Company: IXHL
Filing Date: 2025-09-29
Form Type: 10-K
Source: 0001213900-25-092837
Chunk: 367

Company: Incannex Healthcare Inc.
Filing Date: 2025-09-29
Form: 10-K
Item: Item 1A
Chunk 367
---
makes significant judgments and estimates in determining the accrued liabilities balance at the end of each reporting period. As actual
costs become known, the Company adjusts its accrued liabilities. The Company has not experienced any material differences between accrued
costs and actual costs incurred.

F-10

Acquisitions

The Company evaluates 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, the Company first performs
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, the Company further evaluates 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, the Company concludes
that the acquired set is a business.

The Company measures 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

The Company accounts 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 stock options. The fair value method requires the Company to estimate the fair value of
stock-based payment awards on the date of grant using an option-pricing model. The Company uses 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. The Company has elected a policy of estimating forfeitures at grant date. Option valuation models, including the trinomial pricing
and the BSOPM, require the input of several assumptions. These inputs are subjective and generally require significant analysis and judgment
to develop. Refer to Note 12 - “Stock-based payments” for a discussion of the relevant assumptions.

Equity-Line of Credit Purchase Agreement

On September 6,