Company: IXHL
Filing Date: 2025-09-29
Form Type: 10-K
Source: 0001213900-25-092837
Chunk: 796

Company: Incannex Healthcare Inc.
Filing Date: 2025-09-29
Form: 10-K
Item: Item 6
Chunk 796
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 number of 1,887,045 shares
of common stock to the investors. Thus, Pre-Funded Warrants were accounted for and were classified as additional paid-in capital as part
of the Company’s equity. Total incremental and direct issuance costs were deducted from additional paid-in-capital as they were
allocated to shares of common stock and Pre-Funded Warrants.

The Series A Warrants were classified as liabilities
and accounted for at fair value and re-measured at each reporting date until exercise, expiration or modification that resulted in equity
classification. Any change in the fair value of the Series A Warrants was recognized in the Consolidated Statements of Operations and
Comprehensive Loss.

 The issuance of common stock is recognized
on its settlement date. Upon issuance, the common stock is recorded at its fair value.

In May 2025, the Company entered into letter agreements
with the holders of the Series A Warrants pursuant to which the Company paid to the holders of Series A Warrants an aggregate of $24.8
million in exchange for the cancellation of all of the outstanding Series A Warrants.

 Fair Value of Financial Instruments 

The Company measures certain financial assets and
liabilities at fair value. ASC 820, Fair Value Measurement and Disclosures (“ASC 820”), specifies a hierarchy of valuation
techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market
data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs
have created the following fair-value hierarchy:

Level 1: Quoted prices for identical instruments
in active markets;

Level 2: Quoted prices for similar instruments
in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in
which all significant inputs and significant value drivers are observable in active markets; and

Level 3: Valuations derived from valuation techniques
in which one or more significant inputs or significant value drivers are unobservable.

F-13

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: (1) the Company is able to comply with the relevant conditions of the grant and (2) the grant is
received.

Interest income

Interest income is recognized as interest accrues
using