Enveric Biosciences Inc

Previous wording

The information set forth below should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Unless stated otherwise, references in this Quarterly Report on Form 10-Q to “us,” “we,” “our,” or our “Company” and similar terms refer to Enveric Biosciences, Inc., a Delaware corporation.

Current wording

The information set forth below should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Unless stated otherwise, references in this Quarterly Report on Form 10-Q to “us,” “we,” “our,” or our “Company” and similar terms refer to Enveric Biosciences, Inc., a Delaware corporation, and its subsidiaries.

Previous wording

Following our amalgamation with MagicMed completed in September 2021 (the “Amalgamation”), we have continued to pursue the development of MagicMed’s proprietary psychedelic derivatives library, the Psybrary™ which we believe will help us to identify and develop the right drug candidates needed to address mental health challenges, including anxiety. We synthesize novel versions of classic psychedelics, such as psilocybin, N,N-Dimethyltryptamine (DMT), mescaline and MDMA, using a mixture of chemistry and synthetic biology, resulting in the expansion of the Psybrary™, which includes 15 patent families with over a million potential variations and hundreds of synthesized molecules. Within the Psybrary™ we have three different types of molecules, Generation 1 (classic psychedelics), Generation 2 (pro-drugs), and Generation 3 (new chemical entities). The Company has created over 1,000 novel psychedelic molecular compounds and derivatives (“Psychedelic Derivatives”) that are housed in the Psybrary™. Our current focus is develop our lead molecules EB-002 and EB-003 and to out-license other molecules from the Psybrary™.

Current wording

We have continued to pursue the development of MagicMed’s proprietary psychedelic derivatives library, the Psybrary™ which we believe will help us to identify and develop the right drug candidates needed to address mental health challenges, including anxiety. We synthesize novel versions of classic psychedelics, such as psilocybin, DMT, mescaline and MDMA, using a mixture of chemistry and synthetic biology, resulting in the expansion of the Psybrary™, which includes 15 patent families with over a million potential variations and hundreds of synthesized molecules. Within the Psybrary™ we have three different types of molecules, Generation 1 (classic psychedelics), Generation 2 (new chemical entity pro-drugs of psilocin), and Generation 3 (new chemical entity analogs). The Company has created over 1,000 novel psychedelic molecular compounds and derivatives (“Psychedelic Derivatives”) that are housed in the Psybrary™. Our current focus is develop our lead molecules EB-002 and EB-003 and to out-license other molecules from the Psybrary™.

Previous wording

During the three months ended March 31, 2024, the Company issued 1,668,000 shares of common stock for gross proceeds of $2,392,502 under the Distribution Agreement, and charged offering costs of $583,713 to additional paid in capital on the unaudited condensed consolidated balance sheet. As of March 31, 2024 and December 31, 2023, there were deferred offering costs related to the Distribution Agreement of $0 and $171,944, respectively.

Current wording

During the six months ended June 30, 2024, the Company issued 1,668,000 shares of common stock for gross proceeds of $2,392,502 under the Distribution Agreement, and charged offering costs of $583,713 to additional paid in capital on the unaudited condensed consolidated balance sheet. As of June 30, 2024 and December 31, 2023, there were deferred offering costs related to the Distribution Agreement of $0 and $171,944, respectively.

Previous wording

On December 28, 2023, the Company entered into warrant exercise inducement offer letters (the “Inducement Letters”) with certain holders (the “Holders”) of the February 2022 Post-Modification Warrants and RD and PIPE preferred investment options to purchase shares of the Company’s common stock (the “Existing Warrants and Investment Options”) pursuant to which the Holders agreed to exercise for cash their Existing Warrants and Investment Options to purchase 1,122,000 shares of the Company’s common stock, in the aggregate, at a reduced exercised price of $1.37 per share (from an original exercise price of $7.78 per share), in exchange for the Company’s agreement to issue new warrants (the “Inducement Warrants”) to purchase up to 2,244,000 shares of the Company’s common stock (the “Inducement Warrant Shares”), and the Holders to make a cash payment of $0.125 per Inducement Warrant share for total proceeds of $280,500. In January 2024, the Company received aggregate gross proceeds of $1,817,640 from the exercise of the Existing Warrants and Investment Options by the Holders and the sale of the Inducement Warrants. Because the Existing Warrants and Investment Options by the Holders and the sale of the Inducement Warrants that exercised on December 28, 2023 and unsettled until January 2024, the proceeds are included in the condensed consolidated balance sheet as a subscription receivable as of December 31, 2023. As of December 31, 2023, 418,000 shares of the Existing Warrants and Investment Options exercised were considered issued as the Company had the enforceable right to the obtain the cash proceeds, which were in-transit, and the Holders were no longer able to rescind the exercise election. Due to the beneficial ownership limitation provisions, 704,000 shares of the Existing Warrants and Investment Options exercised were initially unissued and held in abeyance for the benefit of the Holder until notice is received from the Holder that the shares may be issued in compliance with such limitation. During the three months ended March 31, 2024, the Company issued all 704,000 shares of common stock of the 704,000 shares of Existing Warrants and Investment Options exercised that were held in abeyance due to the beneficial ownership limitation provisions.

Current wording

On December 28, 2023, the Company entered into warrant exercise inducement offer letters (the “Inducement Letters”) with certain holders (the “Holders”) of the February 2022 Post-Modification Warrants and RD and PIPE preferred investment options to purchase shares of the Company’s common stock (the “Existing Warrants and Investment Options”) pursuant to which the Holders agreed to exercise for cash their Existing Warrants and Investment Options to purchase 1,122,000 shares of the Company’s common stock, in the aggregate, at a reduced exercised price of $1.37 per share (from an original exercise price of $7.78 per share), in exchange for the Company’s agreement to issue new warrants (the “Inducement Warrants”) to purchase up to 2,244,000 shares of the Company’s common stock (the “Inducement Warrant Shares”), and the Holders to make a cash payment of $0.125 per Inducement Warrant share for total proceeds of $280,500. In January 2024, the Company received aggregate gross proceeds of $1,817,640 from the exercise of the Existing Warrants and Investment Options by the Holders and the sale of the Inducement Warrants. Because the Existing Warrants and Investment Options by the Holders and the sale of the Inducement Warrants that exercised on December 28, 2023 and unsettled until January 2024, the proceeds are included in the condensed consolidated balance sheet as a subscription receivable as of December 31, 2023. As of December 31, 2023, 418,000 shares of the Existing Warrants and Investment Options exercised were considered issued as the Company had the enforceable right to the obtain the cash proceeds, which were in-transit, and the Holders were no longer able to rescind the exercise election. Due to the beneficial ownership limitation provisions, 704,000 shares of the Existing Warrants and Investment Options exercised were initially unissued and held in abeyance for the benefit of the Holder until notice is received from the Holder that the shares may be issued in compliance with such limitation. During the six months ended June 30, 2024, the Company issued all 704,000 shares of common stock of the 704,000 shares of Existing Warrants and Investment Options exercised that were held in abeyance due to the beneficial ownership limitation provisions.

Previous wording

On December 28, 2023, the Company entered into warrant exercise inducement offer letters (the “Inducement Letters”) with certain holders of warrants and preferred investment options. The Inducement Letters prohibit the Company from entering into any variable rate transaction as defined in the Inducement Letters, including the issuance of (1) any variable priced debt or equity securities or (2) transactions whereby the Company may issue securities at a future determined price, such as through an at-the-market offering or an equity line of credit. The variable rate transaction restriction expires after six-month from the closing date of December 28, 2023 for the Inducement Letters for an issuance through an at-the-market offering, and one-year for the remaining variable rate transactions.

Current wording

On December 28, 2023, the Company entered into warrant exercise inducement offer letters (the “Inducement Letters”) with certain holders of warrants and preferred investment options. The Inducement Letters prohibit the Company from entering into any variable rate transaction as defined in the Inducement Letters, including the issuance of (1) any variable priced debt or equity securities or (2) transactions whereby the Company may issue securities at a future determined price, such as through an at-the-market offering or an equity line of credit. The variable rate transaction restriction would have expired after six-months from the closing date of December 28, 2023 for the Inducement Letters for an issuance through an at-the-market offering, and one-year for the remaining variable rate transactions, however the restriction was waived for the at-the-market offering on March 8, 2024 and the equity line on May 3, 2024.

Previous wording

Change in fair value of warrant liabilities for the three months ended March 31, 2024 resulted in income of $10,039 as compared to $50,657 for the three months ended March 31, 2023. The change in fair value of warrant liabilities is due to the exercise of 122,000 of warrants on December 28, 2023, resulting in less warrants outstanding and re-valued at March 31, 2024, as well as, the change in the closing price of Common Stock at the end of each period, as compared to the closing price of Common Stock at the beginning of each period with a strong inverse relationship between changes in fair value of warrant liabilities and the trading price of Common Stock.

Current wording

Change in fair value of warrant liabilities for the three months ended June 30, 2024 resulted in income of $10,805 as compared to an expense of $233,821 for the three months ended June 30, 2023. The change in fair value of warrant liabilities is due to the exercise of 122,000 of warrants on December 28, 2023, resulting in less warrants outstanding and re-valued at June 30, 2024, as well as, the change in the closing price of Common Stock at the end of each period, as compared to the closing price of Common Stock at the beginning of each period with a strong inverse relationship between changes in fair value of warrant liabilities and the trading price of Common Stock.

Previous wording

Change in fair value of investment option liability the three months ended March 31, 2024 resulted in income of $11,398 as compared to $119,505 during the three months ended March 31, 2023. The change in fair value is due to the exercise of 1,000,000 investment options on December 28, 2023, resulting in less investment options re-valued at March 31, 2024 and a significant decrease in the Company’s stock price for the three months ended March 31, 2024.

Current wording

Change in fair value of investment option liability the three months ended June 30, 2024 resulted in income of $7,767 as compared to an expense of $1,082,141 during the three months ended June 30, 2023. The change in fair value is due to the exercise of 1,000,000 investment options on December 28, 2023, resulting in less investment options re-valued at June 30, 2024 and a significant decrease in the Company’s stock price for the three months ended June 30, 2024.

Previous wording

Our general and administrative expenses decreased to $1,933,753 for the three months ended March 31, 2024 from $2,948,400 for the three months ended March 31, 2023, a decrease of $1,014,647, or 34%. This change was primarily driven by decreases in consulting expenses of $339,912, salaries and wages of $235,940, stock compensation expense of $154,654 and accounting fees of $79,031, all primarily related to the second quarter 2023 reduction in force and no longer pursuing the transfer and spin-off its cannabinoid clinical development pipeline assets to Akos Biosciences, Inc., and Delaware franchise taxes of $196,826 partially offset by an increase in director fees of $134,875.

Current wording

Our general and administrative expenses decreased to $3,231,404 for the six months ended June 30, 2024 from $6,192,700 for the six months ended June 30, 2023, a decrease of $2,961,296, or 48%. This change was primarily driven by decreases in consulting expenses of $697,659, salaries and wages of $1,041,946, stock compensation expense of $639,502, investor relations of $256,219 and accounting fees of $142,950, all primarily related to the second quarter 2023 reduction in force and no longer pursuing the transfer and spin-off its cannabinoid clinical development pipeline assets to Akos Biosciences, Inc., and Delaware franchise taxes of $220,075 partially offset by an increase in director fees of $113,573.

Previous wording

Our research and development expense for the three months ended March 31, 2024 was $458,155 as compared to $1,825,792 for the three months ended March 31, 2023 with a decrease of $1,367,637, or approximately 75%. This decrease was primarily driven by a decrease salaries and wages of $765,365, research costs of $323,973 and the gain realized related to the Australian R&D tax incentive of $399,987.

Current wording

Our research and development expense for the six months ended June 30, 2024 was $973,656 as compared to $4,249,981 for the six months ended June 30, 2023 with a decrease of $3,276,325, or approximately 77%. This decrease was primarily driven by a decrease salaries and wages of $1,329,698, research costs of $1,046,750, product development costs of $323,751 and the gain realized related to the Australian R&D tax incentive of $259,591.

Previous wording

The Company has incurred a loss since inception resulting in an accumulated deficit of $98,956,433 as of March 31, 2024 and further losses are anticipated in the development of its business. Further, the Company had operating cash outflows of $2,598,347 for the three months ended March 31, 2024. For the three months ended March 31, 2024, the Company had a loss from operations of $2,477,317. Since inception, being a research and development company, the Company has not yet generated revenue and the Company has incurred continuing losses from its operations. The Company’s operations have been funded principally through the issuance of debt and equity. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these unaudited condensed consolidated financial statements.

Current wording

The Company has incurred a loss since inception resulting in an accumulated deficit of $100,835,827 as of June 30, 2024 and further losses are anticipated in the development of its business. Further, the Company had operating cash outflows of $5,487,520 for the six months ended June 30, 2024. For the six months ended June 30, 2024, the Company had a loss from operations of $4,375,248. Since inception, being a research and development company, the Company has not yet generated revenue and the Company has incurred continuing losses from its operations. The Company’s operations have been funded principally through the issuance of debt and equity. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these unaudited condensed consolidated financial statements.

Previous wording

In assessing the Company’s ability to continue as a going concern, the Company monitors and analyzes its cash and its ability to generate sufficient cash flow in the future to support its operating and capital expenditure commitments. At March 31, 2024, the Company had cash of $6,356,036 and working capital of $5,860,884. The Company’s current cash on hand is insufficient to satisfy its operating cash needs for the 12 months following the filing of this Quarterly Report on Form 10-Q. These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year after the date the financial statements are issued. Management’s plan to alleviate the conditions that raise substantial doubt include raising additional working capital through public or private equity or debt financings or other sources, the Purchase Agreement with Lincoln Park, subject to registration, and may include additional collaborations with third parties as well as disciplined cash spending. Adequate additional financing may not be available to us on acceptable terms, or at all. Should the Company be unable to raise sufficient additional capital, the Company may be required to undertake cost-cutting measures including delaying or discontinuing certain operating activities.

Current wording

In assessing the Company’s ability to continue as a going concern, the Company monitors and analyzes its cash and its ability to generate sufficient cash flow in the future to support its operating and capital expenditure commitments. At June 30, 2024, the Company had cash of $3,502,551 and working capital of $4,874,594. The Company’s current cash on hand is insufficient to satisfy its operating cash needs for the 12 months following the filing of this Quarterly Report on Form 10-Q. These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year after the date the financial statements are issued. Management’s plan to alleviate the conditions that raise substantial doubt include raising additional working capital through public or private equity or debt financings or other sources, and may include additional collaborations with third parties as well as disciplined cash spending. Adequate additional financing may not be available to us on acceptable terms, or at all. Should the Company be unable to raise sufficient additional capital, the Company may be required to undertake cost-cutting measures including delaying or discontinuing certain operating activities.

Previous wording

Cash Flows for the Three Months Ended March 31, 2024 and 2023:

Current wording

Cash Flows for the Six Months Ended June 30, 2024 and 2023:

Previous wording

Net cash used in operating activities was $5,137,009 during the three months ended March 31, 2023, which consisted primarily of a net loss adjusted for non-cash items of $4,214,521, an increase in prepaid expenses and other current assets of $1,549,354, and a decrease in right-of-use operating lease asset and obligation of $26,846, offset by an increase in accounts payable and accrued liabilities of $653,712.

Current wording

Net cash used in operating activities was $5,487,520 during the six months ended June 30, 2024, which consisted primarily of a net loss adjusted for non-cash items of $3,485,028 and an increase in prepaid expenses and other current assets of $543,822 and a decrease in accounts payable and accrued liabilities of $1,458,670.

Previous wording

Net cash used in operating activities was $2,598,347 during the three months ended March 31, 2024, which consisted primarily of a net loss adjusted for non-cash items of $2,041,455 and an increase in prepaid expenses of $759,289, offset by an increase in accounts payable and accrued liabilities of $202,397.

Current wording

Net cash used in operating activities was $9,602,930 during the six months ended June 30, 2023, which consisted primarily of a net loss adjusted for non-cash items of $8,978,712, an increase in prepaid expenses and other current assets of $1,111,913, offset by an increase in accounts payable and accrued liabilities of $542,397.

Previous wording

Net cash used in investing activities was $0 during the three months ended March 31, 2024.

Current wording

Net cash used in investing activities was $0 during the six months ended June 30, 2024.

Previous wording

Net cash used in investing activities was $5,169 during the three months ended March 31, 2023, which consisted of the purchase of property and equipment.

Current wording

Net cash used in investing activities was $11,685 during the six months ended June 30, 2023, which consisted of proceeds from disposal of property and equipment of $16,872, offset by the purchase of property and equipment of $5,187.

Previous wording

Net cash provided by financing activities was $6,658,269 during the three months ended March 31, 2024, which consisted of $1,817,640 from the proceeds received from the stock subscription receivable, $2,676,980 for the exercise of the Inducement Warrants, and $2,307,707 for the common stock sold under the Distribution agreement, net of offering costs, and offset by $144,058 offering costs previously accrued for the Inducement Warrants.

Current wording

Net cash provided by financing activities was $6,692,699 during the six months ended June 30, 2024, which consisted of $1,804,819 from the proceeds received from the stock subscription receivable, $2,676,980 for the exercise of the Inducement Warrants, $2,290,186 for the common stock sold under the Distribution agreement, net of offering costs, and $82,026 for the common stock sold under the Purchase Agreement, offset by $161,312 offering costs previously accrued for the Inducement Warrants.

Previous wording

Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, costs and expenses and related disclosures. Our critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in them have had or are reasonably likely to have a material effect on our financial condition or results of operations. Accordingly, actual results could differ materially from our estimates. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Our most critical accounting estimate includes determining the accruals associated with third party providers supporting research and development efforts.

Current wording

Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP, which requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, costs and expenses and related disclosures. Our critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in them have had or are reasonably likely to have a material effect on our financial condition or results of operations. Accordingly, actual results could differ materially from our estimates. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Our most critical accounting estimate includes determining the accruals associated with third party providers supporting research and development efforts.