Enveric Biosciences, Inc. 10-K

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer’s Purchases of Equity Securities Market Information Our common stock is traded on NASDAQ Capital Markets under the symbol “ENVB”. Holders On March 30, 2021 the Company had 87 stockholders of record. Dividends The Company has never declared or paid cash dividends on its common stock and has no intention to do so in the foreseeable future. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None. Item 6. Selected Financial Data On November 19, 2020, the SEC issued final rules to amend Regulation S-K. These changes are effective for annual filings for the first fiscal year ending on or after August 9, 2021, and early adoption is permitted. We elected to adopt the amendments to Item 301 of Regulation S-K in their entirety, which remove the requirement to furnish selected financial data for each of the last five fiscal years. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations References to the “Company,” “our,” “us,” or “we” in this section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Enveric” refer to Enveric Biosciences, Inc. The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements involving risks and uncertainties and should be read together with the “Risk Factors” and the “Cautionary Statement Regarding Forward-Looking Statements” sections of this Annual Report on Form 10-K. Such risks and uncertainties could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Business Overview We are an early-development-stage biosciences company that is developing innovative, evidence-based prescription products and combination therapies containing cannabinoids to address unmet needs in cancer care. We seek to improve the lives of patients suffering from cancer, initially by developing palliative and supportive care products for people suffering from certain side effects of cancer and cancer treatment such as pain or skin irritation. We currently intend to offer such palliative and supportive care products in the United States, following approval through established regulatory pathways. We are also aiming to advance a pipeline of novel cannabinoid combination therapies for hard-to-treat cancers, including glioblastoma multiforme (GBM) and several other indications, which are currently being researched. We intend to bring together leading oncology clinicians and researchers, academic and industry partners so as to develop both external proprietary products and a robust internal pipeline of product candidates aimed at improving quality of life and outcomes for cancer patients. We intend to evaluate options to out-license its proprietary technology as it moves along the regulatory pathway as well as evaluating building a small, targeted selling organization and will potentially utilize a hybrid approach based on the product indication and the market opportunity. In developing its product candidates, we intend to focus on cannabinoids derived from hemp, other botanical sources, and synthetic materials containing no tetrahydrocannabinol (THC) in order to comply with U.S. federal regulations. Of the potential cannabinoids to be used in therapeutic formulations, THC, which is responsible for the psychoactive properties of marijuana, can result in undesirable mood effects. Cannabidiol (CBD) and cannabigerol (CBG), on the other hand, are not psychotropic and are therefore more attractive candidates for translation into therapeutic practice. In the future, we may utilize cannabinoids that are derived from cannabis plants, which may contain THC; however, we only intend to do so in jurisdictions where THC is legal. These product candidates will then be studied through a typical FDA drug approval process. 40 Tender Agreement, Reverse Stock Split and Related Transactions On December 30, 2020, pursuant to the previously announced Tender Offer Support Agreement and Termination of Amalgamation Agreement dated August 12, 2020 (“Original Amalgamation Agreement”), as amended by that certain Amendment No. 1 to the Tender Offer Support Agreement and Termination of Amalgamation Agreement dated December 18, 2020 (as amended the “Tender Agreement”), the Company completed a tender offer (“Offer”) to purchase all of the outstanding common shares of Jay Pharma, Inc., a Canada corporation and a wholly-owned subsidiary of the Company (“Jay Pharma”), for the number of shares of Company common stock, par value $0.01 per share (“Common Stock”) or Series B Preferred Stock, as applicable, equal to the exchange ratio of 0.8849 (the “Exchange Ratio”), and Jay Pharma became a wholly-owned subsidiary of the Company, on the terms and conditions set forth in the Tender Agreement. In connection with the Offer, the Company changed its name from AMERI Holdings, Inc. to Enveric Biosciences, Inc. The Offer has been accounted for as a “reverse merger” under the acquisition method of accounting for business combinations with Jay Pharma treated as the accounting acquirer of Ameri. As such, the historical financial statements of Jay Pharma have become the historical financial statements of Ameri, or the combined company, and are included in this filing labeled “Enveric Biosciences, Inc.” As a result of the Offer, historical common stock, stock options and additional paid-in capital, including share and per share amounts, have been retroactively adjusted to reflect the equity structure of the combined company, including the effect of the Exchange Ratio and the Common Stock. Immediately following the completion of the Offer, on December 30, 2020, the Company effected a 1-for-4 reverse stock split of the issued and outstanding Common Stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, the per share exercise price of, and the number of shares of Company Common Stock underlying, our stock options and warrants outstanding immediately prior to the Reverse Stock Split were automatically proportionally adjusted based on the 1-for-4 split ratio in accordance with the terms of such options and warrants, as the case may be. Share and per-share amounts of Common Stock, options and warrants included herein have been adjusted to give effect to the Reverse Stock Split. The Reverse Stock Split did not alter the par value of the Common Stock, $0.01 per share, or modify any voting rights or other terms of the Common Stock. Unless otherwise noted, the accompanying financial statements and notes thereto, including the Exchange Ratio applied to historical Jay Pharma common stock and stock options, give retroactive effect to the Reverse Stock Split for all periods presented. Upon completion of the Offer, (i) holders of outstanding common shares of Jay Pharma (referred to herein as the Jay Pharma equity holders) other than Alpha Capital Anstalt (“Alpha”) and Bezalel Partners, LLC (“Bezalel”) received the number of shares of Common Stock in accordance with the Exchange Ratio of 0.8849, as calculated in accordance with the Tender Agreement, (ii) each of Alpha and Bezalel, as an investor who would have beneficially owned more than 10.0% of the Company if it received Common Stock, received shares of Series B Preferred Stock, which are convertible into shares of Common Stock subject to a 9.99% beneficial ownership blocker, pursuant to the terms of the respective exchange agreement entered into by and between Ameri and such stockholder. Each outstanding Jay Pharma option, whether vested or unvested, and warrant that had not previously been exercised was exchanged for Company stock options and Company warrants, in each case convertible into the number of shares of Common Stock equal to the Exchange Ratio. Each share of Series B Preferred Stock is non-voting and is convertible into one share of Common Stock (subject to adjustment) at any time at the option of the holder, provided that each holder would be prohibited from converting Series B Preferred Stock into shares of Common Stock if, as a result of such conversion, any such holder, together with its affiliates, would own more than 9.99% of the total number of shares of Common Stock then issued and outstanding. This limitation may be waived with respect to a holder upon such holder’s provision of not less than 61 days’ prior written notice to the Company. Shares of Series B Preferred Stock are not entitled to receive any dividends, unless and until specifically declared by the Board. However, holders of Series B Preferred Stock are entitled to receive dividends on shares of Series B Preferred Stock equal (on an as-if-converted-to-Common Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when such dividends are specifically declared by the Board. The Company will have no right to require a holder to surrender its Series B Preferred Stock for redemption. Shares of Series B Preferred Stock will not otherwise be entitled to any redemption rights, or mandatory sinking fund or analogous fund provisions. Upon completion of the Offer and the transactions contemplated in the Tender Agreement, but without giving effect to the issuance of the Series B Warrants to purchase 1,791,923 shares of Common Stock at an exercise price of $0.01 per share to Alpha following the completion of the Offer, (i) Jay Pharma equity holders, including those who received Series B Preferred Stock in the Offer, own approximately 82.3% of the outstanding equity of the Company, assuming conversion of the Series B Preferred Stock, (ii) the Ameri equity holders at the time of the completion of the Offer own approximately 14.5% of the outstanding equity of the Company, and (iii) the financial advisor to Jay Pharma and Ameri owns approximately 3.2% of the outstanding equity of the Company. As a significant investor in Jay Pharma, Alpha received Series B Preferred Stock in the Offer instead of Common Stock, as well as Series B Warrants with a nominal exercise price, which were issued to Alpha following the completion of the Offer to account for an adjustment in pricing of the transactions in light of global economic conditions. Because the Series B Preferred Stock is convertible into Common Stock at any time for no consideration, such shares have been included in basic earnings per share. The Series B Warrants are accounted for as a cost of equity as part of the capital issuance. The estimated fair value implied for shares of the Company based on the series of transactions with Alpha is $1.62 per share, which is equal to the $5,300,000 investment made by Alpha divided by 3,262,907, or the number of post-Reverse Stock Split shares of Series B Preferred Stock (convertible into Common Stock) that Alpha received in the Offer. Simultaneously with the execution of the Original Amalgamation Agreement, Jay Pharma issued a Secured Promissory Note, dated January 10, 2020 (the “Original Note”), to Alpha, pursuant to which, on January 10, 2020, Jay Pharma received a $1,500,000 loan from Alpha. The Original Note was amended to reflect an additional investment of $500,000, resulting in a total principal amount of $2,000,000. The Original Note was further amended on August 12, 2020, to account for the termination of the Original Amalgamation Agreement and the change in the structure of the transaction from an amalgamation to a stock-for-stock exchange offer (as amended, the “Note”). Upon the closing of the Offer, the Note was converted into the right to receive 2,473,848 common shares of Jay Pharma and warrants to purchase 2,333,970 common shares of Jay Pharma at an exercise price of $1.03 per share immediately prior to the Offer. In connection with the Offer, such common shares and warrants of Jay Pharma acquired by Alpha upon conversion of the Note were converted into the right to receive (i) 547,278 shares of Series B Preferred Stock that are convertible into up to 547,278 shares of Common Stock, after giving effect to the Reverse Stock Split, and (ii) warrants to purchase up to 516,333 shares of Common Stock at an exercise price of $4.64 per share, after giving effect to the Reverse Stock Split. 41 Alpha also acquired 3,500,954 common shares of Jay Pharma and warrants to purchase 3,500,954 common shares of Jay Pharma at an exercise price of $1.03 per share, immediately prior to the Offer, in connection with the $3 million private placement completed prior to the completion of the Offer (the “Alpha Investment”). In connection with the Offer, such common shares and warrants of Jay Pharma acquired by Alpha in the Alpha Investment were converted into, as applicable, the right to receive (i) 774,499 shares of Series B Preferred Stock that are convertible into up to 774,499 shares of Common Stock, after giving effect to the Reverse Stock Split, and (ii) warrants to purchase up to 774,499 shares of Common Stock at an exercise price of $4.64 per share, after giving effect to the Reverse Stock Split. On December 4, 2020, Jay Pharma and Alpha executed a securities purchase agreement whereby Alpha purchased an additional 1,000,000 common shares of Jay Pharma and warrants to purchase 500,000 common shares of Jay Pharma at an exercise price of $0.30 per share for an aggregate purchase price of $300,000 (the “Alpha December Investment”). In connection with the Offer, such shares were exchanged for 221,225 shares of Common Stock, and such warrants were exchanged for warrants to purchase 110,613 shares of Common Stock at $1.36 per share. Additionally, at the effective time of the Offer, the Company issued five-year warrants (the “Series B Warrants”) to purchase 1,791,923 shares of Common Stock at an exercise price of $0.01 to Alpha, after giving effect to the Reverse Stock Split. The number of shares of Common Stock issuable upon the exercise of the Series B Warrants is equal to the product of (i) 8,100,000 and (ii) the Exchange Ratio of 0.8849, post-Reverse Stock Split. After giving effect to the conversion of its Series B Preferred Stock, the warrants issued to Alpha in connection with the Alpha Investment and the Alpha Bridge Loan and the Series B Warrants, Alpha’s total ownership interest in the Company will be 5,008,078 common shares, or 33.9%, without giving effect to the beneficial ownership limitations in its Series B Preferred Stock. However, under the terms of each of such securities, Alpha may not convert such security to the extent such conversion would cause Alpha, together with its affiliates, to beneficially own a number of shares of Common Stock which would exceed 9.99% of the Common Stock then issued and outstanding following such exercise. Intellectual Property Acquisition In connection with the Offer, Jay Pharma entered into a series of assignment and assumption agreements with affiliates of a third party, Tikkun Pharma, Inc. (“Tikkun”), pursuant to which, on October 2, 2020, Tikkun assigned to Jay Pharma all of Tikkun’s (i) rights to certain skin care treatment assets and (ii) intellectual property rights to certain formulations for the development of therapeutic candidates for the prevention, management and treatment of graft versus host disease (GVHD) in exchange for an aggregate of 10,360,007 common shares of Jay Pharma. Because Alpha required additional shares of the Company, at no or a nominal cost, for Alpha to consummate the Alpha Bridge Loan and the Alpha Investment at the planned valuation, Alpha entered into an agreement with Tikkun pursuant to which, immediately following such assignment, Tikkun sold 7,774,463 of these common shares of Jay Pharma to Alpha for the nominal aggregate purchase price of $10.00 (the “Alpha Nominal Shares”), leaving Tikkun with 2,585,544 common shares of Jay Pharma (the “Tikkun Shares”). In connection with the Offer, the Tikkun Shares were exchanged for 571,987 shares of Common Stock, after giving effect to the Reverse Stock Split, and the Alpha Nominal Shares were exchanged for 1,719,906 shares of Series B Preferred Stock that are convertible into up to 1,719,906 shares of Common Stock, after giving effect to the Reverse Stock Split. Spin-Off Prior to the completion of the Offer, on December 30, 2020, pursuant to the previously announced Ameri SharePurchase Agreement, Ameri and Private Ameri completed the Spin-Off, pursuant to which Ameri contributed, transferred and conveyed to Private Ameri all of the issued and outstanding equity interests of the existing subsidiaries of Ameri, constituting the entire business and operations of Ameri and its subsidiaries, and Private Ameri assumed the liabilities of such subsidiaries, and all of the issued and outstanding shares of Series A preferred stock of Ameri were redeemed for an equal number of shares of Series A preferred stock of Private Ameri. Series B Warrants Pursuant to the Tender Agreement, on December 31, 2020, we issued Series B Warrants (the “Series B Warrants”) to purchase 1,791,923 shares of common stock at an exercise price of $0.01 to Alpha Capital Anstalt (“Alpha”). We were obligated, among other things, to file a registration statement with SEC for purposes of registering the resale of the shares of common stock issuable upon exercise of the Series B Warrants by the investors. The issuance of the Series B Warrants was exempt from the registration requirements of the Securities Act pursuant to an exemption provided by Section 4(a)(2) thereof as a transaction by an issuer not involving a public offering. As described below under “ Letter Agreement with Alpha ”, on January 12, 2021, we have waived the lock-up restrictions on Alpha with respect to dispositions of the shares of common stock issuable upon exercise of the Series B Warrants (the “Series B Warrant Shares”), and Alpha agreed to limit its sales of shares of our common stock on each trading day to no more than 10% of the daily reported trading volume of common stock on the Nasdaq Stock Market for such trading day, provided, such limitation shall terminate if the closing price of our shares of common stock on the Nasdaq Stock Market exceeds $5.29 per share for five consecutive trading days. Director and Officer Resignations and Appointments Effective upon completion of the Offer, Srinidhi “Dev” Devanur, our former Executive Chairman and a former director of the board of directors, Brent Kelton, our former Chief Executive Officer, Barry Kostiner, our former Chief Financial Officer, Carmo Martella, a former director of the board of directors, Thoranath Sukumaran, a former director of the board of directors and Dimitrios Angelis, a former director of the board of directors, all tendered their resignations from their respective positions as officers and directors of our company. Pursuant to the terms of the Tender Agreement, and as disclosed in the Form S-4, the board of directors appointed David Johnson, George Kegler, Sol Mayer and Marcus Schabacker to the board of directors at the effective time of the Offer. Effective upon the completion of the Offer, the board of directors appointed David Johnson as our Chief Executive Officer and Chairman, Avani Kanubaddi as our Chief Operating Officer, John Van Buiten as our Chief Financial Officer, and Robert Wilkins as our Chief Medical Officer. On December 29, 2020 at the special meeting of Ameri stockholders held to approve the Tender Agreement, the shareholders ratified the Bonus Shares Proposal, as described in the Form S-4, resulting in the issuance of shares previously awarded by Ameri’s board of directors to Mr. Devanur, Mr. Kelton, Mr. Kostiner and Brandon Gordon, our Executive Vice President, Business Development in lieu of cash bonuses, with a total of 156,318 post-split shares being awarded on December 30, 2020. Of these shares, 67,635 had originally been awarded, subject to Ameri’s shareholders’ approval, on January 9, 2020, representing aggregate bonus payments of $675,000 divided by a price of $9.98, the closing price on the day immediately preceding board approval. A further 88,683 shares had been awarded, subject to Ameri’s shareholders’ approval, and subject to continued service through the end of 2020, on October 19, 2020, represent aggregate bonus payments of $525,000 divided by a price of $5.92, the closing price on the day immediately preceding board approval, resulting in a total of 156,318 shares granted to officers and directors, The issuance of these shares was exempt from the registration requirements of the Securities Act pursuant to an exemption provided by Section 4(a)(2) thereof as a transaction by an issuer not involving a public offering. Key Components of Our Results of Operations Operating Expenses Our operating expenses include financial statement preparation services, tax compliance, various consulting and director fees, legal services, auditing fees, and stock-based compensation. These expenses have increased in connection with the Company’s product development and the Company’s management expects these expenses to continue to increase as the Company continues to develop its potential product candidates. 42 Results of Operations The following table sets forth information comparing the components of net loss for the years ended December 31, 2020 and the comparable period in 2019: Year Ended December 31, 2020 2019 Expenses General and Administrative 5,443,234 2,296,534 Research and Development 174,083 - Operating expenses $ 5,617,317 $ 2,296,534 Loss from operations (5,617,317 ) (2,296,534 ) Other expense Extinguishment of note payable - 32,316 Interest Expense 445,250 81,823 Inducement Expense 802,109 - Total other expense 1,247,359 114,139 Net Loss $ (6,864,676 ) $ (2,410,673 ) Other comprehensive loss Foreign exchange loss (169,655 ) (6,667 ) Comprehensive loss $ (7,034,331 ) $ (2,417,340 ) Net loss per share - basic and diluted $ (1.19 ) $ (0.46 ) Weighted average shares outstanding, basic and diluted 5,753,598 5,287,145 Operating Expenses Our operating expenses increased to $5,617,317, for the year ended December 31, 2020 from $2,296,534 for the year ended December 31, 2019, with an increase of $3,320,783, or 145%. This change was primarily driven by an increase in stock-based compensation of $1,440,583, an increase in legal and professional fees of $1,147,381, and an increase in research and development costs of $174,083. Interest Expense Our interest expense for the year ended December 31, 2020 was $445,250 compared to $81,823 for the year ended December 31, 2019. This increase was primarily driven by promissory notes that were entered into by the Company during 2020, with an aggregate principal amount of $2,143,925, which it did not have during 2019. Inducement Expense Our inducement expense was $802,109 for the year December 31, 2020 as compared to $0 for the year ended December 31, 2019. The expense is related to inducement incurred related to the conversion of warrants, resulting in a charge of $802,109. Foreign Exchange Our foreign exchange loss was $169,655 for the year December 31, 2020 as compared to $6,667 for the year ended December 31, 2019, for an increase in $162,988. The increase in foreign exchange loss is primarily due to the U.S. Dollar weakening against the Canadian Dollar and the conversion of the Canadian Dollars into United States Dollars for payment of United States Dollar denominated expenses. Liquidity and Capital Resources The Company has incurred continuing losses from its operations. As of December 31, 2020, the Company has had an accumulated deficit of $11,759,557 and working capital of $1,597,920. Since inception, the Company’s operations have been funded principally through the issuance of debt and equity. February 2019 Note On February 7, 2019, Jay Pharma received $60,000 in exchange for a promissory note to David Stefansky with an aggregate face value of $66,000, including an original issue discount of $6,000 (the “February 2019 Note”). The February 2019 Note bore no stated interest rate. On July 21, 2020, Jay Pharma converted the February 2019 Note into common shares. March 2019 Note On February 1, 2019, Jay Pharma entered into a consulting agreement with David Stefansky. In connection with the consulting agreement, on March 5, 2019, Jay Pharma issued a note payable to its executive director for $150,000 (the “March 2019 Note”). The note bore no interest. On July 21, 2020, Jay Pharma converted the March 2019 Note into common shares. April 2019 Note During April 2019, Jay Pharma received $300,000 in exchange for convertible notes in an aggregate principal amount of $300,000 (the “April 2019 Convertible Notes”) and warrants to purchase 250,000 common shares of Jay Pharma. The April 2019 Convertible Notes bore interest at a rate of 6% per annum. On December 30, 2020, the April 2019 Notes were converted into common shares. July 2019 Note On July 8, 2019, Jay Pharma entered into a note agreement (the “July 2019 Note”) to a limited liability company (the “Lender”). The Note’s face value was $157,714 and the original issue discount was $19,714 for total gross proceeds of $138,000, implying an interest rate of 12.5% per annum. Jay Pharma could, without premium or penalty, at any time and from time to time, prepay all or any portion of the Note. The maturity date of the Note was September 8, 2019. On September 20, 2019, Jay Pharma entered into an amendment to the July 2019 Note (the “Amendment”). The Amendment extended the maturity date for the Note until the earlier of (a) the completion of a bridge financing of greater than or equal to $1,500,000, or (b) November 7, 2019. On November 21, 2019, Jay Pharma entered into an amendment for the July 2019 Note that extended the maturity date for the Note until the earlier of (a) the completion of a bridge financing of greater than or equal to $1,500,000, or (b) December 9, 2019. In consideration for this amendment, Jay Pharma agreed to pay an aggregate extension fee of $33,926, which was added to the principal balance of the note. On December 9, 2019, Jay Pharma entered into an additional amendment for the July 2019 Note that extended the maturity date for the Note until the earlier of (a) the completion of a bridge financing of greater than or equal to $1,500,000, or (b) January 7, 2020. Jay Pharma also agreed to pay the previously outstanding extension fees of $33,926 on or before March 1, 2020. 43 On January 8, 2020, Jay Pharma entered into an amendment to the July 2019 Note (the “January 8 Amendment”). The January 8 Amendment extended the maturity date for the July 2019 Note until the (a) the completion of a bridge financing of greater than or equal to $1,500,000, or (b) April 1, 2020. In consideration for the January 8 Amendment, Jay Pharma granted 55,000 shares of the Company’s common stock to the Lender. On May 6, 2020, Jay Pharma entered into an amendment (the “May 2020 Amendment”) whereby both parties agreed to extend the maturity date of the July 2019 Note to September 30, 2020. On January 12, 2020, Jay Pharma repaid $157,714 of the July 2019 Note. On December 31, 2020 the Company paid the remaining unpaid balance of the July 2019 Note. December 2019 Note On December 12, 2019, Jay Pharma received $40,000 in exchange for a promissory note with a lender, including an original issue discount of $4,000 (the “December 2019 Note”). The December 2019 Note bore interest at a rate of ten percent (10%) on its face value per annum. In the case of an event of default, the interest rate would increase to 24% per year. The December 2019 Note matured on January 31, 2020. The promissory note with the lender and Jay Pharma was converted into 170,333 shares of common stock on December 30, 2020. February 2020 Note On February 24, 2020, Jay Pharma received $50,000 in exchange for a promissory note with a lender (the “February 2020 Note”). The February 2020 Note bore interest at a rate of 10% on its face value per annum. In the case of an event of default, the interest rate would increase to 24% per year. The note matured on July 31, 2020. The February 2020 Note was convertible into common shares of Jay Pharma at any time at a conversion price of $0.38 per share. On December 30, 2020, the February 2020 Note was converted into 190,004 shares of the Company’s common stock. Alpha Note Simultaneously with the execution of the Original Amalgamation Agreement, Jay Pharma issued the Original Note, dated January 10, 2020, to Alpha, pursuant to which, on January 10, 2020, Jay Pharma received a $1,500,000 loan from Alpha. The Original Note was amended to reflect an additional investment of $500,000, resulting in a total principal amount of $2,000,000. The Original Note was further amended on August 12, 2020, to account for the termination of the Original Amalgamation Agreement and the change in the structure of the transaction from an amalgamation to a stock-for-stock exchange offer. Upon the closing of the Offer, the Note was converted into the right to receive 2,473,848 common shares of Jay Pharma and warrants to purchase 2,333,970 common shares of Jay Pharma at an exercise price of $1.03 per share immediately prior to the Offer. In connection with the Offer, such common shares and warrants of Jay Pharma acquired by Alpha upon conversion of the Note were converted into the right to receive (i) 547,278 shares of Series B Preferred Stock that are convertible into up to 547,278 shares of Common Stock, after giving effect to the Reverse Stock Split, and (ii) warrants to purchase up to 516,333 shares of Common Stock at an exercise price of $4.64 per share, after giving effect to the Reverse Stock Split. Alpha Investment Alpha also acquired 3,500,954 common shares of Jay Pharma and warrants to purchase 3,500,954 common shares of Jay Pharma at an exercise price of $1.03 per share, immediately prior to the Offer, in connection with the $3 million private placement completed prior to the completion of the Offer. In connection with the Offer, such common shares and warrants of Jay Pharma acquired by Alpha in the Alpha Investment were converted into, as applicable, the right to receive (i) 774,499 shares of Series B Preferred Stock that are convertible into up to 774,499 shares of Common Stock, after giving effect to the Reverse Stock Split, and (ii) warrants to purchase up to 774,499 shares of Common Stock at an exercise price of $4.64 per share, after giving effect to the Reverse Stock Split. Alpha December Investment On December 4, 2020, Jay Pharma and Alpha executed a securities purchase agreement whereby Alpha purchased an additional 1,000,000 common shares of Jay Pharma and warrants to purchase 500,000 common shares of Jay Pharma at an exercise price of $0.30 per share for an aggregate purchase price of $300,000 (the “Alpha December Investment”). In connection with the Offer, such shares were exchanged for 221,225 shares of Common Stock, and such warrants were exchanged for warrants to purchase 110,613 shares of Common Stock at $1.36 per share. Series B Warrants Additionally, at the effective time of the Offer, the Company issued five-year warrants (the “Series B Warrants”) to purchase 1,791,923 shares of Common Stock at an exercise price of $0.01 to Alpha, after giving effect to the Reverse Stock Split. The number of shares of Common Stock issuable upon the exercise of the Series B Warrants is equal to the product of (i) 8,100,000 and (ii) the Exchange Ratio of 0.8849, post-Reverse Stock Split. Registered Direct Offerings On January 14, 2021, the Company completed a registered direct offering of 2,221,458 shares of Common Stock at approximately $4.50 per share for gross proceeds of approximately $10,000,000. On February 11, 2021, the Company completed a registered direct offering of 3,007,026 shares of Common Stock for gross proceeds of approximately $12.8 million. As of March 30, 2021, the Company had cash on hand of approximately $22.9 million. 44 We believe that, as a result of these transactions, we currently have sufficient cash and financing commitments to meet our funding requirements over the next year. Notwithstanding, we expects that we will need to raise additional financing to accomplish our development plan over the next several years. We may seek to obtain additional funding through debt or equity financing in the future. There are no assurances that we will be able to raise capital on terms acceptable to us or at all, or that cash flows generated from our operations will be sufficient to meet our current operating costs. Our ability to obtain additional capital may depend on prevailing economic conditions and financial, business and other factors beyond our control. The COVID-19 pandemic has caused an unstable economic environment globally. Disruptions in the global financial markets may adversely impact the availability and cost of credit, as well as our ability to raise money in the capital markets. Current economic conditions have been and continue to be volatile. Continued instability in these market conditions may limit our ability to access the capital necessary to fund and grow our business. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned development, which could harm our financial condition and operating results. Cash Flows Since inception, we have primarily used our available cash to fund our product development expenditures. Cash Flows for the Years Ended December 31, 2020 and 2019 The following table sets forth a summary of cash flows for the periods presented: Year Ended December 31, 2020 2019 Net cash used in operating activities $ (3,888,785 ) $ (647,860 ) Net cash used in investing activities (44,143 ) - Net cash provided by financing activities 5,531,270 560,000 Effect of foreign exchange rate on cash (63,596 ) 17,903 Net increase (decrease) in cash $ 1,534,746 $ (69,957 ) Operating Activities Net cash used in operating activities was $3,888,785 during the year ended December 31, 2020, which consisted primarily of a net loss of $6,864,676, offset by amortization of note discount of $288,631, stock-based compensation of $1,977,155, induced conversion of warrants of $802,109, amortization of intangible assets of $120,872, increases in prepaid expenses and other current assets for $636,497, and increases in accounts payable and accrued liabilities of $267,002. Net cash used in operating activities was $647,860 during the year ended December 31, 2019, which consisted primarily of a net loss of $2,410,673, offset by amortization of note discount of $68,453, increases in stock-based compensation of $624,052, increases in prepaid expenses and other current assets of $104,340, and increases in accounts payable and accrued liabilities of $919,968. Investing Activities Net cash used in investing activities was $44,143 during the year ended December 31, 2020, which consisted of the acquisition of intellectual property from Tikkun Pharma. The Company did not have any investing activities during the year ended December 31, 2019. Financing Activities Net cash provided by financing activities was $5,531,270 during the year ended December 31, 2020, which consisted primarily of $50,000 in proceeds from convertible notes payable, $1,812,410 in proceeds from note payable, proceeds from the offering and reverse merger of $3,372,500, September 2020 private placement of $227,500, December 2020 private placement of $260,500 and a decrease of $191,640 in repayment of note payable. Net cash provided by financing activities was $560,000 during the year ended December 31, 2019, which consisted of $300,000 in proceeds from convertible notes payable, $238,000 in proceeds from notes payable and $22,000 in advances from a related party. 45 Off-Balance Sheet Arrangements The Company did not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets, or any obligation arising out of a material variable interest in an unconsolidated entity. The Company does not have any subsidiaries to include or otherwise consolidate into the financial statements. Additionally, the Company does not have interests in, nor relationships with, any special purpose entities. Critical Accounting Policies and Significant Judgments and Estimates The Company’s accounting policies are fundamental to understanding its management’s discussion and analysis. The Company’s significant accounting policies are presented in Note 3 to its financial statements for the year ended December 31, 2020, which are included elsewhere in this annual report. The Company’s financial statements have been prepared in accordance and in conformity with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding consolidated financial information. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the report amount of assets and liabilities at the date of the financial statements and expenses during the periods reported. By their nature, these estimates are subject to measurement uncertainty and the effects on the financial statements of changes in such estimates in future periods could be significant. Significant areas requiring management’s estimates and assumptions include determining the fair value of transactions involving common stock and the valuation of stock-based compensation. Actual results could differ from estimates. Recent Accounting Standards Management does not believe that any recently issued, but not yet effective accounting standards, when adopted, will have a material effect on the accompanying financial statements, other than those disclosed below. On February 25, 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). This update will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional disclosures about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods beginning after December 15, 2019. On January 1, 2020, the Company adopted this ASU, which will did not have a material impact on the Company’s financial position and results of operations. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic, 842, Leases”, which clarifies how to apply certain aspects of the new leases standard, ASC 842. The amendments address the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments, among other things. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements”, which provides entities with relief from the costs of implementing certain aspects of the new leasing standard, ASC 842. Specifically, under the amendments in ASU 2018-11, (1) entities may elect not to recast the comparative periods presented when transitioning to ASC 842 and (2) lessors may elect not to separate lease and non-lease components when certain conditions are met. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts. As of December 31, 2020, the Company did not have greater than $250,000 at any US or Canadian financial institutions. Foreign Currency Risk From inception through December 31, 2020, the reporting currency of the Company is the United States dollar while the functional currency of the Company is the Canadian dollar. As a result, the Company is subject to exposure from changes in the exchange rates of the Canadian dollar and the 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. 46 Recent Developments Change in Certifying Accountant On January 5, 2021, our Audit Committee of the board of directors approved the dismissal of Ram Associates, CPA (“Ram”) as our independent registered public accounting firm, effective December 31, 2020, and engaged Marcum LLP (“Marcum”) as our independent registered public accounting firm for the year ending December 31, 2020. Prior to the completion of the Offer, Marcum served as the independent registered public accounting firm of Jay Pharma, and we believe the change in auditors will be more efficient for reporting purposes. January 2021 Registered Direct Offering On January 12, 2021, we entered into a Securities Purchase Agreement (the “January 2021 Purchase Agreement”) with Alpha, The Hewlett Fund LP, Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B (“Alto”), Iroquois Master Fund Ltd., Iroquois Capital Investment Group LLC and Hudson Bay Master Fund Ltd (collectively, the “Subsequent Investors”), pursuant to which the Company issued and sold in a registered direct offering (the “January 2021 Direct Offering”) an aggregate of 2,221,334 shares of our Common Stock at an offering price of $4.5018 per share, for gross proceeds of approximately $10,000,000 before the deduction of fees and offering expenses. Under the January 2021 Purchase Agreement, the Subsequent Investors could choose to purchase pre-funded warrants (the “Pre-funded Warrants”) in lieu of shares of Common Stock. The offering closed on January 14, 2021. The Pre-funded Warrants have an exercise price of $0.01 per share. The Pre-funded Warrants are immediately exercisable and may be exercised at any time after their original issuance until such Pre-funded Warrants are exercised in full. A holder of a Pre-funded Warrant may not exercise any portion of such holder’s Pre-funded Warrants to the extent that the holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s outstanding shares of Common Stock immediately after exercise (the “Beneficial Ownership Limitation”), except that upon at least 61 days’ prior notice from the holder to the Company, the holder may increase the Beneficial Ownership Limitation to up to 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise. The shares, the Pre-funded Warrants, and the shares of Common Stock issuable upon the exercise of the Pre-funded Warrants (the “Pre-funded Warrant Shares”) were offered by the Company pursuant to a shelf registration statement on Form S-3 (File No. 333-233260), previously filed with the SEC on August 14, 2019, and declared effective by the SEC on November 19, 2019. Pursuant to the January 2021 Purchase Agreement, in a concurrent private placement (the “January 2021 Private Placement”) that also closed on January 14, 2021, the Company issued to the Subsequent Investors, unregistered warrants to purchase up to 1,666,018 shares of Common Stock (the “January 2021 Warrants”). The January 2021 Warrants are exercisable immediately upon issuance and terminate five years following issuance and are exercisable at an exercise price of $4.9519 per share, subject to adjustment as set forth therein. A holder of January 2021 Warrants will not have the right to exercise any portion of its January 2021 Warrants if the holder, together with its affiliates, would beneficially own in excess of the Beneficial Ownership Limitation; provided, however, that upon 61 days’ prior notice to the Company, the holder may increase or decrease the Beneficial Ownership Limitation, provided that in no event shall the Beneficial Ownership Limitation exceed 9.99%. The January 2021 Warrants and the shares of our Common Stock issuable upon the exercise of the January 2021 Warrants (the “January 2021 Warrant Shares”) were not registered under the Securities Act, were not offered pursuant to the shelf registration statement, and were offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506(b) promulgated thereunder as a transaction by the issuer not involving a public offering. To induce the Subsequent Investors into the January 2021 Purchase Agreement, the Company also entered into a registration rights agreement, dated January 12, 2021 (the “January Registration Rights Agreement”), with the Subsequent Investors, pursuant to which, among other things, the Company agreed to prepare and file with the Securities and Exchange Commission this Registration Statement to register for resale of all of the January 2021 Warrant Shares. Letter Agreement with Alpha On January 12, 2021 we entered into a letter agreement (the “Letter Agreement”) with Alpha. Under the Letter Agreement, (i) we agreed to register 1,791,923 of the Series B Warrant Shares issuable upon the exercise of Series B Warrants, (ii) the Series B Warrant Shares will not be subject to an existing lock-up agreement between us and Alpha, and Alpha will no longer be subject to any limitations on its ability to dispose of the Series B Warrant Shares that are imposed by us to the extent permitted by applicable rules and regulations, (iii) Alpha agreed to limit its sales of Common Stock on each trading day to no more than 10% of the daily reported trading volume of Common Stock on the Nasdaq Stock Market for such trading day, provided, such limitation shall terminate if the closing price of our shares of Common Stock on the Nasdaq Stock Market exceeds $5.29 per share for five consecutive trading days and (iv) we will be free to waive the terms and conditions of any lock-up agreement between us and any of the former shareholders of Jay Pharma Inc. without the consent of, or notice to, Alpha once this registration statement registering the Series B Warrant Shares is declared effective by the SEC. 47 Stockholder Demand Letter On January 21, 2021, we received a stockholder litigation demand letter from the law firm of Purcell Julie & Lefkowitz LLP, on behalf of James Self, a purported stockholder of our Company. The letter demands that we (i) deem ineffective the December 30, 2020 amendment to our Amended and Restated Certificate of Incorporation in which we effected a one-for-four reverse stock split of our common stock due to the manner in which non-votes by brokers were tabulated, (ii) seek appropriate relief for damages allegedly suffered by the company and its stockholders or seek a valid stockholder approval of the amendment and reverse stock split, and (iii) adopt adequate internal controls to prevent a recurrence of the alleged misconduct. We dispute that the amendment was ineffective or that there were any inadequate internal controls related to the same. However, to eliminate any questions about the amendment, we intend to seek to ratify the amendment at a special stockholders’ meeting pursuant to Section 204 of the Delaware General Corporation Law. This special stockholders’ meeting is scheduled to occur on May 14, 2021. February 2021 Registered Direct Offering On February 8, 2021, we entered into a Securities Purchase Agreement (the “February 2021 Purchase Agreement”) with the Subsequent Investors, pursuant to which the Company issued and sold in a registered direct offering (the “February 2021 Direct Offering”) an aggregate of 3,007,026 shares of our Common Stock at an offering price of $4.27 per share, for gross proceeds of approximately $12,800,000 before the deduction of fees and offering expenses. The offering closed on February 11, 2021. The shares were offered by the Company pursuant to a shelf registration statement on Form S-3 (File No. 333-233260), previously filed with the SEC on August 14, 2019, and declared effective by the SEC on November 19, 2019. Pursuant to the February 2021 Purchase Agreement, in a concurrent private placement (the “February 2021 Private Placement”) that also closed on February 11, 2021, the Company issued to the Subsequent Investors, unregistered warrants to purchase up to 1,503,513 shares of Common Stock (the “February 2021 Warrants”). The February 2021 Warrants are exercisable immediately upon issuance and terminate five years following issuance and are exercisable at an exercise price of $4.90 per share, subject to adjustment as set forth therein. A holder of February 2021 Warrants will not have the right to exercise any portion of its February 2021 Warrants if the holder, together with its affiliates, would beneficially own in excess of the Beneficial Ownership Limitation; provided, however, that upon 61 days’ prior notice to the Company, the holder may increase or decrease the Beneficial Ownership Limitation, provided that in no event shall the Beneficial Ownership Limitation exceed 9.99%. The February 2021 Warrants and the shares of our Common Stock issuable upon the exercise of the February 2021 Warrants (the “February 2021 Warrant Shares”) were not registered under the Securities Act, were not offered pursuant to the shelf registration statement, and were offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506(b) promulgated thereunder as a transaction by the issuer not involving a public offering. To induce the Subsequent Investors into the February 2021 Purchase Agreement, the Company also entered into a registration rights agreement, dated February 8, 2021 (the “February Registration Rights Agreement”), with the Subsequent Investors, pursuant to which, among other things, the Company agreed to prepare and file with the Securities and Exchange Commission this Registration Statement to register for resale of all of the February 2021 Warrant Shares. Palladium Warrants In connection with its role as financial advisor to the Company in the January 2021 Direct Offering, the January 2021 Private Placement, the February 2021 Direct Offering and the February 2021 Private Placement, the Company issued Palladium 155,493 warrants with an exercise price of $4.9519 and 210,492 warrants with an exercise price of $4.90 (the “Palladium Warrants”) on February 11, 2021. The Palladium Warrants and the shares of our Common Stock issuable upon the exercise of the Palladium Warrants (the “Palladium Warrant Shares”) were not registered under the Securities Act and were offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506(b) promulgated thereunder as a transaction by the issuer not involving a public offering. Resale Registration Statement On February 16, 2021, we filed a resale registration statement on Form S-3 (File No. 333-253196) (the “Resale Registration Statement”) registering 5,497,878 shares of our common stock, consisting of the Series B Warrant Shares, the January 2021 Warrant Shares, the February 2021 Warrant Shares, the Palladium Warrant Shares, 156,318 shares issued to former directors and officers of Ameri and 14,121 shares issued to a former consultant of the Company. We expect the Resale Registration Statement to be declared effective shortly following the filing of this Annual Report on Form 10-K. Item 7A. Quantitative and Qualitative Disclosure About Market Risk Not applicable. Item 8. Financial Statements and Supplementary Data The information required by this Item 8 is included at the end of this Annual Report on Form 10-K beginning on page F-1. 48 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.