Enveric Biosciences(ENVB) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents the company's unaudited condensed consolidated financial statements and related disclosures Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Enveric Biosciences, Inc. and its subsidiaries, including balance sheets, statements of operations and comprehensive loss, statements of changes in shareholders' equity, and statements of cash flows, along with detailed notes explaining the company's business, significant accounting policies, intangible assets, commitments, share capital, and the MagicMed Industries Inc. amalgamation Condensed Consolidated Balance Sheets Details the company's financial position, including assets, liabilities, and equity, at specific reporting dates | Assets/Liabilities/Equity | September 30, 2021 | December 31, 2020 | | :------------------------ | :----------------- | :---------------- | | Assets: | | | | Cash | $21,448,426 | $1,578,460 | | Total current assets | $22,281,542 | $2,279,170 | | Intangible assets, net | $38,273,667 | $1,817,721 | | Goodwill | $9,061,927 | — | | Total assets | $69,757,704 | $4,096,891 | | Liabilities: | | | | Total current liabilities | $2,162,812 | $681,250 | | Deferred tax liability | $9,061,927 | — | | Warrant liability | $3,166,116 | — | | Total liabilities | $14,390,855 | $681,250 | | Shareholders' Equity: | | | | Total shareholders' equity| $55,366,849 | $3,415,641 | | Total Liabilities and shareholders' equity | $69,757,704 | $4,096,891 | Condensed Consolidated Statements of Operations and Comprehensive Loss Reports the company's financial performance, including revenues, expenses, and net loss, over specific periods | Metric (Three Months Ended Sep 30) | 2021 | 2020 | | :--------------------------------- | :------------ | :----------- | | Research and development costs | $1,219,339 | $63,302 | | General and administrative expenses| $2,123,834 | $426,532 | | Total operating expenses | $3,516,869 | $489,834 | | Loss from Operations | $(3,516,869) | $(489,834) | | Change in fair value of warrant liabilities | $804,833 | — | | Net Loss | $(2,712,406) | $(565,335) | | Comprehensive loss | $(2,718,916) | $(572,645) | | Net loss per share – basic and diluted | $(0.12) | $(0.10) | | Metric (Nine Months Ended Sep 30) | 2021 | 2020 | | :-------------------------------- | :------------- | :------------ | | Research and development costs | $2,295,826 | $134,259 | | General and administrative expenses| $10,864,696 | $1,959,785 | | Total operating expenses | $13,644,877 | $2,094,044 | | Loss from Operations | $(13,644,877) | $(2,094,044) | | Change in fair value of warrant liabilities | $7,077,376 | — |\ | Net Loss | $(6,871,406) | $(2,482,187) | | Comprehensive loss | $(6,875,442) | $(2,512,264) | | Net loss per share – basic and diluted | $(0.34) | $(0.43) | Condensed Consolidated Statements of Changes in Shareholders' Equity (Deficit) Outlines the changes in the company's equity components, such as share capital and accumulated deficit, over time | Equity Component (as of Sep 30, 2021) | Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Shareholders' Equity | | :------------------------------------ | :----------- | :----------- | :------------------------- | :------------------ | :----------------------------------- | :------------------------- | | Balance as of Dec 31, 2020 | 10,095,109 | $100,951 | $15,222,770 | $(11,759,557) | $(181,277) | $3,415,641 | | January 2021 registered direct offering, net | 2,221,334 | $22,213 | $4,594,874 | | | $4,617,087 | | February 2021 registered direct offering, net | 3,007,026 | $30,070 | $6,986,331 | | | $7,016,401 | | Stock based compensation | | | $3,591,565 | | | $3,591,565 | | Conversion of Series B Preferred Stock| (3,275,407) | $(32,754) | $32,754 | | | — | | Exercise of warrants, net | 851,099 | $8,511 | $3,258,734 | | | $3,267,245 | | Net loss | | | | $(3,250,711) | | $(3,250,711) | | Consideration paid pursuant to amalgamation agreement | 9,951,217 | $99,512 | $38,942,770 | | | $39,042,282 | | Balance as of Sep 30, 2021 | 31,383,632 | $313,836 | $73,869,289 | $(18,630,963) | $(185,313) | $55,366,849 | Condensed Consolidated Statements of Cash Flows Summarizes the cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity (Nine Months Ended Sep 30) | 2021 | 2020 | | :-------------------------------------------- | :------------ | :------------ | | Net cash used in operating activities | $(7,390,358) | $(1,638,798) | | Net cash provided by investing activities | $2,380,327 | — | | Net cash provided by financing activities | $24,899,652 | $1,932,196 | | Net increase in cash | $19,869,966 | $297,184 | Supplemental Disclosure of Non-Cash Transactions (2021): | Transaction | Amount | | :-------------------------------------------- | :------------ | | Issuance of Common Stock (MagicMed amalgamation) | $39,042,282 | | Deferred tax liability (MagicMed amalgamation) | $9,061,927 | | Fair value of warrants issued | $9,981,000 | Notes to the Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the unaudited condensed consolidated financial statements, covering the company's business operations, significant accounting policies, specific asset and liability details, commitments, equity instruments, and the financial impact of the MagicMed Industries Inc. amalgamation NOTE 1 - BUSINESS Enveric Biosciences, Inc. is a pharmaceutical company focused on developing cannabinoid medicines. The company completed a reverse acquisition of Jay Pharma in December 2020 and acquired MagicMed Industries Inc. in September 2021, expanding its focus to psychedelic-derived pharmaceutical candidates. The accounting for the MagicMed amalgamation is provisional - Enveric Biosciences, Inc. (formerly Ameri Holdings, Inc.) is a pharmaceutical company developing innovative, evidence-based cannabinoid medicines[27] - On December 30, 2020, the company completed a tender offer for Jay Pharma Inc., which was treated as a reverse acquisition and recapitalization, making Jay Pharma a wholly-owned subsidiary[28] - On September 16, 2021, the company completed the amalgamation with MagicMed Industries Inc., acquiring all outstanding securities in exchange for company shares. MagicMed develops and commercializes psychedelic-derived pharmaceutical candidates, including its 'Psybrary' of psilocybin and DMT derivatives[29][30][36] - The accounting for the MagicMed amalgamation is provisional as of September 30, 2021, pending final purchase price calculation, opening balance sheet finalization, and valuation report[37] - The company has an accumulated deficit of approximately $18,630,963 as of September 30, 2021, but believes existing cash is sufficient to fund operations for at least the next twelve months[38] NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the significant accounting policies, including the basis of presentation, use of estimates, foreign currency translation, accounting for warrant liabilities, offering costs, net loss per share, fair value measurements, business combinations, intangible assets, research and development, stock-based compensation, segment reporting, long-lived assets, goodwill, and income taxes. It also details recent accounting pronouncements - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and Article 8 of Regulation S-X[40] - The company accounts for warrants not indexed to its own stock as derivative liabilities at fair value, subject to remeasurement each reporting period, with changes recognized in other expense[46] - Potentially dilutive securities, including warrants, convertible notes, restricted stock units, restricted stock awards, and stock options, were excluded from diluted net loss per share calculation for the three and nine months ended September 30, 2021 and 2020, as their inclusion would be anti-dilutive[49][50] | Potentially Dilutive Securities | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2021 | | :------------------------------ | :------------------------------ | :----------------------------- | | Warrants to purchase common stock | 10,576,654 | 332,854 | | Convertible notes | — | 139,721 | | Restricted stock units | 5,775,171 | — | | Restricted stock awards | 28,861 | — | | Options to purchase common stock| 1,147,334 | 797,372 | | Total potentially dilutive securities | 17,528,020 | 1,269,947 | - The company uses Level 3 of the fair value hierarchy for warrant liabilities, which requires significant judgment or estimation due to the lack of an active market[57][59] | Warrant Liabilities (Sep 30, 2021) | Level | Fair Value | | :--------------------------------- | :---- | :--------- | | Warrant liabilities – January Warrants | 3 | $1,487,234 | | Warrant liabilities – February Warrants| 3 | $1,416,391 | | Put rights in warrants (Ameri) | 2 | $262,491 | | Fair value as of September 30, 2021| | $3,166,116 | - The company accounts for business combinations using the acquisition method, recording acquired assets and liabilities at fair value, and expenses all acquisition costs as incurred[64] - Intangible assets, primarily in-process research and development (IPR&D), are considered indefinite-lived until development is complete and are tested for impairment annually[66][67] - Research and development expenses are charged to operations as incurred, including internal and external costs for preclinical development, manufacturing, and clinical trials[70] - The company recognizes stock-based compensation expense using the fair value method, amortizing the grant date fair value over the vesting period[71] - The company operates as a single operating segment and reporting unit[73] - Goodwill is tested for impairment at least annually, with no impairment recorded for the three and nine months ended September 30, 2021[75][76] - The company utilizes an asset and liability approach for income taxes and has a full valuation allowance against deferred tax assets due to historical losses[77][141] NOTE 3 – INTANGIBLE ASSETS This note details the company's intangible assets, including skincare assets, the Diverse Bio License Agreement, and in-process research and development. It also outlines the amortization expense recognized and the terms of the Diverse Bio License Agreement | Intangible Asset (as of Sep 30, 2021) | Useful Life | Carrying Amount | Accumulated Amortization | Net | | :------------------------------------ | :---------- | :-------------- | :----------------------- | :----------- | | Skincare Assets and License Agreements| 4 years | $1,944,689 | $(508,324) | $1,436,365 | | Diverse Bio License Agreement | 4 years | $675,000 | $(84,376) | $590,624 | | In process research and development | Indefinite | $36,246,678 | — | $36,246,678 | | Total | | $38,866,367 | $(592,700) | $38,273,667 | - Amortization expense for intangible assets was $170,692 for the three months ended September 30, 2021 (vs. $0 in 2020) and $481,351 for the nine months ended September 30, 2021 (vs. $0 in 2020)[88] - On March 5, 2021, the company acquired an exclusive, perpetual license from Diverse Biotech, Inc. to develop five therapeutic candidates for cancer patients, involving an upfront payment of $675,000 and future royalties[89][90] NOTE 4 – COMMITMENTS AND CONTINGENCIES This note details various commitments and contingencies, including legal proceedings from stockholder demand letters and a lawsuit related to the reverse stock split and amalgamation, a development and clinical supply agreement with PureForm Global, Inc., a purchase agreement with Prof. Zvi Vogel and Dr. Ilana Nathan involving milestone payments and royalties, and license agreements with Tikkun affiliates - The company resolved several stockholder demand letters and a lawsuit related to its reverse stock split and the MagicMed amalgamation, making certain disclosures and paying settlements totaling $155,000 to the purported stockholders' counsel[96][97][98][99] - A three-year exclusive Development and Clinical Supply Agreement was entered with PureForm Global, Inc. on February 22, 2021, making PureForm the exclusive provider of synthetic cannabidiol (API) for the company's cancer treatment development plans[101][102] - A purchase agreement with Prof. Zvi Vogel and Dr. Ilana Nathan includes a $200,000 milestone payment upon utility patent issuance (accrued as of Sep 30, 2021) and a $300,000 milestone upon Phase II(b) study initiation, plus 2% royalties on net sales up to $20 million[104] - Agreements with Tikkun affiliates involve the assignment of in-licensed rights for pharmaceutical products related to GVHD and skincare business, and a license agreement for cannabis products in the US (excluding NY) for beauty and OTC cancer products, with royalty payments and minimum annual royalties[105][108][109] NOTE 5 - SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS This note details the company's equity activities, including registered direct offerings in January and February 2021, stock option grants and exercises, restricted stock awards, restricted stock units, and warrant issuances and exercises, providing a comprehensive view of changes in share capital - In January 2021, the company completed an offering of 2,221,334 common shares and pre-funded warrants, along with a private placement of warrants for 1,666,019 shares, raising approximately $10,000,000 gross proceeds[113] - In February 2021, another offering of 3,007,026 common shares and a private placement of warrants for 1,503,513 shares generated approximately $12,800,000 gross proceeds[114] | Stock Options (as of Sep 30, 2021) | Number of Shares | Weighted Average Exercise Price | | :--------------------------------- | :--------------- | :------------------------------ | | Outstanding – January 1, 2021 | 929,765 | $1.53 | | Granted | 80,000 | $3.50 | | Options assumed (MagicMed) | 973,840 | $1.34 | | Exercised | (143,796) | $0.23 | | Expired, forfeited, or cancelled | (692,475) | $1.69 | | Outstanding – September 30, 2021 | 1,147,334 | $1.57 | | Exercisable at September 30, 2021 | 931,810 | $1.52 | - Stock-based compensation expense for stock options was $4,683 for both the three and nine months ended September 30, 2021[115] - During Q1 2021, options for 560,404 common shares were exchanged for 325,410 restricted stock units and 42,125 restricted stock awards, resulting in $298,714 inducement expense[115] | Restricted Stock Awards (Nine Months Ended Sep 30, 2021) | Number of Shares | Weighted Average Fair Value | | :------------------------------------------------------- | :--------------- | :-------------------------- | | Non–vested at January 1, 2021 | — | — | | Granted | 70,986 | $3.84 | | Vested | (64,334) | $4.24 | | Non–vested at September 30, 2021 | 6,652 | $2.50 | - Stock-based compensation expense for restricted stock awards was $23,995 for the three months and $80,109 for the nine months ended September 30, 2021[117] | Restricted Stock Units (Nine Months Ended Sep 30, 2021) | Number of Shares | Weighted Average Fair Value | | :------------------------------------------------------ | :--------------- | :-------------------------- | | Non–vested at January 1, 2021 | — | — | | Granted | 5,775,171 | $3.65 | | Vested | (1,207,825) | $4.46 | | Non–vested at September 30, 2021 | 4,567,346 | $3.43 | - Stock-based compensation expense for restricted stock units was $458,308 for the three months and $4,710,225 for the nine months ended September 30, 2021[120] | Warrants (as of Sep 30, 2021) | Warrant Shares Outstanding | Weighted Average Exercise Price (USD) | | :---------------------------- | :------------------------- | :------------------------------------ | | Outstanding at January 1, 2021| 3,770,550 | $2.13 | | Issued | 4,146,146 | $4.90 | | Assumed (MagicMed) | 5,913,672 | $1.31 | | Exercised | (3,253,714) | $1.10 | | Outstanding at September 30, 2021| 10,576,654 | $2.76 | | Exercisable at September 30, 2021| 10,576,654 | $2.76 | NOTE 6 – AMALGAMATION WITH MAGICMED INDUSTRIES INC. This note details the amalgamation with MagicMed Industries Inc. completed on September 16, 2021. The acquisition involved issuing company shares, converting MagicMed options and warrants, and appointing MagicMed's designees to the board. MagicMed specializes in psychedelic-derived pharmaceutical candidates. The purchase price allocation is preliminary, resulting in goodwill primarily from deferred tax liabilities - The amalgamation with MagicMed Industries Inc. was completed on September 16, 2021, with MagicMed becoming an indirect wholly-owned subsidiary[122] - MagicMed shareholders received 9,951,237 Company Shares, representing approximately 31.7% of the Company Shares post-amalgamation. Additionally, MagicMed stock options and warrants were converted into options and warrants to purchase Company Shares[124] - MagicMed Industries develops and commercializes psychedelic-derived pharmaceutical candidates, with its 'Psybrary' initially focusing on psilocybin and DMT derivatives[128] | Purchase Price Allocation (MagicMed Acquisition) | Fair Value | | :----------------------------------------------- | :----------- | | Stock (9,951,217 common shares issued) | $27,067,310 | | Fair value of warrants | $10,724,578 | | Fair value of options | $1,250,394 | | Deferred tax liability incurred | $9,061,927 | | Total Purchase Price | $48,104,209 | - The acquisition is accounted for as a business combination, with preliminary fair values assigned to acquired assets and assumed liabilities. Goodwill of $9,061,927 is primarily attributable to deferred tax liabilities and is not deductible for tax purposes[130][133][135] - Acquisition-related costs of approximately $200,000 were incurred and included in general and administrative expenses[137] | Proforma Net Loss (MagicMed Acquisition) | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2020 | | :--------------------------------------- | :------------------------------ | :----------------------------- | | Net loss | $(862,582) | $(2,810,104) | | Proforma Net Loss (MagicMed Acquisition) | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2021 | | :--------------------------------------- | :------------------------------ | :----------------------------- | | Net loss | $(3,726,677) | $(10,922,678) | NOTE 7 – INCOME TAXES This note explains the company's income tax position, specifically the deferred tax liability arising from the MagicMed acquisition and the full valuation allowance against deferred tax assets due to historical losses - The MagicMed acquisition resulted in a deferred tax liability of $9,061,927 due to intangible assets from in-process research and development that lack a tax basis[141] - A full valuation allowance against deferred tax assets was required as of September 30, 2021, and December 31, 2020, due to the company's history of losses, indicating it is more likely than not that the benefits will not be realized[141] Item 2. Management's discussion and analysis of financial condition and results of operations This section provides management's perspective on the company's financial condition and operational results, highlighting key business developments, financial performance for the three and nine months ended September 30, 2021, liquidity, and critical accounting policies. It also includes forward-looking statements and risk factors Cautionary Note Regarding Forward-Looking Statements Highlights the inherent risks and uncertainties associated with forward-looking statements in the report - The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from expectations, including dependence on product candidates, integration of MagicMed, COVID-19 impact, and the uncertain nature of clinical trials[144] Business Overview Overview of the company's strategic focus on developing cannabinoid and psychedelic pharmaceutical candidates - Enveric Biosciences is an early-development-stage biosciences company focused on developing innovative, evidence-based prescription products and combination therapies containing cannabinoids for cancer care, initially targeting palliative and supportive care[145][146] - The company aims to advance a pipeline of novel cannabinoid combination therapies for hard-to-treat cancers like glioblastoma multiforme (GBM) and intends to focus on hemp-derived, non-THC cannabinoids (CBD, CBG) to comply with U.S. federal regulations[148][150] Tender Offer, Spin-Off and Reverse Stock Split Describes the corporate actions including the reverse acquisition of Jay Pharma and a reverse stock split - On December 30, 2020, the company completed a tender offer for Jay Pharma, Inc., which was accounted for as a reverse merger, making Jay Pharma the accounting acquirer and its historical financial statements the historical financial statements of Enveric Biosciences[151] - Immediately following the tender offer, a 1-for-4 reverse stock split of the common stock was effected on December 30, 2020, with all share and per-share amounts retroactively adjusted[153] Amalgamation Agreement with MagicMed Industries Inc. Details the strategic acquisition of MagicMed Industries, expanding the company's pharmaceutical pipeline - The company completed the amalgamation with MagicMed Industries Inc. on September 16, 2021, acquiring all outstanding securities of MagicMed in exchange for Company Shares[154] - MagicMed shareholders received approximately 31.7% of the Company Shares post-amalgamation, and MagicMed's business focuses on developing psychedelic-derived pharmaceutical candidates, including its 'Psybrary'[156][160] Recent Developments Summarizes significant recent events, including the resolution of stockholder litigation - The company addressed several stockholder demand letters and a lawsuit regarding its reverse stock split and the MagicMed amalgamation, making corrective disclosures and paying settlements totaling $155,000[162][163] Key Components of Our Results of Operations Explains the primary drivers and trends influencing the company's operational expenses and financial performance - Operating expenses, including research and development, general and administrative, and depreciation/amortization, have increased due to product development activities and are expected to continue rising[164] Results of Operations (Three Months Ended September 30, 2021 and 2020) Compares the company's financial performance for the three-month periods ended September 30, 2021 and 2020 | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Research and Development Expense | $1,219,339 | $63,302 | $1,156,037 | 1,826% | | General and Administrative Expenses | $2,123,834 | $426,532 | $1,897,302 | 398% | | Depreciation and Amortization | $173,696 | $0 | $173,696 | N/A | | Change in Fair Value of Warrants | $804,833 | $0 | $804,833 | N/A | | Interest Expense | $(370) | $(75,501) | $75,131 | -99% | | Foreign Currency Translation | $(6,510) | $(7,310) | $800 | -11% | | Net Loss | $(2,712,406) | $(565,335) | $(2,147,071)| 380% | Results of Operations (Nine Months Ended September 30, 2021 and 2020) Compares the company's financial performance for the nine-month periods ended September 30, 2021 and 2020 | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Research and Development Expense | $2,295,826 | $134,259 | $2,161,567 | 1,610% | | General and Administrative Expenses | $10,864,696 | $1,959,785 | $8,904,911 | 454% | | Depreciation and Amortization | $484,355 | $0 | $484,355 | N/A |\ | Change in Fair Value of Warrants | $7,077,376 | $0 | $7,077,376 | N/A | | Interest Expense | $(5,191) | $(388,143) | $382,952 | -99% | | Foreign Currency Translation | $(4,036) | $(30,077) | $26,041 | -87% | | Net Loss | $(6,871,406) | $(2,482,187) | $(4,389,219)| 177% | Liquidity and Capital Resources Assesses the company's ability to meet its short-term and long-term financial obligations and fund operations - As of September 30, 2021, the company had an accumulated deficit of $18,630,963 and working capital of $20,118,730[185] - Cash on hand was $21,448,426 as of September 30, 2021, including $3,055,327 received from the MagicMed amalgamation[186] - The company believes it has sufficient cash to meet funding requirements for the next year but anticipates needing additional financing for its development plan in the coming years[187] Cash Flows Provides a detailed breakdown of cash generated and used across operating, investing, and financing activities | Cash Flow Activity (Nine Months Ended Sep 30) | 2021 | 2020 | | :-------------------------------------------- | :------------ | :------------ | | Net cash used in operating activities | $(7,390,358) | $(1,638,798) | | Net cash provided by investing activities | $2,380,327 | — | | Net cash provided by financing activities | $24,899,652 | $1,932,196 | | Net increase in cash | $19,869,966 | $297,184 | - Operating activities used $7,390,358 in cash in 2021, primarily due to a net loss of $6,841,407, partially offset by non-cash adjustments like stock-based compensation and depreciation/amortization[191] - Investing activities provided $2,380,328 in cash in 2021, mainly from $3,055,328 cash received in the MagicMed amalgamation, offset by $675,000 for the Diverse Bio intellectual property acquisition[193] - Financing activities provided $24,899,652 in cash in 2021, primarily from $21,614,488 in net proceeds from common stock sales and $3,285,164 from warrant exercises[195] Off-Balance Sheet Arrangements Confirms the absence of significant off-balance sheet financial commitments or liabilities - The company did not have any off-balance sheet financing arrangements, liabilities, guarantee contracts, or interests in unconsolidated entities[197] Critical Accounting Policies and Significant Judgments and Estimates Refers to the key accounting policies and estimates that significantly impact the financial statements - The company's financial statements are prepared in accordance with U.S. GAAP, and management's discussion refers to Note 3 of its 2020 Annual Report on Form 10-K for significant accounting policies[198] Warrant Liability Explains the accounting treatment for warrants classified as derivative liabilities at fair value - Warrants not indexed to the company's own stock are accounted for as liabilities at fair value on the balance sheet, with changes in fair value recognized in the statement of operations[200] Recent Accounting Standards Discusses the impact and evaluation of recently adopted and issued accounting pronouncements - The adoption of ASU No. 2019-12 (Income Taxes) and ASU 2020-10 (Codification Improvements) did not materially impact the financial statements[202][203] - The company is currently evaluating the impact of ASU No. 2021-04 (Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options), effective January 1, 2022[204] Concentration of Credit Risk Addresses potential risks related to the concentration of cash in financial institutions - The company's cash accounts in financial institutions may exceed Federal depository insurance coverage, but management believes there is no significant credit risk[205] Foreign Currency Risk Identifies the company's exposure to fluctuations in foreign currency exchange rates - The company is exposed to foreign currency risk due to transactions denominated in Canadian dollars, but has not entered into derivative instruments to hedge this risk, though it may do so in the future[206][207] Item 3. Quantitative and qualitative disclosures about market risk This section discusses the company's exposure to market risks, primarily foreign currency exchange rate fluctuations between the Canadian and U.S. dollars, and notes that no hedging instruments are currently in place - The company is subject to exposure from changes in the exchange rates of the Canadian dollar and the U.S. dollar, as its reporting currency is USD while a portion of transactions are in CAD[208] - The company has not entered into financial derivative instruments to hedge foreign currency exposures but may do so in the future[209] Item 4. Controls and Procedures This section addresses the effectiveness of the company's disclosure controls and procedures and internal control over financial reporting. Management concluded that disclosure controls were not effective as of September 30, 2021, due to material weaknesses, and is implementing a remediation plan - As of September 30, 2021, the company's disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting[211][212] - The material weakness identified relates to inadequate segregation of duties for processing, reviewing, and authorizing transactions[213][214] - Management is implementing a remediation plan, including evaluating the material weakness and establishing procedures for documenting disclosures and disclosure controls[214][215] PART II. OTHER INFORMATION Contains additional disclosures including legal proceedings, risk factors, and exhibits Item 1. Legal proceedings This section states that the company is involved in routine legal proceedings but does not anticipate any material adverse effects on its financial position, results of operations, or cash flows - The company is periodically involved in legal proceedings in the ordinary course of business, but management believes no pending litigation will have a material adverse effect on its financial position, results of operations, or cash flows[218] Item 1A. Risk factors This section highlights specific risk factors, particularly the potential impact of political, economic, and military instability in Israel on the company's development programs, including a planned clinical cancer study - Political, economic, and military instability in Israel, including ongoing conflicts, may impede the company's development programs, specifically a planned Phase 1/2 clinical cancer study in Israel, which could materially affect its business[220][221] Item 2. Unregistered sales of equity securities and use of proceeds This section indicates that there were no unregistered sales of equity securities or use of proceeds to report - There were no unregistered sales of equity securities and use of proceeds to report[222] Item 3. Defaults upon senior securities This section states that there were no defaults upon senior securities - There were no defaults upon senior securities[223] Item 4. Mine safety disclosures This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[224] Item 5. Other information This section states that there is no other information to report - There is no other information to report[225] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including various agreements, certificates, warrants, stock option plans, and certifications - The exhibits include Share Purchase Agreements, Tender Offer Support Agreements, Amended and Restated Certificate of Incorporation, Bylaws, Forms of Warrants, MagicMed Stock Option Plan, and certifications (302 and 906)[228] Signatures This section contains the required signatures for the Form 10-Q, confirming its submission on behalf of Enveric Biosciences, Inc - The report is signed by Dr. Joseph Tucker, Chief Executive Officer (Principal Executive Officer) on November 12, 2021[232]