# Enveric Biosciences, Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [Enveric Biosciences, Inc.](/companies/envb.md) (CIK 890821)
- Form: 10-Q
- Filed: 2024-08-12
- Accepted by EDGAR: Aug 12, 2024, 17:13 ET
- Period: 2024-06-30
- Accession: 0001493152-24-031352
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/890821/000149315224031352/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/890821/000149315224031352/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2024-04-01 to 2024-06-30 | $515.5k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2024-01-01 to 2024-06-30 | $973.7k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | −$1.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | −$4.4m | us-gaap:OperatingIncomeLoss |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $1.7k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | −$1.9m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | −$4.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.25 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.75 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.25 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.75 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 7,587,851 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 5,794,653 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | −$5.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2024-06-30 | $3.5m | us-gaap:Cash |
| Current assets | at 2024-06-30 | $5.5m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $6.1m | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $645.3k | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2024-06-30 | $5.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 28,083 characters.

*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.*

### Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking terms such as “anticipates,” “assumes,” “believes,” “can,” “could,” “estimates,” “expects,” “forecasts,” “guides,” “intends,” “may,” “plans,” “seeks,” “projects,” “targets,” and “would” or the negative of such terms or other variations on such terms or comparable terminology. Such forward-looking statements include, but are not limited to, future financial and operating results, the company’s plans, objectives, expectations and intentions and other statements that are not historical facts. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Form 10-Q and are subject to a number of risks, uncertainties, and assumptions that could cause actual results to differ materially from our historical experience and our present expectations, or projections described under the sections in this Form 10-Q entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These risks and uncertainties include, but are not limited to:

- our dependence on the success of our prospective product candidates, which are in the early stages of development and may not reach a particular stage in development, receive regulatory approval, or be successfully commercialized;
- potential difficulties that may delay, suspend, or scale back our efforts to advance additional early research programs through preclinical development and investigational new drug (“IND”) application filings and into clinical development;
- the limited study on the effects of medical psychedelics, and the chance that future clinical research studies may lead to conclusions that dispute or conflict with our understanding and belief regarding the medical benefits, viability, safety, efficacy, dosing, and social acceptance of psychedelics;
- the expensive, time-consuming, and uncertain nature of clinical trials, which are susceptible to change, delays, termination, and differing interpretations;
- the ability to establish that potential products are efficacious or safe in preclinical or clinical trials;
- the fact that our current and future preclinical and clinical studies may be conducted outside the United States, and the United States Food and Drug Administration may not accept data from such studies to support any new drug applications we may submit after completing the applicable developmental and regulatory prerequisites;
- our ability to effectively and efficiently build, maintain and legally protect our molecular derivatives library so that it can be an essential building block from which those in the biotech industry can develop new patented products;
- our ability to establish or maintain collaborations on the development of therapeutic candidates;
- our ability to obtain appropriate or necessary governmental approvals to market potential products;
- our ability to manufacture product candidates on a commercial scale or in collaborations with third parties;

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- our significant and increasing liquidity needs and potential requirements for additional funding;
- our ability to obtain future funding for developing products and working capital and to obtain such funding on commercially reasonable terms;
- legislative changes related to and affecting the healthcare system, including, without limitation, changes and proposed changes to the Patient Protection and Affordable Care Act;
- the intense competition we face, often from companies with greater resources and experience than us;
- our ability to retain key executives and scientists;
- the ability to secure and enforce legal rights related to our products, including intellectual property rights and patent protection;
- political, economic, and military instability in Israel which may impede our development programs;
- our success at managing the risks involved in the foregoing; and
- the risk of loss in excess of insurance limitations on funds held in U.S Banking Institutions.

For a more detailed discussion of these and other factors that may affect our business and that could cause the actual results to differ materially from those projected in these forward-looking statements, see the risk factors and uncertainties set forth in Part II, Item 1A of this Form 10-Q and Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2023. Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise, except as required by law.

### Business Overview

We are a biotechnology company dedicated to the development of novel neuroplastogenic small-molecule therapeutics for the treatment of depression, anxiety, and addiction disorders. Leveraging our unique discovery and development platform, The Psybrary™, we have created a robust intellectual property portfolio of new chemical entities for specific mental health indications. Our lead program, the EVM201 Series, comprises next generation synthetic prodrugs of the active metabolite, psilocin. We are developing the first product from the EVM201 Series – EB-002 – for the treatment of psychiatric disorders. We are also advancing its second program, the EVM301 Series – EB 003 – expected to offer a first-in-class, new approach to the treatment of difficult-to-address mental health disorders, mediated by the promotion of neuroplasticity without also inducing hallucinations in the patient.

#### Psychedelics

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™.

### Recent Developments

### Equity Distribution Agreement

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.

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.

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.

On March 8, 2024, the Company entered into a series of common stock purchase agreements for the issuance in a registered direct offering of 228,690 shares of the Company’s common stock, par value $0.01 per share to the Holders of the Inducement Warrants. The issuance was made in exchange for the permanent and irrevocable waiver of the variable rate transaction limitation solely with respect to the entry into and/or issuance of shares of common stock in an at the market offering contained in the Inducement Letters. The fair value of the shares issued for consideration of waiving the variable rate transaction limitation was $322,453 and was charged to additional paid in capital on the unaudited condensed consolidated balance sheet as an offering cost related to the Distribution Agreement.

### Lincoln Park Equity Line

During the three and six months ended June 30, 2024, the Company had issued 125,000 shares of common stock through the Purchase Agreement for gross cash proceeds of $82,850 and the Company charged offering costs of $82,850 to additional paid in capital on the unaudited condensed consolidated balance sheet. As of June 30, 2024 and December 31, 2023, the Company has capitalized deferred offering costs of $763,173 and $395,660, respectively.

On May 3, 2024, the Company entered into a series of common stock purchase agreements for the issuance in a registered direct offering of an aggregate of 458,000 shares of the Company’s common stock, to certain institutional investors. The issuance was made in exchange for the permanent and irrevocable waiver of the variable rate transaction limitation with respect to any existing or future agreement by the Company to effect any issuance of shares and issue such shares thereunder, as contained in those certain Inducement Offer Letters, dated December 28, 2023, between the Company and those certain institutional investors. The Company will not receive any net proceeds in connection with the offering. The fair value of the shares issued for consideration of waiving the variable rate transaction limitation was $448,840 and was recorded as deferred offering costs within prepaid expenses and other current assets on the unaudited condensed consolidated balance sheet related to the Purchase Agreement.

During July 2024, the Company issued 1,015,477 shares of common stock through the Purchase Agreement with Lincoln Park for gross cash proceeds of $494,887. As of July 30, 2024, there were no remaining shares available to be issued in connection with this agreement.

### Inducement Warrants

On February 29, 2024, a Holder of the Inducement Warrants, exercised 1,954,000 Inducement Warrants at an exercise price of $1.37 per share for 1,954,000 shares of the Company’s common stock for total gross proceeds of $2,676,980.

### Results of Operations

The following table sets forth information comparing the components of net loss for the three months ended June 30, 2024 and 2023:

| Operating expenses | For the Three Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| General and administrative | $1,297,651 | $3,272,900 |
| Research and development | 515,501 | 2,395,589 |
| Depreciation and amortization | 84,779 | 86,518 |
| **Total operating expenses** | 1,897,931 | 5,755,007 |
| **Loss from operations** | (1,897,931) | (5,755,007) |
| **Other income (expense)** |  |  |
| Change in fair value of warrant liabilities | 10,805 | (233,821) |
| Change in fair value of investment option liability | 7,767 | (1,082,141) |
| Change in fair value of derivative liability | — | 714,000 |
| Interest income (expense), net | (35) | 916 |
| **Total other income (expense)** | 18,537 | (601,046) |
| **Net loss before income taxes** | $(1,879,394) | $(6,356,053) |
| Income tax expense | — | — |
| **Net loss** | $(1,879,394) | $(6,356,053) |

### General and Administrative Expenses

Our general and administrative expenses decreased to $1,297,651 for the three months ended June 30, 2024 from $3,272,900 for the three months ended June 30, 2023, a decrease of $1,975,249, or 60%. This change was primarily driven by decreases in consulting expenses of $357,747, salaries and wages of $806,006, stock compensation expense of $484,848, legal fees of $109,403 and accounting fees of $63,919, 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.

### Research and Development Expenses

Our research and development expense for the three months ended June 30, 2024 was $515,501 as compared to $2,395,589 for the three months ended June 30, 2023 with a decrease of $1,880,088, or approximately 78%. This decrease was primarily driven by a decrease in CRO expense of $531,305, salaries and wages of $564,333, research costs of $722,777 and product development of $124,199.

### Depreciation and Amortization Expense

Depreciation and amortization expense for the three months ended June 30, 2024 was $84,779 as compared to $86,518 for the three months ended June 30, 2023, with a decrease of $1,739, or approximately 2%.

### Change in Fair Value of Warrant Liabilities

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.

### Change in Fair Value of Investment Option Liability

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.

### Change in Fair Value of Derivative Liability

The Company’s change in fair value of derivative liability is due to the May 2023 redemption which ceased the probability of occurrence of the Akos spin-off and Akos Series A Preferred Stock redemption.

The following table sets forth information comparing the components of net loss for the six months ended June 30, 2024 and 2023:

| Operating expenses | For the Six Months Ended June 2024 | 2023 |
| --- | ---: | ---: |
| General and administrative | $3,231,404 | $6,192,700 |
| Research and development | 973,656 | 4,249,981 |
| Depreciation and amortization | 170,188 | 173,004 |
| **Total operating expenses** | 4,375,248 | 10,615,685 |
| **Loss from operations** | (4,375,248) | (10,615,685) |
| **Other income (expense)** |  |  |
| Change in fair value of warrant liabilities | 20,844 | (183,164) |
| Change in fair value of investment option liability | 19,165 | (962,636) |
| Change in fair value of derivative liability | — | 727,000 |
| Interest income, net | 661 | 905 |
| **Total other income (expense)** | 40,670 | (417,895) |
| **Net loss before income taxes** | $(4,334,578) | $(11,033,580) |
| Income tax expense | (1,731) | — |
| **Net loss** | $(4,336,309) | $(11,033,580) |

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### General and Administrative Expenses

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.

### Research and Development Expenses

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.

### Depreciation and Amortization Expense

Depreciation and amortization expense for the six months ended June 30, 2024 was $170,188 as compared to $173,004 for the six months ended June 30, 2023, with a decrease of $2,816, or approximately 2%.

### Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities for the six months ended June 30, 2024 resulted in income of $20,844 as compared to a loss of $183,164 for the six 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.

### Change in Fair Value of Investment Option Liability

Change in fair value of investment option liability the six months ended June 30, 2024 resulted in income of $19,165 as compared to a loss of $962,636 during the six 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 six months ended June 30, 2024.

### Change in Fair Value of Derivative Liability

The Company’s change in fair value of derivative liability is due to the May 2023 redemption which ceased the probability of occurrence of the Akos spin-off and Akos Series A Preferred Stock redemption.

### Going Concern, Liquidity and Capital Resources

The Company has incurred a loss since inception resulting in an accumulated deficit of $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.

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.

As a result of these factors, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date of the unaudited condensed consolidated financial statements. The Company’s unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

### Cash Flows

Since inception, we have primarily used our available cash to fund our product development and operations expenditures.

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

The following table sets forth a summary of cash flows for the years presented:

|  | For the Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(5,487,520) | $(9,602,930) |
| Net cash provided by investing activities | — | 11,685 |
| Net cash provided by (used in) financing activities | 6,692,699 | (1,052,057) |
| Effect of Foreign Exchange Rate on Changes on Cash | 9,395 | 826 |
| Net increase (decrease) in cash | $1,214,574 | $(10,642,476) |

#### Operating Activities

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.

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.

#### Investing Activities

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

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.

#### Financing Activities

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.

Net cash used in financing activities was $1,052,057 during the six months ended June 30, 2023, which consisted of the redemption of redeemable non-controlling interest.

### Critical Accounting Estimates

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.

There have been no material changes to our critical accounting estimates as compared to the critical accounting estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

## Market risk

As filed, 837 characters.

From inception through June 30, 2024, the Company’s reporting currency is the United States dollar while the functional currency of certain of the Company’s subsidiaries is the Canadian dollar and Australian dollar. For the reporting periods ended June 30, 2024 and June 30, 2023, the Company engaged in a number of transactions denominated in Canadian dollars and Australian dollars. As a result, the Company is subject to exposure from changes in the exchange rates of the Canadian dollar and Australian dollar against the U.S. dollar.

The Company has not entered into any financial derivative instruments that expose it to material market risk, including any instruments designed to hedge the impact of foreign currency exposures. The Company may, however, hedge such exposure to foreign currency exchange fluctuations in the future.

## Controls and procedures

As filed, 3,531 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that the information we are required to disclose in reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified under the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The matters that management identified in our Annual Report for the year ended December 31, 2023, continued to exist and were still considered material weaknesses in our internal control over financial reporting at June 30, 2024.

As required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer (our principal executive) and Chief Financial Officer (our principal financial officer and principal accounting officer) carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2024. Based on this evaluation, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in paragraph (e) of Rules 13a-15 and 15d-15 under the Exchange Act) were not effective as of June 30, 2024.

### Management’s Remediation Plan

As previously discussed in our Annual Report for the year ended December 31, 2023, management had concluded that our internal control over financial reporting was not effective as of December 31, 2023, because management identified inadequate segregation of duties to ensure the processing, review, and authorization of all transactions, including non-routine transactions resulting in deficiencies, which, in aggregate, amounted to a material weakness in the Company’s internal control over financial reporting.

As of June 30, 2024, there were control deficiencies that constituted a material weakness in our internal control over financial reporting. Management has taken, and is taking steps to strengthen our internal control over financial reporting: we have conducted evaluation of the material weakness to determine the appropriate remedy and have established procedures for documenting disclosures and disclosure controls.

While we have taken certain actions to address the material weaknesses identified, additional measures may be necessary as we work to improve the overall effectiveness of our internal controls over financial reporting.

### Changes in Internal Control over Financial Reporting

Other than the changes discussed above in the Remediation Plan, there have been no other changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-(f) of the Exchange Act) that occurred during quarter ending June 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 3,507 characters.

Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on March 26, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations of financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, other than as described below, there have been no material changes to the risk factors disclosed in the Company’s Annual Report.

***In the event that we fail to regain compliance with the listing requirements of The Nasdaq Capital Market or satisfy any of the listing requirements of Nasdaq, our common stock may be delisted, which could affect our market price and liquidity.***

Our common stock is listed on Nasdaq. For continued listing on Nasdaq, we will be required to comply with the continued listing requirements, including the minimum market capitalization standard, the stockholders’ equity requirement, the corporate governance requirements and the minimum closing bid price requirement, among other requirements. On May 16, 2024, the Company received a letter from the Listing Qualifications Department of the Nasdaq Stock Market stating that because the closing bid price for the Company’s common stock listed on Nasdaq was below $1.00 for 30 consecutive business days, the Company no longer meets the minimum bid price requirement for continued listing on the Nasdaq Capital Market (the “Minimum Bid Price Requirement”). The Company has a period of 180 calendar days from May 16, 2024, or until November 12, 2024, to regain compliance with the Minimum Bid Price Requirement. If at any time before November 12, 2024, the bid price of the Company’s common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement.

In the event that we fail to regain compliance with the Minimum Bid Price Requirement or satisfy any of the listing requirements of Nasdaq, our common stock may be delisted. We will have an opportunity to appeal the determination to a Hearings Panel, but we cannot guarantee that such appeal will be successful. If we are unable to list on Nasdaq, we would likely be more difficult to trade in or obtain accurate quotations as to the market price of our common stock. If our common stock is delisted from trading on Nasdaq, and we are not able to list our common stock on another exchange or to have it quoted on Nasdaq, our securities could be quoted on the OTC Bulletin Board or on the “pink sheets.” As a result, we could face significant adverse consequences including, without limitation:

- a limited availability of market quotations for our securities;
- a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
- a limited amount of news and analyst coverage for our Company; and
- a decreased ability to issue additional securities (including pursuant to short-form registration statements on Form S-3 or obtain additional financing in the future).

Filed Aug 12, 2024.
Source: SEC EDGAR, the filing index for accession 0001493152-24-031352. Last ingested by Listed: Nov 3, 2026, 18:51 ET. No prices; not investment advice.