Incannex Healthcare Limited Annual Report 2022

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FY2022 Annual Report · Incannex Healthcare Limited

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2022
Annual report

Limitless
Potential

Incannex Healthcare Limited
ASX: IHL | NASDAQ: IXHL

Our Mission is to
create first-in-class
pharmaceutical drugs
and therapies for
patients with unmet
medical needs.

Incannex Healthcare LimitedIncannex Healthcare LimitedCorporate
Information

Contents

Incannex Healthcare Limited
ABN 93 096 635 246

Directors

Mr Joel Latham (Managing Director & CEO)

Mr Troy Valentine (Non-Executive Chairman)

Mr Peter Widdows (Non-Executive Director)

Dr George Anastassov (Non-Executive Director)

Share Register

Automic Pty Ltd
Level 5 126 Phillip Street
Sydney NSW 2000
T +61 2 9698 5414

Mr Robert B. Clark (Non-Executive Director)

Auditors

Company Secretary

Madhukar Bhalla

Registered Office

Level 39, South Tower Rialto
525 Collins Street
Melbourne Victoria 3000

Principal Place of Business

105/8 Century Circuit
Norwest 2153

PKF Brisbane Audit
Level 6, 10 Eagle St
Brisbane 4000, Queensland

Securities Exchange Listing

ASX Limited (Australian Securities Exchange)
Home Exchange: Melbourne Victoria
ASX Codes: IHL

Corporate Information

Chairman’s Message

Directors’ Report

Auditor’s Independence Declaration

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes In Equity

Consolidated Statement of Cash Flows

Notes to the Financial Statements

Directors’ Declaration

Independent Auditor’s Report

Corporate Governance Statement

Securities Exchange Information

102

110

Incannex Healthcare LimitedIncannex Healthcare Limited Integrating with APIRx has
significantly enhanced our
intellectual property position
and has diversified our
pipeline of drug candidates
with a suite of projects with
major economic potential.

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 2022.

The year has presented Incannex with major opportunities and
good fortunes in our research endeavours despite challenging
conditions for capital markets in the second half of the year.

The hard work and dedication of our broader team has
culminated in Incannex becoming an ASX300 company,
an outstanding achievement that puts our business in an
echelon that all emerging public companies strive for, and
we have a lot more to look forward to in the coming year.

Our CEO, Joel Latham has continued to provide outstanding
leadership for the team, which has been bolstered by new
staff appointments of highly experienced people in key roles
for our company.

Operationally we’ve seen significant advancements in
clinical development across the entire portfolio.

In our IHL-42X program to treat obstructive sleep apnoea,
patients in our phase 2 trial were dosed safely and
successfully and the clinical trial results in fact exceeded
the expectations of our scientific team. We’re now looking
forward to working on our FDA IND opening trial, which marks
the commencement of the pivotal studies required to obtain
drug registration and marketing approval in the United States.

It was also an important year for IHL-675A, our multi-use
cannabinoid drug candidate for inflammatory disorders.
Various pre-clinical assessments of IHL-675A have
demonstrated superior outcomes to CBD alone, which
is encouraging to us from a marketability and economic
perspective.

A significant body of work has been undertaken to produce
GMP grade soft gel capsules incorporating our drug
candidate, these capsules are being used in our phase 1
clinical trial being conducted in Adelaide, South Australia.

We’re also very pleased with progress in our IHL-216A
program to treat traumatic brain injury and concussion.
In May of 2022, we reported to ASX that IHL-216A
demonstrated a neuroprotective effect in a rodent model
of sports concussion, restoring spatial memory post-
concussion more rapidly than untreated animals. Following
these and other positive pre-clinical observations, we are
now liaising with the FDA on an appropriate clinical program
to demonstrate our product’s safety and efficacy.

Our partnership with Monash University continues to
flourish as we work with world renowned Dr Paul Liknaitzky
to undertake clinical trials in the psychedelic therapy space.
The phase 2 Psi-GAD clinical trial that combines psilocybin
and psychotherapy to treat patients with generalised anxiety
disorder has been led with the utmost professionalism
and enthusiasm. Psychedelic therapies continue to garner
attention from the psychiatric field globally and we are
delighted to be working with Monash University to build this
highly innovative mode of treatment.

From a corporate perspective, we are excited to have
finalised the acquisition of APIRx Pharmaceuticals.
Integrating with APIRx has significantly enhanced our
intellectual property position and has diversified our
pipeline of drug candidates with a suite of projects with
major economic potential. I’d like to welcome Dr George
Anastassov and Mr Lekhram Changoer, the founders of
APIRx, to the Incannex team.

Financially, the company remains in a strong position with
a long cash runway, reinforced by our $24 million option
exercise program completed in April. Moreover, completing
our listing on Nasdaq has opened us to a whole new market
of stakeholders in the United States.

Our strong financial position and having strong investor
visibility in Australia and the United States gives us the
necessary comfort to conduct our research programs
unimpeded and at pace as we focus on delivering our novel
pharmaceutical products and therapies to patients in need.

Finally, I would like to thank CEO and managing director
Mr Joel Latham and the entire Incannex team for their
energy and commitment they bring to Incannex on a daily
basis. I thank our shareholders - we very much appreciate
your support and look forward to our exciting journey
together throughout FY2023.

Troy Valentine
Chairman

Incannex Healthcare LimitedIncannex Healthcare LimitedDirectors’
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 2022. 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. 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.

Mr Joel Latham
Managing Director &
Chief Executive Officer

Appointed 24 July 2019

Mr Troy Valentine
Non-Executive Chairman

B. Comm
Appointed 11 December 2017

Mr Peter Widdows
Non-Executive Director

ACA (ICAEW), BTec, MAICD
Appointed 1 March 2018

Dr George Anastassov
Non Executive Director

Appointed 28 June 2022

Joel Latham is the CEO and Managing Director of
Incannex Healthcare and is responsible for the Company’s
commercial operations, strategic decision- making, and
oversight of all clinical development assets. Joel has
over 15 years commercial management and executive
experience, working for a range multi-national publicly
traded companies.

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.

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.

Dr Anastassov is responsible for APIRx commercial
operations, strategic decision-making, and oversight of
all clinical development assets. He is one of the
developers of the first-in-the world cannabinoid-containing
chewing gum-based delivery system among a number of
other systems and formulations. Previously, he was
CEO and co-founder of AXIM Biotechnologies, which
achieved an all-time-high market capitalization of
approximately US$1.2B.

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.

Incannex Healthcare LimitedIncannex Healthcare LimitedPrincipal Activities
During the financial year, the principal
activity of the Company was research
and development associated with
medicinal cannabinoid and psychedelic
pharmaceutical products and therapies.

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
2022 after income tax was $14,903,909
(2021: Loss of $8,163,590).

Cash resources
At 30 June 2022, the Group had total
funds, comprising cash at bank and on
hand of $37,500,931 the majority of which
is held in Australian dollars. Total current
assets at year-end stand at $37,879,608.

Director’s
Report

Company Secretary

Robert Clark
Non Executive Director

Madhukar Bhalla

Appointed 17 August 2022

Appointed 7 July 2021

Robert Clark is currently the Vice President, Regulatory
Affairs for Novo Nordisk in the United States. He joined
Novo Nordisk in 2012 after spending over 20 years at
Pfizer in roles of increasing responsibility in the regulatory
field. Robert has over 35 years of US and global regulatory
experience. Under his leadership, his regulatory teams have
received US FDA approvals for a large number of medicines
across various therapeutic areas.

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.

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

Incannex Healthcare LimitedIncannex Healthcare LimitedBusiness
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).

Incannex Healthcare Limited

Business activities
and outlook

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 Terence 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.

Incannex Healthcare LimitedIncannex Healthcare LimitedDrug
Candidates

28 Projects
over which proof of concept has been established in
either pre-clinical, phase 1 or phase 2 clinical studies

Clinical
Project

Addressable Market
Opportunity (in US$)

Stage of
Development

Regulatory Stage
of Development

Next
Steps

Relevant
Patents

Clinical
Project

Addressable Market
Opportunity (in US$)

Stage of
Development

Regulatory Stage
of Development

Next
Steps

Relevant
Patents

IHL-42X
Obstructive Sleep Apnoea

$10.4B (U.S.)

Phase 2A
completed

FDA Pre-IND
completed

IHL-675A
Inflammatory Lung Disease

$50.4B (U.S.) by 2022

Pre-clinical
completed

FDA Pre-IND
completed

IHL-675A
Rheumatoid Arthritis

$57B (U.S.) by 2022

Pre-clinical
completed

IHL-675A
Inflammatory Bowel
Disease

$20B (U.S.) by 2021

Pre-clinical
completed

IND
opening
study

1x Pending
Deemed
novel
& inventive

Phase 1 CT 2x Pending

Deemed
novel
& inventive

Phase 1 CT 2x Pending

Deemed
novel
& inventive

Phase 1 CT 2x Pending

Deemed
novel
& inventive

2x Pending
Deemed
novel
& inventive

IHL-216A
TBI/Concussion

$2.9B in 2019

Pre-clinical
completed

FDA Pre-IND
scheduled (Sept.
2022)

IND
opening
study

Psi-GAD
Generalized Anxiety
Disorder

MedChew™-1401
Pain and Spasticity in
Multiple Sclerosis

MedChew™ GB
Post-herpatic Neuralgia

8M people (U.S. & AUS) Phase 2A

ongoing

FDA Pre-IND
completed

Phase 1

Drafting

$62B (Global) in '21 (a)

Pre-clinical

Pre-IND completed
in NL and
Switzerland

Phase 1

Granted

$3.7B (U.S.) by '27 (n)

Pre-clinical

FDA Pre-IND

Phase 1

Granted

MedChew™-1502
Parkinson's Disease

$8.05B (Global) by '27;
6.5% CAGR (I)

MedChew™-1503
Dementia

$23.9B (Global) by '28;
7.9% CAGR (m)

MedChew™ RL
Restless Legs Syndrome

12.1.% prevalence of
U.S. pop. (j)

Pre-clinical

FDA Pre-IND

Phase 1

Granted

Pre-clinical

FDA Pre-IND

Phase 1

Granted

Pre-clinical

FDA Pre-IND

Phase 1

Granted

MedChew™ Dronabinol
Nausea and Vomiting in
Chemotherapy

$3.1B (Global) by '24 (e)

Phase 1A
completed

FDA Pre-IND
completed

Phase 1B

Granted

CheWell
Addiction: Cannabis
Dependence

CanQuit
Addiction: Tobacco
Smoking Cessation

CanQuit O
Addiction: Opioid Addiction

APIRx-1601
Skin: Vitiligo

APIRx-1602
Skin: Psoriasis

APIRx 1505 Flotex
Gastro: Chrohn's Disease

CanChew Plus
Gastro: IBS

CanChew RX
Gastro: IBD

SuppoCan (Suppository)
Gastro: IBD

$12.6B (Global) by '24 (k) Pre-clinical

Pre-regulatory

Phase 1

Drafting

$40B (U.S.) in '21 (d)

Phase 2A
Completed

Pre-IND, ethical
approval

Phase 2B

Granted

$2.78B (U.S.) by '28 (r)

Pre-clinical

Pre-regulatory

Phase 1

Granted

$2.78B (U.S.) by 28 (r)

Pre-clinical

Pre-regulatory

Phase 1

Granted

Oraximax
Gingivitis and Periodontitis

$42B (U.S. and Europe)
in '21 (a)

Clinical Stage

510(k) pre-market
submission to FDA

Phase 2

Granted

$64B (U.S.) in '21 (c)

Pre-clinical

Pre-IND ready for
submission

Phase 1

Drafting

$47.75B (Global) by '24,
17.3% CAGR (o)

Pre-clinical

Pre-regulatory

Phase 1

Granted

$64B (U.S.) in '21 (c)

Pre-clinical

Pre-regulatory

Phase 1

Granted

$0.1B (Global) in '21 (b)

$0.5B (Global) in '21 (b)

Phase 2
completed

Phase 2A
completed

Pre-IND drafting

Phase 1

Pre-IND drafting

Phase 1

Pre-IND drafting

Phase 1

2x Granted,
1x Pending

APIRx-1603
Skin: Atopic Dermatitis

$1.1B (Global) in '21 (b)

APIRx-1701
Opth: Glaucoma

$10.4B (Global) by '26,
6.3% CAGR (g)

Pre-clinical

Pre-regulatory

APIRx-1702
Opth: Dry Eye Syndrome

$6.6B (Global) by '27,
6.4% CAGR (p)

Pre-clinical

Pre-regulatory

in vitro
studies

APIRx-1801
Ultrapure THC

APIRx-1802
Ultrapure CBD

APIRx-1803
Ultrapure CBG

$31.5B (Global) by '30;
18.6% CAGR (q)

Developed

$31.5B (Global) by '30;
18.6% CAGR (q)

Developed

$31.5B (Global) by '30;
18.6% CAGR (q)

Developed

Granted

(a) Frost & Sullivan Market Report as commissioned by APIRx,

(d) Frost & Sullivan Market Report as commissioned by APIRx,

Sept. 2021

Sept. 2021, market opportunity is Irritable Bowel Syndrome/Disease

(b) Frost & Sullivan Market Report as commissioned by APIRx,

(e) Heraldkeepers, “Chemotherapy Induced Nausea and Vomiting

(k) Heraldkeepers,”Crohn’s Disease Drugs Market Research Report
2022: Prospects, Trends Analysis, Market Size and Forecasts to
2027”, Jan. 2, 2022

(o) Worldwide Market Reports,”Smoking Cessation and Nicotine

De-Addiction Products Market”, May 2018

(p Future Market Insights,”Dry Eye Syndrome Treatment Market”,

Sept. 2021, market opportunity is medications and other, where
other includes visits to physicians, in/out patient costs
(c) Frost & Sullivan Market Report as commissioned by APIRx,

(CINV) Drugs Market Research Report, History and Forecast
2022-2027”, Jan. 2, 2022

(l) Global Market Insights,”Parkinson’s Disease Therapeutics Market”,

July 2017

Base Year 2020

(q Precedence Research “Cannabis Extract Market”, Mar. 2020;

(g) ResearchandMarkets, “Outlook on the Glaucoma Therapeutics

(m) Accurize Market Research,”Dementia Drugs Treatment Market”,

includes THC, CBD, CBG and other

Sept. 2021, market opportunity is Adolescent Substance Abuse

Global Market”, 2020-2026”, Oct. 22. 2021

Nov. 27, 2021

(r) Coherent Market Insights “Inflammatory Bowel Disease Market

(j) Straits Research: Home Care Sleep Screening Devices Market

(n) Comserve,”U.S. Shingles Vaccine Market”, Jan. 4, 2022

Analysis”, Sept. 2021.

Incannex Healthcare LimitedIncannex Healthcare LimitedOur mission

Incannex Healthcare Limited was
incorporated in Australia in April 2001.
Incannex listed its ordinary shares on the
ASX under the symbol “IHL” in November
2016 and, in the form of American
Depositary Shares under the symbol
“IXHL” on Nasdaq in February 2022.
Since 2019, we have been conducting
research and development for synthetic
cannabinoid pharmaceutical products
and psychedelic medicine therapies for
treatment of a range of indications.

Strategy

Our mission is to create premier ethical pharmaceutical
drugs and therapies for patients with unmet or undermet
medical needs, in all instances fulfilling regulatory
requirements of the FDA and other relevant regulatory
agencies. We aim to be recognized as a leading specialty
drug development company, committed to restoring
health and transforming the lives of patients through
the development of novel pharmaceutical products
and treatments.

We develop targeted and scientifically validated fixed-dose
combinations of synthetic cannabinoids and psychedelic
agents, applying proprietary insights in an effort to create
long term value for our patients and shareholders. We focus
on clinical indications that we believe represent unmet or
inadequately addressed medical needs and also represent
compelling commercial opportunities. In particular, we are
developing three unique pharmaceutical compositions to
target five indications: obstructive sleep apnea (“OSA”),
traumatic brain injury and concussion (“TBI”), rheumatoid
arthritis (“RA”), inflammatory bowel disease (“IBD”) and
inflammatory lung conditions (“ARDS”, “COPD”, Asthma,
Bronchitis). We are also developing a treatment for
generalized anxiety disorder (“GAD”) utilising psilocybin
combined with innovative psychotherapy methods. We are
pursuing FDA registration and marketing approval for each
product and therapy under development.

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
Mark Bleakley (our Head of Programs), Rosemarie Walsh
(our Clinical Research Manager), Terrance O’Brien (principal
investigator of the IHL-42X from Alfred Hospital), Dr Jennifer
Walsh (professor at University of Western Australia),
Ron Jithoo (neurosurgeon and advisor for IHL-216), and
Paul Liknaitsky (psychedelic principal investigator from
Monash University). Our advisory board also comprises our
collaborative partners, and in particular Monash University,
The Alfred Hospital and the University of Western Australia
Centre for Sleep Science.

To achieve our goals, we intend to:

• Advance our novel investigational drug candidates

towards approval in the United States and elsewhere.
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 the European Union, Japan, Australia
and Israel.

• Take advantage of accelerated commercialization
pathway options for our drug candidates. 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 a limited amount of pharmaceutical drug
treatments approved in the U.S. to treat the indications
that we are targeting with our drug candidates, and
the pharmaceutical treatments that do exist provide
limited treatment and are costly. These expedited
review programs often result in accelerated and less-
costly regulatory pathways to approval compared
with traditional regulatory pathways. We have not
yet approached the FDA about the suitability of our
products for these accelerated approval pathways
and such designations do not guarantee accelerated
review by the FDA.

Market Opportunity

The combined annual global market size of the indications
we are targeting is over US$420 billion, which is derived
from the total addressable market for the treatment
of all indications over which we are developing drug
candidates. The indications being pursued include: OSA,
TBI, concussions, rheumatoid arthritis, inflammatory bowel
disease, inflammatory lung conditions (ARDS, COPD,
Asthma, Bronchitis), GAD, pain, spasticity, addiction
disorders, dementia, Parkinson’s Disease, restless leg
syndrome, gastrointestinal diseases, periodontitis, skin
conditions and ophthalmic conditions. Thus, there is
significant economic potential to shareholders, as well as
benefit to patients suffering from these medical conditions.

• Develop future drug candidates targeting unmet
medical needs. We intend to only develop drug
candidates that treat unmet or undermet medical
conditions. As a result, we may have opportunities to
accelerate commercialization 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 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 and we own a
further 19 granted and 23 pending patents resulting
from the APIRx acquisition. Our patents approach
aligns with our regulatory strategy, including the
proposed submission of Pre-Investigational New Drug
Application (“pre-IND”) meeting requests to the FDA
for our clinical programs.

Clinical Approach

We are pursuing FDA approval for all our drug candidates
currently being developed. We will continue to work with
FDA to ensure each clinical program is structured to meet
regulatory requirements. FDA approval will be sought
following the completion of successful phase 3 studies.
Once we receive FDA approval for our drug candidates,
we will be able to commercialize our drug candidates in
the United States and pursue regulatory approval for the
drug to be made available in other jurisdictions, including
the Europe, Japan, Australia and Israel. The graphic below
represents our clinical development pipelines.

Incannex Healthcare LimitedIncannex Healthcare LimitedIHL-42X
Obstructive Sleep Apnoea

Obstructive sleep apnea is characterized
by a narrowing or obstruction of the
upper airway during sleep, interfering with
breathing and interrupting sleep. This
relatively common and chronic disorder is
underdiagnosed and inadequately treated.

It 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 pressurized 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. The estimated compound annual growth rate
(“CAGR”) for OSA detection and treatment using CPAP
devices from 2021 to 2028 is 6.2%.

IHL-42X in Obstructive Sleep Apnea

IHL-42X is a fixed-dose combination of acetazolamide, a
registered pharmaceutical, and dronabinol, a synthetic form
of -Delta-9-tetrahydrocannabinol (THC); both agents have
been shown to reduce the apnea hypopnea index (“AHI”).
We believe that the activity of 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 has a therapeutic benefit at doses of each constituent
drug that are safe and tolerable.

Phase 2 Clinical Trial for IHL-42X for Obstructive
Sleep Apnea (“OSA”)

We have completed our proof-of-concept Phase 2 clinical
trial in Australia to support our IND application with FDA
and to inform the clinical design of our future pivotal Phase
2 clinical trial, which will be conducted under the IND to
assess the safety and efficacy of IHL-42X in patients with
Obstructive Sleep Apnea. The IND for IHL-42X in treatment
of OSA has not yet been submitted and although we have
incorporated multiple facets into this study, including full
monitoring by a CRO and CDISC data formatting, there is no
guarantee that the FDA will accept data from the Australian
trial and further testing may be required prior to opening
the NDA.

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 randomized, 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 change in AHI relative to baseline and the
secondary endpoints are change 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.

Incannex Healthcare LimitedIncannex Healthcare LimitedIHL-42X

The study was undertaken at the Alfred Hospital in
Melbourne Australia and the University of Western Australia
Centre for Sleep Science in Perth. Novotech, a global
contract research organization, managed and monitored
the study. In July 2021, a confidential interim analysis of the
data from the phase 2 double blind randomized placebo-
controlled clinical trial was performed, and these results
were utilized to support a patent application regarding the
methods for the treatment of obstructive sleep apnea. In
December 2021, we completed the dosing of participants in
the phase 2 clinical trial.

In March 2022, we announced the completion of a
preliminary analysis of the full patient data set from the
phase 2, proof-of-concept clinical trial. The study assessed
three doses of IHL-42 at reducing AHI compared to placebo
in patients who suffered from the disease. Trial participants
received each of the three doses of IHL-42X, low, medium
and high, and placebo across four seven-day treatment
periods, separated by one week washout periods. A total
of eleven participants were recruited to the study and ten
participants competed treatment periods. Because the
trial assessed low, mid and high doses of IHL-42X and the
placebo in all ten trial participants with one week washout
periods, the trial data is effectively as useful to us as a 40
participant trial.

At baseline, the average AHI was 42.84. For all IHL-42X
treatment periods (using low, mid, and high doses), the
average AHI was 23.81, a 44.4 % reduction (p-value 0.0067)
compared to baseline AHI. During placebo treatment
periods, the average IHI was 40.08, a 6.4 % reduction
(p-value 0.75) compared to baseline. In total, 60% of
participants experienced a reduction in AHI of greater
than 50% (range: 55.0% to 91.5%) and a resulting AHI of
less than 20 during at least one treatment period of one
dose strength of IHL-42X. In addition, 20% of participants
experienced a reduction in AHI of greater than 80% (range:
82.7% to 91.5%) relative to baseline during at least one
treatment period of one dose strength of IHL-42X.

In May 2022, following a pre-IND meeting, the FDA
confirmed that we do not need to conduct studies in
animals to have an IND application approved for IHL-42X.
This decision by the FDA will save Incannex time and cost.
The FDA provided guidance on our proposed long-term
development strategy, including specific parameters to
demonstrate the safety and efficacy in phase 2 and 3 pivotal
studies, which will ensure that we can generate the data
we need for a new drug application with FDA, subject to
ongoing clinical success.

In June 2022, we announced the full and complete analysis
of data from the phase 2 proof-of-concept clinical trial
investigating IHL-42X for treatment of OSA:

• All doses of IHL-42X reduced AHI in patients with
sleep apnoea compared to baseline (Table 1). This
reduction was substantially greater than observed
for placebo.

• At the group level the difference relative to baseline
with low dose and medium dose was statistically
significant (p<0.05)

• When comparing directly to baseline within patients

the difference in AHI compared to baseline between all
three doses and placebo was statistically significant
(p<0.001) (Table 2)

• Low dose IHL-42X reduced AHI by >50% relative to
baseline in 62.5% of patients and by >80% in 25%
of patients

• Low dose IHL-42X reduced AHI to the greatest extent
at both the group level and when comparing the within
patient reduction relative to baseline

• Low dose IHL-42X reduced AHI to a greater extent

than predicted based on published data for dronabinol
and acetazolamide alone (Table 3)

The reduction in AHI observed during IHL-42X treatment
periods means that when treated with our proprietary drug,
patient’s breathing was interrupted less frequently during
sleep. This supports our hypothesis that IHL-42X is an
effective treatment for OSA. Furthermore, greater reduction
in AHI with low dose IHL-42X compared to dronabinol and
acetazolamide at equivalent doses supports our hypothesis
that the two drugs are acting synergistically to produce a
superior outcome than would be expected from dronabinol
and acetazolamide as monotherapies.

With respect to the oxygen desaturation index (‘ODI’),
the data from the phase 2 proof-of-concept clinical trial
supported the following:

• all three doses of IHL-42X reduced ODI compared to

baseline to a greater extent than placebo.

• For low and medium dose IHL-42X the difference

in reduction in ODI relative to baseline compared to
placebo was statistically significant (p<0.05)

Table 1. Average AHI data for baseline and each treatment period

Average AHI

Standard deviation

% Reduction relative to baseline

p value compared to baseline

Baseline

Placebo

42.84

20.33

N/A

40.08

18.16

6.44

0.76

Low

21.13

15.92

50.69

0.029

Medium

22.22

15.52

48.13

0.031

High

27.78

17.61

35.16

0.12

Table 3. Comparison of reduction in AHI relative to baseline with low dose IHL-42X and the predicted reduction with
component drugs as monotherapies at equivalent doses based on reported data

2.5 mg dronabinol (1)

125 mg acetazolamide (2)

Low dose IHL-42X

Reduction in AHI compared to baseline (%)

23.4

50.7

Table 2. Change in AHI from baseline within subject (least square mean)

Table 4. Reduction in ODI compared to baseline during each treatment period

Average change in
AHI from baseline

p-value relative
to placebo
(Bonferroni
adjusted)

Proportion of
subjects with AHI
reduction >50%
relative to baseline
(%)

Proportion of
subjects with AHI
reduction >80%
relative to baseline
(%)

Placebo

Low

Medium

High

1.95

17.51

14.86

16.18

N/A

<0.001

62.5

33.3

22.2

11.1

Reduction in ODI relative to
baseline (least squares mean)

Reduction in ODI relative to
baseline (%)

p value compared to placebo
(Bonferroni adjusted)

Placebo

Low

Medium

High

1.8

11.7

8.32

18.3

59.7

59.0

28.5

N/A

0.021

0.012

0.162

Incannex Healthcare LimitedIncannex Healthcare LimitedIHL-42X

The study also measured the Plasma THC levels in patients’
blood. Plasma samples were collected 2 hours post dose
1 and the morning after dose 7 for each treatment period.
The morning after dose 7, THC levels in the low dose IHL-
42X samples had an average of 0.20 ng/ml and a maximum
of 0.45 ng/ml, both of which are below the thresholds for
impaired driving imposed in countries that have set limits
for THC. With medium and high dose IHL-42X the average
THC concentrations the morning after dose 7 were 0.86 and
0.52 respectively.

During the IHL-42X treatment periods patients more
frequently reported that their sleep quality was good or
very good when compared to placebo. The highest level of
patient reported sleep quality was observed with low and
high dose IHL-42X (Table 5).

For the duration of the clinical trial, patients wore an
Actiwatch, a watch-like device that uses actigraphy to
capture data on activity and sleep. IHL-42X at all doses
improved sleep efficiency (the percentage of time in bed
a patient is asleep), the number of awakenings per night,
and the total minutes every patient was awake during
the night (WASO) compared to placebo (Table 6). These
improvements were greatest for low and high dose IHL-42X.
This means that while taking IHL-42X, trial participants were
asleep for a greater proportion of time they were in bed and
woke up less often.

Adverse events were recorded from the time the patients
enrolled in the trial until their end of study visit. After
recording treatment emergent adverse events (TEAE), the
study team, including investigators and medical monitors,
reviewed the TEAEs to determine whether they were likely
related to the investigational product. The TEAEs were
consistent with what has been reported for dronabinol
and acetazolamide alone. For each treatment period the
proportion of patients reporting one or more TEAEs (Table
7) as well as the total number of TEAEs (Table 8) were
extracted from the clinical study report. Low dose IHL-42X
had a similar proportion of patients reporting TEAEs and a
lower number of total TEAEs than placebo. This indicated
that low dose IHL-42X is well tolerated and in fact was more
tolerable to trial participants than placebo.

Table 5. Patient reported sleep quality during each treatment period

Proportion of subjects reporting good or very good sleep quality

Placebo

Low

Medium

High

Table 6. Sleep metrics captured by actigraphy

Sleep efficiency

average

p value compared to placebo

Awakenings per
night

average

p value compared to placebo

WASO (min)

average

p value compared to placebo

Placebo

76.83

N/A

49.31

N/A

62.59

26.50%

49.49%

38.47%

50.13%

High

84.17

0.0078

37.33

0.012

38.55

Low

84.81

0.0048

35.8

0.0053

37.55

Medium

81.34

0.058

41.44

0.055

47.22

0.00011

0.0031

0.0010

IHL-42X lowered apnoea hypopnea index
score in OSA sufferers during clinical study.

Table 7. Proportion subjects of TEAEs reported for each treatment period

Total TEAE (%)

Related TEAE (%)

Placebo

81.8

27.3

Low

33.3

22.2

Medium

55.6

44.4

High

66.7

55.6

Table 8. Total number of TEAEs reported during each treatment period

Placebo

Low

Medium

High

Total TEAE

Related TEAE

Incannex Healthcare LimitedIncannex Healthcare LimitedIHL-216A for Concussion/Traumatic Brain Injury
and Chronic Traumatic Encephalopathy

Concussion/Traumatic Brain Injury (‘TBI’) 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 behavioral
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.

Experts are still trying to understand how repeated head
traumas, including how many head injuries and the severity
of those injuries, and other factors might contribute to the
changes in the brain that result in CTE.

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 behaviors. Symptoms of CTE often
manifest decades after head trauma occurs.

CTE cannot be made as a diagnosis during life except in
those rare individuals with high-risk exposures. Researchers
do not yet know the frequency of CTE in the population and
do not understand the causes. There is no cure for CTE.
Researchers are currently developing diagnostic biomarkers
for CTE, but none have been validated yet.

The total global addressable market for TBI was estimated
to be US$2.9 billion in 2020 and the anticipated CAGR for
the market from 2021 to 2028 is 8.3%. There are currently
no pharmalogical treatments for the secondary neurological
effects of TBI.

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

Incannex Healthcare LimitedIncannex Healthcare LimitedIHL-216A

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 and is thought to act
by modulating glutamate release and calcium uptake as well
as via effects on mitochondrial membrane depolarization
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. We are also assessing
its 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). Reducing 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 a unique research
and development opportunity. We have formulated IHL-
216A as a combined inhalational product with nebulized
drug delivery that involves using air pressure or ultrasonic
vibrations to turn a liquid drug solution into an aerosol.
We engaged Vectura, a UK based contract development
and manufacturing organization, to develop the nebulised
CBD formulation and device for delivery of the CBD to
the isoflurane anaesthetic circuit. Vectura specializes 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. Development of the nebulized formulation was
an iterative process starting with three steps of refinement
based on properties of the solution, generated aerosol and
dose delivery.

On August 2, 2022, we announced that we have
engaged Curia Global, Inc. (‘Curia’) to further develop
and manufacture GMP-grade IHL-216A. Curia, formerly
AMRI, is a leading contract research, development and
manufacturing organization providing products and
services from R&D through commercial manufacturing to
pharmaceutical and biopharmaceutical customers. Curia’s
3,700 employees at 29 locations across the U.S., Europe
and Asia help its customers advance from curiosity to cure.

Their engagement represents substantial progress in the
development of IHL-216A and follows pleasing results
from extensive proof-of-concept and optimisation studies
undertaken at Vectura. Curia is engaged to scale-up the fill-
finish manufacture of IHL-216A in compliance with Current
Good Manufacturing Practice (‘cGMP’).

Curia will also generate data on the quality and stability of
IHL-216A to support future regulatory filings, including a FDA
pre-IND package and subsequent IND application. The first
cGMP batch manufactured at Curia will be used in a phase
1 clinical trial, which will commence once feedback on the
proposed IHL-216A development plan is received from FDA
in a pre-IND meeting that Incannex is aiming to set with FDA
in Q3 2022.

Due to the product’s potential therapeutic utility in contact
sports, IHL-216A has been developed to satisfy the World
Anti-doping Authority (“WADA”) specifications for use by
elite and amateur 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. Behavioral tests were used to assess
the neurocognitive and motor function over time. We also
monitored secondary injury cascades, 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 behavioral
deficits that are consequences of TBI, as IHL-216A had
a greater effect than the predicted effect of CBD and
isoflurane combined. The predicted result is determined by
analyzing the results of isoflurane and CBD independently,
and then based on those results predicting how well the
drugs would do in combination; to the extent IHL-216A
exceeds the predicted result, we can conclude that the
drugs strengthen the effectiveness of one another and
synergy exists. The study also found that IHL-216A reduced
neuronal damage, neuroinflammation and cognitive deficits
in a rodent model of TBI to a greater extent than either CBD
or isoflurane applied on a standalone basis. These results
have not been assessed for statistical significance.

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
visualise 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.

CA1

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

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.

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, the improvement in Nissl/Neuron ratio observed
for IHL-216A treated animals was increased by 53% for CA1
and 60% for CA2 relative to CBD alone, 28% for CA1 and
145% for CA2 relative to isoflurane alone, and by 20% for
CA1 and 53% for CA2 relative to the predicted effect of CBD
and isoflurane combined. These results demonstrated that
less neuronal damage was observed in the rats treated with
IHL-216A relative to the predicted value.

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. In groups
treated with IHL-216A, levels of the Iba1 neuroinflammation
marker were reduced by 35% more relative to CBD alone
and 123% more relative to isoflurane administered alone.
IHL-216A also reduced the Iba1 neuroinflammation marker
by 10% more than the predicted value of the combined CBD
and isoflurane treatments.

e
v
i
t
a
e
r

m
m
/
1
a
b

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.

Incannex Healthcare LimitedIncannex Healthcare Limited

IHL-216A

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

m
r
o
f
t
a
p
e
h
t

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

m
r
o
f
t
a
p
n

n
o
i
t
a
c
o

s
e
c
n
a
r
t
s
n

e
v
i
t
a
e
R

1.6

1.4

1.2

0.8

0.6

0.4

0.2

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, which 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.

Table 1. Values used to determine synergy between CBD and isoflurane

Relative
instances
in platform
location

Proportion
of rats that
reached the
platform
location

Rotarod
Latency (s)

Nissl/Neuron
CA1

Nissl/Neuron
CA2

Reduction in
Iba1 count/
mm2 relative
to vehicle

Uninjured

Vehicle

CBD

Isoflurane (ISO)

Predicted CBD+ISO

IHL-216A

EOB

% Outperform CBD

% Outperform ISO

% outperform Pred

1.00

0.50

0.40

0.83

0.80

1.50

0.70

275%

81%

87%

0.67

0.33

0.40

0.50

0.54

0.67

0.13

67%

34%

24%

23.39

17.83

17.60

17.33

17.08

19.33

2.25

10%

12%

13%

1.10

0.72

0.86

1.03

1.10

1.32

0.22

53%

28%

20%

1.18

0.54

0.92

0.60

0.96

1.47

0.51

60%

145%

53%

Calculation definitions for Table 1:
• EOB = IHL-216A – Predicted CBD+ISO
• % Outperform CBD = (IHL-216A/CBD) - 1
• % Outperform ISO = (IHL-216A/ISO) – 1
• % Outperform Pred = (IHL-216A/Predicted CBD+ISO) - 1

0.82

0.00

0.51

0.31

0.63

0.69

0.06

35%

123%

10%

Synergy between CBD and isoflurane was detected in the
behavioral 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. The number of animals treated with IHL-216A that
returned to the location of the platform per group and the
proportion of rats in the group that returned to the location
of the platform was greater than that predicted based
on the effect of CBD and isoflurane by 87 % and 24 %
respectively. The improved performance of IHL-216A treated
rats compared to the predicted effect demonstrated the
synergistic effect of CBD and isoflurane.

Stage 2 pre-clinical study for IHL-216A

We have finalized 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 was 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 used in the study was developed by
Monash University 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. Assessments in this
study include neurocognitive performance, levels of blood
biomarkers associated with traumatic brain injury, and
postmortem analysis of brain tissue using both MRI and
immunohistochemistry.

In May 2022, we announced that the stage 2 study had
been completed and that IHL-216A was observed to have
a strong neuroprotective effect in a widely known model of
sports concussion developed in collaboration with the NFL
to accurately represent the type of brain injury that occurs
in sports-related concussion. This study compared six
groups of twenty-four Sprague Dawley rats When animals

Figure 4. IHL-216A restores the deficit in Y-maze novel/familiar arm
discrimination index assessment 24 h post TBI.

A Y-maze was used to assess spatial memory 24 h after induction of TBI.
Sham + Vehicle treated animals displayed a clear preference for the novel
arm. This preference was reduced in TBI + vehicle animals, indicating that
there is a deficit in novel arm discrimination associated with TBI. 10 Each
group consisted of 24 rodents.

were tested in a Y-maze task, which assesses spatial
memory by determining the animal’s ability to discriminate
between a novel (new) and familiar arm, twenty-four hours
after injury, animals treated with IHL-216A were found to
have no difference in discrimination index compared sham
(uninjured) animals (mean difference= 0.0598, p=0.5855)
(Figure 4). In contrast, injured animals treated with either
vehicle or isoflurane alone after injury, the discrimination
index was significantly reduced compared to sham animals
(mean diff=0.2704, p=0.0498 and mean diff=0.3095,
p=0.0245 respectively). The group treated with CBD alone
had intermediate performance in the Y-maze between sham
and vehicle treated animals (mean diff.0.1745, p==0.2933).
These findings indicate that the defect in spatial memory
observed at 1 day post injury is restored in animals treated
with IHL-216A.

Following current and previous positive preclinical
observations, Incannex has commenced preparation of a
pre-IND meeting package for IHL-216A. The study team is
targeting a pre-IND meeting with FDA in Q3 2022 to discuss
our intention to conduct an expedited clinical trial program
required for a new drug application and marketing approval.

Incannex Healthcare LimitedIncannex Healthcare Limited

IHL-675A

IHL-675A multi-use anti-inflammatory drug targeting rheumatoid arthritis,
inflammatory bowel disease and lung inflammation (COPD, asthma, bronchitis,
and ARDS)

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 successful 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 analyzing 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 drug 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. In the context of the IHL-675A
development program, this means that we do not have to
perform many of the nonclinical toxicology studies that are
required for approval of a new chemical entity because
there is adequate toxicology data for both CBD and HCQ
available in pre-existing scientific literature or in regulatory
submissions for the respective reference listed drugs.
However, we still need to demonstrate IHL-675A is safe and
effective in the target indications via a series of randomized,
controlled clinical trials.

In July 2022, we received approval from the Bellberry
Human Research Ethics Committee (“HREC”) for a phase
1 clinical trial investigating the proprietary multi-use of
IHL-675A. The trial will measure the safety, tolerability,
and pharmacokinetic profiles of IHL-675A compared to
the reference listed drugs, Epidiolex (CBD) and Plaquenil
(HCQ). Three cohorts of 12 participants (n = 36) will receive
either IHL-675A, CBD or HCQ and the assessments will
be identical across the three arms of the trial. Patient
recruitment is anticipated to commence in August 2022.
Subject to clinical success, the results of the phase 1
clinical trial will form part of three IND applications with the
FDA for each of the initial three indications the Company is
pursuing for IHL-675A. These indications are rheumatoid
arthritis, inflammatory bowel disease and lung inflammation,
representing major markets for Incannex to pursue with
IHL-675A. Once the IND applications are evaluated and
approved, we intend to conduct clinical trials partly or
wholly in the United States.

Incannex Healthcare LimitedIncannex Healthcare LimitedIHL-675A

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.

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

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 characterized
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
characterized by diarrhea, rectal bleeding, abdominal
pain, fatigue and weight loss. IBD can be debilitating and
sometimes leads to life-threatening complications.

The precise cause of inflammatory bowel disease remains
unknown. Previously, diet and stress were suspected.
However, currently medical practitioners acknowledge that
these factors may aggravate, but are not the cause, of IBD.
One possible cause is an immune system malfunction.
When the immune system attempts to defeat an invading
virus or bacterium, an abnormal immune response can
cause the immune system to attack the cells in the
digestive tract. The total global addressable market for IBD
is estimated at US$20 billion in 2021 and the IBD global
market is anticipated to grow at a CAGR of 4.8% from
2021 to 2028.

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. The
total global addressable market for the pharmaceutical
treatment of rheumatoid arthritis is estimated at
US$57 billion.

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 a medical benefit to 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 a rheumatoid arthritis animal disease model study, low
dose IHL-675A reduced disease severity scores across
multiple assessments including clinical score, paw volume,
pannus score, total histology score and serum cytokine
levels to a greater extent than the equivalent of a standard
dose of HCQ. The reduction in disease severity scores in
animals treated with low dose IHL-675A was 1.06-3.52 times
that observed in animals treated with HCQ alone at the
standard dose equivalent.

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.

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
peripheralblood 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 normalized 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. None of the below data has been
analysed for statistical significance.

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. The reduction in levels
of the five cytokines (relative to vehicle treated PBMCs)
observed in PBMCs treated with IHL-675A was 436% to
1320% greater relative to those treated with HCQ alone,
109% to 767% greater relative to those treated with CBD
alone and 87% to 767% greater relative to the predicted
combinatorial effect of CBD and HCQ. 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 what
our expectation was based on the activity of each drug
individually. The observed inhibition of cytokine release
upon treatment with the CBD HCQ combination was greater
than predicted based on the activity of each drug alone for
each cytokine analyzed.

Incannex Healthcare LimitedIncannex Healthcare LimitedIHL-675A

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Figure 5. Inhibition of LPS-induced cytokine release from human
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Data is presented is the average relative inhibition for the PBMC donors.
Predicted inhibition by CBD+HCQ was calculated using the formula
Epred A+B=(EA+EB)-(EAEB). Observed CBD+HCQ is the level of inhibition
observed in the experiment. (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.

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Preclinical in vivo study of IHL-675A against
inflammation

In November of 2020, we announced the results of an in vivo
study assessing IHL-675A in a mouse model of sepsis. To
determine whether CBD and HCQ synergize in vivo, mice
from 11 groups of 10 mice, weighing 18-20g were injected
with CBD and HCQ both alone and in combination. After
one hour, the mice were injected with LPS to induce an
inflammatory response. Each mouse in every cohort was
assessed for each of the 5 inflammatory cytokines. Two
hours after LPS injection, blood was collected from the mice
by cardiac puncture. Sera were processed and analyzed for
cytokine levels using a Luminex based assay. For synergy
analysis, data was baseline subtracted using sham treated
(no LPS injection) cytokine levels and then the values for
each cytokine were normalized relative to maximum values
across the groups. The normalized values were used
to calculate the relative inhibition where a value of 1 is
complete inhibition and a value of 0 is no inhibition.
Synergy was calculated using the EOB method, or the
difference between the observed and predicted inhibition
between the combination of drug concentrations where the
predicted inhibition is determined using the equation
Epred A+B=(EA+EB)–(EAEB). An EOB score of greater than 0 is
indicative of synergy.

The results of the in vivo study are presented in Figure
6, showing the optimal fixed dose IHL-675A combination
assessed for each cytokine in 11 groups of 10 mice. The
bars noted as ‘Predicted CBD + HCQ’ represent IHL’s
expectation based on the activity of each drug alone. The
observed results from the study significantly exceeded
the predicted results across the inflammatory cytokines
analyzed. CBD and HCQ synergize to inhibit the production
of inflammatory cytokines IL-1β, IL-6, TNF-α, IL12(p70),
and IFN-γ in a mouse model of LPS induced sepsis. The
average EOB scores ranged from 0.15-0.30. Levels of the
five inflammatory cytokines were reduced compared to
animals treated with vehicle to a greater extent in animals
treated with IHL-675A than in those treated with CBD
alone. Reduction in cytokine levels compared to vehicle
treated group in the group treated with IHL-675A was 26%
to 81% greater relative to the predicted effect of the CBD
HCQ combination across the five analyzed cytokines after
2 hours.

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 our proprietary IHL-675A formulation 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.

A rodent model of pulmonary inflammation was used to
assess the anti-inflammatory efficacy of IHL-675A in lungs.
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 analyzed 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.

Cytokine levels were normalized 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
normalized 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. Based
on these results IHL-675A will be assessed for efficacy in
the treatment of pulmonary inflammation in humans. These
results have not been analysed for statistical significance.

Incannex Healthcare LimitedIncannex Healthcare Limited

IHL-675A

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Figure 6. 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.

Figure 7. 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 analyzed 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).

Incannex Healthcare LimitedIncannex Healthcare Limited

IHL-675A

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
in a rheumatoid arthritis model. Results indicate that
a low dose of IHL-675A was 1.06 to 3.52 times more
effective at reducing disease severity scores 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 sulfate, 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 severity 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 analyzed 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.

In the rat model of arthritis, IHL-675A treated animals had
a greater reduction (relative to vehicle treated animals) in
clinical score and paw volume at days 24 and 30, pannus
formation, total histology score, IL-1β and IL-6 than animals
treated with HCQ alone or CBD alone (at equivalent
doses). 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 has potential as a treatment for
rheumatoid arthritis in humans.

Paw Volume Day 24

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HCQ

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Clinical Score Day 24

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Figure 8. 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.

Incannex Healthcare LimitedIncannex Healthcare Limited

IHL-675A

Preclinical studies of IHL-675A in models of
inflammatory bowel disease

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 has the
potential to be a 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
over the course of the experiment. On Day 5 mice were
sacrificed, blood collected for cytokine analysis and the
colon removed for analysis.

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. The data was not
analysed for statistical significance.

Animals treated with IHL-675A displayed a greater
reduction (relative to vehicle treated animals) in colitis index,
macroscopic damage score, stool consistency score, colon
to body weight ratio and myeloperoxidase (MPO) levels than
animals treated with either CBD or HCQ alone. 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.

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Figure 9. 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) relative colon weight, (D) stool
consistency and (E) MPO levels. Drug dose in all assessments was 1 mg/
kg CBD and 2.5 mg/kg HCQ.

Incannex Healthcare LimitedIncannex Healthcare Limited

The other component of this study is monitoring the
pharmacokinetics of the two active pharmaceutical
ingredients (“API”) of IHL-675A, CBD and HCQ, and
comparing them to their respective reference listed
drugs Epidiolex and Plaquenil. Study participants will be
dosed with either IHL-675A, Epidiolex or Plaquenil with
equivalent amounts of the respective API. Blood samples
will be drawn at predetermined intervals over a 72-hour
period and analyzed for levels of CBD and HCQ as well as
their major metabolites. For each molecule the maximum
concentration (“Cmax”), time to maximum concentration
(“Tmax ”) and total exposure (“AUC”) will be determined.
The pharmacokinetic parameters for IHL-675A, Epidolex
and Plaquenil will be compared to determine whether the
APIs in IHL-675A are bioequivalent to the reference listed
drugs. Bioequivalence is an important component of the
FDA 505(b)2 approval pathway that IHL is targeting with
IHL-675A.

Results from this study, which has received clearance from
the Bellberry human research ethics committee to proceed,
will form a component of future regulatory applications for
IHL-675A and will also inform the design of Phase 2 efficacy
and safety studies across indications.

IHL-675A

Planned phase 1 clinical trial for IHL-675A

We have designed a Phase 1 clinical trial in Australia to
assess the safety and pharmacokinetics of IHL-675A in
healthy volunteers, the results of which will form part of
our FDA IND submissions across the indications of lung
inflammation, rheumatoid arthritis and inflammatory bowel
disease. The aims of this study are to demonstrate that there
are no, or minimal, additional risks/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 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, Epidiolex
(CBD), or Plaquenil (HCQ). The safety and pharmacokinetic
assessments will be identical across the three arms.

CBD and HCQ both have both been used historically
as treatments for our targeted indications when used
independently. However, as with any pharmaceuticals
there are risks involved. Part of the strategy in the design
of IHL-675A is that the combination of CBD with HCQ
permits a reduction in HCQ, which reduces the known
risks associated with cumulative HCQ dose, without
sacrificing efficacy. Results from the preclinical studies
we have conducted to-date have led to the hypothesis
that a lower cumulative dose of HCQ, when combined
with CBD, will also reduce disease severity scores in IHL-
675A’s target indications in humans. Nonetheless, there is
always potential for two drugs to interact and exacerbate
minor concerns that exist when used alone or lead to new
safety concerns. Demonstrating that a combination drug
containing CBD and HCQ has a similar safety profile to the
component drugs is an important step in the development
program and is a requirement set out by regulatory
agencies. This clinical trial will be performed in a Phase 1
unit with around the clock monitoring in the event that an
adverse event needs to be managed. Safety assessments
will include cardiac monitoring via ECG and blood
biomarkers, serum liver enzyme levels, blood cell counts
and biochemistry, monitoring of vital signs and mental
health questionnaires. Due to the substantial evidence of
synergy between HCQ and CBD required to produce a
superior outcome on inflammatory markers, dosages of
HCQ and CBD may be significantly lower than for treatment
with the individual drugs and this will be further evaluated
in clinical trials.

Incannex Healthcare LimitedIncannex Healthcare LimitedPsilocybin-assisted Psychotherapy for
General Anxiety Disorder (Psi-GAD)

Generalized Anxiety Disorder

Generalized Anxiety Disorder (‘GAD’) is characterized by
diffuse, excessive, uncontrollable anxiety that frequently
occurs and is not restricted to any particular environmental
circumstances. Symptoms are variable, including feelings of
persistent and excessive worry, nervousness, restlessness,
difficulty in concentrating fatigue, irregular sleeping
patterns, muscle tension, irritability, and nausea.

Generalized anxiety disorder is a relatively common and
serious psychiatric condition affecting around 4-6% of
the population during their lifetime. GAD can severely
affect quality of life and professional career prospects. An
estimated 8 million people in Australia and the United States
have moderate to severe GAD at any point in time, of which,
1 million people reside in Australia and 7 million people
reside in the United States.

Existing treatments

International guidelines for GAD treatment recommend
selective serotonin reuptake inhibitors (“SSRIs”), serotonin
and noradrenaline reuptake inhibitors (“SNRIs”), and
pregabalin as first-line options, with benzodiazepines
such as diazepam as second-line options. GAD is also
treated with psychotherapy alone or in combination with
pharmacotherapies. However, these treatments show limited
efficacy, with less than half of patients achieving remission
following these treatments and substantial treatment side-
effects and cost. In particular, the side effects associated
with long term use of these pharmacotherapies include
emotional numbness, reduced positivity, weight gain, sexual
disfunctions, and suicidal thoughts. Due to the limitations
of existing treatments, we believe there is significant unmet
need for new therapies to improve quality of life outcomes
for patient diagnosed with GAD.

Psilocybin as a treatment for generalized
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 specialized forms of
psychotherapeutic support, psilocybin does not lead to
clinically significant adverse events and can reduce scores
on mental health severity assessments. 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.

Incannex Healthcare Limited

Incannex Healthcare LimitedPsi-GAD

We believe that the following four studies detailed below
support psilocybin-assisted therapy for treating anxiety
using treatment dosages up to 30mg/70kg:

Our investigational psilocybin therapy for
Generalized Anxiety Disorder

• 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
randomized controlled trial. Psilocybin produced
immediate, substantial, and sustained improvements
in anxiety and depression, as well as decreases in
cancer-related demoralization and hopelessness,
improved spiritual wellbeing, and increased quality
of life.

• 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 randomized
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 psilocybin therapy combines psilocybin with
psychological therapy that has been specifically designed
for patients diagnosed with generalized 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. On October 28, 2021,
we conducted a pre-IND meeting with the FDA on the
psilocybin-assisted psychotherapy for GAD program, which
was ultimately aimed at FDA approval of our psilocybin
therapy administered to patients with GAD.

Phase 2 exploratory clinical trial

Our Phase 2 Australian exploratory clinical trial was
approved by the human research ethics committee (’HREC’)
in late 2021 and this approval from an independent board
of examiners permitted us to recruit trial participants
in Australia. Participant screening and recruitment
commenced in February 2022 and the first participants to
the trial commenced treatment in March 2022.

The study is a Phase 2 randomized triple-blind active-
placebo-controlled trial to assess the safety and efficacy
of psilocybin-assisted psychotherapy for GAD. Participants
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.
Safety is assessed by monitoring adverse events including
but not limited to liver function tests and scores on the
Ultra Brief Checklist of Suicidality. Efficacy is assessed by
comparing the change in Hamilton Anxiety Rating Scale
from baseline between the placebo and treatment group.
Tolerability is assessed by comparing the proportion of
participants who complete both dosing sessions in the
placebo and treatment groups. Secondary endpoints will be
assessed by monitoring disability, comorbidity, productivity
and quality of life using patient reported outcome measures.

A preliminary analysis of patient data will be conducted
by an independent data safety monitoring board after 30
patients have completed primary endpoint assessment. All
30 participants are anticipated to have been enrolled and
commenced their treatment programs within Q3, 2022. The
preliminary analysis will allow the trial investigators to inform
the second part of the trial (n=42) and, or decide to initiate
activities to commence a pivotal phase 2b clinical trial that
Incannex is actively planning.

FDA development plan and pre-IND meeting

In October 2021, we conducted a pre-IND meeting with
the FDA on the psilocybin-assisted psychotherapy for GAD
program. The pre-IND meeting package was prepared with
the assistance of Camargo Pharmaceuticals LLC, who also
attended the meeting with us. The FDA confirmed, in both
writing and teleconference, that the therapeutic strategy for
a psilocybin-assisted therapy for GAD is appropriate and
conveyed interest in its development. FDA also provided
guidance on Incannex’s proposed long-term development
strategy with regards to what will be required for a
successful NDA (FDA approval) and marketing authorization.
Specific feedback from the FDA on our proposed clinical
trial designs will shape a pivotal Phase 2b clinical trial, which
will be the IND opening study following either interim or full
results from the Phase 2 exploratory trial.

Intellectual Property Strategy

We strategically protect our innovations with a harmonized
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).

Psilocybin therapy protocol

Our psilocybin therapy comprises administration
of medication with psychotherapy by mental health
professionals that have undergone our specialised therapist
training program. Therapy is designed to optimize patient
safety and therapeutic outcomes in GAD with specific
support before, during and after psilocybin dosing sessions.

Each participant receives two therapeutic doses of our
investigational product, which will be composed of a
specified dosage of psilocybin, with psychotherapy before,
during and after each dose session. The psychotherapy
comprises four distinct phases:

• Preliminary psychotherapy: conducted during the

screening stage with key focus on clinical formulation,
therapeutic alliance, psychedelic treatment
psychoeducation and practical preparation for dosing.

• Preparation psychotherapy: conducted following full
enrollment and prior to the first dosing session with
a key focus on extending preliminary psychotherapy
work, and covering more targeted and GAD-specific
psychological and practical preparation for dosing.

• After dosing support: conducted within a week

following the preparation session with key focus on
trust, suitable mindset, conducive physical setting,
and participant-led support. Dosing support is the
psychotherapy session.

• Integration psychotherapy: conducted following
the dosing sessions, including the day directly
following each dosing session, with key focus on
sustaining benefits through specific mindful, emotion
and somatic-focused therapy, meaning-centered
support, and facilitating contextual changes that
support outcomes.

Incannex Healthcare LimitedIncannex Healthcare LimitedProfessor 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.

Psi-GAD

Monash University

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.

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 sponsors 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 are 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.

Virtual Reality (‘VR’) Exposure Response Therapy
(‘ERP’) and psychede lics

In March 2022, we entered into a license agreement with
Monash to develop a novel treatment that combines Virtual
Reality and psychedelics. The license agreement provides
an exclusive and perpetual license over an immersive
therapeutic Virtual Reality environment developed by
BrainPark. The license allows Incannex to investigate the
use of the Virtual Reality therapy tool in combination with
a psychedelic drug to develop a new treatment for severe
forms of one of more anxiety disorders.

The associated research and development will be led by
Dr Paul Liknaitzky at Monash, a highly reputable, globally
recognized, and innovative university that ranked #40 in the
world in the US News and World Report 2022. Incannex and
Monash are in advanced stages of discussion in relation
to a research agreement for the clinical trials required to
develop the new treatment form. The initial clinical trial will
assess efficacy, safety, tolerability, and optimal dose of the
treatment method.

Incannex Healthcare LimitedIncannex Healthcare LimitedIn May 2022, Incannex announced that it completed a
binding share sale and purchase agreement to acquire
100% of the issued share capital in APIRx Pharmaceuticals
USA, LLC (‘APIRx’). The stakeholders in APIRx (‘Sellers’)
have been issued a total of 218,169,506 new shares at a
notional value of A$0.573 per share to satisfy the purchase
of APIRx, which represents the price agreed at the signing
of the binding terms sheet announced on March 24,
2022. IHL share purchase consideration is equivalent to
approximately 8,726,780 IXHL American Depositary Shares
(ADS). Approval to issue the shares to the APIRX sellers
in consideration for the acquisition of APIRx was sought
and approved at a meeting of shareholders on June 9,
2022. 99.27% of voting shareholders approved the issue
of shares to the sellers. The Company completed the
acquisition on APIRx Pharmaceuticals on the 5th of August,
via the issuance of 218,169,497 IHL ordinary shares to the
stakeholders of APIRx. Legal transfer of the APIRx group
of companies to Incannex has been finalised so that the
group of companies sit within a wholly owned subsidiary
of Incannex.

The acquisition of APIRx presents Incannex with both long
and short-term opportunities for significant value growth.
APIRx has twenty-two (22) active clinical and pre-clinical
research and development projects underpinned by an
intellectual property portfolio that includes 19 granted
patents and 23 pending patents. It holds a diverse portfolio
of promising therapeutic candidates targeted at treating
an extensive range of conditions including pain disorders,
addiction disorders, mental illnesses, gastrointestinal
diseases, gum disease, skin conditions and ophthalmic
conditions. The indications being pursued represented an
aggregate addressable market of US$400B per annum.

Founders of APIRx, Dr George Anastassov and Mr Lekhram
Changoer (M.Science) have joined the Incannex team
as non-executive director and chief technology officer
respectively. Dr. Anastassov is responsible for APIRx
commercial operations, strategic decision- making, and
oversight of all clinical development assets. He is one of the
developers of the first-in-the-world cannabinoid-containing
chewing gum-based delivery system among a number of
other systems and formulations. Previously, he was CEO
and Co-founder of AXIM Biotechnologies, which achieved
an all-time-high market capitalization of approximately
US$1.2B. Mr. Changoer is responsible for the Company’s
R&D, clinical & product development, commercial
operations, quality assurance and Sales & Marketing
of technical, consumer healthcare and pharmaceutical
products. He has co-developed several patents in the
cannabinoid field. Previously, he was CTO and Co-founder
of AXIM Biotechnologies.

The initial priority APIRx drug candidates for
Incannex are:

MedChew Dronabinol for chemotherapy
induced nausea and vomiting

According to the WHO, cancer is one of the leading causes
for death and chemotherapy is utilized by approximately
ten (10) million cancer patients annually and this statistic is
expected to grow by 53% by 2040. Nausea and vomiting
are two of the most dreaded cancer treatment-related side
effects. Dronabinol, which is synthetic Tetrahydrocannabinol
(‘THC’) is an approved treatment of chemotherapy
associated nausea and vomiting as well as anorexia
associated with HIV/AIDS. Oral dronabinol is taken up
slowly, however, taking 1-2.5 hours to reach peak plasma
concentration, and is also subject to first pass metabolism,
which means that only 10-20% of the dose reaches
the circulation.

MedChew Dronabinol is a chewable variant of Dronabinol
that has been developed and patented by APIRx to bypass
first pass metabolism. In a phase 1a study of MedChew
Dronabinol, THC appears in circulation within 10 minutes
and a sustained release profile of 4 to 8 hours was observed
in most study subjects so that the product is more useful in
the time in which it is required. There is an open IND with the
FDA for MedChew Dronabinol and the next developmental
step for the product is to conduct a bioavailability/
bioequivalence clinical study to support application for
approval by bridging to publicly available data on Marinol,
the marketing name of generic dronabinol. The economic
size of the global drug market for chemotherapy induced
Nausea and Vomiting is anticipated to be US$3.1B per
annum by 2024.

MedChew Rx for pain and spasticity in
multiple sclerosis (‘MS’)

Up to 84% of people suffering from MS also experience
spasticity, which causes involuntary muscle stiffness
and spasms. Pain is also a common symptom in MS,
with up to two-thirds of people with MS reporting pain in
worldwide studies. MedChew™ Rx is absorbed through
the oral mucosal membrane and bypasses the liver, and
first pass metabolism. MedChewTM Rx contains the same
constituent formulation of CBD and THC as the product
Sativex, which has received EMA drug approval. MedChew
Rx, however, facilitates extended dosing and reduces the
need to readminister, which for Sativex is up to 12 times per
day. It does not contain alcohol, which Sativex does, and
will not exacerbate the dry mouth that is often associated
with MS pharmacotherapy. MedChew Rx has underlying

Acquisition
of APIRx
Pharmaceuticals

Incannex Healthcare Limited

Incannex Healthcare Limitedpatent protection via granted patents related to chewing
gums comprising cannabinoids. APIRx staff have completed
pre-IND meetings with Swiss-Medic (Switzerland) and
CBG-MEG (Netherlands). There is potential to fast track
to EMA drug approval with bioequivalent phase 1 bridging
study to bridge to Sativex CBD/THC oral spray safety and
efficacy data.

Cannabinoid Chewing Gums and
chewable tablets

Medicated chewing gum and chewable tablets (‘MCGT’)
is a drug delivery system growing in favour in the medical
community due to its application as an extended-release
dosage form that supports continuous, ongoing release
of the medicine contained. MCGTs are fast acting as they
deliver the active ingredients into the oral mucosa, reducing
the potential for gastric intolerance amongst patients. These
qualities make MCGTs an excellent delivery system for
medicinal combinations designed to treat sustaining pain
and addiction disorders. MCGTs are also well tolerated
by patients as there are no capsules to swallow or messy
liquids to administer. The benefits of mastication, otherwise
known as chewing, are well documented and include
improved cerebral circulation, an anti-anxiety effect,
memory improvement, neuroprotection, and an analgesic
effect. These qualities make MCGTs an excellent delivery
system for medicinal combinations designed to treat
sustaining pain and addiction disorders.

We have data for CheWell as a high bioavailability product.
A Phase 1 pharmacokinetic (PK) study demonstrated that
the patented CheWell formulation led to >10x increase
in CBD bioavailability compared to the standard CBD
chewing gum delivery mechanisms. Data from 36 patient
phase 2 proof of concept trial observed a 50% reduction in
abdominal pain in CheWell treated Irritable bowel syndrome
(IBS) patients, supporting a therapeutic effect in IBS.
International regulatory analysis is being undertaken to
identify what is required for commercial launch in different
jurisdictions. Improved bioavailability means that even small
doses of CBD within MCGTs could be highly effective even
without a prescription from a doctor. That is, they could
meet the TGA requirements for an OTC product. Increased
bioavailability also reduces cost of goods, which increases
margins. First marketing claim could be for IBS, however,
could be suitable for a range of indications for which CBD
may currently assist patients.

Medicated Chewing Gum and Chewable Tablets
for Treatment of Addiction

CanChew Rx and SuppoCan for
Inflammatory Bowel Disease

APIRx has multiple patents for cannabinoid-based drug
candidates designed for treatment of addiction to different
drug classes.

CheWell for Cannabis Dependence

CheWell is a CBD chewable tablet with high bioavailability
that can be used in the treatment of people with marijuana
addiction. Cannabis dependence is predicted to be the
fastest growing segment of drug dependence market and
preliminary data observed by APIRx suggest a possible
beneficial impact of CBD on mitigating the craving effect
of cannabis. A case report has shown positive outcomes
for one patient treated with CBD during the withdrawal and
relapse phase of cannabis dependence. A pre-IND for the
use of CheWell in patients with cannabis dependence is with
FDA is currently pending.

CanQuit for Smoking Cessation

CanQuit is a medicated chewing gum that combines
cannabinoids and nicotine to reduce cravings for cigarettes
or tobacco vaping utensils. CanQuit is designed to better
assist addicted smokers to quit smoking and we intend
to trial our product for effectiveness against existing
nicotine chewing gums. A more effective and cost effective
cannabinoid/nicotine combination medicated gum may have
the potential to disrupt the incumbent global nicotine gum
market, which had observed sales of US$ 5.2B in 2020.

CanQuit O for Opioid Addiction

CanQuit O is a medicated chewing gum that combines
cannabinoids with opioid agonists and/or antagonists,
which is designed to suppress opioid-based drug cravings
in people addicted to opioids. We intend CanQuit O to be
a prescription product to help combat the ongoing opioid
addiction crisis in the United States and elsewhere. We
believe CanQuit O has the potential to be a simple solution
to a complex addiction disorder and nationwide problem
with far reaching consequences. Opioid use disorder has an
annual addressable market size estimated to be US$64B by
2028 and with many people being addicted but untreated.

68 million people suffer from Inflammatory Bowel Disease
(IBD) globally. Signs and symptoms of IBD, which
encompass both Crohn’s disease and ulcerative colitis,
include diarrhea, fatigue, abdominal pain and cramping,
reduced appetite, and unintended weight loss. Heretofore,
the main medications for IBD are anti-inflammatory
medications and analgesics. Anti-inflammatories include
courses of corticosteroids which are used to induce
remission but are immunosuppressing. APIRx has
developed a CBD-containing controlled-release functional
chewing gum called CanChew Rx and Suppocan to be
used in conjunction with one another. SuppoCan is a
CBD-containing suppository to facilitate local delivery of
cannabinoids. In experiments, CBD has shown efficacy in
treating IBD in animals and we intend to undertake a phase
1 clinical trial to assess CanChew Rx and Suppocan.

OraxiMax for Periodontal Disease and Gingivitis

Up to 50% of adults suffer from moderate to severe
periodontitis and/or gingivitis. Heretofore, periodontal
disease treatment has been limited to professional dental
cleaning and the use of systemic antibiotics. OraxiMax
Toothpaste and Mouthwash contain CBD and Cannabigerol
(CBG) and are backed by fully granted IP protection. There
products provide for disruption of dental plaque formation,
therefore preventing gingivitis and periodontitis. Due to their
proprietary formulations, the local availability of APIs are
increased while systemic absorption is kept to minimum.

Benefits of CBD in dental protection include:

• Reduction in inflammation that can lead to

gum diseases

• Attacks on bacteria associated with tooth decay,

reducing the risk of cavities.

• Fights bad breath.

• Relieves dental and gum sensitivity

• Encourages tooth remineralization, and

• Restores pH balance.

We have observed encouraging bioavailability data for
Oraximax products and intend to undertake a phase 2
study to, subject to clinical success, achieve results that
demonstrate appropriate safety and efficacy to register the
products as a medical device under the FDA 510(k) approval
process in the United States.

Topical cannabinoid development

APIRx developed and patented a combination of CBD
and CBG, a minor cannabinoid that also has potent anti-
inflammatory properties, in a topical formulation. the
topical solutions combine anti-inflammatory activity with
antimicrobial activity of CBD/CBG to treat skin diseases.
APIRx completed in-human proof of concept studies in
three different skin diseases with dosing occurring for 6
weeks. Our drug product was well tolerated and displayed
a 10% improvement in patients with Vitiligo, up to a 33%
improvement in patients with Psoriasis and up to a 22%
improvement in patients with atopic dermatitis. Patents are
pending for compositions and methods of use for treatment
of each of the three indications and we intend to call a pre-
IND meeting with the FDA to discuss our best development
pathways for the topical cannabinoid solutions.

Cannabinoids for Ophthalmic Conditions

Via the acquisition of APIRx, we have two granted patents
for ophthalmic formulations of cannabinoids. Anecdotal
evidence supports therapeutic benefit for cannabis and
cannabinoids in the treatment of ophthalmic conditions
including: glaucoma, conjunctivitis, age related macular
degeneration, and dry eye syndrome. We proposed that a
therapeutic effect in these eye conditions is derived from
the neuroprotective, anti-inflammatory, and anti-microbial
activities of cannabinoids. We intend to undertake a phase
1 safety and proof of concept clinical trial to advance the
development of cannabinoids for ophthalmic conditions.

Incannex Healthcare LimitedIncannex Healthcare LimitedDirector’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

Mr Troy Valentine

Mr Peter Widdows

Mr Joel Latham

Dr George Anastassov

Mr Robert Clark

Dividends

Number of fully paid
ordinary shares

Number of options
over ordinary shares

No. of performance
rights/shares

36,651,198

16,573,685

23,748,413

66,972,077

–

2,800,000

–

10,100,000

–

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 17 August 2022, the company appointed Robert Bruce
Clark to the board as a non-executive Director.

Share Options
The Company has the following options on issue as at the
date of the Directors’ Report.

On 5 August 2022, the Company completed the acquisition
on APIRx Pharmaceuticals. The acquisition was completed
by an all-scrip transaction by issuing 218,169,497 IHL
ordinary shares to the stakeholders of APIRx.

On 5 August 2022, the Company issued shares and options
to Ryba LLC post year end pursuant to the mandate
executed between the companies in November 2021. As the
transaction between the Company and APIRx was deemed
complete on 05 August 2022 the shares and options
were issued.

No further significant events have occurred since the end of
the financial year.

Expiry Date

Exercise
Price

Listed/
Unlisted

Number

30/06/2025

$0.05

Unlisted

750,000

30/06/2026

$0.05

Unlisted

750,000

30/06/2027

$0.05

Unlisted

750,000

30/06/2025

$0.05

Unlisted

750,000

30/06/2026

$0.05

Unlisted

750,000

30/06/2027

$0.05

Unlisted

750,000

20/11/2023

01/07/2025

01/07/2026

01/07/2027

$0.15

Unlisted

8,200,000

$0.25

Unlisted

20,000,000

$0.20

Unlisted

6,650,000

$0.26

Unlisted

533,333

$0.31

Unlisted

533,333

$0.35

Unlisted

533,334

28/04/2023

$1.00

Unlisted

33,644,386

28/04/2023

$1.00

Unlisted

928

01/07/2025

01/07/2026

01/07/2027

01/07/2025

01/07/2026

01/07/2027

$0.26

Unlisted

1,399,999

$0.31

Unlisted

1,399,999

$0.35

Unlisted

1,400,002

$0.26

Unlisted

1,399,999

$0.31

Unlisted

1,399,999

$0.36

Unlisted

1,400,002

04/08/2025

$0.612

Unlisted

3,000,000

04/08/2025

$0.69

Unlisted

3,000,000

04/08/2025

$0.765

Unlisted

3,000,000

Incannex Healthcare LimitedIncannex Healthcare LimitedUnissued Shares under Option

As at the date of this report, there were 91,995,314 unissued
ordinary shares under options (2021: 338,378,176).

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 207,650,638 ordinary
shares issued as a result of the exercise of options
(2021: 286,500,523).

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 2022.

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.

Insurance premiums

Non–executive director remuneration

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.

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

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 (2021: nil).

Executive Employment Contracts

For the year ended 30 June 2022, 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: $484,000 per annum, plus

$30,000 Board fees, plus superannuation

• Variable remuneration up to 50% of base salary
subject to achieving certain performance hurdles

• Grant of 2,800,000 ordinary shares and 2,800,000

options which vest upon continuing tenure. 933,333
ordinary shares and 933,333 options vested on 30
June 2022. All shares and options granted have
received shareholder approval.

• Termination for cause: no notice period

• Termination without cause: three–month notice period

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 $245,000 is payable for the financial year
ended 30 June 2022 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.

Employee Share Option Plan (ESOP)

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.

1,600,000 shares and 1,600,000 options have been issued
under the ESOP during the year (2021: nil).

Incannex Healthcare LimitedIncannex Healthcare LimitedTable 1: Remuneration of key management personnel (KMP) for the year ended 30 June 2022

Short–term
(cash–based payments)

Long–term
(share based
payments)

Performance
Rights,
Shares and
Options
$

Post–
employment

Super-
annuation
$

Performance
Related
%

Total
$

Key Management
Personnel name

Mr Troy Valentine1

Mr Peter Widdows2

Salary &
fees
$

92,750

84,742

Bonus
$

Other
$

–

240,000

312,538

9,275

8,474

654,563

93,216

–

Mr Joel Latham3

533,500

245,000

716,096

24,998

1,519,594

Dr Sud Agarwal4

48,000

Dr George Anastassov5

–

90,000

–

4,800

142,800

–

Total

758,992

245,000

330,000

1,028,634

47,547

2,410,173

1. Remuneration owed to Mr Valentine at 30 June 2022 is $38,750 included in accrued expenses. Mr Valentine was paid $240,000 for consulting

fees invoiced to the Company, outside of Director fees.

2. Remuneration owed to Mr Widdows at 30 June 2022 is $42,076 included in accrued expenses.

3. Remuneration owed to Mr Latham at 30 June 2022 is $245,000 included in accrued expenses.

4. Remuneration owed to Dr Agarwal at 30 June 2022 is $25,300 is included in accounts payable. Dr Agarwal received $90,000 in fees billed
through Medical Life Publishing Pty Ltd, for services provided as Chief Medical Officer. Dr Agarwal resigned on the 28th of June 2022.

5. Dr Anastassov was appointed on the 28th of June 2022.

Table 2: Remuneration of key management personnel (KMP) for the year ended 30 June 2021

Short–term
(cash–based payments)

Long–term
(share based
payments)

Performance
Rights,
Shares and
Options
$

Post–
employment

Super-
annuation
$

Performance
Related
%

Total
$

Key Management
Personnel name

Mr Troy Valentine1

Mr Peter Widdows2

Salary &
fees
$

54,000

48,000

Mr Joel Latham3

278,731

115,000

Bonus
$

Other
$

–

127,500

–

5,130

4,560

186,630

52,560

217,7125

24,627

636,070

Dr Sud Agarwal4

48,000

–

90,000

454,9876

4,560

597,547

Total

428,731

115,000

217,500

672,699

38,877

1,472,807

47.8

–

63.3

–

34.2

76.1

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.

Incannex Healthcare LimitedIncannex Healthcare LimitedPerformance 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 14 of these financial statements.

Performance rights activity for KMP for the year ended 30 June 2022

Performance rights activity for KMP for the year ended 30 June 2022 are set out in the table below.

The number of performance rights held by Key Management Personnel of the Group during the financial year is as follows:

30 June 2022 – Performance Rights

Name

Mr Troy Valentine1

Mr Peter Widdows1

Mr Joel Latham1

Dr Sud Agarwal2

Dr George Anastassov

Balance at
1 July 2021

Granted/(Expired)
by the Company

Converted to
Ordinary shares

Balance at
30 June 2022

–

30 June 2021 – Performance Rights

Name

Mr Troy Valentine1

Mr Peter Widdows1

Mr Joel Latham1

Dr Sud Agarwal2

Balance at
1 July 2020

Granted/(Expired)
by the Company

Converted to
Ordinary shares

Balance at
30 June 2021

1,500,000

5,000,000

32,303,593

(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.

Incannex Healthcare LimitedIncannex Healthcare LimitedOptions
Key Management Personnel – Option Holdings

The number of options held by Key Management Personnel of the Group during the financial year is as follows:

30 June 2022 – Options

Name

Mr Troy Valentine1

Mr Peter Widdows1

Mr Joel Latham2

Dr Sud Agarwal3

Balance at
1 July 2021

Other changes
during the period

7,116,950

657,895

4,700,000

(4,316,950)

(657,895)

5,400,000

200,000,000

(200,000,000)

Dr George Anastassov

–

Balance at
30 June 2022
(or on cessation)

2,800,000

–

Exercisable

466,666

–

1. Other changes refer to conversion of options held to ordinary shares and share options issued to Troy Valentine approved by shareholders

in 2022.

2. 5,400,000 share options were issued to Joel Latham approved by shareholders in 2022.

3. Dr Agarwal’s change relates to share options that lapsed during the year and conversion of options held.

30 June 2021 – Options

Name

Balance at
1 July 2020

Other changes
during the period

Mr Troy Valentine1

48,355,557

(41,238,607)

Mr Peter Widdows1

Mr Joel Latham2

Dr Sud Agarwal3

3,957,895

6,687,500

(3,300,000)

(1,987,500)

Balance at
30 June 2021
(or on cessation)

7,116,950

657,895

4,700,000

Exercisable

7,116,950

657,895

1,700,000

Shares
30 June 2022 – Shares

Name

Mr Troy Valentine1

Mr Peter Widdows1

Mr Joel Latham2

Dr Sud Agarwal3

Dr George Anastassov

Balance held at
1 July 2021
(or on appointment)

Purchases / Other
Acquisitions

Sales /
Other Disposals

Balance held at
30 June 2022
(or on cessation)

26,734,248

15,915,790

17,948,414

66,303,593

–

9,916,950

657,895

5,800,000

8,999,500

–

36,651,198

16,573,685

23,748,413

75,303,093

–

30 June 2021 – Shares

Name

Mr Troy Valentine1

Mr Peter Widdows1

Mr Joel Latham2

Dr Sud Agarwal3

Balance held at
1 July 2020
(or on appointment)

Purchases / Other
Acquisitions

Sales /
Other Disposals

20,234,248

12,615,790

11,829,129

36,000,000

6,500,000

3,300,000

6,119,285

30,303,593

–

Balance held at
30 June 2021
(or on cessation)

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.

10,100,000

4,683,333

1. The change relates to ordinary shares acquired upon conversion of options.

–

2. Mr Latham’s changes arise from the conversion of 200,000 share options, and new ordinary shares issued as part of his remuneration packages.

3. Mr Agarwal’s changes relates to ordinary shares acquired upon conversion of options.

288,000,000

(88,000,000)

200,000,000

End of Remuneration Report

1. 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.

2. 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. 2,237,500 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.

Incannex Healthcare LimitedIncannex Healthcare LimitedAuditor’s Independence Declaration

Non–Audit Services
The Company has not engaged the auditor to perform any
non–audit services during the year ended 30 June 2022
(2021: $Nil).

Auditor Independence and
Non–Audit Services
Section 307C of the Corporations Act 2001 requires our
auditors, PKF Brisbane Audit, 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 20 and forms part of this
directors’ report for the year ended 30 June 2022.

Signed in accordance with a resolution of the directors.

Troy Valentine
Chairman

Melbourne, Victoria
19/09/2022

U ’ C C UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF INCANNEX HEALTHCARE LTD I declare that, to the best of my knowledge and belief, during the year ended 30 June 2022, 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. This declaration is in respect of Incannex Healthcare Ltd and the entities it controlled during the year. PKF BRISBANE AUDIT LIAM MURPHY PARTNER BRISBANE 19 SEPTEMBER 2022 Incannex Healthcare LimitedIncannex Healthcare LimitedFinancial
Statements

Incannex Healthcare Limited

Consolidated Statement of Comprehensive Income
For the year ended 30 June 2022

Consolidated Statement of Financial Position
As at 30 June 2022

Revenue

Other income

Total revenue and other income

Product costs

Administration expense

Advertising and investor relations

Bad debt expense

Research and development costs

Compliance, legal and regulatory

Share based payments

Occupancy expenses

Salaries and employee benefit expense

Total expenses

Loss before tax

Income tax benefit

Loss after tax

Other comprehensive income

Total comprehensive loss for the year

Earnings per share

Basic loss per share (cents per share)

Diluted loss per share (cents per share)

Notes

3(a)

3(b)

Consolidated

30 June 2022
$

30 June 20211
(restated)
$

–

1,897,596

788,654

(6,338)

(280,969)

75,748

1,973,344

(911,969)

(99,094)

(2,746,226)

(4,345,874)

(134,626)

–

(5,371,821)

(4,749,514)

(3,559,511)

(1,227,244)

(1,464,550)

(600,043)

(112,341)

(115,836)

(2,016,181)

(1,296,569)

(15,692,563)

(13,346,143)

(14,903,909)

(11,372,799)

–

(14,903,909)

(11,372,799)

–

(14,903,909)

(11,372,799)

(1.25)

(1.16)

1. Reclassified and remeasured amounts due to restatement from error in prior year – see note 22 for explanation

Assets

Current assets

Cash and cash equivalents

Trade and other receivables

Other assets

Total current assets

Total assets

Liabilities

Current liabilities

Trade and other payables

Total current liabilities

Total liabilities

Net assets

Equity

Issued capital

Reserves

Accumulated losses

Net equity

Consolidated

Notes

30 June 2022
$

30 June 20211
(restated)
$

37,500,931

9,123,617

294,717

83,960

37,879,608

2,010,533

169,088

36,090

9,328,795

755,049

35,869,075

8,573,746

86,586,794

45,852,107

8,077,191

6,612,641

(58,794,910)

(43,891,002)

35,869,075

8,573,746

1. Reclassified and remeasured amounts due to restatement from error in prior year – see note 22 for explanation

The accompanying notes form part of these financial statements

Incannex Healthcare LimitedIncannex Healthcare Limited
Consolidated Statement of Changes in Equity
For the year ended 30 June 2022

Consolidated Statement of Cash Flows
For the year ended 30 June 2022

Consolidated

Balance at 30 June 2020

Options exercised

Options issued to advisors

Share based payments

Shares issue costs

Issued
Capital
$

Equity
Reserve
$

Accumulated
Losses
$

Total
$

34,192,043

1,490,588

(32,518,203)

3,164,428

12,498,706

–

(838,642)

3,781,344

600,043

740,666

–

12,498,706

3,781,344

600,043

(97,976)

Comprehensive loss for the year

–

(11,372,799)

Balance at 30 June 20211 (restated)

45,852,107

6,612,641

(43,891,002)

8,573,746

Options exercised

Options issued to advisors

Share based payments

Share placements

Shares issued to advisors

Shares issue costs

Comprehensive loss for the year

40,274,242

–

400,000

450,000

(389,555)

–

1,464,550

–

40,274,242

–

1,464,550

400,000

450,000

(389,555)

(14,903,909)

Balance at 30 June 2022

86,586,794

8,077,191

(58,794,910)

35,869,075

1 Reclassified and remeasured amounts due to restatement from error in prior year – see note 22 for explanation

Cash flows from operating activities

Receipts from customers

Receipts from other income

Payments to suppliers and employees

Interest received and other income

Consolidated

2022
$

20211
(restated)
$

Notes

–

1,974,010

782,383

82,807

(13,596,027)

(8,969,276)

6,271

2,679

Net cash (used in) operating activities

(12,807,373)

(6,909,780)

Cash flows from investing activities

Proceeds from disposal of subsidiary

Net cash from investing activities

Cash flows from financing activities

Proceeds from shares issued (net of costs)

Net cash from financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of the year

Effect of exchange rate fluctuations on cash held

–

29,277

41,184,687

12,400,730

41,184,687

12,400,730

28,377,314

9,123,617

–

5,520,227

3,603,390

–

Cash and cash equivalents at end of the year

37,500,931

9,123,617

1. Reclassified and remeasured amounts due to restatement from error in prior year – see note 22 for explanation

The accompanying notes form part of these financial statements

Incannex Healthcare LimitedIncannex Healthcare LimitedNotes to the Financial Statements

For the year ended 30 June 2022

1. Significant accounting policies
The principal accounting policies adopted in the preparation
of the consolidated financial statements are set out below.
These policies have been consistently applied to all
the years presented, unless otherwise stated.

Nature of Operations

Incannex Healthcare Limited (the “Company”) and its
consolidated subsidiaries (collectively, the “Group”) is a
clinical stage pharmaceutical development company that
is developing unique medicinal cannabis pharmaceutical
products and psychedelic medicine therapies. The
Company’s common shares trade on the Australian
Securities Exchange (“ASX”). The Company’s registered
office is at Suite 15, Level 12, 401 Docklands Drive,
Docklands 3008, Victoria, Australia.

For the fiscal year ended 30 June 2022, the Group
incurred a total comprehensive loss after income tax of
$14.9 million and had net cash outflows from operations of
$12.8 million. The Group held total cash of $37.5 million as
of 30 June 2022.

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
International Accounting Standards Board (‘IASB’) that are
mandatory for the current reporting periods.

Any new or amended Accounting Standards or
Interpretations that are not yet mandatory have not been
early adopted.

Historical cost convention

The consolidated financial statements have been prepared
under the historical cost convention, except for, where
applicable, the revaluation of financial assets and liabilities
at fair value through profit or loss, financial assets at fair
value through other comprehensive income and derivative
financial instruments.

Critical accounting estimates

The preparation of the consolidated 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 consolidated financial statements, are disclosed in
note 2.

Comparatives

Where necessary, comparative information has been
reclassified and repositioned for consistency with current
year disclosures.

Statement of compliance

These consolidated financial statements were authorised
for issue by the Board of Directors in September 2022.

The consolidated financial statements comply with
International Financial Reporting Standards (IFRS),
as issued by the International Accounting Standards
Board (IASB).

Parent entity information

In accordance with IFRS 10 Consolidated Financial
Statements, these consolidated financial statements present
the results of the Group only. Supplementary information
about the parent entity is disclosed in note 21.

Principles of consolidation

The consolidated financial statements incorporate the
assets and liabilities of all subsidiaries of the Company as at
30 June 2022 and 2021 and the results of all subsidiaries for
the years then ended. Incannex Healthcare Limited and its
subsidiaries together are referred to in these consolidated
financial statements as the ‘Group’. Details of all controlled
entities are set out in Note 19.

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 between entities in the Group are
eliminated. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the
policies adopted by the Group.

Where the Group loses control over a subsidiary, it
derecognizes the assets including goodwill, liabilities and
non–controlling interest in the subsidiary together with any
cumulative translation differences recognized in equity.
The Group recognizes 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 at note 4 using the
‘management approach’, where the information presented
is on the same basis as the internal reports provided to
the Chief Executive Officer. The Chief Executive Officer
is responsible for the allocation of resources to operating
segments and assessing their performance.

Foreign currency translation

The consolidated financial statements are presented in
Australian dollars, which is the Company’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 recognized in profit or loss.

Revenue recognition

The Company recognizes revenue to depict the transfer of
goods and services to clients in an amount that reflects the
consideration to which the Company expects to be entitled
in exchange for those goods and services by applying the
following steps:

• Identify the contract with a client;

• Identify the performance obligations in the contract;

• Determine the transaction price;

• Allocate the transaction price to the performance

obligations; and

• Recognize revenue when, or as, the Company satisfies

a performance obligation.

Revenue may be earned over time as the performance
obligations are satisfied or at a point in time which is when
the entity has earned a right to payment, the customer has
possession of the asset and the related significant risks
and rewards of ownership, and the customer has accepted
the asset.

The Company’s arrangements with clients can include
multiple performance obligations. When contracts involve
various performance obligations, the Company evaluates
whether each performance obligation is distinct and should
be accounted for as a separate unit of accounting under
AASB 15, Revenue from Contracts with Customers.

The Company determines the standalone selling price
by considering its overall pricing objectives and market
conditions. Significant pricing practices taken into
consideration include discounting practices, the size
and volume of our transactions, our marketing strategy,
historical sales, and contract prices. The determination of
standalone selling prices is made through consultation with
and approval by management, taking into consideration our
go–to–market strategy. As the Company’s go–to–market
strategies evolve, the Company may modify its pricing
practices in the future, which could result in changes in
relative standalone selling prices.

The Company disaggregates revenue from contracts with
customers based on the categories that most closely depict
how the nature, amount, timing and uncertainty of revenue
and cash flows are affected by economic factors. During
the years ended 30 June 2022 and 2021, the Company
recognized revenue from only one such category, being
cannabinoid oils sales.

The Company receives payment from its clients after
invoicing within the normal 28–day commercial terms. If a
client is specifically identified as a credit risk, recognition
of revenue is stopped except to the extent of fees that have
already been collected.

Other income

Other income is recognized when it is received or when
the right to receive it is established. Other income primarily
consists of grant income and interest income.

Interest income

Interest revenue is recognized as interest accrues using the
effective interest method. This is a method of calculating
the amortised cost of a financial asset and allocating the
interest income over the relevant period using the effective
interest rate, which is the rate that exactly discounts
estimated future cash receipts through the expected life
of the financial asset to the net carrying amount of the
financial asset.

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 recognized for prior reporting years,
where applicable.

Incannex Healthcare LimitedIncannex Healthcare LimitedDeferred tax assets and liabilities are recognized 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 recognized 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.

The carrying amount of recognized and unrecognized
deferred tax assets are reviewed at each reporting date.
Deferred tax assets recognized 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
unrecognized deferred tax assets are recognized 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.

Government grants

Income from government grants is recognized only when
the Company has reasonable assurance that the grants
will be received, and the conditions of the grants will
be complied with. Income from Government grants is
recognized on a systematic basis over the periods in which
the Company recognizes as expenses the related costs for
which the grants are intended to compensate. Government
grants relate to Australian Federal Government’s
COVID–19 support package of a “Cash Flow Boost” for
eligible organisations, supporting small and medium
sized organisations.

Current and non–current classification

Other financial assets

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 classified as
non–current.

Cash

Cash and 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.

Trade and other receivables

Trade receivables are initially recognized at fair value
and subsequently measured at amortised cost using the
effective interest method, less any allowance for expected
credit losses. Trade receivables are 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 recognized at amortised cost, less
any allowance for expected credit losses.

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 derecognized 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 a financial asset, its carrying value is
written off.

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. The
Company has not capitalised any development costs for
the years ended June 30, 2022 and 2021.

Trade and other payables

These amounts represent liabilities for goods and services
provided to the Group prior to the end of the financial years
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.

Provisions

Provisions are recognized 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 recognized 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 recognized 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.

Share–based payments

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 a trinomial pricing 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. Inputs into the Black–Scholes option pricing
models used to calculate fair value are classified as level
three inputs under the fair value hierarchy of IFRS 13. No
account is taken of any other vesting conditions.

Incannex Healthcare LimitedIncannex Healthcare LimitedThe cost of equity–settled transactions are recognized 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. The
amount recognized in profit or loss for the period is the
cumulative amount calculated at each reporting date less
amounts already recognized 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 recognized as if the modification has not been
made. An additional expense is recognized, 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
recognized 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 recognized 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.

Fair value measurement

When an asset, liability or equity instrument, 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 an equity instrument 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,
liability or equity instrument, 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, liabilities and equity instruments 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. For assets and liabilities
measured at fair value after initial recognition, 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. The three levels of the fair value hierarchy are
described as follows:

• Level 1 — quoted (unadjusted) market prices in active

markets for identical assets or liabilities;

• Level 2 — valuation techniques for which the

lowest level input that is significant to the fair value
measurement is directly or indirectly observable; and

• Level 3 — valuation techniques for which the

lowest level input that is significant to the fair value
measurement is unobservable.

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 recognized when declared during the

financial years.

Loss per share

Basic loss per share

Basic 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 years, adjusted
for bonus elements in ordinary shares issued during the
financial years. These values are set out in Note 6.

Diluted loss per share

Diluted 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. These values
are set out in Note 6.

Goods and Services Tax (‘GST’) and other
similar taxes

Revenues, expenses and assets are recognized net of
the amount of associated GST, unless the GST incurred
is not recoverable from the tax authority. In this case it is
recognized as part of the cost of the acquisition of the asset
or as part of the expense.

Receivables and payables are stated inclusive of the
amount of GST receivable or payable. The net amount of
GST recoverable from the tax authority is included in other
receivables 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 flow.

Commitments and contingencies are disclosed net of
the amount of GST recoverable from, or payable to, the
tax authority.

New Accounting Standards not yet adopted

International Financial Reporting 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 periods ended 30
June 2022 and 2021.

2. Critical accounting judgements,
estimates and assumptions
The preparation of the consolidated financial statements
requires management to make judgements, estimates
and assumptions that affect the reported amounts in
the consolidated 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 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. There
does not currently appear to be either any significant impact
upon the consolidated 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 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.

Incannex Healthcare LimitedIncannex Healthcare Limited30 June 2022

Revenue from external customers

Interest revenue

Other revenue

Other expenses

Psychedelic
products
$

Cannabinoid
products
$

Corporate
$

Consolidated
$

–

782,383

–

6,175

–

6,271

782,383

(883,708)

(4,642,796)

(10,166,059)

(15,692,563)

Segment loss after income tax

(883,708)

(3,860,317)

(10,159,884)

(14,903,909)

Segment assets

Segment liabilities

30 June 20211 (restated)

Revenue from external customers

Interest revenue

Other revenue

Other expenses

56,058

263,731

37,559,819

37,879,608

(354,310)

(577,819)

(1,078,404)

(2,010,533)

–

1,897,5962

–

1,897,596

–

2,673

73,068

2,679

73,068

(768,316)

(5,202,370)

(7,375,456)

(13,346,143)

Segment loss after income tax

(768,316)

(3,304,768)

(7,299,714)

(11,372,799)

Segment assets

Segment liabilities

2,000

–

104,267

(86,522)

9,222,528

(668,527)

9,328,795

(755,049)

1. Reclassified and remeasured amounts due to restatement from error in prior year – see note 22 for explanation

2. Of the total revenue from pharmaceuticals in each year, 100% was through Cannvalate Pty Ltd’s distribution network.

3. Revenue

(a) Revenue (point in time)

Cannabinoid oils sales

(b) Other income

Income from other arrangements

Government grants

Interest

Refundable R&D tax offset

Consolidated

2022
$

2021
$

–

6,271

782,383

788,654

1,897,596

35,568

37,500

2,679

–

75,747

4. Segment Information
Identification of reportable operating segments

AASB 8 (IFRS 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 Executive Officer 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 Executive Officer 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 Executive Officer.

Based on the quantitative thresholds included in AASB 8 (IFRS 8), for the fiscal year ended 30 June 2022, the Group was
organised into three operating segments:

1. 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.

2. Research and develop the use of medicinal cannabinoid products. During the year the Group continued to research and

develop its products and the range of its products, including further clinical trials.

3. 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 fiscal year
for each segment is shown below.1

1. Revenue earned in 2021 was from the sale of the cannabinoid oil products through Cannvalate Pty Ltd under a distribution agreement,

this agreement was terminated in June 2021.

Incannex Healthcare LimitedIncannex Healthcare Limited5. Income tax
The prima facie income tax benefit on pre–tax accounting loss from operations reconciles to the income tax benefit in the
financial statements as follows:

6. Earnings per share

Accounting loss before tax

Income tax benefit at the applicable tax rate of 25% (2021: 26%)

Non–deductible expenses

Non–assessable income

Deferred tax assets not recognized

Income tax benefit

Unrecognized Deferred Tax Asset

Deferred tax asset not recognized in the financial statements:

Unused tax losses

Net unrecognized tax benefit at 25% (2021: 26%)

Consolidated

2022
$

20211
(restated)
$

(14,903,909)

(11,372,799)

3,725,977

(564,872)

195,596

2,956,928

(1,192,112)

–

(3,356,701)

(1,764,816)

–

24,845,264

20,867,835

6,211,316

5,425,637

1. Reclassified and remeasured amounts due to restatement from error in prior year – see note 22 for explanation

The potential deferred tax benefit has not been recognized as an asset in the financial statements because recovery of the
asset is not considered probable in the context of AASB 112 Income Taxes (IAS 12).

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.

Consolidated

2022
$

(1.25)

20211
(restated)
$

(1.16)

Basic loss per share – cents per share

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:

Total comprehensive loss for the year

(14,903,909)

(11,372,799)

– Weighted average number of ordinary shares (number)

1,191,154,011

976,931,338

1. Reclassified and remeasured amounts due to restatement from error in prior year – see note 22 for explanation

The company notes that the diluted loss per share is the same as basic loss per share.

7. Dividends
The Company has not declared a dividend for the year ended 30 June 2022 (2021: $nil).

Incannex Healthcare LimitedIncannex Healthcare Limited8. Cash and cash equivalents

9. Trade and other receivables (Current)

Cash at bank and on hand

Cash at bank earns interest at floating rates based on daily bank deposit rates.

Reconciliation of loss for the year to net cash flows from operating activities:

Loss after income tax

Non–cash based expenses:

Share–based payments

Depreciation and amortisation

Non–cash expense for investor relation services

Release of Gameday reserve of sales refund

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 used in operations

Consolidated

2022
$

37,500,931

2021
$

9,123,617

Consolidated

2022
$

2021
$

(14,903,909)

(11,372,799)

Current

Other receivables

GST recoverable

Expected credit losses

Consolidated

2022
$

–

294,717

2021
$

53,447

115,641

169,088

The Group applies the AASB 9 (IFRS 9) simplified model of recognizing 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.

1,464,550

600,043

10. Other assets (current)

–

(594,394)

(92,320)

–

53,447

1,111,080

154,173

–

3,781,344

(15,484)

91,354

214,903

183,159

172

(291,311)

(101,161)

(12,807,373)

(6,909,780)

Prepayments

Office rental bond

Prepayment clinical trial insurance

11. Trade and other payables (current)

Trade payables

Accrued expenses

Employee leave entitlements

Consolidated

2022
$

45,911

24,124

13,925

83,960

Consolidated

2022
$

1,300,696

415,449

294,388

2,010,533

2021
$

29,784

–

6,306

36,090

2021
$

233,117

381,717

140,215

755,049

Incannex Healthcare LimitedIncannex Healthcare Limited12. Issued capital

13. Reserves

Ordinary shares

(a) Ordinary shares - movements during year

At start of year

Issues of new shares – placements

Issues of new shares – share based payments2

Exercise of options

Shares in lieu of advisor fees

Share issue costs

At end of year

Consolidated

2022
$

2021 (restated)
$

86,586,794

45,852,107

Consolidated

2022
$

2022
No. of shares

45,852,107

1,068,411,224

400,000

5,000,000

–

10,000,000

40,274,243

207,650,638

450,000

(389,555)

1,272,166

–

86,586,794

1,292,334,028

Equity based premium reserve

Balance at 1 July 2021

Options issued to advisors2

Equity instruments issued to management and directors

At 30 June 2022

Consolidated

2022
$

6,612,641

–

1,464,550

8,077,191

20211
(restated)
$

1,490,588

4,522,010

600,043

6,612,641

1. Reclassified and remeasured amounts due to restatement from error in prior year – see note 22 for explanation

2 During the year ended 30 June 2021, 40,000,000 options exercisable at $0.15, $0.20, and $.25 were issued to consultants for investor relation

services. In addition, 30,164,690 options exercisable at $0.08 were issued as consideration for broker support of the exercise of the 262m listed
IHLOB options series. During the year ended 30 June 2020, 33,000,000 options exercisable at $0.08 and expiring on 30 September 2021, were
issued to brokers who supported the July 2019 capital raisings. These options have been valued using a Black–Scholes option model with inputs
being grant date share price of $0.04 risk–free rate of 0.24% and volatility of 92%.

The equity based premium reserve is used to record the value of equity issued to raise capital, and for
share–based payments.

1. Reclassified and remeasured amounts due to restatement from error in prior year – see note 22 for explanation

2. The fair value of shares issued to employees and Directors expensed during the period has been recorded through the share base payment

equity reserve refer to note 13 for further details.

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.

Incannex Healthcare LimitedIncannex Healthcare Limited14. 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. The total fair value of shares issued to employees and directors during the year was $3,588,000, as
of 30 June 2022 there was $2,743,854 of total unrecognized compensation cost related to unvested shares.

Options

The exercise price of options outstanding as of 30 June 2022 and 2021 ranged between $0.08 and $0.35.

As of 30 June 2022, there was $1,853,263 of total unrecognized compensation cost related to unvested share options, which
is expected to be recognized over a weighted–average period of approximately 1.39 years.

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 options were issued to employees and consultants as share based payments during the year ended
30 June 2022:

Options

Number

Grant Date2

Expiry Date

Exercise
Price

Total
fair value

Options granted to Directors

Unlisted Options

Options granted to employees

Unlisted Options

Total options

1,399,999

09–Jun–22

01–Jul–25

1,399,999

09–Jun–22

01–Jul–26

1,400,002

09–Jun–22

01–Jul–27

1,399,999

09–Jun–22

01–Jul–26

1,399,999

09–Jun–22

01–Jul–27

1,400,002

09–Jun–22

01–Jul–28

533,333

29–Apr–22

01–Jul–25

533,333

29–Apr–22

01–Jul–26

533,334

29–Apr–22

01–Jul–27

10,000,000

$0.26

$0.31

$0.35

$0.26

$0.31

$0.35

$0.26

$0.31

$0.35

$298,200

$309,400

$324,800

$326,200

$334,600

$347,200

$139,200

$143,467

$148,800

$2,371,867

The following share options were issued to employees and consultants as share based payments during the year ended
30 June 2021:

Options

Number

Grant Date2

Expiry Date

Options granted to third parties

Unlisted Options

Total options

10,000,000

20–Nov–20

20–Nov–23

10,000,000

20–Nov–20

20–Nov–23

10,000,000

25–Feb–21

20–Nov–23

10,000,000

25–Feb–21

20–Nov–23

30,164,690

2–Oct–20

30–Sep–21

70,164,690

Exercise
Price

Total
fair value

$0.15

$0.25

$0.20

$0.25

$0.08

$647,348

$527,766

$1,352,588

$1,253,140

$740,665

$4,521,507

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. Inputs into the trinomial and
Black–Scholes option pricing models used to calculate fair value are classified as level three inputs under the fair value
hierarchy of AASB 13 (IFRS 13).

The fair value of the equity–settled share options granted 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 for the year ended
30 June 2022:

$0.26
Options

$0.31
Options

$0.35
Options

$0.26
Options

$0.31
Options

$0.35
Options

$0.26
Options

$0.31
Options

$0.35
Options

01 Jul 25 01 Jul 26

01 Jul 27 01 Jul 26

01 Jul 27 01 Jul 28 01 Jul 25 01 Jul 26

01 Jul 27

Number

1,399,999 1,399,999 1,400,002 1,399,999 1,399,999 1,400,002

533,333

533,334

Expected
volatility (%)

Risk–free
interest rate (%)

Expected life of
option (years)

Exercise price
(cents)

Grant date share
price (cents)

80%

3.12%

3.33%

2.71%

2.90%

3.06

4.06

5.06

4.06

5.06

6.07

3.18

4.18

5.18

Vesting date

30 Jun 22 30 Jun 23 30 Jun 24 30 Jun 23 30 Jun 24 30 Jun 25

01 Jul 22

01 Jul 23

01 Jul 24

Incannex Healthcare LimitedIncannex Healthcare Limited

16. Financial Instruments
The Group’s principal financial instruments comprise cash and short–term deposits.

$0.08 Options

$0.15 Options

$0.25 Options $0.20 Options

$0.25 Options

30–Sep–21

20–Nov–23

Number

30,164,690

10,000,000

Expected volatility (%)

Risk–free interest rate (%)

Expected life of option (years)

Exercise price (cents)

Grant date share price (cents)

100%

0.17%

7.7

100%

0.11%

11.5

100%

0.11%

11.5

101%

0.12%

2.7

101%

0.12%

2.7

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.

(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.

Vesting date

2–Oct–20

20–Nov–20

25–Feb–21

(b) Sensitivity analysis

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may
occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also
not necessarily be the actual outcome.

Performance Rights

Movement in number of Performance Shares and Performance Rights for the years ended:

Security Description

$0.08 Options

Balance at
start of year

Granted by
the Company

Converted
or expired

Balance at
end of year

30 June 2022

30 June 2021

30–Sep–21

–

30–Sep–21

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.

15. Remuneration of auditors

Audit or review of the financial reports of the company

Amounts received & receivable by the auditor:

Audit services – PKF Brisbane Audit

Audit services – HLB Mann Judd

Audit services – Withum Smith & Brown (US auditor)

Other services – Withum Smith & Brown (US auditor)

Consolidated

2022
$

2021
$

85,000

23,138

357,208

–

465,346

43,000

–

287,975

330,975

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 PCAOB compliant audit of the financial statements, along with advisory
work in relation to the listing of securities.

During 2022, 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.

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 recognized 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 2022 were as follows:

Description

Consolidated

Payables & accruals

Less than
1 month
$

1 to 3
months
$

3 months
to 1 year
$

1 to 5
years
$

Total
$

1,828,527

–

1,828,527

Incannex Healthcare LimitedIncannex Healthcare LimitedThe Group’s contractual liabilities at 30 June 2021 were as follows:

Key management personnel compensation

Description

Consolidated

Payables & accruals

(g) Capital Management

Less than
1 month
$

1 to 3
months
$

3 months
to 1 year
$

1 to 5
years
$

Total
$

614,834

–

614,834

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 activities,
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. Accordingly, the objective of the Group’s capital risk
management is to balance the current working capital position against the requirements to meet research and development
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.

17. Commitments and contingencies
Lease commitments

The Group holds three commercial leases for its office premises in Melbourne, Sydney and Perth, Australia. All of these
leases had terms of 12 months from the commencement date of the lease. The lease payment are therefore recognized on a
straight line basis over the lease term.

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

18. Key Management Personnel compensation and related party disclosure
The Key Management Personnel of Incannex Healthcare Limited during the year were:

• Troy Valentine

• Peter Widdows

• Joel Latham

• Sud Agarwal (resigned 28 June 2022)

• George Anastassov (appointed 28 June 2022)

Short–term employee benefits

Post–employment benefits

Share based payments

Total KMP compensation

Transactions with related entities

2022
$

1,333,992

47,547

1,028,634

2,410,173

2021
$

761,231

38,877

672,699

1,472,807

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, $407,824 (2021: $97,976) 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.

19. Details of the controlled entities
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 is incorporated in Australia and IHL owns
100% of the issued ordinary shares in IXPL (2021: 100%). PXPL is incorporated in Australia and IHL owns 100% of the issued
ordinary shares in PXPL (2021: 100%).

20. Events Subsequent to Reporting Date
On 17 August 2022, the company appointed Robert Bruce Clark to the board as a non–executive Director.

On 5 August 2022, the Company completed the acquisition on APIRx Pharmaceuticals via the issuance of 218,169,497 IHL
ordinary shares to the stakeholders of APIRx in an all–scrip transaction. As substantially all of the fair value of the assets
acquired in the transaction relates to intangible assets (e.g., patents, trademarks, active clinical and pre-clinical research and
development projects), the transaction has been determined to be an asset acquisition and not a business combination.

On 5 August 2022, the Company issued shares and options to Ryba LLC post year end pursuant to the mandate executed
between the companies in November 2021. As the transaction between the Company and APIRx was deemed complete on
4 August 2022 the shares and options were issued.

No further significant events have occurred since the end of the financial year.

Incannex Healthcare LimitedIncannex Healthcare Limited21. Parent entity disclosures
The individual financial statements for the parent entity show the following aggregate amounts.

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

Contingencies of the Parent Entity

There are no contingent liabilities involving the parent entity (2021: Nil).

Guarantees of the Parent Entity

There are no guarantees involving the parent entity (2021: Nil)

2022
$

2021
$

37,559,819

9,222,528

–

37,559,819

9,222,528

(1,078,404)

(668,527)

–

(1,078,404)

(668,527)

36,481,415

8,554,001

86,586,794

45,852,107

8,077,191

6,612,641

(58,182,570)

(43,910,747)

36,481,415

8,554,001

22. Restatement of financial statements
It was identified in the current period that the accounting for share options issued to consultants and advisors as
share-based payments during the year 30 June 2021 were recorded using the incorrect vesting dates. As such, this was an
error in the financial report for the year ended 30 June 2021. Details of the restated accounts appear below:

Statement of Financial Position

Assets

Total assets

Liabilities

Total liabilities

Net Assets

Equity

Issued capital

Reserves

Accumulated losses

Total Equity

Statement of Comprehensive Income

Advertising and promotion

Loss before tax

Net loss for the period

Reported at
30 June 2021
$

Effect of error
$

Restated
30 June 2021
$

9,328,795

755,049

8,573,746

–

9,328,795

755,049

8,573,746

45,938,576

(86,469)

45,852,107

3,316,963

3,295,678

6,612,641

(40,681,793)

(3,209,209)

(43,891,002)

8,573,746

–

8,573,746

Reported at
30 June 2021
$

Effect of error
$

Restated
30 June 2021
$

(1,136,666)

(3,209,208)

(4,345,874)

(8,163,590)

(3,209,208)

(11,372,799)

(8,163,590)

(3,209,208)

(11,372,799)

Total comprehensive loss for the period

(8,163,590)

(3,209,208)

(11,372,799)

Earnings per share

Basic loss per share (cents per share)

Diluted loss per share (cents per share)

(0.83)

(0.33)

(1.16)

Incannex Healthcare LimitedIncannex Healthcare LimitedAuditor’s Independence Report

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:
i. giving a true and fair view of the Group’s financial position as at 30 June 2022 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.

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 2022.

This declaration is signed in accordance with a resolution of the Board of Directors.

Troy Valentine
Chairman

Melbourne, Victoria
19/09/2022

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF INCANNEX HEALTHCARE LTD Report on the Financial Report Opinion We have audited the accompanying financial report of Incannex Healthcare Ltd (the company), which com-prises the consolidated statement of financial position as at 30 June 2022, 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, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the company and the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. In our opinion the financial report of Incannex Healthcare Ltd is in accordance with the Corporations Act 2001, including: a) Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2022 and of its performance for the year ended on that date; 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the consolidated entity 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 (including Independence Standards) (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. Key Audit Matters Key audit matter is the matter that, in our professional judgement, was of most significance in our audit of the financial report of the current period. This matter was 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 this matter. For each matter below, our description of how our audit addressed the matter is provided in that context. Incannex Healthcare LimitedIncannex Healthcare Limited98

1. Valuation of share-based payments Why significant How our audit addressed the key audit matter During the year ended 30 June 2022, the company is-sued options and shares (“securities”) to employees in-cluding key management personnel, which were ac-counted for as share-based payments under AASB 2: Share-based Payment. Equity In-strument No. Issued Fair Value $ Expensed during FY22 $ Options 10,000,000 2,371,867 529,386 Shares 10,000,000 3,588,000 844,146 20,000,000 5,959,867 1,373,532 In addition, a further $4,614,910 exists representing the balance of the fair value of securities issued as share based payments that are unrecognised as at 30 June 2022. The value of these securities has not yet been recognised as the balance represents the unamortised value of securities issued that are being recognised over the vesting period. Total share-based payment expense for the year, includ-ing expense recognised in relation to securities issued as share-based payments in prior years, totalled $1,464,550. This is a key audit matter because 1. the company valued the options using the Black Scholes model, where inputs such as volatility and risk-free rate require judgement. 2. The significance of the share-based payment ex-pense to the company’s financial performance. 3. the level of unamortised value of securities issued that will be expensed over future reporting periods. Refer to Notes 1, 2, 13 and 14 to the financial report for a description of the accounting policy, significant esti-mates and judgements applied, and other details in re-lation to share-based payments. Our audit procedures included but were not limited to: • Obtaining an understanding of the key terms and conditions of the options and shares by in-specting relevant supporting documentation. • Assessing the competence and qualifications of management’s expert. • Assessed the reasonableness of key inputs into the valuation model used by the expert engaged by management. • Recalculating the estimated fair value of the op-tions using the Black Scholes option valuation methodology. • Testing the accuracy of the amortisation of share-based payments over the vesting period and the recording of an expense in the state-ment of profit or loss and an increment to the share-based payment reserve (options) or is-sued capital (shares). • Reviewing the adequacy of the company’s dis-closures in respect of the accounting treatment of share-based payments in the financial state-ments, including the significant judgments in-volved, and the accounting policy adopted. Other Information The Directors are responsible for the other information. The other information comprises the information in-cluded in the consolidated entity’s Annual Report, 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 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. Directors’ Responsibilities 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 consolidated entity’s ability 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 consolidated entity 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 accord-ance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstate-ments can arise from fraud or error and are considered material if, individually or in 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 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 result-ing 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 consolidated entity’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 consolidated entity’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 Incannex Healthcare LimitedIncannex Healthcare Limited100

101

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 consolidated entity 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. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the consolidated entity to express an opinion on the group financial report. We are respon-sible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. 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 reason-ably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. 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. Report on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2022. The Directors of the company are responsible for the preparation and presentation of the Remuneration Re-port 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. Opinion In our opinion, the Remuneration Report of Incannex Healthcare Ltd for the year ended 30 June 2022 complies with section 300A of the Corporations Act 2001. PKF BRISBANE AUDIT LIAM MURPHY PARTNER BRISBANE 19 September 2022 Incannex Healthcare LimitedIncannex Healthcare LimitedCorporate
Governance
Statement

Incannex Healthcare’s governance practices guide the Company
and its controlled entities’ activities and decision-making to ensure
the Company meets stakeholder expectations of sound corporate
governance and continuous improvement in company performance.

This Corporate Governance statement reviews the Company’s corporate
governance practices against the ASX Corporate Governance Principles
and Recommendations – 4th Edition (Corporate Governance Principles).
All these practices, unless otherwise stated, were in place as at
24 January 2022.

Incannex Healthcare Limited

102

Incannex Healthcare Limited

103

The Corporate Governance Principles are as follows:

Principle 1:

Lay solid foundations for management
and oversight

Principle 2:

Structure the board to be effective and
add value

Principle 3:

Instil a culture of acting lawfully, ethically
and responsibly

Principle 4:

Safeguard the integrity of corporate
reports

Principle 5:

Make timely and balanced disclosure

Principle 6:

Respect the rights of security holders

Principle 7:

Recognize and manage risk

Principle 8:

Remunerate fairly and responsibly

Given the differences in size, complexity, history and culture
of listed companies, the Corporate Governance Principles
adopt an “if not, why not” approach to compliance and
disclosure, requiring companies to explain the reasons for
any departure from the Corporate Governance Principles
recommendations. These explanations are included in
section 9 of this statement.

Specific corporate governance policies of the Group are
detailed on the Company’s investor website under the
‘Investor Centre’ tab, at https://www.incannex.com.au/
investors/. In this statement Incannex Healthcare and its
controlled entities together are referred to as the “Group”
or “Company”.

Principle 1:
Lay Solid Foundations for
Management And Oversight

1.1 Board Charter and roles and responsibilities

The Board has adopted a Board Charter establishing
corporate governance roles and responsibilities within
the Group.

Under its Charter, the Board is ultimately responsible to
the Company’s shareholders for all matters related to the
running of the Company. The Board’s role is to govern the
Company rather than to manage it, with the role of Senior
Executives and Management to manage the company in
accordance with the direction and delegations of the Board.

In general, the Board is responsible for overseeing all
policies, practices, management, and operations of the
Company, including corporate reporting systems, risk
management, remuneration frameworks, governance issues,
succession planning, and stakeholder communications.
The Board also takes decisions regarding matters of
fundamental importance to the Group.

The Board’s focus is to enhance the interests of
shareholders and other key stakeholders and to ensure
the Group is properly managed. Management is directly
accountable to the Board to deliver timely, accurate,
and relevant information to enable the Board to perform
its responsibilities. Management is also responsible for
operating within the relevant directives and the risk appetite
established by the Board whilst supporting the Managing
Director in executing day-to- day operations.

The respective roles and responsibilities of the
Board include:

• providing strategic guidance to the Group, including

contributing to the development of and approving the
corporate strategy reviewing and approving business
plans, the budget, financial plans, and major capital
expenditure initiatives

• overseeing and monitoring:

a) organisational performance and the achievement
of the Group’s strategic goals and objectives

b) progress of major capital expenditures and other
significant corporate projects including any
acquisitions or divestments or clinical trials

c) financial performance including approval of the

1. Responsibilities

annual and half-year financial reports and liaison
with the Group’s auditors; and

d) effectiveness of the Group’s governance policies

and procedures

• appointment, performance assessment and, if
necessary, removal of the Managing Director

• ratifying the appointment and/or removal and

contributing to the performance assessment of
members of the Senior Executive team including the
CFO, Chief Operating Officer and Company Secretary

• ensuring there are effective management processes
in place and approving major corporate initiatives
enhancing and protecting the reputation of the Group

• overseeing the operation of the Group’s system
for compliance and risk management reporting
to shareholders

• ensuring appropriate resources are available to the

Senior Executive

Incannex Healthcare Limited ABN 93 096 635 246 is
committed to:

(a) complying with its disclosure obligations under the

Corporations Act and ASX Listing Rules;

(b) the promotion or investor confidence by ensuring that
all investors have equal and timely access to material
information concerning the Company, including
material information about its financial position,
performance, ownership and governance; and

and expressed in a clear and objective manner.

The purpose of this policy is to:

(a) raise awareness of the Company’s obligations under

the continuous disclosure regime;

(b) establish a process to ensure that information about
the Company which may be market sensitive, and
which may require disclosure is brought to the
attention of the relevant person in a timely manner
and is kept confidential; and

and contractors of the Company to ensure that
the Company complies with its continuous
disclosure obligations.

Compliance with this policy does not obviate the need for
the Company to comply with ‘Annual Report Disclosure’.

1.1 Executive Management

(a) Understand the continuous disclosure regulations;

and Report potentially material information
immediately to either the Company Secretary, the
Managing Director or the Chair.

1.2 Company Secretary

(a) Liaise with the Managing Director and/or Chair on
information supplied to determine if it needs to be
disclosed under continuous disclosure regulations;
and

(b) Report the material information to the market.

2. Policy

(a) Executive Management will make themselves aware
of the continuous disclosure regulations in the ASX
Listing Rules.

(b) In the event that any member of management

becomes aware of any fact or circumstance which
may give rise to a requirement to disclose such
information under the ASX Listing Rules, they will
immediately inform either the Company Secretary, the
Managing Director or the Chair.

conjunction with the Managing Director and/or the
Chair, will review the information to enable a judgement
as to the appropriate disclosure to be made.

(d) If there is uncertainty over the requirement to comply

with the continual disclosure requirements, then the
Company will seek external legal advice.

(e) The Company, through the Company Secretary, will

notify the market of any information it is determined is
required to be disclosed.

(f) In accordance with ASX Listing Rules, the Company
will immediately notify the market of information:

(i) concerning the Company that a reasonable person
would expect to have a material effect on the price
or value of the Company’s securities;

(ii) that would, or would be likely to, influence persons
who commonly invest in securities in deciding
whether to acquire or dispose of the Company’s
securities; and

(iii) The only exception to this is where the ASX

Listing Rules do not require such information to
be disclosed.

(g) The Board must receive a copy of all material ASX

announcements promptly after they have been made.

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Incannex Healthcare LimitedIncannex Healthcare Limited2.2 Internal notification and decision-making
concerning the disclosure obligation

The Board has designated the Company Secretary as
the person responsible for overseeing and coordinating
disclosure of information to the market as well as
communicating with the relevant authorities. The
Company Secretary will be responsible for ensuring
that Company announcements are made in a timely
manner and will establish a vetting procedure to ensure
that the announcements are factual and do not omit any
material information.

The Company Secretary will also ensure that Company
announcements are expressed in a clear and objective
manner that allows investors to assess the impact of the
information when making investment decisions.

To assist the Company Secretary, fulfil the Company’s
disclosure requirements, executive staff are responsible
for immediately communicating to the Company Secretary
any possible continuous disclosure matter concerning the
operations of the Company. Executive staff are responsible
for ensuring that the information is provided to the Company
Secretary as soon as they become aware of it and that
it is factual and does not omit any material information.
Executive staff will promptly respond to requests from the
Company Secretary for further information concerning the
possible continuous disclosure matter.

The Company Secretary, after consultation with the Chair
and Managing Director, determines whether information
should be disclosed to the market.

Before an announcement is released to ASX, the Company
must ensure:

(a) the Company Secretary has completed its review

process; and

(b) the announcement has been circulated to the Board

for review; and

announcement in writing.

2.3 Promoting and monitoring compliance

The Company has a Continuous Disclosure Committee,
comprising the following:

(a) Company Secretary;

(b) General Counsel;

(d) The Chair and Non-Executive Directors will form part

of the Committee for major announcements

The purpose of the Continuous Disclosure Committee is
to promote and monitor compliance with the Company’s
continuous disclosure obligations and to ensure that
all employees are aware of this policy. In addition, the
Continuous Disclosure Committee is responsible for
ensuring that all staff are aware of the type of information
that needs to be communicated and their obligation to
communicate to the Company Secretary any possible
continuous disclosure matter.

A meeting of the Committee may be convened from time to
time to consider particular continuous disclosure issues.

On a daily basis, the Company Secretary is charged with
monitoring compliance with this policy. As part of that
monitoring, all major announcements to the market will
be reviewed for compliance with this policy. All public
announcements will also be audited for compliance. These
compliance reviews will be reported to the Continuous
Disclosure Committee as part of their regular review of
compliance. Any possible non-compliance will be reported
to the Board at its next meeting. The Company Secretary
must notify both the Chair and the Managing Director at
the earliest opportunity if they believe that a false market in
the Company’s securities either exists or has the possibility
to exist.

2.4 Measures for seeking to avoid the emergence of
a false market in the Company’s securities

The Company recognizes that a false market in the
Company’s securities may result if the Company provides
incomplete information to the market or if the Company
fails to respond to market and media speculation that
may, or may be likely to, have an impact on the price of the
Company’s securities.

While the Company does not, in general, respond to market
speculation or rumours unless required to do so by law
or other relevant bodies, the Company is committed to
disclosing as much information as possible, without harming
the Company, to a wide audience of investors through media
releases of important milestones, including information that
may not strictly be required under continuous disclosure
requirements. Information given to the market will also be
provided to investors through media releases.

Where appropriate, the Company will request a trading
halt to prevent trading in the Company’s securities by an
inefficient and uninformed market until the Company can
make an announcement to the market.

2.5 Safeguarding confidentiality of corporate
information to avoid premature disclosure

All employees are advised of the confidentiality of
Company information. In addition, the Company imposes
communication blackout periods for financial information
between the end of financial reporting periods and the
announcement of results to the market. To protect against
inadvertent disclosure of price sensitive information, the
Company does not hold meetings or briefings to discuss
financial information with individual investors, institutional
investors, analysts or media representatives during the
communication blackout periods, unless such meetings
or briefings are the subject of a specific announcement to
the market.

2.6 Media contact and comment

The Board has designated the Managing Director or the
Chair (where appropriate) to speak to the press on matters
associated with the Company. In speaking to the press, the
Managing Director or the Chair will not comment on price
sensitive information that has not already been disclosed
to the market, however, they may clarify previously
released information. To assist in safeguarding against the
inadvertent disclosure of price sensitive information, the
Managing Director or the Chair will be informed of what the
Company has previously disclosed to the market on any
issue prior to briefing anyone outside the Company.

Subject to the policies of the Board and any committee
that the Board may appoint from time to time, the Chair is
authorised to comment on:

(a) annual and half yearly results at the time of the
release of the annual or half yearly report;

(b) resolutions to be put to General Meetings of

the Company;

(d) any speculation concerning Board meetings or the

outcomes of Board meetings; and

(e) other matters specifically related to shareholders.

Subject to the policies of the Board and any committee that
the Board may appoint from time to time, the Managing
Director is authorised to comment on:

(a) the Company’s future outlook;

(b) any operational matter;

reflect either positively or negatively on the Company;

(d) proposed or actual legal actions; and

(e) queries and general discussion concerning the

Company’s industry.

There will be times when Directors and employees will be
approached by the media for public comment. On such
occasions, the Director(s) or employee(s) should comply
with the following:

(a) refer the person to the Managing Director or the Chair

of the Board as appropriate for comment;

(b) refrain from disclosing any information, documents

or other forms of data to the person without the prior
consent of the Managing Director or the Chair of the
Board; and

employee, the reason (explicit or inferred) for the
contact and a summary of any other relevant
information as soon as possible to the Managing
Director or the Chair.

2.7 External communications including analyst
briefings and responses to shareholder questions

The Company discloses its financial and operational
results to the market each year/half year/quarter as well as
informing the market of other events throughout the year as
they occur. Quarterly financial reports, media releases and
AGM speeches are all lodged with the relevant authority. As
all financial information is disclosed, the Company will only
comment on factual errors in information and underlying
assumptions when commenting on market analysts’
financial projections, rather than commenting on the
projections themselves.

In addition to the above disclosures, the Company does
conduct briefings and discussions with analysts and
institutional investors. However, price sensitive information
will not be discussed unless that particular information has
been formally disclosed to the market via an announcement.
Slides and investor presentations used in briefings will also
be released immediately prior to the briefing to the market.

After the conclusion of each briefing or discussion, it will
be reviewed to determine whether any price sensitive
information has been inadvertently disclosed. If any price
sensitive information was disclosed, it will be announced
immediately to the market.

Similarly, when answering shareholder questions, price
sensitive information will not be discussed unless that
particular information has been formally disclosed to the
market via an announcement.

Where a question can only be answered by disclosing price
sensitive information, the Company will decline to answer
it or take it on notice and announce the information to the
market prior to responding.

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107

Incannex Healthcare LimitedIncannex Healthcare LimitedIf any new price sensitive information is to be used in
briefing media, institutional investors and analysts or in
answering shareholder queries, written materials containing
such information will be lodged with the relevant authority
prior to the briefing commencing. These briefing materials
may also include information that may not strictly be
required under continuous disclosure requirements.

Where practicable the Company will also make available
the opportunity for shareholders to participate in new and
substantive investor presentations by dial-in or live-stream
or by uploading a transcript or recording of the presentation
to ASX subsequently. The Company is not required to make
available presentations that do not contain new market
sensitive information.

This policy will form a component of the induction process
for all new employees.

The Company is committed to the full and accurate
reporting of its financial results. Consequently, when
complying with its periodic disclosure requirements, the
Company will provide commentary on its financial results.
The purpose of the commentary will be to clarify and
balance the information in the financial results.

This commentary will be delivered in a manner that is
neutral, free from any bias and easy to understand. This
may involve the provision of both positive and negative
information about the Company that the Company believes
is necessary to keep investors fully informed.

The Company respects the rights of its shareholders and to
facilitate the effective exercise of those rights the Company
is committed to:

(a) communicating effectively with shareholders;

(b) giving shareholders ready access to balanced and

understandable information about the Company and
corporate proposals; and

“Substantive” presentations include results presentations
and the types of presentations given at annual general
meetings, investor days or broker conferences.

2.9 Provision of Information to the Board

The Company Secretary is to ensure that a copy of all
material market announcements is to be circulated to the
Board as soon as is practicable after its release.

2.10 Company website

The Company provides general information about the
Company and its operations, details of the Company’s
corporate governance policies and procedures and
information specifically targeted at keeping the Company’s
shareholders informed about the Company on its website.

In particular, where appropriate, after confirmation of receipt
by the relevant authority, the following will be posted to
the website:

(a) relevant announcements made to the market;

(b) media releases;

general meetings of the Company.

during briefings;

2.8 Provision of information

material;

(d) the full text of notices of meeting and explanatory

The Company will communicate with shareholders in three
main ways:

(e) information related to general meetings, including the

Chair’s address, speeches and voting results;

(a) through ASX releases to the market;

(b) through information provided directly to shareholders

at general meetings of the Company; and

It is the Company’s policy to comply with its continuous
and periodic disclosure obligations. In accordance with the
Company’s continuous disclosure policy, unless exempted
by the ASX Listing Rules, the Company will immediately
notify the market of information:

(a) concerning the Company that a reasonable person

would expect to have a material effect on the price or
value of the Company’s securities; and

(b) that would, or would be likely to, influence persons

who commonly invest in securities in deciding whether
to acquire or dispose of the Company’s securities.

(f) copies of press releases and announcements for the

preceding year; and

(g) copies of annual and half-yearly reports including

financial statements for the preceding year.

Where possible, the website will also be used for web-
casting or teleconferencing analyst and media briefings
as well as general meetings of the Company. Where the
Company does webcast the preceding events, and even
where it is not possible to do so, a transcript or summary of
the information discussed will be posted to the website.

2.11 Direct communications with shareholders

Throughout the year it may be appropriate for the Company
to directly communicate with shareholders. For example, to
give shareholders notice of general meetings or to update
shareholders by way of a Chair’s letter.

In relation to information that is directly communicated
to shareholders, all shareholders have the right to elect
to receive all such information by post, facsimile or
electronic mail.

2.12 Meetings of the Company

In preparing for general meetings of the Company, the
Company will draft the notice of meeting and related
explanatory information so that they provide all of the
information that is relevant to shareholders in making
decisions on matters to be voted on by them at the meeting.
This information will be presented clearly and concisely so
that it is easy to understand and not ambiguous.

The Company will use general meetings as a tool to
effectively communicate with shareholders and allow
shareholders a reasonable opportunity to ask questions
of the Board of Directors and to otherwise participate in
the meeting.

The external auditor of the Company will be asked to attend
each annual general meeting and to be available to answer
shareholder questions about the conduct of the audit and
the preparation and content of the auditor’s report.

2.13 Other information

While the Company aims to provide sufficient information
to shareholders about the Company and its activities,
it understands that shareholders may have specific
questions and require additional information. To ensure
that shareholders can obtain all relevant information to
assist them in exercising their rights as shareholders, the
Company will make available a telephone number and email
address for shareholders to make their enquiries.

2.14 Investor Presentations

Where a new and substantive investor or analyst
presentation is to be given, the Company will release a
copy of the presentation materials on the ASX market
announcements platform ahead of the presentation.

3. Review

This policy will be reviewed annually be the Board to
ensure it is operating effectively and determine whether any
amendments are required.

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Incannex Healthcare LimitedIncannex Healthcare LimitedSecurities 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 22 August 2022)

Position

Holder Name

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

DR SUDHANSHU AGARWAL

GEORGE ANASTASSOV

PRASCH BV

CANNVALATE PTY LTD

MR RAYMOND LAURENCE CARROLL

MR JOEL BRADLEY LATHAM

BROWNARROWS PTY LTD

J P MORGAN NOMINEES AUSTRALIA PTY LIMITED

NATIONAL NOMINEES LIMITED

MR PETER WIDDOWS

IMI LLC

BAGBO PTY LTD

GEMINI CAPITALL LLC

ALIGNMENT CAPITAL PTY LTD

RYBA LLC

MR BRIAN PETER BYASS

MR KAIDE WANG

ERIC HOCHI KIM

CIPATER PTY LTD

Holding

76,046,581

75,303,093

66,972,077

63,954,841

32,000,000

30,000,000

23,748,414

21,615,707

20,699,995

17,332,787

15,973,694

14,642,234

14,516,434

13,787,086

13,194,248

13,090,170

13,062,500

12,699,699

12,216,405

12,206,477

% IC

4.99%

4.94%

4.40%

4.20%

2.10%

1.97%

1.56%

1.42%

1.36%

1.14%

1.05%

0.96%

0.95%

0.90%

0.87%

0.86%

0.83%

0.80%

Total

563,062,442

36.96%

Distribution of Shareholders (as at 22 August 2022)

Holding Ranges

Holders

Total Units % Issued Share Capital

above 0 up to and including 1,000

above 1,000 up to and including 5,000

above 5,000 up to and including 10,000

above 10,000 up to and including 100,000

above 100,000

Totals

648

4,308

1,991

4,148

1,302

420,167

11,832,722

15,091,242

136,237,493

1,207,817,874

12,397

1,371,399,498

0.03%

0.86%

1.10%

9.93%

88.07%

100.00%

There were 1,492 shareholders holding less than a marketable parcel (less than 1,639 shares at $ 0.305) at 22 August 2022 –
a total of 1,523,934 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 22 August 2022:

Class

All classes of OPTIONS

Number

91,994,386

110

111

Incannex Healthcare LimitedIncannex Healthcare LimitedThe potential
is limitless

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