Company: IXHL
Filing Date: 2025-09-29
Form Type: 10-K
Source: 0001213900-25-092837
Chunk: 790

Company: Incannex Healthcare Inc.
Filing Date: 2025-09-29
Form: 10-K
Item: Item 6
Chunk 790
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invoicing within the normal 28-day commercial terms. If a client is specifically identified as a credit risk, recognition of revenue is
stopped except to the extent of fees that have already been collected.

R&D Costs

R&D costs are expensed as incurred. Research
and development consist of salaries, benefits and other personnel related costs including equity-based compensation expense, laboratory
supplies, preclinical studies, clinical trials and related clinical manufacturing costs, costs related to manufacturing preparations,
fees paid to other entities to conduct certain R&D activities on the Company’s behalf and allocated facility and other related
costs.

Nonrefundable advance payments for goods or services
that will be used or rendered for future R&D activities are deferred and capitalized as prepaid expenses until the related goods are
delivered or services are performed.

The Company records accrued liabilities for estimated
costs of R&D activities conducted by third-party service providers, which include the conduct of preclinical studies and clinical
trials, and contract manufacturing activities. The Company records the estimated costs of R&D activities based upon the estimated
amount of services provided but not yet invoiced and includes these costs in trade and other payables on the consolidated balance sheets
and within R&D expenses on the consolidated statements of operations and comprehensive loss.

The Company accrues for these costs based on factors
such as estimates of the work completed and in accordance with agreements established with its third-party service providers. The Company
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