Incannex Healthcare Inc 10-Q for FY2026 Q2
Incannex Healthcare Inc. (IXHL)
About this 10-Q
Incannex Healthcare Inc filed this 10-Q on February 13, 2026, covering the quarter ended December 31, 2025 (FY2026 Q2).
Headline figures
Quarter ended December 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $6.52M
- compared with a net loss of $5.89M a year earlier
- Diluted EPS
- -$0.02
- compared with -$0.33 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
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Table of Contents
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, adopted pursuant to the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:
| ● | our ability to implement our product development and business strategies, including our ability to continue to pursue development pathways and regulatory strategies for IHL-42X, PSX-001, and IHL-675A and any of our other drug candidates; |
| ● | estimates regarding market size and related future growth rates; |
| ● | our research and development (“R&D”) activities, including clinical testing and manufacturing and the related costs and timing; |
| ● | the possibility that we may be required to conduct additional clinical studies or trials for our drug candidates and the consequences resulting from the delay in obtaining necessary regulatory approvals; |
| ● | the timing, scope or likelihood of regulatory filings and approvals and our ability to obtain and maintain regulatory approvals for our drug candidates for any indication; |
| ● | the pricing, coverage and reimbursement of our drug candidates, if approved and commercialized; |
| ● | the rate and degree of market acceptance and clinical utility of our drug candidates; |
| ● | our ability to compete with other drugs or therapies currently marketed or in development for our target indications; |
| ● | our expectations around feedback from and discussions with regulators, regulatory development paths and with respect to Controlled Substances Act designation; |
| ● | our ability to obtain or maintain effective patent rights and other intellectual property protection for our drug candidates, and to prevent competitors from using technologies we consider important to the successful development and commercialization of our drug candidates; |
| ● | our estimates regarding expenses, revenues, financial performance and capital requirements, including the length of time our capital resources will sustain our operations; |
| ● | our ability to commercialize drug candidates and to generate revenues; |
| ● | our financial condition, including our ability to obtain the funding necessary to advance the development of our drug candidates; |
| ● | our ability to comply with the provisions and requirements of our debt arrangements and to pay amounts owed, including any amounts that may be accelerated; |
| ● | our ability to retain and attract qualified employees, directors, consultants and advisors; |
| ● | our ability to continue to comply with applicable privacy laws and protect confidential information from security breaches; |
| ● | how recent and potential future changes in healthcare policy could negatively impact our business and financial condition; |
ii
| ● | the extent to which global economic and political developments, including existing regional conflicts, pandemics, natural disasters, and the indirect and/or long-term impact of inflation, will affect our business operations, clinical trials, or financial condition; and |
| ● | any statement of assumptions underlying any of the foregoing. |
These risks are not exhaustive. Other sections of this Quarterly Report may include additional factors that could harm our business and financial performance.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” previously disclosed in Item 1A in our Annual Report on Form 10-K, as filed with the SEC on September 29, 2025 (the “2025 Annual Report”). Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report and, while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.
We may announce material business and financial information to our investors using our investor relations website (https://www.incannex.com/investors/). We therefore encourage investors and others interested in our company to review the information that we make available on our website. Our website and information included in or linked to our website are not part of this Quarterly Report.
iii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
INCANNEX HEALTHCARE INC.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except share and per share amounts)
(expressed in U.S. Dollars, unless otherwise stated)
| December 31, 2025 | June 30, 2025 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Prepaid expenses and other assets | ||||||||
| Research and development (“R&D”) tax incentive receivable | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Investment in joint venture | ||||||||
| Operating lease right-of-use assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Trade and other payables | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Operating lease liabilities, current | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 8) | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock, $ | ||||||||
| Preferred stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Foreign currency translation reserve | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
INCANNEX HEALTHCARE INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
(in thousands, except share and per share amounts)
(expressed in U.S. Dollars, unless otherwise stated)
| For the three months ended December 31, | For six months ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue from customers | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| General and administrative | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income, net: | ||||||||||||||||
| R&D tax incentive | ||||||||||||||||
| Foreign exchange gains/(losses) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||
| Interest income | ||||||||||||||||
| Change in fair value of convertible rights | ( | ) | ( | ) | ||||||||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||||||||||
| ELOC commitment fee | ( | ) | ( | ) | ||||||||||||
| Share of earnings (loss) of joint venture | ||||||||||||||||
| Total other income, net | ( | ) | ( | ) | ||||||||||||
| Loss before income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income/(loss): | ||||||||||||||||
| Currency translation adjustment, net of tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share: Basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of shares outstanding, basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
INCANNEX HEALTHCARE INC.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(unaudited)
(in thousands, except share amounts)
(expressed in U.S. Dollars, unless otherwise stated)
| Foreign | Total | |||||||||||||||||||||||
| Additional | currency | Stockholders’ | ||||||||||||||||||||||
| paid-in | Accumulated | translation | Equity | |||||||||||||||||||||
| Common Stock | capital | deficit | reserve | (Deficit) | ||||||||||||||||||||
| Shares | Amount | Amount | Amount | Amount | Amount | |||||||||||||||||||
| # | $ | $ | $ | $ | $ | |||||||||||||||||||
| Balance at June 30, 2025 | ( | ) | ( | ) | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Share issuance | ||||||||||||||||||||||||
| Share issuance costs | - | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Currency translation adjustment, net of tax | - | |||||||||||||||||||||||
| Balance at September 30, 2025 | ( | ) | ( | ) | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Share issuance | ||||||||||||||||||||||||
| Share repurchase | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Share issuance costs | - | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Currency translation adjustment, net of tax | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at December 31, 2025 | ( | ) | ( | ) | ||||||||||||||||||||
| Foreign | Total | |||||||||||||||||||||||
| Additional | currency | Stockholders’ | ||||||||||||||||||||||
| paid-in | Accumulated | translation | Equity | |||||||||||||||||||||
| Common Stock | capital | deficit | reserve | (Deficit) | ||||||||||||||||||||
| Shares | Amount | Amount | Amount | Amount | Amount | |||||||||||||||||||
| # | $ | $ | $ | $ | $ | |||||||||||||||||||
| Balance at June 30, 2024 | ( | ) | ( | ) | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Share issuance | - | - | - | - | - | - | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Currency translation adjustment, net of tax | - | |||||||||||||||||||||||
| Balance at September 30, 2024 | ( | ) | ( | ) | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Convertible note conversion | - | |||||||||||||||||||||||
| Share issuance | ||||||||||||||||||||||||
| Share issuance costs | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Currency translation adjustment, net of tax | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at December 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
INCANNEX HEALTHCARE INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands, except share and per share amounts)
(expressed in U.S. Dollars, unless otherwise stated)
| For the six months ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Unrealized loss on foreign currency remeasurement | ||||||||
| Non-cash expense of ELOC commitment | ||||||||
| Stock-based compensation expense | ||||||||
| Change in fair value of warrant liabilities | ||||||||
| Change in fair value of convertible rights | ||||||||
| Non-cash interest expense | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ||||||||
| R&D tax incentive | ( | ) | ||||||
| Securities pledged | ( | ) | ||||||
| Trade and other payables | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||
| Investment of joint venture | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds received from facility agreement | ||||||||
| Repayment of facility agreement | ( | ) | ||||||
| Proceeds from share issuance | ||||||||
| Share issuance costs | ( | ) | ||||||
| Proceeds from issuance of convertible debt | ||||||||
| Debt issuance costs | ( | ) | ||||||
| Share repurchase | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | |||||||
| Net increase/(decrease) in cash, cash equivalents, and restricted cash | ( | ) | ||||||
| Cash and cash equivalents, and restricted cash at beginning of period | ||||||||
| Cash and cash equivalents, and restricted cash at end of period | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
| Issuance of ELOC warrants at initial fair value | ||||||||
| Issuance of convertible note warrants at initial fair value | ||||||||
| Issuance of convertible rights at initial fair value | ||||||||
| Total | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
INCANNEX HEALTHCARE INC.
Notes To Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(expressed in U.S. Dollars, unless otherwise stated)
Note 1 – Business
Incannex Healthcare Inc. (the “Company”) is a corporation formed under the laws of Delaware in July 2023. Incannex Healthcare Inc. and its subsidiaries are referred to as “the Company” unless the text otherwise requires.
The Company’s fiscal year end is June 30. References to a particular “fiscal year” are to the Company’s fiscal year ended June 30 of that calendar year.
The unaudited condensed consolidated financial statements of the Company are presented in United States dollars and consist of Incannex Healthcare Inc. and the following wholly-owned subsidiaries:
Subsidiary | Jurisdiction | |
| Incannex Healthcare Limited | ||
| Incannex Pty Ltd | ||
| Psychennex Pty Ltd | ||
| APIRx Pharmaceutical USA, LLC | ||
| APIRx Pharmaceuticals Holding BV | ||
| Clarion Clinics Group Pty Ltd | ||
| Clarion Model Clinic Pty Ltd | ||
| Psychennex Licensing and Franchising Pty Ltd |
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The Company’s unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC.
Reference is frequently made herein to the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”). This is the source of authoritative U.S. GAAP recognized by the FASB to be applied to non-governmental entities.
Unaudited Interim Financial Information
In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of December 31, 2025, and its results of operations for the three and six months ended December 31, 2025, and 2024, and cash flows for the six months ended December 31, 2025, and 2024. The Company has condensed or omitted certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP pursuant to the applicable required disclosures and regulations of the SEC. As such, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2025 (the “2025 Annual Report”).
Going Concern Basis
The financial report has been prepared on the going concern basis, which assumes continuity of normal business activities and the realization of assets and the settlement of liabilities in the ordinary course of business.
The Company has incurred total comprehensive losses
of $
5
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)
As of December 31, 2025 and June 30,
2025, the Company had cash and cash equivalents of $
Historically, the Company has financed its 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. The Company continues to plan for additional capital through the sale of common stock in public offerings and/or private placements, debt financings, or through other capital sources, including pursuant to the at-the-market offering program, collaborations with other companies or other strategic transactions.
Based on the Company’s unrestricted cash and cash equivalents as of December 31, 2025, the Company anticipates that it will be able to fund its planned operating expenses and capital expenditure requirements for at least twelve months from the date of these financial statements.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Details of all controlled entities are set out in Note 1. All intercompany balances and transactions have been eliminated on consolidation.
Equity Method Investment
The Company has a joint venture with Mind Medicine
Australia (“MMA”) to operate a psychedelic-assisted therapies services clinic in Melbourne, Australia. The Company owns
The carrying value of equity method investments were $
Comparative information
Comparative information has been reclassified where appropriate to conform to changes in presentation in the current year to enhance comparability.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the Company’s unaudited condensed consolidated financial statements and accompanying notes.
The most significant estimates and assumptions in the Company’s unaudited condensed consolidated financial statements include the valuation of equity-based instruments issued, accrued research and development expense, and the research and development tax credit. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ materially from those estimates.
Risks and Uncertainties
The Company is subject to risks and uncertainties common to companies in the biopharmaceutical industry. The Company believes that changes in any of the following areas could have a material adverse effect on future financial position or results of operations: ability to obtain future financing; regulatory approval and market acceptance of, and reimbursement for, drug candidates; performance of third-party clinical research organizations and manufacturers upon which the Company relies; protection of the Company’s intellectual property; litigation or claims against the Company based on intellectual property, patent, product, regulatory or other factors; the Company’s ability to attract and retain employees.
There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid technological change and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties.
6
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)
Significant Accounting Policies
The following is provided to update the Company’s significant accounting policies disclosed in Note 2 to the Consolidated Financial Statements described in the 2025 Annual Report that have had a material impact on the Company’s unaudited condensed consolidated financial statements and related notes.
Equity-Line of Credit Purchase Agreement
On September 6, 2024, the Company 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 had committed to purchase up to $
The purchase price per share of Common Stock was obtained by multiplying
by
On December 9, 2024, in connection with the
ELOC Purchase Agreement, the Company issued
As additional consideration for Arena Global’s
execution and delivery of the ELOC Purchase Agreement, the Company issued a five-year warrant (the “ELOC Warrant”) on October 31,
2024, exercisable for
The Company determines whether to classify contracts, such as warrants, that may be settled in the Company’s own stock as equity of the entity or as a liability. An equity-linked financial instrument must be considered indexed to the Company’s own stock to qualify for equity classification. The Company classifies warrants as liabilities for any contracts that may require a transfer of assets. Warrants classified as liabilities are accounted for at fair value and remeasured at each reporting date until exercise, expiration or modification that results in equity classification. Any change in the fair value of the warrants is recognized in the Consolidated Statements of Operations and Comprehensive Loss.
Classification of the ELOC Warrants as liability instruments was based on management’s analysis of the guidance in ASC 815 and in a statement issued by the Staff of the SEC regarding the accounting and reporting considerations for warrants issued entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies”.
Management considered whether the ELOC Warrant displayed the three characteristics of a derivative under ASC 815 and concluded that the ELOC Warrant meets the definition of a derivative. However, the ELOC Warrant failed to meet the equity scope exception in ASC 815-10-15-74(a) and thus is classified as a liability measured at fair value, subject to remeasurement at each reporting period. This conclusion is based on the fact that the ELOC Warrant includes certain cash-settlement features in the event of a tender offer, which is outside the control of the Company, and that the exercise price is denominated in a currency other than the reporting entity’s functional currency. As a result, the instrument is not considered to be indexed to the reporting entity’s own stock. The Company measured the ELOC Warrant as a liability at fair value as at each reporting period with changes in fair value recognized as other (income) expense, net in the consolidated statements of operations and comprehensive income (loss).
7
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)
Convertible Debenture Financing
On September 6, 2024, the Company entered into a Securities Purchase
Agreement (the “September 2024 Purchase Agreement”) with Arena Investors, LP (“Arena Investors”), which provided
for the issuance of secured convertible debentures in an aggregate principal amount of up to $
The Company completed the closing of the first tranche under the September
2024 Purchase Agreement for the issuance of a
The net proceeds received from the issuance of
the First Tranche Debenture, after deduction of expenses reimbursable to the Arena Investors, was $
The Company did not meet the closing conditions for the second and third tranche closings set forth in the September 2024 Purchase Agreement.
On November 6, 2024, and as required by the
Company’s 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
The Company evaluates its convertible instruments and warrants to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC 815, Derivatives and Hedging. The classification of derivative instruments, including whether such instruments should be recorded as assets, liabilities, or equity, is reassessed at the end of each reporting period. For equity-linked financial instruments, the Company must determine whether the underlying instrument is indexed to its own Common Stock in order to classify the derivative instrument as equity. Otherwise, the derivative asset or liability, including embedded derivatives, is recognized at fair value with subsequent changes in fair value recognized in the consolidated statements of operations and comprehensive income (loss).
For hybrid instruments, ASC 815-15 requires bifurcation of embedded features if (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. The nature of the host instrument is therefore evaluated to determine if it is more akin to a debt-like or equity-like host. In this assessment, the Company considers the stated and implied substantive features of the contract as well as the economic characteristics and risks of the hybrid instrument. Each term and feature are then weighed based on the relevant facts and circumstances to determine the nature of the host contract. Terms and features of the hybrid.
On February 5, 2025, Arena Investors converted
a total of $
8
On March 13, 2025 the Company repaid in full the outstanding Convertible
Debenture, previously issued pursuant to that certain Securities Purchase Agreement dated as of September 6, 2024, by and between the
Company and the Arena Investors, by making a cash payment of $
The Company has accounted for the First Tranche Debenture as a financing transaction, wherein the net proceeds that were received were allocated to the financial instruments issued. Prior to making the accounting allocation, the Company evaluated the Convertible Debentures under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis of embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract.
The Company evaluated that the Conversion right meets the definition of a derivative under ASC 815-10-15-83. Further the Company evaluated that the Conversion right requires bifurcation from the debt host on the basis that it fails to meet the equity scope exception in ASC 815-10-15-74(a) and thus are classified as a liability measured at fair value, subject to remeasurement at each reporting period.
The Company evaluated that the First Tranche warrant is a detachable freestanding instrument. The First Tranche Warrant includes certain cash- settlement features in the event of a tender offer, which is outside the control of the company, and that the exercise price is denominated in a currency (USD) other than the reporting entity’s functional currency (AUD), and thus fails to meet the equity scope exception in ASC 815-10-15-74(a). Therefore the instrument is not considered indexed to the reporting entity’s own stock. As such the First Tranche Warrants are classified as a liability and measured at fair value, with changes in fair value each period reported in earnings.
The proceeds from issuing the Convertible Debentures were allocated first to the First Tranche Warrants based on its fair value. The proceeds allocated to the debt instrument was then further allocated between the debt host contract and the bifurcated derivative based on the fair value of that derivative as prescribed by ASC 815-15-30-2.
Debt discount and the debt issuance costs were capitalized to the carrying amount of the debt. Such costs are presented on the balance sheet as a direct deduction from that debt liability host.
Fair Value of Financial Instruments
The Company measures certain financial assets and liabilities at fair value. ASC 820, Fair Value Measurement and Disclosures (“ASC 820”), specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair-value hierarchy:
Level 1: Quoted prices for identical instruments in active markets;
Level 2: Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
9
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)
Cash and Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated statements of cash flows:
| December 31, 2025 | June 30, 2025 | |||||||
| $ | $ | |||||||
| (in thousands) | ||||||||
| Unrestricted cash | ||||||||
| Unrestricted cash equivalents | ||||||||
| Total unrestricted cash and cash equivalents | ||||||||
| Short-term restricted cash | ||||||||
| Long-term restricted cash | ||||||||
| Total restricted cash | ||||||||
| Total unrestricted and restricted cash and cash equivalents | ||||||||
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash. Cash equivalents are reported at fair value.
Restricted Cash
The restricted cash, current balance of $
Note 3 – Prepaid expenses and other current assets
| December 31, 2025 | June 30, 2025 | |||||||
| $ | $ | |||||||
| (in thousands) | ||||||||
| Prepayments1 | ||||||||
| GST recoverable | ||||||||
| Total prepaid expenses and other current assets | ||||||||
| 1 |
Note 4 – R&D tax incentive receivable
| December 31, 2025 | June 30, 2025 | |||||||
| $ | $ | |||||||
| (in thousands) | ||||||||
| R&D tax incentive receivable | ||||||||
R&D tax incentive is recorded within the unaudited condensed consolidated
statements of operations and comprehensive loss and amounted to $
10
Note 5 – Property, Plant and Equipment, net
| December 31, 2025 | June 30, 2025 | |||||||
| $ | $ | |||||||
| (in thousands) | ||||||||
| Furniture, fittings and equipment | ||||||||
| Assets under construction | ||||||||
| Total property, plant and equipment, gross | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Total property, plant and equipment, net | $ | $ | ||||||
Depreciation expense is recorded within general and administrative
in the unaudited condensed consolidated statements of operations and comprehensive loss and amounted to $
Note 6 – Trade and other payables, accrued expenses and other current liabilities
| December 31, 2025 | June 30, 2025 | |||||||
| $ | $ | |||||||
| (in thousands) | ||||||||
| Current liabilities | ||||||||
| Trade payables | ||||||||
| Contract liabilities | ||||||||
| Total trade and other payables | ||||||||
| Accrued expenses | ||||||||
| Employee leave entitlements | ||||||||
| Total accrued expenses and other current liabilities | ||||||||
| Total trade and other payables, accrued expenses and other current liabilities | ||||||||
Trade and other payables are unsecured, non-interest bearing and are normally settled within 30 days. The carrying amounts are a reasonable approximation of fair value.
Note 7 – Leases
During fiscal year 2023, the Company entered into three lease agreements for its corporate head office in Sydney, Melbourne office and Clarion Clinic site. The leases have four, five and three-year terms respectively. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases also include renewal options at the election of the Company to renew or extend the lease for an additional three to five years. These optional periods have not been considered in the determination of the right-of-use assets or lease liabilities associated with these leases as the Company did not consider it reasonably certain it would exercise the options.
11
Note 7 – Leases (continued)
The following table summarizes the weighted-average remaining lease term and discount rates for the Company’s operating leases:
| December 31, 2025 | June 30, 2025 | |||||||
| Lease term (years) | ||||||||
| Discount rate | % | % | ||||||
The following table summarizes the lease costs pertaining to the Company’s operating leases:
| December 31, 2025 | June 30, 2025 | |||||||
| $ | $ | |||||||
| (in thousands) | ||||||||
| Operating lease cost | ||||||||
Cash paid for amounts included in the measurement of operating lease
liabilities during the six months ended December 31, 2025 and fiscal year June 30, 2025 was $
The following table summarizes the future minimum lease payments due under operating leases as of December 31, 2025, (in thousands):
| Operating leases | Amount $ (in thousands) | |||
| June 30, 2026 | ||||
| June 30, 2027 | ||||
| June 30, 2028 | ||||
| Total minimum lease payments | ||||
| Less amount representing interest | ( | ) | ||
| Total operating lease liabilities | ||||
As of December 31, 2025, the Company’s
operating lease has a weighted-average remaining lease term of
Note 8 – Commitments and contingencies
The Company records a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company also discloses material contingencies when it believes a loss is not probable but reasonably possible. Accounting for contingencies requires the Company to use judgment related to both the likelihood of a loss and the estimate of the amount or range of loss. Although the Company cannot predict with assurance the outcome of any litigation or tax matters, it does not believe there are currently any such actions that, if resolved unfavorably, would have a material impact on the Company’s operating results, financial position or cash flows.
Note 9 – Stockholder’s equity/issued capital
Common Stock
The Company has one class of Common Stock. The Company’s amended
and restated certificate of incorporation provides for the issuance of
12
Note 10 – Stock-based payments
| For the six months ended December 31, 2025 | ||||||||
| 2025 | 2024 | |||||||
| $ | $ | |||||||
| (in thousands) | ||||||||
| Research and development | ||||||||
| General and administrative | ||||||||
| Total stock-based compensation expense | ||||||||
| For the three months ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| $ | $ | |||||||
| (in thousands) | ||||||||
| Research and development | ||||||||
| General and administrative | ||||||||
| Total stock-based compensation expense | ||||||||
Restricted Stock and Restricted Stock Units
A summary of the changes in the Company’s restricted stock unit and restricted stock activity for the three and six month period ended December 31, 2025, are as follows:
| Number of Shares | Weighted Average Grant Date Fair Value $ | |||||||
| Unvested and Outstanding as of June 30, 2025 | ||||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Unvested and Outstanding as of December 31, 2025 | ||||||||
13
Note 10 – Stock-based payments (continued)
| Number of Shares | Weighted Average Grant Date Fair Value $ |
|||||||
| Unvested and Outstanding as of September 30, 2025 | ||||||||
| Granted | ||||||||
| Vested | ( |
) | ||||||
| Forfeited | ||||||||
| Unvested and Outstanding as of December 31, 2025 | ||||||||
Stock Options
A summary of the changes in the Company’s stock options activity for the three and six months ended December 31, 2025, are as follows:
| Number of Shares | Weighted Average Exercise Price ($) | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in thousands) ($) | |||||||||||||
| Outstanding as of June 30, 2025 | ||||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Cancelled or forfeited | ( | ) | ||||||||||||||
| Outstanding as of December 31, 2025 | ||||||||||||||||
| Unvested as of December 31, 2025 | ||||||||||||||||
| Number of Shares | Weighted Average Exercise Price ($) | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in thousands) ($) | |||||||||||||
| Outstanding as of September 30, 2025 | ||||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Cancelled or forfeited | ||||||||||||||||
| Outstanding as of December 31, 2025 | ||||||||||||||||
| Unvested as of December 31, 2025 | ||||||||||||||||
The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s Common Stock for those stock options that had exercise prices lower than the fair value of the Company’s Common Stock.
Note 11 – Income Tax
For the six months ended December 31, 2025, and December 31, 2024, respectively, the Company did not recognize a provision or benefit for income taxes as it incurred net losses. In addition, the net deferred tax assets generated from net operating losses were fully offset by a valuation allowance as the Company believes it is not more likely than not that the benefit will be realized.
14
Note 12 – Information on Share Repurchase Program
In August 2025, our Board of Directors authorized
a $
During the three and six months ended December 31, 2025, the Company
repurchased
Note 13 – Loss per share
Basic and diluted net loss per share attributable to stockholders was calculated as follows (in thousands, except share and per share amounts):
For the six months ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| $ | $ | |||||||
| Basic and diluted loss per share – (dollars per share) | ( | ) | ( | ) | ||||
| The loss and weighted average number of shares used in the calculation of basic loss per share is as follows: | ||||||||
| Total comprehensive loss (in thousands) | ( | ) | ( | ) | ||||
| - Weighted average number of shares (number) | ||||||||
For the three months ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| $ | $ | |||||||
| Basic and diluted loss per share – (dollars per share) | ( | ) | ( | ) | ||||
| The loss and weighted average number of shares used in the calculation of basic loss per share is as follows: | ||||||||
| Total comprehensive loss (in thousands) | ( | ) | ( | ) | ||||
| - Weighted average number of shares (number) | ||||||||
The Company notes that the diluted loss per share is the same as basic loss per share.
Note 14 – Related Party Transactions
Transactions between related parties are on commercial terms and conditions, no more favorable than those available to other parties unless otherwise stated.
There were amounts payable to any related parties as of December 31, 2025 and June 30, 2025.
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 29, 2025 (the “2025 Annual 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.
Our accounting policies under U.S. GAAP are referred to in Note 2 of the unaudited condensed consolidated financial statements in this Quarterly Report. All amounts are in United States dollars, unless otherwise indicated.
Overview
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.
Results of Operations
Comparison of the Three and Six Months Ended December 31, 2025 and 2024
The following tables summarize our results of operations for the periods presented (in thousands):
| For the three months ended December 31, | For six months ended December 31, | |||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||||||||
| Revenue from customers | $ | - | $ | 12 | $ | (12 | ) | (100 | )% | $ | - | $ | 86 | $ | (86 | ) | (100 | )% | ||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||
| Research and development | (2,280 | ) | (1,414 | ) | (866 | ) | 61 | % | (3,401 | ) | (4,310 | ) | 909 | (21 | )% | |||||||||||||||||
| General and administrative | (4,715 | ) | (3,602 | ) | (1,113 | ) | 31 | % | (10,388 | ) | (7,034 | ) | (3,357 | ) | 48 | % | ||||||||||||||||
| Total operating expenses | (6,995 | ) | (5,016 | ) | (1,979 | ) | 39 | % | (13,789 | ) | (11,344 | ) | (2,448 | ) | 22 | % | ||||||||||||||||
| Loss from operations | (6,995 | ) | (5,004 | ) | (1,991 | ) | 40 | % | (13,789 | ) | (11,258 | ) | (2,534 | ) | 22 | % | ||||||||||||||||
| Other income / (expense): | ||||||||||||||||||||||||||||||||
| R&D tax incentive | 482 | 956 | (474 | ) | (50 | )% | 871 | 1,767 | (896 | ) | (51 | )% | ||||||||||||||||||||
| Foreign exchange gains (losses) | (24 | ) | (326 | ) | 302 | (93 | )% | (37 | ) | (331 | ) | 294 | (89 | )% | ||||||||||||||||||
| Interest income | 5 | 28 | (23 | ) | (82 | )% | 10 | 57 | (47 | ) | (82 | )% | ||||||||||||||||||||
| Interest expense | - | (171 | ) | 171 | (100 | )% | - | (171 | ) | 171 | (100 | )% | ||||||||||||||||||||
| Change in fair value of convertible rights | - | (179 | ) | 179 | (100 | )% | - | (179 | ) | 179 | (100 | )% | ||||||||||||||||||||
| Change in fair value of warrant liabilities | - | (103 | ) | 103 | (100 | )% | - | (103 | ) | 103 | (100 | )% | ||||||||||||||||||||
| ELOC commitment fee | - | (1,095 | ) | 1,095 | (100 | )% | - | (1,095 | ) | 1,095 | (100 | )% | ||||||||||||||||||||
| Share of earnings (loss) of joint venture | 11 | - | 11 | - | % | 17 | - | 17 | - | % | ||||||||||||||||||||||
| Total other income / (expenses), net | 474 | (890 | ) | 1,364 | (153 | )% | 861 | (55 | ) | 916 | (1,665 | )% | ||||||||||||||||||||
| Currency translation adjustment, net of tax | (287 | ) | (414 | ) | 127 | (31 | )% | (64 | ) | (75 | ) | 11 | (15 | )% | ||||||||||||||||||
| Comprehensive loss | $ | (6,808 | ) | $ | (6,308 | ) | $ | (500 | ) | 8 | % | $ | (12,992 | ) | $ | (11,388 | ) | $ | (1,604 | ) | 14 | % | ||||||||||
16
Revenue from Customers
We have not generated revenue for the three and six months ended December 31, 2025, and we do not expect to generate material revenue unless and until our drug candidates are approved.
Operating Expenses
Research and development
Research and development expenses consist primarily of external and internal costs incurred in performing clinical and preclinical development activities.
Our R&D expenses include:
| ● | external costs incurred under agreements with contract research organizations, contract manufacturers, consultants and other third parties to conduct and support our clinical trials and preclinical studies; and |
| ● | internal costs, including R&D personnel-related expenses such as salaries, and benefits, as well as allocated facilities costs and dues and subscriptions. |
We expense research and development costs as incurred.
Research and development expenses increased by $0.9 million for the three months ended December 31, 2025 compared to the three months ended December 31, 2024. The increase was primarily due to the late-stage and close-out costs associated with the IHL-42X safety and pharmacokinetics clinical trial. These costs were partially offset by the pausing of patient recruitment in the Australian Phase 2 clinical trial for IHL-675A in rheumatoid arthritis.
Research and development expenses decreased by $0.9 million for the six months ended December 31, 2025 compared to the six months ended December 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. These decisions were 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. We have since resumed development activities for this candidate. The primary R&D expense for the period was the Phase 2/3 RePOSA clinical trial investigating IHL-42X in patients with OSA.
We generally expect research and development costs to increase as we progress our drug candidates through clinical trials. 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:
| ● | the number and scope, rate of progress, expense and results of our clinical trials and preclinical studies, including any modifications to clinical development plans based on feedback that we may receive from regulatory authorities; |
| ● | per patient trial costs; |
| ● | the number of trials required for approval; |
| ● | the number of sites included in the trials; |
| ● | the countries in which the trials are conducted; |
| ● | the length of time required to enroll eligible patients; |
| ● | the number of patients that participate in the trials; |
| ● | the number of doses that patients receive; |
17
| ● | the drop-out or discontinuation rates of patients; |
| ● | the potential additional safety monitoring requested by regulatory agencies; |
| ● | the duration of patient participation in the trials and follow-up; |
| ● | the cost and timing of manufacturing of our drug candidates; |
| ● | the costs, if any, of obtaining third-party drugs for use in our combination trials; |
| ● | the extent of changes in government regulation and regulatory guidance; |
| ● | the efficacy and safety profile of our drug candidates; |
| ● | the timing, receipt, and terms of any approvals from applicable regulatory authorities; and |
| ● | the extent to which we establish additional collaboration, license, or other arrangements. |
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.
General and Administrative
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.
General and administrative expenses increased by $1.1 million for the three months ended December 31, 2025 compared to the three months ended December 31, 2024. The increase was primarily attributable to increases in recognition of amortized stock-based payment expenses in the current quarter and additional consulting charges including recurring monthly fees from advisory firms.
General and administrative expenses increased by $3.4 million for the six months ended December 31, 2025 compared to the six months ended December 31, 2024. The increase was primarily attributable to increases in recognition of amortized stock-based payment expenses in the current quarter and additional consulting charges including recurring monthly fees from advisory firms.
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.
Other Income (Expense)
Benefit from R&D tax credit
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 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 research and development activities during the year.
Benefit from R&D tax incentive decreased by $0.5 million for the three months ended December 31, 2025 compared to the three months ended December 31, 2024. The decrease in the R&D tax incentive receivable for the three months ended December 31, 2025, was primarily due to a lower estimate based on historical experience of claims.
Benefit from R&D tax incentive decreased by $0.9 million for the six months ended December 31, 2025 compared to the six months ended December 31, 2024. The decrease in the R&D tax incentive receivable for the six months ended December 31, 2025, was primarily due to a lower estimate based on historical experience of claims.
Foreign exchange losses and Interest Income
Foreign exchange losses decreased by $0.3 million for the three months ended December 31, 2025 compared to the three months ended December 31, 2024, due to favorable currency exchange rates. Interest income decrease over the same period, reflecting lower interest received from cash deposits.
Foreign exchange losses decreased by $0.3 million for the six months ended December 31, 2025 compared to the six months ended December 31, 2024, due to favorable currency exchange rates. Interest income decreased over the same period, reflecting lower interest received from cash deposits.
18
Share of earnings (loss) of joint venture
Share of earnings (loss) of joint venture increased by $17,000 for the six months ended December 31, 2025, compared to the six months ended December 31, 2024, due to the investment in Mind Clinics Australia.
Currency translation adjustment, net of tax
Currency translation adjustment, net of tax, decreased by $0.1 million for the three months ended December 31, 2025, compared to the three months ended December 31, 2024. The increase was due to the appreciation of the Australian dollar against the U.S. dollar.
Currency translation adjustment, net of tax, increased by $0.1 million for the six months ended December 31, 2025, compared to the six months ended December 31, 2024. The increase was due to the appreciation 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.
Liquidity and Capital Resources
Sources of Liquidity
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.
We incurred total comprehensive losses of $13.0 million and $11.4 million for the six months ended December 31, 2025 and six months ended December 31, 2024, respectively. We incurred net losses of $12.9 million and $11.3 million for the six months ended December 31, 2025 and 2024, respectively. As of December 31, 2025, we had accumulated deficit of $170.5 million. For the six months ended December 31, 2025, we experienced net cash used in operating activities of $13.8 million, an increase of $6.0 million compared to the six months ended December 31, 2024. In addition, during the three and six months ended December 31, 2025, the Company repurchased 3.1 million shares of its Common Stock at an aggregate cost of $1.2 million under the share repurchase program. The Company will continue to assess market conditions and may deploy the buyback program at its discretion as appropriate.
Historically, the Company has financed its 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.
As of December 31, 2025, we had cash and cash equivalents of $68.9 million, an increase of $53.9 million compared to our cash and cash equivalents as of June 30, 2025 of $15.0 million. As of December 31, 2025, our current assets exceed our current liabilities by $72.0 million, a $59.9 million increase compared to the difference between our current assets and current liabilities as of June 30, 2025 of $13.0 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 included in this Quarterly Report. However, we could use our capital resources sooner than we expect. Our operating plans may change, and we may need additional funds sooner than planned. The process of testing drug candidates in pre-clinical and clinical studies is costly, and the timing of progress in studies is uncertain. Because the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our drug candidates or whether, or when, we may achieve profitability.
Until such time as we can generate product revenues, if ever, we expect to finance our cash needs through the sale of common stock in public offerings and/or private placements, debt financings, or through other capital sources, including pursuant to the at-the-market offering program, collaborations with other companies or other strategic transactions. During the three months ended December 31, 2025, we sold 4,525,000 shares of our common stock pursuant to our at-the-market offering program. We paid commissions and fees of $75,000 to the sales agents in connection with these sales, resulting in net proceeds of $2.1 million. Any additional equity fundraising in the capital markets may be dilutive for our stockholders. To the extent that we raise additional capital through the sale of equity, convertible debt or other securities convertible into equity, the ownership interest of our stockholders will be diluted, and the terms of new securities may include liquidation or other preferences that adversely affect rights of our stockholders. Debt financing, if available at all, would likely involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, completing acquisitions or declaring or paying dividends. If we raise additional funds through strategic collaborations or licensing arrangements with third parties, we may have to relinquish valuable rights to our drug candidates or future revenue streams or grant licenses on terms that are not favorable to us.
Off-Balance Sheet Arrangements
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.
19
Cash Flows
Comparison of cash flows for the six months ended December 31, 2025 and 2024
The following table summarizes our cash flows for the periods presented (in thousands):
| For Six Months Ended December 31, 2025 | For Six Months Ended December 31, 2024 | |||||||
| Net cash used in operating activities | $ | (13,785 | ) | $ | (7,872 | ) | ||
| Net cash used in investing activities | (46 | ) | (8 | ) | ||||
| Net cash provided by financing activities | 68,104 | 4,050 | ||||||
| Net increase/(decrease) in cash | $ | 54,273 | $ | (3,830 | ) | |||
Net cash flows from operating activities
Cash used in operating activities increased by $5.9 million for the six months ended December 31, 2025, compared to the six months ended December 31, 2024. The increase was due to a decrease in trade and other payables.
Net cash flows from investing activities
Cash used in investing activities increased by $38,000 for the six months ended December 31, 2025 compared to the six months ended December 31, 2024. The increase was due to our investment in Mind Medicine Australia.
Cash flows from financing activities
Cash provided by financing activities increased by $64.1 million for the six months ended December 31, 2025, compared to the six months ended December 31, 2024. The increase was due to stock issuances under our at-the-market offering program offsetting with stock repurchases under the share repurchase program.
Critical Accounting Policies and Estimates
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, 2025, which have been prepared in accordance with “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.
While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements described in the 2025 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.
Stock Based Compensation
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 stock 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.
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Research and Development Costs
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.
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.
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.
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.
Benefit from R&D Tax Incentive
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company” (as defined by Item 10 of Regulation S-K), we are permitted to omit information required by this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e)) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated, as of the end of the period covered by this Quarterly Report, the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2025, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weakness in internal control over financial reporting which existed as of December 31, 2025, relating to the documentation of accounting policies and procedures, particularly relating to the correct application of complex accounting measures as previously reported in our 2025 Annual Report.
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A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Management has concluded that we did not maintain effective disclosure controls and procedures due to the material weakness in internal control over financial reporting which existed as of December 31, 2025, relating to the documentation of accounting policies and procedures, particularly relating to the correct application of complex accounting measures.
Remediation Efforts
The measures that we are undertaking to remediate the material weakness in internal control over financial reporting have and will include: (a) hiring qualified internal control personnel or consultants to manage the implementation of internal control policies, procedures and improvement of the internal audit function, as applicable; (b) developing and implementing written policies and procedures for accounting and financial reporting that meet the standards applied to public companies listed in the United States; and (c) conducting internal control training to management, key operations personnel and the accounting department, so that management and relevant personnel understand the requirements and elements of internal control over financial reporting mandated by the US securities laws.
We believe we have made progress in accordance with our remediation plan even though the material weaknesses will not be considered remediated until we have completed implementing the necessary additional applicable controls and operate with them for a sufficient period of time to allow management and our auditors to concluded that these controls are operating effectively.
We cannot determine when our remediation plan will be fully completed and we cannot provide any assurance that these remediation efforts will be successful or that our internal control over financial reporting will be effective as a result of these efforts.
Changes in Internal Control over Financial Reporting
Other than the remediation of the material weakness discussed above, there were no changes in our internal controls over financial reporting (as such term is defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) that occurred during three months ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in litigation or other legal proceedings arising in the ordinary course of our business. We are not currently a party to any material litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors.
Item 1A. Risk Factors
There have been no material changes to the risk factors set forth in Part I, Item 1A, “Risk Factors,” of the 2025 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The number of shares of Common Stock repurchased by us under our share repurchase program and the average price paid per share for the three months ended December 31, 2025, are as follows:
| Period | (a) Total Number of Shares Repurchased | (b) Average Price Paid Per Share | (c) Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs | (d) Maximum Dollar Value of Shares that May Yet Be Repurchased Under the Plans or Programs | ||||||||||||
| October 2025 (10/1/2025 - 10/31/2025) | 1,480,000 | 0.4054 | 1,480,000 | 19,400,008 | ||||||||||||
| November 2025 (11/1/2025 - 11/30/2025) | 1,624,008 | 0.35465 | 1,624,008 | 18,824,054 | ||||||||||||
| December 2025 (12/1/2025 - 12/31/2025) | — | — | — | 18,824,054 | ||||||||||||
| Total(1) | 3,104.008 | 3,104,008 | 18,824,054 | |||||||||||||
| (1) | In August 2025, our board of directors authorized a share repurchase program pursuant to which the Company may repurchase up to $20 million of its outstanding shares of Common Stock. The share repurchase program expires on August 30, 2026. Under the share repurchase program, the Company may repurchase shares from time to time in the open market, privately negotiated transactions, accelerated share repurchase arrangements, or other methods permitted under applicable securities laws, including in compliance with Rule 10b-18 of the Exchange Act. All purchases listed above were made in the open market at prevailing market prices. |
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 trading arrangements
During the three months ended December 31,
2025, none of our directors or officers
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Item 6. Exhibits
The information required by this Item 6 is set forth on the Exhibit Index that immediately precedes the signature page to this report and is incorporated herein by reference.
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Incannex Healthcare Inc. | ||
| Date: February 13, 2026 | By: | /s/ Joel Latham |
| Joel Latham | ||
| Chief Executive Officer, Director and President | ||
| Date: February 13, 2026 | By: | /s/ Joseph Swan |
| Joseph Swan | ||
| Chief Financial Officer, Treasurer and Secretary | ||
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Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joel Latham, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended December 31, 2025 of Incannex Healthcare Inc. (the “Company”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
| 4. | The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and |
| 5. | The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
| Date: February 13, 2026 | ||
| By: | /s/ Joel Latham | |
| Name: | Joel Latham | |
| Title: | President and Chief Executive Officer (principal executive officer) |
|
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joseph Swan, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended December 31, 2025 of Incannex Healthcare Inc. (the “Company”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
| 4. | The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and |
| 5. | The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
| Date: February 13, 2026 | ||
| By: | /s/ Joseph Swan | |
| Name: | Joseph Swan | |
| Title: | Chief Financial Officer, Treasurer and Secretary (principal financial and accounting officer) |
|
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES OXLEY ACT OF 2002
In connection with the Quarterly Report of Incannex Healthcare Inc. (the “Company”) on Form 10-Q for the quarter ended December 31, 2025 (the “Report”) as filed with the Securities and Exchange Commission on the date hereof, I, Joel Latham, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: February 13, 2026 | ||
| By: | /s/ Joel Latham | |
| Name: | Joel Latham | |
| Title: | President and Chief Executive Officer | |
| (principal executive officer) | ||
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES OXLEY ACT OF 2002
In connection with the Quarterly Report of Incannex Healthcare Inc. (the “Company”) on Form 10-Q for the quarter ended December 31, 2025 (the “Report”) as filed with the Securities and Exchange Commission on the date hereof, I, Joseph Swan, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: February 13, 2026 | ||
| By: | /s/ Joseph Swan | |
| Name: | Joseph Swan | |
| Title: | Chief Financial Officer, Treasurer and Secretary (principal financial and accounting officer) |
|