ENVERIC
BIOSCIENCES, INC. AND SUBSIDIARY
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
As of March 31,
|
|
|
As of December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
22,657,150
|
|
|
$
|
1,578,460
|
|
Prepaid
expenses and other current assets
|
|
|
767,298
|
|
|
|
700,710
|
|
Total
current assets
|
|
|
23,424,448
|
|
|
|
2,279,170
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets, net
|
|
|
2,362,177
|
|
|
|
1,817,721
|
|
Total
assets
|
|
$
|
25,786,625
|
|
|
$
|
4,096,891
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’
Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
626,947
|
|
|
$
|
681,250
|
|
Total
liabilities
|
|
|
626,947
|
|
|
|
681,250
|
|
|
|
|
|
|
|
|
|
|
Warrant liabilities
|
|
|
6,168,000
|
|
|
|
-
|
|
Total liabilities
|
|
|
6,794,947
|
|
|
|
681,250
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
(Note 6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred Stock, $0.01 par value, 20,000,000
shares authorized, 0 and 3,275,407 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
|
|
|
-
|
|
|
|
32,754
|
|
Common stock, $0.01 par
value, 100,000,000 shares authorized, 19,449,975 and 10,095,109 shares issued and outstanding as of March 31, 2021 and December
31, 2020, respectively
|
|
|
194,499
|
|
|
|
100,951
|
|
Additional paid-in capital
|
|
|
33,952,988
|
|
|
|
15,222,770
|
|
Accumulated deficit
|
|
|
(15,010,268
|
)
|
|
|
(11,759,557
|
)
|
Accumulated
other comprehensive loss
|
|
|
(145,541
|
)
|
|
|
(181,277
|
)
|
Total
shareholders’ equity
|
|
|
18,991,678
|
|
|
|
3,415,641
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
25,786,625
|
|
|
$
|
4,096,891
|
|
The
accompanying notes are in integral part of these unaudited condensed consolidated financial statements.
ENVERIC
BIOSCIENCES, INC. AND SUBSIDIARY
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
|
For
the Three Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
General and
administrative expenses
|
|
$
|
6,607,045
|
|
|
$
|
836,702
|
|
Research
and development
|
|
|
157,952
|
|
|
|
-
|
|
Total
operating expenses
|
|
|
6,764,997
|
|
|
|
836,702
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(6,764,997
|
)
|
|
|
(836,702
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Inducement
expense
|
|
|
(298,714
|
)
|
|
|
-
|
|
Change
in fair value of warrant liabilities
|
|
|
3,813,000
|
|
|
|
-
|
|
Interest
expense
|
|
|
-
|
|
|
|
(261,759
|
)
|
Total
other income (expense)
|
|
|
3,514,286
|
|
|
|
(261,759
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(3,250,711
|
)
|
|
|
(1,098,461
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
|
|
35,736
|
|
|
|
(12,698
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
|
$
|
(3,214,975
|
)
|
|
$
|
(1,111,159
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss per share - basic and diluted
|
|
$
|
(0.20
|
)
|
|
$
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding, basic and diluted
|
|
|
16,220,661
|
|
|
|
5,653,820
|
|
The
accompanying notes are in integral part of these unaudited condensed consolidated financial statements.
ENVERIC
BIOSCIENCES, INC. AND SUBSIDIARY
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
FOR
THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
|
|
Series
B Preferred Stock
|
|
|
Common
Stock
|
|
|
Additional
paid-in
|
|
|
Accumulated
|
|
|
Accumulated
Other Comprehensive
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
5,573,915
|
|
|
$
|
55,739
|
|
|
$
|
3,039,163
|
|
|
$
|
(4,894,881
|
)
|
|
$
|
(11,622
|
)
|
|
$
|
(1,811,601
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for accounts payable
|
|
|
-
|
|
|
|
-
|
|
|
|
85,942
|
|
|
|
859
|
|
|
|
172,623
|
|
|
|
-
|
|
|
|
-
|
|
|
|
173,482
|
|
Warrants
issued in conjunction with notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,149
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,149
|
|
Beneficial
conversion feature issued with note payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,851
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,851
|
|
Foreign
exchange loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(12,698
|
)
|
|
|
(12,698
|
)
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,098,461
|
)
|
|
|
-
|
|
|
|
(1,098,461
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of March 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
5,659,857
|
|
|
$
|
56,598
|
|
|
$
|
3,261,786
|
|
|
$
|
(5,993,342
|
)
|
|
$
|
(24,320
|
)
|
|
$
|
(2,699,278
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2021
|
|
|
3,275,407
|
|
|
$
|
32,754
|
|
|
|
10,095,109
|
|
|
$
|
100,951
|
|
|
$
|
15,222,770
|
|
|
$
|
(11,759,557
|
)
|
|
$
|
(181,277
|
)
|
|
$
|
3,415,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
2021 registered direct offering
|
|
|
-
|
|
|
|
-
|
|
|
|
2,221,334
|
|
|
|
22,213
|
|
|
|
4,594,874
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,617,087
|
|
February
2021 registered direct offering
|
|
|
-
|
|
|
|
-
|
|
|
|
3,007,026
|
|
|
|
30,070
|
|
|
|
6,986,331
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,016,401
|
|
Stock
based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,591,565
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,591,565
|
|
Induced
conversion of stock options into restricted stock awards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
298,714
|
|
|
|
-
|
|
|
|
-
|
|
|
|
298,714
|
|
Conversion
of Series B Preferred Stock
|
|
|
(3,275,407
|
)
|
|
|
(32,754
|
)
|
|
|
3,275,407
|
|
|
|
32,754
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercise
of warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
851,099
|
|
|
|
8,511
|
|
|
|
3,258,734
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,267,245
|
|
Foreign
exchange gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35,736
|
|
|
|
35,736
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,250,711
|
)
|
|
|
-
|
|
|
|
(3,250,711
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of March 31, 2021
|
|
|
-
|
|
|
$
|
-
|
|
|
|
19,449,975
|
|
|
$
|
194,499
|
|
|
$
|
33,952,988
|
|
|
$
|
(15,010,268
|
)
|
|
$
|
(145,541
|
)
|
|
$
|
18,991,678
|
|
The
accompanying notes are in integral part of these unaudited condensed consolidated financial statements.
ENVERIC
BIOSCIENCES, INC. AND SUBSIDIARY
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For
the Three Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Cash Flows From Operating
Activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,250,711
|
)
|
|
$
|
(1,098,461
|
)
|
Adjustments
to reconcile net loss to cash used in operating activities:
|
|
|
|
|
|
|
|
|
Extinguishment of note
payable
|
|
|
-
|
|
|
|
233,240
|
|
Accrued interest
|
|
|
-
|
|
|
|
28,519
|
|
Change in fair value of warrant liability
|
|
|
(3,813,000
|
)
|
|
|
-
|
|
Stock-based compensation
|
|
|
3,591,565
|
|
|
|
-
|
|
Inducement expense
|
|
|
298,714
|
|
|
|
-
|
|
Amortization of intangible
assets
|
|
|
136,640
|
|
|
|
-
|
|
Change
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other
current assets
|
|
|
(66,208
|
)
|
|
|
(49,588
|
)
|
Accounts
payable and accrued liabilities
|
|
|
(59,278
|
)
|
|
|
(7,632
|
)
|
Net cash used in operating
activities
|
|
|
(3,162,278
|
)
|
|
|
(893,922
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing
Activities:
|
|
|
|
|
|
|
|
|
Purchase
of license agreement
|
|
|
(675,000
|
)
|
|
|
-
|
|
Net cash used in investing
activities
|
|
|
(675,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing
Activities:
|
|
|
|
|
|
|
|
|
Proceeds from sale of common
stock, net of offering costs
|
|
|
21,614,488
|
|
|
|
-
|
|
Proceeds from convertible notes payable
|
|
|
-
|
|
|
|
50,000
|
|
Proceeds from note payable
|
|
|
-
|
|
|
|
1,319,910
|
|
Repayment of note payable
|
|
|
-
|
|
|
|
(157,714
|
)
|
Proceeds
from warrant exercises
|
|
|
3,267,245
|
|
|
|
-
|
|
Net cash provided by financing
activities
|
|
|
24,881,733
|
|
|
|
1,212,196
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange
rate on cash
|
|
|
34,235
|
|
|
|
(86,677
|
)
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
21,078,690
|
|
|
|
231,597
|
|
Cash - beginning of period
|
|
|
1,578,460
|
|
|
|
43,714
|
|
Cash - end of period
|
|
$
|
22,657,150
|
|
|
$
|
275,311
|
|
|
|
|
|
|
|
|
|
|
Supplemental non-cash financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued in conjunction with notes payable issuances
|
|
$
|
-
|
|
|
$
|
17,851
|
|
Shares of common stock issued for note payable extensions
|
|
$
|
-
|
|
|
$
|
32,149
|
|
Shares of common stock issued for accounts payable
|
|
$
|
-
|
|
|
$
|
173,482
|
|
The
accompanying notes are in integral part of these unaudited condensed consolidated financial statements.
ENVERIC
BIOSCIENCES, INC. AND SUBSIDIARY
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 - Business
Nature
of operations
Enveric
Biosciences, Inc. (“Enveric Biosciences, Inc.” “Enveric” or the “Company”) (formerly known as Ameri
Holdings, Inc.) (“Ameri”) is a pharmaceutical company developing innovative, evidence-based cannabinoid medicines. The head
office of the Company is located in Naples, Florida.
On
January 10, 2020, the Company entered into an Amalgamation Agreement (as amended on May 6, 2020), (the “Amalgamation Agreement”)
with Jay Pharma Merger Sub, Inc., a company organized under the laws of Canada and a wholly owned subsidiary of the Company (“Merger
Sub”), Jay Pharma Inc., a company organized under the laws of Canada (“Jay Pharma”), Jay Pharma ExchangeCo., Inc. a
company organized under the laws of British Columbia and a wholly owned subsidiary of the Company (“ExchangeCo”), and Barry
Kostiner, as the Company Representative, which provided that, among other things, Merger Sub and Jay Pharma would be amalgamated and
would continue as one corporation (“Amalco”), with Amalco continuing as a direct wholly owned subsidiary of ExchangeCo and
an indirect wholly owned subsidiary of Ameri, on the terms and conditions set forth in the Amalgamation Agreement. On August 12, 2020,
the Company, Jay Pharma and certain other signatories thereto entered into a tender agreement (the “Tender Agreement”), which
provided that, among other things, Ameri would make a tender offer (the “Offer”) to purchase all of the outstanding common
shares of Jay Pharma for the number of shares of Enveric common stock equal to the exchange ratio set forth in the Tender Agreement,
and Jay Pharma would become a wholly-owned subsidiary of Ameri, on the terms and conditions set forth in the Tender Agreement. The Tender
Agreement terminated and replaced in its entirety the Amalgamation Agreement. On December 30, 2020, the Company, Jay Pharma, Merger Sub,
and ExchangeCo completed the Offer and Jay Pharma became a wholly owned subsidiary of the Company. The transaction was
treated as a reverse acquisition and recapitalization and accordingly, the historical financial statements prior to the date of the Business
Combination in these unaudited condensed consolidated financial statements are those of Jay Pharma.
COVID-19
During 2020 and continuing into 2021, the
world has been, and continues to be, impacted by the novel coronavirus (COVID-19) pandemic. COVID-19 and measures to prevent its spread
impacted our business in a number of ways. The impact of these disruptions and the extent of their adverse impact on our financial and
operating results will be dictated by the length of time that such disruptions continue, which will, in turn, depend on the currently
unknowable duration and severity of the impacts of COVID-19, and among other things, the impact of governmental actions imposed in response
to COVID-19 and individuals’ and companies’ risk tolerance regarding health matters going forward and developing strain mutations.
ENVERIC
BIOSCIENCES, INC. AND SUBSIDIARY
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note
2 – SUMMARY OF Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States (“U.S. GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Management’s
opinion is that all adjustments (consisting of normal accruals) considered necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2021. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial
statements for the year ended December 31, 2020 and related notes thereto included in the Company’s Annual Report on Form 10-K
filed with the SEC on April 1, 2021.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amount of assets and liabilities at the date of the financial statements and expenses during the periods reported. By their
nature, these estimates are subject to measurement uncertainty and the effects on the financial statements of changes in such estimates
in future periods could be significant. Significant areas requiring management’s estimates and assumptions include determining
the fair value of transactions involving common stock and the valuation of stock-based compensation. Actual results could differ from
those estimates.
Foreign
Currency Translation
The
reporting currency of the Company is the United States Dollar. The financial statements of companies located outside of
the U.S. are measured in their functional currency, which is the local currency. The functional currency of the Company is the
Canadian dollar. Monetary assets and liabilities are translated using public exchange rates at the balance sheet date. Income
and expense items are translated using average monthly exchange rates. Shareholders’ equity accounts and non-monetary assets
are translated at their historical exchange rates. Translation adjustments are included in accumulated other comprehensive loss
in the accompanying balance sheets.
Cash
and cash equivalents
The
Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
The Company did not have any cash equivalents as of March 31, 2021 and December 31, 2020.
Warrant
Liability
The
Company accounts for warrants for shares of the Company’s common stock that are not indexed to its own stock as liabilities
at fair value on the balance sheet. Such warrants are subject to remeasurement at each balance sheet date and any change in fair
value is recognized as a component of other expense on the statement of operations. The Company will continue to adjust the liability
for changes in fair value until the earlier of the exercise or expiration of such common stock warrants. At that time, the portion
of the warrant liability related to such common stock warrants will be reclassified to additional paid-in capital.
Offering Costs
The Company allocates offering costs to the different
components of the capital raise on a pro rata basis. Any offering costs allocated to common stock are charged directly to additional
paid-in capital. Any offering costs allocated to warrant liabilities are charged to general and administrative expenses on the Company’s
statement of operations.
Net
Loss per Share
Basic
net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during
the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential
common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the
exercise of stock options and warrants (using the treasury stock method) and convertible notes. The computation of basic net loss
per share for the three months ended March 31, 2021 and 2020 excludes potentially dilutive securities. The computations of net
loss per share for each period presented is the same for both basic and fully diluted.
Potentially
dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because the effect
of their inclusion would have been anti-dilutive.
|
|
For
the three months ended March 31, 2021
|
|
|
For
the three months ended March 31, 2020
|
|
Warrants to purchase shares of
common stock
|
|
|
5,979,611
|
|
|
|
1,504,593
|
|
Convertible notes
|
|
|
-
|
|
|
|
380,920
|
|
Restricted stock units
|
|
|
3,279,284
|
|
|
|
-
|
|
Restricted stock awards
|
|
|
70,986
|
|
|
|
-
|
|
Options to purchase
shares of common stock
|
|
|
369,361
|
|
|
|
3,604,348
|
|
Total
potentially dilutive securities
|
|
|
9,699,242
|
|
|
|
5,489,861
|
|
ENVERIC
BIOSCIENCES, INC. AND SUBSIDIARY
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note
2 – SUMMARY OF Significant Accounting Policies, continued
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts
and management believes the Company is not exposed to significant risks on such accounts.
Fair
Value Measurement
The
Company follows Accounting Standards Codification (“ASC”) 820–10 “Fair Value Measurement” of the
Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification to measure the fair value
of its financial instruments and disclosures about fair value of its financial instruments. ASC 820–10 establishes a framework
for measuring fair value and expands disclosures about fair value measurements. To increase consistency and comparability in fair
value measurements and related disclosures, ASC 820–10 establishes a fair value hierarchy which prioritizes the inputs to
valuation techniques used to measure fair value into three (3) broad levels.
The
three (3) levels of fair value hierarchy defined by ASC 820–10 are described below:
Level
1
|
|
Quoted
market prices available in active markets for identical assets or liabilities as of the reporting date.
|
|
|
|
Level
2
|
|
Pricing
inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable
as of the reporting date.
|
|
|
|
Level
3
|
|
Pricing
inputs that are generally unobservable inputs and not corroborated by market data.
|
Financial
assets or liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow
methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within
more than one level described above, the categorization is based on the lowest level input that is significant to the fair value
measurement of the instrument.
The
carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses and other current assets,
accounts payable and accrued expenses approximate their fair values due to the short-term nature of these instruments.
The
Company uses Level 3 of the fair value hierarchy to measure the fair value of its warrant liabilities. The Company revalues such
liabilities at every reporting period and recognizes gains or losses as change in fair value of warrant liabilities in the condensed
consolidated statements of operations that are attributable to the change in the fair value of the warrant liabilities.
The
following table provides the financial liabilities measured on a recurring basis and reported at fair value on the balance sheet
as of March 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair
value:
|
|
Level
|
|
|
March 31, 2021
|
|
Warrant liabilities – January Warrants
|
|
|
3
|
|
|
$
|
3,164,000
|
|
Warrant liabilities – February Warrants
|
|
|
3
|
|
|
|
3,004,000
|
|
Fair value as of March 31, 2021
|
|
|
|
|
|
$
|
6,168,000
|
|
The
Company had no assets or liabilities measured at fair value at December 31, 2020.
Both
the January and February Warrants are classified as Level 3, for which there is no current market for these securities such as
the determination of fair value requires significant judgment or estimation. Changes in fair value measurement categorized within
Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.
ENVERIC
BIOSCIENCES, INC. AND SUBSIDIARY
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note
2 – SUMMARY OF Significant Accounting Policies, continued
Fair
Value Measurement, continued
Initial
Measurement
The
Company established the initial fair value of its warrant liabilities at the respective dates of issuance. The Company used a
Black Scholes valuation model in order to determine their value. The key inputs into the Black Scholes valuation model for the
initial valuations are below:
|
|
January Warrants
|
|
|
February
Warrants
|
|
|
|
January 13,
2021
|
|
|
February
12, 2021
|
|
Term (years)
|
|
|
5.0
|
|
|
|
5.0
|
|
Stock price
|
|
$
|
4.21
|
|
|
$
|
4.62
|
|
Exercise price
|
|
$
|
4.95
|
|
|
$
|
4.95
|
|
Dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Expected volatility
|
|
|
84.7
|
%
|
|
|
84.7
|
%
|
Risk free interest rate
|
|
|
0.5
|
%
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
Number of shares
|
|
|
1,821,514
|
|
|
|
1,714,005
|
|
Value (per share)
|
|
$
|
2.66
|
|
|
$
|
3.00
|
|
Subsequent
measurement
The
following table presents the changes in fair value of the warrant liabilities:
|
|
January Warrants
|
|
|
February Warrants
|
|
|
Total Warrant Liability
|
|
Fair value as of December 31, 2020
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Initial value of warrant liability
|
|
|
4,846,000
|
|
|
|
5,135,000
|
|
|
|
9,981,000
|
|
Change in fair value
|
|
|
(1,682,000
|
)
|
|
|
(2,131,000
|
)
|
|
|
(3,813,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value as of March 31, 2021
|
|
$
|
3,164,000
|
|
|
$
|
3,004,000
|
|
|
$
|
6,168,000
|
|
The
key inputs into the Black Scholes valuation model for the Level 3 valuations as of March 31, 2021 are below:
|
|
January Warrants
|
|
|
February Warrants
|
|
Term (years)
|
|
|
4.8
|
|
|
|
4.9
|
|
Stock price
|
|
$
|
3.07
|
|
|
$
|
3.07
|
|
Exercise price
|
|
$
|
4.95
|
|
|
$
|
4.95
|
|
Dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Expected volatility
|
|
|
84.7
|
%
|
|
|
84.7
|
%
|
Risk free interest rate
|
|
|
0.9
|
%
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
Number of shares
|
|
|
1,821,514
|
|
|
|
1,714,005
|
|
Value (per share)
|
|
$
|
1.74
|
|
|
$
|
1.75
|
|
ENVERIC BIOSCIENCES,
INC. AND SUBSIDIARY
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note
2 – SUMMARY OF Significant Accounting Policies, continued
Recent Accounting Pronouncements
In December 2019, the Financial Accounting Standards
Board (“FASB”) issued ASU No. 2019-12, Income Taxes (Topic 740: Simplifying the Accounting for Income Taxes (“ASU 2019-12”),
which removes certain exceptions to the general principles in Topic 740. ASU 2019-12 is effective for the fiscal years beginning after
December 15, 2020, with early adoption permitted. The adoption of this guidance did not have a material impact on the Company’s
financial statements.
In October 2020, the FASB issued ASU 2020-10,
“Codification Improvements.” The new accounting rules improve the consistency of the Codification by including all disclosure
guidance in the appropriate Disclosure Section (Section 50) that had only been included in the Other Presentation Matters Section (Section
45) of the Codification. Additionally, the new rules also clarify guidance across various topics including defined benefit plans, foreign
currency transactions, and interest expense. The new accounting rules were effective for the Company in the first quarter of 2021. The
adoption of the new accounting rules did not have a material impact on the Company’s financial statements.
In May 2021, the FASB issued ASU No. 2021-04,
Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation
(Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for
Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The amendments in ASU No. 2021-04 provides
guidance to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified
written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this ASU
No. 2021-04 are effective for all entities for fiscal years beginning after December 15, 2021, and interim periods within those fiscal
years, with early adoption permitted, including interim periods within those fiscal years. As a result, the Company will not be required
to adopt ASU 2021-04 until October 1, 2022. The Company is currently evaluating the impact of the adoption of this principle on the Company’s
condensed consolidated financial statements.
Subsequent Events
The Company has evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date that the financial statements were issued. Other than as described in these
financial statements, the Company did not identify any subsequent events that would have required adjustment to or disclosure in the
financial statements.
NOTE
3 – INTANGIBLE ASSETS
As
of March 31, 2021, the Company’s intangible assets consisted of:
|
|
Useful
Life
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Skincare Assets and License Agreements
|
|
4 years
|
|
$
|
1,944,689
|
|
|
$
|
(257,512
|
)
|
|
$
|
1,687,177
|
|
Diverse Bio License
Agreement
|
|
4 years
|
|
|
675,000
|
|
|
|
-
|
|
|
|
675,000
|
|
Total
|
|
|
|
$
|
2,619,689
|
|
|
$
|
(257,512
|
)
|
|
$
|
2,362,177
|
|
During the three months ended March 31, 2021 and
2020, the Company recognized amortization expense of $136,640 and $0, respectively.
Acquisition
of Diverse Bio License Agreement
On
March 5, 2021, the Company entered into an Exclusive License Agreement (the “DB Agreement”) with Diverse Biotech, Inc. (“Diverse”),
pursuant to which the Company acquired an exclusive, perpetual license to develop five therapeutic candidates (collectively, the “Agents”)
with the goal of alleviating the side effects that cancer patients experience. Under the terms of the DB Agreement, Diverse has granted
the Company an exclusive license to its intellectual property rights covering the Agents and its products. In exchange, the Company has
granted Diverse the right to information relating to the Agents developed for the express purpose of using such information to obtain
patent rights, which right terminates upon the issuance or denial of the patent rights.
Under
the DB Agreement, the Company will maintain sole responsibility and ownership of the development and commercialization of the Agents
and its products. Diverse has agreed not to develop or commercialize any agent or product that would compete with the Agents, or its
products containing the Agents, at any time during or after the term of the DB Agreement. If Diverse intends to license, sell, or transfer
any other molecules linked with cannabinoids not granted to the Company under the terms of the DB Agreement, the Company will have the
first right, but not the obligation, to negotiate an agreement with Diverse for such cannabinoids. The Company has also agreed to pay
Diverse an up-front investment payment in the amount of $675,000, as well as a running royalty starting with the first commercial sale
by the Company to a third party in an arms’-length transaction.
The
term of the DB Agreement shall continue for as long as the Company intends to develop or commercialize the new drugs, unless earlier
terminated by either Party. The Agreement may be terminated by either party upon ninety (90) days written notice of an uncured material
breach or in the event of bankruptcy or insolvency. In addition, the Company has the right to terminate the DB Agreement at any time
upon sixty (60) days’ prior written notice to Diverse.
ENVERIC
BIOSCIENCES, INC. AND SUBSIDIARY
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
4 – COMMITMENTS AND CONTINGENCIES
The
Company is periodically involved in legal proceedings, legal actions and claims arising in the normal course of business. Management
believes that the outcome of such legal proceedings, legal actions and claims will not have a significant adverse effect on the Company’s
financial position, results of operations or cash flows.
Stockholder
Demand Letter
On
January 21, 2021, the Company received a stockholder litigation demand letter from the law firm of Purcell Julie & Lefkowitz
LLP, on behalf of James Self, a purported stockholder of the Company. The letter demands that the Company (i) deem ineffective
the December 30, 2020 amendment to our Amended and Restated Certificate of Incorporation in which the Company effected a one-for-four
reverse stock split of its common stock due to the manner in which non-votes by brokers were tabulated, (ii) seek appropriate
relief for damages allegedly suffered by the company and its stockholders or seek a valid stockholder approval of the amendment
and reverse stock split, and (iii) adopt adequate internal controls to prevent a recurrence of the alleged misconduct. The Company
disputes that the amendment was ineffective or that there were any inadequate internal controls related to the same. However,
to eliminate any questions about the amendment, the Company ratified the amendment at a special stockholders’ meeting
pursuant to Section 204 of the Delaware General Corporation Law. This special stockholders’ meeting occurred on
May 14, 2021. On May 14, 2021, the Company filed a certificate of validation with the State of Delaware to ratify the reverse
stock split on December 30, 2020.
Development
and Clinical Supply Agreement
On
February 22, 2021, the Company entered into a Development and Clinical Supply Agreement (the “PureForm Agreement”)
with PureForm Global, Inc. (“PureForm”), pursuant to which PureForm will be the exclusive provider of synthetic cannabidiol
(“API”) for the Company’s development plans for cancer treatment and supportive care. Under the terms of the
PureForm Agreement, PureForm has granted the Company the exclusive right to purchase API and related product for cancer
treatment and supportive care during the term of the Agreement (contingent upon an initial minimum order volume during the first
thirty (30) days from the effective date) and has agreed to manufacture, package and test the API and related product in accordance
with specifications established by the parties. All inventions that are developed jointly by the parties in the course of performing
activities under the PureForm Agreement will be owned jointly by the parties in accordance with applicable law; however,
if the Company funds additional research and development efforts by PureForm, the parties may enter into a further agreement whereby
PureForm would assign any resulting inventions or technical information to the Company.
The
initial term of the PureForm Agreement is three (3) years commencing on the effective date of the Agreement, subject to
extension by mutual agreement of the parties. The PureForm Agreement may be terminated by either party upon thirty (30)
days written notice of an uncured material breach or immediately in the event of bankruptcy or insolvency. The Agreement contains,
among other provisions, representation and warranties, indemnification obligations and confidentiality provisions in favor of
each party that are customary for an agreement of this nature.
Appointment of
Chief Financial Officer
On April 9, 2021, John M.
Van Buiten resigned from his position as the Company’s chief financial officer, effective May 15, 2021. Mr. Van Buiten’s
resignation was not the result of any disagreement regarding any matter relating to the Company’s operations, policies, or practices.
On April 9, 2021, Carter
J. Ward, 56, was appointed as the Company’s chief financial officer, effective May 15, 2021 (the “Effective Date”).
In connection with Mr. Ward’s
appointment as chief financial officer, Mr. Ward entered into an employment agreement with the Company on April 9, 2021 (the “Ward
Employment Agreement”), effective as of May 15, 2021, pursuant to which Mr. Ward will receive a base salary of $295,000 (“Base
Salary”) and is eligible to receive annual performance bonuses of up to 50% of his Base Salary, as determined from time-to-time
by the Company’s board of directors.
NOTE
5 - SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS
Authorized
Capital
The
holders of the Company’s common stock are entitled to one vote per share. Holders of common stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of legally available funds. Upon the liquidation, dissolution,
or winding up of the Company, holders of common stock are entitled to share rateably in all assets of the Company that are legally available
for distribution. As of December 31, 2020, 100,000,000 shares of common stock and 20,000,000 shares of Series B Preferred Stock were
authorized under the Company’s articles of incorporation. The Company’s Series B preferred stock is convertible by the holder
at any time into common stock at a rate of one to one.
Conversion
of Series B Preferred Stock
During
the three months ended March 31, 2021, holders of an aggregate of 3,275,407 shares of Series B Preferred Stock converted their shares
into 3,275,407 shares of common stock. Following those conversions, no Series B Preferred stock shares remain outstanding.
ENVERIC
BIOSCIENCES, INC. AND SUBSIDIARY
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
5 - SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS, CONTINUED
Offerings
On January 14, 2021, the Company completed an
offering of 2,221,458 shares of Common Stock and pre-funded warrants at approximately $4.50 per share and a concurrent private placement
of warrants to purchase 1,666,019 shares of Common Stock at $4.9519 per share, exercisable immediately and terminating five years after
the date of issuance for gross proceeds of approximately $10,000,000. The net proceeds to the Company after deducting financial advisory
fees and other costs and expenses were approximately $8,806,087.
On February 11, 2021, the Company completed an
offering of 3,007,026 shares of Common Stock and a concurrent private placement of warrants to purchase 1,503,513 shares of Common Stock
at $4.90 per share, exercisable immediately and terminating five year from the date of issuance for gross proceeds of approximately $12,800,000.
The net proceeds to Enveric from the offering after deducting financial advisory fees and other costs and expenses were approximately
$11,624,401.
Stock
Options
|
|
Number
of Shares
|
|
|
Weighted
Average Exercise Price (USD)
|
|
|
Weighted
Average Grant Date Fair Value (USD)
|
|
|
Weighted
Average Remaining Contractual Term (years)
|
|
|
Aggregate
Intrinsic Value (USD)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding – January 1, 2021
|
|
|
929,765
|
|
|
$
|
1.53
|
|
|
$
|
2.50
|
|
|
|
|
|
|
|
|
|
Expired forfeited, or
cancelled
|
|
|
(560,404
|
)
|
|
$
|
1.65
|
|
|
$
|
1.66
|
|
|
|
|
|
|
|
|
|
Outstanding – December 31, 2020
|
|
|
369,361
|
|
|
$
|
1.35
|
|
|
$
|
3.80
|
|
|
|
5.2
|
|
|
$
|
636,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2020
|
|
|
369,361
|
|
|
$
|
1.35
|
|
|
$
|
3.80
|
|
|
|
5.2
|
|
|
$
|
636,156
|
|
The
Company’s stock based compensation expense related to stock options for the three months ended March 31, 2021 and 2020 was $0 and
$0, respectively. As of March 31, 2021, the Company had $0 in unamortized stock option expense.
During
the three months ended March 31, 2021, the Company exchanged options to purchase 560,404 shares of common stock for 325,410 restricted
stock units and 42,125 restricted stock awards. In connection with this exchange, the Company recognized $298,714 in inducement expense
related to the increase in fair value of the new awards over the old awards, which is included in general and administrative expenses
on the Company’s statement of operations and comprehensive loss.
Restricted
Stock Awards
The
Company’s activity in restricted common stock was as follows for the three months ended March 31, 2021:
|
|
Number
of
shares
|
|
|
Weighted
average
grant date
fair
value
|
|
Non–vested at January 1, 2021
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
70,986
|
|
|
$
|
4.16
|
|
Vested
|
|
|
(44,390
|
)
|
|
$
|
4.49
|
|
Non–vested at March 31, 2021
|
|
|
26,596
|
|
|
$
|
3.61
|
|
For
the three months ended March 31, 2021 and 2020, the Company recorded $32,112 and $0, in stock-based compensation expense related
to restricted stock awards. As of March 31, 2021, unamortized stock-based compensation costs related to restricted share awards was $72,009,
which will be recognized over a weighted average period of 0.47 years.
ENVERIC
BIOSCIENCES, INC. AND SUBSIDIARY
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
5 - SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS, CONTINUED
Issuance
of Restricted Stock Units
The
Company’s activity in restricted stock units was as follows for the three months ended March 31, 2021:
|
|
Number
of shares
|
|
|
Weighted
average
grant date fair
value
|
|
Non–vested at January 1, 2021
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
3,279,284
|
|
|
$
|
4.41
|
|
Vested
|
|
|
(1,207,825
|
)
|
|
$
|
4.46
|
|
Non–vested at March 31, 2021
|
|
|
2,071,459
|
|
|
$
|
4.38
|
|
For
the three months ended March 31, 2021 and 2020, the Company recorded $3,559,453 and $0, respectively, in stock-based compensation
expense related to restricted stock units, which is a component of general and administrative expenses in the condensed consolidated
statement of operations. As of March 31, 2021, unamortized stock-based compensation costs related to restricted stock units was $9,416,205
and will be recognized over a weighted average period of 1.93 years.
Warrants
The
following table summarizes information about shares issuable under warrants outstanding at March 31, 2021:
|
|
Warrant
shares
outstanding
|
|
|
Weighted
average
exercise price (USD)
|
|
|
Weighted
average remaining life
|
|
|
Intrinsic
value
|
|
Outstanding at January 1, 2021
|
|
|
3,661,178
|
|
|
$
|
1.98
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
3,535,519
|
|
|
$
|
4.93
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(851,099
|
)
|
|
$
|
4.17
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2021
|
|
|
6,345,598
|
|
|
$
|
3.33
|
|
|
|
4.9
|
|
|
$
|
6,049,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2021
|
|
|
6,345,598
|
|
|
$
|
3.33
|
|
|
|
4.9
|
|
|
$
|
6,049,152
|
|
Item
2. Management’s discussion and analysis of financial condition and results of operations
The
information set forth below should be read in conjunction with the condensed consolidated financial statements and notes thereto included
elsewhere in this Quarterly Report on Form 10-Q. Unless stated otherwise, references in this Quarterly Report on Form 10-Q to “us,”
“we,” “our,” or our “Company” and similar terms refer to Enveric Biosciences, Inc., a Delaware corporation.
Cautionary
Note Regarding Forward-Looking Statements
This
quarterly report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking
terms such as “anticipates,” “assumes,” “believes,” “can,” “could,” “estimates,”
“expects,” “forecasts,” “guides,” “intends,” “is confident that,” “may,”
“plans,” “seeks,” “projects,” “targets,” and “would” or the negative of such
terms or other variations on such terms or comparable terminology. Such forward-looking statements include, but are not limited to, future
financial and operating results, the company’s plans, objectives, expectations and intentions and other statements that are not
historical facts. We have based these forward-looking statements largely on our current expectations and projections about future events
and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements
speak only as of the date of this Form 10-Q and are subject to a number of risks, uncertainties, and assumptions that could cause actual
results to differ materially from our historical experience and our present expectations, or projections described under the sections
in this Form 10-Q entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations”. These risks and uncertainties include, but are not limited to:
●
|
our
dependence on the success of our prospective product candidates, which are in early stages of development and may not reach a particular
stage in development, receive regulatory approval or be successfully commercialized;
|
●
|
potential
difficulties that may delay, suspend, or scale back our efforts to advance additional early research programs through preclinical
development and IND application filings and into clinical development;
|
●
|
the
impact of the novel coronavirus (COVID-19) on our business, including our current plans for product development, as well as any currently
ongoing preclinical studies and clinical trials and any future studies or other development or commercialization activities;
|
●
|
the
limited study on the effects of medical cannabinoids, and the chance that future clinical research studies may lead to conclusions
that dispute or conflict with our understanding and belief regarding the medical benefits, viability, safety, efficacy, dosing, and
social acceptance of cannabinoids;
|
●
|
the
expensive, time-consuming, and uncertain nature of clinical trials, which are susceptible to change, delays, termination, and differing
interpretations;
|
●
|
the
ability to establish that potential products are efficacious or safe in preclinical or clinical trials;
|
●
|
the
fact that our current and future preclinical and clinical studies may be conducted outside the United States, and the United States
Food and Drug Administration may not accept data from such studies to support any new drug applications we may submit after completing
the applicable developmental and regulatory prerequisites;
|
●
|
the
ability to establish or maintain collaborations on the development of therapeutic candidates;
|
●
|
the
ability to obtain appropriate or necessary governmental approvals to market potential products;
|
●
|
our
ability to manufacture product candidates on a commercial scale or in collaborations with third parties;
|
●
|
our
significant and increasing liquidity needs and potential requirements for additional funding;
|
●
|
our
ability to obtain future funding for developmental products and working capital and to obtain such funding on commercially reasonable
terms;
|
●
|
the
intense competition we face, often from companies with greater resources and experience than us;
|
●
|
our
ability to retain key executives and scientists;
|
●
|
the
ability to secure and enforce legal rights related to our products, including intellectual property rights and patent
protection; and
|
●
|
political, economic, and military instability
in Israel which may impede our development programs.
|
For
a more detailed discussion of these and other factors that may affect our business and that could cause the actual results to differ
materially from those projected in these forward-looking statements, see the risk factors and uncertainties set forth in Part II, Item
1A of this Form 10-Q. Any one or more of these uncertainties, risks and other influences could materially affect our results of operations
and whether forward-looking statements made by us ultimately prove to be accurate. We undertake no obligation to publicly update or revise
any forward-looking statements, whether from new information, future events or otherwise, except as required by law.
Business
Overview
We
are an early-development-stage biosciences company that is developing
innovative, evidence-based prescription products and combination therapies containing cannabinoids to address unmet needs in cancer care.
We seek to improve the lives of patients suffering from cancer, initially by developing palliative and supportive care products for people
suffering from certain side effects of cancer and cancer treatment such as pain or skin irritation. We currently intend to offer such
palliative and supportive care products in the United States, following approval through established regulatory pathways.
We
are also aiming to advance a pipeline of novel cannabinoid combination therapies for hard-to-treat cancers, including glioblastoma multiforme
(GBM) and several other indications, which are currently being researched.
We
intend to bring together leading oncology clinicians and researchers, academic and industry partners so as to develop both external proprietary
products and a robust internal pipeline of product candidates aimed at improving quality of life and outcomes for cancer patients. We
intend to evaluate options to out-license its proprietary technology as it moves along the regulatory pathway as well as evaluating building
a small, targeted selling organization and will potentially utilize a hybrid approach based on the product indication and the market
opportunity.
In
developing its product candidates, we intend to focus on cannabinoids derived from hemp, other botanical sources, and synthetic materials
containing no tetrahydrocannabinol (THC) in order to comply with U.S. federal regulations. Of the potential cannabinoids to be used in
therapeutic formulations, THC, which is responsible for the psychoactive properties of marijuana, can result in undesirable mood effects.
Cannabidiol (CBD) and cannabigerol (CBG), on the other hand, are not psychotropic and are therefore more attractive candidates for translation
into therapeutic practice. In the future, we may utilize cannabinoids that are derived from cannabis plants, which may contain THC; however,
we only intend to do so in jurisdictions where THC is legal. These product candidates will then be studied through a typical FDA drug
approval process.
Tender
Offer, Spin-Off and Reverse Stock Split
On
December 30, 2020, pursuant to the previously announced Tender Offer Support Agreement and Termination of Amalgamation Agreement dated
August 12, 2020 (“Original Amalgamation Agreement”), as amended by that certain Amendment No. 1 to the Tender Offer Support
Agreement and Termination of Amalgamation Agreement dated December 18, 2020 (as amended the “Tender Agreement”), the Company
completed a tender offer (“Offer”) to purchase all of the outstanding common shares of Jay Pharma, Inc., a Canada corporation
and a wholly-owned subsidiary of the Company (“Jay Pharma”), for the number of shares of Company common stock, par value
$0.01 per share (“Common Stock”) or Series B Preferred Stock, as applicable, equal to the exchange ratio of 0.8849 (the “Exchange
Ratio”), and Jay Pharma became a wholly-owned subsidiary of the Company, on the terms and conditions set forth in the Tender Agreement.
In connection with the Offer, the Company changed its name from AMERI Holdings, Inc. to Enveric Biosciences, Inc. The Offer has been
accounted for as a “reverse merger” under the acquisition method of accounting for business combinations with Jay Pharma
treated as the accounting acquirer of Ameri. As such, the historical financial statements of Jay Pharma have become the historical financial
statements of Ameri, or the combined company, and are included in this filing labeled “Enveric Biosciences, Inc.” As a result
of the Offer, historical common stock, stock options and additional paid-in capital, including share and per share amounts, have been
retroactively adjusted to reflect the equity structure of the combined company, including the effect of the Exchange Ratio and the Common
Stock.
Prior
to the completion of the Offer, on December 30, 2020, pursuant to a Share Purchase Agreement, Ameri contributed to Ameri100 Inc. (“Private
Ameri”) all of the issued and outstanding equity interests of the existing subsidiaries of Ameri, constituting the entire business
and operations of Ameri and its subsidiaries, and Private Ameri assumed the liabilities of such subsidiaries. All of the issued and outstanding
shares of Series A preferred stock of Ameri were redeemed for an equal number of shares of Series A preferred stock of Private Ameri.
Immediately
following the completion of the Offer, on December 30, 2020, the Company effected a 1-for-4 reverse stock split of the issued and outstanding
Common Stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, the per share exercise price of, and the
number of shares of Company Common Stock underlying, our stock options and warrants outstanding immediately prior to the Reverse Stock
Split were automatically proportionally adjusted based on the 1-for-4 split ratio in accordance with the terms of such options and warrants,
as the case may be. Share and per-share amounts of Common Stock, options and warrants included herein have been adjusted to give effect
to the Reverse Stock Split. The Reverse Stock Split did not alter the par value of the Common Stock, $0.01 per share, or modify any voting
rights or other terms of the Common Stock. Unless otherwise noted, the accompanying financial statements and notes thereto, including
the Exchange Ratio applied to historical Jay Pharma common stock and stock options, give retroactive effect to the Reverse Stock Split
for all periods presented.
Recent
Financings
January
2021 Offering
On
January 14, 2021, we closed a registered direct offering of 1,610,679 shares of common stock and pre-funded warrants to purchase 610,679
shares of common stock, pursuant to a Securities Purchase Agreement (the “January 2021 Purchase Agreement”) with certain
institutional investors at an offering price of $4.5018 per share and $4.4918 per pre-funded warrant (the “Pre-funded Warrant”),
for gross proceeds of approximately $10,000,000 before the deduction of fees and offering expenses.
The
Pre-funded Warrants have an exercise price of $0.01 per share. The Pre-funded Warrants are immediately exercisable and may be exercised
at any time after their original issuance until such Pre-funded Warrants are exercised in full. A holder of a Pre-funded Warrant may
not exercise any portion of such holder’s Pre-funded Warrants to the extent that the holder, together with its affiliates, would
beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s outstanding shares of Common Stock
immediately after exercise (the “Beneficial Ownership Limitation”), except that upon at least 61 days’ prior notice
from the holder to the Company, the holder may increase the Beneficial Ownership Limitation to up to 9.99% of the number of shares of
Common Stock outstanding immediately after giving effect to the exercise.
Pursuant
to the January 2021 Purchase Agreement, in a concurrent private placement (the “January 2021 Private Placement”) that also
closed on January 14, 2021, the Company issued to the investors unregistered warrants to purchase up to 1,666,018 shares of Common Stock
(the “January 2021 Warrants”). The January 2021 Warrants are exercisable immediately upon issuance and terminate five years
following issuance and are exercisable at an exercise price of $4.9519 per share, subject to adjustment as set forth therein. A holder
of January 2021 Warrants does not have the right to exercise any portion of its January 2021 Warrants if the holder, together with its
affiliates, would beneficially own in excess of the Beneficial Ownership Limitation; provided, however, that upon 61 days’ prior
notice to the Company, the holder may increase or decrease the Beneficial Ownership Limitation, provided that in no event shall the Beneficial
Ownership Limitation exceed 9.99%.
February
2021 Offering
On
February 11, 2021, we closed a registered direct offering of 3,007,026 shares of common stock, pursuant to a Securities Purchase Agreement
(the “February 2021 Purchase Agreement”) with certain institutional investors at an offering price of $4.27 per share, for
gross proceeds of approximately $12,800,000 before the deduction of fees and offering expenses. The shares were offered by the Company
pursuant to a shelf registration statement on Form S-3 (File No. 333-233260), previously filed with the SEC on August 14, 2019, and declared
effective by the SEC on November 19, 2019.
Pursuant
to the February 2021 Purchase Agreement, in a concurrent private placement (the “February 2021 Private Placement”) that also
closed on February 11, 2021, the Company issued to the investors unregistered warrants to purchase up to 1,503,513 shares of Common Stock
(the “February 2021 Warrants”). The February 2021 Warrants are exercisable immediately upon issuance and terminate five years
following issuance and are exercisable at an exercise price of $4.90 per share, subject to adjustment as set forth therein. A holder
of February 2021 Warrants does not have the right to exercise any portion of its February 2021 Warrants if the holder, together with
its affiliates, would beneficially own in excess of the Beneficial Ownership Limitation; provided, however, that upon 61 days’
prior notice to the Company, the holder may increase or decrease the Beneficial Ownership Limitation, provided that in no event shall
the Beneficial Ownership Limitation exceed 9.99%.
Palladium
Warrants
In
connection with its role as financial advisor to the Company in the January 2021 Direct Offering, the January 2021 Private Placement,
the February 2021 Direct Offering, and the February 2021 Private Placement, the Company issued Palladium 155,493 warrants with an exercise
price of $4.9519 and 210,492 warrants with an exercise price of $4.90 (the “Palladium Warrants”) on February 11, 2021.
Stockholder
Demand Letter
On
January 21, 2021, the Company received a stockholder litigation demand letter from the law firm of Purcell Julie & Lefkowitz LLP,
on behalf of James Self, a purported stockholder of our Company. The letter demands that the Company (i) deem ineffective the December
30, 2020 amendment to our Amended and Restated Certificate of Incorporation in which the Company effected a one-for-four reverse stock
split of its common stock due to the manner in which non-votes by brokers were tabulated, (ii) seek appropriate relief for damages allegedly
suffered by the company and its stockholders or seek a valid stockholder approval of the amendment and reverse stock split, and (iii)
adopt adequate internal controls to prevent a recurrence of the alleged misconduct. The Company disputes that the amendment was ineffective
or that there were any inadequate internal controls related to the same. However, to eliminate any questions about the amendment, the
Company ratified the amendment at a special stockholders’ meeting pursuant to Section 204 of the Delaware General
Corporation Law. This special stockholders’ meeting occurred on May 14, 2021. On May 14, 2021, the Company filed a Certificate of Validation with the State of Delaware to ratify the reverse
stock split on December 30, 2020.
Development
and Clinical Supply Agreement
On
February 22, 2021, the Company entered into a Development and Clinical Supply Agreement (the “Agreement”) with PureForm Global,
Inc. (“PureForm”), pursuant to which PureForm will be the exclusive provider of synthetic cannabidiol (“API”)
for the Company’s development plans for cancer treatment and supportive care. Under the terms of the Agreement, PureForm has granted
the Company the exclusive right to purchase API and related product for cancer treatment and supportive care during the term of the Agreement
(contingent upon an initial minimum order volume during the first thirty (30) days from the effective date) and has agreed to manufacture,
package and test the API and related product in accordance with specifications established by the parties. All inventions that are developed
jointly by the parties in the course of performing activities under the Agreement will be owned jointly by the parties in accordance
with applicable law; however, if the Company funds additional research and development efforts by PureForm, the parties may enter into
a further agreement whereby PureForm would assign any resulting inventions or technical information to the Company.
The
initial term of the Agreement is three (3) years commencing on the effective date of the Agreement, subject to extension by mutual agreement
of the parties. The Agreement may be terminated by either party upon thirty (30) days written notice of an uncured material breach or
immediately in the event of bankruptcy or insolvency. The Agreement contains, among other provisions, representation and warranties,
indemnification obligations and confidentiality provisions in favor of each party that are customary for an agreement of this nature.
Acquisition
of Diverse Bio License Agreement
On
March 5, 2021, the Company entered into an Exclusive License Agreement (the “DB Agreement”) with Diverse Biotech, Inc. (“Diverse”),
pursuant to which the Company acquired an exclusive, perpetual license to develop five therapeutic candidates (collectively, the
“Agents”) with the goal of alleviating the side effects that cancer patients experience. Under the terms of the DB Agreement,
Diverse granted the Company an exclusive license to its intellectual property rights covering the Agents and its products. In exchange,
the Company has granted Diverse the right to information relating to the Agents developed for the express purpose of using such information
to obtain patent rights, which right terminates upon the issuance or denial of the patent rights.
Under
the DB Agreement, the Company will maintain sole responsibility and ownership of the development and commercialization of the Agents
and its products. Diverse has agreed not to develop or commercialize any agent or product that would compete with the Agents, or its
products containing the Agents, at any time during or after the term of the DB Agreement. If Diverse intends to license, sell, or transfer
any other molecules linked with cannabinoids not granted to the Company under the terms of the DB Agreement, the Company will have the
first right, but not the obligation, to negotiate an agreement with Diverse for such cannabinoids. The Company has also agreed to pay
Diverse an up-front investment payment in the amount of $675,000, as well as a running royalty starting with the first commercial sale
by the Company to a third party in an arms’-length transaction.
The
term of the DB Agreement shall continue for as long as the Company intends to develop or commercialize the new drugs, unless earlier
terminated by either Party. The DB Agreement may be terminated by either party upon ninety (90) days written notice of
an uncured material breach or in the event of bankruptcy or insolvency. In addition, the Company has the right to terminate the
DB Agreement at any time upon sixty (60) days’ prior written notice to Diverse.
Appointment
of Chief Financial Officer
On
April 9, 2021, John M. Van Buiten resigned from his position as the Company’s chief financial officer, effective May 15,
2021. Mr. Van Buiten’s resignation was not the result of any disagreement regarding any matter relating to the Company’s
operations, policies, or practices.
On
April 9, 2021, Carter J. Ward, 56, was appointed as the Company’s chief financial officer, effective May 15, 2021 (the “Effective
Date”).
In
connection with Mr. Ward’s appointment as chief financial officer, Mr. Ward entered into an employment agreement with the Company
on April 9, 2021 (the “Ward Employment Agreement”), effective as of May 15, 2021, pursuant to which Mr. Ward will receive
a base salary of $295,000 (“Base Salary”) and is eligible to receive annual performance bonuses of up to 50% of his Base
Salary, as determined from time-to-time by the Company’s board of directors. Additionally, Mr. Ward will receive 525,000 restricted
stock units (“RSUs”), 262,500 of such RSUs shall be subject to time-based vesting (the “Time Based RSUs”), and
the remaining 262,500 of such RSUs shall be subject to performance-based vesting (the “Performance RSUs”). The RSUs shall
be subject to the terms and conditions of the Company’s 2020 Long-Term Incentive Plan. The Time Based RSUs shall vest in quarters
on each anniversary of the Effective Date, and the Performance RSUs shall vest based on the achievement of performance milestones established
by the Company.
Key
Components of Our Results of Operations
Operating
Expenses
Our
operating expenses include financial statement preparation services, tax compliance, various consulting and director fees, legal services,
auditing fees, and stock-based compensation. These expenses have increased in connection with the Company’s product development
and the Company’s management expects these expenses to continue to increase as the Company continues to develop its potential product
candidates.
Results
of Operations
The
following table sets forth information comparing the components of net loss for the three months ended March 31, 2021 and the comparable
period in 2020:
|
|
Three
Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
|
6,607,045
|
|
|
|
836,702
|
|
Research
and development
|
|
|
157,952
|
|
|
|
-
|
|
Operating
expenses
|
|
$
|
6,764,997
|
|
|
$
|
836,702
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(6,764,997
|
)
|
|
|
(836,702
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Inducement expense
|
|
|
(298,714
|
)
|
|
|
-
|
|
Change in fair value of warrants
|
|
|
3,813,000
|
|
|
|
-
|
|
Interest
Expense
|
|
|
-
|
|
|
|
261,759
|
|
Total
other income (expense)
|
|
|
3,514,286
|
|
|
|
261,759
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(3,250,711
|
)
|
|
$
|
(1,098,461
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
|
|
35,736
|
|
|
|
(12,698
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
|
$
|
(3,214,975
|
)
|
|
$
|
(1,111,159
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss per share - basic and diluted
|
|
$
|
(0.20
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding, basic and diluted
|
|
|
16,220,661
|
|
|
|
25,607,042
|
|
General
and Administrative Expenses
Our
general and administrative expenses increased to $6,607,045, for the three months ended March 31, 2021 from $836,702 for
the three months ended March 31, 2020, with an increase of $5,770,343, or 690%. This change was primarily driven
by stock-based compensation of $3,591,565, stock option modification expense of $298,714, and an increase in public company costs
of $582,667.
Research
and Development Expense
Our
research and development expense for the three months ended March 31, 2021 was $157,952 compared to $0 for the three months ended March
31, 2020. This increase was primarily driven by the preparations ongoing for our glioblastoma study and the formulation costs for our
radio-dermatitis study.
Change
in Fair Value of Warrant Liability
The
Company’s change in fair value warrant liability was a gain of $3,813,000 for the three months ended March 31, 2021 due
primarily to a decrease in the Company’s stock price.
Interest
Expense
Our
interest expense for the three months ended March 31, 2021 was $0 compared to $261,759 for the three months ended March 31, 2020. This
decrease was primarily driven by promissory notes that were entered into by the Company during 2020, which no longer remained outstanding
in 2021.
Foreign
Currency Translation
Our
foreign currency translation gain (loss) was $35,736 for the three months ended March 31, 2021 as compared to $(12,698) for the
three months ended March 31, 2020, for an increase in $48,434. The increase in foreign exchange gain is primarily due to the U.S. Dollar
weakening against the Canadian Dollar and the conversion of the Canadian Dollars into United States Dollars for payment of United States
Dollar denominated expenses.
Liquidity
and Capital Resources
The
Company has incurred continuing losses from its operations. As of March 31, 2021, the Company has had an accumulated deficit of
$15,010,268 and working capital of $16,629,501. Since inception, the Company’s operations have been funded
principally through the issuance of debt and equity.
On
January 14, 2021, the Company completed a registered direct offering of 2,221,458 shares of Common Stock at approximately $4.50
per share for gross proceeds of approximately $10,000,000. The net proceeds to the Company after deducting financial advisory
fees and other costs and expenses were approximately $8,806,087. On February 11, 2021, the Company completed a registered
direct offering of 3,007,026 shares of Common Stock for gross proceeds of approximately $12,800,000. The net proceeds to the
Company after deducting financial advisory fees and other costs and expenses were approximately $11,624,401. As of May
14, 2021, the Company had cash on hand of approximately $22 million.
We
believe that, as a result of these transactions, we currently have sufficient cash and financing commitments to meet our funding requirements
over the next year. Notwithstanding, we expects that we will need to raise additional financing to accomplish our development plan over
the next several years. We may seek to obtain additional funding through debt or equity financing in the future. There are no assurances
that we will be able to raise capital on terms acceptable to us or at all, or that cash flows generated from our operations will be sufficient
to meet our current operating costs. Our ability to obtain additional capital may depend on prevailing economic conditions and financial,
business and other factors beyond our control. The COVID-19 pandemic has caused an unstable economic environment globally. Disruptions
in the global financial markets may adversely impact the availability and cost of credit, as well as our ability to raise money in the
capital markets. Current economic conditions have been and continue to be volatile. Continued instability in these market conditions
may limit our ability to access the capital necessary to fund and grow our business. If we are unable to obtain sufficient amounts of
additional capital, we may be required to reduce the scope of our planned development, which could harm our financial condition and operating
results.
Cash
Flows
Since
inception, we have primarily used our available cash to fund our product development expenditures.
Cash
Flows for the Three Months Ended March 31, 2021 and 2020
The
following table sets forth a summary of cash flows for the periods presented:
|
|
Three
Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Net cash used in operating activities
|
|
$
|
(3,162,278
|
)
|
|
$
|
(893,922
|
)
|
Net cash used in investing activities
|
|
|
(675,000
|
)
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
24,881,733
|
|
|
|
1,212,196
|
|
Effect of foreign exchange
rate on cash
|
|
|
34,235
|
|
|
|
(86,667
|
)
|
Net increase in cash
|
|
$
|
21,078,690
|
|
|
$
|
231,597
|
|
Operating
Activities
Net
cash used in operating activities was $3,162,278 during the three months ended March 31, 2021, which consisted primarily of a
net loss of $3,250,711, offset by amortization of intangibles of $136,640, change in fair value of warrant liability of $3,813,000,
stock-based compensation of $3,591,565, induced conversion of warrants of $298,714, and increases in prepaid expenses and
other current assets for $66,208, offset by increases in accounts payable and accrued liabilities of $59,278.
Net
cash used in operating activities was $893,922 during the three months ended March 31, 2020, which consisted primarily of a net loss
of $1,098,461, offset by amortization of note discount of $233,240 and accrued interest of $28,519, increases in prepaid expenses and
other current assets of $49,588, and decreases in accounts payable and accrued liabilities of $7,632.
Investing
Activities
Net
cash used in investing activities was $675,000 during the three months ended March 31, 2021, which consisted of the acquisition of intellectual
property from Diverse Bio.
The
Company did not have any investing activities during the three months ended March 31, 2020.
Financing
Activities
Net
cash provided by financing activities was $24,881,733 during the three months ended March 31, 2021, which consisted primarily
of $9,463,087 in net proceeds from the January registered direct offering, $12,151,401 in net proceeds from
February registered direct offering, and proceeds from the exercise of warrants of $3,267,245.
Net
cash provided by financing activities was $1,212,196 during the three months ended March 31, 2020, which consisted of $50,000 in proceeds
from convertible notes payable, and $1,319,910 in proceeds from notes payable, offset by $157,714 in repayment of notes payable.
Off-Balance
Sheet Arrangements
The
Company did not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests
in transferred assets, or any obligation arising out of a material variable interest in an unconsolidated entity. The Company does not
have any subsidiaries to include or otherwise consolidate into the financial statements. Additionally, the Company does not have interests
in, nor relationships with, any special purpose entities.
Critical
Accounting Policies and Significant Judgments and Estimates
The
Company’s accounting policies are fundamental to understanding its management’s discussion and analysis. The Company’s
significant accounting policies are presented in Note 3 to its financial statements for the year ended December
31, 2020. The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in
the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the
information and notes required by U.S. GAAP. However, in the opinion of the management of the Company, all adjustments necessary for
a fair presentation of the financial position and operating results have been included in the Company’s condensed financial statements.
Warrant Liability
The Company accounts for warrants for shares of
the Company’s common stock that are not indexed to its own stock as liabilities at fair value on the balance sheet. Such warrants
are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other expense on
the statement of operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise
or expiration of such common stock warrants. At that time, the portion of the warrant liability related to such common stock warrants
will be reclassified to additional paid-in capital.
Recent
Accounting Standards
Management
does not believe that any recently issued, but not yet effective accounting standards, when adopted, will have a material effect on the
accompanying financial statements, other than those disclosed below.
In December 2019, the Financial
Accounting Standards Board (“FASB”) issued ASU No. 2019-12, Income Taxes (Topic 740: Simplifying the Accounting for Income
Taxes (“ASU 2019-12”), which removes certain exceptions to the general principles in Topic 740. ASU 2019-12 is effective
for the fiscal years beginning after December 15, 2020, with early adoption permitted. The adoption of this guidance did not have a material
impact on the Company’s financial statements.
In October 2020, the FASB
issued ASU 2020-10, “Codification Improvements.” The new accounting rules improve the consistency of the Codification by
including all disclosure guidance in the appropriate Disclosure Section (Section 50) that had only been included in the Other Presentation
Matters Section (Section 45) of the Codification. Additionally, the new rules also clarify guidance across various topics including defined
benefit plans, foreign currency transactions, and interest expense. The new accounting rules were effective for the Company in the first
quarter of 2021. The adoption of the new accounting rules did not have a material impact on the Company’s financial statements.
In May 2021, the FASB issued
ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock
Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s
Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The amendments in ASU No. 2021-04
provides guidance to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified
written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this ASU
No. 2021-04 are effective for all entities for fiscal years beginning after December 15, 2021, and interim periods within those fiscal
years, with early adoption permitted, including interim periods within those fiscal years. As a result, the Company will not be required
to adopt ASU 2021-04 until October 1, 2022. The Company is currently evaluating the impact of the adoption of this principle on the Company’s
condensed consolidated financial statements.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts
and management believes the Company is not exposed to significant risks on such accounts.
Foreign
Currency Risk
The
reporting currency of the Company is the United States dollar, while the functional currency of our subsidiary, Jay Pharma, Inc., is
the Canadian dollar. As a result, the Company is subject to exposure from changes in the exchange rates of the Canadian dollar and the
United States dollar.
The
Company has not entered into any financial derivative instruments that expose it to material market risk, including any instruments designed
to hedge the impact of foreign currency exposures. The Company may, however, hedge such exposure to foreign currency fluctuations in
the future.