Company: IXHL
Filing Date: 2025-09-29
Form Type: 10-K
Source: 0001213900-25-092837
Chunk: 478

Company: Incannex Healthcare Inc.
Filing Date: 2025-09-29
Form: 10-K
Item: Item 1C
Chunk 478
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 contribute to the ability to create outputs. If so, we conclude that the acquired set
is a business.

We measure 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

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
(“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. We have elected
a policy of estimating forfeitures at grant date. Option valuation models, including the trinomial pricing and BSOPM, require the input
of several assumptions. These inputs are subjective and generally require significant analysis and judgment to develop.

R&D Costs

R&D costs are expensed as incurred. R&D
costs 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 our 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.

We record 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. We record 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.

We accrue 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. We make significant
judgments and estimates in determining