Company: IXHL
Filing Date: 2025-09-29
Form Type: 10-K
Source: 0001213900-25-092837
Chunk: 224

Company: Incannex Healthcare Inc.
Filing Date: 2025-09-29
Form: 10-K
Item: Item 1
Chunk 224
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 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, 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