Company: IXHL
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001213900-25-043682
Chunk: 15

Company: Incannex Healthcare Inc.
Filing Date: 2025-05-15
Form: 10-Q
Item: Part I, Item 1
Chunk 15
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arrant Shares”) of Common Stock at a price of $1.0799 per Pre-Funded Warrant and Series A common stock warrants (the “Series
A Warrants”) to purchase up to 11,574,090 shares of Common Stock at an initial exercise price of $2.16 per share.

The pre-funded warrants are exercisable for the
same number of shares of common stock and may be exercised at any time until exercised in full at an exercise price of $0.0001. On March
10, 2025, the Company received substantially all the Pre-Funded Warrants proceeds upfront as part of the Pre-Funded Warrants’ purchase
price and in return the Company is obligated to issue fixed number of 11,574,090 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 are 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.

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

Refer to Note 12 for the accounting of the 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.