Incannex Healthcare Inc

Previous 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 for the fiscal year ended June 30, 2024, as filed with the Securities and Exchange Commission (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.

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

We are a clinical-stage biopharmaceutical development company dedicated to developing combination medicines that target the underlying biological pathways associated with chronic conditions, including obstructive sleep apnea (“OSA”), rheumatoid arthritis and generalized anxiety disorder. We are advancing novel oral fix-dosed treatments and therapeutic regimens based on evidence-based innovation. Our lead Phase 2/3 and Phase 2 clinical programs include IHL-42X for the treatment of OSA; IHL-675A for the treatment of inflammatory conditions, including rheumatoid arthritis, and PSX-001, our oral synthetic psilocybin treatment, in combination with psychotherapy, for the treatment of generalized anxiety disorder. Our programs target disorders that have limited, inadequate, or no approved pharmaceutical treatment options.

Current wording

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.

Previous wording

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 Common Stock 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 the 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 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 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-1 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-1 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-month period, one-third of the Company’s p…

Excerpt shortened here; the source contains the full paragraph.

Current wording

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.

Previous wording

On September 6, 2024, we entered into a Securities Purchase Agreement (the “September 2024 Purchase Agreement”) with Arena Investors, LP (“Arena Investors”), which provides for the issuance ofconvertible debentures in an aggregate principal amount of up to $10 million at an aggregate purchase price of up to $9 million (a 10% original issue discount), divided into three separate tranches subject to closing conditions for each tranche. Pursuant to the September 2024 Purchase Agreement, the conversion price of each secured convertible debenture is to equal to 115% of the closing price of our Common Stock on the trading day preceding the date of the issuance of the respective secured convertible debenture, subject to subsequent adjustments and alternative conversion prices related to the then-current trading price of our Common Stock on Nasdaq as further described in the September 2024 Purchase Agreement. For each secured convertible debenture purchased under the September 2024 Purchase Agreement, the Company will also issue to the purchaser a warrant exercisable to purchase up to that number of shares of Common Stock equal to 25% of the total principal amount of the related secured convertible debenture purchased by the purchaser on the applicable closing date divided by 115% of the closing price of the Company’s Common Stock on the trading day immediately preceding such closing date. The Company is not obligated to issue warrants with respect to any tranche that does not close. The exercise price of each warrant issued pursuant to the September 2024 Purchase Agreement will be 115% of the closing price of the Common Stock on its issuance date and the warrants will have a five-year term.

Current wording

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.

Previous wording

Pursuant to the September 2024 Purchase Agreement, we, certain of our subsidiaries (the “Subsidiaries”), and Arena Opportunities entered into a security agreement, effective as of October 14, 2024 (the “Security Agreement”), under 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 described 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, under which IHPL granted 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, under 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 September 2024 Debentures and other obligations under the related transaction documents.

Current wording

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.

Previous wording

We are required to register the shares of our Common Stock issuable upon conversion of the September 2024 Debentures and upon exercise of the September 2024 Debenture Warrants. However, the issuance of the common stock underlying the September 2024 Debentures 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. On December 11, 2024, our stockholders approved, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of 20% or more of our issued and outstanding Common Stock pursuant to the September 2024 Purchase Agreement, including upon the conversion of September 2024 Debentures and September 2024 Warrants.

Current wording

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.

Previous wording

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 under the September 2024 Purchase Agreement 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 (a 10% original issue discount) to Arena Special Opportunities (Offshore) Master II LP (“Arena Opportunities”). The First Tranche Debenture provides for a payment-in-kind interest rate at 5% and 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. The net proceeds received from the issuance of the First Tranche Debenture, after deduction of expenses reimbursable to the Arena Investors, were $2,877,588. The Company did not meet the closing conditions for the second and third tranche closings set forth in the September 2024 Purchase Agreement, but the Company and Arena Investors may conduct additional closings under the September 2024 Purchase Agreement as they may agree and subject to the closing conditions set forth therein. There can be no assurance that the parties will reach such an agreement for additional tranche closings.

Current wording

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.

Previous wording

On November 6, 2024, pursuant to our agreements in connection with the First Tranche Debenture, the Company filed a resale Registration Statement on Form S-1/A with the SEC, 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. This registration statement was declared effective on December 6, 2024.

Current wording

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.

Previous wording

On October 9, 2024, we entered into a Facility Agreement (the “Facility Agreement”) with FC Credit Pty Ltd (“FC Credit”), under 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 in an initial drawdown, after deducting certain fees payable by us under the Facility Agreement. The Facility Agreement has a term of 12 months from the date of the initial drawdown (the “Final Repayment Date”). Interest 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 wording

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.

Previous wording

Subject to its terms, 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, when the Research and Development Tax Incentive program (“RDIT”) rebates are paid. The RDIT is a key initiative 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 wording

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.

Previous wording

Comparison of the Three and Six Months Ended December 31, 2024 and 2023

Current wording

Comparison of the Three and Nine Months Ended March 31, 2025 and 2024

Previous wording

We have generated revenue from Clarion Clinics for patient services for the three and six months ended December 31, 2024. However, we do not expect to generate material revenues unless and until our drug candidates are approved.

Current wording

We have generated revenue from Clarion Clinics for patient services for the three and nine months end March 31, 2025. However, we do not expect to generate material revenues unless and until our drug candidates are approved.

Previous wording

Research and development expenses decreased by $1.2 million for the three months ended December 31, 2024 compared to the three months ended December 31, 2023. The decrease was primarily due to the completion of the IHL-42Xsafety and pharmacokinetics clinical trial and the pausing of patient recruitment in the Australian Phase 2 clinical trial for IHL-675A in rheumatoid arthritis. This decision was made to reallocate resources for the IHL-675A program and focus on expanding research efforts in the United States, where an expedited regulatory pathway may be available. The primary R&D expense for the period was the Phase 2/3 RePOSA clinical trial investigating IHL-42X in patients with OSA.

Current wording

Research and development expenses decreased by $0.5 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decrease was primarily due to the completion of the IHL-42X safety and pharmacokinetics clinical trial and the pausing of patient recruitment in the Australian Phase 2 clinical trial for IHL-675A in rheumatoid arthritis. This decision was made to reallocate resources for the IHL675A program and focus on expanding research efforts in the United States, where an expedited regulatory pathway may be available. The primary R&D expense for the period was the Phase 2/3 RePOSA clinical trial investigating IHL-42X in patients with OSA.

Previous wording

Research and development expenses decreased by $1.1 million for the six months ended December 31, 2024 compared to the six months ended December 31, 2023. The decrease was primarily due to the completion of the IHL-42Xsafety and pharmacokinetics clinical trial and the pausing of patient recruitment in the Australian Phase 2 clinical trial for IHL-675A in rheumatoid arthritis. This decision was made to reallocate resources for the IHL-675A program and focus on expanding research efforts in the United States, where an expedited regulatory pathway may be available. The primary R&D expense for the period was the Phase 2/3 RePOSA clinical trial investigating IHL-42X in patients with OSA.

Current wording

Research and development expenses decreased by $1.5 million for the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024. The decrease was primarily due to the completion of the IHL-42X safety and pharmacokinetics clinical trial and the pausing of patient recruitment in the Australian Phase 2 clinical trial for IHL-675A in rheumatoid arthritis. This decision was made to reallocate resources for the IHL-675A program and focus on expanding research efforts in the United States, where an expedited regulatory pathway may be available. The primary R&D expense for the period was the Phase 2/3 RePOSA clinical trial investigating IHL-42X in patients with OSA.

Previous wording

Although R&D 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 R&D 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 R&D expenses have varied, and our future R&D expenses may vary, significantly based on a wide variety of factors such as:

Current wording

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:

Previous wording

General and administrative expenses decreased by $1.7 million for the three months ended December 31, 2024, compared to the three months ended December 31, 2023. The decrease was primarily attributable to a decrease in employee benefits, resulting from a reduction in the amount of restricted stock issued to our directors and officers.

Current wording

General and administrative expenses decreased by $1.9 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The decrease was primarily attributable to a decrease in employee benefits, resulting from a reduction in the amount of restricted stock issued to our directors and officers.

Previous wording

General and administrative expenses decreased by $0.3 million for the six months ended December 31, 2024, compared to the six months ended December 31, 2023. The decrease was primarily attributable to a decrease in employee benefits, resulting from a reduction in the amount of restricted stock issued to our directors and officers.

Current wording

General and administrative expenses decreased by $2.5 million for the nine months ended March 31, 2025, compared to the nine months ended March 31, 2024. The decrease was primarily attributable to a decrease in employee benefits, resulting from a reduction in the amount of restricted stock issued to our directors and officers.

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. If our aggregated turnover is less than A$20 million and is not 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 incentive decreased by $2.0 million for the three months ended December 31, 2024 compared to the three months ended December 31, 2023. The decrease was due to a lower estimate of our R&D tax incentive receivable for the three months ended December 31, 2024.

Current wording

Benefit from R&D tax incentive decreased by $0.9 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decrease was due to a lower estimate of our R&D tax incentive receivable for the three months ended March 31, 2025.

Previous wording

Benefit from R&D tax incentive decreased by $5.1 million for the six months ended December 31, 2024 compared to the six months ended December 31, 2023. The decrease was due to a lower estimate of our R&D tax incentive receivable for the six months ended December 31, 2024.

Current wording

Benefit from R&D tax incentive decreased by $6.0 million for the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024. The decrease was due to a lower estimate of our R&D tax incentive receivable for the nine months ended March 31, 2025.

Previous wording

Foreign exchange losses also increased by $0.3 million for the six months ended December 31, 2024 compared to the six months ended December 31, 2023, due to unfavorable currency exchange rates. Interest income increased over the same period, reflecting higher interest received from cash deposits.

Current wording

Foreign exchange losses decreased by $0.1 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, due to favourable currency exchange rates. Interest income decreased over the same period, reflecting lower interest received from cash deposits.

Previous wording

Foreign exchange losses increased by $0.3 million for the three months ended December 31, 2024, compared to the three months ended December 31, 2023, due to unfavorable currency exchange rates. Interest income increased over the same period, reflecting higher interest received from cash deposits.

Current wording

Foreign exchange losses increased by $0.3 million for the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024, due to unfavorable currency exchange rates. Interest income decreased over the same period, reflecting lower interest received from cash deposits.

Previous wording

Currency translation adjustment, net of tax, decreased by $1.3 million for the three months ended December 31, 2024, compared to the three months ended December 31, 2023. The decrease was due to the depreciation of the Australian dollar against the U.S. dollar. We maintain our consolidated financial statements in Australian dollars, our functional currency, while our financial statements are translated into U.S. dollars for reporting purposes.

Current wording

Currency translation adjustment, net of tax, decreased by $0.7 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The decrease was due to the depreciation of the Australian dollar against the U.S. dollar. We maintain our consolidated financial statements in Australian dollars, our functional currency, while our financial statements are translated into U.S. dollars for reporting purposes.

Previous wording

Currency translation adjustment, net of tax decreased by $0.5 million for the six months ended December 31, 2024, compared to the six months ended December 31, 2023. The decrease was due to the depreciation of the Australian dollar against the U.S. dollar.

Current wording

Currency translation adjustment, net of tax decreased by $0.2 million for the nine months ended March 31, 2025, compared to the nine months ended March 31, 2024. The decrease was due to the depreciation of the Australian dollar against the U.S. dollar.

Previous 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 advance 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.

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

We incurred total comprehensive losses of $11.4 million and $5.6 million for the six months ended December 31, 2024 and six months ended December 31, 2023, respectively. We incurred net losses of $5.9 million and $11.3 million for the six months ended December 31, 2024 and six months ended December 31, 2023, respectively. As of December 31, 2024, we had accumulated deficit of $122.0 million.

Current wording

We incurred total comprehensive losses of $16.2 million and $12.4 million for the nine months ended March 31, 2025 and nine months ended March 31, 2024, respectively. We incurred net losses of $15.3 million and $12.0 million for the nine months ended March 31, 2025 and nine months ended March 31, 2024, respectively. As of March 31, 2025, we had accumulated deficit of $126.0 million.

Previous wording

As of December 31, 2024, we had cash and cash equivalents of $2.1 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. We do not currently have an update to our previously disclosed cash runway estimate. We have based our cash runway estimates on assumptions that may prove to be incorrect, and we could use our capital resources sooner than we currently expect.

Current wording

As of March 31, 2025, we had cash and cash equivalents of $6.7 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. We do not currently have an update to our previously disclosed cash runway estimate. We have based our cash runway estimates on assumptions that may prove to be incorrect, and we could use our capital resources sooner than we currently expect.

Previous wording

For the six months ended December 31, 2024, we experienced net cash used in operating activities of $7.9 million, an increase of $0.1 million compared to the six months ended December 31, 2023. As of December 31, 2024, we had cash and cash equivalents of $2.1 million, a decrease of $3.8 million compared to our cash and cash equivalents as of June 30, 2024 of $5.9 million. As of December 31, 2024, our current assets exceed our current liabilities by $4.7 million, a $5.9 million decrease compared to the difference between our current assets and current liabilities as of June 30, 2024 of $10.6 million.

Current wording

For the nine months ended March 31, 2025, we experienced net cash used in operating activities of $11.0 million, a decrease of $1.2 million compared to the nine months ended March 31, 2024. As of March 31, 2025, we had cash and cash equivalents of $6.7 million, an increase of $0.8 million compared to our cash and cash equivalents as of June 30, 2024 of $5.9 million. As of March 31, 2025, our current assets exceed our current liabilities by $8.2 million, a $2.4 million decrease compared to the difference between our current assets and current liabilities as of June 30, 2024 of $10.6 million.* *

Previous wording

Comparison of cash flows for the for the six months ended December 31, 2024 and six months ended December 31, 2023

Current wording

Comparison of cash flows for the for the nine months ended March 31, 2025 and nine months ended March 31, 2024

Previous wording

Net cash used in operating activities increased an insignificant amount for the six months ended December 31, 2024, compared to the six months ended December 31, 2023. The increase was due to a decrease in in R&D tax incentive received.

Current wording

Cash used in operating activities decreased by $1.2 million for the nine months ended March 31, 2025, compared to the nine months ended March 31, 2024. The decrease due to …

Previous wording

Net cash used in investing activities decreased by $0.3 million for the six months ended December 31, 2024 compared to the six months ended December 31, 2023. The decrease was due to reduced spending on property, plant and equipment.

Current wording

Cash used in investing activities decreased by $0.3 million for the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024. The decrease was due to reduced spending on property, plant and equipment.

Previous wording

Net cash flows from financing activities

Current wording

Cash flows from financing activities

Previous 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 December 31, 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 these 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.

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 March 31, 2025, 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.

Previous wording

While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements described in the 2024 Annual Report, we believe the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Current wording

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.

Previous wording

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 R&D activities on our behalf and allocated facility, and other related costs.

Current wording

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.

Previous wording

We record accrued liabilities for estimated costs of R&D activities based on estimated services to be conducted by third-party service providers, which include preclinical studies and clinical trials, and contract manufacturing activities. We record these estimated costs based upon the estimated amount of services provided, but not yet invoiced, and include these costs in trade and other payables on the consolidated balance sheets and within R&D expenses on the consolidated statements of operations and comprehensive loss.

Current wording

We record accrued liabilities for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of preclinical studies and clinical trials, and contract manufacturing activities. We record the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and includes these costs in trade and other payables on the consolidated balance sheets and within research and development expenses on the consolidated statements of operations and comprehensive loss.

Previous wording

We accrue these costs based on factors such as estimates of the work completed and in accordance with agreements established with our third-party service providers. We make significant judgments and estimates when determining the accrued liabilities balance at the end of each reporting period. As actual costs become known, we adjust our accrued liabilities accordingly. To date, we have not experienced any material differences between the accrued costs and actual costs incurred.

Current wording

We accrue for these costs based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers. We make significant judgments and estimates in determining the accrued liabilities balance at the end of each reporting period. As actual costs become known, we adjust our accrued liabilities. We have not experienced any material differences between accrued costs and actual costs incurred.

Previous wording

Benefit from the R&D tax credit consists of the R&D tax credit received in Australia, which is recorded within other income (expense), net. The Company recognizes grants once both of the following conditions are met: (i) the Company is able to comply with the relevant conditions of the grant and (ii) the grant is received.

Current wording

Benefit from R&D tax credit consists of the R&D tax credit received in Australia, which is recorded within other income (expense), net. The Company recognizes grants once both of the following conditions are met: (i) the Company is able to comply with the relevant conditions of the grant and (ii) the grant is received.