2021
Annual report
Limitless
Potential
Incannex Healthcare Limited ASX: IHL
Our Mission is to
create first-in-class
pharmaceutical drugs
and therapies for
patients with unmet
medical needs.
2
3
Incannex Healthcare LimitedIncannex Healthcare Limited Corporate
Information
Contents
Incannex Healthcare Limited
ABN 93 096 635 246
Directors
Mr Troy Valentine (Non-Executive Chairman)
Mr Peter Widdows (Non-Executive Director)
Dr Sud Agarwal (Non-Executive Director)
Mr Joel Latham (Managing Director)
Company Secretary
Madhukar Bhalla
Registered Office
Level 39, South Tower Rialto
525 Collins Street
Melbourne Victoria 3000
Principal Place of Business
207/11 Solent Circuit
Norwest NSW 2153
Share Register
Automic Pty Ltd
Level 5 126 Phillip Street
Sydney NSW 2000
T +61 2 9698 5414
Auditors
HLB Mann Judd (WA Partnership)
Level 4, 130 Stirling Street
Perth Western Australia 6000
Securities Exchange Listing
ASX Limited (Australian Securities Exchange)
Home Exchange: Melbourne Victoria
ASX Codes: IHL
4
Corporate Information
Chairman’s Message
Directors’ Report
Auditor’s Independence Declaration
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes In Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Corporate Governance Statement
Securities Exchange Information
4
6
8
53
56
57
58
59
60
84
85
90
98
5
Incannex Healthcare LimitedIncannex Healthcare Limited Chairman’s
Message
On behalf of the Board of Directors, I am pleased to present the
Annual Report of Incannex Healthcare Limited (“Incannex” or “IHL”)
for the financial year ended 30 June 2021.
The past year has seen exciting research results and rapid
progress within the Company’s novel drug development program.
Our talented and knowledgeable team has continued to
demonstrate their commitment to delivering world-class clinical
programs in a determined pursuit to achieve FDA approval.
We are proud to be working with
The Alfred Hospital, Monash
University and the University
of Western Australia as these
organisations contribute to
the scientific quality of our
clinical programs.
We have taken further leaps in developing-out our unique
cannabinoid-based and now psychedelic medicines in no
less than six indications with major unmet patient needs.
Those unmet needs represent potential multi-billion-dollar
markets in sleep apnoea, traumatic brain injury, rheumatoid
arthritis, lung inflammation, inflammatory bowel disease and
generalised anxiety disorder.
Incannex has focused its expenditures on research and
development and has spared no expense to ensure that its
research programs are consistent with FDA processes. During
the last financial year, we entered regulatory discussions with
the FDA regarding drug candidate IHL-675A and I am pleased
to report that those meetings have enabled us to establish a
regulatory pathway to registration, subject to clinical success.
As such, we will commence clinical trials for IHL-675A here in
South Australia in the 4th quarter of this year.
We look forward to having further discussions with the FDA
regarding our other drug candidates during the current
financial year. Particularly, as we finalise phase 2 studies
for IHL-42X in patients with obstructive sleep apnoea and
commence phase 2 clinical studies for our psilocybin
therapy program.
During the year, we expanded our partnerships with
scientific experts and world-renowned academic
institutions. We are proud to have entered collaborations
with The Alfred Hospital, Monash University and the
University of Western Australia as these organisations lend
scientific exceptionalism to our clinical programs.
Dr Paul Liknaitzky became a member of our scientific
advisory board during the year, and I would like to
sincerely thank him for his contribution to our psychedelic
psychotherapy program. Dr Liknaitzky is Australia’s only
full-time psychedelic medicine and therapy researcher, and
he is world-renowned for his knowledge, commitment, and
dedication to developing therapies that have the potential
to transform the lives of people with mental-ill health. From
a corporate perspective, we welcomed Canary Capital as
Australian corporate advisors to our company. Their keen
interest in and continued support for Incannex has been
greatly appreciated. We would also like to thank Eddie Sugar
and EAS Advisors for their support and work in assisting us
with our plans to list on Nasdaq in the United States.
I would sincerely like to thank our Managing Director and
CEO Mr Joel Latham for the unwavering commitment and
drive that he brings to the Company on a daily basis. His
efforts, in conjunction with the work of our core medical
team comprising our CMO Dr Sud Argawal, our CSO Dr
Mark Bleackley, our CRM Mrs Rosemarie Walsh and our
Head of Psychedelic Medicine Dr Paul Liknaitzky, continue
to play leading roles in driving Incannex to become a world
leader in drug development and healthcare.
I would also like to thank my fellow directors for their efforts
over the past twelve months and, finally I would like to
extend to all our shareholders the best of health and safety
to them and their families during the ongoing Covid-19
crisis. We very much appreciate your support and look
forward to continuing to enjoy our exciting journey together
over the next twelve months.
Troy Valentine
Chairman
6
7
Incannex Healthcare LimitedIncannex Healthcare Limited Directors’
Report
Your directors submit the annual financial report of Incannex Healthcare Limited
(“IHL” or “the Company”) and its wholly owned subsidiary (‘the Group”) for the
financial year ended 30 June 2021. In order to comply with the provisions of the
Corporations Act 2001, the Directors report as follows:
Directors
The names of directors who held office during or since the end of the year and
until the date of this report are as follows. Directors were in office for this entire
period unless otherwise stated.
Mr Troy Valentine
Non-Executive Chairman
B. Comm
Appointed 11 December 2017
Mr Joel Latham
Managing Director &
Chief Executive Officer
Appointed 24 July 2019
Dr Sud Agarwal
Non Executive Director
BSc(Hons), MB ChB, FANZCA
Appointed 24 July 2019
Mr Peter Widdows
Non-Executive Director
ACA (ICAEW), BTec, MAICD
Appointed 1 March 2018
Troy Valentine has been Chairman of the Board of Directors
since December 2017. Mr. Valentine is a finance professional
with managerial and Board experience spanning over
27 years. He commenced his career with Australian
brokerage firm Hartley Poynton (now Euroz Hartley’s
Limited) in 1994 before moving to Patersons Securities
(now Canaccord Genuity) in 2000 and subsequently became
an Associate Director. During his time at Patersons, he
was responsible for managing both retail and institutional
accounts. Mr. Valentine has significant corporate and capital
raising experience, especially with start-ups and small to
mid-cap size companies.
He is currently a director of Australian boutique corporate
advisory firm Alignment Capital Pty Ltd, which he
co-founded in 2014.
Joel Latham has been the Chief Executive Officer and
Managing Director of Incannex since July 2018. Mr. Latham
is responsible for the Company’s commercial operations,
strategic decision-making, and oversight of all clinical
development assets for Incannex Healthcare. Prior to his
appointment as Chief Executive Officer, Mr. Latham had
been a key member of our senior leadership team acting
as General Manager since 2016. During this time, he was
instrumental in the marketing and procurement of multiple
revenue-generating opportunities and partnerships,
including with Pacific Smiles (ASX:PSQ), 1300 Smiles (ASX:
ONT), the National Rugby League, the Australian Football
League, ONE Fighting Championship, FIT Technologies and
Cannvalate. During his time at the Company, Mr. Latham has
been pivotal in the development and execution of Incannex’s
drug development and regulatory strategy.
Prior to joing Incannex in 2016, Mr. Latham had over
14 years’ experience, with major firms such as Mars Foods,
Tabcorp and Philip Morris International in management and
commercial operational roles.
No director served as a director of any other listed
company during the period of three years immediately
before the end of the financial year.
Dr Sud Agarwal has been our Chief Medical Officer of
Incannex since June 2019. He is responsible for the
oversight over the Company’s cannabinoid clinical program
and pipeline of proprietary products. Dr Agarwal is a
specialist anaesthesiologist and physician researcher
and passed his board exams and was made a Fellow of
the Australian and New Zealand College of Anaesthetists
in 2009. Dr. Sud Agarwal is a key opinion leader in the
clinical use of medicinal cannabis and is regularly invited
as a keynote to industry and pharmaceutical events,
including the World Cannabis Conference (June 2019), the
Australian Medicinal Cannabis Conference (March 2019),
Prohibition Partners (September 2020) and the forthcoming
International Cannabinoid Derived Pharmaceuticals Summit
in Boston (September 2021).
Since 2018, Dr. Agarwal also serves as Chief Executive
Officer and Chairman of Cannvalate, an Australian private
medicinal cannabis company that owns a 3% beneficial
interest in Incannex.
Peter Widdows is the former Regional CEO of the H.J. Heinz
corporation, with responsibility for a large portion of Asia
and Australasia. He has extensive experience in Australian
and international consumer goods markets and has worked
as a senior executive/CEO in numerous geographies,
including Europe, the USA and Asia/Pacific. Mr Widdows
has a strong track record of driving profitable growth in
both small and large companies and turning around poor
performing businesses.
He is the current Non-executive Chair of Sunny Queen
Australia Ltd – Australia’s largest shell egg and egg based
meal producer and a Non-Executive Director of Youi
Holdings Ltd – A general insurance company.
8
9
Incannex Healthcare LimitedIncannex Healthcare Limited Principal Activities
During the course of the financial year the
principal activities of the Company were:
1. Research, development and sales of
medicinal cannabinoid products.
2. On 20 November 2020 the Group
established a separate business
to research and develop the use
of psychedelic medicine and
therapies for the treatment of
mental health disorders.
Review of operations and
significant changes in
state of affairs
Operating result for the year
The Group’s loss for the year to 30 June
2021 after income tax was $8,163,590
(2019: Loss of $4,697,636).
Director’s
Report
Company Secretary
Madhukar Bhalla
Appointed 7 July 2021
Glenn Fowles
Appointed 7 December 2017
Resigned 7 July 2021
Madhukar “Madhu” is an experienced company secretary
who has previously worked with multiple ASX-listed
companies and is proficient in corporate governance,
company administration, financial management, and
corporate law. Madhu also has significant business and
management experience having previous job titles including
general manager and corporate administrator. Madhu was
the managing director of Colortype Press for a period
of 8 years until 2004. There, he was responsible for the
overall management of the business, including marketing,
contracting, procurement and directing over 30 employees.
Glenn has over 30 years’ experience working with listed
companies having worked for HSBC Asset Management
and Contango Asset Management in the funds management
industry. He has held positions of Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer and
Company Secretary within these organisations as well as
serving as a Director and Company Secretary of a number
of companies listed on ASX. Glenn resigned on 7 July 2021.
Director’s Meetings
The number of meetings of Directors held during the year, and the number of meetings attended by each
director were as follows:
Name
Number of meetings eligible to attend
Number of meetings attended
Troy Valentine
Peter Widdows
Dr Sud Agarwal
Joel Latham
11
11
10
10
11
11
10
10
10
11
Incannex Healthcare LimitedIncannex Healthcare Limited Business
activities
and outlook
Our mission is to create premier ethical pharmaceutical drugs and
therapies for patients with unmet medical needs, in all instances
fulfilling regulatory requirements of the Food and Drug Administration
(“FDA”) and other relevant regulatory agencies (EMA, TGA).
12
13
Incannex Healthcare LimitedIncannex Healthcare Limited Business activities
and outlook
Additionally, we seek to secure patents on our drug candidates in conjunction
with our medical and scientific staff, advisors and the investigators of our
research studies that constitute our advisory board. Our advisory board is
comprised of industry and academic experts familiar with our business, and we
meet with the advisory board regularly.
The current members of our advisory board are Dr. Sud Agarwal (our Chief Medical Officer and Director), Dr. Mark
Bleackley (our Chief Scientific Officer), Rosemarie Walsh (our Clinical Research Manager), Dr. Ron Jithoo (neurosurgeon
and advisor for IHL-216A), and Dr. Paul Liknaitsky (psychedelic principal investigator from Monash University). Our
advisory board also comprises our collaborative partners, in particular Monash University. Clinical trials are being
conducted at The Alfred Hospital and the University of Western Australia Centre for Sleep Science with Prof Terernce
O’Brien (Alfred Hospital), Dr Jennifer Walsh (University of Western Australia) as principal investigators.
To achieve our goals, we intend to:
01. Advance
02. Accelerate
03. Develop
04. Maintain IP
05. Approach
06. Opportunity
Advance our novel investigational
drug candidates towards approval
in the United States and elsewhere.
Take advantage of accelerated
commercialisation pathway
options for our drug candidates.
We are pursuing FDA approval of
all our drug candidates currently in
development. All preclinical and clinical
trials are structured to ensure that each
program is FDA compliant. We will
be pursuing a New Drug Application
(“NDA”) with the FDA with respect to
each of our drug candidates. If the
NDA is approved, the product may be
marketed in the United States. Once
an NDA for one of our drug candidates
is approved in the United States, we
plan to pursue marketing approval of
our drug candidates in other regions
including Europe, Japan, Australia
and Israel.
We and our regulatory consultants
believe that each of our drug
candidates will qualify for one
or more FDA expedited review
programs (breakthrough designation,
accelerated approval, priority review
and/or fast track), as there are limited
pharmaceutical treatments approved
in the U.S. for the indications that
we are targeting with our drug
candidates, and the pharmaceutical
treatments that do exist have limited
efficacy and/or are expensive. These
expedited review programs often
result in accelerated and less-costly
pathways to approval compared with
traditional regulatory pathways.
Develop future clinical
products targeting unmet
medical needs.
We intend to develop
clinical products that treat
unmet medical conditions
or conditions where current
treatment options are limited.
As a result, we may have
opportunities to accelerate
commercialisation of
such products.
Maintain a strong intellectual
property portfolio.
We have developed a global intellectual
property strategy to support our
commercial objectives. We are
monitoring the results of our research
and development programs to identify
new intellectual property that aligns
with those commercial objectives. We
intend to take a global approach to
our intellectual property strategy and
we intend to pursue patent protection
in key global markets, including the
United States, Europe, Japan and Israel.
We have pending patent applications
relating to our drug candidates IHL-42X,
IHL-216A and IHL-675A.
Clinical Approach
Market Opportunity
We are pursuing FDA approval of all our
drug candidates currently being developed.
The graphic on page 16 represents
our clinical development pipeline and
estimated timelines until the receipt of
FDA pre-IND advice and the opening of
INDs for each research program.
The combined annual global
market size of the indications
we are targeting is over
US$110 billion, which is derived
from the total addressable
market for the treatment of OSA,
TBI, concussion, rheumatoid
arthritis, inflammatory bowel
disease, inflammatory lung
conditions (ARDS, COPD,
Asthma, Bronchitis) and GAD.
Thus, there is significant
economic potential to
shareholders, as well as benefit
to patients suffering from
untreated medical conditions.
14
15
Incannex Healthcare LimitedIncannex Healthcare Limited Drug
Candidates
6 Clinical Programs,
1 Primary Goal –
Alleviate Human Suffering
IHL-42X
Pre-clinical
Studies
Australian Phase 2 Clinical Trial*
FDA Pre-IND
IND
Submission
Enrollment in
FDA Phase 2
Trial
FDA Phase 2
Trial begins
Obstructive Sleep
Apnoea
Multiple
Animal Studies
Completed
Complete Phase 2 Proof-of-
concept and Dose-finding
Clinical trial in Q4 2021
Submit in Q4 2021
Anticipated in
Q3 2022
IHL-216A
Pre-clinical
Studies
Australian Phase 2 Clinical Trial
(Monash university)*
FDA Pre-IND
IND
Submission
Enrollment in
FDA Phase 2
Trial
FDA Phase 2
Trial begins
Traumatic Brain
Injury/Concussion
Multiple
Animal Studies
Completed
Complete Stage 2
Pre-Clinical trial in
Q4 2021
Submit in Q4 2021
Anticipated in
Q3 2022
IHL-675A
Pre-clinical
Studies
Australian Phase 1 Clinical Trial*
FDA Pre-IND
IND
Submission
Enrollment in
FDA Phase 2
Trial
FDA Phase 2
Trial begins
Rheumatoid
Arthritis
Multiple
Animal Studies
Completed
Complete Phase 1
Trial in Q4 2021
Submit in Q1 2022
Anticipated in
Q2 2023
IHL-675A
Pre-clinical
Studies
Australian Phase 1 Clinical Trial*
FDA Pre-IND
Australian
Phase 2
Clinical Trial*
IND
Submission
Enrollment in
FDA Phase 2
Trial
Irritable Bowel
Disease
Complete Phase 1
Trial in Q4 2021
Submit in Q3 2022
Anticipated in
Q3 2022
IHL-675A
Pre-clinical
Studies
FDA Pre-IND
Australian Phase 1
Clinical Trial*
Australian
Phase 2 Clinical
Trial*
IND
Submission
Enrollment in
FDA Phase 1
Trial
Inflamatory
Lung Disease
Completed in Q2 2021
Q4 2021
Anticipated in
Q3 2022
PSI-GAD
Pre-clinical
Studies
Australian Phase 2 – Design and Dose
finding Clinical Trial*
FDA Pre-IND
IND
Submission
Enrollment in
FDA Phase 2
Trial
FDA Phase 2
Trial Begins
Psilocybin-assisted
Psychotherapy for
GAD
Commence
Q4 2021
Submit in Q3 2021
Anticipated in
Q3 2022
* This clinical trial or planned clinical trial is or will be an Australian clinical trial that is or will be conducted under HREC guidance, and is not, and will
not be, an FDA trial
16
17
Incannex Healthcare LimitedIncannex Healthcare Limited IHL-42X
Obstructive Sleep Apnoea
Obstructive sleep apnoea is characterised
by a narrowing or obstruction of the
upper airway in sleep, interfering with
breathing and interrupting sleep. This
relatively common and chronic disorder is
underdiagnosed and inadequately treated.
Obstructive sleep apnoea (OSA) is understood to contribute
to a wide range of serious long-term outcomes, including
cardiovascular disease, cognitive impairments such as
memory loss, poor concentration and judgment, depression
and death or injury due to traffic accidents resulting from
excessive daytime sleepiness. The costs associated with
OSA are substantial, relating to lost productivity, workplace
and motor vehicle accidents.
A 2019 article published by the Lancet premised on literature-
based analysis of 17 studies across 16 countries, estimated
that OSA affects some 936 million adults worldwide. This
alarming statistic is also thought to be increasing due
to growing prevalence of obesity and an ageing global
population. Many people with OSA develop high blood
pressure (hypertension), which can increase the risk of
cardiovascular disease. The more severe the OSA, the
greater the risk of coronary artery disease, heart attack,
heart failure and stroke.
There are no registered drugs for OSA. Current treatment
options include: continuous positive airway pressure (“CPAP”)
in which an external device pneumatically splints the airway
open to prevent disruptions in breathing; oral appliances to
advance the mandible or to retain the tongue, putting the
mouth in a position more conducive to breathing; surgery
to remove physical obstructions to air flow; and implantable
electronic stimulators to activate muscles at the base of the
tongue, opening the airway in synchrony with respiration.
However, all of these therapies are inadequate, expensive,
and for implantable stimulators and surgery, invasive.
The standard treatment option is the mechanical CPAP
device, however, we believe patient compliance to CPAP
devices is low due to discomfort and claustrophobia resulting
from pressurised air being pumped into the patient’s nose
and/or mouth during sleep. Despite these discomforts, the
global annual market for OSA detection and treatment using
CPAP devices is over US$10 billion and growing.
IHL-42X in Obstructive Sleep Apnoea
IHL-42X is a fixed-dose combination of acetazolamide,
a registered pharmaceutical, and dronabinol, a synthetic
cannabidiol; both agents have been shown to reduce the
apnoea hypopnea index (“AHI”). We believe that the activity
of synthetic dronabinol on cannabinoid receptors causes
dilation of the airway, and acetazolamide induces modest
metabolic acidosis, signalling to the body that there is excess
CO2 in the blood, thus increasing respiration. By exploiting
two mechanisms that both reduce AHI in one pharmaceutical
formulation, we believe that IHL-42X can have a therapeutic
benefit at doses of each constituent drug that are safe
and tolerable.
Australian Stage 2 Clinical Trial for IHL-42X for
Obstructive Sleep Apnoea (“OSA”)
We are currently conducting a proof-of-concept Phase 2
clinical trial in Australia to support our IND application with
the FDA and to inform the clinical design of our planned FDA
compliant pivotal Phase 2 clinical trial in Australia to assess
the safety and efficacy of IHL-42X in patients with Obstructive
Sleep Apnoea. We received approval from The Alfred
Hospital Human Research Ethics Committee in September
2020 to proceed with the trial in Australia. In December 2020,
we recruited the first patients to the randomised, double-
blind, placebo-controlled clinical trial that assesses the
therapeutic benefit of IHL-42X at three different doses. The
primary endpoint of the trial is the measurement of reduction
in the AHI and the secondary endpoints are reduction in
oxygen desaturation index (“ODI”), daytime somnolence
measured by the Epworth Sleepiness Scale, improvement in
mood as measured by the POMS (Profile of Moods State),
and well-being as measured by the Short Form 36 and the
safety of the IHL-42X combination will be established through
adverse event monitoring.
The study is currently underway and well-advanced at the
Alfred Hospital in Melbourne Australia and the University of
Western Australia Centre for Sleep Science in Perth. We have
retained Novotech, a global contract research organisation,
to manage and to monitor the study. In July 2021, an interim
analysis of the data from our ongoing phase 2b double blind
randomised placebo-controlled clinical trial was performed
and these results have been utilised to support a patent
application regarding the methods for the treatment of
obstructive sleep apnoea.
Incannex has received HREC approval to commence an open
label extension to the phase 2b clinical trial. The open label
extension study will recruit people who have experienced
a benefit from IHL-42X in the phase 2b trial and will assess
the therapeutic benefit and tolerability of IHL-42X in those
patients over an extended timeframe.
The open label extension study will consist of 6 months
of treatment with IHL-42X. The primary endpoint will be
reduction in Apnoea Hypopnea Index (‘AHI’) compared to
the patient’s original, pre-treatment baseline measurement.
AHI will be assessed during three overnight sleep studies
at day 28, 64 and 168. The main goal of this study is to
determine whether the reduction in AHI that was observed for
these subjects in the phase 2b study is maintained over an
extended period.
Additionally, we plan to supply IHL-42X for sale in Australia
under the Special Access Scheme for unregistered medicinal
synthetic cannabidiol products after the completion of the
Phase 2 study and prior to drug registration.
18
19
Incannex Healthcare LimitedIncannex Healthcare Limited IHL-216A for Concussion/Traumatic Brain Injury
and Chronic Traumatic Encephalopathy
Concussion/Traumatic Brain Injury are caused by a rapid acceleration/deceleration of
the brain caused by a direct blow to the head or sudden impact to the body that jolts
the skull. This causes the brain to compress against the skull. The impact of the brain
against the skull causes both macro and micro scale damage to the brain which sets
of a series of physiological events called secondary injury cascades. These secondary
injury cascades are what cause many of the neurocognitive deficits seen in TBI patients.
Falls, vehicle collisions, violence, sports and combat injuries
are the main activities leading to TBI and concussion. The
signs and symptoms of a concussion can be subtle and
may not show up immediately. Symptoms can last for
days, weeks or even longer. Common symptoms after a
concussive traumatic brain injury are headache, loss of
memory (amnesia) and confusion. The amnesia usually
involves forgetting the event that caused the concussion.
Other symptoms include nausea, vomiting, fatigue, blurry
vision and ringing in the ears.
Complications can occur immediately or soon after a
traumatic brain injury. Severe injuries increase the risk
of a greater number of and more-severe complications.
Moderate to severe traumatic brain injury can result in
prolonged or permanent changes in a person’s state of
consciousness, awareness or responsiveness. Many people
who have had a significant brain injury will experience
changes in their cognitive ability, have executive functioning
problems and or communication, emotional and behavioural
problems. Some research suggests that repeated or
severe traumatic brain injuries might increase the risk
of degenerative brain diseases, but this risk cannot be
predicted for an individual.
Chronic traumatic encephalopathy (“CTE”) is the term used
to describe brain degeneration likely caused by repeated
head traumas. CTE is a diagnosis made only at autopsy
by studying sections of the brain. CTE is a rare disorder
that is not yet well understood. CTE is not related to the
immediate consequences of a late-life episode of head
trauma. CTE has a complex relationship with head traumas
such as persistent post-concussive symptoms and second
impact syndrome that occur earlier in life.
CTE has been found in the brains of football players, boxers
and other athletes that play contact sports, along with
military personnel who were exposed to explosive blasts.
Some signs and symptoms of CTE are thought to include
difficulties with thinking (cognition) and emotions, physical
problems and other behaviours. Symptoms of CTE often
manifest decades after head trauma occurs.
IHL-216A Formulation development for
clinical trials
IHL-216A is a fixed dose combination of isoflurane,
a registered pharmaceutical, and CBD, intended for
administration in the immediate period after primary
blunt head injury to prevent development of brain injuries.
Isoflurane is approved in the United States for induction
and maintenance of anaesthesia. CBD is approved
for use in seizure disorders and has shown effects on
neuroinflammatory responses to brain injury. Isoflurane is
a registered pharmaceutical, and also has demonstrated
neuroprotective activity (neuroprotective activity, or
neuroprotection, is defined as reduced neuronal cell
death or disruption) in animal studies of TBI by modulating
glutamate release and calcium uptake as well as effects
on mitochondrial membrane depolarisation and excitatory
neurotransmission. Thus, we believe that IHL-216A may
affect neuroexcitation, neuro-inflammation, cerebral
blood flow and cerebral oxygen consumption resulting
in overall neuroprotection.
20
21
Incannex Healthcare LimitedIncannex Healthcare Limited We are also assessing IHL-216A’s ability to protect the brain
against secondary injury mechanisms that cause neuronal
cell death and raised intracranial pressure in the days
and weeks following head trauma in sports, and all other
applicable scenarios resulting in head trauma (falls, vehicle
collisions, violence, combat, among other causes). Ablating
secondary brain injury may improve positive outcomes for
long term neurological sequelae, including CTE, a major
health risk associated with contact sports.
The formulation of IHL-216A presents unique challenges.
Because isoflurane is an inhaled volatile anaesthetic, it cannot
be used in a typical oral drug combination product. We intend
to formulate IHL-216A as a combined inhalational product.
We engaged Vectura, a UK based contract development
and manufacturing organisation, to develop the inhaled
CBD formulation and device for delivery of the CBD to the
isoflurane anaesthetic circuit. Development of the inhaled
CBD formulation will be an iterative process starting with
three steps of refinement based on properties of the solution,
generated aerosol, and dose delivery. Vectura specialises in
the development of inhaled drugs and has an excellent track
record of bringing products to market and have formulated
pharmaceutical drugs for multinational pharmaceutical
companies including Bayer, Sandoz and Novartis.
Appointing Vectura to develop the IHL-216A formulation
in parallel with the animal study using the NFL model
of concussion will ensure that we are readied with the
specific formulation and delivery mechanism required for
advancement of a pivotal Phase 2 clinical trial once the
Stage 2 in vivo study and formulation is finalised.
Due to the product’s potential therapeutic utility in contact
sports, IHL216A is being designed to satisfy the World Anti-
doping Authority (“WADA”) specifications for use by athletes
at risk of TBI and CTE.
Stage 1 pre-clinical study for IHL-216A
for TBI and CTE
In December 2020, we completed an animal study to
formally assess the neuroprotective capability of IHL-216A.
The study introduced rodents to head trauma in a highly
controlled manner to inflict a reproducible injury. Various
doses of IHL-216A or its active pharmaceutical ingredients
were administered to eight cohorts of rodents soon after
traumatic head injury. Behavioural tests were used to assess
the neurocognitive and motor function over time. We also
monitored secondary injury cascades, assessed structural
damage to the brain using magnetic resonance imaging and
performed micro-scale cellular analysis post-mortem to
discern and compare neuronal damage across the cohorts.
As detailed below, we found that the IHL-216A components,
CBD and isoflurane, act synergistically to reduce indicators
of neuronal damage, neuroinflammation and behavioural
deficits that are consequences of TBI, as IHL-216A
outperformed the predicted effect of CBD and isoflurane
combined. The predicted result is determined by analysing
the results of isoflurane and CBD independently, and then
based on those results predicting how well the drugs
would do on a combined basis; to the extent IHL-216A
exceeds the predicted result, we can conclude that the
drugs strengthen the effectiveness of one another and
synergies exist. The study also found that IHL-216A was
significantly more effective than CBD or isoflurane applied
on a standalone basis.
Post-mortem analysis of rat brains also detected synergy
between CBD and isoflurane. Brains were fixed and
sectioned prior to Nissl staining to identify neuronal
damage. Nissl staining is a microscopy technique to visual
Nissl bodies. Healthy neurons typically have more Nissl
bodies than damaged ones. Neuronal damage is indicated
by the ratio of Nissl bodies to neurons across different
sections of the hippocampus with a lower Nissl/neuron
ratio indicative of increased neuronal damage. Synergy
between CBD and isoflurane was detected in hippocampal
regions cornu ammonis 1 (CA1) and cornu ammonis 2 (CA2).
These regions of the brain are known to be important in the
formation and storage of memories. In the study, IHL-216A
outperformed CBD alone by 53% for CA1 and 60% for
CA2, outperformed isoflurane alone by 28% for CA1 and
145% for CA2, and outperformed the predicted effect of
CBD and isoflurane combined by 20% for CA1 and 53% for
CA2. These results demonstrated less neuronal damage
experienced by the rats treated with IHL-216A relative to the
predicted value.
CA1
A
n
o
r
u
e
N
/
l
s
s
i
N
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
CA2
B
n
o
r
u
e
N
/
l
s
s
i
N
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Uninjured Vehicle
CBD
Isoflurane Predicted
CBD+Iso
IHL-216A
Uninjured Vehicle
CBD
Isoflurane Predicted
CBD+Iso
IHL-216A
Figure 1. Synergistic activity of CBD and isoflurane (IHL-216A) in neuronal damage as assessed by Nissl staining.
Rodents that had undergone TBI and treated with CBD and/or isoflurane or vehicle were assessed for neuronal damage by post-mortem analysis of fixed
brain sections by Nissl staining. Nissl staining permits the quantitation of the ratio of Nissl bodies to total neurons, a lower ratio being indicative of increased
neuronal damage. The Nissl/neuron ratio observed in hippocampal regions (A) CA1 and (B) CA2 contralateral to the site of injury in the group treated with
IHL-216A was greater than that predicted based on the groups treated with each drug alone, which is indicative of synergy. Values are average of the
respective treatment group. Group sizes: Uninjured n=6, vehicle n=6, CBD n=6, isoflurane n=5, IHL-216A n=6. Neuroinflammation Marker — Iba1.
A post-mortem analysis of the rat brains also determined
that CBD and isoflurane were synergistic in reducing
levels of the neuroinflammation marker Iba1 as detected
using immunofluorescence. Iba1 is a protein expressed
in microglia, a type of innate immune cell in the brain,
that is an established marker of microglial activation and
neuroinflammation. The levels of Iba1 in the brain are
detected using immunofluorescence, which is a microscopy
technique that employs antibodies specific to Iba1 which
are detected using a fluorescent tag. Increased levels of
Iba1 are indicative of increased neuroinflammation. IHL-
216A reduced the Iba1 neuroinflammation marker by 35%
more than CBD alone and 123% more than isoflurane
administered alone. IHL-216A also reduced the Iba1
neuroinflammation marker by 10% more than the predicted
value of the combined CBD and isoflurane.
e
v
i
t
a
e
r
l
2
m
m
/
1
a
b
I
n
i
n
o
i
t
c
u
d
e
R
e
l
c
i
h
e
v
o
t
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
Uninjured Vehicle
CBD Isoflurane Predicted
CBD+Iso
IHL-216A
Figure 2. Synergistic activity of CBD and isoflurane (IHL-216A)
in reducing levels of the neuroinflammatory marker Iba1.
Rodents that had undergone TBI and treated with CBD and/or
isoflurane or vehicle were assessed for neuroinflammation through
immunofluorescence analysis of the neuroinflammatory marker Iba1.
Iba1 levels increase after TBI and a reduction in Iba1 is indicative of a
reduction in neuroinflammation. Iba1 levels in brain sections ipsilateral
to the site of injury in the group treated with IHL-216A were reduced
more than would be predicted based on the reduction observed in
groups treated with each drug alone, which is indicative of synergy.
Values are average of the respective treatment group. Group sizes:
Uninjured n=6, vehicle n=5, CBD n=6, isoflurane n=3, IHL-216A n=5.
22
23
Incannex Healthcare LimitedIncannex Healthcare Limited
A
d
e
h
c
a
e
r
t
a
h
t
s
t
a
r
f
o
n
o
i
t
r
o
p
o
r
P
n
o
i
t
a
c
o
l
m
r
o
f
t
a
p
e
h
t
l
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
B
m
r
o
f
t
a
p
n
l
i
n
o
i
t
a
c
o
l
s
e
c
n
a
r
t
s
n
i
e
v
i
t
a
e
R
l
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
Uninjured Vehicle
CBD
Isoflurane Predicted
CBD+Iso
IHL-216A
Uninjured Vehicle
CBD
Isoflurane Predicted
CBD+Iso
IHL-216A
Figure 3. Synergistic activity of CBD and isoflurane (IHL-216A) in the Morris Water Maze assessment.
Rodents that had undergone TBI and treated with CBD and/or isoflurane or vehicle were assessed for spatial learning and memory using the Morris
Water Maze. The observed performance with respect to both (A) relative instances of animal in platform location and (B) proportion of animals in that
reached the platform location was better in the group treated with the CBD isoflurane combination (IHL-216A) than what was predicted based on the
performance of the groups treated with each drug alone. This outperformance by the IHL-216A compared to the predicted performance is indicative
of synergy. Values are average of the respective treatment group. Group sizes: Uninjured n=6, vehicle n=6, CBD n=5, isoflurane n=6, IHL-216A n=6.
Synergy between CBD and isoflurane was detected in
the behavioural outcomes assessed using the Morris
Water Maze. In the Morris Water Maze animals are trained
to find a platform in a pool of water. After a number of
training sessions, the platform is removed and the mice are
monitored to determine whether they return to the location
of the platform, which is a measure of spatial learning and
memory. IHL-216A outperformed the predicted value of
combined CBD and isoflurane when assessing both the
number of times rats returned to the location of the platform
per group by 87% as well as the proportion of rats in the
group that returned to the location of the platform by 24%,
demonstrating the synergistic effect of CBD and isoflurane.
Stage 2 pre-clinical study for IHL-216A
We are currently undertaking a second and more-extensive
animal study on the protective effect of IHL-216A in
sports concussion with the Monash Trauma Group at the
Department of Neuroscience, Monash University, Australia.
The Monash Trauma Group consists of a team of leading
scientists within their respective fields. Their research
focuses on the effects, underlying pathophysiological
mechanisms, biomarkers, and treatments of trauma related
conditions including TBI and concussion as well as other
types of neurological diseases, including CTE.
The study is coordinated by Dr Stuart McDonald, an expert
in fluid biomarker development for monitoring TBI, Associate
Professor Richelle Mychasiuk, an expert in animal models
of TBI and their clinical relevance, and Associate Professor
Sandy Shultz, an expert in the pathological mechanisms,
biomarkers and treatments of TBI and related conditions.
The model of TBI being used in this study was developed in
collaboration with the US National Football League (“NFL”).
The results of the study will be used as a precursory data set
to inform the pivotal clinical trials required for drug registration.
24
25
Incannex Healthcare LimitedIncannex Healthcare Limited
IHL-675A
IHL-675A comprises a combination of hydroxychloroquine, a registered
pharmaceutical, and CBD. Hydroxychloroquine (HCQ) is a disease modifying anti-
rheumatic drug that regulates the activity of the immune system, which may be
overactive in some conditions. HCQ can modify the underlying disease process,
rather than simply treating the symptoms. We have demonstrated that IHL-675A
components, cannabidiol and hydroxychloroquine, act synergistically to inhibit
production of key inflammatory cytokines in an in vitro study and in 4 distinct in
vivo experiments using established models of inflammation.
We are able to determine whether synergies exist in IHL-675A
studies by comparing the predicted result of CBD and HCQ
acting together to the actual IHL-675A results. The predicted
result is determined by analysing the results of HCQ and CBD
independently in the study, and then based on those results
predicting how well the drugs would do on a combined basis;
to the extent IHL-675A exceeds the predicted result, we can
conclude that the drugs strengthen the effectiveness of one
another and synergies exist.
We have evaluated the results of these experiments and
believe IHL-675A to be a multi-use candidate for the
prevention and treatment of inflammatory lung conditions
(ARDS, COPD, asthma, and bronchitis), rheumatoid arthritis
and inflammatory bowel diseases. Potentially, this could
mean that IHL-675A is a better alternative to CBD based
products for certain inflammatory diseases, subject to
further examination.
We have completed a pre-IND meeting with the FDA to
discuss the regulatory pathway for the development of IHL-
675A for lung inflammation in the United States and plan
to open INDs for each of the three indications. FDA agreed
that marketing applications for IHL-675A should be 505(b)
(2) applications due to the existence of certain safety and
efficacy information on the active ingredients of IHL-675A
originating from historical studies that we are entitled to use
in a new drug application.
Lung Inflammation
(COPD, Asthma, ARDS and Bronchitis)
Chronic obstructive pulmonary disease (“COPD”) is a
chronic inflammatory lung disease that causes obstructed
airflow from the lungs. Symptoms include breathing
difficulty, cough, mucus (sputum) production and
wheezing. It is typically caused by long-term exposure
to irritating gases or particulate matter, most often from
cigarette smoke. People with COPD are at increased risk
of developing heart disease, lung cancer and a variety of
other conditions.
Asthma is a condition in which inflammation causes the
airways to narrow and swell and which may cause the
patient to produce extra mucus. This can make breathing
difficult and trigger coughing, a whistling sound (wheezing)
during breathing and shortness of breath. For some people,
asthma is a minor nuisance. For others, it can be a major
problem that interferes with daily activities and may lead to
a life-threatening asthma attack. According to Allied Market
Research, the Global COPD and asthma drug market is
expected to reach US$50.4 billion by 2022, growing at a
CAGR of 3.7% from 2016 to 2022.
26
27
Incannex Healthcare LimitedIncannex Healthcare Limited This indicates that the combination of CBD and HCQ in
IHL-675A has the potential to permit a ten-fold reduction in
HCQ dose, when combined with CBD, without sacrificing
efficacy in treatment of arthritis.
We have broadened claims within initial patent filings to cover
rheumatoid arthritis as an indication. We are continuously
monitoring the results of our research and development
program, with a view to identifying and protecting new IP that
aligns with our commercial objectives.
Inflammatory Bowel Disease
Inflammatory Bowel Disease (“IBD”) is an umbrella term
used to describe disorders that involve chronic inflammation
of the digestive tract. Significant types of IBD include:
• Ulcerative colitis. This condition involves
inflammation and sores (ulcers) along the superficial
lining of the large intestine (colon) and rectum.
• Crohn’s disease. This type of IBD is characterised by
inflammation of the lining of the digestive tract, which
often can involve the deeper layers of the digestive tract.
Both ulcerative colitis and Crohn’s disease are usually
characterised by diarrhoea, rectal bleeding, abdominal
pain, fatigue and weight loss. IBD can be debilitating and
sometimes leads to life-threatening complications.
Acute respiratory distress syndrome (“ARDS”) occurs when
fluid builds up in the air sacs (alveoli) located in the lungs.
The fluid prevents oxygen from reaching the bloodstream.
This deprives organs of the oxygen they need to function.
ARDS typically occurs in people who are already critically ill
or who have significant injuries. Severe shortness of breath
(the main symptom of ARDS) usually develops within a few
hours to a few days after the primary injury or infection.
It is the one of the main causes of death resulting from
COVID-19 and many people who develop ARDS do not
survive. The risk of death increases with age and severity
of illness. People who survive ARDS may experience lasting
damage to their lungs.
Bronchitis is an inflammation of the lining of the bronchial
tubes of the lungs. Bronchitis may be either acute or
chronic. While acute bronchitis is common, chronic
bronchitis, a more serious condition, is a constant irritation
or inflammation of the lining of the bronchial tubes.
Rheumatoid Arthritis
Rheumatoid arthritis is a chronic inflammatory disorder that
can affect joints, skin, eyes, lungs, heart and blood vessels.
As an autoimmune disorder, rheumatoid arthritis is caused by
attacks to body tissues by one’s immune system. Unlike the
wear-and-tear damage caused by osteoarthritis, rheumatoid
arthritis causes a painful swelling that can eventually result in
bone erosion and joint deformity.
HCQ is approved for treatment of rheumatoid arthritis in
the form of hydroxychloroquine sulphate and marketed as
Plaquenil. HCQ has risks of ocular toxicity and cardiac effects
including cardiomyopathy and QT prolongation amongst long
term users, as listed in the prescribing material.
Similarly, long term use of HCQ in rheumatoid arthritis
patients was associated with increased cardiovascular
mortality. Therefore, there is value in reducing the dose of
HCQ in these arthritis patients. To understand the capacity
for the combination of CBD with HCQ to permit reduction of
the HCQ dose, in an animal study, low dose IHL-675A (1 mg/
kg CBD + 2.5 mg/kg HCQ) was compared to a standard dose
of HCQ (25 mg/kg HCQ). The 25 mg/kg HCQ dose in rats is
equivalent to a 243 mg HCQ dose in a 60 kg human based on
the FDA body surface area dose equivalence of 6/37.
In an animal study, low dose IHL-675A was more effective
at reducing arthritis across multiple assessments including
clinical score, paw volume, pannus score, total histology
score and serum cytokine levels than the standard dose of
HCQ. The reduction in disease assessments by low dose IHL-
675A was 1.06-3.52 times that observed for HCQ alone at the
standard dose.
A
n
o
i
t
i
i
b
h
n
i
e
v
i
t
l
a
e
R
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
IL-1β
B
n
o
i
t
i
i
b
h
n
i
e
v
i
t
l
a
e
R
IL-1
⍺
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
CBD
HCQ
Predicted
CBD+HCQ
IHL-675A
CBD
HCQ
Predicted
CBD+HCQ
IHL-675A
C
IL-6
D
MIP-1
⍺
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
n
o
i
t
i
b
h
n
i
i
e
v
i
t
a
e
R
l
CBD
HCQ
Predicted
CBD+HCQ
IHL-675A
CBD
HCQ
Predicted
CBD+HCQ
IHL-675A
TNF-
⍺
CBD
HCQ
Predicted
CBD+HCQ
IHL-675A
Figure 4. Inhibition of LPS-induced cytokine release from human
PBMCs by IHL-675A, CBD and HCQ.
Data is presented is the average relative inhibition for two PBMC donors
treated with IHL-675A, CBD or HCQ. Predicted inhibition by CBD+HCQ
was calculated using the formula Epred A+B=(EA+EB)-(EAEB). (A) IL-1b,
(B) IL-1a, (C) IL-6, (D) MIP-1a, and (E) TNF- a. Error bars are standard error
of the mean of the donors.
n
o
i
t
i
b
h
n
i
i
e
v
i
t
a
e
R
l
E
n
o
i
t
i
b
h
n
i
i
e
v
i
t
a
e
R
l
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
28
29
Incannex Healthcare LimitedIncannex Healthcare Limited
Preclinical in vitro study of IHL-675A
against inflammation
On November 5, 2020, we released the results of our
first in vitro study to investigate the synergistic activity
of IHL-675A to inhibit inflammation. To test the anti-
inflammatory potential of IHL-675A, human peripheral blood
mononuclear cells (“PBMCs”) were stimulated with bacterial
lipopolysaccharide (“LPS”). PBMCs were incubated with a
range of concentrations of CBD and HCQ in combination
or each drug alone and then stimulated with LPS to induce
an inflammatory response. The inflammatory response was
assessed by measuring cytokine levels in the culture medium
after 24 hours. A reduction in cytokine levels in response to
drug treatment is indicative of anti-inflammatory activity.
Cytokine levels were averaged across three replicates from
two donors and normalised to maximum values to yield a
relative inhibition value. A relative inhibition of 1 is complete
inhibition of cytokine release whereas a value of 0 is no
inhibition of cytokine release. Anti-inflammatory synergy
was determined using the standard scientific “Excess over
Bliss” (“EOB”) method where the predicted inhibition, as
calculated using the formula Epred A+B=(EA+EB)-(EAEB),
is subtracted from the observed inhibition to yield an EOB
score. An EOB score of greater than zero indicates that the
combination is synergistic.
The study demonstrated that CBD and HCQ act
synergistically to inhibit production of the assessed
inflammatory cytokines IL-1β, IL-6, TNF-α, IL-1aα, and MIP-
1α by PBMCs from the donors. The average EOB scores
ranged from 0.32-0.57. IHL-675A outperformed HCQ alone
by 436% to 1320% and CBD alone by 109% to 767% across
the five cytokines and outperformed the predicted cytokine
inhibition of IHL-675A based on the activity of each drug
alone by 87% to 767% across the 5 cytokines. The results
in Figures A, B, C, D and E presented below, display the
optimal fixed dose IHL-675A combination assessed for each
cytokine. The bars noted as Predicted CBD+HCQ represent
the expected level of inhibition by the drug combination
based on the activity of each drug alone. The observed
results from the study exceeded these in each inflammatory
cytokine analysed.
IL-1β
IL-6
n
o
i
t
i
b
h
n
i
i
e
v
i
t
a
e
R
l
n
o
i
t
i
i
b
h
n
i
e
v
i
t
l
a
e
R
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
n
o
i
t
i
b
h
n
i
i
CBD
HCQ
Predicted
CBD+HCQ
IHL-675A
TNF-α
e
v
i
t
a
e
R
l
n
o
i
t
i
i
b
h
n
i
e
v
i
t
l
a
e
R
0.4
0.3
0.2
0.1
0.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
CBD
HCQ
Predicted
CBD+HCQ
IHL-675A
IL-12(p70)
n
o
i
t
i
b
h
n
i
i
e
v
i
t
a
e
R
l
IFN-γ
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
CBD
HCQ
Predicted
CBD+HCQ
IHL-675A
Figure 5. Synergistic anti-inflammatory activity of CBD and HCQ
in a mouse sepsis model.
The anti-inflammatory activity of the combination of CBD and HCQ was
greater than that predicted using the Excess over Bliss method. The
CBD+HCQ combination was synergistic at inhibiting release of IL-1β, IL-6,
TNF-α, IL12(p70), and IFN- γ.
Cytokine levels were normalised to those detected in vehicle
treated mice and then the relative inhibition was calculated.
IHL-675A reduced levels of all assessed inflammatory
cytokines IL-1β, IL-6, TNF-α, CXCL1 and MCP-1 to a greater
extent than either CBD or HCQ alone. WBC counts were
normalised using the same method used for cytokines and
IHL-675A reduced WBC counts to a greater extent than
CBD or HCQ alone. These results indicate that IHL-675A
has superior anti-inflammatory activity compared to CBD
and HCQ in a mouse pulmonary inflammation model, and
therefore IHL-675A may be effective in the treatment of
inflammation in humans.
Preclinical in vivo study of IHL-675A against
Pulmonary Inflammation (ARDS, COPD, Asthma
and Bronchitis)
In February 2021, we announced the results of an in vivo
study assessing IHL-675A anti-inflammatory capabilities
regarding chronic obstructive pulmonary disease, asthma,
bronchitis, and other inflammatory respiratory conditions.
We also assessed the anti-inflammatory effect of IHL-675A
on Pulmonary Neutrophilia, which is a primary underlying
cause of COPD, asthma, bronchitis, and other inflammatory
respiratory conditions. We reported encouraging results, as
discussed below, which facilitate a substantial expansion of
the potential uses for IHL-675A and represent new patient
treatment opportunities.
In this study, ten groups of six mice each were pre-treated
with either CBD, HCQ or IHL-675A prior to intratracheal
administration of bacterial lipopolysaccharide (“LPS”), which
was then inhaled and acts as an inflammatory stimulus in
the lungs. A sham group where LPS was not administered
to the mice was also included as a control. The lungs
were flushed with a saline solution 24 hours after LPS
administration and bronchoalveolar lavage fluid (‘BALF’)
was analysed for cytokine levels using a Luminex based
assay. Cytokines are proteins that mediate the inflammatory
response and a reduction in cytokine levels is indicative of
reduced inflammation. A white blood cell (‘WBC’) count was
also performed on the BALF. When inflammation occurs in
the lungs, WBCs are recruited as part of the inflammatory
response. A reduction in WBC count is also indicative of
reduced inflammation.
CBD
HCQ
Predicted
CBD+HCQ
IHL-675A
CBD
HCQ
Predicted
CBD+HCQ
IHL-675A
30
31
Incannex Healthcare LimitedIncannex Healthcare Limited
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
A
)
%
(
n
o
i
t
i
i
b
h
n
I
e
v
i
t
l
a
e
R
C
)
%
i
(
n
o
i
t
i
b
h
n
I
e
v
i
t
a
e
R
l
E
)
%
i
(
n
o
i
t
i
b
h
n
I
e
v
i
t
a
e
R
l
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
IL-1β
IL-6
B
)
%
(
n
o
i
t
i
i
b
h
n
I
e
v
i
t
l
a
e
R
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
CBD
HCQ
IHL-675A
CBD
HCQ
IHL-675A
TNF-α
D
)
%
i
(
n
o
i
t
i
b
h
n
I
e
v
i
t
a
e
R
l
CBD
HCQ
IHL-675A
MCP-1
F
)
%
(
n
o
i
t
i
b
h
n
i
i
e
v
i
t
a
e
R
l
CXCL1
CBD
HCQ
IHL-675A
WBC
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
CBD
HCQ
IHL-675A
CBD
HCQ
IHL-675A
Figure 6. Reduction in cytokine levels and white blood cell count in BALF resulting from treatment with by IHL-675A,
CBD or HCQ in a mouse model of pulmonary inflammation.
Mice were treated with CBD, HCQ or a combination of CBD and HCQ (IHL-675A) and then LPS was administered intratracheally. Twenty-four hours
after LPS administration bronchioalveolar lavage fluid (BALF) was analysed for cytokine levels and white blood cell count. The reduction in cytokine
levels by IHL-675A was greater than that for either drug alone. Drug concentrations were 1 mg/kg CBD and 25 mg/kg HCQ for (A) IL-1β, (B) IL-6, (C)
MCP1 and (E) TNF-α, 10 mg/kg CBD and 2.5 mg/kg HCQ for CXCL-1 and WBC (white blood cell count).
Preclinical study of IHL-675A in a model of
Rheumatoid Arthritis
In March 2021, we announced the results of an in vivo study
assessing IHL-675A’s anti-inflammatory capabilities regarding
rheumatoid arthritis. Results indicate that a low dose of
IHL-675A was 1.06 to 3.52 times more effective at reducing
arthritis across multiple assessments including clinical
score, paw volume, pannus score, total histology score and
serum cytokine levels compared to a standard dose of HCQ
only. HCQ is approved and widely used for the treatment
of rheumatoid arthritis in the form of hydroxychloroquine
sulphate, which is marketed as Plaquenil.
In this model of rheumatoid arthritis, female Lewis rats
were challenged with porcine type-II collagen with Freund’s
adjuvant on Day 1 (0.2 mg/0.2 mL/rat) by subcutaneous
injection at the base of the tail to induce arthritis. A booster
injection at 0.1 mg/0.1 mL/rat was injected on day 7. On day
16, rats were allocated into groups of six. There were ten
groups of modelled rats and one sham injected group. CBD,
HCQ or IHL-675A were injected intraperitoneally once per
day from day 17 to 30 (total of 14 days). Drug doses were 1
and 10 mg/kg CBD and 2.5 and 25 mg/kg HCQ. The 10 mg/
kg CBD and 25 mg/kg HCQ doses were selected as they are
representative of standard doses in humans based on the
FDA body surface area dose equivalence estimation for rats
to humans of 6/37. For a 60 kg person, the 10 mg/kg CBD
dose in rats is equivalent to 97 mg and the 25 mg/kg HCQ
dose in rats is equivalent to 243 mg. The maintenance dose
range recommended for rheumatoid arthritis in the Plaquenil
prescribing information is 200-400 mg daily.
Disease was assessed by measuring hind paw volume with
a plethysmometer and using a qualitative severity score
system on days 1, 7 ,10, 14, 16, 18, 20, 22, 24, 26, 28 and
30. Post termination on day 30, blood was collected from all
rats and analysed for levels of the inflammatory cytokines
IL-1β and IL-6 using commercially available ELISA kits.
These two cytokines were selected as they are known to be
involved in the pathophysiology of rheumatoid arthritis. Both
hind paws were harvested, weighed and formalin-fixed for
histopathology. Histopathological evaluation consisted of
an evaluation of cartilage and bone destruction by pannus
formation (an abnormal layer of fibrovascular or granulated
tissue) and mononuclear cell infiltration in synovial joint
tissues. A total histology score, which is a sum of the pannus
formation and mononuclear cell infiltration scores, was
also calculated. For all assessments, the score was sham
subtracted and then the reduction relative to the vehicle
group was calculated.
IHL-675A outperformed HCQ alone in the study (at equivalent
doses) at reducing clinical score and paw volume at days 24
and 30, pannus formation, total histology score, IL-1β and
IL-6 in the rat model of arthritis. The reduction in disease
assessments by IHL-675A was 1.07-8.72 times that observed
for HCQ alone at an equivalent dose, which indicates that
IHL-675A has a benefit in a rat model of arthritis greater than
that of HCQ alone and demonstrates that IHL-675A is
a potential treatment for arthritis in humans.
Clinical Score Day 24
A
)
%
(
n
o
i
t
c
u
d
e
r
e
v
i
t
a
e
R
l
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
CBD
HCQ
IHL-675A
Paw Volume Day 24
B
)
%
(
n
o
i
t
c
u
d
e
r
e
v
i
t
a
e
R
l
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
CBD
HCQ
IHL-675A
32
33
Incannex Healthcare LimitedIncannex Healthcare Limited
C
)
%
(
n
o
i
t
c
u
d
e
r
e
v
i
t
l
a
e
R
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
E
)
%
(
n
o
i
t
c
u
d
e
r
e
v
i
t
a
e
R
l
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Pannus Score
Total Histology Score
D
)
%
(
n
o
i
t
c
u
d
e
r
e
v
i
t
l
a
e
R
30.0
25.0
20.0
15.0
10.0
5.0
0.0
CBD
HCQ
IHL-675A
CBD
HCQ
IHL-675A
IL-1β
IL-6
F
)
%
(
n
o
i
t
c
u
d
e
r
e
v
i
t
a
e
R
l
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
CBD
HCQ
IHL-675A
CBD
HCQ
IHL-675A
Figure 7. Comparison of IHL-675A to its component drugs CBD and HCQ in reduction of disease assessments in a rat model of
rheumatoid arthritis.
Groups of rats that had undergone collagen-induced arthritis modelling were treated with IHL-675A, CBD or HCQ at equivalent doses (1 mg/kg CBD,
2.5 mg/kg HCQ). The reduction in arthritis disease severity in IHL-675A treated rats was greater than for either CBD or HCQ treated rats with respect to
(A) clinical score at day 24, (B) paw volume at day 24, (C) pannus formation, (D) total histology score, (E) serum IL-1b levels and (F) serum IL-6 levels.
Preclinical studies of IHL-675A in models of
inflammatory bowel disease
over the course of the experiment. On Day 5 mice were
sacrificed and the colon removed for analysis.
In February 2021, we announced the results of an in vivo
study assessing IHL-675A’s anti-inflammatory capabilities
regarding inflammatory bowel disease. IHL-675A
demonstrated a reduction in the Colitis index of 46%, while
CBD only and HCQ only treatment achieved a reduction of
25% and 27% respectively, demonstrating that IHL-675A has
superior anti-inflammatory activity compared to CBD only
and HCQ only, which indicates that IHL-675A is a potential
treatment for inflammatory bowel disease in humans.
This study used eleven groups of six mice. Mice were
treated with IHL-675A, CBD or HCQ for four consecutive
days after administration of TNBS/ethanol to induce
ulcerative colitis. A vehicle treated group and sham group
were included in the study. Stool consistency was monitored
Endpoint measurements include stool consistency score
(an ordinal scale that measures stool consistency with a
higher number indicative of looser stools), colon weight,
colon macroscopic damage score (an ordinal scale that
combines adhesions, strictures, ulcers/inflammations and
instances of wall thickening), colitis index (a composite
scale from the histological examination of colon sections)
and myeloperoxidase (an enzyme abundantly expressed
in neutrophil granulocytes that contributes to inflammatory
damage in IBD) levels in the colon tissue at day 5. The
results from each of these endpoints were sham subtracted
and the relative reduction was calculated.
A
)
%
(
n
o
i
t
c
u
d
e
r
e
v
i
t
l
a
e
R
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
C
)
%
(
n
o
i
t
c
u
d
e
r
e
v
i
t
a
e
R
l
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
E
)
%
(
n
o
i
t
c
u
d
e
r
e
v
i
t
a
e
R
l
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Colitis index
Macro damage score
B
)
%
(
n
o
i
t
c
u
d
e
r
e
v
i
t
l
a
e
R
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
CBD
HCQ
IHL-675A
CBD
HCQ
IHL-675A
Stool consistency score
CBD
HCQ
IHL-675A
MPO
CBD
HCQ
IHL-675A
Relative colon weight
D
)
%
(
n
o
i
t
c
u
d
e
r
e
v
i
t
a
e
R
l
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
CBD
HCQ
IHL-675A
Figure 8. Reduction in colitis score assessments by CBD and HCQ
(IHL-675A) in a mouse model of colitis.
Colitis was induced in mice by intracolonic installation of
TNBS/ethanol and then treated with CBD, HCQ or CBD and HCQ
(IHL-675A). After 4 days, mice were sacrifice and the colons extracted
for macro and microscopic analysis. The reduction in colitis severity
was greater in mice treated with IHL-675A than for either CBD or HCQ
alone for (A) colitis index, (B) macroscopic damage score, (C) stool
consistency, (D) relative colon weight and (E) MPO levels. Drug dose in
all assessments was 1 mg/kg CBD and 2.5 mg/kg HCQ.
34
35
Incannex Healthcare LimitedIncannex Healthcare Limited
On the 16th of July 2021, Incannex announced that it
engaged Procaps S.A. (‘Procaps’) to manufacture soft gel
capsules for the Company’s clinical trial programs. Procaps
manufacturing plant has been inspected and approved for
good manufacturing practices (GMP) by multiple regulatory
agencies including FDA, TGA, Health Canada and MHRA.
Production of IHL-675A soft gel capsules can quickly
ramp up to commercial quantities for sale as either an
unregistered or registered product in various markets upon
the achievement of successful clinical trial outcomes.
CMAX Clinical Research CMAX Clinical Research is an
independent clinical research facility, based in Adelaide,
Australia. CMAX has been established as a Phase I-II unit
since December 1993, making it the longest-running in
Australia which has consistently maintained world class
standards with a commitment to providing excellence and
quality in all areas of clinical service. CMAX has conducted
more than 600 studies since the unit was established and
was most recently US FDA audited in 2019 with no findings.
CMAX is one of Australia’s most modern Phase I-II clinical
facilities, adjacent to Adelaide’s Biomed City.
IHL-675A outperformed both CBD only and HCQ only at
reducing the colitis index, macroscopic damage score,
stool consistency score, colon to body weight ratio and
myeloperoxidase (MPO) levels. These results indicate that
IHL-675A has a benefit in a mouse model of ulcerative colitis
greater than that of CBD or HCQ alone, which indicates that
IHL-675A is a potential treatment for inflammatory bowel
disease in humans.
Phase 1 clinical trial for IHL-675A
We have commenced a phase 1 clinical trial to assess
IHL-675A soft gel capsules in healthy volunteers. The study
will be conducted at CMAX Clinical Research (CMAX) in
South Australia and managed by Australian CRO Avance
Clinical (Avance).
The aims of the study are to demonstrate that there are
no, or minimal, additional side effects associated with the
combination of CBD and HCQ compared to each drug alone
and that the uptake and metabolism (pharmacokinetics) of
the two drugs do not materially interfere with one another.
A total of 36 subjects will participate in the trial, evenly
divided across three arms. The three arms of 12 subjects
each will receive one of IHL-675A, CBD, or HCQ. The safety
and pharmacokinetic assessments will be identical across
the three arms of the trial.
IHL anticipates that the first participants will be recruited
in Q4 2021. Subject to clinical success, the results of this
clinical trial will form part of three FDA investigational new
drug (IND) applications for each of the three indications the
Company is pursuing with IHL-675A. Those indications are
lung inflammation, rheumatoid arthritis, and inflammatory
bowel disease, representing major markets for IHL to pursue
with IHL-675A. Once the IND applications are evaluated and
approved, the Company intends to conduct phase 2 and 3
clinical trials partly or wholly in the United States.
36
37
Incannex Healthcare LimitedIncannex Healthcare Limited Psilocybin-assisted Psychotherapy for
General Anxiety Disorder (Psi-GAD)
Generalised Anxiety Disorder
Generalised Anxiety Disorder (GAD) is characterised
by diffuse, excessive, uncontrollable anxiety that is not
restricted to any specific environmental circumstances and
occurs more days than not for at least 6 months (American
Psychiatric Association, 2013). About 3% of the adult
population in the USA and Australia are estimated to have
GAD in any 12-month period. This equates to an estimated
9M people in the US (7M moderate to severe) having
GAD and approximately 1M people in Australia. Patients
experience intense, persistent, and often debilitating anxiety.
First line treatment options for GAD include Cognitive
Behavioural Therapy, anti-depressants (SSRIs, SNRIs)
and pregabalin, with benzodiazepines (e.g. Diazepam)
as a second-line, short-term option. Existing treatments
show limited efficacy, with less than 50% of patients
achieving remission, alongside high relapse rates. These
treatment limitations highlight significant unmet need in
this patient group.
GAD tends to be more frequent and severe than within other
anxiety disorders, having a chronic, unremitting course. It is
associated with a high public burden, and significant distress
and impairment in quality of life, relationships, work, or other
areas of functioning.
Psilocybin as a treatment for generalised
anxiety disorder
Psychedelic-assisted psychotherapy may provide rapid,
significant, and lasting benefit in treating unipolar depression,
depression and anxiety symptoms associated with a
terminal illness, and substance misuse. Psilocybin is a
psychoactive molecule that occurs naturally in several
genera of mushrooms, which primarily acts on the serotonin
receptor system, and can modulate states of consciousness,
cognition, perception, and mood.
When combined with specialised forms of psychotherapeutic
support, psilocybin can be both a safe and highly effective
mental health treatment. Through the 1950s and 1960s,
tens of thousands of individuals participated in psychedelic
research. While methodologically limited by modern
standards, the findings from many of these studies showed
substantial improvements in anxiety, depression and
addiction levels, and quality of life.
Following decades of socio-political obstruction to
psychedelic treatments, an increasing number of clinical
psychedelic trials are now being conducted at highly
esteemed institutions around the world, including Imperial
College London, John Hopkins University, University of
California, and now Monash University, Melbourne, in
partnership with us.
Over the past decade, the therapeutic potential of psilocybin
in anxiety, depression and addiction has been demonstrated
in various academic-sponsored studies. In these studies,
psilocybin-assisted psychotherapy, provided a rapid
reduction in anxiety and depression symptoms on the day of
administration with generally maintained treatment effects
at follow-up assessments many months later. These studies
have shown psilocybin to be generally well-tolerated, with low
toxicity and no serious adverse events reported.
We believe that the following four studies detailed below
support psilocybin-assisted therapy for treating anxiety using
treatment dosages up to 30mg/70kg:
• New York University, Ross et al 2016 (n=29): Rapid
and sustained symptom reduction following psilocybin
treatment for anxiety and depression in patients with
life-threatening cancer: a randomised controlled trial.
Psilocybin produced immediate, substantial, and
sustained improvements in anxiety and depression,
as well as decreases in cancer-related demoralisation
and hopelessness, improved spiritual wellbeing, and
increased quality of life.
38
39
Incannex Healthcare LimitedIncannex Healthcare Limited • Imperial College London, Carhart-Harris et al 2018
(n=20): Psilocybin with psychological support for
treatment-resistant depression: six-month follow-up.
Good tolerability, effect sizes large and symptom
improvements appeared rapidly after just two psilocybin
treatment sessions and remained significant six months
post-treatment in a treatment-resistant cohort.
• University of California, Los Angeles, Grob et al 2011
(n=12): Pilot study of psilocybin treatment for anxiety in
patients with advanced-stage cancer. The State-Trait
Anxiety Inventory trait anxiety subscale demonstrated
a significant reduction in anxiety at one and three
months after treatment. There were no clinically
significant adverse events with psilocybin.
• John Hopkins University, Griffiths et al 2017 (n=51):
Psilocybin produces substantial and sustained
decreases in depression and anxiety in patients with
life-threatening cancer: a randomised double-blind
trial. Large and significant decreases in clinician-rated
and self-rated measures of depression, anxiety or
mood disturbance, and increase measures of quality
of life, life meaning, death acceptance, and optimism.
Two psilocybin research programs for depression have
received breakthrough designation from the FDA. A small
number of other psilocybin treatment development programs
are underway globally. Should the results from any of these
research programs be positive, approval of psilocybin-
assisted psychotherapy as a prescription treatment could
occur within the next five years.
Our investigational psilocybin therapy for
Generalised Anxiety Disorder
Our psilocybin therapy combines psilocybin with
psychological therapy that has been specifically designed
for patients diagnosed with generalised anxiety disorder
by a multidisciplinary team of experts lead by Principal
Investigator Dr Paul Liknaitzky, along with Co-Investigators
Professor Suresh Sundram and Professor Murat Yucel.
The wider research team includes experts in psychedelic-
assisted therapies, psychometric evaluation, qualitative
research, therapist training, and risk management. We are in
the process of coordinating two clinical trials as part of our
clinical development program, which we hope will lead to a
Pre-IND submission in Q3 of 2021, and which is ultimately
aimed at FDA approval of our psilocybin therapy administered
to patients with GAD.
Therapist recruitment in anticipation of the Phase 2
exploratory trial has commenced and therapist training is
anticipated to commence in Q3 2021.
Phase 2a clinical trial
Monash University
The protocol for our planned Phase 2 Australian exploratory
clinical trial has been completed and a research proposal
has been submitted to the human research ethics committee
(HREC) for approval in Q3 of 2021. HREC approval is
required prior to the commencement of patient recruitment in
Australia. Dr Paul Liknaitzky has successfully achieved HREC
approval for other clinical psilocybin studies in Australia and
has successfully acquired regulatory permits and imported
psilocybin into Australia.
The study is a Phase 2 randomised triple-blind active-placebo-
controlled trial to assess the safety and efficacy of psilocybin-
assisted psychotherapy for GAD. It will include 72 participants
that will experience two psilocybin or active-placebo dosing
sessions and up to 11 non-drug, specialist psychotherapy
sessions over a period of 10 weeks. Primary outcomes are
safety, efficacy and tolerability, and secondary outcomes are
quality of life, functional impairment, and comorbidities.
A preliminary analysis of patient data will be conducted
by an independent data safety monitoring board after 30
patients have completed primary endpoint assessment.
The preliminary analysis will allow the trial investigators to
inform the second part of the trial, with an opportunity to
adjust certain treatment design parameters to optimise
patient outcomes, or terminate the trial based on predefined
outcomes and adequate conditional power.
FDA development plan and pre-IND meeting
In February 2021, we formally engaged Camargo
Pharmaceuticals LLC, to advise upon and compile the pre-
investigational new drug application information package
necessary to formally request a pre-IND meeting with FDA.
This meeting request has been submitted to the FDA in Q3
2021 and we anticipate that the meeting will occur in Q4
2021. We believe that FDA guidance will provide us with the
regulatory clarity and commercial confidence to submit an
IND to the FDA and concurrently conduct a Phase 2b pivotal
clinical trial partly or wholly in the United States in 2022.
In December 2020, we entered into a partnership agreement
with Monash University (“Monash”) in Australia to conduct
a psilocybin-assisted psychotherapy trial to treat GAD.
Monash will sponsor our initial Phase 2 exploratory clinical
trial, ensuring rigorous scientific independence and the
highest standards in ethical and safe research. We are
funding and supporting this investigator-initiated trial, and
retain all intellectual property created by the trial. We are
also investigating the commencement of other psychedelic
medicine research projects that would offer an opportunity
to address what we believe is an unmet need in patients
diagnosed with other mental illnesses.
Monash is one of Australia’s leading universities and
consistently ranks among the world’s top 100. Psychedelic
treatment for our exploratory trials will be delivered
within BrainPark, a state-of-the-art research platform at
Monash’s Turner Institute for Brain and Mental Health and
Biomedical Imaging Facility, that provides a highly conducive
environment for psychedelic treatments in a research context.
Both the School of Psychological Sciences within the Turner
Institute for Brain and Mental Health, and the Department
of Psychiatry within the School of Clinical Sciences, have
combined forces to conduct psychedelic research and the
team comprises leading researchers and clinicians in relevant
fields of psychiatry, psychotherapy, and mental health
treatment development.
Clinical trial investigators
The Principal Investigator is Dr Paul Liknaitzky, with
Co-Investigators Professor Murat Yucel and Professor
Suresh Sundram.
Dr. Liknaitzky is Head of the Clinical Psychedelic Research
Lab within the Turner Institute and the Dept of Psychiatry,
Monash. He is a Chief Principal Investigator and Research
Fellow at Monash University, and has Adjunct or Honorary
appointments at St Vincent’s Hospital, Macquarie University,
Deakin University, and the University of Melbourne.
He earned an Honours in Neuroscience and a PhD in
Psychology from the University of Melbourne. His work
examines mechanisms of mental illness and treatment
development primarily within mood, anxiety and addiction
research. Liknaitzky is an Investigator across a number
of Australia’s first clinical psychedelic trials. He has been
invited to deliver numerous academic, professional, and
public talks on psychedelic-assisted psychotherapy, and
has been interviewed on the topic for print media, radio, and
podcasts. Liknaitzky leads Australia’s first clinical psychedelic
lab, coordinates Australia’s first applied psychedelic
therapist training program, and is establishing Australia’s
largest psychedelic trial (Psi-GAD). His work is focused on
developing a rigorous program of research in psychedelic
medicine at Monash University that seeks to evaluate
therapeutic effects, innovate on treatment design, mitigate
known risks, explore potential drawbacks, and understand
therapeutic mechanisms.
Professor Murat Yucel gained a PhD combined with specialist
clinical training in Clinical Neuropsychology in 2001 at La
Trobe University. He then worked across as numerous mental
health research centres at the University of Melbourne and
was promoted to professor in 2012. He now works within
the Monash School of Psychological Sciences, where he
heads the mental health and addiction research programs.
He is a director of BrainPark — a world-first neuroscience
research clinic designed to bring the latest neuroscience with
diagnostic or therapeutic benefit to the community in an
accessible way.
Professor Suresh Sundram is the Head, Department of
Psychiatry, School of Clinical Sciences, Monash University
and Director of Research, Mental Health Program, Monash
Health. He has been investigating the molecular pathology
of schizophrenia and related psychotic disorders using
pharmacological, neurochemical and neuropathological
approaches. These inter-related methods have been
applied to parse components of the disorder such as
treatment resistance and suicide to better understand
their neurobiological substrates. He undertook his doctoral
and post-doctoral studies at the Mental Health Research
Institute in Melbourne before establishing his laboratory there
and subsequently at the Florey Institute and concurrently
establishing a clinical research laboratory undertaking clinical
trial and biomarker research in psychotic disorders. He then
transferred to and integrated his research program at Monash
University and Monash Medical Centre.
Intellectual Property Strategy
We strategically protect our innovations with a harmonised
IP strategy, combining patent protection with regulatory
and market exclusivity. We are pursuing patent protection
for aspects of our psilocybin therapy program. The patent
position that will be available to us is unlikely to cover
psilocybin alone as a clinical entity. However, we are pursuing
a patent position in relation methods of treatment using
psilocybin including combination therapies (e.g. formulations,
actives plus psychotherapeutic modalities) and other
therapeutic methods (e.g., specific dosage regimens).
40
41
Incannex Healthcare LimitedIncannex Healthcare Limited Director’s
interests
in the
Company
As at the date of this report, the interests of the directors in the shares and options of the Company were:
Director
Number of fully paid ordinary
shares
Number of options over
ordinary shares
No. of performance rights/
share
26,734,248
15,915,790
17,948,144
66,303,593
7,116,950
657,895
4,700,000
200,000,000
–
–
–
–
Troy Valentine
Peter Widdows
Joel Latham
Dr Sud Agarwal
Dividends
No dividends have been paid or declared since the start of
the financial year and the directors do not recommend the
payment of a dividend in respect of the financial year.
After Balance Date Events
On 21 July 2021, the Company issued 239,103 ordinary
shares upon the exercise of unlisted options by option
holders with an exercise price of $0.08 per share, receiving
$19,128 upon conversion.
The Company issued a further 2,739,662 ordinary shares on
the exercise of of “IHLAH” share options at an exercise price
of $0.08 per share on 16 August 2021, raising $219,713.
On 18 August 2021 the Company announced its public
filing of Form F-1 with the Securities Exchange Commission
(“SEC”) in the US, in preparation for the for a proposed
listing on the NASDAQ. An extraordinary General Meeting
has been called on 17 September 2021 to put a resolution
to shareholders to issue up to 180 million ordinary shares in
relation to the proposed Initial Public Offering (“IPO”) in the US.
No further significant events have occurred since the end of
the financial year.
Likely Developments and
Expected Results
The Group will continue clinical trials in both its
pharmaceutical products and psychotherapy products.
The Group has announced a manufacturing agreement for
the production of IHL-675A soft-gel capsules for trials in
the pharmaceutical sector, as well as open label studies
on IHL-42X, a prospective treatment for sleep apnoea.
The Group’s partnership with Monash University in the
development of Psi-GAD, part of the Group’s psychotherapy
sector, will continue with Phase 2a trials announced
subsequent to the year end.
As noted in After Balance Date Events the Company has
proposed an IPO in the US to list its shares on the NASDAQ.
It has filed Form F-1 with the SEC in preparation as well
as called an AGM to put a resolution before shareholders
to issue up to 180 million ordinary shares in the IPO. The
process is ongoing.
42
43
Incannex Healthcare LimitedIncannex Healthcare Limited Insurance premiums
Non-executive director remuneration
Employee Share Option Plan (ESOP)
Share Options
The Company has the following options on issue as at the
date of the Directors’ Report.
Expiry date
Exercise Price Listed/Unlisted
Number
30/06/2025
30/09/2021
30/06/2026
30/06/2027
30/09/2021
30/06/2025
30/06/2026
30/06/2027
20/11/2023
20/11/2023
20/11/2023
$0.05
$0.08
$0.05
$0.05
$0.20
$0.05
$0.05
$0.05
$0.15
$0.20
$0.25
Unlisted
750,000
Unlisted
93,878,176
Unlisted
Unlisted
750,000
750,000
Unlisted
200,000,000
Unlisted
Unlisted
Unlisted
750,000
750,000
750,000
Unlisted
10,000,000
Unlisted
20,000,000
Unlisted
10,000,000
The Company has arranged directors’ and officers’ liability
insurance, for past, present or future directors, secretaries,
and executive officers. The insurance cover relates to:
• costs and expenses incurred by the relevant officers in
defending proceedings, whether civil or criminal and
whatever their outcome; and
• other liabilities that may arise from their position, with
the exception of conduct involving a wilful breach of
duty or improper use of information or position to gain
a personal advantage.
The insurance policies outlined above do not contain details
of the premiums paid in respect of individual directors or
officers of the Company.
Environmental Regulations
The Group is not subject to any significant
environmental regulation.
Unissued Shares under Option
As at the date of this report, there were 326,437,328
unissued ordinary shares under options (2020: 626,095,870).
Option holders do not have any right, by virtue of the
options, to participate in any share issue of the Company or
any related body corporate.
Shares issued as a result of the exercise of options
During the financial year there were 286,500,523 ordinary
shares issued as a result of the exercise of options (2020:
34,427,321).
Indemnification and Insurance of
Directors and Officers
Indemnification
The Company has agreed to indemnify the directors of the
Company, against all liabilities to another person (other than
the Company or a related body corporate) that may arise
from their position as directors of the Company, except
where the liability arises out of conduct involving a lack of
good faith. The agreement stipulates that the Company will
meet the full amount of any such liabilities, including costs
and expenses.
Remuneration Report (Audited)
This report, which forms part of the Directors’ Report,
outlines the remuneration arrangements in place for the key
management personnel of Incannex Healthcare Limited (the
“Company”) for the financial year ended 30 June 2021.
The key management personnel of the Company are the
Directors of the Company including the Managing Director/
Chief Executive Officer.
Remuneration philosophy
The performance of the Company depends upon the quality
of the directors and executives. The philosophy of the
Company in determining remuneration levels is to:
• set competitive remuneration packages to attract and
retain high calibre employees;
• link executive rewards to shareholder value
creation; and
• establish appropriate, demanding performance
hurdles for variable executive remuneration.
Remuneration Structure
In accordance with best practice Corporate Governance,
the structure of non-executive director and executive
remuneration is separate and distinct.
The Incannex Healthcare Limited ESOP provides for
the directors to set aside shares in order to reward and
incentivise employees. Directors will not set aside more than
5% of the total number of issued shares in the Company
at the time of the proposed issue. Officers and employees
both full and part-time are eligible to participate in the plan.
No shares or options have been issued under the ESOP
during the year (2020: nil).
Performance Rights Plan (PRP)
Shareholders approved the Company’s PRP at the Annual
General Meeting held on 23 November 2011. The PRP
is designed to provide a framework for competitive and
appropriate remuneration so as to retain and motivate
skilled and qualified personnel whose personal rewards are
aligned with the achievement of the Company’s growth and
strategic objectives.
No performance rights have been issued under the PRP
during the year (2020: nil).
Executive Employment Contracts
For the year ended 30 June 2021, Mr Joel Latham, was
appointed as Chief Executive Officer under an employment
agreement. The material terms of the agreement are set out
as follows:
• Commencement date: 1 July 2018
• Term: No fixed term
• Fixed remuneration: $230,000 per annum, plus
$30,000 Board fees, plus superannuation and vehicle
allowance of $19,500.
• Variable remuneration up to 50% of base salary
subject to achieving certain performance hurdles
• Grant of 2,952,619 ordinary shares and 2,250,000
options which vest upon continuing tenure. 984,207
ordinary shares and 750,000 options vested on
30 June 2021. All shares and options granted have
received shareholder approval.
• Termination for cause: no notice period
• Termination without cause: three-month notice period
The Board seeks to set aggregate remuneration at a level
that provides the Company with the ability to attract and
retain directors of the highest calibre, whilst incurring a
cost that is acceptable to shareholders. The amount of
aggregate remuneration apportioned amongst directors is
reviewed annually. The Board considers the fees paid to
non-executive directors of comparable companies when
undertaking the annual review process. Independent advice
is obtained when considered necessary to confirm that
remuneration is in line with market practice.
Each director receives a fee for being a director of
the Company. Non-executive directors may receive
performance rights (subject to shareholder approval) as it
is considered an appropriate method of providing sufficient
reward whilst maintaining cash reserves.
Executive director remuneration
Remuneration consists of fixed remuneration and variable
remuneration (comprising short-term and long-term
incentive schemes).
Fixed remuneration
Fixed remuneration is reviewed annually by the Board.
The process consists of a review of relevant comparative
remuneration in the market and internally and, where
appropriate, external advice on policies and practices.
The Board has access to external, independent advice
where necessary.
The fixed remuneration component of key management
personnel is detailed in Tables 1 and 2.
Variable remuneration
The objective of the short-term incentive program is to link
the achievement of the Group’s operational targets with the
remuneration received by the KMP charged with meeting
those targets. The total potential short-term incentive
available is set at a level so as to provide sufficient incentive
to the KMP to achieve the operational targets and such that
the cost to the Group is reasonable in the circumstances.
Actual payments granted to each KMP depend on the extent
to which specific operating targets set at the beginning
of the financial year are met. A short-term incentive
remuneration of $115,000 is payable for the financial year
ended 30 June 2021 to Joel Latham.
The Company also makes long term incentive payments to
reward senior executives in a manner that aligns this element
of remuneration with the creation of shareholder wealth. The
long-term incentive is provided in the form of performance
rights and options over ordinary shares in the Company.
44
45
Incannex Healthcare LimitedIncannex Healthcare Limited Table 1: Remuneration of key management personnel (KMP) for the year ended 30 June 2021
Short-term (cash-based payments)
Long-term (share
based payments)
Post-
employment
Salary & fees
$
Bonus
$
Other
$
Performance
Rights, Shares
and Options
$
Superannuation
$
Total
$
Performance
Related %
Key Management
Personnel name
Mr Troy Valentine1
54,000
Mr Peter Widdows2
48,000
–
–
Mr Joel Latham3
278,731
115,000
127,500
–
–
Dr Sud Agarwal4
48,000
–
90,000
–
–
217,7125
454,9876
5,130
4,560
24,627
4,560
186,630
52,560
636,070
597,547
–
–
34.2
76.1
TOTAL
428,731
115,000
217,500
672,699
38,877
1,472,807
1. Remuneration owed to Mr Valentine at 30 June 2021 is $73,739 included in accounts payable.
Mr Valentine was paid $127,500 for consulting fees invoiced to the Company, outside of Director fees.
2. Remuneration owed to Mr Widdows at 30 June 2021 is $12,000 included in accounts payable.
3. Remuneration owed to Mr Latham at 30 June 2021 is $239,596 included in accrued expenses and leave entitlements.
4. Remuneration owed to Dr Agarwal at 30 June 2021 is $15,717 is included in accounts payable and accrued expenses.
Dr Agarwal received $90,000 in fees billed through Medical Life Publishing Pty Ltd, for services provided as Chief Medical Officer.
5. This represents amounts expensed during FY21 for securities granted during FY20.
6. This represents amounts expensed during FY21 for securities granted during FY20.
Table 2: Remuneration of key management personnel (KMP) for the year ended 30 June 2020
Short-term (cash-based payments)
Long-term (share
based payments)
Post-
employment
Salary & fees
$
Bonus
$
Other
$
Performance
Rights, Shares
and Options
$
Superannuation
$
Total
$
Performance
Related %
Key Management
Personnel name
Mr Troy Valentine1
105,500
Mr Peter Widdows2
36,000
Mr Joel Latham3
Dr Sud Agarwal4
226,961
119,067
Mr Alistair Blake5
60,673
–
–
90,000
–
–
TOTAL
548,201
90,000
–
–
–
–
–
–
–
–
53,7106
511,7387
–
3,610
3,420
19,709
3,246
–
109,110
39,420
390,380
634,051
60,673
–
–
13.8
80.7
–
565,448
29,985
1,233,634
1. Mr Valentine was appointed as a director on 11 December 2017. Remuneration owed to Mr Valentine at 30 June 2020 is $11,110 included in
accrued expenses.
2. Mr Widdows was appointed as a director on 1 March 2018. Remuneration owed to Mr Widdows at 30 June 2020 is $3,420 included in accrued expenses.
3. Mr Latham was appointed as Managing Director on 24 July 2019. Remuneration owed to Mr Latham at 30 June 2020 is $128,790 included in
accrued expenses and leave entitlements.
4. Dr Agarwal was appointed as a director on 24 July 2019. Remuneration owed to Dr Agarwal at 30 June 2020 is $17,813 is included in accrued expenses.
5. Fees were paid to Alistair Pty Ltd. Mr Blake was appointed as a director on 20 October 2016 and ceased as a director on 24 July 2019. Mr Blake
ceased all employment on 31 October 2019.
6. This represents $28,456 from the issue of shares plus $25,254 from the issue of options
7. This represents $192,000 from the issue of shares plus $130,667 from the issue of options plus $189,071 from the issue of performance rights.
A total of 2,000,000 milestone and 30,303,593 value-based performance rights were issued to Dr Agarwal. Milestone performance rights will
convert to ordinary shares on attainment of clinical milestones being achieved prior to 31 January 2021, 28 February 2021, and 31 March 2021.
Value-based performance rights will convert to ordinary shares on attainment of the Company’s market capitalisation reaching specified levels.
These milestones and market capitalisation levels are set out in the Notice of Extraordinary General Meeting of Shareholders that was sent to
shareholders and posted on the ASX announcements platform on 26 May 2020.
46
47
Incannex Healthcare LimitedIncannex Healthcare Limited Performance Rights
Each performance right is convertible into one ordinary share upon
achievement of the performance hurdles. No performance right will
vest if the conditions are not satisfied, hence the minimum value of
the performance rights yet to vest is nil.
The assessed fair value at grant date of performance
rights granted is expensed according to the performance
or market-based conditions attached to the performance
hurdle. Performance based hurdles are expensed to
each reporting period evenly over the period from grant
date to vesting date. Market based hurdles are expensed
on the grant date unless there is an explicit or implicit
service condition. The relevant amount is included in the
remuneration table (Table 1) above.
Fair values at grant date are independently determined
using a trinomial pricing model that takes into account
the exercise price, term, the share price at grant date and
expected price volatility of the underlying share, barrier
price / performance hurdles, the expected dividend yield
and the risk-free interest rate. For details on the valuation
of performance rights, including assumptions used, refer to
note 2 of these financial statements.
Performance rights activity for KMP for the year ended 30 June 2021
Performance rights activity for KMP for the year ended 30 June 2021 are set out in the table below.
Key Management Personnel – Performance Rights and Performance Share Holdings
The number of performance rights held by Key Management Personnel of the Group during the financial year is as follows:
30 June 2021 – Performance Rights
Name
Balance at 1 July 2020
Granted/(Expired)
by the Company
Converted to
Ordinary shares
Balance at 30 June 2021
Mr Troy Valentine1
Mr Peter Widdows1
Mr Joel Latham1
1,500,000
1,500,000
5,000,000
Dr Sud Agarwal2
32,303,593
(1,500,000)
(1,500,000)
(5,000,000)
(2,000,000)
–
–
–
(30,303,593)
–
–
–
–
1. Performance rights expired during the period as performance hurdle not attained.
The performance rights lapsed were granted in FY2019, with a value of $13,527.
2. Dr Agarwal’s held performance rights at the start of the year, with the initial 2,000,000 expiring upon failure of the performance hurdle. All other
performance rights achieved the performance hurdles during the year and converted to ordinary shares accordingly
The performance rights that expired during the year were granted in FY 2020. The value of lapsed performance rights in total was $64,000.
$1,341 was expensed in FY2020 and was reversed in the current year.
The performance rights converted to shares were granted in FY2020 and were valued initially at $469,324. $281,124 was expensed in FY2021.
30 June 2020 – Performance Rights
Name
Balance at 1 July 2019
Granted/(Expired)
by the Company
Converted to
Ordinary shares
Balance at 30 June 2020
Mr Troy Valentine1
Mr Peter Widdows1
Mr Joel Latham1
Dr Sud Agarwal
1,833,334
1,833,334
6,000,000
-
Mr Alistair Blake1
3,000,000
-
-
-
32,303,593
(3,000,000)
(333,334)
(333,334)
(1,000,000)
-
-
1,500,000
1,500,000
5,000,000
32,303,593
-
1. Mr Blake resigned 24 July 2019.
48
49
Incannex Healthcare LimitedIncannex Healthcare Limited Options
Options granted to KMP for the year ended 30 June 2021
No options were granted to KMP during the year.
Key Management Personnel – Option Holdings
The number of options held by Key Management Personnel of the Group during the financial year is as follows:
Shares
Key Management Personnel – Shareholdings
The number of ordinary shares in Incannex Healthcare Limited held by each KMP of the Group during the financial year is as follows:
30 June 2021 – Options
30 June 2021 – Shares
Balance at 30 June
2021 (or on cessation)
Exercisable
Name
Balance at 1 July 2020
(or on appointment)
Purchases / Other
Acquisitions
Sales /
Other Disposals
Balance held at 30 June
2021 (or on cessation)
Name
Balance at 1 July 2020 Other changes during
Mr Troy Valentine1
48,355,557
Mr Peter Widdows2
Mr Joel Latham3
3,957,895
6,687,500
the period
(6,500,000)
(3,300,000)
(1,987,500)
34,738,607
657,895
4,700,000
34,738,607
657,895
1,700,000
Dr Sud Agarwal4
288,000,000
(88,000,000)
200,000,000
200,000,000
Other changes refer to conversion of 6,500,000 “IHLOB” options held to ordinary shares and the disposal of 34,738,607
options at $0.007.
1. 2,250,000 share options were issued to Joel Latham, that were granted in 2020 and approved by shareholders in 2021.
2,000,000 options were converted during the year. These options were held on appointment.
2. 2,237,500 were disposed of during the year. These options were held on appointment.
3. Dr Agarwal’s change relates to share options that lapsed during the year as the vesting condition was not met. The value of the lapsed options,
previously issued to settle outstanding invoices, was $72,656.
30 June 2020 – Options
Name
Balance at 1 July 2019 Other changes during
Mr Troy Valentine
41,238,607
Mr Peter Widdows
Mr Joel Latham
Dr Sud Agarwal
3,300,000
4,237,500
–
the period
7,116,950
657,895
2,450,000
Balance at 30 June
2020 (or on cessation)
Exercisable at
30 June 2020
48,355,557
3,957,895
6,687,500
48,355,557
3,957,895
6,687,500
Mr Troy Valentine1
20,234,248
Mr Peter Widdows1
12,615,790
Mr Joel Latham2
Dr Sud Agarwal3
11,829,129
36,000,000
6,500,000
3,300,000
6,119,285
30,303,593
–
–
–
–
26,734,248
15,915,790
17,948,414
66,303,593
1. The change relates to ordinary shares acquired upon conversion of options.
2. Mr Latham’s changes arise from the conversion of 2,000,000 share options, and the removal from voluntary escrow of 4,119,285 ordinary shares.
3. Mr Agarwal’s changes arise from the conversion of performance rights upon achievement of performance hurdles.
30 June 2020 – Shares
Name
Mr Troy Valentine
Mr Peter Widdows
Mr Joel Latham
Dr Sud Agarwal
Balance at 1 July 2019
(or on appointment)
Purchases / Other
Acquisitions
Sales /
Other Disposals
Balance held at 30 June
2020 (or on cessation)
19,900,914
10,966,666
9,845,795
–
333,334
1,649,124
1,983,334
36,000,000
–
–
–
–
–
20,234,248
12,615,790
11,829,129
36,000,000
21,282,518
Mr Alistair Blake1
21,282,518
–
288,000,000
288,000,000
–
1. Mr Blake resigned 24 July 2019.
Mr Alistair Blake1
3,855,184
–
3,855,184
3,855,184
1. Mr Blake resigned 24 July 2019.
Other Key Management Personnel Transactions
There have been no transactions involving equity instruments other than those described in the above tables. Other transactions
with key management personnel during the financial year and not disclosed above are noted below:
For the year ended 30 June 2021, $97,976 (2020: $145,200) in fees were paid to Alignment Capital Pty Ltd (“Alignment”), an entity
in which Mr Valentine is a director. Alignment was engaged by the Company to manage the exercise of IHLOB options program.
These fees were in addition to Mr Valentine’s remuneration disclosed above.
End of remuneration report.
50
51
Incannex Healthcare LimitedIncannex Healthcare Limited Non-Audit Services
The Company has not engaged the auditor to perform any
non-audit services during the year ended 30 June 2021
(2020: $Nil).
Auditor Independence And Non-Audit
Services
Section 307C of the Corporations Act 2001 requires our
auditors, HLB Mann Judd, to provide the directors of the
Company with an Independence Declaration in relation
to the audit of the annual report. This Independence
Declaration is set out on page 51 and forms part of this
directors’ report for the year ended 30 June 2021.
Signed in accordance with a resolution of the directors.
Troy Valentine
Chairman
Melbourne, Victoria
30 August 2021
Auditor’s Independence Declaration
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the consolidated financial report of Incannex Healthcare Limited for
the year ended 30 June 2021, I declare that to the best of my knowledge and belief, there have
been no contraventions of:
a)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
b)
any applicable code of professional conduct in relation to the audit.
Perth, Western Australia
30 August 2021
L Di Giallonardo
Partner
52
53
32
Incannex Healthcare LimitedIncannex Healthcare Limited
Financial
Statements
54
55
Incannex Healthcare LimitedIncannex Healthcare Limited Statement of Comprehensive Income
For the year ended 30 June 2021
Statement of Financial Position
As at 30 June 2021
Revenue
Other revenue
Product costs
Administration expense
Advertising and promotion
Research and development costs
Compliance, legal and regulatory
Share based payments
Occupancy expenses
Salaries and employee benefit expense
Notes
3
3
4
18
Consolidated
2021
$
1,897,596
75,747
(911,968)
(99,093)
(1,136,666)
2020
$
604,884
217,170
(450,345)
(457,673)
(406,225)
(4,749,515)
(2,110,639)
(1,227,243)
(600,043))
(115,836)
(1,296,569)
(235,163)
(565,448)
(2,084)
(523,760)
Loss before tax from continuing operations
(8,163,590)
(3,929,283)
Income tax benefit
Loss after tax from continuing operations
Loss after tax from discontinuing operations
Net loss for the year
Other comprehensive income
Total comprehensive loss for the year
Basic loss per share from continuing and discontinued
operations (cents per share)
Basic loss per share from continuing operations (cents per share)
The accompanying notes form part of these financial statements
6
7
8
8
-
-
(8,163,590)
(3,929,284)
-
(768,352)
(8,163,590)
(4,697,636)
-
-
(8,163,590)
(4,697,636)
(0.83)
(0.69)
(0.83)
(0.60)
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other assets
Inventory
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Other liabilities
Total current liabilities
Total liabilities
Net assets/(liabilities)
Equity
Issued capital
Reserves
Accumulated losses
Net equity/(deficiency)
Notes
Consolidated
2021
$
2020
$
10
11
12
13
14
15
16
17
9,123,617
3,603,390
169,088
36,090
-
9,328,795
9,328,795
413,268
36,262
183,159
4,236,079
4,236,079
755,049
-
955,006
116,645
755,049
1,071,651
755,049
8,573,746
1,071,651
3,164,428
45,938,576
34,192,043
3,316,963
1,490,588
(40,681,793)
(32,518,203)
8,573,746
3,164,428
The accompanying notes form part of these financial statements
56
57
Incannex Healthcare LimitedIncannex Healthcare Limited Statement of Changes In Equity
For the year ended 30 June 2021
Statement of Cash Flows
For the year ended 30 June 2021
Consolidated
Issued Capital
Equity Reserve
Accumulated
Losses
$
$
$
Total
$
Balance at 1 July 2019
26,951,744
451,643
(27,820,567)
(417,180)
Cash flows from operating activities
(4,697,636)
(4,697,636)
Receipts from customers
Comprehensive loss for the year
Options exercised
Options issued to advisors
Share based payments
Shares issued
Shares issue costs
-
1,077,093
-
-
7,105,354
(942,148)
-
-
449,093
589,852
-
-
-
-
-
-
-
1,077,093
449,093
589,852
7,105,354
(942,148)
Balance at 30 June 2020
34,192,043
1,490,588
(32,518,203)
3,164,428
Payments to suppliers and employees
Interest received and other income
Cash flows from investing activities
Proceeds from disposal of subsidiary
Payments for property, plant and equipment
Comprehensive loss for the year
-
Options exercised
12,498,706
Options issued to advisors
Share based payments
Shares issue costs
-
-
(752,173)
-
-
572,136
600,043
654,196
(8,163,590)
(8,072,669)
Proceeds from disposal of property, plant and equipment
-
-
-
-
12,498,706
572,136
507,122
(97,977)
Net cash from/(used in) investing activities
Cash flows from financing activities
Proceeds from shares issued (net of costs)
Balance at 30 June 2021
45,938,576
3,316,963
(40,681,793)
8,573,746
Debt repaid
The accompanying notes form part of these financial statements
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Notes
Consolidated
2021
$
2020
$
2,006,325
1,389,254
(9,013,852)
(5,299,667)
97,247
3,079
29,277
-
-
29,277
-
-
13,000
13,000
12,401,230
7,469,392
-
(65,000)
12,401,230
7,404,392
5,520,227
3,510,058
3,603,390
93,332
Net cash (used in) operating activities
9(i)
(6,918,280)
(3,907,334)
Cash and cash equivalents at end of the year
10
9,123,617
3,603,390
The accompanying notes form part of these financial statements
58
59
Incannex Healthcare LimitedIncannex Healthcare Limited Notes to the Financial Statements
For the year ended 30 June 2021
1. Significant accounting policies
These financial statements are general purpose financial
statements that have been prepared in accordance with
Australian Accounting Standards, Australian Accounting
Interpretations and the Corporations Act 2001, as
appropriate for-profit oriented entities.
Comparatives
Where necessary, comparative information has been
reclassified and repositioned for consistency with current
year disclosures.
Parent entity information
The financial statements cover the Company and the entities
it controlled during the year for the year ended 30 June
2021. The Company is a company limited by shares,
incorporated and domiciled in Australia.
In accordance with the Corporations Act 2001, these
financial statements present the results of the Group only.
Supplementary information about the parent entity is
disclosed in note 25.
The principal activities of the Group for the year were:
Principles of consolidation
1. Research, development and sales of medicinal
cannabinoid products.
2. On 20 November 2020 the Group established a
separate business to research and develop the use of
psychedelic medicine and therapies for the treatment
of mental health disorders.
Except for the Statement of Cash Flows, the financial
statements have been prepared on the accruals basis.
The financial statements were authorised for issue by the
Directors on 30 August 2021.
New or amended Accounting Standards and
Interpretations adopted
The Group has adopted all of the new or amended
Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board (‘AASB’) that are
mandatory for the current reporting period. This has had no
material effect on the Group.
Historical cost convention
The financial statements have been prepared under the
historical cost convention, modified where appropriate
by the measurement of fair value of selected non-current
assets. All amounts are presented in Australian dollars
unless otherwise noted.
Critical accounting estimates
The preparation of the financial statements requires the
use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process
of applying the Group’s accounting policies. The areas
involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to
the financial statements, are disclosed in note 2.
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of Incannex Healthcare
Limited (‘company’ or ‘parent entity’) as at 30 June 2021
and the results of all subsidiaries for the year then ended.
Incannex Healthcare Limited and its subsidiaries together are
referred to in these financial statements as the ‘Group’.
Subsidiaries are all those entities over which the Group
has control. The Group controls an entity when the Group
is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect
those returns through its power to direct the activities of
the entity. Subsidiaries are fully consolidated from the date
on which control is transferred to the Group. They are de-
consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised
gains on transactions between entities in the Group are
eliminated. Unrealised losses are also eliminated unless the
transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the
policies adopted by the Group.
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. A change in ownership
interest, without the loss of control, is accounted for as
an equity transaction, where the difference between the
consideration transferred and the book value of the share of
the non-controlling interest acquired is recognised directly
in equity attributable to the parent.
Non-controlling interest in the results and equity of
subsidiaries are shown separately in the statement of profit
or loss and other comprehensive income, statement of
financial position and statement of changes in equity of
the Group. Losses incurred by the Group are attributed to
the non-controlling interest in full, even if that results in a
deficit balance.
Where the Group loses control over a subsidiary, it
derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any
cumulative translation differences recognised in equity.
The Group recognises the fair value of the consideration
received and the fair value of any investment retained
together with any gain or loss in profit or loss.
Operating segments
Operating segments are presented using the ‘management
approach’, where the information presented is on the same
basis as the internal reports provided to the Chief Operating
Decision Makers (‘CODM’). The CODM is responsible for
the allocation of resources to operating segments and
assessing their performance.
Foreign currency translation
The financial statements are presented in Australian dollars,
which is Incannex Healthcare Limited’s functional and
presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian
dollars using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and
from the translation at financial year-end exchange rates
of monetary assets and liabilities denominated in foreign
currencies are recognised in profit or loss.
Revenue recognition
The Group recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the
consideration to which the Group is expected to be
entitled in exchange for transferring goods or services
to a customer. For each contract with a customer, the
Group: identifies the contract with a customer; identifies
the performance obligations in the contract; determines
the transaction price which takes into account estimates
of variable consideration and the time value of money;
allocates the transaction price to the separate performance
obligations on the basis of the relative stand-alone selling
price of each distinct good or service to be delivered; and
recognises revenue when or as each performance obligation
is satisfied in a manner that depicts the transfer to the
customer of the goods or services promised.
Variable consideration within the transaction price, if any,
reflects concessions provided to the customer such as
discounts, rebates and refunds, any potential bonuses
receivable from the customer and any other contingent
events. Such estimates are determined using either the
‘expected value’ or ‘most likely amount’ method. The
measurement of variable consideration is subject to
a constraining principle whereby revenue will only be
recognised to the extent that it is highly probable that a
significant reversal in the amount of cumulative revenue
recognised will not occur. The measurement constraint
continues until the uncertainty associated with the variable
consideration is subsequently resolved. Amounts received
that are subject to the constraining principle are recognised
as a refund liability.
Sale of goods
Revenue from the sale of goods is recognised at the point in
time when the customer obtains control of the goods, which
is generally at the time of delivery.
Interest and Other revenue
Interest revenue is recognised when it is received or when
the right to receive it is established.
Income tax
The income tax expense or benefit for the period is the
tax payable on that period’s taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by
the changes in deferred tax assets and liabilities attributable
to temporary differences, unused tax losses and the
adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for
temporary differences at the tax rates expected to be
applied when the assets are recovered or liabilities are
settled, based on those tax rates that are enacted or
substantively enacted, except for:
• When the deferred income tax asset or liability arises
from the initial recognition of goodwill or an asset
or liability in a transaction that is not a business
combination and that, at the time of the transaction,
affects neither the accounting nor taxable profits; or
• When the taxable temporary difference is associated
with interests in subsidiaries, associates or joint
ventures, and the timing of the reversal can be
controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those
temporary differences and losses.
60
61
Incannex Healthcare LimitedIncannex Healthcare Limited The carrying amount of recognised and unrecognised
deferred tax assets are reviewed at each reporting date.
Deferred tax assets recognised are reduced to the extent
that it is no longer probable that future taxable profits will be
available for the carrying amount to be recovered. Previously
unrecognised deferred tax assets are recognised to the
extent that it is probable that there are future taxable profits
available to recover the asset.
Deferred tax assets and liabilities are offset only where there
is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against
deferred tax liabilities; and they relate to the same taxable
authority on either the same taxable entity or different
taxable entities which intend to settle simultaneously.
Discontinued operations
A discontinued operation is a component of the Group
that has been disposed of or is classified as held for sale
and that represents a separate major line of business or
geographical area of operations, is part of a single co-
ordinated plan to dispose of such a line of business or area
of operations, or is a subsidiary acquired exclusively with
a view to resale. The results of discontinued operations
are presented separately on the face of the statement of
comprehensive income.
Current and non-current classification
Assets and liabilities are presented in the statement of financial
position based on current and non-current classification.
An asset is classified as current when: it is either expected to
be realised or intended to be sold or consumed in the Group’s
normal operating cycle; it is held primarily for the purpose of
trading; it is expected to be realised within 12 months after
the reporting period; or the asset is cash or cash equivalent
unless restricted from being exchanged or used to settle a
liability for at least 12 months after the reporting period. All
other assets are classified as non-current.
A liability is classified as current when: it is either expected
to be settled in the Group’s normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled
within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability
for at least 12 months after the reporting period. All other
liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as
non-current.
Cash and cash equivalents
Other financial assets
Cash and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or
less that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes
in value. For the statement of cash flows presentation
purposes, cash and cash equivalents also includes bank
overdrafts, which are shown within borrowings in current
liabilities on the statement of financial position.
Trade and other receivables
Trade receivables are initially recognised at fair value
and subsequently measured at amortised cost using the
effective interest method, less any allowance for expected
credit losses. Trade receivables are generally due for
settlement within 30 days.
The Group has applied the simplified approach to measuring
expected credit losses, which uses a lifetime expected loss
allowance. To measure the expected credit losses, trade
receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less
any allowance for expected credit losses.
Inventories
Raw materials, work in progress and finished goods are
stated at the lower of cost and net realisable value on a ‘first
in first out’ basis. Cost comprises of direct materials and
delivery costs, direct labour, import duties and other taxes,
an appropriate proportion of variable and fixed overhead
expenditure based on normal operating capacity, and,
where applicable, transfers from cash flow hedging reserves
in equity. Costs of purchased inventory are determined after
deducting rebates and discounts received or receivable.
Stock in transit is stated at the lower of cost and net
realisable value. Cost comprises of purchase and delivery
costs, net of rebates and discounts received or receivable.
Net realisable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and
the estimated costs necessary to make the sale.
Other financial assets are initially measured at fair value.
Transaction costs are included as part of the initial
measurement, except for financial assets at fair value
through profit or loss. Such assets are subsequently
measured at either amortised cost or fair value depending
on their classification. Classification is determined based on
both the business model within which such assets are held
and the contractual cash flow characteristics of the financial
asset unless an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive
cash flows have expired or have been transferred and the
Group has transferred substantially all the risks and rewards
of ownership. When there is no reasonable expectation of
recovering part or all of a financial asset, it’s carrying value
is written off.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair
value through other comprehensive income are classified as
financial assets at fair value through profit or loss. Typically,
such financial assets will be either: (i) held for trading, where
they are acquired for the purpose of selling in the short-term
with an intention of making a profit, or a derivative; or (ii)
designated as such upon initial recognition where permitted.
Fair value movements are recognised in profit or loss.
Financial assets at fair value through other
comprehensive income
Financial assets at fair value through other comprehensive
income include equity investments which the Group intends
to hold for the foreseeable future and has irrevocably
elected to classify them as such upon initial recognition.
Impairment of financial assets
The Group recognises a loss allowance for expected credit
losses on financial assets which are either measured at
amortised cost or fair value through other comprehensive
income. The measurement of the loss allowance depends
upon the Group’s assessment at the end of each reporting
period as to whether the financial instrument’s credit risk
has increased significantly since initial recognition, based
on reasonable and supportable information that is available,
without undue cost or effort to obtain.
Where there has not been a significant increase in exposure
to credit risk since initial recognition, a 12-month expected
credit loss allowance is estimated. This represents a
portion of the asset’s lifetime expected credit losses that
is attributable to a default event that is possible within
the next 12 months. Where a financial asset has become
credit impaired or where it is determined that credit risk
has increased significantly, the loss allowance is based on
the asset’s lifetime expected credit losses. The amount of
expected credit loss recognised is measured on the basis of
the probability weighted present value of anticipated cash
shortfalls over the life of the instrument discounted at the
original effective interest rate.
For financial assets mandatorily measured at fair value
through other comprehensive income, the loss allowance
is recognised in other comprehensive income with a
corresponding expense through profit or loss. In all other
cases, the loss allowance reduces the asset’s carrying value
with a corresponding expense through profit or loss.
Intangibles
Research and development
Research costs are expensed in the period in which they
are incurred. Development costs are capitalised when it is
probable that the project will be a success considering its
commercial and technical feasibility; the Group is able to
use or sell the asset; the Group has sufficient resources
and intent to complete the development; and its costs can
be measured reliably. Capitalised development costs are
amortised on a straight-line basis over the period of their
expected benefit, being their finite life of 10 years.
Patents and trademarks
Significant costs associated with patents and trademarks are
deferred and amortised on a straight-line basis over the period
of their expected benefit, being their finite life of 10 years.
Trade and other payables
These amounts represent liabilities for goods and services
provided to the Group prior to the end of the financial year
and which are unpaid. Due to their short-term nature they
are measured at amortised cost and are not discounted.
The amounts are unsecured and are usually paid within 30
days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair
value of the consideration received, net of transaction costs.
They are subsequently measured at amortised cost using
the effective interest method.
62
63
Incannex Healthcare LimitedIncannex Healthcare Limited Lease liabilities
A lease liability is recognised at the commencement date
of a lease. The lease liability is initially recognised at the
present value of the lease payments to be made over the
term of the lease, discounted using the interest rate implicit
in the lease or, if that rate cannot be readily determined,
the Group’s incremental borrowing rate. Lease payments
comprise of fixed payments less any lease incentives
receivable, variable lease payments that depend on an index
or a rate, amounts expected to be paid under residual value
guarantees, exercise price of a purchase option when the
exercise of the option is reasonably certain to occur, and
any anticipated termination penalties. The variable lease
payments that do not depend on an index or a rate are
expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using
the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease
payments arising from a change in an index or a rate used;
residual guarantee; lease term; certainty of a purchase
option and termination penalties. When a lease liability is
remeasured, an adjustment is made to the corresponding
right-of use asset, or to profit or loss if the carrying amount
of the right-of-use asset is fully written down.
Finance costs
Finance costs attributable to qualifying assets are
capitalised as part of the asset. All other finance costs are
expensed in the period in which they are incurred.
Provisions
Provisions are recognised when the Group has a present
(legal or constructive) obligation as a result of a past
event, it is probable the Group will be required to settle
the obligation, and a reliable estimate can be made of the
amount of the obligation. The amount recognised as a
provision is the best estimate of the consideration required
to settle the present obligation at the reporting date, taking
into account the risks and uncertainties surrounding the
obligation. If the time value of money is material, provisions
are discounted using a current pre-tax rate specific to the
liability. The increase in the provision resulting from the
passage of time is recognised as a finance cost.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary
benefits, annual leave and long service leave expected to
be settled wholly within 12 months of the reporting date are
measured at the amounts expected to be paid when the
liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not
expected to be settled within 12 months of the reporting
date are measured at the present value of expected future
payments to be made in respect of services provided by
employees up to the reporting date using the projected unit
credit method. Consideration is given to expected future wage
and salary levels, experience of employee departures and
periods of service. Expected future payments are discounted
using market yields at the reporting date on corporate bonds
with terms to maturity and currency that match, as closely as
possible, the estimated future cash outflows.
Retirement benefit obligations
All employees of the Group are entitled to superannuation
contributions in accordance with Australian law.
Contributions to employees’ nominated superannuation
plans are expensed in the period in which they are incurred.
The amount recognised in profit or loss for the period is the
cumulative amount calculated at each reporting date less
amounts already recognised in previous periods.
Market conditions are taken into consideration in
determining fair value. Therefore any awards subject to
market conditions are considered to vest irrespective
of whether or not that market condition has been met,
provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum an
expense is recognised as if the modification has not been
made. An additional expense is recognised, over the
remaining vesting period, for any modification that increases
the total fair value of the share-based compensation benefit
as at the date of modification.
If the non-vesting condition is within the control of the Group
or employee, the failure to satisfy the condition is treated as
a cancellation. If the condition is not within the control of the
Group or employee and is not satisfied during the vesting
period, any remaining expense for the award is recognised
over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it
has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement
award is substituted for the cancelled award, the cancelled
and new award is treated as if they were a modification.
Share-based payments
Fair value measurement
Equity-settled compensation benefits are provided
to employees.
Equity-settled transactions are awards of shares,
performance rights or options over shares, that are provided
to employees in exchange for the rendering of services.
The cost of equity-settled transactions are measured at fair
value on grant date. Fair value is independently determined
using either the Binomial or Black-Scholes option pricing
model that takes into account the exercise price, the term
of the option, the impact of dilution, the share price at grant
date and expected price volatility of the underlying share,
the expected dividend yield and the risk free interest rate for
the term of the option, together with non-vesting conditions
that do not determine whether the Group receives the
services that entitle the employees to receive payment. No
account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as
an expense with a corresponding increase in equity over
the vesting period. The cumulative charge to profit or loss is
calculated based on the grant date fair value of the award,
the best estimate of the number of awards that are likely to
vest and the expired portion of the vesting period.
When an asset or liability, financial or non-financial,
is measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would
be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the
measurement date; and assumes that the transaction will
take place either: in the principal market; or in the absence
of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming they act in their economic best interests.
For non-financial assets, the fair value measurement is
based on its highest and best use. Valuation techniques
that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, are used,
maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified
into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements.
Classifications are reviewed at each reporting date and
transfers between levels are determined based on a
reassessment of the lowest level of input that is significant
to the fair value measurement.
For recurring and non-recurring fair value measurements,
external valuers may be used when internal expertise
is either not available or when the valuation is deemed
to be significant. External valuers are selected based
on market knowledge and reputation. Where there is a
significant change in fair value of an asset or liability from
one period to another, an analysis is undertaken, which
includes a verification of the major inputs applied in the
latest valuation and a comparison, where applicable, with
external sources of data.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net
of tax, from the proceeds.
Dividends
Dividends are recognised when declared during the financial
year and no longer at the discretion of the company.
Earnings/(loss) per share
Basic earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing
the profit attributable to the owners of Incannex Healthcare
Limited, excluding any costs of servicing equity other
than ordinary shares, by the weighted average number
of ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares issued
during the financial year.
Diluted earnings/(loss) per share
Diluted earnings/(loss) per share adjusts the figures used
in the determination of basic earnings per share to take
into account the after income tax effect of interest and
other financing costs associated with dilutive potential
ordinary shares and the weighted average number of
shares assumed to have been issued for no consideration
in relation to dilutive potential ordinary shares.
Goods and Services Tax (‘GST’) and other
similar taxes
Revenues, expenses and assets are recognised net of
the amount of associated GST, unless the GST incurred
is not recoverable from the tax authority. In this case it is
recognised as part of the cost of the acquisition of the asset
or as part of the expense.
64
65
Incannex Healthcare LimitedIncannex Healthcare Limited Receivables and payables are stated inclusive of the amount
of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included
in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST
components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax
authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of
the amount of GST recoverable from, or payable to, the
tax authority.
New Accounting Standards and Interpretations
not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that
have recently been issued or amended but are not yet
mandatory, have not been early adopted by the Group
for the annual reporting period ended 30 June 2021. The
directors are satisfied that these standards will not have
a material impact on the Group.
2. Critical accounting judgements,
estimates and assumptions
The preparation of the financial statements requires
management to make judgements, estimates and
assumptions that affect the reported amounts in the
financial statements. Management continually evaluates its
judgements and estimates in relation to assets, liabilities,
contingent liabilities, revenue and expenses. Management
bases its judgements, estimates and assumptions on
historical experience and on other various factors, including
expectations of future events, management believes to
be reasonable under the circumstances. The resulting
accounting judgements and estimates will seldom equal
the related actual results. The judgements, estimates
and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets
and liabilities (refer to the respective notes) within the next
financial year are discussed below.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts
that the Coronavirus (COVID-19) pandemic has had, or
may have, on the Group based on known information.
This consideration extends to the nature of the products
and services offered, customers, supply chain, staffing
and geographic regions in which the Group operates.
Other than as addressed in specific notes, there does not
currently appear to be either any significant impact upon
the financial statements or any significant uncertainties with
respect to events or conditions which may impact the Group
unfavourably as at the reporting date or subsequently as a
result of the Coronavirus (COVID-19) pandemic.
Share-based payment transactions
The Group measures the cost of equity-settled transactions
with employees and third parties, where the value of
services cannot be reliably measured, by reference to the
fair value of the equity instruments at the date at which they
are granted. The fair value is determined by using either
the trinomial or Black-Scholes model taking into account
the terms and conditions upon which the instruments were
granted. The accounting estimates and assumptions relating
to equity-settled share-based payments would have no
impact on the carrying amounts of assets and liabilities
within the next annual reporting period but may impact profit
or loss and equity. Refer to note 18 for further information.
3. Revenue
(a) Revenue (point in time)
Cannabinoid oils sales
(b) Other income
Revenue from other contractual arrangements
Government grants
Interest
4. Expenses
Leases
Short term lease payments
Include in Employee expenses:
Director fees
Superannuation (defined contribution scheme)
Research costs
Research costs (Pharmaceutical)
Clinical trials (Pharmaceutical)
Consulting fees (Pharmaceutical)
Research costs (Psychotherapy)
Clinical trials (Psychotherapy)
Consulting fees (Psychotherapy)
Consolidated
2021
$
2020
$
1,897,596
1,897,596
35,568
37,500
2,679
75,747
604,884
604,884
123,125
89,500
4,545
217,170
Consolidated
2021
$
2020
$
86,703
47,352
150,000
66,694
108,567
72,042
1,790,805
2,043,923
4,005
142,712
668,070
100,000
1,746,191
174,536
189,912
-
-
-
4,749,515
2,110,639
66
67
Incannex Healthcare LimitedIncannex Healthcare Limited
5. Segment Information
Identification of reportable operating segments
AASB 8 Operating Segments requires operating segments
to be identified on the basis of internal reports about
components of the Group that are regularly reviewed by
the Chief Operating Decision Maker in order to allocate
resources to the segment and to assess its performance.
The Group’s operating segments have been determined
with reference to the monthly management accounts used
by the Chief Operating Decision maker to make decisions
regarding the Group’s operations and allocation of working
capital. Due to the size and nature of the Group, the Board
as a whole has been determined as the Chief Operating
Decision Maker.
Based on the quantitative thresholds included in AASB 8,
for the financial year ended 30 June 2021, the Group was
organised into three operating segment:
• Research and develop the use of psychedelic
medicine and therapies for the treatment of mental
health disorders. This activity commenced during the
year. During the current year the operations consisted
entirely of research and development activities,
including clinical trials.
• Research, development and sale of medicinal
cannabinoid products. During the year the Group
generated revenue from sales of pharmaceutical
products, and continued to research and develop
its products and the range of its products, including
further clinical trials.
• Corporate operations, consisting of management
of the organisation, capital management and
management of resources. Revenues consist of
finance income and other income.
The Group has only one geographical segment,
namely Australia.
The revenues and results of these segments of the Group
as a whole are set out in the condensed statement of
comprehensive income and the assets and liabilities of the
Group as a whole are set out in the condensed statement of
financial position. A summary of revenue and expenses for
the period and assets and liabilities at the end of the period
for each segment is shown below.
Segment results
30 June 2021
Revenue from external
customers
Interest revenue
Other revenue
Other expenses
Segment loss after income tax
Psychedelic products
$
Cannabinoid Products
$
Corporate
$
Consolidated
$
-
-
-
1,897,5961
-
1,897,596
6
-
2,673
73,068
2,679
73,068
(768,316)
(768,316)
(5,202,370)
(4,166,247)
(10,136,933)
(3,304,768)
(4,090,506)
(8,163,590)
Segment assets
2,000
104,267
9,222,528
9,328,795
Segment liabilities
30 June 2020
Revenue from external
customers
Interest revenue
Other revenue
Depreciation
Amortisation
Other expenses
Segment loss after income tax
Segment assets
Segment liabilities
-
(86,522)
(668,527)
(755,049)
Oral and Dental
Devices (discontinued)
Pharmaceuticals
Unallocated
Consolidated
718,656
604,8841
-
1,446,665
8
140,816
(14,854)
(21,688)
(1,591,290)
(768,352)
-
-
2
4,544
212,625
-
-
-
-
-
4,555
230,316
(14,854)
(21,688)
(2,899,761)
(1,851,578)
(6,342,630)
(2,082,250)
(1,847,034)
(4,697,636)
662,414
3,573,665
4,236,079
(567,423)
(504,228)
(1,071,651)
1. Of the total revenue from pharmaceuticals in each year, 100% was through Cannvalate Pty Ltd’s distribution network.
68
69
Incannex Healthcare LimitedIncannex Healthcare Limited 6. Income tax
The prima facie income tax (expense)/benefit on pre-tax accounting (loss)/profit from operations reconciles to the income tax
benefit in the financial statements as follows:
Consolidated
2021
$
2020
$
7. Discontinued operations
Description
On 30 June 2020 the Group sold its 100% subsidiary - Gameday International Pty Ltd (“Gameday”), for consideration of
$29,277 which was the carrying value of its assets at that date so no loss on disposal was incurred. Gameday produced and
sold the Group’s dental devices and had been a loss maker since 2016. As a result of the COVID-19 pandemic it suffered
further as a result of the shut-down of community sport which directly affected the sale of its main product being sporting
mouthguards. The disposal of Gameday will allow the Group to pursue and focus entirely on its medicinal cannabis activities.
Accounting loss before tax
(8,163,590)
(4,697,636)
Income tax benefit at the applicable tax rate of 27.5% (2020: 27.5%)
2,244,987
1,291,850
8. Loss per share
Non-deductible expenses
Non-assessable income
(322,211)
(155,498)
10,313
Basic loss per share – continuing and discontinued operations - cents per share
Basic loss per share – continuing operations - cents per share
(0.83)
(0.83)
(0.69)
(0.60)
Deferred tax assets not recognised
(1,933,089)
(1,136,352)
Income tax benefit
-
Basic loss per share
The loss and weighted average number of ordinary shares
used in the calculation of basic loss per share is as follows:
Unrecognised Deferred Tax Asset
Deferred tax asset not recognised in the financial statements:
- Loss from continuing and discontinued operations ($)
(8,163,590)
(4,697,636)
- Loss from continuing operations ($)
(8,163,590)
(4,075,011)
Weighted average number of ordinary shares (number)
978,017,743
684,035,399
Unused tax losses
21,109,495
14,080,080
Net unrecognised tax benefit at 27.5% (2020: 27.5%)
5,805,111
3,872,022
9. Dividends
The Company has not declared a dividend for the year ended 30 June 2021 (2020: $nil).
The potential deferred tax benefit has not been recognised as an asset in the financial statements because recovery of the
asset is not considered probable in the context of AASB 112 Income Taxes.
10. Cash and cash equivalents
The benefit will only be realised if:
a. the Company derives future assessable income of a nature and of an amount sufficient to enable the benefit to be realised.
b. the Company complies with the conditions for deductibility imposed by the law; and
c. no changes in tax legislation adversely affect the Company in realising the benefit.
Cash at bank and on hand
Consolidated
2021
$
2020
$
9,123,617
3,603,390
9,123,617
3,603,390
Cash at bank earns interest at floating rates based on daily bank deposit rates.
70
71
Incannex Healthcare LimitedIncannex Healthcare Limited Reconciliation of loss for the year to net cash flows from operating activities:
12. Other assets (current)
Loss after income tax
(8,163,590)
(4,697,636)
Non-cash based expenses:
Share based payments
Depreciation and amortisation
Other non-cash expenses
Changes in net assets and liabilities:
(Increase)/Decrease in receivables
(Increase)/Decrease in inventory
Decrease in other current assets
(Increase)/Decrease in trade payables and accrued expenses
Increase/(Decrease) in other liabilities
Cash flows from (used in) operations
11. Trade and other receivables (Current)
Current
Receivables
GST recoverable
1,171,677
565,448
-
91,355
36,542
97,221
214,903
183,159
172
(291,311)
(116,645)
(315,484)
(30,355)
2,928
464,223
(30,221)
(6,910,280)
(3,907,334)
Consolidated
2021
$
2020
$
53,447
115,641
169,088
276,151
137,117
413,268
Prepayments
Office rental bond
13. Inventories
Current
Medicinal cannabis products in-transit
Total inventories
14. Trade and other payables (current)
Trade payables
Accrued expenses
Employee leave entitlements
Expected credit losses
The Group applies the AASB 9 simplified model of recognising lifetime expected credit losses for all trade receivables as
these items do not have a significant financing component.
In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as they possess
shared credit risk characteristics. They have been grouped based on the days past due and also according to the
geographical location of customers.
Consolidated
2021
$
2020
$
36,090
-
36,090
11,083
25,179
36,262
Consolidated
2020
$
183,159
183,159
2021
$
-
-
Consolidated
2021
$
2020
$
233,117
381,717
140,215
755,049
590,099
316,046
48,861
955,006
72
73
Incannex Healthcare LimitedIncannex Healthcare Limited 15. Other current liabilities
Provision for sales refunds1
Movement in provision:
Opening balance
Provision made
Repayments made
Provision written off
16. Issued capital
Issued Capital
-
-
116,645
116,545
At 30 June 2021
Expiry date
and exercise price
Balance at start of
year
Granted during
year
b. Movement in number of options on issue for the year
30-Sep-2020 $0.04 IHLOB
260,533,407
116,545
-
01-Dec-2020 $0.06 unlisted
-
116,545
01-Dec-2020 $0.08 unlisted
(101,061)
(15,484)
-
-
01-Dec-2020 $0.10 unlisted
01-Dec-2020 $0.12 unlisted
-
116,545
01-Dec-2020 $0.14 unlisted
14,000,000
16,000,000
18,000,000
20,000,000
20,000,000
Exercised /
(expired) during
year
(260,533,407)
(14,000,000)
(16,000,000)
(18,000,000)
(20,000,000)
(20,000,000)
-
-
-
-
-
-
Balance at end of
year
-
-
-
-
-
-
Consolidated
2021
$
2020
$
45,938,576
34,192,043
a. Ordinary shares – movements during year
Year ended 30 June 2021
Year ended 30 June 2020
No. of shares
$
No. of shares
$
At start of year
748,654,489
34,192,043
581,897,040
26,951,744
Issues of new shares – placements
-
Issues of new shares – share based payments
2,952,619
Conversion of performance rights
30,303,593
-
-
-
114,663,460
7,105,354
5,750,000
11,916,668
-
-
286,500,523
12,498,706
34,427,321
1,077,093
-
(752,173)
-
(942148)
Exercise of options
Cost of issuing shares
At end of year
30-Sep-2021 $0.08 unlisted1
89,919,705
30,164,690
(25,967,116)
94,117,279
30-Sep-2021 $0.20 unlisted
200,000,000
30-Jun-2025 $0.05 unlisted2
30-Jun-2026 $0.05 unlisted2
30-Jun-2027 $0.05 unlisted2
20-Nov-2023 $0.15 unlisted3
20-Nov-2023 $0.20 unlisted4
20-Nov-2023 $0.25 unlisted3,4
750,000
750,000
750,000
-
-
-
-
750,000
750,000
750,000
10,000,000
10,000,000
20,000,000
-
-
-
-
-
-
-
200,000,000
1,500,000
1,500,000
1,500,000
10,000,000
10,000,000
20,000,000
Total
640,703,112
72,414,690
(374,500,523)
338,617,279
Weighted average price ($)
$0.104
$0.152
$0.058
$0.166
1. Options lapsed were previously issued to settle outstanding invoices. See note 18, page 76.
2. 30,164,690 options were issued to brokers who supported the exercise of the IHLOB series of listed options and the associated shortfall.
3. 2,250,000 options were issued to the Company’s Chief Executive Officer (Mr Joel Latham), after approval by shareholders on 26 June 2020. The
options were granted in FY2020.
4. 10,000,000 $0.15 and 10,000,000 $0.25 options were issued to Canary Capital per the ASX announcement of November 2020.
1,068,411,224
45,938,576
748,654,489
34,192,043
5. 10,000,000 $0.20 and 10,000,000 $0.25 options were issued to EAS Advisors per the ASX announcement of February 2021.
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion
to the number of shares held. On a show of hands, every shareholder present at a meeting is entitled to one vote and upon a
poll each share is entitled to one vote. Ordinary shares have no par value and the Company does not have a limited amount
of authorised capital.
74
75
Incannex Healthcare LimitedIncannex Healthcare Limited b. Movement in number of options on issue for the year
At 30 June 2020
Expiry date and exercise price
Balance at start of
year
Granted during
year
Exercised /
(expired) during
year
Balance at end of
year
30-Sep-2020 $0.04 IHLOB
262,960,728
-
(2,427,321)
260,533,407
01-Jan-2020 $0.02 unlisted1
01-May-2020 $0.03 unlisted1
01-May-2020 $0.04 unlisted1
01-Dec-2020 $0.06 unlisted1
01-Dec-2020 $0.08 unlisted1
01-Dec-2020 $0.10 unlisted1
01-Dec-2020 $0.12 unlisted1
01-Dec-2020 $0.14 unlisted1
30-Sep-2021 $0.08 unlisted2
30-Sep-2021 $0.20 unlisted3
30-Jun-2025 $0.05 unlisted4
30-Jun-2026 $0.05 unlisted4
30-Jun-2027 $0.05 unlisted4
-
-
-
-
-
-
-
-
-
-
-
-
-
10,000,000
(10,000,000)
10,000,000
(10,000,000)
12,000,000
(12,000,000)
14,000,000
16,000,000
18,000,000
20,000,000
20,000,000
89,919,705
200,000,000
750,000
750,000
750,000
-
-
-
-
-
-
-
-
-
-
-
-
-
14,000,000
16,000,000
18,000,000
20,000,000
20,000,000
89,919,705
200,000,000
750,000
750,000
750,000
c. Movement in number of Performance Shares and Performance Rights for the year
At 30 June 2021
Security Description
Balance at start of
year
Granted by the
Company
Converted or
Expired
Balance at end of
year
Performance Rights1
41,553,593
-
(41,553,593)
-
1. 30,303,593 performance rights converted into ordinary shares upon achievement of designated performance hurdles and 11,250,000 performance
rights expired.
At 30 June 2021
Security Description
Balance at start of
year
Granted by the
Company
Converted or
Expired
Balance at end of
year
Performance Rights
24,166,668
32,303,593
(14,916,668)
41,553,593
Performance Shares
20,000,002
-
(20,000,002)
-
17. Reserves
Equity based premium reserve
Balance at 1 July 2020
Consolidated
2021
$
2020
$
1,490,588
1,226,332
-
600,043
451,643
449,093
244,403
345,449
Total
262,960,728
412,169,705
(34,427,321)
640,703,112
Options issued to advisors1
Weighted average price ($)
$0.04
$0.139
$0.031
$0.104
Options issued to Cannvalate Pty Ltd
1. A total of 120,000,000 options were issued to Cannvalate Pty Ltd upon approval by shareholders on 9 August 2019.
2. 22,368,422 options were issued to participants of the July 2019 equity capital raisings attaching to shares subscribed for under those raisings and
33,000,000 options were issued to brokers who supported those equity capital raisings. A further 34,551,283 options were issued to participants
of the October 2019 capital raising attaching to shares subscribed for under that raising.
Equity instruments issued to management and directors
At 30 June 2021
3,316,963
1,490,588
3. 200,000,000 options were issued as remuneration for the Company’s Chief Medical Officer (Dr Sud Agarwal), after approval by shareholders on
1. 30,164,690 options were issued to brokers who supported the exercise of the IHLOB series of listed options and the associated shortfall.
26 June 2020.
4. 2,250,000 options were issued as FY20 remuneration for the Company’s Chief Executive Officer (Mr Joel Latham), after approval by shareholders
on 26 June 2020.
The equity based premium reserve is used to record the value of equity issued to raise capital, and for share-based
payments.
76
77
Incannex Healthcare LimitedIncannex Healthcare Limited
18. Share based payments
From time to time, the Company may issue equity securities
(i.e. shares, options or performance rights) to its employees,
directors or advisors to more closely align rewards for
performance with the achievement of the Company’s growth
and strategic objectives. Where the recipient is a director
of the Company, shareholder approval must be sought
under the ASX Listing Rules prior to the issue of any equity
securities to any director.
Fair value of shares issued
The fair value of shares issued to employees is determined
using the closing price of shares on the grant date and
expensed over the vesting period.
Fair value of options and performance rights
granted
The fair values at grant date are independently determined
using either a trinomial pricing or Black-Scholes option
model that take into account any price to exercise, the
term of the options or rights, the share price at grant date,
the price volatility of the underlying share and the risk-
free interest rate for the term of the options or rights. The
expensed fair value in the tables below represents the
proportion of the total fair value that has been allocated
to the current period with the balance to be expensed
in future periods.
The following share-based payment arrangements were put
into place during the period:
Options
Number
Grant Date2
Expiry Date
Exercise
Price
Total
fair value
Expensed
fair value
Unlisted options (series 1)
10,000,000 20-Nov-2020
20-Nov-2023
$0.15
$659,400
$133,687
Unlisted options (series 2)
10,000,000 20-Nov-2020
20-Nov-2023
$0.25
$539,500
$109,378
Unlisted options (series 3)
10,000,000
25-Feb-2021
20-Nov-2023
$0.20
$1,361,800
$170,566
Unlisted options (series 4)
10,000,000
25-Feb-2021
20-Nov-2023
$0.25
$1,261,500
$158,003
Total options
$571,634
The share options were issued to consultants providing investor relations to the Group.
The fair value of the equity-settled share options granted in the above table is estimated as at the grant date using a Black-
Scholes option model taking into account the terms and conditions upon which the options were granted, as follows:
Number
10,000,000
10,000,000
10,000,000
10,000,000
Series 1
20-Nov-2023
Series 2
20-Nov-2023
Series 3
20-Nov-2023
Series 4
20-Nov-2023
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Exercise price (cents)
Grant date share price (cents)
0%
100%
2%
3
15.0
11.5
0%
100%
2%
3
25.0
11.5
0%
100%
2%
2.5
20.0
22
0%
100%
2%
2.5
25.0
22
Share based payment expense
As at 30 June 2020 the Group had a number of securities on
issue or unissued but granted that had either not completed
all vesting conditions or had yet to reach performance
hurdles. These included:
a. 88,000,000 unlisted options previously issued with
various performance hurdles set for achievement
prior to expiry on 1 December 2020. The performance
hurdles were not met and the options lapsed. The
amount previously expensed of $72,656 has been
reversed during the current year.
b. 1,166,666 ordinary shares approved by shareholders
on 26 June 2020. Half of these vested upon the CEO
continuing employment with the Company on 30 June
2021. The other half vests upon the CEO continuing
employment with the Company at 30 June 2022.
c. 1,500,000 options with a strike price of $0.05 (750,000
expiring 30 June 2025 and 750,000 expiring 30 June
2026) were issued along with the ordinary shares, with
the same vesting conditions as in (b).
d. 2,952,619 ordinary shares vesting in three tranches
upon CEO continued employment at 30 June 2021,
30 June 2022 and 30 June 2023.
e. 2,250,000 unlisted shares options vesting in three
tranches as in (d).
f. 18,266,328 value-based performance rights with
an expiry date of 22 November 2021, achieved
the milestone attached during the year and were
converted to ordinary shares during the year. The full
expense has been recognised accordingly.
g. 12,037,265 value-based performance rights with
milestone achieved during the year, and expensed in
full accordingly.
h. 2,000,000 milestone-based performance rights
subject to performance hurdles to be met between
January and March 2021 were forfeited during the year
as those hurdles were not met.
i. 200,000,000 unlisted options vesting upon the
achievement of a share price of $0.20, expiring on
30 September 2021.
Expensed during the current year:
Description
88,000,000 unlisted options1
1,166,666 ordinary shares
1,500,000 unlisted share options
2,952,619 ordinary shares
2,250,000 unlisted share options
18,266,328 value-based performance rights
12,037,265 value-based performance rights
2,000,000 milestone-based performance rights
200,000,000 unlisted share options
Total
Expense 30 June
2020
$
Current year
expense/(reversal)
$
72,656
(72,656)
456
438
961
531
127,235
60,964
1,341
131,096
41,620
39,938
87,702
48,452
190,059
91,066
(1,341)
175,203
600,043
To be expensed
$
-
13,924
13,801
56,015
23,295
-
-
-
-
1. These options lapsed during the year. The value of the lapsed options, previously issued to settle outstanding invoices, was $72,656.
Vesting date
30-Nov-2023
30-Nov-2023
30-Nov-2023
30-Nov-2023
Refer note 16(b) for all options in place during the year.
The weighted average contractual life of the options at 30 June 2021 was 0.5 years.
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not
necessarily be the actual outcome.
78
79
Incannex Healthcare LimitedIncannex Healthcare Limited 19. Remuneration of auditors
Audit or review of the financial reports of the company
Amounts received & receivable by the auditor:
Audit services – HLB Mann Judd
Audit services – Withum Smith & Brown (US auditor)
Other services – Withum Smith & Brown (US auditor)
43,000
-
287,975
330,975
37,000
-
-
37,000
Withum Smith & Brown, PC were appointed auditors in the US in preparation for listing the Company’s securities in the US.
During the year the work carried out involved the audit of US GAAP compliant financial statements, along with advisory work
in relation to the listing of securities.
20. Financial Instruments
The Group’s principal financial instruments comprise cash
and short-term deposits and convertible notes.
The main purpose of these financial instruments is to raise
finance for the Group’s operations. The Group has various
other financial liabilities such as trade payables, which arise
directly from its operations. It is, and has been throughout
the year under review, the Group’s policy that no trading in
financial instruments shall be undertaken. The main risks
arising from the Group’s financial instruments are cash flow
interest rate risk, liquidity risk, and credit risk. The Board
reviews and agrees policies for managing each of these
risks and they are summarised below.
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses
are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in
note 1 to the financial statements.
a. Interest rate risk
The Group’s exposure to the risk of changes in market
interest rates relates primarily to the Group’s short-term
deposits with a floating interest rate.
The Group’s exposure to interest rate on financial assets
and financial liabilities is detailed in the sensitivity analysis
section of this note.
b. Sensitivity analysis
During 2021, if interest rates had been 50 basis points
higher or lower than the prevailing rates realised, with all
other variables held constant, there would have been an
immaterial change in post-tax result for the year. The impact
on equity would have been the same.
c. Net fair values
The net fair value of cash and cash equivalents and non-
interest bearing monetary financial assets and liabilities
approximates their carrying value.
d. Commodity price risk
The Group’s exposure to price risk is minimal.
e. Credit risk
There are no significant concentrations of credit risk within
the Group.
With respect to credit risk arising from the other financial
assets of the Group, which comprise cash and cash
equivalents, available-for-sale financial assets and certain
derivative instruments, the Group’s exposure to credit risk
arises from default of the counter party, with a maximum
exposure equal to the carrying amount of these instruments.
Since the Group trades only with recognised third parties,
there is no requirement for collateral.
f. Liquidity risk
The Group’s objective is to maintain a balance between
continuity of funding and flexibility through the use of share
issues and convertible notes.
The Group’s contractual liabilities at 30 June 2021 were as follows:
Description
Less than 1
month
1 to 3 months
3 months to 1
year
1 to 5 years
Total
Consolidated
$
$
$
$
$
Payables & accruals
614,834
614,834
-
-
-
-
-
-
614,834
614,834
The Group’s contractual liabilities at 30 June 2020 were as follows:
Description
Less than 1
month
1 to 3 months
3 months to 1
year
1 to 5 years
Total
Consolidated
$
$
$
$
$
Payables & accruals
906,145
906,145
-
-
-
-
-
-
906,145
906,145
g. Capital Management
The Group’s objectives when managing capital are to
safeguard its ability to continue as a going concern, so that
it may continue to provide returns for shareholders and
benefits for other stakeholders. Due to the nature of the
Group’s past activities, being mineral exploration, it does
not have ready access to credit facilities and therefore is not
subject to any externally imposed capital requirements, with
the primary source of Group funding being equity raisings
and unsecured convertible notes. Accordingly, the objective
of the Group’s capital risk management is to balance the
current working capital position against the requirements
to meet exploration programmes and corporate overheads.
This is achieved by maintaining appropriate liquidity to meet
anticipated operating requirements, with a view to initiating
fund raisings as required.
21. Commitments and contingencies
Operating lease commitments – group as lessee
The Company leases premises on a short term basis, and has
no material commitments arising from lease arrangements.
Other commitments
The Group entered into an arrangement with Monash
University (“Monash”) on 23 November 2020, whereby
Monash will provide Research Trials in relation to Psi-GAD-1
over a 3 year period. The agreement sets out the scope of
the Trials to be conducted, and the cost to the Group, of
which 50% was paid on commencement of the agreement.
Consolidated
2021 2020
$ $
80
81
Incannex Healthcare LimitedIncannex Healthcare Limited 22. Key Management Personnel compensation and related party disclosure
The Key Management Personnel of Incannex Healthcare Limited during the year were:
Mr Troy Valentine, Mr Peter Widdows, Mr Joel Latham and Dr Sud Agarwal
25. Parent entity disclosures
The individual financial statements for the parent entity show the following aggregate amounts. The information presented
has been prepared using accounting policies as discussed in Note 1.
Key management personnel compensation
Short-term employee benefits
Long-term employment benefits
Post-employment benefits
Total KMP compensation
Transactions with related entities
Consolidated
2021
$
2020
$
761,231
38,877
672,699
638,201
29,985
565,448
1,472,807
1,233,634
Transactions between related parties are on commercial terms and conditions, no more favourable than those available to other
parties unless otherwise stated.
During the year, $97,976 (2019: $145,200) in fees were paid to Alignment Capital Pty Ltd (“Alignment”), an entity in which
Mr Valentine is a director. Alignment was engaged by the Company to manage the exercise of IHLOB options program.
23. Details of the controlled entity
The consolidated financial statements include the financial
statements of Incannex Healthcare Limited (‘IHL’) and its
wholly owned subsidiaries Incannex Pty Ltd (‘IXPL’) and
Psychennex Pty Ltd (‘PXPL’).
• IXPL was incorporated in Australia on 30 November
2018 and IHL owns 100% of the issued ordinary
shares in IXPL (2020: 100%).
• PXPL was incorporated on 30 November 2020 in
Australia and IHL owns 100% of the issued ordinary
shares in PXPL.
• On 30 June 2020, the Group disposed entirely of its
100% subsidiary - Gameday International Pty Ltd,
(‘Gameday’).
24. Events Subsequent to
Reporting Date
On 21 July 2021, the Company issued 239,103 ordinary
shares upon the exercise of unlisted options by option
holders with an exercise price of $0.08 per share, receiving
$19,128 upon conversion.
The Company issued a further 2,739,662 ordinary shares on
the exercise of of “IHLAH” share options at an exercise price
of $0.08 per share on 16 August 2021, raising $219,713.
On 18 August 2021 the Company announced that its public
filing of Form F-1 with the Securities Exchange Commission
(“SEC”) in the US, in preparation for the for a proposed
listing on the NASDAQ. An extraordinary General Meeting
has been called on 17 September 2021 to put a resolution
to shareholders to issue up to 180 million ordinary shares in
relation to the proposed Initial Public Offering (“IPO”) in the US.
No further significant events have occurred since the end of
the financial year.
Statement of Financial Position
Financial Position
Current assets
Non-Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Issued capital
Reserves
Accumulated losses
Shareholders’ equity
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Contingencies of the Parent Entity
There are no contingent liabilities involving the parent entity (2020: Nil).
Guarantees of the Parent Entity
There are no guarantees involving the parent entity (2020: Nil)
Consolidated
2021
$
2020
$
9,222,528
3,573,665
-
-
9,222,528
3,573,665
(668,527)
(504,228)
-
-
(668,527)
(504,228)
8,554,001
2,237,151
45,938,576
34,192,043
3,316,963
1,490,588
(40,701,538)
(32,613,194)
8,554,001
2,237,151
(8,088,344)
(12,115,578)
(8,088,344)
(12,115,578)
82
83
Incannex Healthcare LimitedIncannex Healthcare Limited Directors’ Declaration
1. In the opinion of the Directors:
a. the accompanying financial statements, notes and
additional disclosures are in accordance with the
Corporations Act 2001 including:
2. This declaration has been made after receiving the
declarations required to be made to the Directors in
accordance with Section 295A of the Corporations Act
2001 for the financial year ended 30 June 2021.
This declaration is signed in accordance with a resolution
of the Board of Directors.
i. giving a true and fair view of the Group’s
financial position as at 30 June 2021 and of its
performance for the year then ended; and
ii. complying with Accounting Standards and
Corporations Regulations 2001; and
b. there are reasonable grounds to believe the Company
will be able to pay its debts as and when they become
due and payable.
c. the financial statements and notes thereto are in
accordance with International Financial Reporting
Standards issued by the International Accounting
Standards Board.
Troy Valentine
Chairman
Melbourne, Victoria
30 August 2021
Auditor’s Independence Report
INDEPENDENT AUDITOR’S REPORT
To the members of Incannex Healthcare Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Incannex Healthcare Limited (“the Company”) and its
controlled entities (“the Group”), which comprises the consolidated statement of financial position
as at 30 June 2021, the consolidated statement of comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the year then
ended, and notes to the financial statements, including a summary of significant accounting
policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the
Corporations Act 2001, including:
a) giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its
financial performance for the year then ended; and
b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report. We are independent of the Group in accordance with the
auditor independence requirements of the Corporations Act 2001 and the ethical requirements of
the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (“the Code”) that are relevant to our audit of the financial report in
Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial report of the current period. These matters were addressed in the context
of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
We have determined the matters described below to be the key audit matters to be communicated
in our report.
58
84
85
Incannex Healthcare LimitedIncannex Healthcare Limited
Key Audit Matter
Revenue Recognition
Refer to Note 3 Revenue
A substantial amount of the Group's revenue
relates to the sale of medical cannabinoid
products and oils.
Revenue recognition was a key audit matter due
to users’
the matter
to
understanding of the financial report.
importance of
the
How our audit addressed the key audit
matter
Our procedures included but were not limited
to:
− We evaluated management's processes
and key controls regarding accounting for
the Group's sales revenues;
− We ensured that the Group’s accounting
Australian
policies
with
Accounting Standards; and
comply
− We performed testing over a sample of
revenue transactions and agreed these
transactions to supporting evidence.
Our procedures included but were not limited
to:
− We assessed management’s valuation,
classification and calculation of each
category of share based payments; and
− We ensured that the accounting for, and
disclosure of, the share based payments
complied with Australian Accounting
Standards.
Valuation of Share Based Payments
Refer to Note 18 Share based payments
The securities issued to directors, advisors and
brokers as part of their remuneration was a
complex area of accounting and valuation.
The securities issued to directors, advisors and
brokers included market-based performance
rights and non-market-based options, requiring
and
different
valuation techniques.
accounting methodologies
Valuation of share based payments was a key
audit matter due to the complex nature of the
valuation principles and the material amount of
the resulting expense.
Information other than the financial report and auditor’s report thereon
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual financial report for the year ended 30 June 2021, but
does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives
a true and fair view in accordance with Australian Accounting Standards and the Corporations Act
2001 and for such internal control as the directors determine is necessary to enable the preparation
of the financial report that gives a true and fair view and is free from material misstatement, whether
due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group
to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend to liquidate the Group
or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with Australian Auditing Standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
-
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
-
-
- Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial report or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.
-
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
59
60
86
87
Incannex Healthcare LimitedIncannex Healthcare Limited
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included within the directors’ report for the year ended
30 June 2021.
In our opinion, the Remuneration Report of Incannex Healthcare Limited for the year ended 30
June 2021 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
HLB Mann Judd
Chartered Accountants
Perth, Western Australia
30 August 2021
L Di Giallonardo
Partner
61
88
89
Incannex Healthcare LimitedIncannex Healthcare Limited
Corporate
Governance
Statement
Incannex Healthcare Limited, (“IHL” or “the Company”) and its
controlled entities (the “Group”) have adopted the corporate governance
framework and practices set out in this statement. The Board of the
Company is responsible for its corporate governance, that is, the system
by which the Group is managed. The corporate governance framework
and practices have been in place throughout the financial year, and
comply with the third edition of the ASX Corporate Governance
Council’s Corporate Governance Principles and Recommendations
(“Recommendations”), unless otherwise stated below.
This statement has been approved by the Board, and
the information in the statement remains current as
at 30 August 2021. Company policies and charters are
available in the ‘Investors’ section of the Company’s
website at www.incannex.com.au
90
91
Incannex Healthcare LimitedIncannex Healthcare Limited 1.2 Information on New Directors
1.5 Diversity
Principle 1
Lay Solid Foundations for
Management and Oversight
1.1 Role of the Board and Management
The Board is responsible for evaluating and setting the
strategic direction for the Group, establishing goals for
management and monitoring the achievement of those goals.
The Board has responsibility for the following:
• appointing and removing the Chief Executive Officer
(“CEO”) and Managing Director, Chief Financial Officer
(“CFO”), Company Secretary and any other executives
and approving their remuneration;
• determining the strategic direction of the Group and
measuring performance of management against
approved strategies;
• review of the adequacy of resources for management
to properly carry out approved strategies and
business plans;
• adopting operating and capital expenditure
budgets at the commencement of each financial
year, approving acquisitions and divestitures, and
monitoring progress by both financial and non-
financial key performance indicators;
• monitoring the Group’s medium-term capital and cash
flow requirements;
• approving and monitoring financial and other
reporting to regulatory bodies, shareholders and
other organisations;
• determining that satisfactory arrangements are in
place for auditing the Group’s financial affairs;
• reviewing and ratifying systems of risk management
and internal compliance and control, codes of conduct
and compliance with legislative requirements; and
• ensuring that policies and compliance systems
consistent with the Group’s objectives and best practice
are in place and that the Company and its officers act
legally, ethically and responsibly on all matters.
The Board’s role and the Group’s corporate governance
practices are continually reviewed and improved as required.
The Company has access to an external supplier to undertake
appropriate checks on any potential director appointments.
Under the Company’s Constitution, all directors appointed
throughout the year as an additional director or to fill a casual
vacancy hold office to the AGM. Current directors hold office
and are required to be considered by Shareholders for re-
election under the Listing Rules.
All directors, whether appointed throughout the year as an
additional director or to fill a casual vacancy or who are due
for election under the Listing Rules, are disclosed in the
Notice of AGM, with all material information in its possession
relevant to a decision on whether or not to elect or re-elect
a director. The company’s constitution provides that at each
annual general meeting, one third of the Board (other than
any managing director in office from time to time) or, if their
number is not a multiple of three, the number nearest to one
third, must retire and, if the retiring directors so chose, may
offer themselves for re-election.
1.3 Contracts with Directors
On appointment, directors are provided with a formal letter
of appointment and executive management with written
employment agreements incorporating job descriptions
(where relevant).
1.4 Professional Advice
The Board has determined that individual directors have
the right in connection with their duties and responsibilities
as directors, to seek independent professional advice at
the Group’s expense. The engagement of an outside adviser
is subject to prior approval of the Chairman and this will not
be withheld unreasonably. If appropriate, any advice
so received will be made available to all Board members.
The finance function is outsourced to an external consultant
with appropriate skills. The company secretarial function
is currently performed by Madhukar Bhalla. The Company
Secretary is accountable to the Board through the
Chairman on corporate governance matters pertaining to
the company secretarial role. All directors have access to
the Company Secretary.
Recommendation 1.5 is that the Company should establish
and disclose a diversity policy. Due to the Company’s size
and nature of operations, the Board has not yet implemented
a diversity policy but the Board recognises the value of
diversity and the opportunities that it brings. As the Company
grows and positions become available, the Board remains
conscious of the requirement to establish a diversity policy
and will seek to promote and increase diversity.
Recommendation 1.5 also states that the Company should
report against a set of measurable objectives for achieving
gender diversity. Due to the Company’s size and nature of
operations, the Board has not yet established measurable
objectives for achieving gender diversity.
The Company currently has three permanent full-time
employees (one male and two female) and uses the services
of a number of consultants. There are four directors on the
Board, all of whom are male.
Recommendation 1.7 includes a requirement to disclose
whether a performance evaluation for senior executives has
taken place in the reporting period - performance evaluation
for senior executives was undertaken during
the 2020 financial year.
Principle 2
Structure of the Board to Add Value
2.1 Nomination Committee
Recommendation 2.1 is that the Board should establish
a nomination committee. The Board considers that the
Group is not currently of a size, nor are its affairs of
such complexity to justify the formation of a nomination
committee at this time. The Board as a whole considers
the following factors when selecting new directors and
when recommending directors to shareholders for
appointment or re-election:
1.6 Performance Review – Board and Directors
• the aim of having a majority of independent directors
Due to the size of the Company and the Board, an informal
self-assessment is normally undertaken in relation to the
Board’s collective performance and the performance of
the Chairman and individual directors during each financial
year. There are currently no formal policies in place for these
evaluations. The Board, its committees and non-executive
directors continually monitors its performance during the
year in accordance with the processes described above.
Recommendation 1.6 includes the requirement to disclose
whether a performance evaluation for the Board and Directors
has taken place in the reporting period - a formal self-
assessment was performed during the 2021 financial year.
1.7 Performance Review – senior executives
Arrangements put in place by the Board to monitor the
performance of the Group’s executives include:
• a review by the Board of the Group’s financial
performance;
• annual performance appraisal meetings, incorporating
analysis of key performance indicators with each
individual, to ensure that the level of reward is
aligned with respective responsibilities and individual
contributions made to the success of the Group;
• an analysis of the Group’s prospects and projects and
• a review of feedback obtained from third parties,
including advisors.
on the Board and of having an independent
non-executive chairman;
• the aim of having an independent director, other than
the Board chairman, as the chairman of the Audit and
Risk Management Committee;
• that between them, the directors have the appropriate
skill base and range of expertise, experience and
diversity to discharge the Board’s mandate;
• that each individual director has sufficient time to meet
his/her commitments as a director of the Company;
• the duration of each existing director’s tenure, noting
the retirement provisions of the Constitution as set out
below; and
• whether the size of the Board is appropriate to
facilitate effective discussions and efficient
decision-making.
Where appropriate, independent consultants will be
engaged to identify possible new candidates for the
Board. To date, new candidates to join the Board have
predominantly been sought through referrals, rather
than through professional intermediaries.
Directors are initially appointed by the full Board, subject to
election by shareholders at the next annual general meeting.
Under the Company’s Constitution a director (other than the
managing director and only one managing director where
the position is jointly held) is subject to reappointment
by shareholders not later than the third anniversary
92
93
Incannex Healthcare LimitedIncannex Healthcare Limited following his/her last appointment. The nomination of
existing directors for reappointment is not automatic and is
contingent on performance and on the current and future
needs of the Company.
2.2 Board Skills Matrix
The Board has developed a Board skills matrix, to simplify
the process for identifying any ‘gaps’ in the Board’s skills,
expertise and experience. As part of the review of the
skills matrix the Board monitor the skills, expertise and
experience that are relevant to the Company and assesses
those requirements against the collective attributes of the
directors. The Board skills matrix will be reviewed by the
directors on an annual basis.
Details of the Directors’ skills, experience, expertise
and attendance at meetings are set out in the Directors’
Report in each year’s Annual Report.
2.3/2.4 Independent Directors
During the financial year ended 30 June 2021, the Company
had the following Board members, who served as
directors throughout.
• Mr Troy Valentine
Non-Executive Chairman (appointed 11 December 2017)
• Mr Peter Widdows
Non-Executive Director (appointed 1 March 2018)
On 24 July 2019, Mr Alistair Blake (Executive Director -
appointed 20 October 2016) resigned from the Board, and
on that same day, the following appointments to the Board
were made:
• Dr Sud Agarwal
Non-Executive Director (appointed 24 July 2019)
• Mr Joel Latham
Managing Director (appointed 24 July 2019)
The Board currently consists of one executive and three
Non-executive Directors.
Details of the directors’ skills, experience, expertise, special
responsibilities, attendance at Board meetings and dates of
appointment are set out in the directors’ report.
In assessing the independence of the directors, the Board
has defined an independent director as a director who:
• is non-executive;
• is not a substantial shareholder (i.e. greater than
5%) of the Company or an officer of, or otherwise
associated directly with, a substantial shareholder of
the Company;
• has not within the last three years been employed
in an executive capacity by the Company or another
Group member;
• has not within the last three years been a principal
or employee of a material professional adviser or a
material consultant to the Company or another Group
member, or an employee materially associated with
the service provided;
• is not a material supplier or customer of the Company
or another Group member, or an officer of or otherwise
associated, directly or indirectly, with a material
supplier or customer;
• has no material contractual relationship with the
Company or another Group member other than as a
director of the Company; and
• is free from any interest and any business or other
relationship which could, or could reasonably be
perceived to, materially interfere with the director’s
ability to act in the best interests of the Company.
Materiality for these purposes is determined on both
quantitative and qualitative bases. An amount which is
greater than five percent of either the net assets of the
Company or an individual director’s net worth is considered
material for these purposes.
Troy Valentine is an independent director.
Peter Widdows is deemed to be an independent director.
Sud Agarwal is deemed to be a non-independent director.
Joel Latham is the Group Managing Director and Chief
Executive Officer and is therefore not independent.
The Company’s Constitution provides that the number of
directors shall not be less than three and not more than
seven. The Board considers that the Company is not
currently of a size, nor are its affairs of such complexity to
justify the appointment and further expense of additional
independent non-executive directors.
The Board believes that the four individuals on the Board
can, and do, make independent judgments and act in the
best interests of shareholders.
In accordance with the Corporations Act 2001 and the
Company’s Constitution, directors must keep the Board
advised, on an ongoing basis, of any interest that could
potentially conflict with those of the Group. Where the
Board believes that a significant conflict exists, the director
concerned does not receive the relevant Board papers and
is not present at the meeting whilst the item is considered.
2.5 Chairman
Troy Valentine performs the role of chairman.
The Chairman’s responsibilities include leadership of the
Board and the efficient organisation and conduct of the
functioning of the Board. The Board generally manages the
day-to-day affairs of the Group.
2.6 Director Induction
The Board implements an induction program for new
Directors which involves providing information about the
company, its constitution and policies and practices. The
Board is continually informed by Senior Management of key
developments in the Company’s business and the industry
in which the Company operates.
Principle 3
Act ethically and responsibly
3.1 Code of Conduct
The Group has a Code of Business Conduct in place which
provides guidelines aimed at maintaining high ethical
standards, corporate behaviour and accountability within
the Group.
All Group personnel and directors are expected to:
• respect the law and act in accordance with it;
• respect confidentiality and not misuse Group
information, assets or facilities;
• value and maintain professionalism;
• avoid real or perceived conflicts of interest;
• act in the best interests of shareholders;
• by their actions contribute to the Group’s reputation as
a good corporate citizen, which seeks the respect of
the community and environment in which it operates;
• perform their duties in ways that minimise
environmental impacts and maximise workplace safety;
• exercise fairness, courtesy, respect, consideration and
sensitivity in all dealings within their workplace and with
customers, suppliers and the public generally; and
• act with honesty, integrity, decency and responsibility
at all times.
Any member of Group personnel that breaches the Code
of Ethics and Conduct may face disciplinary action. If a
member of Group personnel suspects that a breach of the
Code of Ethics and Conduct has occurred or will occur, he
or she must report that breach to management. No member
of Group personnel will be disadvantaged or prejudiced if he
or she reports in good faith a suspected breach. All reports
will be acted upon and kept confidential.
Principle 4
Safeguard Integrity in Corporate
Reporting
4.1 Audit Committee
Recommendation 4.1 is that the Board should establish
an Audit and Risk Management Committee. The Board
considers that the Group is not currently of a size, nor are
its affairs of such complexity to justify the formation of an
audit committee at this time. During the year, the full Board
reviews the integrity of the Company’s financial reporting
and the processes to ensure the independence and
competence of the external auditors.
The Board currently fulfils the responsibilities which are
usually assigned to an audit committee including:
• considering whether the Company’s financial
statements reflect the understanding of the
Committee members of, and otherwise provide
a true and fair view of, the financial position and
performance of the Company;
• ensuring that the quality of financial controls is
appropriate for the business of the Company;
• considering the appointment or removal of the external
auditor, the rotation of the external audit partner and
approving the remuneration and terms of engagement
of the external auditor;
• monitoring and reviewing the external auditor’s
independence, objectivity and performance, taking
into consideration relevant professional and regulatory
requirements; and
• reviewing the Company’s risk management and
internal control systems.
94
95
Incannex Healthcare LimitedIncannex Healthcare Limited 4.2 CEO/CFO declarations
6.2 Investor Relations
7.2 Risk Management Review
• fluctuations in commodity prices and exchange rates;
The Board has received a written assurance from each of
the Chief Executive Officer and Chief Financial Officer for
each financial reporting period that in their opinion, the
declaration provided by them in accordance with section
295A of the Corporations Act is founded on a sound system
of risk management and internal control and that the system
is operating effectively in all material respects in relation to
financial reporting risks.
The Group places considerable importance on effective
communications with shareholders.
The Group communicates with shareholders and other
stakeholders in an open, regular and timely manner, so
that the market has sufficient information to make informed
investment decisions on the operations and results of the
Group. The following communications are posted on the
Company’s website:
4.3 External Auditors present at the
Annual Meeting
• ASX Quarterly Cash Flow Reports;
• Half Yearly Report;
The Company’s policy is to appoint external auditors
who clearly demonstrate quality and independence. The
performance of the external auditor is considered annually
and applications for tender for external audit services are
requested as deemed appropriate, taking into consideration
assessment of performance, existing value and tender
costs. The audit engagement partner is rotated periodically,
as required by the Corporations Act.
A representative from the external auditor is invited to attend
each annual general meeting to answer any questions
concerning the audit of the Group and the contents of the
auditor’s report.
Principle 5
Make Timely and Balanced Disclosure
5.1 Market Disclosure Policy
The Market Disclosure Policy requires executive
management to determine when a market release is
required to comply with the ASX Listing Rule continuous
disclosure requirements. The Policy sets out details of
accountability for the preparation and approval of ASX
releases, and is available on the Company’s website.
Principle 6
Respect the Rights of Shareholders
6.1 Website Information
The Company discloses information about itself, ASX
announcements, its Corporate Governance Statement and all
its Corporate Governance Policies on the Company’s website.
• presentations at the Annual General Meeting/General
Meetings;
• Annual Report; and
• other announcements lodged with ASX.
6.3 Participation at Shareholder Meetings
The Board encourages full participation of shareholders at
the Annual General Meeting. Shareholders who are unable
to attend general meetings are encouraged to lodge proxy
appointments in advance of the meeting.
6.4 Electronic Communications
Shareholders may elect to receive electronic notifications
when the Annual Report is available on the Company’s
website, and may electronically lodge proxy instructions for
items of business to be considered at general meetings.
Principle 7
Recognise and Manage Risk
7.1 Risk Committee
Recommendation 7.1 is that the Board should establish a
committee to oversee risk. The Board considers that the Group
is not currently of a size, nor are its affairs of such complexity
to justify the formation of a risk committee at this time.
The Board currently fulfils the responsibilities which are
usually assigned to a risk committee. Senior executives and
the Board regularly consider strategic and operational areas
of risk for the Group and records any remedial action the
Group has taken in the management of those risks.
Recommendation 7.2 is that the Board or a Committee
should review the risk management framework at least
annually. During the year, ongoing monitoring, mitigating and
reporting on material risks by senior executives and the Board
took place in accordance with the processes disclosed.
The Board has established a framework for the management
of the Group including a system of internal controls, a
business risk management process and the establishment
of appropriate ethical standards. The identification and
effective management of risk, including calculated risk-
taking, is viewed as an essential part of the Group’s
approach to creating long-term shareholder value.
• accuracy of mineral reserve and resource estimates;
• reliance on licenses, permits and approvals from
governmental authorities;
• ability to obtain additional financing;
• acquisition of new business opportunities; and
• changed operating, market or regulatory environments.
These risk areas are provided here to assist investors to
understand better the nature of the risks faced by the
Group, and are not necessarily an exhaustive list.
Management is responsible for designing, implementing and
reporting on the adequacy of the Group’s risk management
and internal control system.
Principle 8
Remunerate Fairly and Responsibly
Key elements of the Group’s internal control systems include:
8.1 Remuneration Committee
• the Code of Conduct, which sets out an ethical and
legal framework for all employees in the conduct of the
Group’s business; and
• financial and reporting systems to provide timely,
relevant and reliable information to management and
the Board.
During the year and up to the date of this statement,
management and the Company Secretary reported directly
to the Board on the Group’s key risks and the effectiveness
of the Company’s management of those risks.
7.3 Internal Audit Function
The Board, has determined not to have an internal audit
function due to the size of the Company.
The Company’s external auditors are engaged to perform
a half year review and full year audit as required under the
Corporations Act 2001. Senior executives and the Board
have regular meetings and contact with the external auditors
during the year and for the review and audits.
7.4 Material Exposure to Risk
Recommendation 7.4 is that the Board should disclose
whether it has any material exposure to economic,
environmental and social sustainability risks and if so, how it
manages those risks. The Group believes that the following
operational risks are inherent in the industry in which the
Group operates, having regard to the Group’s circumstances
(including financial resources, prospects and size):
Recommendation 8.1 is that the Board should establish
a remuneration committee. The Board considers that the
Company is not currently of a size, nor are its affairs of
such complexity to justify the formation of a remuneration
committee. The Board as a whole is responsible for the
remuneration arrangements for directors and executives
of the Company.
Details of the Group’s remuneration policy are set out in the
remuneration report.
8.2 Remuneration Disclosure for Non-Executive
and Executive Directors
The remuneration of non-executive directors is determined
by the Board as a whole having regard to the level of fees
paid to non-executive directors by other companies of
similar size in the industry. Due to the size of the Company,
the structure of both executive and non-executive directors’
remuneration includes a long-term incentive component,
linked to the performance of the Group.
The non-executive directors receive no retirement benefits,
other than statutory superannuation contributions. Any
increase in the maximum total remuneration of the non-
executive directors of the Company, which is set at $500,000
is subject to the approval of shareholders. Further information
on directors’ and executives’ remuneration is set out in the
directors’ report under the heading Remuneration Report in
the Directors’ Report in each year’s Annual Report.
Any directors or IHL personnel participating in equity-
based remuneration schemes are prohibited from entering
into transactions in associated products which limit the
economic risk of their unvested entitlements.
96
97
Incannex Healthcare LimitedIncannex Healthcare Limited Distribution of Shareholders (as at 27 August 2021)
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and above
Total
Total Holders
104
2,305
1,454
2,873
1,062
7,798
Units
25,583
7,091,829
11,280,326
102,220,552
957,421,140
1,078,039,430
% of Total
0.00%
0.66%
1.05%
9.48%
88.81%
100.00%
There were 120 shareholders holding less than a marketable parcel (less than 1,285 shares at $ 0.385) at 27 August 2021 –
a total of 44,677 shares.
There is no current on-market buy back taking place.
During the reporting year the Company used its cash and assets in a manner consistent with its business objectives.
The Company had the following unlisted equity securities on issue as at 27 August 2021:
Class
All classes of OPTIONS
Number
326,437,328
Securities Exchange Information
Additional information required by the ASX Limited Listing Rules, and not disclosed elsewhere in this report.
Shareholdings
No individual shareholder is recorded as being a substantial
shareholder (>5% of the Company’s ordinary share capital).
Class of Shares and Voting Rights
The voting rights attached to the Fully Paid Ordinary shares
of the Company are:
a. at a meeting of members or classes of members each
member entitled to vote may vote in person or by proxy
or by attorney; and
b. on a show of hands every person present who is a
member has one vote, and on a poll every person
present in person or by proxy or attorney has one vote
for each ordinary share held.
Options do not carry any voting rights.
Twenty Largest Shareholders (as at 27 August 2021)
Holder Name
Number Held
Percentage
1 MR RAYMOND LAURENCE CARROLL
2
3
DR SUDHANSHU AGARWAL
CANNVALATE PTY LTD
4 MR ANTHONY MICHAEL MALYNIAK
5
BAGBO PTY LTD
6 MR BRIAN PETER BYASS
7 MR PETER WIDDOWS
8
SLADE TECHNOLOGIES PTY LTD
9 MR JOEL BRADLEY LATHAM
10 ALIGNMENT CAPITAL PTY LTD
11 CIPATER PTY LTD
12 MR KAIDE WANG
13
JAPL NOMINEES PTY LTD
14 ELLAZ PTY LTD
15 CITICORP NOMINEES PTY LIMITED
16 MR PETER FRANCIS SCANLAN
17 MR SAM BOAKE
18 VBS EXCHANGE PTY LTD
19 PELRUS PTY LTD
20 MS NIOMIE ESTHER VARADY
Total
45,250,000
34,303,593
32,000,000
25,650,000
16,556,198
15,800,000
15,315,799
15,100,000
13,829,129
13,194,248
12,765,000
11,601,607
10,014,370
10,000,000
9,686,241
9,500,000
9,001,493
9,000,000
7,530,000
7,185,508
4.20%
3.18%
2.97%
2.38%
1.54%
1.47%
1.42%
1.40%
1.28%
1.22%
1.18%
1.08%
0.93%
0.93%
0.90%
0.88%
0.84%
0.83%
0.70%
0.67%
323,283,186
29.99%
98
99
Incannex Healthcare LimitedIncannex Healthcare Limited The potential
is limitless
incannex.com.au