Enveric Biosciences, Inc 10-Q for FY2024 Q1
Enveric Biosciences, Inc. (ENVB)
About this 10-Q
Enveric Biosciences, Inc filed this 10-Q on May 15, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $2.46M
- compared with a net loss of $4.68M a year earlier
- Diluted EPS
- -$0.61
- compared with -$2.31 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For
the quarterly period ended:
OR
| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from ___ to ___
Commission
File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
| (Address of principal executive offices) | (Zip code) |
| (Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was
required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller
reporting company | ||
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 9, 2024, there were shares outstanding of Registrant’s Common Stock (par value $0.01 per share).
ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
| 2 |
ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
| March 31, 2024 | December 31, 2023 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Other assets: | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES, MEZZANINE EQUITY, AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Investment option liability | ||||||||
| Warrant liability | ||||||||
| Total current liabilities | ||||||||
| Commitments and contingencies (Note 8) | ||||||||
| Mezzanine equity | ||||||||
| Series C redeemable preferred stock, $ par value, shares authorized, and shares issued and outstanding as of March 31, 2024 and December 31, 2023 | ||||||||
| Total mezzanine equity | ||||||||
| Shareholders’ equity | ||||||||
| Preferred stock, $ par value, shares authorized; Series B preferred stock, $ par value, shares authorized, shares issued and outstanding as of March 31, 2024 and December 31, 2023 | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding as of March 31, 2024 and December 31, 2023 | ||||||||
| Additional paid-in capital | ||||||||
| Stock subscription receivable | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities, mezzanine equity, and shareholders’ equity | $ | $ | ||||||
See the accompanying notes to the unaudited condensed consolidated financial statements.
| 3 |
ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| 2024 | 2023 | |||||||
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating expenses | ||||||||
| General and administrative | $ | $ | ||||||
| Research and development | ||||||||
| Depreciation and amortization | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other (expense) income | ||||||||
| Change in fair value of warrant liabilities | ||||||||
| Change in fair value of investment option liability | ||||||||
| Change in fair value of derivative liability | ||||||||
| Interest income (expense), net | ( | ) | ||||||
| Total other income | ||||||||
| Net loss before income taxes | ( | ) | ( | ) | ||||
| Income tax expense | ( | ) | ||||||
| Net loss | ( | ) | ( | ) | ||||
| Less preferred dividends attributable to non-controlling interest | ||||||||
| Less deemed dividends attributable to accretion of embedded derivative at redemption value | ||||||||
| Net loss attributable to shareholders | ( | ) | ( | ) | ||||
| Other comprehensive loss | ||||||||
| Foreign currency translation | ||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share - basic and diluted | $ | ) | $ | ) | ||||
| Weighted average shares outstanding, basic and diluted | ||||||||
See the accompanying notes to the unaudited condensed consolidated financial statements.
| 4 |
ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
| Shares | Amount | Capital | Receivable | Deficit | Loss | Equity | |||||||||||||||||||||||
| Common Stock | Additional Paid-In | Subscription | Accumulated | Accumulated Other Comprehensive | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Capital | Receivable | Deficit | Loss | Equity | |||||||||||||||||||||||
| Balance at January 1, 2024 | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Stock-based compensation | — | ||||||||||||||||||||||||||||
| Common stock sold under the Equity Distribution Agreement, net of offering costs of $ | |||||||||||||||||||||||||||||
| Issuance of direct offering shares (see Note 7) | |||||||||||||||||||||||||||||
| Exercise of Inducement Warrants for common stock | |||||||||||||||||||||||||||||
| Proceeds from the subscription receivable related to the issuance of Inducement
Warrants, net of offering costs of $ | — | ( | ) | ||||||||||||||||||||||||||
| Proceeds from the subscription receivable related to the exercise of warrants and preferred investment options and issuance of common stock in abeyance (see Note 7) | ( | ) | |||||||||||||||||||||||||||
| Foreign exchange translation gain | — | ||||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
| Shares | Amount | Equity | Shares | Amount | Capital | Deficit | Loss | Equity | ||||||||||||||||||||||||||||
| Redeemable Non-controlling Interest | Total Mezzanine | Common Stock | Additional Paid-In | Accumulated | Accumulated Other Comprehensive | Total Shareholders’ | ||||||||||||||||||||||||||||||
| Shares | Amount | Equity | Shares | Amount | Capital | Deficit | Loss | Equity | ||||||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Preferred dividends attributable to redeemable non-controlling interest | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Accretion of embedded derivative to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Foreign exchange translation gain | — | — | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
See the accompanying notes to the unaudited condensed consolidated financial statements.
| 5 |
ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| 2024 | 2023 | |||||||
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities | ||||||||
| Change in fair value of warrant liability | ( | ) | ( | ) | ||||
| Change in fair value of investment option liability | ( | ) | ( | ) | ||||
| Change in fair value of derivative liability | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Amortization of right of use asset | ||||||||
| Amortization of intangibles | ||||||||
| Depreciation expense | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ||||||||
| Right-of-use operating lease asset and obligation | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows From Investing Activities: | ||||||||
| Purchases of property and equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows From Financing Activities: | ||||||||
| Proceeds from the subscription receivable related to the issuance of Inducement Warrants and the exercise of warrants and preferred investment options | ||||||||
| Proceeds from exercise of Inducement Warrants | ||||||||
| Proceeds from common stock sold under the Equity Distribution Agreement, net of offering costs | ||||||||
| Payment for offering costs previously accrued | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Effect of Foreign Exchange Rate on Changes on Cash | ( | ) | ||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental disclosure of cash and non-cash transactions: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| Offering costs accrued not paid | $ | $ | ||||||
| Issuance of common shares for offering costs | $ | $ | ||||||
| Preferred dividends attributable to redeemable non-controlling interest | $ | $ | ||||||
| Accretion of embedded derivative to redemption value | $ | $ | ||||||
See the accompanying notes to the unaudited condensed consolidated financial statements.
| 6 |
ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BUSINESS AND LIQUIDITY AND OTHER UNCERTAINTIES
Nature of Operations
Enveric Biosciences, Inc. (“Enveric” or the “Company”) is a biotechnology company developing novel neuroplastogenic small-molecule therapeutics for the treatment of depression, anxiety, and addiction disorders. The head office of the Company is located in Naples, Florida. The Company has the following wholly-owned subsidiaries: Jay Pharma Inc. (“Jay Pharma”), 1306432 B.C. Ltd. (“HoldCo”), MagicMed Industries, Inc. (“MagicMed”), Enveric Canada Inc., and Enveric Therapeutics, Pty. Ltd. (“Enveric Therapeutics”).
Leveraging its unique discovery and development platform, the Psybrary™, Enveric has created a robust intellectual property portfolio of new chemical entities for specific mental health indications. Enveric’s lead program, the EVM201 Series, comprises next generation synthetic prodrugs of the active metabolite, psilocin. Enveric is developing the first product from the EVM201 Series – EB-002 (formerly, EB-373) – for the treatment of psychiatric disorders. Enveric is also advancing its second program, the EVM301 Series, expected to offer a first-in-class, new approach to the treatment of difficult-to-address mental health disorders, mediated by the promotion of neuroplasticity without also inducing hallucinations in the patient.
Following the Company’s amalgamation with MagicMed completed in September 2021 (the “Amalgamation”), the Company has continued to pursue the development of MagicMed’s proprietary Psychedelic Derivatives library, the Psybrary™ which the Company believes will help to identify and develop the right drug candidates needed to address mental health challenges, including cancer-related distress. The Company synthesizes novel versions of classic psychedelics, such as psilocybin, DMT, mescaline and MDMA, using a mixture of chemistry and synthetic biology, resulting in the expansion of the Psybrary™, which includes 15 patent families with over a million potential variations and hundreds of synthesized molecules. Within the Psybrary™ the Company has three different types of molecules, Generation 1 (classic psychedelics), Generation 2 (pro-drugs), and Generation 3 (new chemical entities). The Company is working to add novel psychedelic molecular compounds and derivatives (“Psychedelic Derivatives”) on a regular basis through its work at the Company’s labs in Calgary, Alberta, Canada, where the Company has a team of PhD scientists with expertise in synthetic biology and chemistry. To date the Company has created over 500 molecules that are housed in the Psybrary™.
The Company screens newly synthesized molecules in the Psybrary™ through PsyAI™, a proprietary artificial intelligence (“AI”) tool. Leveraging AI systems is expected to reduce the time and cost of pre-clinical, clinical, and commercial development. The Company believes it streamlines pharmaceutical design by predicting ideal binding structures of molecules, manufacturing capabilities, and pharmacological effects to help determine ideal drug candidates, tailored to each indication. Each of these molecules that the Company believes are patentable can then be further screened to see how changes to its makeup alter its effects in order to synthesize additional new molecules. New compounds of sufficient purity are undergoing pharmacological screening, including non-clinical (receptors/cell lines), preclinical (animal), and ultimately clinical (human) evaluations. The Company intends to utilize the Psybrary™ and the AI tool to categorize and characterize the Psybrary™ substituents to focus on bringing more psychedelics-inspired molecules from discovery to the clinical phase.
Going Concern, Liquidity and Other Uncertainties
The
Company has incurred a loss since inception resulting in an accumulated deficit of $
| 7 |
ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In
assessing the Company’s ability to continue as a going concern, the Company monitors and analyzes its cash and its ability to
generate sufficient cash flow in the future to support its operating and capital expenditure commitments. At March 31, 2024, the
Company had cash of $
As a result of these factors, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date of the unaudited condensed consolidated financial statements are issued. The Company’s unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Inflation Risks
The Company considers the current inflationary trend existing in the North American economic environment reasonably likely to have a material unfavorable impact on results of continuing operations. Higher rates of price inflation, as compared to recent prior levels of price inflation, have caused a general increase in the cost of labor and materials. In addition, there is an increased risk of the Company experiencing labor shortages due to a potential inability to attract and retain human resources due to increased labor costs resulting from the current inflationary environment.
Nasdaq Notice
On
November 21, 2023, the Company received a letter from the Listing Qualifications Department of the Nasdaq Stock Market stating that as
of September 30, 2023, the Company did not meet the minimum of $
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principal of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. Management’s opinion is that all adjustments (consisting of normal accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2023, and related notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 26, 2024.
The Company’s significant accounting policies and recent accounting standards are summarized in Note 2 of the Company’s consolidated financial statements for the year ended December 31, 2023. There were no significant changes to these accounting policies during the three months ended March 31, 2024.
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and expenses during the periods reported. By their nature, these estimates are subject to measurement uncertainty and the effects on the financial statements of changes in such estimates in future periods could be significant. Significant areas requiring management’s estimates and assumptions include determining the fair value of transactions involving common stock, the valuation of warrants and preferred investment options, and the valuation of stock-based compensation and accruals associated with third party providers supporting research and development efforts. Actual results could differ from those estimates.
| 8 |
ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Reclassification
Certain reclassifications have been made to the prior period’s unaudited condensed consolidated financial statements in order to conform to the current year presentation. In the prior year, the Company included certain investor related expenses were included within research and development on the unaudited condensed consolidated statements of operations. These expenses were reclassified to general and administrative expenses in the current year. This reclassification had no effect on the Company’s previously reported results of operations, changes in equity, or cash flows.
Foreign Currency Translation
From inception through March 31, 2024, the reporting currency of the Company was the United States dollar while the functional currency of certain of the Company’s subsidiaries was the Canadian dollar and Australian dollar. For the reporting periods ended March 31, 2024 and 2023, the Company engaged in a number of transactions denominated in Canadian dollars and Australian dollars. As a result, the Company is subject to exposure from changes in the exchange rates of the Canadian dollar and Australian dollar against the United States dollar.
The Company translates the assets and liabilities of its Canadian subsidiaries and Australian subsidiary into the United States dollar at the exchange rate in effect on the balance sheet date. Revenues and expenses are translated at the average exchange rate in effect during each monthly period. Unrealized translation gains and losses are recorded as foreign currency translation gain (loss), which is included in the unaudited condensed consolidated statements of shareholders’ equity as a component of accumulated other comprehensive loss.
The Company has not entered into any financial derivative instruments that expose it to material market risk, including any instruments designed to hedge the impact of foreign currency exposures. The Company may, however, hedge such exposure to foreign currency exchange fluctuations in the future.
Adjustments that arise from exchange rate changes on transactions denominated in a currency other than the local currency are included in other comprehensive loss in the unaudited condensed consolidated statements of operations and comprehensive loss as incurred.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which at times, may exceed the federal depository insurance coverage of $
Research and Development
Research and development expenses are charged to operations as incurred. Research and development expenses include, among other things, internal and external costs associated with preclinical development, pre-commercialization manufacturing expenses, and clinical trials. The Company accrues for costs incurred as the services are being provided by monitoring the status of the trial or services provided and the invoices received from its external service providers. In the case of clinical trials, a portion of the estimated cost normally relates to the projected cost to treat a patient in the trials, and this cost is recognized based on the number of patients enrolled in the trial. As actual costs become known, the Company adjusts its accruals accordingly.
Income Taxes
The Company files U.S. federal and state returns. The Company’s foreign subsidiary also files a local tax return in their local jurisdiction. From a U.S. federal, state, and Canadian perspective, the years that remain open to examination are consistent with each jurisdiction’s statute of limitations.
Research and Development Tax Incentive Receivable
The Company, through its wholly-owned subsidiary in Australia, participates in the Australian research and development tax incentive program, such that a percentage of the Company’s qualifying research and development expenditures are reimbursed by the Australian government, and such incentives are reflected as a reduction of research and development expense. The Australian research and development tax incentive is recognized when there is reasonable assurance that the incentive will be received, the relevant expenditure has been incurred and the amount of the consideration can be reliably measured. At each period end, management estimates the reimbursement available to the Company based on available information at the time.
Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and warrants (using the treasury stock method). The computation of basic net loss per share for the three months ended March 31, 2024 and 2023 excludes potentially dilutive securities. The computations of net loss per share for each period presented is the same for both basic and fully diluted. In accordance with ASC 260 “Earnings per Share” (“ASC 260”), penny warrants were included in the calculation of weighted average shares outstanding for the purposes of calculating basic and diluted earnings per share.
| 9 |
ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SCHEDULE OF POTENTIALLY DILUTIVE SECURITIES
| 2024 | 2023 | |||||||
| For the three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Warrants to purchase shares of common stock | ||||||||
| Restricted stock units - vested and unissued | ||||||||
| Restricted stock units - unvested | ||||||||
| Restricted stock awards - vested and unissued | ||||||||
| Investment options to purchase shares of common stock | ||||||||
| Options to purchase shares of common stock | ||||||||
| Total potentially dilutive securities | ||||||||
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for all entities for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company adopted ASU 2023-07 effective January 1, 2024, and has determined that the adoption of this guidance had no impact on its unaudited condensed consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which amends the disclosure to address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information and includes certain other amendments to improve the effectiveness of income tax disclosures. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024, and early adoption and retrospective application are permitted. Early adoption is permitted. The Company is currently assessing potential impacts of ASU 2023-09 and does not expect the adoption of this guidance will have a material impact on its unaudited condensed consolidated financial statements and disclosures.
NOTE 3. PREPAID EXPENSES AND OTHER CURRENT ASSETS
As of March 31, 2024 and December 31, 2023, the prepaid expenses and other current assets of the Company consisted of the following:
SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS
| March 31, 2024 | December 31, 2023 | |||||||
| Prepaid research and development | $ | $ | ||||||
| Prepaid value-added taxes | ||||||||
| Prepaid insurance | ||||||||
| Prepaid other | ||||||||
| Deferred offering costs (see Note 7) | ||||||||
| Franchise tax receivable | ||||||||
| R&D tax incentive receivable | ||||||||
| Total prepaid expenses and other current assets | $ | $ | ||||||
| 10 |
ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. INTANGIBLE ASSETS
As of March 31, 2024, the Company’s intangible assets consisted of:
SCHEDULE OF INTANGIBLE ASSETS
| Definite lived intangible assets | ||||
| Balance at January 1, 2024 | $ | |||
| Amortization | ( | ) | ||
| Balance at March 31, 2024 | $ |
For
identified definite lived intangible assets, there was
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following assets which are located in Calgary, Canada, with all amounts converted into U.S. dollars:
SCHEDULE OF PROPERTY PLANT AND EQUIPMENT NET OF ACCUMULATED DEPRECIATION
| March 31, 2024 | December 31, 2023 | |||||||
| Lab equipment | $ | $ | ||||||
| Computer equipment and leasehold improvements | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net of accumulated depreciation | $ | $ | ||||||
Depreciation
expense was $
NOTE 6. ACCRUED LIABILITIES
As of March 31, 2024 and December 31, 2023, the accrued liabilities of the Company consisted of the following:
SCHEDULE OF ACCRUED LIABILITIES
| March 31, 2024 | December 31, 2023 | |||||||
| Product development | $ | $ | ||||||
| Accrued salaries, wages, and bonuses | ||||||||
| Professional fees | ||||||||
| Accrued restructuring costs (see Note 8) | ||||||||
| Accrued income taxes | ||||||||
| Patent costs | ||||||||
| Total accrued expenses | $ | $ | ||||||
| 11 |
ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS
Equity Distribution Agreement
On
September 1, 2023, the Company entered into the Equity Distribution Agreement (the “Distribution Agreement”), with Canaccord
Genuity LLC (“Canaccord”), pursuant to which the Company may offer and sell from time to time, through Canaccord as sales
agent and/or principal, shares of common stock of the Company, par value $ per share having an aggregate offering price of up to
$
During
the three months ended March 31, 2024, the Company issued
shares of common stock for gross proceeds of $
On
December 28, 2023, the Company entered into warrant exercise inducement offer letters (the “Inducement Letters”) with certain
holders (the “Holders”) of the February 2022 Post-Modification Warrants and RD and PIPE preferred investment options to purchase
shares of the Company’s common stock (the “Existing Warrants and Investment Options”) pursuant to which the Holders
agreed to exercise for cash their Existing Warrants and Investment Options to purchase shares of the Company’s common
stock, in the aggregate, at a reduced exercised price of $
On December 28, 2023, the Company entered into warrant exercise inducement offer letters (the “Inducement Letters”) with certain holders of warrants and preferred investment options. The Inducement Letters prohibit the Company from entering into any variable rate transaction as defined in the Inducement Letters, including the issuance of (1) any variable priced debt or equity securities or (2) transactions whereby the Company may issue securities at a future determined price, such as through an at-the-market offering or an equity line of credit. The variable rate transaction restriction expires after six-month from the closing date of December 28, 2023 for the Inducement Letters for an issuance through an at-the-market offering, and one-year for the remaining variable rate transactions.
On
March 8, 2024, the Company entered into a series of common stock purchase agreements for the issuance in a registered direct offering
of shares of the Company’s common stock to the Holders of the Inducement Warrants. The issuance was made in exchange for
the permanent and irrevocable waiver of the variable rate transaction limitation solely with respect to the entry into and/or issuance
of shares of common stock in an at the market offering contained in the Inducement Letters. The fair value of the shares issued for consideration
of waiving the variable rate transaction limitation was $
Lincoln Park Equity Line
On
November 3, 2023, the Company entered into a Purchase Agreement (the “Purchase Agreement”) and a registration rights agreement
(the “Registration Rights Agreement”), with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which
Lincoln Park has committed to purchase up to $
Under
the terms and subject to the conditions of the Purchase Agreement, the Company has the right, but not the obligation, to sell to Lincoln
Park, and Lincoln Park is obligated to purchase up to $
Because the purchase price per share to be paid by Lincoln Park for the shares of Common Stock that the Company may elect to sell to Lincoln Park under the Purchase Agreement, if any, will fluctuate based on the market prices of the Company’s Common Stock at the time the Company elects to sell shares to Lincoln Park pursuant to the Purchase Agreement, if any, it is not possible for us to predict the number of shares of Common Stock that the Company will sell to Lincoln Park under the Purchase Agreement, the purchase price per share that Lincoln Park will pay for shares purchased from us under the Purchase Agreement, or the aggregate gross proceeds that the Company will receive from those purchases by Lincoln Park under the Purchase Agreement.
As
of March 31, 2024 and December 31, 2023, the Company had issued no shares of common stock through the Equity Line and capitalized deferred
offering costs of $
Subsequent to March 31, 2024, the variable rate transaction limitation on the equity line of credit from the Inducement Warrants (as defined in the Equity Distribution Agreement section) was waived. See Note 9.
Stock Options
Amendment to 2020 Long-Term Incentive Plan
On November 2, 2023, the stockholders approved the amendments to the 2020 Long-Term Incentive Plan, which was approved by the Board on August 8, 2023 (the “Amended Incentive Plan”). The Amended Incentive Plan (i) increased the number of authorized shares reserved for issuance under the Amended Incentive Plan to a maximum of , subject to adjustment, and (ii) removed the Evergreen Provision implemented in the Plan Amendment. During the first quarter of 2024, the Board approved an equitable adjustment to increase the number of shares available under the Plan by shares. As of March 31, 2024, the total number of shares available for grant under the Incentive Plan was .
| 12 |
ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SCHEDULE OF STOCK OPTION
| Number of Shares | Weighted Average Exercise Price | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | ||||||||||||||||
| Outstanding at December 31, 2023 | $ | $ | $ | |||||||||||||||||
| Granted | $ | $ | — | |||||||||||||||||
| Forfeited | ( | ) | $ | $ | — | |||||||||||||||
| Outstanding at March 31, 2024 | $ | $ | $ | |||||||||||||||||
| Exercisable at March 31, 2024 | $ | $ | $ | |||||||||||||||||
The Company’s stock based compensation expense, recorded within general and administrative expense in the unaudited condensed consolidated statement of operations and comprehensive loss, related to stock options for the three months ended March 31, 2024 and 2023 was $ and $, respectively.
As of March 31, 2024, the Company had $ in unamortized stock option expense, which will be recognized over a weighted average period of years.
Issuance of Restricted Stock Units
The Company’s activity in restricted stock units was as follows for the three months ended March 31, 2024:
SCHEDULE OF RESTRICTED STOCK UNITS AND AWARDS ACTIVITY
| Number of shares | Weighted average fair value | |||||||
| Non-vested at December 31, 2023 | $ | |||||||
| Granted | $ | |||||||
| Forfeited | ( | ) | $ | |||||
| Vested | ( | ) | $ | |||||
| Non-vested at March 31, 2024 | $ | |||||||
For the three months ended March 31, 2024 and March 31, 2023, the Company recorded $ and $, respectively, in stock-based compensation expense related to restricted stock units, which is a component of both general and administrative and research and development expenses in the unaudited condensed consolidated statement of operations and comprehensive loss. As of March 31, 2024, the Company had unamortized stock-based compensation costs related to restricted stock units of $ which will be recognized over a weighted average period of years. As of March 31, 2024, restricted stock units are vested without shares of common stock being issued, with all of these shares due as of March 31, 2024.
SCHEDULE OF STOCK-BASED COMPENSATION FOR RESTRICTED STOCK UNITS
| Stock-based compensation expense for RSUs: | 2024 | 2023 | ||||||
| Three Months Ended March 31, | ||||||||
| Stock-based compensation expense for RSUs: | 2024 | 2023 | ||||||
| General and administrative | $ | $ | ||||||
| Research and development | ||||||||
| Total | $ | $ | ||||||
| Stock-based compensation expense for RSUs | $ | $ | ||||||
| 13 |
ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Warrants and Preferred Investment Options
The following table summarizes information about shares issuable under warrants outstanding at March 31, 2024:
SCHEDULE OF WARRANTS OUTSTANDING
| Warrant shares outstanding | Weighted average exercise price | Weighted average remaining life | Intrinsic value | |||||||||||||
| Outstanding at December 31, 2023 | $ | $ | ||||||||||||||
| Exercised | ( | ) | — | $ | — | |||||||||||
| Outstanding at March 31, 2024 | $ | $ | ||||||||||||||
| Exercisable at March 31, 2024 | $ | $ | ||||||||||||||
The following table summarizes information about investment options outstanding at March 31, 2024:
SCHEDULE OF WARRANTS AND INVESTMENT OPTIONS
| Investment options outstanding | Weighted average exercise price | Weighted average remaining life | Intrinsic value | |||||||||||||
| Outstanding at December 31, 2023 | $ | $ | ||||||||||||||
| Outstanding at March 31, 2024 | $ | $ | ||||||||||||||
| Exercisable at March 31, 2024 | $ | $ | ||||||||||||||
NOTE 8. COMMITMENTS AND CONTINGENCIES
The Company is periodically involved in legal proceedings, legal actions and claims arising in the normal course of business. Management believes that the outcome of such legal proceedings, legal actions and claims will not have a significant adverse effect on the Company’s financial position, results of operations or cash flows.
Australian Subsidiary Research and Development
On
March 23, 2023, the Company issued a press release announcing the selection of Australian CRO, Avance Clinical, in preparation for
Phase 1 Study of EB-002, the Company’s lead candidate targeting the treatment of anxiety disorders. Under the agreement,
Avance Clinical will manage the Phase 1 clinical trial of EB-002 in coordination with the Company’s newly established
Australian subsidiary, Enveric Therapeutics Pty, Ltd. The Phase 1 clinical trial is designed as a multi-cohort, dose-ascending study
to measure the safety and tolerability of EB-002. EB-373, a next-generation proprietary psilocin prodrug, has been recognized as a
New Chemical Entity (NCE) by Australia’s Therapeutic Goods Administration (TGA) and is currently in preclinical development
targeting the treatment of anxiety disorder. The total cost of the Avance Clinical contract is approximately
| 14 |
ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
According to Australian tax law, the Company is allowed an R&D tax credit that reduces a company’s tax
bill in Australia for expenses incurred in R&D subject to certain requirements. The Company’s Australian subsidiary submits
R&D tax credit requests annually for research and development expenses incurred. At March 31, 2024 and December 31, 2023, the Company
had a research and development tax credit receivable of $
Purchase agreement with Prof. Zvi Vogel and Dr. Ilana Nathan
On
December 26, 2017, Jay Pharma entered into a purchase agreement with Prof. Zvi Vogel and Dr. Ilana Nathan (the “Vogel-Nathan Purchase
Agreement”), pursuant to which Jay Pharma was assigned ownership rights to certain patents, which were filed and unissued as of
the date of the Vogel-Nathan Purchase Agreement. The Vogel-Nathan Purchase Agreement includes a commitment to pay a one-time milestone
totaling $
Other Consulting and Vendor Agreements
The
Company has entered into a number of agreements and work orders for future consulting, clinical trial support, and testing services,
with terms ranging between 1 and 12 months. These agreements, in aggregate, commit the Company to approximately $
Reduction in Force/Restructuring
In
May 2023, the Company entered into a cost reduction plan, including a reduction in force (“RIF”) of approximately
In June 2023, the Company entered into a separation agreement with Avani Kanubaddi, the Company’s President and Chief Operating Officer (the “Kanubaddi Separation Agreement”). In accordance with the Kanubaddi Separation Agreement, Mr. Kanubaddi received salary and benefits that is paid out in twelve monthly installments beginning in July 2023, was eligible for his 2023 performance bonus, which was not achieved, and any outstanding restricted stock units retained their vesting conditions.
The following table summarizes the Reduction in Force/Restructuring activity and ending balance at March 31, 2024 for the remaining severance payments included in accrued expenses in the consolidated balance sheet:
SCHEDULE OF REDUCTION IN FORCE/RESTRUCTURING ACTIVITY
| Accrued Restructuring Costs | ||||
| January 1, 2024 beginning balance | $ | |||
| Restructuring costs paid | ( | ) | ||
| March 31, 2024 ending balance | $ | |||
NOTE 9. SUBSEQUENT EVENTS
On May 3, 2024, the Company entered into a series of common stock purchase agreements (the “Purchase Agreements”) for the issuance in a registered direct offering of an aggregate of shares of the Company’s common stock, to certain institutional investors. The issuance was made in exchange for the permanent and irrevocable waiver of the variable rate transaction limitation with respect to any existing or future agreement by the Company to effect any issuance of shares and issue such shares thereunder, as contained in those certain Inducement Offer Letters, dated December 28, 2023, between the Company and those certain institutional investors. The Company did not receive any net proceeds in connection with the offering.
The Purchase Agreements contain customary representations and warranties and certain indemnification obligations of the Company. The Purchase Agreements also restrict the Company from issuing, entering into any agreement to issue, or announcing the issuance of the Company’s common stock from the date of the Purchase Agreements until the earlier of 30 days after entering into the agreements or at such time as shares of the Company’s common stock have traded in the open market. The closing of the issuance of the Shares pursuant to the Purchase Agreements closed on May 3, 2024. On May 8, 2024, over shares of the Company’s common stock were traded in the open market.
On May 13, 2024, the Company issued shares and received $
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Item 2. Management’s discussion and analysis of financial condition and results of operations
The information set forth below should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Unless stated otherwise, references in this Quarterly Report on Form 10-Q to “us,” “we,” “our,” or our “Company” and similar terms refer to Enveric Biosciences, Inc., a Delaware corporation.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking terms such as “anticipates,” “assumes,” “believes,” “can,” “could,” “estimates,” “expects,” “forecasts,” “guides,” “intends,” “may,” “plans,” “seeks,” “projects,” “targets,” and “would” or the negative of such terms or other variations on such terms or comparable terminology. Such forward-looking statements include, but are not limited to, future financial and operating results, the company’s plans, objectives, expectations and intentions and other statements that are not historical facts. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Form 10-Q and are subject to a number of risks, uncertainties, and assumptions that could cause actual results to differ materially from our historical experience and our present expectations, or projections described under the sections in this Form 10-Q entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These risks and uncertainties include, but are not limited to:
| ● | our dependence on the success of our prospective product candidates, which are in the early stages of development and may not reach a particular stage in development, receive regulatory approval, or be successfully commercialized; | |
| ● | potential difficulties that may delay, suspend, or scale back our efforts to advance additional early research programs through preclinical development and investigational new drug (“IND”) application filings and into clinical development; | |
| ● | the risk that the cost savings, synergies and growth from our combination with MagicMed Industries Inc. and the successful use of the rights and technologies acquired in the combination may not be fully realized or may take longer to realize than expected; | |
| ● | the limited study on the effects of medical cannabinoids and psychedelics, and the chance that future clinical research studies may lead to conclusions that dispute or conflict with our understanding and belief regarding the medical benefits, viability, safety, efficacy, dosing, and social acceptance of cannabinoids or psychedelics; | |
| ● | the expensive, time-consuming, and uncertain nature of clinical trials, which are susceptible to change, delays, termination, and differing interpretations; | |
| ● | the ability to establish that potential products are efficacious or safe in preclinical or clinical trials; | |
| ● | the fact that our current and future preclinical and clinical studies may be conducted outside the United States, and the United States Food and Drug Administration may not accept data from such studies to support any new drug applications we may submit after completing the applicable developmental and regulatory prerequisites; | |
| ● | our ability to effectively and efficiently build, maintain and legally protect our molecular derivatives library so that it can be an essential building block from which those in the biotech industry can develop new patented products; | |
| ● | our ability to establish or maintain collaborations on the development of therapeutic candidates; | |
| ● | our ability to obtain appropriate or necessary governmental approvals to market potential products; |
| 16 |
| ● | our ability to manufacture product candidates on a commercial scale or in collaborations with third parties; | |
| ● | our significant and increasing liquidity needs and potential requirements for additional funding; | |
| ● | our ability to obtain future funding for developing products and working capital and to obtain such funding on commercially reasonable terms; | |
| ● | legislative changes related to and affecting the healthcare system, including, without limitation, changes and proposed changes to the Patient Protection and Affordable Care Act; | |
| ● | the intense competition we face, often from companies with greater resources and experience than us; | |
| ● | our ability to retain key executives and scientists; | |
| ● | the ability to secure and enforce legal rights related to our products, including intellectual property rights and patent protection; | |
| ● | political, economic, and military instability in Israel which may impede our development programs; | |
| ● | our success at managing the risks involved in the foregoing; and | |
| ● | the risk of loss in excess of insurance limitations on funds held in U.S Banking Institutions. |
For a more detailed discussion of these and other factors that may affect our business and that could cause the actual results to differ materially from those projected in these forward-looking statements, see the risk factors and uncertainties set forth in Part II, Item 1A of this Form 10-Q and Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2023. Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise, except as required by law.
Business Overview
We are a biotechnology company dedicated to the development of novel neuroplastogenic small-molecule therapeutics for the treatment of depression, anxiety, and addiction disorders. Leveraging our unique discovery and development platform, the Psybrary™, we have created a robust intellectual property portfolio of new chemical entities for specific mental health indications. Our lead program, the EVM201 Series, comprises next generation synthetic prodrugs of the active metabolite, psilocin. We are developing the first product from the EVM201 Series – EB-002 – for the treatment of psychiatric disorders. We are also advancing its second program, the EVM301 Series – EB-003 – expected to offer a first-in-class, new approach to the treatment of difficult-to-address mental health disorders, mediated by the promotion of neuroplasticity without also inducing hallucinations in the patient.
Psychedelics
Following our amalgamation with MagicMed completed in September 2021 (the “Amalgamation”), we have continued to pursue the development of MagicMed’s proprietary psychedelic derivatives library, the Psybrary™ which we believe will help us to identify and develop the right drug candidates needed to address mental health challenges, including anxiety. We synthesize novel versions of classic psychedelics, such as psilocybin, N,N-Dimethyltryptamine (DMT), mescaline and MDMA, using a mixture of chemistry and synthetic biology, resulting in the expansion of the Psybrary™, which includes 15 patent families with over a million potential variations and hundreds of synthesized molecules. Within the Psybrary™ we have three different types of molecules, Generation 1 (classic psychedelics), Generation 2 (pro-drugs), and Generation 3 (new chemical entities). The Company has created over 1,000 novel psychedelic molecular compounds and derivatives (“Psychedelic Derivatives”) that are housed in the Psybrary™. Our current focus is develop our lead molecules EB-002 and EB-003 and to out-license other molecules from the Psybrary™.
Recent Developments
Equity Distribution Agreement
During the three months ended March 31, 2024, the Company issued 1,668,000 shares of common stock for gross proceeds of $2,392,502 under the Distribution Agreement, and charged offering costs of $583,713 to additional paid in capital on the unaudited condensed consolidated balance sheet. As of March 31, 2024 and December 31, 2023, there were deferred offering costs related to the Distribution Agreement of $0 and $171,944, respectively.
On December 28, 2023, the Company entered into warrant exercise inducement offer letters (the “Inducement Letters”) with certain holders (the “Holders”) of the February 2022 Post-Modification Warrants and RD and PIPE preferred investment options to purchase shares of the Company’s common stock (the “Existing Warrants and Investment Options”) pursuant to which the Holders agreed to exercise for cash their Existing Warrants and Investment Options to purchase 1,122,000 shares of the Company’s common stock, in the aggregate, at a reduced exercised price of $1.37 per share (from an original exercise price of $7.78 per share), in exchange for the Company’s agreement to issue new warrants (the “Inducement Warrants”) to purchase up to 2,244,000 shares of the Company’s common stock (the “Inducement Warrant Shares”), and the Holders to make a cash payment of $0.125 per Inducement Warrant share for total proceeds of $280,500. In January 2024, the Company received aggregate gross proceeds of $1,817,640 from the exercise of the Existing Warrants and Investment Options by the Holders and the sale of the Inducement Warrants. Because the Existing Warrants and Investment Options by the Holders and the sale of the Inducement Warrants that exercised on December 28, 2023 and unsettled until January 2024, the proceeds are included in the condensed consolidated balance sheet as a subscription receivable as of December 31, 2023. As of December 31, 2023, 418,000 shares of the Existing Warrants and Investment Options exercised were considered issued as the Company had the enforceable right to the obtain the cash proceeds, which were in-transit, and the Holders were no longer able to rescind the exercise election. Due to the beneficial ownership limitation provisions, 704,000 shares of the Existing Warrants and Investment Options exercised were initially unissued and held in abeyance for the benefit of the Holder until notice is received from the Holder that the shares may be issued in compliance with such limitation. During the three months ended March 31, 2024, the Company issued all 704,000 shares of common stock of the 704,000 shares of Existing Warrants and Investment Options exercised that were held in abeyance due to the beneficial ownership limitation provisions.
On December 28, 2023, the Company entered into warrant exercise inducement offer letters (the “Inducement Letters”) with certain holders of warrants and preferred investment options. The Inducement Letters prohibit the Company from entering into any variable rate transaction as defined in the Inducement Letters, including the issuance of (1) any variable priced debt or equity securities or (2) transactions whereby the Company may issue securities at a future determined price, such as through an at-the-market offering or an equity line of credit. The variable rate transaction restriction expires after six-month from the closing date of December 28, 2023 for the Inducement Letters for an issuance through an at-the-market offering, and one-year for the remaining variable rate transactions.
On March 8, 2024, the Company entered into a series of common stock purchase agreements for the issuance in a registered direct offering of 228,690 shares of the Company’s common stock, par value $0.01 per share to the Holders of the Inducement Warrants. The issuance was made in exchange for the permanent and irrevocable waiver of the variable rate transaction limitation solely with respect to the entry into and/or issuance of shares of common stock in an at the market offering contained in the Inducement Letters. The fair value of the shares issued for consideration of waiving the variable rate transaction limitation was $322,453 and was charged to additional paid in capital on the unaudited condensed consolidated balance sheet as an offering cost related to the Distribution Agreement.
Inducement Warrants
On February 29, 2024, a Holder of the Inducement Warrants, exercised 1,954,000 Inducement Warrants at an exercise price of $1.37 per share for 1,954,000 shares of the Company’s common stock for total gross proceeds of $2,676,980.
| 17 |
Results of Operations
The following table sets forth information comparing the components of net loss for the three months ended March 31, 2024 and 2023:
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating expenses | ||||||||
| General and administrative | $ | 1,933,753 | $ | 2,948,400 | ||||
| Research and development | 458,155 | 1,825,792 | ||||||
| Depreciation and amortization | 85,409 | 86,486 | ||||||
| Total operating expenses | 2,477,317 | 4,860,678 | ||||||
| Loss from operations | (2,477,317 | ) | (4,860,678 | ) | ||||
| Other (expense) income | ||||||||
| Change in fair value of warrant liabilities | 10,039 | 50,657 | ||||||
| Change in fair value of investment option liability | 11,398 | 119,505 | ||||||
| Change in fair value of derivative liability | — | 13,000 | ||||||
| Interest income (expense), net | 696 | (11 | ) | |||||
| Total other income | 22,133 | 183,151 | ||||||
| Net loss before income taxes | $ | (2,455,184 | ) | $ | (4,677,527 | ) | ||
| Income tax expense | (1,731 | ) | 0 | |||||
| Net loss | $ | (2,456,915 | ) | $ | (4,677,527 | ) | ||
General and Administrative Expenses
Our general and administrative expenses decreased to $1,933,753 for the three months ended March 31, 2024 from $2,948,400 for the three months ended March 31, 2023, a decrease of $1,014,647, or 34%. This change was primarily driven by decreases in consulting expenses of $339,912, salaries and wages of $235,940, stock compensation expense of $154,654 and accounting fees of $79,031, all primarily related to the second quarter 2023 reduction in force and no longer pursuing the transfer and spin-off its cannabinoid clinical development pipeline assets to Akos Biosciences, Inc., and Delaware franchise taxes of $196,826 partially offset by an increase in director fees of $134,875.
Research and Development Expenses
Our research and development expense for the three months ended March 31, 2024 was $458,155 as compared to $1,825,792 for the three months ended March 31, 2023 with a decrease of $1,367,637, or approximately 75%. This decrease was primarily driven by a decrease salaries and wages of $765,365, research costs of $323,973 and the gain realized related to the Australian R&D tax incentive of $399,987.
Depreciation and Amortization Expense
Depreciation and amortization expense for the three months ended March 31, 2024 was $85,409 as compared to $86,486 for the three months ended March 31, 2023, with a decrease of $1,077, or approximately 1%.
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Change in Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities for the three months ended March 31, 2024 resulted in income of $10,039 as compared to $50,657 for the three months ended March 31, 2023. The change in fair value of warrant liabilities is due to the exercise of 122,000 of warrants on December 28, 2023, resulting in less warrants outstanding and re-valued at March 31, 2024, as well as, the change in the closing price of Common Stock at the end of each period, as compared to the closing price of Common Stock at the beginning of each period with a strong inverse relationship between changes in fair value of warrant liabilities and the trading price of Common Stock.
Change in Fair Value of Investment Option Liability
Change in fair value of investment option liability the three months ended March 31, 2024 resulted in income of $11,398 as compared to $119,505 during the three months ended March 31, 2023. The change in fair value is due to the exercise of 1,000,000 investment options on December 28, 2023, resulting in less investment options re-valued at March 31, 2024 and a significant decrease in the Company’s stock price for the three months ended March 31, 2024.
Change in Fair Value of Derivative Liability
The Company’s change in fair value of derivative liability is due to the May 2023 redemption which ceased the probability of occurrence of the Akos spin-off and Akos Series A Preferred Stock redemption.
Going Concern, Liquidity and Capital Resources
The Company has incurred a loss since inception resulting in an accumulated deficit of $98,956,433 as of March 31, 2024 and further losses are anticipated in the development of its business. Further, the Company had operating cash outflows of $2,598,347 for the three months ended March 31, 2024. For the three months ended March 31, 2024, the Company had a loss from operations of $2,477,317. Since inception, being a research and development company, the Company has not yet generated revenue and the Company has incurred continuing losses from its operations. The Company’s operations have been funded principally through the issuance of debt and equity. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these unaudited condensed consolidated financial statements.
In assessing the Company’s ability to continue as a going concern, the Company monitors and analyzes its cash and its ability to generate sufficient cash flow in the future to support its operating and capital expenditure commitments. At March 31, 2024, the Company had cash of $6,356,036 and working capital of $5,860,884. The Company’s current cash on hand is insufficient to satisfy its operating cash needs for the 12 months following the filing of this Quarterly Report on Form 10-Q. These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year after the date the financial statements are issued. Management’s plan to alleviate the conditions that raise substantial doubt include raising additional working capital through public or private equity or debt financings or other sources, the Purchase Agreement with Lincoln Park, subject to registration, and may include additional collaborations with third parties as well as disciplined cash spending. Adequate additional financing may not be available to us on acceptable terms, or at all. Should the Company be unable to raise sufficient additional capital, the Company may be required to undertake cost-cutting measures including delaying or discontinuing certain operating activities.
As a result of these factors, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date of the unaudited condensed consolidated financial statements. The Company’s unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Cash Flows
Since inception, we have primarily used our available cash to fund our product development and operations expenditures.
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Cash Flows for the Three Months Ended March 31, 2024 and 2023:
The following table sets forth a summary of cash flows for the years presented:
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (2,598,347 | ) | $ | (5,137,009 | ) | ||
| Net cash used in investing activities | — | (5,169 | ) | |||||
| Net cash provided by financing activities | 6,658,269 | — | ||||||
| Effect of Foreign Exchange Rate on Changes on Cash | 8,137 | (19,893 | ) | |||||
| Net increase (decrease) in cash | $ | 4,068,059 | $ | (5,162,071 | ) | |||
Operating Activities
Net cash used in operating activities was $2,598,347 during the three months ended March 31, 2024, which consisted primarily of a net loss adjusted for non-cash items of $2,041,455 and an increase in prepaid expenses of $759,289, offset by an increase in accounts payable and accrued liabilities of $202,397.
Net cash used in operating activities was $5,137,009 during the three months ended March 31, 2023, which consisted primarily of a net loss adjusted for non-cash items of $4,214,521, an increase in prepaid expenses and other current assets of $1,549,354, and a decrease in right-of-use operating lease asset and obligation of $26,846, offset by an increase in accounts payable and accrued liabilities of $653,712.
Investing Activities
Net cash used in investing activities was $0 during the three months ended March 31, 2024.
Net cash used in investing activities was $5,169 during the three months ended March 31, 2023, which consisted of the purchase of property and equipment.
Financing Activities
Net cash provided by financing activities was $6,658,269 during the three months ended March 31, 2024, which consisted of $1,817,640 from the proceeds received from the stock subscription receivable, $2,676,980 for the exercise of the Inducement Warrants, and $2,307,707 for the common stock sold under the Distribution agreement, net of offering costs, and offset by $144,058 offering costs previously accrued for the Inducement Warrants.
Net cash provided by financing activities was $0 during the three months ended March 31, 2023.
Critical Accounting Estimates
Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, costs and expenses and related disclosures. Our critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in them have had or are reasonably likely to have a material effect on our financial condition or results of operations. Accordingly, actual results could differ materially from our estimates. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Our most critical accounting estimate includes determining the accruals associated with third party providers supporting research and development efforts.
There have been no material changes to our critical accounting estimates as compared to the critical accounting estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
| 20 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk
From inception through March 31, 2024, the Company’s reporting currency is the United States dollar while the functional currency of certain of the Company’s subsidiaries is the Canadian dollar and Australian dollar. For the reporting periods ended March 31, 2024 and March 31, 2023, the Company engaged in a number of transactions denominated in Canadian dollars and Australian dollars. As a result, the Company is subject to exposure from changes in the exchange rates of the Canadian dollar and Australian dollar against the U.S. dollar.
The Company has not entered into any financial derivative instruments that expose it to material market risk, including any instruments designed to hedge the impact of foreign currency exposures. The Company may, however, hedge such exposure to foreign currency exchange fluctuations in the future.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that the information we are required to disclose in reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified under the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The matters that management identified in our Annual Report for the year ended December 31, 2023, continued to exist and were still considered material weaknesses in our internal control over financial reporting at March 31, 2024.
As required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer (our principal executive) and Chief Financial Officer (our principal financial officer and principal accounting officer) carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2024. Based on this evaluation, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in paragraph (e) of Rules 13a-15 and 15d-15 under the Exchange Act) were not effective as of March 31, 2024.
Management’s Remediation Plan
As previously discussed in our Annual Report for the year ended December 31, 2023, management had concluded that our internal control over financial reporting was not effective as of December 31, 2023, because management identified inadequate segregation of duties to ensure the processing, review, and authorization of all transactions, including non-routine transactions resulting in deficiencies, which, in aggregate, amounted to a material weakness in the Company’s internal control over financial reporting.
As of March 31, 2024, there were control deficiencies that constituted a material weakness in our internal control over financial reporting. Management has taken, and is taking steps to strengthen our internal control over financial reporting: we have conducted evaluation of the material weakness to determine the appropriate remedy and have established procedures for documenting disclosures and disclosure controls.
While we have taken certain actions to address the material weaknesses identified, additional measures may be necessary as we work to improve the overall effectiveness of our internal controls over financial reporting.
Changes in Internal Control over Financial Reporting
Other than the changes discussed above in the Remediation Plan, there have been no other changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-(f) of the Exchange Act) that occurred during quarter ending March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 21 |
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company may be periodically involved in legal proceedings, legal actions and claims arising in the ordinary course of business. We do not have any pending litigation that, separately or in the aggregate, would, in the opinion of management, have a material adverse effect on our financial position, results of operations or cash flows.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on March 26, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations of financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in the Company’s Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
INDEX TO EXHIBITS
| 22 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ENVERIC BIOSCIENCES, INC. | ||
| May 14, 2024 | By: | /s/ Dr. Joseph Tucker |
| Joseph Tucker, Ph.D | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| May 14, 2024 | By: | /s/ Kevin Coveney |
| Kevin Coveney | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
| 23 |
EXHIBIT 31.1
CERTIFICATION PURSUANT to Exchange Act Rule 13a-14(a)/15d-14(a) as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Dr. Joseph Tucker, Chief Executive Officer of Enveric Biosciences, Inc., certify that:
| 1. | I have reviewed this report on Form 10-Q of Enveric Biosciences, Inc. (the “registrant”); | ||
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | ||
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | ||
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | ||
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | ||
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | ||
| Date: May 14, 2024 | /s/ Dr. Joseph Tucker |
| Joseph Tucker, Ph.D. | |
| Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION PURSUANT to Exchange Act Rule 13a-14(a)/15d-14(a) as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Kevin Coveney, Chief Financial Officer of Enveric Biosciences, Inc., certify that:
| 1. | I have reviewed this report on Form 10-Q of Enveric Biosciences, Inc. (the “registrant”); | ||
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | ||
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | ||
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | ||
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | ||
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | ||
| Date: May 14, 2024 | /s/ Kevin Coveney |
| Kevin Coveney | |
| Chief Financial Officer (Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Enveric Biosciences, Inc. (the “Issuer”) on Form 10-Q for the period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(i) the Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
(ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Issuer.
Dated: May 14, 2024
| By: | /s/ Dr. Joseph Tucker | |
| Joseph Tucker, Ph.D. | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Kevin Coveney | |
| Kevin Coveney | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |