022, because such expenses related to the acquisition of APIRx Pharmaceutical USA, LLC, which was recorded as an asset acquisition during such period. The acquisition of APIRx was completed in August 2022. We concluded that the acquisition of APIRx did not meet the definition of business under ASC 805, Business Combinations as APIRx did not have outputs present and a substantive process was not acquired.

Current wording

Acquisition of in-process research and development expense was recorded exclusively in the nine months ended March 31, 2023, because such expenses related to the acquisition of APIRx Pharmaceutical USA, LLC, which was recorded as an asset acquisition during such period. The acquisition of APIRx was completed in August 2022. We concluded that the acquisition of APIRx did not meet the definition of business under ASC 805, Business Combinations as APIRx did not have outputs present and a substantive process was not acquired.

Previous wording

General and administrative expenses increased by $3.3 million for the three months ended December 31, 2023, compared to the three months ended December 31, 2022. The increase was due to increases of $3.1 million in salaries, and other employee benefits (from $0.9 million to 4.0 million) as a result of the issuance of restricted stock to our directors in December 2023, $71,908 in compliance, legal and regulatory as a result of increased legal costs to implement our re-domiciliation, $0.1 million in other administration expenses (from $0.1 million to 0.2 million), partially offset by a decrease of $0.2 million in in advertising and investor relations (from $0.4 million to 0.2 million), $11,803 in occupancy expenses and $808 in depreciation expense.

Current wording

General and administrative expenses increased by $2.1 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. The increase was due to increases of $1.9 million in salaries, and other employee benefits (from $1.0 million to $2.9 million) as a result of the issuance of restricted stock to our directors in March 2024, $304,000 in compliance, legal and regulatory as a result of increased legal and accounting expenses due to the increase cost of our reporting obligations following our re-domiciliation, $20,000 in occupancy expenses, $30,000 in depreciation expense, and $0.1 million in other administration expenses (from $0.1 million to $0.2 million), partially offset by a decrease of $0.3 million in advertising and investor relations (from $0.4 million to $0.1 million).

Previous wording

General and administrative expenses increased by $4.1 million for the six months ended December 31, 2023 compared to the six months ended December 31, 2022. The increase was due to increases of $2.7 million in salaries, and other employee benefits (from $2.1 million to $4.8 million), $0.9 million in compliance, legal and regulatory (from $0.7 million to $1.6 million), $0.1 million in occupancy expenses (from $35,000 to $153,000), $0.3 million in advertising and investor relations (from $0.4 million to $0.7 million), $0.2 million in other administration expenses (from $0.2 million to 0.4 million), partially offset by a decrease of $10,000 in depreciation expense (from $34,000 to $24,000).

Current wording

General and administrative expenses increased by $6.2 million for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. The increase was due to increases of $4.6 million in salaries, and other employee benefits (from $3.1 million to $7.7 million), $1.2 million in compliance, legal and regulatory as a result of increased legal and accounting costs due to the increase expenses of our reporting obligations following our re-domiciliation (from $1.2 million to $2.4 million), $0.1 million in occupancy expenses, $0.04 million in advertising and investor relations, $0.3 million in other administration expenses, and $0.02 million in depreciation expense.

Previous wording

Benefit from R&D tax credit increased by $2.1 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022. The increase was due to an increase in the research and development tax credit received from the Australian Taxation Office as a result of our research and clinical trials activities in Australia.

Current wording

Benefit from R&D tax credit decreased by $1.4 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease was due to a decrease in the research and development tax credit received from the Australian Taxation Office for our research and clinical trials activities in Australia following finalization of the fiscal 2023 Australian tax return.

Previous wording

Benefit from R&D tax credit increased by $6.1 million for the six months ended December 31, 2023 compared to the six months ended December 31, 2022. The increase was due to an increase in the research and development tax credit received from the Australian Taxation Office as a result of our research and clinical trials activities in Australia.

Current wording

Benefit from R&D tax credit decreased by $7.5 million for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. The decrease was due to a decrease in the research and development tax credit received from the Australian Taxation Office for our research and clinical trials activities in Australia following finalization of the fiscal 2023 Australian tax return.

Previous wording

Foreign exchange losses and interest income decreased by $40,000 for the three months ended December 31, 2023 compared to the three months ended December 31, 2022. The decrease was due to a decrease in income received from cash deposited in our bank accounts and an increase in losses due to currency exchange rates.

Current wording

Interest income decreased by $88,000 for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, due to a decrease in income received from cash deposited in our bank accounts, and foreign exchange losses increased by $11,000 due to unfavorable currency exchange rates during the same period.

Previous wording

Foreign exchange losses and interest income increased by $3,000 for the six months ended December 31, 2023 compared to the six months ended December 31, 2022. The increase was due to an increase in income received from cash deposited in our bank accounts (from $82,000 to $92,000), partially offset by an increase in losses due to currency exchange rates.

Current wording

Foreign exchange losses increased by $17,000 for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023, due to unfavorable currency exchange rates, partially offset by an increase in interest income received from cash deposited in our bank accounts by $13,000 during the same period.

Previous wording

Currency translation adjustment, net of tax decreased $2.8 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022. The decrease was due to currency translation of the financial statements from the Australian dollar to the U.S. dollar. We maintain our consolidated financial statements in the Australian dollar, which is our functional currency. However, our financial statements are translated into US dollars for reporting purposes. See our note 2 “Foreign Currency Translation” to our financial statements included in this Quarterly Report for further information.

Current wording

Currency translation adjustment, net of tax increased $0.6 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was due to currency translation of the financial statements from the Australian dollar to the U.S. dollar. We maintain our consolidated financial statements in the Australian dollar, which is our functional currency. However, our financial statements are translated into US dollars for reporting purposes. See our note 2 “Foreign Currency Translation” to our financial statements included in this Quarterly Report for further information.

Previous wording

Currency translation adjustment, net of tax decreased $2.2 million for the six months ended December 31, 2023 compared to the six months ended December 31, 2022. The decrease was due to currency translation of the financial statements from the Australian dollar to the US dollar. We maintain our consolidated financial statements in Australian dollar, which is our functional currency. However, our financial statements are translated into US dollars for reporting purposes. See our note 2 “Foreign Currency Translation” to our financial statements included in this Quarterly Report for further information.

Current wording

Currency translation adjustment, net of tax decreased $1.8 million for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. The decrease was due to currency translation of the financial statements from the Australian dollar to the U.S. dollar. We maintain our consolidated financial statements in Australian dollar, which is our functional currency. However, our financial statements are translated into U.S. dollars for reporting purposes. See our note 2 “Foreign Currency Translation” to our financial statements included in this Quarterly Report for further information.

Previous wording

As of December 31, 2023, we had cash of $14.5 million. We anticipate that our current cash will be sufficient for the current fiscal year and to fund our operations at least until December 2024. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

Current wording

As of March 31, 2024, we had cash of $9.3 million. We anticipate that our current cash will be sufficient for the current fiscal year and to fund our operations at least until December 2024. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

Previous wording

Cash used in operating activities increased by $2.4 million for the six months ended December 31, 2023, compared to the six months ended December 31, 2022. The increase was due to an increase in prepaid expenses and other current assets (from $224,000 to $5.9 million), partially offset by positive cash flow regarding trade and other payables by $1.1 million and an increase in positive cash flow regarding share-based compensation by $2.4 million.

Current wording

Cash used in operating activities increased by $4.0 million for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023. The increase was due to an increase in prepaid expenses and other current assets (from $264,000 to $5.5 million), partially offset by positive cash flow regarding trade and other payables by $0.8 million.

Previous wording

Cash used in financing activities increased by $167,000 for the six months ended December 31, 2023 compared to the six months ended December 31, 2022. The increase was due to an increase in cash used to purchase equipment to conduct our clinical trials.

Current wording

Cash used in financing activities increased by $129,000 for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. The increase was due to an increase in cash used to purchase equipment to conduct our clinical trials.

Previous wording

Cash provided by financing activities decreased to nil for the six months ended December 31, 2023 compared to the six months ended December 31, 2022. The decrease was due to a decrease in the proceeds from issuances of shares of common stock.

Current wording

Cash provided by financing activities decreased to nil for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. The decrease was due to a decrease in the proceeds from issuances of shares of common stock.