Item
1.01 Entry Into a Material Definitive Agreement.
Private
Placement
In
connection with Enveric Biosciences, Inc.’s (the “Company”) planned spin off its cannabinoid assets into
a separately traded public company, the Company created Acanna Therapeutics, Inc. (“Acanna”), a wholly-owned
subsidiary of the Company, and, on May 5, 2022, Acanna and the Company entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with an accredited investor (the “Investor”), pursuant to which Acanna agreed to
sell up to an aggregate of 5,000 shares of Acanna’s Series A Convertible Preferred Stock, par value $0.01 per share (the “Series
A Preferred Stock”), at price of $1,000 per share, and warrants (the “Warrants”) to purchase
shares of Acanna’s common stock, par value $0.01 per share (the “Acanna Common Stock”), for an aggregate
purchase price of up to $5,000,000 (the “Private Placement”). Pursuant to the Purchase Agreement, Acanna has
issued 1,000 shares of the Series A Preferred Stock to the Investor in exchange for $1,000,000 on May 5, 2022, with the remaining Series
A Preferred Stock and Warrants to be issued for a price of $4,000,000 upon the completion of the spin-off of Acanna into an independent,
separately traded public company listed on The Nasdaq Stock Market (the “Spin-Off” and such date that Acanna
commences trading on the Nasdaq Stock Market being referred to herein as the “Spin-Off Date”). Pursuant the
terms of the Purchase Agreement and the Certificate of the Designations (as defined below), the holders of the Series A Preferred Stock
have a Put Right (as defined below) under certain circumstances described below, with Acanna’s payment obligations under the Put
Right guaranteed by the Company. The Purchase Agreement contains customary representations and warranties, agreements, obligations, conditions
to closing and termination provisions.
Palladium
Capital Advisors, LLC (“Palladium”) acted as placement agent for the Private Placement. Pursuant to the Purchase
Agreement, Acanna has agreed to pay Palladium a cash fee equal to 9% of the aggregate gross proceeds raised from the sale of the shares
of the Series A Preferred Stock and a non-accountable expense allowance of 1% of the aggregate gross proceeds raised the sale of the
Series A Preferred Stock in the Private Placement. In addition, Acanna will issue to Palladium warrants equal to 8% of the shares issuable
upon conversion of the Series A Preferred Stock (the “Palladium Warrants”). The fee due in connection with
the Private Placement shall be paid to Palladium in the form of convertible preferred stock and warrants on similar terms to the securities
issued in the Private Placement (together with the Palladium Warrants, the “Palladium Securities”).
Terms
of Series A Preferred Stock
Under
the Certificate of the Designations, Preferences and Rights of Series A Convertible Preferred Stock (the “Certificate of
Designations”), on or immediately prior to the Spin-Off Date, each share of SeriesA Preferred Stock will be automatically
converted into a number of shares of Acanna Common Stock equal to 25% of the then issued and outstanding Acanna Common Stock, subject
to the Beneficial Ownership Limitation (as defined below).
The
Certificate of Designations contains limitations that prevent the holder thereof from acquiring shares of Acanna Common Stock upon conversion
that would result in the number of shares of Acanna Common Stock beneficially owned by such holder and its affiliates exceeding 9.99%
of the total number of shares of Acanna Common Stock outstanding immediately after giving effect to the conversion (the “Beneficial
Ownership Limitation”), except that upon notice from the holder to Acanna, the holder may increase or decrease the amount
of ownership of outstanding shares of Acanna Common Stock after converting the holder’s shares of Series A Preferred Stock, provided
that any change in the Beneficial Ownership Limitation shall not be effective until 61 days following notice to Acanna.
The
Certificate of Designations provides that upon the earlier of (i) the one-year anniversary of May 5, 2022, and only in the event that
the Spin-Off has not occurred; or (ii) such time that Acanna and the Company have abandoned the Spin-Off or the Company is no longer
pursuing the Spin-Off in good faith, the holders of the Series A Preferred Stock shall have the right (the “Put Right”),
but not the obligation, to cause Acanna to purchase all or a portion of the Series A Preferred Stock for a purchase price equal to $1,000
per share, subject to certain adjustments (the “Stated Value”), plus all the accrued but unpaid dividends per
share. In addition, after the one-year anniversary of May 5, 2022, and only in the event that the Spin-Off has not occurred and Acanna
is not in material default of any of the transaction documents, Acanna may, at its option, at any time and from time to time, redeem
the outstanding shares of Series A Preferred Stock, in whole or in part, for a purchase price equal to the aggregate Stated Value of
the shares of Series A Preferred Stock being redeemed and the accrued and unpaid dividends on such shares.
Registration
Rights Agreement
In
connection with the Private Placement, Acanna entered into a registration rights agreement, dated as of May 5, 2022 (the “Registration
Rights Agreement”), with the Investor, pursuant to which Acanna shall, on such date that Acanna files a registration statement
with the Securities and Exchange Commission in connection with the Spin-Off, file such a registration statement to register the shares
of Acanna Common Stock issuable upon: (i) the conversion of the Series A Preferred Stock
sold in the Private Placement, (ii) the exercise of the Warrants sold in the Private Placement, and (iii) the conversion or exercise,
as applicable, of the Palladium Securities (the “Registrable Securities”); and to cause such registration statement
to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the
Spin-Off Date, and shall use its reasonable best efforts to keep such registration statement continuously effective under the Securities
Act until the date that all Registrable Securities covered by such registration statement have been sold or are otherwise able to be
sold pursuant to Rule 144. The Registration Rights Agreement provides for liquidated damages to the extent that Acanna does not file
or maintain a registration statement in accordance with the terms thereof.
The
foregoing description of the Purchase Agreement, Certificate of Designations, Registration Rights Agreement and Warrants
are qualified in their entirety by reference to the Purchase Agreement, Certificate of Designations, Registration Rights Agreement
and Warrants, which are attached hereto as Exhibit 10.1, Exhibit 10.2, Exhibit 10.3 and Exhibit 10.4, respectively,
and incorporated by reference herein.