Company: IXHL
Filing Date: 2025-02-14
Form Type: 10-Q
Source: 0001213900-25-013783
Chunk: 66

Company: Incannex Healthcare Inc.
Filing Date: 2025-02-14
Form: 10-Q
Item: Part I, Item 8
Chunk 66
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 Company issued a five-year warrant (the “ELOC Warrant”) on October
31, 2024, exercisable for 585,000 shares of Common Stock with an exercise price equal to $1.66 per share.

We determine whether to classify contracts, such
as warrants, that may be settled in our own stock as equity of the entity or as a liability. An equity-linked financial instrument must
be considered indexed to the Company’s own stock to qualify for equity classification. The Company classifies warrants as liabilities
for any contracts that may require a transfer of assets. Warrants classified as liabilities are accounted for at fair value and remeasured
at each reporting date until exercise, expiration or modification that results in equity classification. Any change in the fair value
of the warrants is recognized in the Consolidated Statements of Operations and Comprehensive Loss.

Refer to Note 12 for the accounting of the ELOC
Purchase Agreement.

7

Note 2 – Basis of Presentation and Summary of Significant
Accounting Policies (continued)

Convertible Debenture Financing

On September 6, 2024, the Company entered into
a Securities Purchase Agreement (the “September 2024 Purchase Agreement”) with Arena Investors, LP (“Arena Investors”),
which provides for the issuance of secured convertible debentures in an aggregate principal amount of up to $10 million at an aggregate
purchase price of up to $9 million (a 10% original issue discount), divided into three separate tranches, each subject to closing conditions.
Under the September 2024 Purchase Agreement, the conversion price of each secured convertible debenture will equal 115% of the closing
price of the Common Stock on the trading day preceding the date of the issuance of the respective secured convertible debenture, subject
to subsequent adjustments and alternative conversion prices based on the then-current trading price of the Common Stock on Nasdaq, as
further detailed in the September 2024 Purchase Agreement. For each secured convertible debenture purchased under the September 2024 Purchase
Agreement, the Company will also issue a warrant to the purchaser, exercisable to purchase up to the number of shares of Common Stock
equal to 25% of the total principal amount of the related secured convertible debenture, divided by 115% of the closing price of the Company’s
Common Stock on the trading day immediately preceding the applicable closing date. The Company is not obligated to issue warrants for
any tranche that does not close. The exercise price of