Company: IXHL
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001213900-25-043682
Chunk: 69

Company: Incannex Healthcare Inc.
Filing Date: 2025-05-15
Form: 10-Q
Item: Part I, Item 2
Chunk 69
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 flows from financing activities

Cash used in financing activities increased by
$11.8 million for the nine months ended March 31, 2025 and the nine months ended March 31, 2024.

Critical Accounting Policies and
Estimates

Our management’s discussion and analysis
of our financial condition and results of operations is based on our unaudited interim condensed consolidated financial statements as
of March 31, 2025, which have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
The preparation of these unaudited interim condensed consolidated financial statements requires our management to make judgments and estimates
that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities during
the reporting periods. We base our estimates on historical experience, known trends and events, and various other factors we believe are
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may
differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described
in more detail in Note 2 to our consolidated financial statements described in the Company’s Annual Report on Form 10-K, we believe
the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

28

Stock Based Compensation 

We account 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 share options. The fair value method requires us to estimate the fair value of stock-based payment
awards on the date of grant using an option-pricing model. We use either the trinomial pricing or Black-Scholes option-pricing model 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. We have elected a policy of estimating forfeitures
at grant date. Option valuation models, including the trinomial pricing and Black-Scholes option-pricing model, require the input of several
assumptions. These inputs are subjective and generally require significant analysis and judgment to develop.

Research and development Costs

Research and development costs are expensed as
incurred.