Incannex Healthcare Inc
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
IXHL$2.24-1.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-15.
0001213900-24-043391
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001213900-24-098421
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 54 previous paragraphs and 75 current paragraphs.
17 unchanged; 14 reworded; 44 added; 22 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 7 previous and 21 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (44)
Current report
We are a clinical-stage biopharmaceutical development company dedicated to developing innovative medicines for patients living with serious chronic diseases and significant unmet needs. Our lead drug candidates, which are currently in Phase 2/3 and Phase 2 clinical developments, include IHL-42X for the treatment of OSA; PSX-001, our psilocybin treatment in combination with psychological therapy in development to treat patients with GAD; and IHL-675A for rheumatoid arthritis. Each of these programs target conditions that currently have limited, inadequate, or no approved pharmaceutical treatment options.
Current report
Recent Developments
Current report
Equity-Line of Credit Purchase Agreement
Current report
On September 6, 2024, we entered into an equity line of credit Purchase Agreement (the “ELOC Purchase Agreement”) with Arena Business Solutions Global SPC II, Ltd (“Arena Global”). Under the ELOC Purchase Agreement Arena Global has committed to purchase up to $50 million of our common stock par value $0.0001 per share, at our direction from time to time, subject to the satisfaction of the conditions in the ELOC Purchase Agreement. The purchase price per share of our common stock is obtained by multiplying by 96% the daily volume weighted average price (“VWAP”) on The Nasdaq Global Market (“Nasdaq”) for the trading day specified in the sale notice (same trading day or one trading day following such notice) delivered to Arena Global. The ELOC Purchase Agreement will terminate automatically upon the earliest to occur of (i) the first day of the month next following the 36-month anniversary of the date of the ELOC Purchase Agreement; or (ii) the date on which Arena Global shall have purchased shares of our common stock under the ELOC Purchase Agreement for an aggregate gross purchase price equal to the Commitment Amount (as defined in the ELOC Purchase Agreement). In connection with the ELOC Purchase Agreement we agreed, among other things to issue to Arena Global, as a commitment fee, that number of shares of our common stock equal to 250,000 divided by the simple average of the daily VWAP of our common stock during the five trading days immediately preceding the effectiveness of a “shelf” registration statement on Form S-3 on which the estimated number of shares of our common stock are registered. As additional consideration for Arena Global’s execution and delivery of the ELOC Purchase Agreement, we issued on October 31, 2024, a five-year warrant (the “ELOC Warrant”) exercisable for 585,000 shares of our common stock with an exercise price equal to $1.66 per share. However, we may not sell common stock to Arena Global under the ELOC Purchase Agreement if (i) a shelf Registration Statement on Form S-3 that registers the common stock issuable under the ELOC Purchase Agreement has not been declared effective by the SEC; (ii) the number of shares of our common stock issuable to Arena Global pursuant to a sale notice causes the aggregate number of shares of our common stock beneficially owned by Arena Global and its affiliates would exceed 9.99% of the number of shares of our common stock then outstanding; (iii) the Shareholder Approval (as defined in the ELOC Purchase Agreement) to issue Common Stock in excess of the Exchange Cap (a cap limiting the issuance of shares pursuant to the ELOC Purchase Agreement and ELOC Warrant to 19.99% of the Company’s issued and outstanding shares on the date of the ELOC Purchase Agreement (3,526,802 shares of Common Stock) to the extent such prior stockholder approval would be required for compliance with the rules and regulations of Nasdaq); or (iv) such sale of shares of our common stock would exceed, during any 12-…
Excerpt shortened here; the source contains the full paragraph.
Current report
Convertible Debenture Financing
Current report
On September 6, 2024, we entered into that certain Securities Purchase Agreement (the “September 2024 Purchase Agreement”) with Arena Investors, LP (“Arena Investors”) pursuant to which we will issue secured convertible debentures in an aggregate principal amount of up to $10 million at an aggregate purchase price of up to $9 million, divided into three separate tranches that are each subject to closing conditions, with a 10% original issue discount (the “September 2024 Debentures”). The conversion price of each September 2024 Debenture would be equal to 115% of the closing price of our common stock on the trading day preceding the date of the issuance of the respective September 2024 Debenture, subject to adjustments related to the trading price of our common stock on Nasdaq.
Current report
Pursuant to the September 2024 Purchase Agreement, we and certain of our subsidiaries (the “Subsidiaries”) and Arena Special Opportunities (Offshore) Master II LP (“Arena Opportunities”) entered into a security agreement effective as of October 14, 2024 (the “Security Agreement”), pursuant to which we (i) pledged the equity interests in the Subsidiaries and (ii) granted to Arena Opportunities a security interest in, among other items, all of our owned assets, whether currently owned or later acquired, and all proceeds therefrom (the “Assets”), as set forth in the Security Agreement. In addition, our Subsidiary, Incannex Healthcare Pty Ltd (IHPL) entered into a patent security agreement (the “Patent Security Agreement”) and a trademark security agreement (the “Trademark Security Agreement”), each effective as of October 14, 2024, pursuant to which IHPL granted to the investors a security interest in its patents, patent applications, and all proceeds therefrom and a security interest in its trademarks, trademark applications, and all proceeds therefrom, respectively. In addition, pursuant to the Security Agreement, the Subsidiaries granted to Arena Opportunities a security interest in its Assets and, pursuant to a Subsidiary Guarantee effective as of October 14, 2024 (the “Subsidiary Guarantee”), jointly and severally agreed to guarantee and act as surety for our obligation to repay the Debentures and other obligations under the other transaction documents.
Current report
As additional consideration for the Purchaser’s purchase of each September 2024 Debenture, we will issue a warrant (a “September 2024 Debenture Warrant”), with a five year expiration, each exercisable for number of shares of our common stock equal to 25% of the total principal amount of the related September 2024 September 2024 Debenture purchased by the Purchaser on the applicable closing date divided by 115% of the closing price of our common stock on the trading day immediately preceding such closing date. We are not obligated to issue a September 2024 Debenture Warrant with respect to any September 2024 Debenture tranche that does not close. The exercise price of each September 2024 Debenture Warrant will be 115% of the closing price of our common stock on its issuance date.
Current report
We must register the shares of our common stock issuable upon conversion of the September 2024 Debentures and exercise of the September 2024 Debenture Warrants. However, the issuance of the common stock underlying the September 2024 Debenture and the September 2024 Debenture Warrants are subject to stockholder approval to the extent the issuance would exceed 19.99% of the number of shares of our common stock outstanding as of the date of the September 2024 Purchase Agreement.
Current report
As described in Note 16 of the Financial Statements included in this Quarterly Report, on October 17, 2024, we completed the closing of the first tranche for the issuance of a 10% original issue discount secured convertible debenture (the “First Tranche Debenture”) in the principal amount of $3,333,333 at an aggregate purchase price of $3 million, with 10% original issue discount and payment-in-kind interest rate at 5%, to Arena Opportunities pursuant to the September 2024 Purchase Agreement. The First Tranche Debenture matures on April 14, 2026. In addition, we issued a warrant to Arena Investors exercisable for up to 453,749 shares of common stock (the “First Tranche Warrant”). The exercise price of the First Tranche Warrant is $1.89 per share.
Current report
The net proceeds received from the issuance of the First Tranche Debenture, after deduction of expenses reimbursable to the Arena Investors, was $2,877,588.
Current report
Pursuant to the September 2024 Purchase Agreement, we and Arena Opportunities entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which we agreed to file with the SEC a registration statement on Form S-3 after the closing of each tranche of the debenture to register for resale the shares of common stock issued upon conversion of the applicable debenture and the shares issuable upon exercise of any warrants issued in the applicable closing, within 20 calendar days after the closing date of the first tranche (the “Filing Deadline”) and to have such registration statement declared effective within 60 days after the Filing Deadline (or in the event of full review by the SEC, within 90 calendar days after the Filing Deadline). On November 6, 2024, we filed with the SEC the Resale Registration Statement, registering for resale up to 61,389,758 shares of common stock, including up to 10,101,009 shares of common stock issuable upon conversion of the First Tranche Debenture and up to 453,749 shares of common stock issuable upon the exercise of the First Tranche Warrant.
Current report
Facility Agreement
Current report
On October 9, 2024, we entered into a Facility Agreement (the “Facility Agreement”) with FC Credit Pty Ltd (“FC Credit”), pursuant to which FC Credit will provide a term loan facility for up to $4.7 million (the “Loan Facility”). On October 10, 2024, we received approximately $4.6 million as the initial drawdown amount, after deducting certain fees payable by us under the Facility Agreement. The Loan Facility has a term of 12 months from the date of the initial drawdown (the “Final Repayment Date”). Interest under the Loan Facility will accrue at the rate of 14.5% per annum and is payable on the last date of each calendar month and on the Final Repayment Date.
Current report
This facility provides us with immediate access to funds based on research and development expenses incurred during the 2023 and 2024 financial years, aligning with the end of the Australian financial year. The Research and Development Tax Incentive (“RDTI”) program is a key program under the Australian government's innovation framework, designed to encourage companies to undertake research and development activities that benefit Australia. It offers a tax rebate, currently at 48.5%, for eligible research and development expenses, allowing companies to recoup almost half of their research and development spending.
Current report
Revenue from Customers
Current report
We have generated revenue from clinic patients on rehabilitation services which reflects the consideration to which the Company expects to be entitled in exchange for those services for the three months ended September 30, 2024. We have not generated any revenue from the sale of products. We do not expect to generate material revenues unless and until our drug candidates are approved.
Current report
Research and development expenses consist primarily of external and internal costs incurred in performing clinical and preclinical development activities.
Current report
Our R&D expenses include:
Current report
We expense research and development costs as incurred.
Current report
Although research and development activities are central to our business model, the successful development of our drug candidates is highly uncertain. There are numerous factors associated with the successful development of our drug 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. In addition, future regulatory factors beyond our control may impact our clinical development programs. Drug candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later stage clinical trials. As a result, we expect our research and development expenses will increase substantially in connection with our ongoing and planned clinical and preclinical development activities in the near term and in the future to the extent our development activities are successful. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of our drug candidates. Our research and development expenses have varied, and our future research and development expenses may vary, significantly based on a wide variety of factors such as:
Current report
A change in the outcome of any of these variables with respect to the development of our drug candidates could significantly change the costs and timing associated with the development of that drug candidate. We may never succeed in obtaining regulatory approval for any drug candidate.
Current report
General and administrative expenses consist primarily of personnel-related expenses finance and accounting, human resources and other administrative functions, including salaries, stock-based compensation and benefits for employees, legal fees, expenses relating to patent and corporate matters and professional fees paid for accounting, auditing, consulting and tax services, as well as facilities-related costs not otherwise included in research and development expenses and other costs such as insurance costs and travel expenses.
Current report
We anticipate our general and administrative expenses will increase substantially in the future as we expand our operations, including increasing our headcount to support our continued research and development activities and preparing for potential commercialization of our drug candidates. We also anticipate we will incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance, and investor and public relations expenses associated with operating as a U.S. public company.
Current report
We incurred total comprehensive losses of $5.1 million and $1.2 million for the three months ended September 30, 2024 and three months ended September 30, 2023, respectively. We incurred net losses of $5.4 million and $0.7 million for the three months ended September 30, 2024 and three months ended September 30, 2023, respectively. As of September 30, 2024, we had accumulated deficit of $116.1 million.
Current report
As of September 30, 2024, we had cash and cash equivalents of $3.6 million. We expect our negative cash flows from operating activities to continue and thus have determined that the losses and negative cash flows from operations and uncertainty in generating sufficient cash to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern for at least one year from the issuance date of the financial statements included in this Quarterly Report.
Current report
For the three months ended September 30, 2024, we experienced net cash used in operating activities of $2.5 million, a decrease of $3.2 million compared to the three months ended September 30, 2023. As of September 30, 2024, we had cash and cash equivalents of $3.6 million, a decrease of $2.2 million compared to our cash and cash equivalents as of June 30, 2024 of $5.9 million. As of September 30, 2024, our current assets exceed our current liabilities by $6.0 million, a $4.6 million decrease compared to the difference between our current assets and current liabilities as of June 30, 2024 of $11.4 million.
Current report
Going Concern
Current report
Off-Balance Sheet Arrangements
Current report
We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Current report
Comparison of cash flows for the for the three months ended September 30, 2024 and three months ended September 30, 2023
Current report
The following table summarizes our cash flows for the periods presented (in thousands):
Current report
Cash used in operating activities decreased by $3.5 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The decrease was due to a decrease in in R&D tax incentive received (from $4.1 to $0.7 million).
Current report
Cash used in investing activities decreased by $0.2 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was due to no spending on property, plant and equipment.
Current report
Cash used in financing activities decreased by $0.05 million for the three months ended September 30, 2024 and the three months ended September 30, 2023.
Current report
While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements described in the Company’s Annual Report on Form 10-K, we believe the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Current report
We account for stock-based compensation arrangements with employees and non-employees using a fair value method which requires the recognition of compensation expense for costs related to all stock-based payments including share options. The fair value method requires us to estimate the fair value of stock-based payment awards on the date of grant using an option-pricing model. We use either the trinomial pricing or Black-Scholes option-pricing model to estimate the fair value of options granted. Stock-based compensation awards are expensed using the graded vesting method over the requisite service period, which is generally the vesting period, for each separately vesting tranche. We have elected a policy of estimating forfeitures at grant date. Option valuation models, including the trinomial pricing and Black-Scholes option-pricing model, require the input of several assumptions. These inputs are subjective and generally require significant analysis and judgment to develop.
Current report
Research and development Costs
Current report
Research and development costs are expensed as incurred. Research and development costs consist of salaries, benefits and other personnel related costs including equity-based compensation expense, laboratory supplies, preclinical studies, clinical trials and related clinical manufacturing costs, costs related to manufacturing preparations, fees paid to other entities to conduct certain research and development activities on our behalf and allocated facility and other related costs.
Current report
Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses until the related goods are delivered or services are performed.
Showing the first 40 of 44 passages. Open the source sections for the rest.
Removed paragraphs (22)
Previous report
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 report
Acquisition of in-process research and development
Previous report
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 report
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 report
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 report
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 report
Since our inception, our operations have mainly been financed through the issuance of equity securities. Additional funding has come through interest earned from cash on term deposit.
Previous report
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 report
Due to our focus on research and development activities, we do not have ready access to credit facilities and, therefore, are not subject to externally imposed capital requirements. Our objective in relation to capital risk management is to balance our current working capital position against the requirements to meet research and development programs and corporate overheads.
Previous report
We anticipate that we will require substantial additional funds in order to achieve our long-term goals and complete the research and development of our current drug candidates. We do not expect to generate significant revenue until we obtain regulatory approval to market and sell our drug candidate and sales of our drug candidate have commenced. We therefore expect to continue to incur substantial losses in the near future.
Previous report
Our future capital requirements are difficult to forecast and will depend on many factors, including:
Previous report
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 report
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 report
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.
Previous report
The Company records compensation expense for stock options based on the fair market value of the awards on the date of grant. The fair value of stock-based compensation awards is amortized over the vesting period of the award. Compensation expense for performance-based awards is measured based on the number of shares ultimately expected to vest, estimated at each reporting date based on management’s expectations regarding the relevant performance criteria. For certain awards, the Company estimates the fair value of share options and other equity-based compensation using a binomial option pricing model on the date of grant.
Previous report
Income Taxes
Previous report
Income taxes are accounted for using the liability method. 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. 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. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that a portion of the deferred tax asset will not be realized. The Company reviews its uncertain tax positions regularly. An uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed return, or planned to be taken in a future tax return or claim that has not been reflected in measuring income tax expense for financial reporting purposes. The Company recognizes the tax benefit from an uncertain tax position when it is more-likely-than-not that the position will be sustained upon examination on the basis of the technical merits or the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired.
Previous report
Emerging Growth Company Status
Previous report
We are an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.
Previous report
We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Previous report
Fully Diluted Share Capital
Previous report
The number of issued and outstanding shares of common stock on a fully converted basis as at March 31, 2024 was as follows:
Reworded paragraphs (14)
Previous wording
The following discussion should be read in conjunction with the unaudited consolidated financial statements and notes thereto included elsewhere in this Quarterly Report. This Quarterly Report contains forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed or implied by such forward-looking statements. For a detailed discussion of these risks and uncertainties, see Item 3D “Risk Factors” in our 2023 Annual Report and this Quarterly Report. See also “Special Note Regarding Forward-Looking Statements.” We caution the reader not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this Quarterly Report. We undertake no obligation to update forward-looking statements, which reflect events or circumstances occurring after the date of this Quarterly Report.
Current wording
The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”). This Quarterly Report contains forward-looking statements. This discussion and analysis contain forward looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section in our Annual Report on Form 10-K, as filed with the SEC on September 30, 2024 (the “2024 Annual Report”) and this Quarterly Report. We caution the reader not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this Quarterly Report. We undertake no obligation to update forward-looking statements, which reflect events or circumstances occurring after the date of this Quarterly Report.
Previous wording
Our accounting policies under U.S. GAAP are referred to in Note 1 of the Consolidated Financial Statements in this Quarterly Report. All amounts are in United States dollars, unless otherwise indicated.
Current wording
Our accounting policies under U.S. GAAP are referred to in Note 1 of the unaudited condensed consolidated financial statements in this Quarterly Report. All amounts are in United States dollars, unless otherwise indicated.
Previous wording
Comparison of the Three and Nine Months Ended March 31, 2024 and 2023
Current wording
Comparison of the Three Months Ended September 30, 2024 and 2023
Previous 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.
Current wording
Research and development expenses increased by $0.3 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was primarily due to the commencement of a BA/BE 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
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).
Current wording
General and administrative expenses increased by $1.1 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase was due to increase of $0.6 million in salaries, and other employee benefits (from $0.9 million to $1.5 million) as a result of the issuance of restricted stock to our directors, $0.3 million in compliance, legal and regulatory services as a result of increased legal costs to implement our re-domiciliation (from $0.8 million to $1.1 million), $52,000 in depreciation expenses and $60,000 in advertising and investor relations expense.
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 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.
Current wording
We receive tax incentives from the Australian government for research and development activities. Subject to certain exclusions, the Australian Government tax incentives provide benefits for eligible research and development 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 A$20 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 research and development activities during the year.
Previous 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.
Current wording
Benefit from R&D tax credit decreased by $3.3 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decreasewas due to a decrease in the R&D tax credit received from the Australian Taxation Office for our research and clinical trials activities in Australia following finalization of the fiscal year 2023 Australian tax return.
Previous 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.
Current wording
Foreign exchange losses increased by $3,000 for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, due to unfavorable currency exchange rates, and interest income decreased by $43,000 due to a decrease in interest received from cash deposited in our bank accounts as a result of a decrease in the cash deposited.
Previous 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.
Current wording
Currency translation adjustment, net of tax increased by $0.8 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was due to the appreciation of the Australian dollar against 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 US dollars for reporting purposes.
Previous wording
We are a development stage enterprise at an early stage in the development of our drug candidate. We have incurred net losses since inception and expect to incur substantial and increasing losses for the next several years as we expand our research and development activities (“R&D”) and move our drug candidate into later stages of development. The process of carrying out the development of our drug candidates to later stages of development may require significant additional research and development expenditures, including pre-clinical testing and clinical trials, as well as for obtaining regulatory approval. To date, we have funded our operations primarily through the sale of equity securities, proceeds from the exercise of options, tax grants from R&D activities and interest income.
Current wording
We have incurred net losses since inception and expect to incur substantial and increasing losses in the future as we expand our R&D activities in an effort to move our drug candidates into later stages of development. Historically, we have funded our operations primarily through the sale of equity securities, proceeds from the exercise of options, tax grants from R&D activities and interest income.
Previous wording
See Note 2 “Basis of Presentation and Summary of Significant Accounting Policies” in our consolidated financial statements included in this Quarterly Report for further information.
Current wording
Refer to Note 2 – Basis of Presentation and Summary of Significant Accounting Policies – Going Concern Basis
Previous wording
Cash flows from operating activities
Current wording
Net cash flows from operating activities
Previous wording
Cash flows from investing activities
Current wording
Net cash flows from investing activities
Previous wording
Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited interim consolidated financial statements as of March 31, 2024, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of these unaudited interim consolidated financial statements requires our management to make judgments and estimates that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on 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 readily apparent from other sources. Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material.
Current wording
Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited interim condensed consolidated financial statements as of September 30, 2024, which have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of these unaudited interim condensed consolidated financial statements requires our management to make judgments and estimates that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities during the reporting periods. We base our estimates on historical experience, known trends and events, and various other factors we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
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.