Annual Report for Fiscal Year Ending June 30, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes included elsewhere in this Annual Report. This discussion and analysis contains forward looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the "Risk Factors" section of this Annual Report. Actual results may differ materially from those contained in any forward-looking statements. For a discussion on forward-looking statements, see the information set forth in the introductory note to this Annual Report under the caption "Special Note Regarding Forward Looking Statements," which information is incorporated herein by reference.

Overview

We are a clinical-stage biopharmaceutical development company dedicated to developing innovative medicines for patients living with serious chronic diseases and significant unmet needs. Our lead drug candidates include IHL-42X for the treatment of OSA; PSX-001, our psilocybin treatment in combination with psychological therapy in development to treat patients with GAD; and IHL-675A for rheumatoid arthritis. Each of these programs target conditions that currently have limited, inadequate, or no approved pharmaceutical treatment options.

Recent Developments

ATM Program Increase

On July 24, 2025, we filed a prospectus supplement to increase the capacity of our existing "at-the-market" offering program (the "ATM") by up to an additional $100 million. While this filing increases the available capacity under the ATM, we are under no obligation to issue any shares of our commons stock pursuant to the program. The expanded facility is intended to enhance our financial flexibility, providing an efficient mechanism to access capital if, and when, deemed appropriate. Any utilization of the ATM will be at our discretion, taking into account prevailing market conditions and strategic priorities.

As previously disclosed, the ATM is conducted pursuant to the Amended and Restated Sales Agreement, dated May 28, 2025 (the "Amended and Restated Sales Agreement") by and among us, A.G.P./Alliance Global Partners ("A.G.P.") and Curvature Securities, LLC ("Curvature," and together with A.G.P, the "Sales Agents"). Accordingly, pursuant to the prospectus supplement, the amount of shares of our common stock that we may issue under the Amended and Restated Sales Agreement has been increased by up to an aggregate of $100 million of shares of our common stock. There can be no assurance that the Sales Agents will be able to complete future placements pursuant to the Amended and Restated Sales Agreement, even if instructed to do so. The number of shares of our common stock that we may ultimately sell under the Amended and Restated Sales Agreement will fluctuate based on a number of factors, including the market price of our common stock during the sales period, the limits it may set in any instruction to sell Shares, and the demand for our common stock during an applicable sales period.

Results of Operations

Comparison of Fiscal Years Ended June 30, 2025 to June 30, 2024

The following tables summarize our results of operations for the periods presented (in thousands):

		For the Years Ended June 30								$				%
		2025				2024				Change				Change
Revenue from customers			86				12				74				617
Operating expenses:
Research and development			(10,747	)			(12,879	)			2,132				(17	)
General and administrative			(13,128	)			(17,174	)			4,046				(24	)
Total operating expenses			(23,875	)			(30,053	)			6,178				(21	)
Loss from operations			(23,789	)			(30,041	)			6,252				(21	)
Other income/(expense):
R&D tax incentive			1,756				11,434				(9,678	)			(85	)
Foreign exchange gains (losses)			(289	)			(28	)			(261	)			932
Interest expense			62				206				(144	)			(70	)
Interest income			(303	)			-				(303	)			100
Change in fair value of convertible rights			299				-				299				100
Change in fair value of warrant liabilities			(21,925	)			-				(21,925	)			100
Warrant issuance costs			(129	)			-				(129	)			100
Loss on extinguishment			(1,472	)			-				(1,472	)			100
ELOC commitment fee			(1,095	)			-				(1,095	)			100
Total other income/(expense), net			(23,096	)			11,612				(34,708	)			(299	)
Loss before income tax expense			(46,885	)			(18,429	)			(28,456	)			154
Income tax expense			-				(30	)			30				(100	)
Net loss			(46,885	)			(18,459	)			(28,426	)			154
Other comprehensive income/(loss):
Currency translation adjustment, net of tax			208				(77	)			285				(370	)
Comprehensive loss		$	(46,677	)		$	(18,536	)		$	(28,141	)			152

Revenue from Customers

During the fiscal year ended June 30, 2025, we generated revenue from clinic patients for rehabilitation services. This figure reflects the consideration to which the Company expects to be entitled in exchange for those services. Revenue increased approximately 617% when compared to revenues generated during the fiscal year ended June 2024 primarily as a result of our expansion of these services. We have not generated any revenue from the sale of products. We do not expect to generate material revenues unless and until our drug candidates are approved.

Operating Expenses

Our operating expenses consist of (i) R&D expenses, (ii) acquisition of in-process research and development ("IPR&D") expense and (iii) general and administrative expenses.

R&D Expenses

R&D expenses consist primarily of external and internal costs incurred in performing clinical and preclinical development activities.

Our R&D expenses include:

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external costs incurred under agreements with CROs, contract manufacturers, consultants and other third parties to conduct and support our clinical trials and preclinical studies; and

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internal costs, including R&D personnel-related expenses such as salaries, and benefits, as well as allocated facilities costs and dues and subscriptions.

We expense R&D costs as incurred.

R&D expenses decreased by $2.1 million for the fiscal year ended June 30, 2025 compared to the fiscal year ended June 30, 2024. The decrease was primarily due to a pause in our development activities that occurred during the fiscal year ended June 30, 2025 for resource conservation reasons. We have since resumed development activities for all of our lead drug candidates.

Although R&D activities are central to our business model, the successful development of our drug candidates is highly uncertain. There are numerous factors associated with the successful development of our drug candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. In addition, future regulatory factors beyond our control may impact our clinical development programs. Drug candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later stage clinical trials. As a result, we expect our R&D expenses will increase substantially in connection with our ongoing and planned clinical and preclinical development activities in the near term and in the future to the extent our development activities are successful. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of our drug candidates. Our R&D expenses have varied, and our future R&D expenses may vary, significantly based on a wide variety of factors such as:

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the number and scope, rate of progress, expense and results of our clinical trials and preclinical studies, including any modifications to clinical development plans based on feedback that we may receive from regulatory authorities;

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per patient trial costs;

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the number of trials required for approval;

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the number of sites included in the trials;

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the countries in which the trials are conducted;

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the length of time required to enroll eligible patients;

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the number of patients that participate in the trials;

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the number of doses that patients receive;

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the drop-out or discontinuation rates of patients;

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the potential additional safety monitoring requested by regulatory agencies;

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the duration of patient participation in the trials and follow-up;

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the cost and timing of manufacturing of our drug candidates;

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the costs, if any, of obtaining third-party drugs for use in our combination trials;

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the extent of changes in government regulation and regulatory guidance;

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the efficacy and safety profile of our drug candidates;

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the timing, receipt, and terms of any approvals from applicable regulatory authorities; and

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the extent to which we establish additional collaboration, license, or other arrangements.

A change in the outcome of any of these variables with respect to the development of our drug candidates could significantly change the costs and timing associated with the development of that drug candidate. We may never succeed in obtaining regulatory approval for any drug candidate.

In addition, we are obligated under our contracts with CROs to reimburse these CROs for certain expenses incurred by them in the performance of the services they provide to us. The precise timing and amounts of these expenses and our corresponding reimbursement obligations are and may continue to be uncertain and outside of our control. We incur the costs for these reimbursement obligations when invoiced by the CRO. We often receive invoices long after the CRO has performed the services that are the subject of the invoice. As a result, our related operating expenses have and may continue to vary significantly period-to-period and are not necessarily indicative of the expenses associated with the activities of the CRO conducted during the period covered by the periodic report in which these expenses are disclosed.

Acquisition of IPR&D

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

General and Administrative

General and administrative expenses consist primarily of personnel-related expenses finance and accounting, human resources and other administrative functions, including salaries, stock-based compensation and benefits for employees, legal fees, expenses relating to patent and corporate matters and professional fees paid for accounting, auditing, consulting and tax services, as well as facilities-related costs not otherwise included in R&D expenses and other costs such as insurance costs and travel expenses.

General and administrative expenses decreased by $4.0 million for the fiscal year ended June 30, 2025 compared to the fiscal year ended June 30, 2024. The decrease was mainly due to a decrease of $6.3 million (from $8.9 million to $2.6 million) in equity compensation and benefits for employees and directors, primarily driven by less amortization expense incurred as the equity compensation was issued in May 2025 (compared to the prior period the equity compensation was issued in December 2024). This decrease was partially offset by an increase of $1.4 million (from $2.8 million to $4.2 million) in salaries, and other employee benefits, which resulted from the appointment of Chief Medical Officer and additional middle management positions during the period. Additionally, compliance, legal and regulatory expenses increased by $0.8 million (from $3.1 million to $3.9 million) primarily due to enhanced reporting obligations.

We anticipate our general and administrative expenses will increase substantially in the future as we expand our operations, including increasing our headcount to support our continued R&D activities and preparing for potential commercialization of our drug candidates. We also anticipate we will incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance, and investor and public relations expenses associated with operating as a U.S. public company.

Other Income (Expense)

Benefit from R&D Tax Credit

We receive tax incentives from the Australian government for R&D activities. Subject to certain exclusions, the Australian Government tax incentives provide benefits for eligible R&D activities. Entities are entitled to either (i) a 48.5% refundable tax offset for eligible companies with an aggregated turnover of less than A$20 million per annum or (ii) a non-refundable 38.5% tax offset for all other eligible companies. As our aggregated turnover is less than A$20 million and we are not controlled by one or more income tax exempt entities, we anticipate being entitled to a claim of 48.5% refundable tax offset for costs relating to eligible R&D activities during the year.

Benefit from R&D tax credit decreased by $9.7 million (from $11.4 million to $1.8 million) for the fiscal year ended June 30, 2025 compared to the fiscal year ended June 30, 2024. The decrease primarily due to the multiple years of tax incentives being granted and successful lodgement of overseas findings on the Company's lead assets, which we revised the estimates for the R&D tax incentive receivable, primarily based on historical experience of claims in the fiscal year ended June 30, 2024.

Foreign Exchange Losses

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

Change in fair value of convertible rights

On October 17, 2024, we issued a convertible debenture as part of a financing arrangement. The convertible debenture was repaid in full on March 13, 2025, and the convertible rights associated with the convertible debenture were derecognized along with the debt repayment. The changes in the fair value of the convertible rights amounted to $0.3 million for the fiscal year ended June 30, 2025.

Change in fair value of warrant liabilities

In 2024 and 2025 we issued warrants in connection with our equity line of credit financing, convertible debenture financing and private investment in public equity financing. These warrants were subsequently exercised or cancelled later during the year. The changes in the fair value of warrant liabilities amounted to $21.9 million for the fiscal year ended June 30, 2025.

Loss on extinguishment

As mentioned above, the convertible debenture was repaid in full on March 13, 2025, and the associated convertible rights were derecognized along with the debt repayment. This resulted in a total loss on extinguishment of $1.5 million, comprising a $1.0 million loss on the debt host contract and $0.5 million related to the associated convertible rights.

ELOC commitment fee

We entered into an equity line of credit purchase agreement in September 2024 and as part of that arrangement, we issued shares as commitment fee to secure the equity line of credit facility. The commitment fee expense incurred for the fiscal year ended June 30, 2025 as a result of these share issuances was $1.1 million.

Currency Translation Adjustment Losses

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

Liquidity and Capital Resources

We have incurred net losses since inception and expect to incur substantial and increasing losses in the future as we expand our R&D activities in an effort to move our drug candidates into later stages of development. Historically, we have funded our operations primarily through the sale of equity securities, proceeds from the exercise of options, tax grants from R&D activities and interest income.

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

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

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

Going Concern

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

Historically, we have financed our operations to date primarily through partnerships, funds received from public offerings of common stock, a debt financing facility, as well as funding from governmental bodies. We continue to plan for additional capital through the sale of common stock in public offerings and/or private placements, debt financings, or through other capital sources, including pursuant to the ATM, collaborations with other companies or other strategic transactions. While there can be no assurance that these plans will be completed successfully or at all, our current financial position and resources mitigate prior concerns related to going concern uncertainties.

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

Off-Balance Sheet Arrangements

We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Cash Flows

Comparison of Cash Flows for the Fiscal Year ended June 30, 2025, with June 30, 2024

The following table summarizes our cash flows for the periods presented:

		Year Ended June 30,
		2025				2024
Net cash used in operating activities		$	(12,513	)		$	(15,845	)
Net cash provided by/(used in) investing activities			(8	)			(277	)
Net cash provided by financing activities			21,396				-
Net (decrease)/increase in cash, cash equivalents and restricted cash		$	8,875			$	(16,122	)

Net cash flows from operating activities

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

Net cash flows from investing activities

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

Cash flows from financing activities

Cash provided by financing activities increased by $21.4 million in the fiscal year ended June 30, 2025, compared to the fiscal year ended June 30, 2024. This increase was primarily driven by share issuance proceeds of $48.3 million, partially offset by cash outflows related to financing arrangements entered into during the year, including the cancellation of warrants amounting to $24.8 million and the repayment of convertible debt totaling $3.8 million.

Critical Accounting Estimates

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events, and various other factors we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

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

Acquisitions

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

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

Stock-Based Compensation

We account for stock-based compensation arrangements with employees and non-employees using a fair value method which requires the recognition of compensation expense for costs related to all stock-based payments including share options. The fair value method requires us to estimate the fair value of stock-based payment awards on the date of grant using an option-pricing model. We use either the trinomial pricing or Black-Scholes option-pricing model ("BSOPM") to estimate the fair value of options granted. Stock-based compensation awards are expensed using the graded vesting method over the requisite service period, which is generally the vesting period, for each separately vesting tranche. We have elected a policy of estimating forfeitures at grant date. Option valuation models, including the trinomial pricing and BSOPM, require the input of several assumptions. These inputs are subjective and generally require significant analysis and judgment to develop.

R&D Costs

R&D costs are expensed as incurred. R&D costs consist of salaries, benefits and other personnel related costs including equity-based compensation expense, laboratory supplies, preclinical studies, clinical trials and related clinical manufacturing costs, costs related to manufacturing preparations, fees paid to other entities to conduct certain R&D activities on our behalf and allocated facility and other related costs.

Nonrefundable advance payments for goods or services that will be used or rendered for future R&D activities are deferred and capitalized as prepaid expenses until the related goods are delivered or services are performed.

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

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

Benefit from R&D Tax Incentive

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

Emerging Growth Company Status and Smaller Reporting Company Status

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act ("JOBS Act"). The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards. We have elected to avail ourselves of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we can adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that we either (i) irrevocably elect to opt out of such extended transition period or (ii) no longer qualify as an emerging growth company. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

We will continue to remain an emerging growth company until the earliest of the following:

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the last day of the fiscal year following the fifth anniversary of the date of the completion of the first sale of common equity securities pursuant to an effective registration statement under the Securities Act;

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the last day of the fiscal year in which our total annual gross revenue is equal to or more than $1.235 billion;

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the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or

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the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.