Company: IXHL
Filing Date: 2025-09-29
Form Type: 10-K
Source: 0001213900-25-092837
Chunk: 954

Company: Incannex Healthcare Inc.
Filing Date: 2025-09-29
Form: 10-K
Item: Item 8
Chunk 954
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 in full on March
13, 2025, including the outstanding principal, interest, amounts and redemption premiums that was due as of February 28, 2025. The convertible
rights are derecognized along with the debt repayment. The Company recognized a $1.0 million loss on extinguishment of the debt host contract
and the bifurcated derivative.

The changes in the fair value of the Debenture
Warrants liability were a decrease of $0.2 million for the fiscal year ended June 30, 2025.

Series A Warrants

Classification of the Series A Warrants as liability
instruments was based on management’s analysis of the guidance in ASC 815 and in a statement issued by the staff of the SEC regarding
the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement
on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies.”

Management considered whether the Series A Warrants
displayed the three characteristics of a derivative under ASC 815 and concluded that the Series A Warrants met the definition of a derivative.
However, the Series A Warrants failed to meet the equity scope exception in ASC 815-10-15-74(a) and thus were classified as a liability
measured at fair value, subject to remeasurement at each reporting period. This is on the basis that the exercise price of the Series
A Warrants was denominated in a currency other than the reporting entity’s functional currency, and therefore the instrument was
not considered indexed to the reporting entity’s own stock. The Company measured the Series A Warrants as a liability at fair value
as at each reporting period with changes in fair value recognized as other (income) expense, net in the Consolidated Statements of Operations
and Comprehensive Income (Loss).

F-20

The Series A Warrants were classified as a level
3 financial instrument in the fair value hierarchy and were valued using the BSOPM.

The changes in the fair value of the Series A Warrant
liability were an increase of $22.7 million for the fiscal year ended June 30, 2025.

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.

Note 14 - Income Tax

The prima