Lunai Bioworks Inc 10-Q for FY2021 Q3
Lunai Bioworks Inc. (LNAI)
About this 10-Q
Lunai Bioworks Inc filed this 10-Q on May 17, 2021, covering the quarter ended March 31, 2021 (FY2021 Q3).
Headline figures
Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $4.03M
- compared with a net loss of $1.51M a year earlier
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
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 001-38758
Enochian Biosciences Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 45-2259340 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification Number) | |
| 2080 Century Park East, Suite
906 Los Angeles, CA |
90067 | |
| (Address of principal executive offices) | (Zip Code) |
+1(305) 918-1980
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
| Common Stock, par value $0.0001 per share | ENOB | The Nasdaq Stock Market LLC |
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. Yes ☒ No ☐
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 for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See 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 | ☐ |
| Non-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 17, 2021, the number of shares of the registrant’s common stock outstanding was 47,795,952.
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
- INDEX -
| i |
PART I – FINANCIAL INFORMATION
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, the financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.
The results for the period ended March 31, 2021 are not necessarily indicative of the results of operations for the full year. These financial statements and related footnotes should be read in conjunction with the financial statements and footnotes thereto included in the Company’s Form 10-K for the fiscal year ended June 30, 2020, filed with the Securities and Exchange Commission on September 23, 2020.
| 1 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | June 30, | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 4,526,284 | $ | 8,696,361 | ||||
| Other receivables | — | 1,982 | ||||||
| Prepaid expenses | 394,887 | 242,866 | ||||||
| Total Current Assets | 4,921,171 | 8,941,209 | ||||||
| Property and equipment, net | 708,667 | 778,118 | ||||||
| OTHER ASSETS | ||||||||
| Definite life intangible assets, net | 69,225 | 77,323 | ||||||
| Indefinite life intangible assets | 154,824,000 | 154,824,000 | ||||||
| Goodwill | 11,640,000 | 11,640,000 | ||||||
| Deposits and other assets | 30,484 | 137,550 | ||||||
| Right of use assets | 1,503,951 | 1,703,859 | ||||||
| Total Other Assets | 168,067,660 | 168,382,732 | ||||||
| TOTAL ASSETS | $ | 173,697,498 | $ | 178,102,059 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable – trade | $ | 504,862 | $ | 592,877 | ||||
| Accrued expenses | 313,374 | 470,636 | ||||||
| Other short term liabilities | 302,992 | — | ||||||
| Current portion of operating lease liabilities | 287,025 | 271,285 | ||||||
| Total Current Liabilities | 1,408,253 | 1,334,798 | ||||||
| NON-CURRENT LIABILITIES | ||||||||
| Contingent consideration liability | 2,951,599 | 3,182,434 | ||||||
| Leases liabilities, non-current | 1,314,095 | 1,531,779 | ||||||
| Convertible notes payable-long term | 1,200,000 | 1,200,000 | ||||||
| Notes payable – long term, net of discount | 4,504,840 | 4,580,787 | ||||||
| Total Liabilities | $ | 11,378,787 | 11,829,798 | |||||
| Commitments and Contingencies | — | — | ||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding | — | — | ||||||
| Common stock, par value $0.0001, 100,000,000 shares authorized 47,795,952 shares issued and outstanding at March 31, 2021; 46,497,409 shares issued and outstanding at June 30, 2020 | 4,780 | 4,650 | ||||||
| Additional paid-in capital | 235,875,627 | 230,497,225 | ||||||
| Accumulated deficit | (73,548,774 | ) | (64,188,198 | ) | ||||
| Accumulated other comprehensive loss | (12,922 | ) | (41,416 | ) | ||||
| Total Stockholders’ Equity | 162,318,711 | 166,272,261 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 173,697,498 | $ | 178,102,059 | ||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 2 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues | $ | — | $ | — | $ | — | $ | — | ||||||||
| Cost of Goods Sold | — | — | — | — | ||||||||||||
| Gross profit (Loss) | — | — | — | — | ||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | 1,943,498 | 1,486,561 | 5,661,409 | 5,622,721 | ||||||||||||
| Research and development | 1,079,607 | 2,307,336 | 3,464,451 | 3,388,996 | ||||||||||||
| Depreciation and amortization | 30,825 | 35,764 | 92,043 | 78,912 | ||||||||||||
| Total Operating Expense | (3,053,930 | ) | 3,829,661 | 9,217,903 | 9,090,629 | |||||||||||
| LOSS FROM OPERATIONS | (3,053,930 | ) | (3,829,661 | ) | (9,217,903 | ) | (9,090,629 | ) | ||||||||
| Other Income (Expense) | ||||||||||||||||
| Change in fair value of contingent consideration | (882,498 | ) | 2,310,202 | 38,313 | 1,450,202 | |||||||||||
| Interest expense | (96,347 | ) | (12,030 | ) | (282,086 | ) | (12,030 | ) | ||||||||
| (Loss) gain on currency transactions | (221 | ) | (371 | ) | (32,510 | ) | 148,936 | |||||||||
| Gain on settlement | — | 5,000 | — | 140,000 | ||||||||||||
| Interest and other income | 1,437 | 12,371 | 8,809 | 45,324 | ||||||||||||
| Total Other Income (Expense) | (977,629 | ) | 2,315,172 | (267,474 | ) | 1,772,432 | ||||||||||
| Loss Before Income Taxes | (4,031,559 | ) | (1,514,489 | ) | (9,485,377 | ) | (7,318,197 | ) | ||||||||
| Income Tax Benefit | 849 | — | 124,801 | — | ||||||||||||
| NET LOSS | $ | (4,030,710 | ) | $ | (1,514,489 | ) | $ | (9,360,576 | ) | $ | (7,318,197 | ) | ||||
| BASIC AND DILUTED LOSS PER SHARE | $ | (.09 | ) | $ | (.03 | ) | $ | (.20 | ) | $ | (.16 | ) | ||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED | 46,783,343 | 46,275,591 | 46,723,501 | 46,280,139 | ||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements
| 3 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE LOSS
(UNAUDITED)
| For the Three Months | For the Nine Months | |||||||||||||||
| Ended March 31, | Ended March 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net Loss | $ | (4,030,710 | ) | $ | (1,514,489 | ) | $ | (9,360,576 | ) | $ | (7,318,197 | ) | ||||
| Foreign Currency Translation, Adjustments | (9,828 | ) | (10,198 | ) | 28,494 | (157,563 | ) | |||||||||
| Other Comprehensive Loss | $ | (4,040,538 | ) | $ | (1,524,687 | ) | $ | (9,332,082 | ) | $ | (7,475,760 | ) | ||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 4 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
| # of Shares | Common Shares | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total | |||||||||||||||||||
| July 1, 2020 | 46,497,409 | $ | 4,650 | $ | 230,497,225 | $ | (64,188,198 | ) | $ | (41,416 | ) | $ | 166,272,261 | |||||||||||
| Stock-based compensation | — | — | 326,156 | — | — | 326,156 | ||||||||||||||||||
| Issuance of commitment shares | 139,567 | 14 | (14 | ) | — | — | — | |||||||||||||||||
| Comprehensive Loss | ||||||||||||||||||||||||
| Net Loss | — | — | — | (2,396,570 | ) | — | (2,396,570 | ) | ||||||||||||||||
| Other Comprehensive Loss | ||||||||||||||||||||||||
| Foreign Currency Translation Adjustment | — | — | — | — | 28,389 | 28,389 | ||||||||||||||||||
| September 30, 2020 | 46,636,976 | $ | 4,664 | $ | 230,823,367 | $ | (66,584,768 | ) | $ | (13,027 | ) | $ | 164,230,236 | |||||||||||
| Stock issued pursuant to warrants exercised | 63,122 | 6 | 82,050 | — | — | 82,056 | ||||||||||||||||||
| Contingent Shares issued pursuant to Acquisition Agreement | 63,122 | 6 | 192,516 | — | — | 192,522 | ||||||||||||||||||
| Stock-Based Compensation | — | — | 359,391 | — | — | 359,391 | ||||||||||||||||||
| Comprehensive Loss | ||||||||||||||||||||||||
| Net Loss | — | — | — | (2,933,296 | ) | — | (2,933,296 | ) | ||||||||||||||||
| Other Comprehensive Loss | ||||||||||||||||||||||||
| Currency Translations | — | — | — | — | 9,933 | 9,933 | ||||||||||||||||||
| December 31, 2020 | 46,763,220 | 4,676 | 231,457,324 | (69,518,064 | ) | (3,094 | ) | 161,940,842 | ||||||||||||||||
| Shares issued pursuant to 2021 private placement | 923,678 | 93 | 3,620,707 | — | — | 3,620,800 | ||||||||||||||||||
| Shares issued in lieu of interest on $5 million notes payable extension | 74,054 | 7 | 298,171 | — | — | 298,178 | ||||||||||||||||||
| Restricted shares converted to shares for services rendered | 35,000 | 4 | 146,996 | — | — | 147,000 | ||||||||||||||||||
| Stock-Based Compensation | — | — | 352,429 | — | — | 352,429 | ||||||||||||||||||
| Comprehensive Loss | ||||||||||||||||||||||||
| Net Loss | — | — | — | (4,030,710 | ) | — | (4,030,710 | ) | ||||||||||||||||
| Other Comprehensive Loss | ||||||||||||||||||||||||
| Currency Translations | — | — | — | — | (9,828 | ) | (9,828 | ) | ||||||||||||||||
| March 31, 2021 | 47,795,952 | $ | 4,780 | $ | 235,875,627 | $ | (73,548,774 | ) | $ | (12,922 | ) | $ | 162,318,711 | ) | ||||||||||
| # of Shares | Common Stock | Additional Paid-In-Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total | |||||||||||||||||||
| July 1, 2019 | 45,273,924 | $ | 4,527 | $ | 225,765,432 | $ | (52,771,840 | ) | $ | 101,818 | $ | 173,099,937 | ||||||||||||
| Stock issued pursuant to warrants exercised | 500,000 | 50 | 999,950 | — | — | 1,000,000 | ||||||||||||||||||
| Contingent Share issued pursuant to Acquisition Agreement | 500,000 | 50 | 2,209,950 | — | — | 2,210,000 | ||||||||||||||||||
| Stock-based compensation | — | — | 234,010 | — | — | 234,010 | ||||||||||||||||||
| Comprehensive Loss | ||||||||||||||||||||||||
| Net Loss | — | — | — | (4,083,177 | ) | — | (4,083,177 | ) | ||||||||||||||||
| Other Comprehensive Loss | ||||||||||||||||||||||||
| Foreign Currency Translation Adjustment | — | — | — | — | (278,656 | ) | (278,656 | ) | ||||||||||||||||
| September 30, 2019 | 46,273,924 | $ | 4,627 | $ | 229,209,342 | $ | (56,855,017 | ) | $ | (176,838 | ) | $ | 172,182,114 | |||||||||||
| Stock-based compensation | — | — | 546,061 | — | — | 546,061 | ||||||||||||||||||
| Restricted shares converted to shares for services rendered | 30,000 | 3 | 143,997 | — | — | 144,000 | ||||||||||||||||||
| Comprehensive Loss | ||||||||||||||||||||||||
| Net Loss | — | — | — | (1,720,531 | ) | — | (1,720,531 | ) | ||||||||||||||||
| Other Comprehensive Loss | ||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | 131,291 | 131,291 | ||||||||||||||||||
| December 31, 2019 | 46,303,924 | $ | 4,630 | $ | 229,899,400 | $ | (58,575,548 | ) | $ | (45,547 | ) | $ | 171,282,935 | |||||||||||
| Stock-based Compensation | — | — | (28,094 | ) | — | — | (28,094 | ) | ||||||||||||||||
| Shares issued in kind for prepaid interest on Notes Payable-LT | 188,485 | 19 | 493,173 | — | — | 493,192 | ||||||||||||||||||
| Shares issued for fully vested RSUs | 5,000 | 1 | (1 | ) | — | — | — | |||||||||||||||||
| Comprehensive Loss | ||||||||||||||||||||||||
| Net Loss | — | — | — | (1,514,489 | ) | — | (1,514,489 | ) | ||||||||||||||||
| Other Comprehensive Loss | ||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | (10,198 | ) | (10,198 | ) | ||||||||||||||||
| March 31, 2020 | 46,497,409 | $ | 4,650 | $ | 230,364,478 | $ | (60,090,037 | ) | $ | (55,745 | ) | $ | 170,223,346 | |||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 5 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended | ||||||||
| March 31, | ||||||||
| 2021 | 2020 | |||||||
| NET LOSS | $ | (9,360,576 | ) | $ | (7,318,197 | ) | ||
| ADJUSTMENT TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: | ||||||||
| Depreciation and amortization | 92,042 | 78,912 | ||||||
| Change in contingent consideration liability | (38,313 | ) | (1,450,202 | ) | ||||
| Stock Based Compensation Expense | 1,184,975 | 895,976 | ||||||
| ROU assets | 199,908 | 192,335 | ||||||
| Amortization of Discount of Notes Payable | 222,231 | (140,000 | ||||||
| Gain on Settlement for non-trade payable | — | — | ||||||
| CHANGES IN ASSETS AND LIABILITIES: | ||||||||
| Other Receivables | 1,982 | 16,892 | ||||||
| Prepaid Expenses/Deposits | 562,295 | (130,507 | ) | |||||
| Accounts Payable | (88,015 | ) | (205,197 | ) | ||||
| Accounts Payable –Non-Trade | — | (100,000 | ) | |||||
| Accrued Expenses | (157,261 | ) | 132,622 | |||||
| Other current liabilities | — | — | ||||||
| Operating Lease Liabilities | (201,944 | ) | (186,959 | ) | ||||
| NET CASH USED IN OPERATING ACTIVITIES | $ | (7,582,676 | ) | $ | (8,214,325 | ) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | (10,721 | ) | (174,015 | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | $ | (10,721 | ) | $ | (174,015 | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from exercise of warrants | 82,057 | 1,000,000 | ||||||
| Repayment of finance agreement | (304,258 | ) | — | |||||
| Proceeds from 2021 Private Placement | 3,620,800 | — | ||||||
| Proceeds from convertible notes payable – long-term | — | 1,200,000 | ||||||
| Proceeds from notes payable – long-term | — | 5,000,000 | ||||||
| NET CASH PROVIDED BY(USED IN) FINANCING ACTIVITIES | $ | 3,398,599 | $ | 7,200,000 | ||||
| (Loss) on Currency Translation | $ | 24,721 | $ | (154,718 | ) | |||
| NET CHANGE IN CASH | $ | (4,170,077 | ) | $ | (1,343,058 | ) | ||
| CASH, BEGINNING OF PERIOD | $ | 8,696,361 | $ | 12,282,224 | ||||
| CASH, END OF PERIOD | $ | 4,526,284 | $ | 10,939,166 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the quarter end for: | ||||||||
| Interest | $ | 36,453 | $ | — | ||||
| Income Taxes | $ | 37 | $ | — | ||||
| Non-cash operating, investing and financing Activities: | ||||||||
| Contingent Shares issued in connection with Acquisition Agreement | $ | — | $ | 2,210,000 | ||||
| Shares issued in lieu of interest Expense on $5 million note payable extension | $ | 298,178 | $ | — | ||||
| Compensation for the issuance of stock for consulting services | $ | 147,000 | $ | 144,000 | ||||
| Discount on $5 million note payable related to prepaid interest paid in the form of shares issued | $ | 222,231 | $ | 493,192 | ||||
| Right of uses obtained in exchange for operating lease liabilities upon adoption of ASC 842 - Leases | $ | — | $ | 2,054,295 | ||||
See accompanying notes to the unaudited condensed consolidated financial statement.
| 6 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business– Enochian BioSciences Inc., (“Enochian”, or “Registrant”, and together with its subsidiaries, the “Company”, “we” or “us”) is a pre-clinical stage biotechnology company committed to using our genetically modified cellular and immune-therapy technologies to prevent or potentially cure HIV, Hepatitis B (HBV), and to provide potentially life-long cancer remission of some of the deadliest cancers.
Basis of Presentation- The Company prepares consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and follows the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The accompanying financial statements are unaudited. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2021 and 2020 and for the periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s June 30, 2020 audited financial statements. The results of operations for the periods ended March 31, 2021 and 2020 are not necessarily indicative of the operating results for the full year.
Consolidation - For the three and nine months ended March 31, 2021 and 2020, the consolidated financial statements include the accounts and operations of the Registrant, and its subsidiaries. All material inter-company transactions and accounts have been eliminated in the consolidation.
Accounting Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimated. Significant estimates include the fair value and potential impairment of intangible assets, and fair value of equity instruments issued.
COVID-19- During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The pandemic has significantly affected the economic conditions in the U.S. A number of states, counties and municipalities issued orders requiring persons who were not engaged in essential activities and businesses to remain at home. On March 27, 2020, the US enacted the Coronavirus Aid, Relief and Economic Security Aid (“CARES Act”) to help stimulate an economic recovery; however, there are no reliable estimates of how long the pandemic will last or how many people are likely to be affected by it. No one knows what over-all effects the COVID-19 pandemic will have on economic conditions during the remainder of the fiscal year.
Our senior management team is monitoring COVID-19’s impact and will continue to adjust our operations as necessary. However, the impact of this event on the Company’s results of operations, financial position, and liquidity or capital resources cannot be reasonably estimated at this time.
Functional Currency & Foreign currency translation - The functional currency of Enochian Denmark is the Danish Kroner (“DKK”). The Company’s reporting currency is the U.S. Dollar for the purpose of these financial statements. The Company’s balance sheet accounts are translated into U.S. dollars at the period-end exchange rates and all revenue and expenses are translated into U.S. dollars at the average exchange rates prevailing during the periods ended March 31, 2021, and June 30, 2020, and March 31, 2020. Translation gains and losses are deferred and accumulated as a component of other comprehensive income in stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are included in the statement of operations as incurred.
| 7 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents —The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The Company had balances held in financial institutions in Denmark and in the United States in excess of federally insured States amounts at March 31, 2021 and June 30, 2020 of $4,232,336 and $8,160,270, respectively.
Property and Equipment — Property and equipment are stated at cost. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized, upon being placed in service. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed for financial statement purposes on a straight-line basis over the estimated useful lives of the assets, which range from four to ten years (See Note 3).
Intangible Assets - The Company has both definite and indefinite life intangible assets.
Definite life intangible assets include patents. The Company accounts for definite life intangible assets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, “Goodwill and Other Intangible Assets”. Intangible assets are recorded at cost. Patent costs consist of costs incurred to acquire the underlying patent. If it is determined that a patent will not be issued, the related remaining capitalized patent costs are charged to expense. Intangible assets are amortized on a straight-line basis over their estimated useful life. The estimated useful life of patents is twenty years from the date of application.
Indefinite life intangible assets include license agreements and goodwill. The Company accounts for indefinite life intangible assets in accordance with ASC 350, “Goodwill and Other Intangible Assets”. License agreement costs represent the Fair Value of the license agreement on the date acquired and are tested annually for impairment. The fair value analysis performed on the license agreements, and the fair value analysis performed on goodwill supported that both indefinite life intangible assets are not impaired as of June 30, 2020, and no impairment is deemed necessary as of March 31, 2021. (See Note 4)
Goodwill —Goodwill is not amortized but is evaluated for impairment annually as of June 30th of each fiscal year or whenever events or changes in circumstances indicate the carrying value may not be recoverable.
We test for goodwill impairment at the reporting unit level, which is one level below the operating segment level. Our detailed impairment testing involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit and is based on discounted cash flows or relative market-based approaches. If the fair value exceeds carrying value, then it is concluded that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, a second step is required to measure possible goodwill impairment loss. The second step includes hypothetically valuing the tangible and intangible assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting unit’s goodwill is compared to the carrying value of that goodwill. If the carrying value of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value.
The carrying value of goodwill at March 31, 2021, was $11,640,000. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to test for impairment losses on goodwill. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to an impairment charge that could be material.
| 8 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impairment of Long-Lived Assets — Long-lived assets, such as property, plant, and equipment, patents and licenses are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and would no longer be depreciated. The depreciable basis of assets that are impaired and continue in use is their respective fair values.
Leases — In accordance with ASC Topic 842, the Company determined the initial classification and measurement of its right-of-use assets and lease liabilities at the lease commencement date and thereafter. The lease terms include any renewal options and termination options that the Company is reasonably assured to exercise, if applicable. The present value of lease payments is determined by using the implicit interest rate in the lease, if that rate is readily determinable; otherwise, the Company develops an incremental borrowing rate based on the information available at the commencement date in determining the present value of the future payments.
Rent expense for operating leases is recognized on a straight-line basis, unless the operating lease right of use assets have been impaired, over the reasonably assured lease term based on the total lease payments and is included in operating expense in the consolidated statement of operations. For operating leases that reflect impairment, the Company will recognize the amortization of the operating lease right-of-use assets on a straight-line basis over the remaining lease term with rent expense still included in general and administrative expenses in the unaudited condensed consolidated statements of operations.
The Company has elected the practical expedient to not separate lease and non-lease components. The Company’s non-lease components are primarily related to property maintenance, insurance and taxes, which vary based on future outcomes, and thus are recognized in general and administrative expenses when incurred. (See Note 5).
Research and Development Expenses — The Company expenses research and development costs incurred in formulating, improving, validating and creating alternative or modified processes related to and expanding the use of the HIV, HBV, and Cancer therapies and technologies for use in the prevention, treatment, amelioration of and/or therapy for HIV, HBV, and Cancer. Research and development expenses for the three and nine months ended March 31, 2021 amounted to $1,079,607, and $3,464,451, respectively. Research and development expenses for the three and nine months ended March 31, 2020 amounted to $ 2,307,336, and $3,388,996.
Income Taxes — The Company accounts for income taxes in accordance with FASB ASC Topic 740 Accounting for Income Taxes, which requires an asset and liability approach for accounting for income taxes. During the quarter ended December 31, 2020, the Company’s Danish subsidiary received a payment for an R&D tax credit owed under Danish statutory tax laws for $122,831.
Loss Per Share — The Company calculates earnings/(loss) per share in accordance with FASB ASC 260 Earnings Per Share. Basic earnings per common share (EPS) are based on the weighted average number of shares of Common Stock, par value 0.0001 per share (“Common Stock”) outstanding during each period. Diluted earnings per common share are based on shares outstanding (computed as under basic EPS) and potentially dilutive shares of Common Stock. Potential shares of Common Stock included in the diluted earnings per share calculation include in-the-money stock options that have been granted but have not been exercised. Because of the net loss for the three and nine months ended March 31, 2021 and 2020, the dilutive shares for both periods were excluded from the Diluted EPS calculation as the effect of these potential shares of Common Stock is anti-dilutive. The Company had 3,967,275 and 3,554,185 potential shares of Common Stock excluded from the Diluted EPS calculation as of March 31, 2021 and March 31, 2020.
| 9 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments — The Company accounts for fair value measurements for financial assets and financial liabilities in accordance with FASB ASC Topic 820, “Fair Value Measurements”. The authoritative guidance, which, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| ● | Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities; |
| ● | Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
| ● | Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
The Company adopted ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements, which amends certain disclosures requirements over fair value measurements. Under the new guidance, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy or valuation processes for Level 3 fair value measurements. However, public companies will be required to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and related changes in unrealized gains and losses included in other comprehensive income. The Company adopted this guidance on July 1, 2020, and there was no material impact to its condensed consolidated financial statement disclosures (See Note 2-Fair Value of Financial Instruments for more information about the Company’s fair value classifications.)
Stock Options and Restricted Share Units - The Company has granted stock options, restricted share units (“RSUs”) and warrants. The Company accounts for options in accordance with the provisions of FASB ASC Topic 718, Compensation - Stock Compensation. Stock based compensation costs for the vesting of options and RSUs granted to officers, board members, employees, and consultants for the three and nine months ended March 31, 2021 were $499,428 and $1,184,975, respectively. For the three and nine months ended March 31, 2020 were $(28,094) and $895,976, respectively.
Stock-Based Compensation -The Company records stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to consultants and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employees required service period, which is generally the vesting period. The Company issued zero and 15,000 options with immediate vesting for services rendered with a Black-Sholes value of zero and $27,990 during the three and nine months ended March 31, 2021, respectively. The Company issued zero and 30,000 restricted units shares with immediate vesting in exchange for consulting services valued at $144,000 for services for the three and nine months ended March 31, 2020, respectively (see Note 7).
Recent Adopted Accounting Pronouncements
The Company adopted ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements, as of July 1, 2020 (Note 2).
Other recent accounting pronouncements issued by the FASB do not or are not believed by management to have a material impact on the Company’s present or future financial statements.
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ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — FAIR VALUE MEASUREMENT — The Company accounts for fair value measurements for financial assets and financial liabilities in accordance with FASB ASC Topic 820, “Fair Value Measurements”. The authoritative guidance, which, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| ● | Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities; |
| ● | Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
| ● | Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
The were no Level 1, 2 or 3 assets, nor any Level 1 or 2 liabilities as of March 31, 2021.
Level 3 liabilities held as of March 31, 2021 consisted of a contingent consideration liability related to the February 16, 2018 acquisition of Enochian BioPharma Inc. (the “Acquisition”). As consideration for the Acquisition, the stockholders of Enochian Biopharma received (i) 18,081,962 shares of Common Stock, and (ii) the right to receive contingent shares pro rata upon the exercise of warrants, which were outstanding at closing. The contingent consideration liability was recorded at fair value of $21,516,000 at the time of acquisition and is subsequently remeasured to fair value at each reporting period. At March 31, 2021, 1,350,000 contingent shares are issuable in connection with the Acquisition of Enochian Biopharma.
The fair value of the contingent consideration liability is estimated using an option-pricing model. The key inputs to the model are all contractual or observable with the exception being volatility, which is computed, based on the Company’s underlying stock. The key inputs to valuing the contingent consideration liability on the date of acquisition and as of March 31, 2021, include the Company’s stock price on the valuation date of $3.54; the exercise price of the warrants of $1.30, the risk-free rate of .10% the expected volatility of the Company’s Common Stock of 102.1%, the digital call rate 61%, and the 1,350,000 of contingent shares remaining at the end of the period. Fair Value measurements are highly sensitive to changes in these inputs and significant changes in these inputs could result in a significantly higher or lower fair value.
Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, accounts receivable, prepaid expenses, investments, accounts payable, accrued expenses, capital lease obligations and notes payable approximates their recorded values due to their short-term maturities.
The following table sets forth the Level 3 liability at March 31, 2021, which is recorded on the balance sheet at fair value on a recurring basis. As required, these are classified based on the lowest level of input that is significant to the fair value measurement:
| Fair Value Measurements at Reporting Date Using | ||||||||||||
| Quoted Prices in Active Markets for Identical Assets Inputs | Significant Other Observable Inputs | Significant Other Unobservable | ||||||||||
| (Level 1) | (Level 2) | (Level 3) | ||||||||||
| Contingent Consideration Liability | — | — | $ | 2,951,599 | ||||||||
| The roll forward of the contingent consideration liability is as follows: | ||||||||||||
| Balance June 30, 2020 | — | — | $ | 3,182,434 | ||||||||
| Contingent Shares issued pursuant to the Acquisition Agreement | — | — | $ | (192,522 | ) | |||||||
| Fair value adjustment | — | — | $ | (38,312 | ) | |||||||
| Balance March 31, 2021 | — | — | $ | 2,951,599 | ||||||||
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ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 — PROPERTY AND EQUIPMENT
| Useful Life | March 31, 2021 | June 30, 2020 | ||||||||||
| Lab Equipment and Instruments | 4-7 | $ | 545,248 | $ | 534,527 | |||||||
| Leasehold Improvements | 10 | $ | 224,629 | 224,629 | ||||||||
| Furniture Fixtures and Equipment | 4-7 | $ | 171,975 | $ | 171,975 | |||||||
| Total | $ | 941,852 | $ | 931,131 | ||||||||
| Less Accumulated Depreciation | $ | (233,185 | ) | $ | (153,013 | ) | ||||||
| Net Property and Equipment | $ | 708,667 | $ | 778,118 | ||||||||
Depreciation expense amount to $26,814, and $80,172 for the three and nine months ended March 31, 2021 respectively, and $35,764 and $78,912, for the three and nine months ended March 31, 2020, respectively.
NOTE 4 —INTANGIBLE ASSETS
At March 31, 2021 and June 30, 2020, definite-life intangible assets, net of accumulated amortization, consisted of patents on the Company’s products and processes of $69,225 and $77,323, respectively. The patents are recorded at cost and amortized over twenty years from the date of application. Amortization expense for the three and nine months ended March 31, 2021 was $4,012 and $11,871, respectively.
At March 31, 2021 and 2020, indefinite life intangibles assets consisted of a license agreement classified In-Process Research and Development (“IPR&D”) intangible assets, which are not amortizable until the intangible asset provides economic benefit, and goodwill.
At March 31, 2021 and June 30, 2020, definite and indefinite-life intangible assets consisted of the following:
| Useful Life | June 30, 2020 | Period Change | Effect of Currency Translation | March 31, 2021 | ||||||||||||||
| Definite Life Intangible Assets | ||||||||||||||||||
| Patents | 20 Years | $ | 299,175 | $ | — | $ | 14,090 | $ | 313,265 | |||||||||
| Less Accumulated Amortization | $ | (221,852 | ) | $ | (5,938 | ) | $ | (16,250 | ) | (244,040 | ) | |||||||
| Net Definite-Life Intangible Assets | $ | 77,323 | $ | (5,938 | ) | $ | (2,160 | ) | $ | 69,225 | ||||||||
| Indefinite Life Intangible Assets | ||||||||||||||||||
| License Agreement | $ | 154,824,000 | $ | 154,824,000 | ||||||||||||||
| Goodwill | 11,640,000 | 11,640,000 | ||||||||||||||||
| Total Indefinite Life Intangible Assets | $ | 166,464,000 | $ | 166,464,000 | ||||||||||||||
| Year ending June 30, | ||||||
| 2021 | $ | 381 | ||||
| 2022 | 15,154 | |||||
| 2023 | 15,154 | |||||
| 2024 | 15,154 | |||||
| 2025 | 15,154 | |||||
| Thereafter | 8,228 | |||||
| Total | $ | 69,225 | ||||
During February 2018, the Company acquired a License Agreement (as licensee) to the HIV therapy being developed as ENOB-HV-01 which consists of a perpetual, fully paid-up, royalty-free, sub-licensable, and sole and exclusive worldwide license to research, develop, use, sell, have sold, make, have made, offer for sale, import and otherwise commercialize certain intellectual property in cellular therapies for the prevention, treatment, amelioration of and/or therapy exclusively for HIV in humans, and research and development exclusively relating to HIV in humans. Because the HIV License Agreement is considered, an IPR&D intangible asset it is classified as an indefinite life asset that is tested annually for impairment.
Impairment – Following the fourth quarter of each year, management performs its annual test of impairment of intangible assets by performing a quantitative assessment and determines if it is more than likely than not that, the fair value of the asset is greater than or equal to the carrying value of the asset. The results of the quantitative assessment supported Management’s conclusion that an impairment adjustment was not required as of June 30, 2020.
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ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 — LEASES
Operating Leases — On November 13, 2017, Enochian entered into a Lease Agreement for a term of five years and two months from November 1, 2017 (the “Term”) with Plaza Medical Office Building, LLC, a California limited liability company (the “Landlord”), as landlord, pursuant to which the Company agreed to lease from the Landlord approximately 2,325 rentable square feet. The base rent increases by 3% each year, and ranges from approximately $8,719 per month for the first year to $10,107 per month for the two months of the sixth year.
On June 19, 2018, the Registrant entered into a Lease Agreement for a term of ten years from September 1, 2018 with Century City Medical Plaza Land Co., Inc., pursuant to which the Company agreed to lease approximately 2,453 rentable square feet. On February 20, 2019, the Registrant entered into an Addendum to the original Lease Agreement with an effective date of December 1, 2019, where it expanded the lease area to include another 1,101 square feet for a total rentable 3,554 square feet. The base rent increases by 3% each year, and ranges from $17,770 per month for the first year to $23,186 per month for the tenth year. The equalized monthly lease payment for the term of the lease is $20,050. The Company was entitled to $148,168 in contributions toward tenant improvements.
The Company identified and assessed the following significant assumptions in recognizing the right-of-use asset and corresponding liabilities:
Expected lease term — The expected lease term includes both contractual lease periods and, when applicable, cancelable option periods when it is reasonably certain that the Company would exercise such options. The Company’s leases have remaining lease terms between 21 months and 77 months. As of March 31, 2021, the weighted-average remaining term is 5.84 years.
Incremental borrowing rate — The Company’s lease agreements do not provide an implicit rate. As the Company does not have any external borrowings for comparable terms of its leases, the Company estimated the incremental borrowing rate based on the U.S. Treasury Yield Curve rate that corresponds to the length of each lease. This rate is an estimate of what the Company would have to pay if borrowing on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment. As of March 31, 2021, the weighted-average discount rate is 3.99%.
Lease and non-lease components — In certain cases the Company is required to pay for certain additional charges for operating costs, including insurance, maintenance, taxes, and other costs incurred, which are billed based on both usage and as a percentage of the Company’s share of total square footage. The Company determined that these costs are non-lease components and they are not included in the calculation of the lease liabilities because they are variable. Payments for these variable, non-lease components are considered variable lease costs and are recognized in the period in which the costs are incurred.
Lease expense charged to general and administrative expenses for the three and nine months ended amounted to $77,345 and $255,719 March 31, 2021, respectively. Lease expense charged to general and administrative expenses for the three and nine months ended amounted to $88,144 and $270,198 March 31, 2020, respectively.
Below are the lease commitments for the next 5 years and thereafter:
| Year Ending June 30th | Lease Expense | ||||
| 2021 | $ | 85,138 | |||
| 2022 | 348,495 | ||||
| 2023 | 298,305 | ||||
| 2024 | 246,004 | ||||
| 2025 | 253,384 | ||||
| Thereafter | 574,821 | ||||
| Less imputed interest | (204,993 | ) | |||
| Total | $ | 1,601,154 | |||
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ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 — NOTES PAYABLE
Convertible Notes Payable
On February 6, 2020, the Company issued two Convertible Notes (the “Convertible Notes”) to an existing stockholder of the Company each with a face value amount of $600,000, convertible into shares of the Company’s Common Stock. The outstanding principal amount of the Convertible Notes is due and payable on February 6, 2023. Interest on the Convertible Notes commenced accruing on the date of issuance at six percent (6%) per annum, computed on the basis of twelve 30-day months, and is compounded monthly on the final day of each calendar month based upon the Principal and all accrued and unpaid interest outstanding as of such compound date. The interest is payable in cash on a semi-annual basis.
The holder of the Convertible Notes had the right at any time prior to the date that is twelve months from issuance to convert all or any part of the outstanding and unpaid Principal and all unpaid Interest into shares of the Company’s Common Stock. The conversion price is equal to $12.00 per share of Common Stock. The Company evaluated the Convertible Notes in accordance with ASC 470-20 and identified that they each contain an embedded conversion feature that shall not be bifurcated from the host document (i.e., the Convertible Notes) as they are not deemed to be readily convertible into cash. All proceeds received from the issuance have been recognized as a liability on the balance sheet. The holder did not exercise the conversion feature prior to expiration. The conversion expired as of February 6, 2021. The Convertible Notes balance as of March 31, 2021 and June 30, 2020, was $1,200,000. For the three and nine months ended March 31, 2021, the Company recorded accrued interest in the amount of $6,000, which is included in accrued expenses.
Note Payable
On March 31, 2020 (the “Issuance Date”), the Company issued a Promissory Note in the principal amount of $5,000,000 (the “Unsecured Note”) to Paseco APS, a Danish limited company and an existing stockholder of the Company. The principal amount of the Note was originally payable on November 30, 2021 (the “Maturity Date”) and bears interest at a fixed rate of 6% per annum, computed based on the number of days between the Issuance Date and the Maturity Date, which was prepaid by the Company in full on the Issuance Date through the issuance of 188,485 shares of the Company’s Common Stock based on the closing market price on that date for a total value of $501,370. The Company evaluated the Unsecured Note in accordance with ASC 470-Debt Pursuant to ASC 470-20, proceeds received from the issuance are to be recognized at their relative fair value, thus the liability is shown net of the corresponding discount of $493,192. The discount will be accreted over the life of the Unsecured Note.
On February 11, 2021, the Company entered into an amendment to the Unsecured Note in the principal amount of $5,000,000 that will extend the Maturity Date out to November 30, 2022. All other terms of the Unsecured Note remain the same. The change in Maturity Date requires an additional year of interest at the fixed rate of 6% per annum, which was prepaid by the Company in full on the date of the amendment through the issuance of 74,054 shares of the Company’s Common Stock based on the closing market price on that date for a total value of $298,178. The Note Payable balance, net of discount at March 31, 2021 was $4,504,840. The amortization of the discount was $74,274 and $148,253 for the three and nine months ended March 31, 2021, respectively. The amortization for the periods are included in total interest expense.
Finance Agreement
On December 4, 2020, the Company entered into a premium finance agreement (“Agreement”) with a principal amount of $607,250 at 4.99% interest per annum. The repayment of the Agreement will be made in nine equal monthly installments of $62,077. The remaining balance at March 31, 2021 is $302,992. The amount is reflected in other current liabilities.
For the three and nine months ended March 31, 2021, the Company recorded total interest expense in the amount of $96,347 and $282,086, respectively. These amounts are reflected in other income and expenses.
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ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 — STOCKHOLDERS’ EQUITY
Preferred Stock — The Company has 10,000,000 authorized shares of Preferred Stock, par value $0.0001 per share. At March 31, 2021, and June 30, 2020, there were zero shares issued and outstanding.
Common Stock — The Company has 100,000,000 authorized shares of Common Stock, par value $0.0001 per share. At March 31, 2021, and June 30, 2020, there were 47,795,952 and 46,497,409 shares issued and outstanding, respectively.
Voting — Holders of Common Stock are entitled to one vote for each share held of record on each matter submitted to a vote of stockholders, including the election of directors, and do not have any right to cumulate votes in the election of directors.
Dividends — Holders of Common Stock are entitled to receive ratably such dividends as the Board from time to time may declare out of funds legally available.
Liquidation Rights — In the event of any liquidation, dissolution or winding-up of affairs of the Company, after payment of all of our debts and liabilities, the holders of Common Stock will be entitled to share ratably in the distribution of any of our remaining assets.
| 15 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 — STOCKHOLDERS’ EQUITY (Continued)
Purchase Agreement with Lincoln Park Capital
On July 8, 2020, we entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which the Company may sell and issue to Lincoln Park, and Lincoln Park is obligated to purchase, up to $20,000,000 of shares of our Common Stock from time to time through August 1, 2023.
Under the Purchase Agreement, we may direct Lincoln Park, at our sole discretion subject to certain conditions, to purchase up to 200,000 shares of Common Stock on any business day (a “Regular Purchase”). The amount of a Regular Purchase may be increased under certain circumstances up to 125,000 shares of Common Stock, provided that Lincoln Park’s committed obligation for Regular Purchases on any business day shall not exceed $1,000,000. In the event we direct to purchase the full amount allowed for a Regular Purchase on any given business day, we may also direct Lincoln Park to purchase additional amounts as accelerated and additional accelerated purchases. The purchase price of shares of Common Stock related to the future funding will be based on the then prevailing market prices of such shares at the time of sales as described in the Purchase Agreement.
Our sale of shares of Common Stock to Lincoln Park subsequent to the Amendment Date is limited to 12,016,457 shares of Common Stock, representing 19.99% of the shares of the Common Stock outstanding on the Amendment Date unless (i) stockholder approval is obtained, (ii) the average price of all applicable sales to Lincoln Park under the Purchase Agreement equals or exceeds the lower of (A) the closing price of the Common Stock on the Nasdaq Capital Market immediately preceding the date of the Purchase Agreement or (B) the average of the closing prices on the Nasdaq Capital Market for the five Business Days immediately preceding the date of the Purchase Agreement or (iii) to the extent it would cause Lincoln Park to beneficially own more than 9.99% of the Company’s outstanding shares of Common Stock at any given time.
In consideration for entering into the Purchase Agreement, we issued 139,567 shares of Common Stock to Lincoln Park as a commitment fee on July 21, 2020.
During the three and nine months ended March 31, 2021, we did not sell any shares of Common Stock to Lincoln Park under the Purchase Agreement.
Common Stock Issuances —
On March 31, 2021, the Registrant issued 56,123 shares of Common Stock at a price of $3.92 per share pursuant to a private placement for total proceeds to the Registrant of $220,000.
On March 18, 2021, the Registrant issued 867,555 shares of Common Stock at a price of $3.92 per share pursuant to a private placement for total proceeds to the Registrant of $3,400,800.
On February 18, 2021, there were 35,000 restricted share units issued that immediately vested and were converted into shares of Common Stock in exchange for consulting services valued at $147,000.
On December 14, 2020, the Registrant issued 63,122 shares of Common Stock valued at the price of $1.30 strike price per share pursuant to the exercise of vested warrants for total proceeds of $82,056.
On December 14, 2020, the Registrant issued 63,122 shares of Common Stock valued at the price of $3.05 per share in connection with the acquisition of Enochian Biopharma Inc. This non-cash transaction impacted shareholders’ equity in the amount of $192,522.
On December 27, 2019, there were 30,000 restricted share units issued that immediately vested and were converted into shares of Common Stock in exchange for consulting services valued at $144,000.
On July 3, 2019, the Registrant issued 500,000 shares of Common Stock valued at the price of $2.00 strike price per share pursuant to the exercise of vested grant warrants for total proceeds of $1.0 million.
On July 3, 2019, the Registrant issued 500,000 shares of Common Stock valued at the price of $4.42 per share in connection with the acquisition of Enochian Biopharma. This non-cash transaction impacted shareholders’ equity in the amount of $2.2 million.
Acquisition of Enochian Biopharma Inc. / Contingently issuable shares — On February 16, 2018, the Acquisition was completed when the subsidiary merged with and into Enochian Biopharma, with Enochian Biopharma as the surviving corporation. As consideration for the Acquisition, the stockholders of Enochian Biopharma received (i) 18,081,962 shares of Common Stock, and (ii) the right to receive contingent shares pro rata upon the exercise or conversion of warrants, which were outstanding at closing. At March 31, 2021, 1,350,000 contingent shares are issuable in connection with the Acquisition of Enochian Biopharma.
Acquisition of Enochian Denmark — At March 31, 2021 and June 30, 2020, the Company maintained a reserve of 17,414 and 82,237 shares of Common Stock of the Registrant held in escrow according to Danish law (the “Escrow Shares”), respectively, all of which are reflected as issued and outstanding in the accompanying financial statements. The Escrow Shares are reserved to acquire the shares of Enochian Denmark held by non-consenting shareholders of Enochian Denmark on both March 31, 2021 and June 30, 2020, in accordance with Section 70 of the Danish Companies Act and the Articles of Association of DanDrit Denmark. There have been 167,639 shares of Common Stock issued to non-consenting shareholders of Enochian Denmark as of March 31, 2021. During the three and nine months ended March 31, 2021, the Company issued zero and 64,823 shares of Common Stock to such non-consenting shareholders of Enochian Denmark, respectively. There is no impact on outstanding shares as these shares are reflected as issued and outstanding.
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ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 — STOCKHOLDERS’ EQUITY (Continued)
Recognition of Options
The Company recognizes compensation costs for stock option awards to employees and directors based on their grant-date fair value. The value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model. The weighted-average assumptions used to estimate the fair values of the stock options granted using the Black-Scholes option-pricing model are as follows:
| Enochian Biosciences Inc. | ||||
| Expected term (in years) | 5.5 | |||
| Volatility | 79.77%-82.85% | |||
| Risk free interest rate | 0.26%-.88% | |||
| Dividend yield | 0 | % | ||
The Company recognized stock-based compensation expense related to the options of $499,428 and $1,184,975 for the three and nine months ended March 31, 2021, respectively. The Company recognized stock-based compensation expense related to the options of $(28,094) and $895,976 for the three and nine months ended March 31, 2020, respectively. At March 31, 2021, the Company had approximately $429,620 of unrecognized compensation cost related to non-vested options.
Plan Options
On February 6, 2014, the Board adopted the Company’s 2014 Equity Incentive Plan (the “Plan”), and the Company had reserved 1,206,000 shares of Common Stock for issuance in accordance with the terms of the Plan.
On October 30, 2019, the Board approved and on October 31, 2019, the Company’s shareholders adopted the Enochian’s 2019 Equity Incentive Plan (the “2019 Plan”), which replaced the 2014 Plan. The 2019 Plan authorized options to be awarded to not exceed the sum of (1) 6,000,000 new shares of Common Stock, and (2) the number of shares of Common Stock available for the grant of awards as of the effective date under the 2014 Plan that, after the effective date of the 2019 Plan, expires, or is terminated, surrendered, or forfeited for any reason without issuance of shares. The remaining shares of Common Stock available for grant related to the 2014 Plan was 655,769 as of the effective date; this amount along with the new 6,000,000 shares totals 6,655,769 shares of Common Stock available to grant immediately after the effective date of the 2019 Plan.
For the three and nine months ended March 31, 2021, the Company granted annual options to purchase 52,500 and 140,131 shares of Common Stock to members of the Board of Directors and Scientific Advisory Board with a one-year vesting period. Options will be exercisable at the market price of the Company’s Common Stock on the date of the grant.
For the three and nine months ended March 31, 2020, the Company granted annual options of 92,576 and 123,826 to members of the Board of Directors and Scientific Advisory Board with a one-year vesting period pursuant to their contracts.
For three and nine months ended March 31, 2021, the Company granted options of zero and 9,201 to employees with a three year vesting period. For the three and nine months ended March 31, 2020, the Company granted options of zero and 21,999, to employees with a three year vesting period, respectively. Options will be exercisable at the market price of the Company’s common stock on the date of grant. Options will be exercisable at the market price of the Company’s common stock on the date of the grant.
The Company issued zero and 15,000 options with immediate vesting for services rendered with a Black-Sholes value of $27,990, during the three and nine months ended March 31, 2021. The Company issued 35,000 restricted units shares with immediate vesting in exchange for consulting services valued at $147,000 for services for the three and nine months ended March 31, 2021.
To date the Company has granted options under the 2019 Plan (“Plan Options”) to purchase 1,262,275 shares of Common Stock.
| 17 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 — STOCKHOLDERS’ EQUITY (Continued)
A summary of the status of the Plan Options and Grant Warrants outstanding at March 31, 2021 is presented below:
| Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||
| Exercise Price Ranges | Number Outstanding | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | ||||||||||||||||||||||
| $ | 2.00–4.50 | 248,163 | 9.41 | $ | 3.22 | 98,832 | 8.96 | $ | 2.92 | |||||||||||||||||||
| $ | 4.51–6.50 | 479.997 | 7.87 | $ | 6.15 | 451,999 | 7.84 | $ | 6.18 | |||||||||||||||||||
| 6.51–8.00 | 534,115 | 8.89 | $ | 7.97 | 82,925 | 7.23 | $ | 7.83 | ||||||||||||||||||||
| Total | $ | — | 1,262,275 | 8.60 | $ | 6.35 | 633,755 | 7.93 | $ | 5.88 | ||||||||||||||||||
A summary of the status of the Plan Options at March 31, 2021 and changes since July 1, 2020 are presented below:
| Weighted Average | Average | Weighted Average | ||||||||||||||
| Shares | Exercise Price | Remaining Life | Intrinsic Value | |||||||||||||
| Outstanding at beginning of period | 1,105,442 | $ | 6.78 | 9.19 | $ | 107,931 | ||||||||||
| Granted | 164,332 | $ | 3.37 | 10.0 | ||||||||||||
| Exercised | — | — | — | — | ||||||||||||
| Forfeited | — | — | — | |||||||||||||
| Expired | (7,499 | ) | — | — | — | |||||||||||
| Outstanding at end of period | 1,262,275 | $ | 6.35 | 8.60 | $ | 100,074 | ||||||||||
| Vested and expected to vest | — | |||||||||||||||
| Exercisable end of period | 633,755 | $ | 5.88 | 7.93 | $ | 63,589 | ||||||||||
At March 31, 2021, the Company had 633,755 exercisable Plan Options. The total intrinsic value of options at March 31, 2021 is $100,074. Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) at March 31, 2021 (for outstanding options), less the applicable exercise price.
| 18 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 — STOCKHOLDERS’ EQUITY (Continued)
Common Stock Purchase Warrants
A summary of the shares of Common Stock, which can be purchased, related to the underlying the warrants outstanding for the six-month period as of March 31, 2021, is presented below:
| Weighted Average | Weighted Average | ||||||||||||
| Shares | Exercise Price | Remaining Life | |||||||||||
| Outstanding at beginning of period | 1,438,122 | $ | 1.42 | 1.99 | |||||||||
| Granted | |||||||||||||
| Exercised | (63,122 | ) | 1.30 | 1.30 | |||||||||
| Cancelled/Expired | (25,000 | ) | — | — | |||||||||
| Outstanding at end of period | 1,350,000 | $ | 1.30 | 1.27 | |||||||||
| Exercisable end of period | 1,350,000 | $ | 1.30 | 1.27 | |||||||||
| Equivalent Shares | Underlying Warrants | Outstanding | Equivalent Shares Exercisable | |||||||||||||||||
| Exercise Prices | Equivalent Shares | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||
| $ | 1.30 | 1,350,000 | 1.27 | $ | 1.30 | 1,350,000 | $ | 1.30 | ||||||||||||
The exercise price of certain warrants and the number of shares underlying the warrants are subject to adjustment for stock dividends, subdivisions of the outstanding shares of Common Stock and combinations of the outstanding shares of Common Stock. For so long as the warrants remain outstanding, we are required to keep reserved from our authorized and unissued shares of Common Stock a sufficient number of shares to provide for the issuance of the shares underlying the warrants.
Restricted Stock Units (RSUs)
The Company recognized stock-based compensation expense related to the RSUs of $147,000 for the three and nine months ended March 31, 2021, respectively. The Company recognized stock-based compensation expense related to RSUs of zero and $144,000 for the three and nine months ended March 31, 2020. At March 31, 2021, the Company had approximately $9,166 of unrecognized compensation cost related to restricted units.
A summary of the status of Restricted Stock Units outstanding at March 31, 2021 is presented below:
| Weighted Average | Weighted Average | Weighted Average | |||||||||||||||
| Shares | Issuance Price | Remaining Life | Intrinsic Value | ||||||||||||||
| Outstanding at beginning of period | 10,000 | $ | 6.15 | .77 | $ | — | |||||||||||
| Granted | 35,000 | — | — | — | |||||||||||||
| Exercised | (40,000 | ) | — | — | — | ||||||||||||
| Cancelled/Expired | — | — | — | — | |||||||||||||
| Outstanding at end of period | 5,000 | 6.15 | .77 | $ | — | ||||||||||||
| Exercisable end of period | — | $ | — | — | $ | — | |||||||||||
| Restricted Stock Units Outstanding | |||||||||||||
| Grant Price | Stock Units | Weighted Average Remaining Contractual Life (years) | Weighted Average Issuance Price | ||||||||||
| 6.15 | 5,000 | .77 | $ | 6.15 | |||||||||
| Total | 5,000 | .77 | $ | 6.15 | |||||||||
| 19 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — COMMITMENTS AND CONTINGENCIES
Consulting Agreements –
On July 9, 2018, the Company entered into a consulting agreement with G Tech Bio, LLC, a California limited liability company (“G Tech”) to assist the Company with the development of the gene therapy and cell therapy modalities for the prevention, treatment, and amelioration of HIV in humans, and with the development of a genetically enhanced Dendritic Cell for use as a wide spectrum platform for various diseases (including but not limited to cancers and infectious diseases) (the “G Tech Agreement”). G Tech was entitled to consulting fees for 20 months, with a monthly consulting fee of not greater than $130,000 per month. Upon the completion of the 20 months, the monthly consulting fee of $25,000 continued for scientific consulting and knowledge transfer on existing HIV experiments, and will continue until the services are no longer rendered or the agreement is terminated. G Tech is controlled by certain members of Weird Science. For the three and nine months ended March 31, 2021 $75,000 and 200,000, was charged to research and development expenses in our Condensed Consolidated Statements of Operations related to this consulting agreement, respectively. For the three and nine months ended March 31, 2020, $300,000 and $1,050,000, was charged to research and development expenses in our Condensed Consolidated Statements of Operations related to this consulting agreement, respectively.
On January 31, 2020, the Company entered into a Statement of Work & License Agreement (the “HBV License Agreement”) by and among the Company, G Tech, and G Health Research Foundation, a not for profit entity organized under the laws of California doing business as Seraph Research Institute (“SRI”), whereby the Company acquired a perpetual, sublicensable, exclusive license (the “HBV License”) for a treatment under development (the “Treatment”) aimed to treat Hepatitis B Virus (HBV) infections in accordance with its agreement in principle with G Tech and SRI.
The HBV License Agreement states that in consideration for the HBV License, the Company shall provide cash funding for research costs and equipment and certain other in-kind funding related to the Treatment over a 24 month period, and provides for an up-front payment of $1.2 million within 7 days of January 31, 2020, along with additional payments upon the occurrence of certain benchmarks in the development of the technology set forth in the HBV License Agreement, in each case subject to the terms of the HBV License Agreement. Additionally, the HBV License Agreement provides for cooperation related to the development of intellectual property related to the Treatment and for a 2% royalty to G Tech on any net sales that may occur under the HBV License. On February 6, 2020, the Company paid the $1.2 million aforementioned.
The cash funding for research costs and equipment pursuant to the HBV License Agreement consist of monthly payments amounting to $144,500 that cover scientific staffing resources to complete the project as well as periodic payments for materials and equipment needed to complete the project. During the three and nine months ended March 31, 2021, the Company paid $433,500 and $1,300,500 for scientific staffing resources, respectively. During the three and nine months ended March 31, 2021, the Company paid $275,000 and $675,000 for costs related to research studies pursuant to the HBV agreement.
The HBV License Agreement contains customary representations, warranties and covenants of the parties with respect to the development of the Treatment and the HBV License. G Tech and SRI are each controlled by certain members of Weird Science, LLC, a shareholder of the Company.
Shares held for non-consenting shareholders – The 17,414 remaining shares of Common Stock have been reflected as issued and outstanding in the accompanying financial statements. There were zero and 64,823 shares of Common Stock issued to such non-consenting shareholders during the three and nine months ended March 31, 2021, respectively. (See Note 7)
Employment and Service Agreements - The Company has an agreement with the Executive Vice-Chair, where he fulfills the duties as prescribed by the Company’s bylaws and receives annual compensation in the amount of $430,000, plus 300,000 options that vested immediately. Dr. Dybul was given a one-time grant of options to purchase 450,000 shares of Common Stock at a strike price of $8.00 per share on June 11, 2020. The Company executed a consulting agreement for services for a Senior Medical Advisor of $210,000 on a part-time basis. The Company maintains employment agreements with other staff in the ordinary course of business.
Contingencies – From time to time, the Company is involved in routine legal and administrative proceedings and claims of various types. While any proceedings or claim contains an element of uncertainty, management does not expect a material impact on our results of operations or financial position.
| 20 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 — RELATED PARTY TRANSACTIONS
The Company paid G-Tech $918,500 and $2,400,500 in related party transaction which included payments for consulting agreements, contractual costs related to the HBV License Agreement (See Note 8), and security expenses, for the three and nine months ended March 31, 2021, respectively.
NOTE 10 — SUBSEQUENT EVENTS
On April 18, 2021, Enochian Biosciences, Inc., a Delaware corporation (the “Company” or “Enochian”) entered into a Statement of Work & License Agreement (the “License Agreement”), by and among the Company, G Tech Bio, LLC, a California limited liability company (“G -Tech”) and G Health Research Foundation, a not for profit entity organized under the laws of California doing business as Seraph Research Institute (“SRI”), whereby the Company acquired a sublicensable, exclusive license (the “License”) to research, develop and commercialize certain formulations which are aimed at preventing and treating pan-coronavirus or the potential combination of the pancoronavirus and pan-influenza, including the SARS-coronavirus that causes COVID-19 and pan-influenza (the “Prevention and Treatment”).
The License Agreement was entered into pursuant to the existing Framework Agreement between the parties dated November 15, 2019. The License Agreement states that in consideration for the License, the Company shall provide cash funding for research costs and equipment and certain other in-kind funding related to the Prevention and Treatment over a 24-month period, and provides for an up-front payment of $10 million within 60 days of April 18, 2021, along with additional payments upon the occurrence of certain benchmarks in the development of the technology set forth in the License Agreement, in each case subject to the terms of the License Agreement. Under the License Agreement, G Tech has the right to terminate the Licensing Agreement if the Company has not made the up-front payment of $10 million within 60 days of April 18, 2021. Additionally, the License Agreement provides for cooperation related to the development of intellectual property related to the Prevention and Treatment and for a 3% royalty to G Tech on any net sales that may occur under the License.
On April 23, 2021, the Registrant issued 89,286 shares of Common Stock at a price of $3.92 per share pursuant to a private placement for total proceeds to the Registrant of $350,000.
In accordance with ASC 855-10, Company management reviewed all material events through the date of this report.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statement Notice
Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Enochian Biosciences, Inc. (“Enochian”, and together with its subsidiaries, the “Company”, “we” or “us”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our actual future results and trends may differ materially depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on September 23, 2020. The Company’s plans and objectives are based, in part, on assumptions involving the continued expansion of the business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.
Our Business
We are a pre-clinical stage biotechnology company committed to using our genetically modified cell, gene, and immune therapy technologies to prevent or potentially cure HIV, HBV as well as to potentially provide life-long cancer remission of some of the deadliest cancers. We do this by genetically modifying, or re-engineering, different types of human immune cells, depending on the therapeutic area and then injecting or returning the re-engineered cells into a patient with HIV or some cancers to provide treatment or potentially cure.
To date, our operations have been funded by sales of our securities and the issuance of debt. Sales revenue will not support our current operations, and we expect this to be the case until our therapies or products are approved for marketing in the United States and Europe. Even if we are successful in having our therapies or products approved for sale in the United States and Europe, we cannot guarantee that a market for the product will develop. We may never be profitable.
Human Immunodeficiency Virus (HIV), and Acquired Immunodeficiency Syndrome (AIDS)
HIV attacks the human immune system, specifically killing off CD4+ cells, or T cells, which play a central, controlling role in the immune system. Left untreated, HIV dramatically reduces the number of T cells in the body, devastates the immune system, leading to AIDS, a condition where the immune system cannot fight off life-threatening infections and cancers.
Currently there are over 30 antiretroviral drugs, or ART, approved by the U.S. Food and Drug Administration (“FDA”) to treat HIV but these drugs are expensive, require daily adherence and can have significant side effects over time. In addition, on a global basis, approximately 1 million people, including persons in high-income countries, continue to die from HIV/AIDS due to drug-resistant HIV or lack of access to treatment. To date, there are no treatments that can eliminate the reservoir of immune cells that are quietly infected with HIV from the body. Consequently, treatment for HIV is life-long.
There have been several efforts to cure HIV by re-engineering a person’s own T-cells so that these cells no longer express a special protein on these cells (C-C chemokine co-receptor type 5 or CCR5) which HIV uses to gain entry to them. A naturally occurring mutation that blocks expression of CCR5 on T cells occurs in ~1% of persons living in or from Northern Europe with no known adverse effects. The “Berlin patient”, and more recently the “London patient” are HIV- positive persons who developed cancer and were treated with a bone marrow transplant with cells donated from persons with this naturally occurring mutation of CCR5. The Berlin and London patients seem to be effectively cured from HIV providing proof-of-concept that HIV can be cured. However, because the transplanted cells come from another person, such transplants carry high risk and can result in death in a significant proportion of patients. Given the success with these two patients, several researchers and companies have attempted to replicate this experience by genetically modifying T cells of HIV-positive patients to render them unable to be infected by HIV and then returning them to the patient. Because the transplanted cells are from the same person, the risks to the patient are much lower. The uptake, or engraftment of the modified, T cells, however, has not been optimal, leading to failure to achieve a cure. In addition, the transplant pre-treatment that has been used is bone marrow-destroying chemotherapy, which wipes out the patient’s immune system and can have long-term side effects including the risk of developing cancer.
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ENOB-HV-01 is a novel, proprietary approach with the potential to overcome the failures of recent efforts. The intervention: 1) provides gene-modified, T cells with a competitive advantage over non-modified cells in the HIV-positive person, with the potential to significantly increase engraftment; and 2) avoids the need for chemotherapy that substantially depletes the bone marrow and, in fact, could potentially be given as an outpatient treatment. The Company met with the FDA INTERACT team on June 2, 2020. INTERACT is the first available FDA interaction and is a key step in the process towards a potential Investigational New Drug (IND) to study First-in-Human products potentially leading to marketing authorization via Biologics License Application (BLA). The FDA Center for Biologics Evaluation and Research (CBER) has numerous INTERACT requests and grants meetings that are deemed appropriate for this early FDA engagement. The Enochian management team considered the meeting to be successful with strong alignment between Enochian’s approach to developing ENOB-HV-01 and the comments of the FDA reviewers.
Initial scientific findings from a mouse study on the ENOB-HV-01 approach were presented at the annual conference of the American Society of Cell and Gene Therapy (ASCGT) in May 2020. Additional in vitro and in vivo studies are ongoing and/or planned. Pre-IND submission to the US FDA is potentially possible by Q4 of 2021.
We are also developing ENOB-HV-11 and ENOB-HV-12 that will utilize a novel cellular- and immunotherapy approach that could potentially provide both preventative and therapeutic vaccines for HIV. A non-human primate study is in process and on schedule. Preliminary results could potentially be available by the end of 2021.
We are in the development phase of additional product candidates related to our HIV pipeline. ENOB-HV-31, which is an in vivo gene therapy, and ENOB-HV-32, which is a peptide drug for packaging and distribution.
Hepatitis B (HBV)
Despite the availability of an effective vaccine, hepatitis B virus (HBV) is the world’s most common serious liver infection. It is the leading cause of liver cancer and the second leading cause of cancer deaths in the world. Two billion people have been infected with HBV, approximately 350 million have chronic HBV infection, and nearly one million people die every year.
Current efforts to develop novel treatment or cure largely focus on approaches to deplete the pool of a certain type of HBV DNA. Enochian has collaborated with Seraph Research Institute (SRI) to develop an innovative approach to co-opt HBV polymerase, a key expanding factor that the virus needs to reproduce itself, to induce the death of liver cells infected with the virus.
The initial in vitro and in vivo work was presented at the biannual HEP DART meeting in December of 2019, where it was selected as one of the best new therapies/novel strategies. Additional data was presented at the annual conference of the ASCGT in May 2020. A proof-of-concept, in vivo cure study is in advanced stages. A Pre-IND request was accepted. FDA comments are expected in September 2021.
On July 27, 2020, Enochian announced the creation of an HBV Scientific Advisory Board comprised of distinguished leaders in HBV disease, treatment and cure.
Cancer
Based on learning from peer-reviewed publications of Phase I/IIa trials, we have designed an innovative therapeutic vaccination platform that could potentially be used to induce life-long remissions from some of the deadliest solid tumors. Initial preclinical in vitro studies have been encouraging. We plan to initially target pancreatic cancer, triple-negative breast cancer, glioblastoma, and renal cell carcinoma. The platform might also allow for non-specific immune enhancement that could have impact against a broad array of solid tumors. As with HIV, our approach would potentially allow for outpatient therapy without ablating or significantly impairing the patient’s immune system, as many current approaches require.
Through a collaboration with a leader in the field of pancreatic cancer, our first therapeutic target, we are developing the pipeline with in vitro and in vivo proof-of-concept studies to evaluate the potential to induce long-term remission or cure. Results are expected in 2021.
Recent Developments
On April 18, 2021, the Company entered into a Statement of Work & License Agreement (the “License Agreement”), by and among the Company, G Tech Bio, LLC, a California limited liability company (“G Tech”) and G Health Research Foundation, a not for profit entity organized under the laws of California doing business as Seraph Research Institute (“SRI”), whereby the Company acquired a sublicensable, exclusive license (the “License”) to research, develop and commercialize certain formulations which are aimed at preventing and treating pan-coronavirus or the potential combination of the pancoronavirus and pan-influenza, including the SARS-coronavirus that causes COVID-19 and pan-influenza (the “Prevention and Treatment”).
The License Agreement was entered into pursuant to the existing Framework Agreement between the parties dated November 15, 2019. The License Agreement states that in consideration for the License, the Company shall provide cash funding for research costs and equipment and certain other in-kind funding related to the Prevention and Treatment over a 24-month period, and provides for an up-front payment of $10 million within 60 days of April 18, 2021, along with additional payments upon the occurrence of certain benchmarks in the development of the technology set forth in the License Agreement, in each case subject to the terms of the License Agreement.
Under the License Agreement, G Tech has the right to terminate the Licensing Agreement if the Company has not made the up-front payment of $10 million within 60 days of April 18, 2021. Additionally, the License Agreement provides for cooperation related to the development of intellectual property related to the Prevention and Treatment and for a 3% royalty to G Tech on any net sales that may occur under the License.
Corporate History
On February 16, 2018, we completed our acquisition of Enochian Biopharma pursuant to an acquisition agreement, dated January 12, 2018, by and among the Registrant, its wholly owned subsidiary DanDrit Acquisition Sub, Inc., Enochian Biopharma and Weird Science with Enochian Biopharma surviving as a wholly owned subsidiary of the Registrant. As consideration for the acquisition, the stockholders of Enochian Biopharma received (i) 18,081,962 shares of Common Stock and (ii) the right to receive contingent shares pro rata upon the exercise or conversion of warrants, which were outstanding at closing (See Note 7.)
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COVID-19 Outlook
During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The pandemic has significantly affected the economic conditions in the U.S. A number of states, counties and municipalities issued orders requiring persons who were not engaged in essential activities and businesses to remain at home. On March 27, 2020, the US enacted the Coronavirus Aid, Relief and Economic Security Aid (“CARES Act”) to help stimulate an economic recovery and additional legislation related to COVID-19 has been proposed; however, there are no reliable estimates of how long the pandemic will last or how many people are likely to be affected by it. No one knows what over-all effects the COVID-19 pandemic will have on economic conditions during the remainder of 2021.
Our senior management team is monitoring COVID-19’s impact and will continue to adjust our operations as necessary. However, the impact of this event on the Company’s results of operations, financial position, and liquidity or capital resources cannot be reasonably estimated at this time.
Results of Operations for the three and nine months ended March 31, 2021 and 2020
The following tablesets forth our revenues, expenses and net loss for the three and nine months ended March 31, 2021 and March 31, 2020. The financial information below is derived from our unaudited condensed consolidated financial statements.
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||||||||||
| March 31, | Increase/(Decrease) | March 31, | Increase/(Decrease) | |||||||||||||||||||||||||||||
| 2021 | 2020 | $ | % | 2021 | 2020 | $ | % | |||||||||||||||||||||||||
| Revenues | $ | — | $ | — | $ | — | — | % | $ | — | $ | — | $ | — | — | % | ||||||||||||||||
| Cost of Goods Sold | $ | — | $ | — | $ | — | — | % | $ | — | $ | — | $ | — | $ | — | % | |||||||||||||||
| Gross profit (Loss) | $ | — | $ | — | $ | — | — | % | $ | — | $ | — | $ | — | $ | — | % | |||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||||||||||
| General and administrative expenses | 1,943,498 | 1,486,561 | 456,936 | 30.7 | 5,661,409 | 5,622,721 | 38,688 | 0.7 | ||||||||||||||||||||||||
| Research and development expenses | 1,079,607 | 2,307,336 | (1,227,729 | ) | (53.2 | ) | 3,464,451 | 3,388,996 | 75,455 | 2.2 | ||||||||||||||||||||||
| Depreciation and amortization | 30,825 | 35,764 | (4,939 | ) | (13.8 | ) | 92,043 | 78,912 | 13,131 | 16.6 | ||||||||||||||||||||||
| Total Operating Expense | $ | 3,053,930 | $ | 3,829,661 | $ | (775,732 | ) | (20.3 | )% | $ | 9,217,903 | $ | 9,090,629 | $ | 127,274 | 1.4 | % | |||||||||||||||
| LOSS FROM OPERATIONS | $ | (3,053,930 | ) | $ | (3,053,930 | ) | $ | 775,732 | (20.3 | )% | $ | (9,217,903 | ) | $ | (9,090,629 | ) | $ | (127,274 | ) | 1.4 | % | |||||||||||
| Other Income (Expense) | — | |||||||||||||||||||||||||||||||
| Change in fair value of contingent consideration | (882,498 | ) | 2,310,202 | (3,192,701 | ) | (138.2 | ) | 38,313 | 1,450,202 | (1,411,890 | ) | (97.4 | ) | |||||||||||||||||||
| Interest expense | (96,347 | ) | (12,030 | ) | (84,317 | ) | 100.0 | (282,086 | ) | (12,030 | ) | (270,056 | ) | 100.0 | ||||||||||||||||||
| Gain (Loss) on currency transactions | (221 | ) | (371 | ) | 150 | (40.4 | ) | (32,510 | ) | 148,936 | (181,446 | ) | (121.8 | ) | ||||||||||||||||||
| Gain on settlement | — | 5,000 | (5,000 | ) | (100.0 | ) | — | 140,000 | (140,000 | ) | (100.0 | ) | ||||||||||||||||||||
| Interest income | 1,437 | 12,371 | (10,934 | ) | (88.4 | ) | 8,809 | 45,324 | (36,515 | ) | (80.6 | ) | ||||||||||||||||||||
| Total Other (expense) income | (977,629 | ) | 2,315,172 | (3,292,802 | ) | (142.2 | ) | (267,474 | ) | 1,772,432 | (2,039,907 | ) | (115.1 | ) | ||||||||||||||||||
| Loss Before Income Taxes | $ | (4,031,559 | ) | $ | (1,514,489 | ) | $ | (2,517,070 | ) | 166.2 | % | $ | (9,485,377 | ) | $ | (7,318,197 | ) | $ | (2,167,181 | ) | 29.6 | % | ||||||||||
| Income Tax Benefit | $ | 849 | $ | — | $ | — | $ | 124,801 | $ | — | $ | 124,801 | 100.0 | |||||||||||||||||||
| NET LOSS | $ | (4,030,710 | ) | $ | (1,514,489 | ) | $ | (2,516,221 | ) | 166.1 | % | $ | (9,360,576 | ) | $ | (7,318,197 | ) | $ | (2,042,380 | ) | 27.9 | % | ||||||||||
Results of Operations for the three months ended March 31, 2021 compared to the three months ended December 31, 2019
The following tablesets forth our revenues, expenses and net loss for the three months ended March 31, 2021 and December 31, 2019. The financial information below is derived from our unaudited condensed consolidated financial statements
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Revenues
Revenues from operations for the three and nine months ended March 31, 2021, and March 31, 2020 were $0 and $0, respectively.
Cost of Goods Sold
Our cost of goods sold was $0 and $0 during the three and nine months ended March 31, 2021, and March 31, 2020, respectively.
Gross profit (Loss)
Gross profit for the three and nine months ended March 31, 2021, and March 31, 2020 was $0 and $0, respectively.
Expenses
Our operating expenses for the three months ended March 31, 2021, and March 31, 2020 were $3,053,930 and $3,829,661, respectively, representing a decrease of $775,731, or approximately 20%.
Our operating expenses for the nine months ended March 31, 2021, and March 31, 2020 were $9,217,903 and $9,090,629, respectively, representing an increase of $127,274, or approximately 1%.
General and administrative expenses for the three months ended March 31, 2021, and March 31, 2020 were $1,943,498 and $1,486,561, respectively, representing an increase of $456,937 or approximately 31%. The variance is primarily related to an increase in stock based compensation of $527,000, offset by decreases of legal fees of $101,000. The increase in stock based compensation is due to the amortization of compensation cost from the increase of options provided to employees and directors, and the issuance of restricted shares in lieu of services rendered valued at $147,000, when compared to the comparative period in the prior year. The variance in legal fees is due to the decrease in licensing agreement related costs associated to the HBV technology, which occurred in the prior reporting period when compared to current legal fees.
General and administrative expenses for the nine months ended March 31, 2021 and 2020, remained relatively stable during for the comparative periods.
Research and development expenses for the three months ended March 31, 2021, and March 31, 2020 were $1,079,607 and $2,307,336, respectively, representing a decrease of $1,227,729, or approximately 53%. The variance is primarily driven by the $1.2 million upfront fee related to the Hepatitis B License Agreement payment in the prior year. No other milestone payments related to this agreement have been made through March 31, 2021. All other R&D costs have remained relatively stable during this period.
Research and development expenses for the nine months ended March 31, 2021 and 2020, remained relatively stable during for the comparative periods.
The Company recorded other (expense) of $977,630 for the three months ended March 31, 2021, compared to other income of $2,315,172 for the three months ended March 31, 2020, representing an increase in other (expenses) of $3,292,802 or 142%. The variance is primarily due to the change in fair value of the contingent consideration liability expense of $3,192,701, and the impact of warrants expired during the quarter.
The Company recorded other (expense) of $267,475 for the nine months ended March 31, 2021, compared to other income of $1,772,432 for the nine months ended March 31, 2020, representing an increase in other (expenses) of $2,039,907 or 115%. The variance is primarily due to the change in fair value of the contingent consideration liability expense of $1,411,890, and the impact of warrants exercised during the period.
Net Loss
Net loss for the three months ended March 31, 2021, and 2020, was ($4,030,710) or ($0.09) per share and ($1,514,489) or ($0.03) per share, respectively, representing an increase in loss of $2,516,221 or approximately 166%. The increase in loss was primarily due to the increase in fair value of the contingent consideration expense of $3,192,701 and the decrease in research and development expenses of $1,227,729 primarily related to the HBV License Agreement upfront fee that was paid in the prior year, not incurred in the current year.
Net loss for the nine months ended March 31, 2021, and 2020, was ($9,360,577) or ($0.20) per share and ($7,318,197) or ($0.16) per share, respectively, representing a decrease in loss of $2,042,380 or approximately (28)%. The increase in loss was primarily due to the increase in fair value of the contingent consideration of $1,780,811, offset by the increase in research and development expenses of $1,303,184 primarily related to the HBV License Agreement, and the commencement of new studies related to ENOB-HV11/12 product line.
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Liquidity and Capital Resources
We have historically satisfied our capital and liquidity requirements through funding from shareholders, the issuance of convertible notes and the sale of our Common Stock and warrants. We currently have no sales revenue to support our current operations and we expect this to be the case until our therapies or products are approved for marketing in the United States and Europe. Even if we are successful in having our therapies or products approved for sale in the United States and Europe, we cannot guarantee that a market for the product will develop. We may never be profitable. At this time, we believe we have sufficient liquidity and access to committed funds to fund our operations for the next twelve months.
At this time, we believe we have sufficient liquidity and access to committed funds to fund our operations for the next twelve months. We may need additional funds for (a) purchase of equipment and, (b) research and development, specifically to open an Investigational New Drug Application (IND) (the first step in the drug review process by the FDA) for ENOB-HV01, to continue our research and development of ENOB-HV11/12, to fund the HBV License Agreement in furtherance of the Treatment for Hepatitis B, and possible future strategic acquisitions of businesses, products or technologies complementary to our business. If additional funds are required, we may raise such funds from time to time through public or private sales of our equity or debt securities. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could materially adversely affect our growth plans and our financial condition and results of operations.
As of March 31, 2021, the Company had $4,526,284 in cash and working capital of $3,512,918 as compared to $8,696,361 in cash and working capital of $7,606,411 as of June 30, 2020, a decrease of 48.0 % and 53.82%, respectively.
Assets
Total assets at March 31, 2021, were $173,697,498 compared to $178,102,059 as of June 30, 2020. The decrease in total assets were primarily due to the decrease in cash of $4,170,077. The change is primarily attributed to the following expenditures, $3,464,451 in research and development costs primarily related to the HBV License Agreement and ENOB-HV11/12 studies, and general and administrative expenses of $3,702,857 net of non-cash items, offset by the cash provided by the private placement and warrants exercised of $3,702,857.
Liabilities
Total Liabilities at March 31, 2021, were $11,378,787 compared to $11,829,798 as of June 30, 2020. The decrease in total liabilities were primarily related to reduction in accrued expenses that totaled approximately $157,262 due to timing, and the decrease of approximately $230,835 in the contingent consideration liability as a result of mark to market adjustment and warrants expiring, and the reduction in lease liabilities of approximately $201,944 offset by an increase in other short term liabilities of $302,992.
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Following is a summary of the Company’s cash flows (used by) provided by operating, investing, and financing activities:
| Nine Months Ended March 31, 2021 | Nine Months Ended March 31, 2020 | |||||||
| Net Cash (Used in) Operating Activities | $ | (7,582,676 | ) | $ | (8,214,325 | ) | ||
| Net Cash (Used in) Investing Activities | (10,721 | ) | (174,015 | ) | ||||
| Net Cash Provided by Financing Activities | 3,398,599 | 7,200,000 | ||||||
| (Loss) Gain on Currency Translation | 24,721 | (154,718 | ) | |||||
| Change in Cash and Cash Equivalents | $ | (4,170,077 | ) | $ | (1,343,058 | ) | ||
Cash Flows
Cash used in operating activities for the nine months ended March 31, 2021, and 2020 was ($7,582,676) and ($8,214,325), respectively. Cash used in operating activities during the current period included $3,464,451 in research and development costs primarily related to the HBV License Agreement and studies related to ENOB-HV11/12, and general and administrative expenses of $3,702,857 net of non-cash items.
Cash used in investing activities was $10,721 and $174,015 during the nine months ended March 31, 2021 and 2020, respectively, primarily due to purchase of equipment for the lab.
Cash provided by financing activities for the nine months ended March 31, 2021 and 2020, respectively, was $3,398,599 and $7,200,000, respectively. The Company received financing from a private placement of common stock, and the exercising of warrants held by shareholders, offset of payments towards the finance agreement.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Significant Accounting Policies and Critical Accounting Estimates
The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result, of the need to make estimates regarding matters that are inherently uncertain.
For a full explanation of our accounting policies, see Note 1 to the unaudited condensed consolidated financial statements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, the Company is not required to provide the information required by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our Principal Executive Officer and Chief Financial Officer (the “Certifying Officers”) are responsible for establishing and maintaining disclosure controls and procedures for the Company. The Certifying Officers have designed such disclosure controls and procedures to ensure that material information is made known to them, particularly during the period in which this Report was prepared.
The Certifying Officers are responsible for establishing and maintaining adequate internal control over financial reporting for the Company used the “Internal Control over Financial Reporting Integrated Framework” issued by Committee of Sponsoring Organizations (“COSO”) to conduct an extensive review of the Company’s “disclosure controls and procedures” (as defined in the Exchange Act, Rules 13a-15(e) and 15-d-15(e)) as of the end of each of the periods covered by this Report (the “Evaluation Date”). Based upon that evaluation, the Certifying Officers concluded that, as of March 31, 2021, our disclosure controls and procedures were not effective in ensuring that the information we were required to disclose in reports that we file or submit under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. The deficiencies are attributed to the fact that the Company does not have adequate resources to address complex accounting issues, as well as an inadequate number of persons to whom it can segregate accounting tasks within the Company so as to ensure the segregation of duties between those persons who approve and issue payment from those persons who are responsible to record and reconcile such transactions within the Company’s accounting system. These control deficiencies will be monitored and attention will be given to the matter as we continue to accelerate through our current growth stage.
The Certifying Officers based their conclusion on the fact that the Company has identified material weaknesses in controls over financial reporting, detailed below. In order to reduce the impact of these weaknesses to an acceptable level, the Company has contracted with consultants with expertise in U.S. GAAP and SEC financial reporting standards to review and compile all financial information prior to filing that information with the SEC. However, even with the added expertise of these consultants, we still expect to be deficient in our internal controls over disclosure and procedures until sufficient capital is available to hire the appropriate internal accounting staff and individuals with requisite GAAP and SEC financial reporting knowledge. There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Changes in Internal Controls
There have been no changes in our internal controls over financial reporting during the nine months ended March 31, 2021 that have materially affected or are reasonably likely to materially affect our internal controls.
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There are presently no material pending legal proceedings other than in the ordinary course of business to which the Company or any of its subsidiaries, is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.
Risk factors that may affect our business and financial results are discussed within Item 1A ”Risk Factors” of our annual report for the fiscal year ended June 30, 2020 on Form 10-K (“2020 Form 10-K”) filed with the SEC on September 23, 2020. There have been no material changes to the disclosures relating to this item from those set forth in our 2020 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On March 31, 2021, the Company conducted a private placement offering of 56,123 shares (the “Shares”) of its Common Stock, at a purchase price of $3.92 per share, for aggregate proceeds to the Company of $220,000. The private placement was completed pursuant to Regulation S promulgated under the Securities Act of 1933, as amended (“Regulation S”). In connection with the private placement, each investor executed a subscription agreement in the form of Exhibit 10.1 attached hereto. Each subscription agreement contains customary representations and warranties of the Company and of each investor, including that all investors purchasing Shares are not “U.S. persons” as defined by Rule 902 of Regulation S. The private placement was made directly by the Company and no underwriter or placement agent was engaged by the Company. The Company did not engage in general solicitation or advertising and did not offer securities to the public in connection with such issuances. The foregoing description of the private placement does not purport to be complete, and is qualified in its entirety by reference to the form of subscription agreement attached hereto as Exhibit 10.1, which is incorporated by reference herein.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
| (a) | Exhibits required by Item 601 of Regulation S-K. |
| ** | Filed herewith. |
| *** | Furnished herewith. |
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: May 17, 2021 | ENOCHIAN BIOSCIENCES, INC. | |
| By: | /s/ Mark Dybul | |
| Mark Dybul | ||
| Executive Vice Chair | ||
| (Principal Executive Officer) | ||
| By: | /s/ Luisa Puche | |
| Luisa Puche | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
30
Exhibit 31.1
OFFICER’S CERTIFICATE
PURSUANT TO SECTION 302
I, Mark Dybul, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2021 of Enochian Biosciences, Inc.;
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 17, 2021 | By: | /s/ Mark Dybul |
| Name: | Mark Dybul | |
| Title: | Executive Vice Chair (Principal Executive Officer) |
Exhibit 31.2
OFFICER’S CERTIFICATE
PURSUANT TO SECTION 302
I, Luisa Puche, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2021 of Enochian Biosciences, Inc.;
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 17, 2021 | By: | /s/ Luisa Puche |
| Name: | Luisa Puche | |
| Title: | Chief Financial Officer (Principal Financial 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 Enochian Biosciences, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2021 as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
| Date: May 17, 2021 | By: | /s/ Mark Dybul |
| Name: | Mark Dybul | |
| Title: | Executive Vice Chair (Principal Executive Officer) |
A signed original of this written statement required by Section 906, or other document authentications, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the U.S. Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
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 Enochian Biosciences, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2021, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
| Date: May 17, 2021 | By: | /s/ Luisa Puche |
| Name: | Luisa Puche | |
| Title: | Chief Financial Officer
(Principal Financial Officer) |
A signed original of this written statement required by Section 906, or other document authentications, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the U.S. Securities and Exchange Commission or its staff upon request.