Incannex Healthcare Inc.

Previous 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.

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 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

During the fiscal year ended June 30, 2024, 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. 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 wording

During the fiscal year ended June 30, 2025, we generated revenue from clinic patients for rehabilitation services. This figure reflects the consideration to which the Company expects to be entitled in exchange for those services. Revenue increased approximately 617% when compared to revenues generated during the fiscal year ended June 2024 primarily as a result of our expansion of these services. 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.

Previous wording

Acquisition of IPR&D expense was recorded in the fiscal year ended June 30, 2023, in connection with the acquisition of APIRx in August 2022. We concluded that the acquisition of APIRx did not meet the definition of business under Accounting Standards Codification (“ASC”) 805, Business Combinations as APIRx did not have outputs present and a substantive process was not acquired and recorded the transaction as an asset acquisition as a result. We determined that drug candidates pertaining to APIRx had no alternative future use at the time of acquisition and charged $35.3 million, including transaction costs of $2.43 million, to the acquisition of IPR&D expense as of the date of acquisition.

Current wording

Acquisition of IPR&D expense was recorded in the fiscal year ended June 30, 2024, in connection with the acquisition of APIRx Pharmaceutical USA, LLC (“APIRx”) in August 2022. We concluded that the acquisition of APIRx did not meet the definition of business under Accounting Standards Codification (“ASC”) 805, Business Combinations as APIRx did not have outputs present and a substantive process was not acquired and recorded the transaction as an asset acquisition as a result. We determined that drug candidates pertaining to APIRx had no alternative future use at the time of acquisition and charged $35.3 million, including transaction costs of $2.43 million, to the acquisition of IPR&D expense as of the date of acquisition.

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 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 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. As our aggregated turnover is less than A$20 million and we are 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.

Previous wording

Foreign exchange losses decreased by $39,000 for the fiscal year ended June 30, 2024 2024 compared to the fiscal year ended June 30, 2023, due to favorable currency exchange rates, and interest income received from cash deposited in our bank accounts decreased by $35,000 during the same period as a result of a decrease in the cash deposited.

Current wording

Foreign exchange losses increased by $0.3 million for the fiscal year ended June 30, 2025 compared to the fiscal year ended June 30, 2024, primarily due to unfavorable currency exchange rates during the period.

Previous wording

Currency translation adjustment, net of tax decreased by $2.2 million for the fiscal year ended June 30, 2024 compared to the fiscal year ended June 30, 2023. The increase 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 Note 2 to our financial statements included in this Annual Report for further information, under the heading “Foreign Currency Translation.”

Current wording

Currency translation adjustment, net of tax increased by $0.3 million for the fiscal year ended June 30, 2025 compared to the fiscal year ended June 30, 2024. The increase resulted primarily from the translation of financial statements from the functional currency to U.S. dollars. For certain of our international subsidiaries, the local currency is the functional currency, and their financial statements are then translated into U.S. dollars for reporting purposes. See Note 2 to our financial statements included in this Annual Report for further information, under the heading “Foreign Currency Translation.”

Previous wording

We incurred total comprehensive losses of $18.5 million and $48.8 million for the fiscal years ended June 30, 2024 and 2023, respectively. We incurred net losses of $18.5 million and $48.8 million for the fiscal years ended June 30, 2024 and 2023, respectively. The decrease in net loss is primarily attributable to a $35.3 million decrease in acquisition of IPR&D expense related to the acquisition of APIRx during the fiscal year ended June 30, 2023. As of June 30, 2024, we had accumulated comprehensive losses of $110.7 million.

Current wording

We incurred total comprehensive losses of $46.7 million and $18.5 million for the fiscal years ended June 30, 2025 and 2024, respectively. The increase in net loss is attributable to a $24.3 million increase driven by financing activities, including changes in the fair value of warrants and convertible debt, as well as loss on extinguishment of debt during the fiscal year ended June 30, 2025. As of June 30, 2025, we had accumulated comprehensive losses of $157.6 million.

Previous wording

As of June 30, 2024, we had cash and cash equivalents of $5.9 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 in this Annual Report.

Current wording

As of June 30, 2025, we had cash and cash equivalents of $15.0 million. Although we expect our negative cash flows from operating activities to continue, we believe our current cash balances, together with anticipated cash flows and available financing arrangements, provide sufficient resources to meet our obligations and sustain operations for at least one year from the issuance date of the financial statements in this Annual Report.

Previous wording

For the fiscal year ended June 30, 2024, we experienced net cash outflows from operating activities of $15.8 million, an increase of $5.1 million compared to the fiscal year ended June 30, 2023. As of June 30, 2024, we had cash and cash equivalents of $5.6 million, a decrease of $16.5 million compared to our cash and cash equivalents as of June 30, 2023 of $22.1 million. As of June 30, 2024, our current assets exceed our current liabilities by $10.6 million, a $9.8 million decrease compared to the difference between our current assets and current liabilities as of June 30, 2023 of $20.4 million.

Current wording

For the fiscal year ended June 30, 2025, we experienced net cash outflows from operating activities of $12.5 million, a decrease of $3.3 million compared to the fiscal year ended June 30, 2024. As of June 30, 2025, we had cash and cash equivalents of $15.0 million, an increase of $9.2 million compared to our cash and cash equivalents as of June 30, 2024 of $5.9 million. As of June 30, 2025, our current assets exceed our current liabilities by $13.0 million, a $2.4 million increase compared to the difference between our current assets and current liabilities as of June 30, 2024 of $10.6 million.

Previous wording

We believe there is substantial doubt about our ability to obtain additional capital when and as needed to continue as a going concern as of the date of this Annual Report. We have not yet established an ongoing source of revenue sufficient to cover our operating and capital expenditure requirements and to cover any potential payments that may become due and payable pursuant to any debentures to provide sufficient certainty that we will continue as a going concern. Historically, we have financed our operations to date primarily through partnerships, funds received from public offerings of common stock, a debt financing facility, as well as funding from governmental bodies. We plan to address this condition through the sale of common stock in public offerings and/or private placements, debt financings, or through other capital sources, including collaborations with other companies or other strategic transactions, but there is no assurance these plans will be completed successfully or at all. Pursuant to the requirements of ASC 205-40,* Presentation of Financial Statements - Going Concern*, and as a result of our financial condition and other factors described herein, there is substantial doubt about our ability to continue as a going concern for a period of at least twelve months from the date of the financial statements.

Current wording

As of the date of this Annual Report, we believe there is no longer substantial doubt about our ability to continue as a going concern. Although we have not yet established an ongoing source of revenue sufficient to cover all operating and capital expenditure requirements, including any potential payments pursuant to debentures, recent improvements in our financial position provide reasonable assurance that we will continue as a going concern for at least twelve months from the date of the financial statements.

Previous wording

Based on our unrestricted cash and cash equivalents as of June 30, 2024, we anticipate that we will be able to fund our planned operating expenses and capital expenditure requirements into December 2024. We believe that our current cash and cash equivalents and anticipated cash flows from the financing activities contemplated by the September 2024 Purchase Agreement and the ELOC Agreement would be sufficient to meet our anticipated working capital requirements and capital expenditures in the ordinary course of business until August 2025. However, there can be no assurance that we will continue to comply with the terms of these agreements or that these issuances will occur. We have based these estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

Current wording

During the three months ended June 30, 2025, we sold 163,283,465 shares of common stock for aggregate gross proceeds of $40.2 million and net proceeds of approximately $38.7 million after deducting $1.5 million in commissions payable to the sales agent. As of September 29, 2025, our unrestricted cash and cash equivalents were $73.4 million. Based on our unrestricted cash and cash equivalents as of September 29, 2025, we anticipate that we will be able to fund our planned operating expenses and capital expenditure requirements for at least twelve months from the date of the financial statements included in this Annual Report. We have based these estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

Previous wording

Net cash used in operating activities increased by $5.1 million in the fiscal year ended June 30, 2024 compared to the fiscal year ended June 30, 2023. The increase was due to an increase in cash used to conduct our R&D activities of $6.6 million (from $6.3 million to $12.9 million), partially offset by an increase in R&D tax incentive received (from $0.7 million to $2.6 million).

Current wording

Net cash used in operating activities decreased by $3.3 million in the fiscal year ended June 30, 2025 compared to the fiscal year ended June 30, 2024. The decrease was primarily driven by a $6.3 million reduction in share-based compensation expense (from $8.9 million to $2.6 million) and a decrease in cash paid related to trade and other payables of $1.6 million (from $3.0 million to $1.4 million), partially offset by an increase in R&D tax incentive received of $15.4 million (from outflow of $9.8 million to inflow of $5.6 million).

Previous wording

Net cash used in investing activities decreased by $39,000 in the fiscal year ended June 30, 2024 compared to fiscal 2023. The decrease was due to less spending on property, plant and equipment.

Current wording

Net cash used in investing activities decreased by $0.3 million in the fiscal year ended June 30, 2025 compared to fiscal year ended June 30, 2024. The decrease was due to less spending on property, plant and equipment.

Previous wording

While our significant accounting policies are described in more detail in Note 2 to our financial statements included elsewhere in this prospectus, 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 financial statements included elsewhere in this 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.

Previous wording

The Company evaluate acquisitions under the accounting framework in ASC 805, Business Combinations, to determine whether the transaction is a business combination or an asset acquisition. In determining whether an acquisition should be accounted for as a business combination or an asset acquisition, the Company first perform a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this is the case, the acquired set is not deemed to be a business and is instead accounted for as an asset acquisition. If this is not the case, the Company further evaluate whether the acquired set includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If so, the Company conclude that the acquired set is a business.

Current wording

We evaluate acquisitions under the accounting framework in ASC 805, Business Combinations, to determine whether the transaction is a business combination or an asset acquisition. In determining whether an acquisition should be accounted for as a business combination or an asset acquisition, we first perform a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this is the case, the acquired set is not deemed to be a business and is instead accounted for as an asset acquisition. If this is not the case, we further evaluate whether the acquired set includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If so, we conclude that the acquired set is a business.

Previous wording

The Company measures and recognizes asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, which includes pre-acquisition direct costs recorded in accrued professional and consulting fees. Goodwill is not recognized in asset acquisitions.

Current wording

We measure and recognizes asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, which includes pre-acquisition direct costs recorded in accrued professional and consulting fees. Goodwill is not recognized in asset acquisitions.

Previous wording

The Company accounts 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 the Company to estimate the fair value of stock-based payment awards on the date of grant using an option-pricing model. The Company uses 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. The Company has 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 wording

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 (“BSOPM”) 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 BSOPM, require the input of several assumptions. These inputs are subjective and generally require significant analysis and judgment to develop.

Previous wording

R&D costs are expensed as incurred. R&D 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

R&D costs are expensed as incurred. R&D 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.