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Item 7. Management’s Discussion and Analysis

2023-03-31 compared with 2022-03-31 · 551 added, 603 removed, 141 unchanged (89% of the section changed)

11 unchanged sentences

statements contained in the following discussion and analysis.

Business Overview

are an early-development-stage biosciences company developing next-generation mental health and oncology treatments using our clinical

discovery platform to help leverage psychedelic-derived molecules for the mind and synthetic cannabinoids for the body.

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 anxiety, depression, pain, and skin damage from radiation treatment.

are a biotechnology company dedicated to the development of novel small-molecule therapeutics for the treatment of anxiety, depression,

and addiction disorders.

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.

intend to offer such palliative and supportive care products in the United States, following approval through established regulatory

Amalgamation Agreement

with MagicMed Industries Inc.

May 24, 2021, the Company entered into an Amalgamation Agreement (the “Amalgamation Agreement”) with 1306432 B.C.

corporation existing under the laws of the Province of British Columbia and a wholly-owned subsidiary of the Company (“HoldCo”),

Ltd., a corporation existing under the laws of the Province of British Columbia and a wholly-owned subsidiary of HoldCo

(“Purchaser”), and MagicMed Industries Inc., a corporation existing under the laws of the Province of British Columbia (“MagicMed”),

pursuant to which, among other things, the Company, indirectly through Purchaser, acquired all of the outstanding securities of MagicMed

in exchange for securities of the Company by way of an amalgamation under the British Columbia Business Corporations Act, upon the terms

and conditions set forth in the Amalgamation Agreement, such that, upon completion of the Amalgamation (as defined herein), the amalgamated

corporation (“Amalco”) will be an indirect wholly-owned subsidiary of the Company.

The Amalgamation was completed on September

the effective time of the Amalgamation (the “Effective Time”), holders of outstanding common shares of MagicMed (the “MagicMed

Shares”) received such number of shares of common stock of the Company (“Company Shares”) representing, together with

the Company Shares issuable upon exercise of the Warrants and the Converted Options (each as defined herein), approximately 36.6% of

the issued and outstanding Company Shares (on a fully diluted basis).

The MagicMed Shares were initially converted into Amalco Redeemable

Preferred Shares (as defined in the Amalgamation Agreement), which immediately following the Amalgamation were redeemed for 0.000001

of a Company Share.

Following such redemption, the shareholders of MagicMed received additional Company Shares equal to the product of

the Exchange Ratio (as defined in the Amalgamation Agreement) multiplied by the number of MagicMed Shares held by each such shareholder.

Additionally, following the Effective Time (i) each outstanding MagicMed stock option was converted into and became an option to purchase

(the “Converted Options”) the number of Company Shares equal to the Exchange Ratio multiplied by the number of MagicMed Shares

subject to such MagicMed stock option, and (ii) each holder of an outstanding MagicMed warrant (including Company Broker Warrants (as

defined in the Amalgamation Agreement), the “Warrants”) received upon exercise of such Warrant that number of Company Shares

which the holder would have been entitled to receive as a result of the Amalgamation if, immediately prior to the date of the Amalgamation

(the “Effective Date”), such holder had been the registered holder of the number of MagicMed Shares to which such holder

would have been entitled if such holder had exercised such holder’s Warrants immediately prior to the Effective Time (the foregoing

collectively, the “Amalgamation”).

In aggregate, holders of MagicMed Shares received 9,951,217 Company Shares representing

approximately 31.7% of the Company Shares following the consummation of the Amalgamation.

The maximum number of Company Shares to be

issued by the Company as in respect of the Warrants and Converted Options shall not exceed 7,404,101 Company Shares.

aggregate number of Company Shares that the Company issued in connection with the Amalgamation (collectively, the “Share Consideration”)

was in excess of 20% of the Company’s pre-transaction outstanding Company Shares.

Accordingly, the Company sought and received

stockholder approval of the issuance of the Share Consideration in the Amalgamation in accordance with the NASDAQ Listing Rules.

to the terms of the Amalgamation Agreement, the Company appointed, effective as of the Effective Time two individuals selected by MagicMed

to the Company Board of Directors, Dr.

Joseph Tucker and Dr.

Brad Thompson.

Amalgamation Agreement contained representations and warranties, closing deliveries and indemnification provisions customary for a transaction

of this nature.

The closing of the Amalgamation was conditioned upon, among other things, (i) the Share Consideration being approved

for listing on Nasdaq, (ii) the effectiveness of a Registration Statement on Form S-4 registering the Share Consideration (the “S-4

Registration Statement”) and (iii) the approval (a) of the MagicMed stockholders of the Amalgamation and (b) of the Company’s

stockholders of each of the Amalgamation and the issuance of the Share Consideration in the Amalgamation.

The closing of the Amalgamation

occurred on September 16, 2021.

Industries develops and commercializes psychedelic-derived pharmaceutical candidates.

MagicMed’s psychedelic derivatives library,

the Psybrary™, is an essential building block from which industry can develop new patented products.

The initial focus of the Psybrary™

is on psilocybin and DMT derivatives, and it is then expected to be expanded to other psychedelics.

Subsequent Events

Public Offering

February 15, 2022, the Company completed a public offering of 20,000,000 shares of Common Stock and warrants to purchase up to 20,000,000

shares of Common Stock for gross proceeds of approximately $10 million, before deducting underwriting discounts and commissions and other

offering expenses.

A.G.P./Alliance Global Partners acted as sole book-running manager for the offering.

In addition, Enveric granted

the underwriter a 45-day option to purchase up to an additional 3,000,000 shares of common stock and/or warrants to purchase up to an

additional 3,000,000 shares of common stock at the public offering price, which the underwriter has partially exercised for warrants

to purchase up to 3,000,000 shares of common stock.

the securities being sold in the offering were offered by Enveric.

At closing, Enveric received net proceeds from the offering of approximately

$9.2 million, after deducting underwriting discounts and commissions and estimated offering expenses.

The Company intends to use the

net proceeds from this offering for working capital and to fund other general corporate purposes.

Nasdaq Bid Price

February 18, 2022, the Company received a letter from the Listing Qualifications Department of the Nasdaq indicating that, based upon

the closing bid price of the Company’s common stock for the 30 consecutive business day period between January 5, 2021, through

February 17, 2022, the Company did not meet the minimum bid price of $1.00 per share required for continued listing on The Nasdaq Capital

Market pursuant to Nasdaq Listing Rule 5550(a)(2).

The letter also indicated that the Company will be provided with a compliance period

of 180 calendar days, or until August 17, 2022, in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).

further provided that if, at any time during the 180-day period, the closing bid price of the Company’s common stock was at least

$1.00 for a minimum of 10 consecutive business days, Nasdaq would provide the Company with written confirmation that it had achieved

compliance with the minimum bid price requirement.

are a pre-revenue biotech company that has to date, not generated any revenues.

During the year ended December 31, 2021, we raised approximately

$25.0 million from the sales of common stock and warrants and from proceeds realized from the exercise of cash warrants.

the Amalgamation was a cash accretive transaction from which we realized approximately $3.1 million in cash assets.

These amounts were

the primary source of funds upon which our operations were financed.

our amalgamation with MagicMed completed in September 2021 (the “Amalgamation”), we have continued to pursue the development

of MagicMed’s proprietary psychedelic derivatives library, the Psybrary™ which we believe will help us to identify and develop

the right drug candidates needed to address mental health challenges, including anxiety.

We synthesize novel versions

of classic psychedelics, such as psilocybin, N-dimethyltryptamine (DMT), mescaline and MDMA, using a mixture of chemistry and synthetic

biology, resulting in the expansion of the Psybrary™, which includes 15 patent families with over a million potential variations

and hundreds of synthesized molecules.

Within the Psybrary™ we have three different types of molecules, Generation 1 (classic psychedelics),

Generation 2 (pro-drugs), and Generation 3 (new chemical entities).

The Company is working to add novel psychedelic molecular compounds

and derivatives (“Psychedelic Derivatives”) on a regular basis through our work at Enveric Labs in Calgary, Alberta, Canada,

where we have a team of PhD scientists with expertise in synthetic biology and chemistry.

To date we have created over 500 molecules

that are housed in the Psybrary™.

screen newly synthesized molecules in the Psybrary™ through PsyAI™, a proprietary artificial intelligence (AI) tool.

AI systems is expected to reduce the time and cost of pre-clinical, clinical, and commercial development.

We believe it streamlines pharmaceutical

design by predicting ideal binding structures of molecules, manufacturing capabilities, and pharmacological effects to help determine

ideal drug candidates, tailored to each indication.

Each of these molecules that we believe are patentable can then be further screened

to see how changes to its makeup alter its effects in order to synthesize additional new molecules.

New compounds of sufficient purity

are undergoing pharmacological screening, including non-clinical (receptors/cell lines), preclinical (animal), and ultimately clinical

(human) evaluations.

We intend to utilize our Psybrary™ and the AI tool to categorize and characterize the Psybrary™ substituents

to focus on bringing more psychedelics-inspired molecules from discovery to the clinical phase.

aim to advance a pipeline of novel cannabinoid combination therapies for the side effects of cancer treatments, such as chemotherapy

and radiotherapy.

intend to bring together leading oncology clinicians, researchers, academic and industry partners 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.

intend to evaluate options to out-license our proprietary technology as it moves along the regulatory pathway.

developing our product candidates, we intend to focus on cannabinoids derived from non-hemp 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.

Selected cannabidiol (CBD) and cannabigerol (CBG) candidates, on the other hand, have amounts of THC well below 0.1% and are not psychotropic

and therefore more attractive candidates for translation into therapeutic practice.

Drugs with less than 0.1% THC have a history, when

approved as drugs by FDA, of being able to be rescheduled by DEA from Schedule I to Schedule V, as in the case of Epidiolex and Marinol.

In the future, we may utilize cannabinoids that are derived from cannabis plants, which may contain higher amounts of THC;

only intend to do so in jurisdictions where THC is legal.

However, synthetic THC is a Schedule I controlled substance;

so, the use of

any APIs (Active Pharmaceutical Ingredients) containing synthetic THC (or naturally derived THC in concentrations greater than 0.3%)

may increase regulatory scrutiny and require additional expenses and authorizations.

All current and future product candidates that we

are developing or may develop will be tested for safety and efficacy under an IND application and subject to the Food and Drug Administration

(“FDA”) pre-market approval process for new drugs.

we continue to pursue the development of our cannabinoid-based product candidates, our principal focus is on the development of psychedelic-based

May 11, 2022, the Company announced plans to transfer and spin-off its cannabinoid clinical development pipeline assets (the “Spin-Off”)

to Akos Biosciences, Inc.

(formerly known as Acanna Therapeutics, Inc.), a majority owned subsidiary of the Company (“Akos”).

In connection with the Spin-Off, the Company would transfer its cannabinoid clinical development pipeline assets to Akos, while retaining

its psychedelics clinical development pipeline assets.

July 14, 2022, the Company filed a Certificate of Amendment of Amended and Restated Certificate of Incorporation (the “Certificate

of Amendment”) with the Secretary of State of Delaware to effect a 1-for-50 reverse stock split of the shares of the Company’s

common stock, par value $0.01 per share (the “Common Stock”), either issued and outstanding or held by the Company as treasury

stock, effective as of 4:05 p.m.

(New York time) on July 14, 2022 (the “Reverse Stock Split”).

The Company held a special

meeting of stockholders (the “Special Meeting”), during which the Company’s stockholders approved the amendment to

the Company’s Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), to

effect a reverse stock split of the Company’s common stock at a ratio in the range of 1-for-10 to 1-for-100, with such ratio to

be determined by the Company’s board of directors (the “Board”) and included in a public announcement.

Following the

meeting, the Board determined to effect the Reverse Stock Split at a ratio of 1-for-50 and approved the corresponding final form of the

Certificate of Amendment.

a result of the Reverse Stock Split, every 50 shares of issued and outstanding Common Stock were automatically combined into one issued

and outstanding share of Common Stock, without any change in the par value per share.

No fractional shares were issued as a result of

the Reverse Stock Split.

Any fractional shares that would otherwise have resulted from the Reverse Stock Split were rounded up to the

next whole number.

The Reverse Stock Split reduced the number of shares of Common Stock outstanding from 52,684,548 shares to 1,054,043

The number of authorized shares of Common Stock under the Certificate of Incorporation remained unchanged at 100,000,000 shares.

All historical share and per share amounts reflected throughout this report have been adjusted to reflect the Reverse Stock Split described

Proportionate

adjustments were made to the per share exercise price and the number of shares of Common Stock that may be purchased upon exercise of

outstanding stock options granted by the Company, and the number of shares of Common Stock reserved for future issuance under the Company’s

2020 Long-Term Incentive Plan.

2022 Offering

On February 15, 2022, we completed a public offering of 400,000 shares

of Common Stock and warrants to purchase up to 400,000 shares of Common Stock for gross proceeds of approximately $10 million, before

deducting underwriting discounts and commissions and other offering expenses.

A.G.P./Alliance Global Partners acted as sole book-running

manager for the offering.

In addition, we granted the underwriter a 45-day option to purchase up to an additional 60,000 shares of Common

Stock and/or warrants to purchase up to an additional 60,000 shares of Common Stock at the public offering price, which the underwriter

has partially exercised for warrants to purchase up to 60,000 shares of Common Stock.

All the securities being sold in the offering were

offered by Enveric.

At closing, we received net proceeds from the offering of approximately $9.1 million, after deducting underwriting

discounts and commissions and estimated offering expenses with $5.8 million allocated to equity, $3.6 million to warrant liability and

$0.3 million recorded as an expense.

C Preferred Shares

On May 3, 2022, the Board of Directors (the “Board”) declared

a dividend of one one-thousandth of a share of the Company’s Series C Preferred Stock (“Series C Preferred Stock”) for

each outstanding share of Common Stock held of record as of 5:00 p.m.

Eastern Time on May 13, 2022 (the “Record Date”).

dividend was based on the number of outstanding shares of Common Stock prior to the Reverse Stock Split.

The outstanding shares of Series

C Preferred Stock were entitled to vote together with the outstanding shares of the Company’s Common Stock, as a single class, exclusively

with respect to a proposal giving the Board the authority, as it determines appropriate, to implement a reverse stock split within twelve

months following the approval of such proposal by the Company’s stockholders (the “Reverse Stock Split Proposal”), as

well as any proposal to adjourn any meeting of stockholders called for the purpose of voting on the Reverse Stock Split Proposal (the

“Adjournment Proposal”).

Company held a special meeting of stockholders on July 14, 2022 (the “Special Meeting”) for the purpose of voting on, among

other proposals, a Reverse Stock Split Proposal and an Adjournment Proposal.

All shares of Series C Preferred Stock that were not present

in person or by proxy at the Special Meeting were automatically redeemed by the Company immediately prior to the opening of the polls

at Special Meeting (the “Initial Redemption”).

All shares that were not redeemed pursuant to the Initial Redemption were

redeemed automatically upon the approval by the Company’s stockholders of the Reverse Stock Split Proposal at the Special Meeting

(the “Subsequent Redemption” and, together with the Initial Redemption, the “Redemption”).

Each share of Series

C Preferred Stock was entitled to receive $0.10 in cash for each 10 whole shares of Series C Preferred Stock immediately prior to the

As of August 12, 2022, both the Initial Redemption and the Subsequent Redemption occurred.

As a result, as of December 31,

2022, no shares of Series C Preferred Stock remain outstanding.

Company was not solely in control of redemption of the shares since the holders had the option of deciding whether to return a proxy

card for the Special Meeting, which determine whether a given holder’s shares of Series C Preferred Stock were redeemed in the

Initial Redemption or the Subsequent Redemption.

Since the redemption of the Series C Preferred Stock was not solely in the control of

the Company, the preferred shares are classified within temporary equity in the Company’s consolidated balance sheets.

The preferred

shares were initially measured at redemption value.

As of December 31, 2022, no shares of Series C Preferred Stock are outstanding.

and Related Private Placement

connection with the planned Spin-Off, on May 5, 2022, Akos and the Company entered into a Securities Purchase Agreement (the “Akos

Purchase Agreement”) with an accredited investor (the “Akos Investor”), pursuant to which Akos agreed to sell up to

an aggregate of 5,000 shares of Akos’ Series A Convertible Preferred Stock, par value $0.01 per share (the “Akos Series A

Preferred Stock”), at price of $1,000 per share, and warrants (the “Akos Warrants”) to purchase shares of Akos’

common stock, par value $0.01 per share (the “Akos Common Stock”), for an aggregate purchase price of up to $5,000,000 (the

“Akos Private Placement”).

The Akos Purchase Agreement is guaranteed by the Company.

Pursuant to the Akos Purchase Agreement,

Akos has issued 1,000 shares of the Akos Series A Preferred Stock to the Akos Investor in exchange for $1,000,000 on May 5, 2022.

additional $4,000,000 will be received on or immediately prior to the Spin-Off.

The issuance of the Akos Series A Preferred Stock results

in a non-controlling interest (“NCI”) (see Note 2).

Palladium Capital Advisors, LLC (“Palladium”) acted as placement

agent for the Private Placement.

Pursuant to the Akos Purchase Agreement, Akos has agreed to pay Palladium a fee equal to 9% of the aggregate

gross proceeds raised from the sale of the shares of the Akos Series A Preferred Stock and a non-accountable expense allowance of 1%

of the aggregate gross proceeds raised the sale of the Akos Series A Preferred Stock in the Akos Private Placement.

The fee due in connection

with the Akos Private Placement shall be paid to Palladium in the form of convertible preferred stock and warrants on similar terms to

the securities issued in the Akos Private Placement.

As of December 31, 2022, there have been no accruals recorded for the fees or warrants

since the closing of the spin-off is not probable.

Palladium is also entitled to warrants to purchase Akos Common Stock in an amount

up to 8% of the number of shares of Akos Common Stock underlying the shares issuable upon conversion of the Akos Series A Preferred Stock.

the Certificate of the Designations, Preferences and Rights of Series A Convertible Preferred Stock of Akos (the “Akos Series A

Preferred Certificate of Designations”), on or immediately prior to the completion of the Spin-Off, the outstanding Akos Series

A Preferred Stock will be automatically converted into a number of shares of Akos Common Stock equal to 25% of the then issued and outstanding

Akos Common Stock, subject to the Beneficial Ownership Limitation (as defined below).

Akos Series A Preferred Certificate of Designations provides that upon the earlier of (i) the one-year anniversary of May 5, 2022, and

only in the event that the Spin-Off has not occurred;

or (ii) such time that Akos and the Company have abandoned the Spin-Off or the

Company is no longer pursuing the Spin-Off in good faith, the holders of the Akos Series A Preferred Stock shall have the right (the

“Put Right”), but not the obligation, to cause Akos to purchase all or a portion of the Akos Series A Preferred Stock for

a purchase price equal to $1,000 per share, subject to certain adjustments as set forth in the Akos Series A Preferred Certificate of

Designations (the “Stated Value”), plus all the accrued but unpaid dividends per share.

Pursuant to the Akos Purchase Agreement,

the Company has guaranteed the payment of the purchase price for the shares purchased under the Put Right.

In addition, after the one-year

anniversary of May 5, 2022, and only in the event that the Spin-Off has not occurred and Akos is not in material default of any of the

transaction documents, Akos may, at its option, at any time and from time to time, redeem the outstanding shares of Akos Series A Preferred

Stock, in whole or in part, for a purchase price equal to the aggregate Stated Value of the shares of Akos Series A Preferred Stock being

redeemed and the accrued and unpaid dividends on such shares.

The Akos Series A Preferred Certificate of Designations contains limitations

that prevent the holder thereof from acquiring shares of Akos Common Stock upon conversion of the Akos Series A Preferred Stock that

would result in the number of shares of Akos Common Stock beneficially owned by such holder and its affiliates exceeding 9.99% of the

total number of shares of Akos Common Stock outstanding immediately after giving effect to the conversion (the “Beneficial Ownership

Limitation”), except that upon notice from the holder to Akos, the holder may increase or decrease the limit of the amount of ownership

of outstanding shares of Akos Common Stock after converting the holder’s shares of Akos Series A Preferred Stock, provided that

any change in the Beneficial Ownership Limitation shall not be effective until 61 days following notice to Akos.

connection with the Spin-Off, the Company would transfer its cannabinoid clinical development pipeline assets to Akos, while retaining

its psychedelics clinical development pipeline assets.

As of December 31, 2022, there is no accrual recorded since the closing of the

spin-off is not probable.

to 2020 Long-Term Incentive Plan

May 3, 2022, our Board adopted the First Amendment (the “Plan Amendment”) to the Enveric Biosciences, Inc.

2020 Long-Term

Incentive Plan (the “Incentive Plan”) to (i) increase the aggregate number of shares available for the grant of awards by

146,083 shares to a total of 200,000 shares, and (ii) add an “evergreen” provision whereby the number of shares authorized

for issuance pursuant to awards under the Incentive Plan will be automatically increased on the first trading date immediately following

the date the Company issues any share of Common Stock (defined below) to any person or entity, to the extent necessary so that the number

of shares of the Company’s Common Stock authorized for issuance under the Incentive Plan will equal the greater of (x) 200,000

shares, and (y) 15% of the total number of shares of the Company’s Common Stock outstanding as of such issuance date.

Amendment was approved by the Company’s stockholders at a special meeting of the Company’s stockholders held on July 14,

2022 Offerings

On July 22, 2022, the Company entered

into a securities purchase agreement (the “Registered Direct Securities Purchase Agreement”) with an institutional investor

for the purchase and sale of 116,500 shares of Common Stock, pre-funded warrants to purchase up to 258,500 shares of common stock, and

unregistered preferred investment options (the “RD Preferred Investment Options”) to purchase up to 375,000 shares of Common

Stock (the “RD Offering”).

The gross proceeds from the RD Offering were approximately $3,000,000.

Shares of Common Stock and

RD Pre-Funded Warrants issued in the RD Offering were offered pursuant to a “shelf” registration statement on Form S-3 previously

filed with the SEC on July 2, 2021.

Subject to certain ownership limitations, the PIPE Pre-Funded Warrants became immediately exercisable

at an exercise price equal to $0.0001 per share of Common Stock.

There is not expected to be any trading market for the common warrants

issued in the RD Offering.

On August 3, 2022, all of the issued RD Pre-Funded Warrants were exercised.

Subject to certain ownership limitations,

the RD Preferred Investment Options became immediately exercisable at an exercise price equal

to $7.78 per share of common stock.

The RD Preferred Investment Options are exercisable for

five and one-half years from the date of issuance.

Concurrently with the RD Offering,

the Company entered into a securities purchase agreement (the “PIPE Securities Purchase Agreement”) with institutional investors

for the purchase and sale of 116,000 shares of common stock, pre-funded warrants to purchase up to 509,000 shares of Common Stock, and

preferred investment options (the “PIPE Preferred Investment Options”) to purchase up to 625,000 shares of the common stock

in a private placement (the “PIPE Offering”).

The gross proceeds from the PIPE Offering were approximately $5,000,000.

Subject to certain ownership limitations, the PIPE Pre-Funded Warrants became immediately exercisable at an exercise price equal to $0.0001

per share of Common Stock.

There is not expected to be any trading market for the common warrants issued in the PIPE Offering.

the issued PIPE Pre-Funded Warrants were exercised on various dates prior to August 18, 2022.

Subject to certain ownership limitations,

PIPE Preferred Investment Options became immediately exercisable at an exercise price equal

to $7.78 per share of common stock.

The PIPE Preferred Investment Options are exercisable

for five and one-half years from the date of issuance.

RD offering and PIPE Offering closed on July 26, 2022, with aggregate gross proceeds of approximately $8 million.

The aggregate net proceeds

from the offerings, after deducting the placement agent fees and other estimated offering expenses, were approximately $7.1 million.

On July 26, 2022, in connection with the RD Offering and PIPE Offering,

the Company issued preferred investment options (the “Placement Agent Preferred Investment

Options”) to an entity to purchase up to 70,000 shares of Common Stock for acting as a placement agent.

The Placement Agent Preferred

Investment Options have substantially the same terms as the RD Preferred Investment Options and the PIPE Preferred Investments Options,

except the Placement Agent Preferred Investment Options have an exercise price of $10.00 per share.

The Placement

Agent Preferred Investment Options are exercisable for five years from the date of issuance.

connection with the RD Offering and the PIPE, the Company entered into Warrant Amendment Agreements (the “Warrant Amendments”)

with the investors in both offerings to amend certain existing warrants to purchase up to an aggregate of 122,000 shares of Common Stock

that were previously issued to the investors on February 15, 2022, with an exercise price of $27.50 per share and expiration date of

February 15, 2027.

Pursuant to the Warrant Amendments, the previously issued warrants were amended, effective upon the closing of the

offerings, so that the amended warrants have a reduced exercise price of $7.78 per share and expire five and one-half years following

the closing of the offerings.

The Company determined

the fair value of the February 2022 Warrants immediately prior to the Warrant Amendment and the fair value of the amended warrants immediately

after the Warrant Amendment.

The incremental change in fair value was deemed to be $251,357, which was included as equity issuance costs

related to the RD and PIPE financing transactions.

We are a pre-revenue biotech company that has to date, not generated any

During the year ended December 31, 2022, we raised approximately $18.2 million from the sales of Common Stock, warrants,

preferred investment options, and redeemable non-controlling interest, and from proceeds realized from the exercise of cash warrants.

These amounts were the primary source of funds upon which our operations were financed.

and Development Expenses

34 unchanged sentences

of Intangible Assets and Goodwill

assets consist of the Psybrary and Patent Applications, In Process Research and Development (“IPR&D”) and license agreements.

assets consist of the Psybrary™ and Patent Applications, In Process Research and Development (“IPR&D”) and license

Psybrary™ and Patent Applications intangible assets are valued using the relief from royalty method.

The cost of license agreements is amortized over the economic life of the license.

assesses the carrying value of its intangible assets for impairment each year.

During the year ended December 31, 2021, the Company acquired

intangible assets, valued at approximately $35.5 million and relating to the Psybrary and Patent Applications and IPR&D.

The cost of license

agreements is amortized over the economic life of the license.

The Company assesses the carrying value of its intangible assets for impairment

During the year ended December 31, 2021, the Company acquired intangible assets, valued at approximately $35.5 million relating

to the Psybrary™ and Patent Applications and IPR&D.

consists of the excess fair value after the allocation to the identifiable net assets.

During the year ended December 31, 2021, the Company

recorded goodwill in aggregate of approximately $9.8 million, consisting of $9.1 million being specifically attributable to the deferred

tax liabilities incurred and $0.8 million relating to the residual intangible asset that generates earnings in excess of a normal return

on all other tangible and intangible assets.

Company performs an annual impairment test of intangible assets and goodwill as of December 31 of each fiscal year.

As of December 31,

2021, the Company qualitatively assessed whether it is more likely than not that the respective fair value of the Company’s intangible

assets and goodwill is less than its carrying amount.

During the fourth quarter 2021, the Company experienced a sustained decline in

the quoted market price of the Company’s common stock and as a result the Company determined that as of December 31, 2021 it was

more likely than not that the carrying value of these acquired intangibles exceeded their estimated fair value.

Accordingly, the Company

performed an impairment analysis as of that date using the income approach.

This analysis required significant judgments, including primarily

the estimation of future development costs, the probability of success in various phases of its development programs, potential post

launch cash flows and a risk-adjusted weighted average cost of capital.

Pursuant to ASU 2017-04, the Company recorded an impairment of

intangible assets of approximately $30.5 million, and an impairment of goodwill of approximately $8.2 million.

There were no impairment

charges during the year ended December 31, 2020.

There was no goodwill or indefinite lived intangible assets as of December 31, 2020.

During the years ended December 31, 2022 and 2021,

the Company recorded goodwill in aggregate of approximately $— and $9.8 million, consisting of $— and $9.1 million being

specifically attributable to the deferred tax liabilities incurred and $— and $0.8 million relating to the residual intangible

asset that generates earnings in excess of a normal return on all other tangible and intangible asset, respectively.

The Company performs an annual impairment test of intangible assets and

goodwill as of December 31 of each fiscal year.

As of December 31, 2022, the Company qualitatively assessed whether it is more likely

than not that the respective fair value of the Company’s intangible assets and goodwill is less than its carrying amount.

in the fourth quarter of 2021 and throughout 2022, the Company experienced a sustained decline in the quoted market price of its Common

Stock and as a result the Company determined that as of December 31, 2022 and 2021 it was more likely than not that the carrying

value of these acquired intangibles exceeded their estimated fair value.

Accordingly, the Company performed an impairment analysis as

of December 31, 2022 and 2021 using the income approach.

This analysis required significant judgments, including primarily the estimation

of future development costs, the probability of success in various phases of its development programs, potential post launch cash flows

and a risk-adjusted weighted average cost of capital.

Pursuant to Accounting Standard Update (“ASU”) 2017-04, the Company recorded

an impairment of intangible assets of approximately $6.0 million and $30.5 million, and an impairment of goodwill of approximately $1.5

million and $8.2 million for the years ended December 31, 2022 and 2021, respectively.

significant portion of our operating expenses is related to stock-based compensation costs.

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charged to expense upon achievement of such milestones.

in fair value of warrant liabilities

in fair value of warrant liabilities, investment options and derivative liabilities

Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives

or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging”

The Company accounts for warrants for shares of the Company’s common stock that are not indexed to its

own stock as derivative liabilities at fair value on the consolidated balance sheet.

The Company adjusts this derivative liability at

each reporting period, with the liability recorded on the balance sheet being equal to fair value of such liability on the relevant balance

or contain features that qualify as embedded derivatives, pursuant to ASC 480.

“Distinguishing Liabilities from Equity” (“ASC

480”) and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).

The Company accounts for warrants for shares

of the Company’s common stock that are not indexed to its own stock as derivative liabilities at fair value on the consolidated

balance sheet.

The Company adjusts this derivative liability at each reporting period, with the liability recorded on the balance sheet

being equal to fair value of such liability on the relevant balance sheet date.

value of derivative liabilities is determined in accordance with ASC 820-10 “Fair Value Measurement”.

As of December 31,

2021, the fair value of all derivative liabilities was determined using the Black-Scholes method, which is a level 3 method, as defined

2022 and 2021, the fair value of the embedded derivative liabilities was determined using weighted-average scenario analysis and the

fair value of warrant liabilities was determined using the Black-Scholes valuation model, both of which are level 3 methods, as defined

in ASC 820-10.

The were no derivative liabilities existing on the Company’s balance sheet as of December 31, 2020.

liabilities with an initial fair value of approximately $10.0 million were recorded during the year ended December 31, 2021, all of which

were attributable to certain warrants issued as part the Company’s sales of common stock and warrants in January and February 2021.

During the year ended December 31, 2021 an aggregate decrease in value of derivative liabilities of approximately $9.3 million was recorded,

resulting in other income equal to such amount.

The fair value of these derivative liabilities has a strong correlation to the price

per share of the Company’s common stock as publicly traded.

Increases in the Company’s price per share will result in an

increased derivative liability, with a corresponding other expense being recorded in the other income (expense) section of the statement

of operations.

Decreases in the Company’s price per share will result in a decreased derivative liability, with a corresponding

other income being recorded in the other income (expense) section of the statement of operations.

liabilities with an initial fair value of approximately $8.3 million and $10.0 million were recorded during the years ended December

31, 2022 and 2021, respectively, which were attributable to certain warrants issued as part the Company’s sales of common stock

and warrants in February 2022, embedded derivatives issued as part of the Company’s convertible preferred stock issuance in May

2022, and investment options issued in July 2022.

All of the derivative liabilities recorded during 2021 were attributable to certain

warrants issued as part of the Company’s sales of common stock and warrants in January and February 2021.

During the years ended

December 31, 2022 and 2021, an aggregate increase in value of derivative liabilities of approximately $7.5 million and $9.3 million,

respectively, was recorded, resulting in other income equal to such amount.

The fair value of these derivative liabilities has a strong

correlation to the price per share of the Company’s common stock as publicly traded.

Increases in the Company’s price per

share will result in increased derivative liabilities, with a corresponding other expense being recorded in the other income (expense)

section of the statement of operations and comprehensive loss.

Decreases in the Company’s price per share will result in decreased

derivative liabilities, with a corresponding other income being recorded in the other income (expense) section of the statement of operations

and comprehensive loss.

Components of Our Results of Operations

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with the Company’s expanded product development activities which significantly increased as a result of the Amalgamation Agreement

and the Company’s management expects these expenses to continue to at current or increased levels as the Company continues to execute

its product development plans.

in 2021 and the Company’s management expects these expenses to continue at current or increased levels as the Company continues

to execute its product development plans.

Since the Amalgamation occurred during 2021, the Company incurred a full year of product development

activities related to MagicMed during the year ended December 31, 2022.

of Operations

following table sets forth information comparing the components of net loss for the years ended December 31, 2021 and the comparable

period in 2020:

Ended December 31,

following table sets forth information comparing the components of net loss for the years ended December 31, 2022 and 2021:

For the Years Ended December 31,

Operating expenses

development costs

General and administrative

Impairment of intangible

assets and goodwill

and amortization

Research and development

Impairment of intangible assets and goodwill

Depreciation and amortization

Total operating expenses

from operations

Loss from operations

(27,415,106 )

(64,623,420 )

Other income (expense)

Inducement expense

Change in fair value of warrant liabilities

Change in fair value of investment option liability

Change in fair value of derivative liability

Interest expense

Change in fair value of

warrant liabilities

other income (expense)

loss before income taxes

Total other income

Net loss before income taxes

$ (19,957,393 )

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Income tax benefit

Net loss after income tax benefit

Other comprehensive gain

exchange gain (loss)

Comprehensive

(18,471,333 )

(48,976,896 )

Net loss per share -

basic and diluted

Weighted average shares

outstanding, basic and diluted

Known Trends or Uncertainties

Less preferred dividends attributable to non-controlling interest

Less deemed dividends attributable to accretion of embedded derivative at redemption value

Net loss attributable to shareholders

(18,800,323 )

(48,976,896 )

Other comprehensive loss

Foreign currency translation

Comprehensive loss

$ (19,306,255 )

$ (48,826,421 )

Net loss per share - basic and diluted

Weighted average shares outstanding, basic and diluted

Trends or Uncertainties

current inflationary trend existing in the North American economic environment is considered by Management to be reasonably likely to

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labor costs resulting from the current inflationary environment.

Operating expenses increased

to $64,623,420 for the year ended December 31, 2021 from $5,617,317 for the year ended December 31, 2020, an increase of $59,006,103,

This change was primarily driven by costs that include, without limitation, costs related to impairment of intangible

assets and goodwill of $38,678,918, which did not occur in the prior year, and increases in research and development costs

of $4,614,724, stock-based compensation of $9,812,669, legal & accounting costs of $1,706,263, human resource costs of $1,585,457,

insurance costs of $1,752,068 and marketing, & public company costs of $554,813, as compared to the prior year.

expense for the year ended December 31, 2021 was $10,316 compared to $445,250 for the year ended December 31, 2020.

A decrease of 98%.

This decrease is due to the Company’s satisfaction of promissory notes with an aggregate principal amount of approximately

$2.1 million during the year ended December 31, 2020, resulting in the current year having significantly decreased interest-bearing

expense was $1,125,291 for the year December 31, 2021 as compared to $802,109 for the year ended December 31, 2020.

An increase of 40%.

The expenses recorded are related to inducement incurred related to the conversion of warrants and options.

and Administrative Expenses

general and administrative expenses decreased to $11,605,761 for the year ended December 31, 2022 from $20,499,052 for the year ended

December 31, 2021, a decrease of $8,893,291, or 43%.

This change was primarily driven by a decrease in stock-based compensation of $10,162,593,

a decrease in legal fees of $1,676,798, and other general and administrative expenses of $16,683.

This is slightly offset by an increase

in professional fees, which consist of audit, accounting, and director fees, of $1,076,415, an increase in transaction expenses related

to capital raises of $735,044, an increase in salaries and wages of $379,119, and an increase in marketing expenses of $309,142.

decrease in stock-based compensation is due to two employees who received approximately $10,000,000 in share-based compensation during

the year ended December 31, 2021, whose RSU shares were fully vested and expensed during 2021 and received no share-based compensation

during the year ended December 31, 2022.

The decrease in legal fees is due to the Company incurring a significant amount of legal fees

related to the Amalgamation of MagicMed in 2021, which were not incurred during the year ended December 31, 2022.

The increase in salaries

and wages is due to MagicMed employees earning salaries for a full year during 2022, compared with approximately 3.5 months in 2021 after

the Amalgamation of MagicMed occurred.

and Development Expenses

research and development expense for the year ended December 31, 2022 was $8,027,773 as compared to $4,788,807 for the year ended December

31, 2021 with an increase of $3,238,966, or approximately 68%.

This increase was primarily driven by increased product development activities

during the current year, as compared to the prior year, in particular, research relating to psychedelic molecules, activities which the

Company was not engaged in during the prior year.

In addition, $1,026,907 of stock-based compensation expense was allocated to research

and development for the year ended December 31, 2022, compared to $840,644 for the year ended December 31, 2021.

and Amortization Expense

and amortization expense for the year ended December 31, 2022 was $327,910 as compared to $656,643 for the year ended December 31, 2021,

with a decrease of $328,733, or approximately 50%.

The decrease in amortization is due to amortization of approximately $525,476 recorded

for the Skincare license during the year ended December 31, 2021.

The Skincare license was subsequently fully impaired in the fourth

quarter of 2021, resulting in no amortization of the Skincare license during 2022.

This decrease was offset by an increase in amortization

of the Diverse Bio license of $28,125 during the year ended December 31, 2022 as compared to the year ended December 31, 2021.

the Diverse Bio license was acquired during 2021, it received a partial year of amortization during the year ended December 31, 2021,

compared to a full year of amortization during the year ended December 31, 2022.

in Fair Value of Warrant Liabilities

in fair value of warrant liabilities for the year ended December 31, 2021 was an income of $9,327,326 as compared to $—

in fair value of warrant liabilities for the year ended December 31, 2022 resulted in income of $4,315,236 as compared to $9,327,326

for the year ended December 31, 2021.

The change in fair value of warrant liabilities is significantly influenced by 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.

tax benefit for the year ended December 31, 2021 was $7,454,805 as compared to $— for the year ended December 31, 2020.

tax benefit was realized in conjunction with the decrease in deferred tax liability resulting from the impairment of intangible assets

and goodwill charges incurred during the year ended December 31, 2021.

currency translation

on foreign currency translation was $150,475 for the year ended December 31, 2021 as compared to a loss on foreign currency translation

of $169,655, a net increase in comprehensive income of $320,130.

Gains and losses on foreign currency translation result

from financial transactions of the Company’s two subsidiaries in Canada being recorded in their functional currency of Canadian

dollars and then translated to United States dollars at period end for consolidated reporting by the parent company.

The Company incurred

significant impairment of intangible asset charges at December 31, 2021, with these large amounts being applied to the variation in exchange

rates as compared to prior period end translations being the primary catalyst of the increase in comprehensive income relating

to foreign currency translation as compared to the year ended December 31, 2021.

and Capital Resources

Company has incurred continuing losses from its operations.

As of December 31, 2021, the Company had an accumulated deficit of $60,736,453

and working capital of $15,653,281.

Since inception, the Company’s operations have been funded principally through the issuance

of debt and equity.

Company’s material cash requirements consist of working capital to fund capital expenditures incurred at our research facility

in Calgary and our operations, which consist primarily of, without limitation, employee related expenses, product development activities

conducted by third parties, research materials and lab supplies, facility related expenses including rent and maintenance, costs associated

with preclinical studies, patent related costs, costs of regulatory and public company compliance, insurance costs, audit costs, consultants

and legal fees.

Additionally, we currently utilize third-party contract CROs to assist with our clinical development activities.

obtain regulatory approval for any of our product candidates, we expect to incur significant expenses to engage third-party contract

CMOs to carry out our clinical manufacturing activities as we do not yet have a commercial organization, and incur significant expenses

related to developing our internal commercialization capability to support product sales, marketing and distribution.

The change in fair value of warrant liabilities is significantly influenced by 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.

price of the Company was $2.08 as of December 31, 2022, $46.50 as of December 31, 2021, and $213.00 as of December 31, 2020.

price of the Company decreased approximately 96% during the year ended December 31, 2022 compared to a decrease of approximately 78%

during the year ended December 31, 2021.

The significant change in the Company’s stock price during the year ended December 31,

2022 compared to the year ended December 31, 2021, resulted in the significant decrease to the change in fair value of warrant liabilities.

in Fair Value of Investment Option Liability

in fair value of investment option liability for the year ended December 31, 2022 resulted in income of $3,472,726.

The Company did not

have any outstanding investment option liabilities during the year ended December 31, 2021.

The change in fair value is due to the significant

decrease in the Company’s stock price between the issuance of the investment option liability and December 31, 2022.

The Company’s

current working capital resources, which include amounts received pursuant to the February 2022 underwritten public offering described

below are sufficient to fund these material cash requirements for the next twelve months.

expect to finance our future cash needs through public or private equity offerings, debt financings, or business development transactions.

If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate our research and development programs

or obtain funds through arrangements with collaborators or others that may require us to relinquish rights to certain pipeline candidates

that we might otherwise seek to develop or commercialize independently.

Our ability finance our future cash need through equity offerings

may be limited by our amount of authorized and unissued share.

As of the date of filing of this Annual Report on Form 10-K, the Company

does not have sufficient unreserved, authorized shares to secure an equity investment of sufficient amount, based on the Company’s

currently traded price per share.

The Company intends to seek shareholder approval for an increase in authorized shares to remedy the

insufficiency of unreserved authorized shares.

There can be no assurances given as to shareholder approval of an increase in authorized

on February 18, 2022, we received a letter from the Listing Qualifications Department of the Nasdaq indicating that, based upon the closing

bid price of the Company’s common stock for the 30 consecutive business day period between January 5, 2022, through February 17,

2022, the Company did not meet the minimum bid price of $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant

to Nasdaq Listing Rule 5550(a)(2).

The letter also indicated that the Company will be provided with a compliance period of 180 calendar

days, or until August 17, 2022 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).

order to regain compliance with Nasdaq’s minimum bid price requirement, the Company’s common stock must maintain a minimum

closing bid price of $1.00 for at least ten consecutive business days during the Compliance Period.

In the event the Company does not

regain compliance by the end of the Compliance Period, the Company may be eligible for additional time to regain compliance.

the Company will be required to meet the continued listing requirement for the market value of its publicly held shares and all other

initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will need to provide written

notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary.

If the Company meets these requirements, the Company may be granted an additional 180 calendar days to regain compliance.

it appears to Nasdaq that the Company will be unable to cure the deficiency, or if the Company is not otherwise eligible for the additional

cure period, Nasdaq will provide notice that the Company’s common stock will be subject to delisting.

the letter has no immediate impact on the listing of the Company’s common stock, which will continue to be listed and traded on

The Nasdaq Capital Market, subject to the Company’s compliance with the other listing requirements of The Nasdaq Capital Market,

a failure to cure this deficiency would result in a delisting from the Nasdaq, which would result in significantly increased uncertainty

as to the Company’s ability to raise capital required to fund its material cash requirements.

2022 underwritten public offering

February 11, 2022, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with A.G.P./Alliance

Global Partners (the “Underwriter”).

Pursuant to the Underwriting Agreement, the Company agreed to sell, in a firm commitment

offering, 20,000,000 shares of the Company’s common stock, $0.01 par value per share, and accompanying warrants to purchase up

to an aggregate of 20,000,000 shares of its common stock, as well as up to 3,000,000 additional shares of common stock and/or warrants

to purchase an aggregate of up to 3,000,000 shares of its common stock that may be purchased by the Underwriter pursuant to a 45-day

option granted to the Underwriter by the Company (the “Offering”).

Each share of common stock is being sold together with

a common warrant to purchase one share of common stock, at an exercise price of $0.55 per share.

Such common warrants are immediately

exercisable and will expire five years from the date of issuance.

The combined public offering price of each share of common stock and

accompanying common warrant sold in the Offering was $0.50.

On February 14, 2022, the Underwriter exercised its option to purchase warrants

to purchase up to 3,000,000 additional shares of the Company’s common stock.

the securities being sold in the offering were offered by Enveric.

At closing, Enveric received net proceeds from the offering of approximately

$9.2 million, after deducting underwriting discounts and commissions and estimated offering expenses.

The Company intends to use the

net proceeds from this offering for working capital and to fund other general corporate purposes.

offering was made pursuant to an effective shelf registration statement on Form S-3 (No.

333-257690) previously filed with the U.S.

and Exchange Commission (the “SEC”) that was declared effective by the SEC on July 9, 2021, and to a prospectus supplement

and accompanying prospectus.

The final prospectus supplement and accompanying prospectus relating to the offering were filed with the

SEC and are available on the SEC’s website located at http://www.sec.gov.

Warrant exercises during the year ended

stock price was $6.33 on July 26, 2022 (the date of issuance) and $2.08 on December 31, 2022, a decrease of approximately 67% during

in Fair Value of Derivative Liability

Company’s change in fair value of derivative liability increased by $325,000 for the year ended December 31, 2022, due primarily

to the announcement of the planned spin-off of Akos and greater probability of completion at December 31, 2022.

expense was $0 for the year ended December 31, 2022 as compared to $1,125,291 for the year ended December 31, 2021.

The expenses recorded

in 2021 were related to inducement incurred related to the conversion of warrants and options.

The Company did not incur such expenses

in the current period.

Currency Translation

foreign currency translation loss for the year ended December 31, 2022 was $505,932 as compared to a gain of $150,475 for the year ended

December 31, 2021.

the year ended December 31, 2021, the Company received aggregate proceeds of $3,285,171 pursuant to the exercise of cash warrants with

an aggregate of 2,643,047 shares of Common Stock being issued.

Amalgamation with MagicMed

Gains and losses on foreign currency translation result from financial transactions of the Company’s two subsidiaries

in Canada being recorded in their functional currency of Canadian dollars and then translated to United States dollars at period end

for consolidated reporting by the parent company.

Concern, Liquidity and Capital Resources

Company has incurred a loss since inception resulting in an accumulated deficit of $79,207,786 as of December 31, 2022 and further losses

are anticipated in the development of its business.

Further, the Company has operating cash outflows of $17,146,723 for the year ended

December 31, 2022.

For the year ended December 31, 2022, the Company had a loss from operations of $27,415,106.

Since inception, being

a research and development company, the Company has not yet generated revenue and the Company has incurred continuing losses from its

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

financial statements.

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 December 31, 2022, the Company had

cash of $17,723,884 and working capital of $14,435,964.

The Company’s current cash on hand is not sufficient enough to satisfy

its operating cash needs for the 12 months from the filing of this Annual Report on Form 10-K.

The Company believes that it has adequate

cash on hand to cover anticipated outlays through December 31, 2023.

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.

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, which may include collaborations with third parties as well as disciplined cash spending.

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.

a result of these factors, management has concluded that there is substantial doubt about the Company’s ability to continue as

a going concern.

The Company’s consolidated financial statements do not include any adjustments that might result from the outcome

of this uncertainty.

with MagicMed (Item 1.

May 24, 2021, the Company entered into the Amalgamation Agreement with Holdco and Purchaser and MagicMed, pursuant to which, among other

4 unchanged sentences

The Amalgamation was completed on September 16, 2021.

the Effective Time, holders of the MagicMed Shares received such number of shares of Company Shares representing, together with the Company

Shares issuable upon exercise of the Warrants and the Converted Options (each as defined herein), approximately 36.6% of the issued and

outstanding Company Shares (on a fully diluted basis).

The MagicMed Shares were initially converted into Amalco Redeemable Preferred

Shares (as defined in the Amalgamation Agreement), which immediately following the Amalgamation were redeemed for 0.000001 of a Company

Following such redemption, the shareholders of MagicMed received additional Company Shares equal to the product of the Exchange

Ratio (as defined in the Amalgamation Agreement) multiplied by the number of MagicMed Shares held by each such shareholder.

Additionally,

following the Effective Time (i) each outstanding MagicMed stock option was converted into and became an option to purchase (the “Converted

Options”) the number of Company Shares equal to the Exchange Ratio multiplied by the number of MagicMed Shares subject to such

MagicMed stock option, and (ii) each holder of an outstanding MagicMed warrant (including Company Broker Warrants (as defined in the

Amalgamation Agreement), the “Warrants”) received upon exercise of such Warrant that number of Company Shares which the holder

would have been entitled to receive as a result of the Amalgamation if, immediately prior to the date of the Amalgamation (the “Effective

Date”), such holder had been the registered holder of the number of MagicMed Shares to which such holder would have been entitled

if such holder had exercised such holder’s Warrants immediately prior to the Effective Time (the foregoing collectively, the “Amalgamation”).

In aggregate, holders of MagicMed Shares received 9,951,217 Company Shares representing approximately 31.7% of the Company Shares following

the consummation of the Amalgamation.

The maximum number of Company Shares to be issued by the Company as in respect of the Warrants

and Converted Options shall not exceed 7,404,101 Company Shares.

The aggregate number of Company

Shares that the Company issued in connection with the Amalgamation (collectively, the “Share Consideration”) was in excess

of 20% of the Company’s pre-transaction outstanding Company Shares.

Accordingly, the Company sought and received stockholder approval

of the issuance of the Share Consideration in the Amalgamation in accordance with the NASDAQ Listing Rules.

At the Effective Time, holders of the MagicMed Shares received such number

of shares of Common Stock representing, together with the Common Stock issuable upon exercise of the Warrants and the Converted Options

(each as defined herein), approximately 36.6% of the issued and outstanding Common Stock (on a fully diluted basis).

The MagicMed Shares

were initially converted into Amalco Redeemable Preferred Shares (as defined in the Amalgamation Agreement), which immediately following

the Amalgamation were redeemed for 0.000001 of a share of Common Stock.

Following such redemption, the shareholders of MagicMed received

additional Common Stock equal to the product of the Exchange Ratio (as defined in the Amalgamation Agreement) multiplied by the number

of MagicMed Shares held by each such shareholder.

Additionally, following the Effective Time (i) each outstanding MagicMed stock option

was converted into and became an option to purchase (the “Converted Options”) the number of shares of Common Stock equal to

the Exchange Ratio multiplied by the number of MagicMed Shares subject to such MagicMed stock option, and (ii) each holder of an outstanding

MagicMed warrant (including Company Broker Warrants (as defined in the Amalgamation Agreement), the “Warrants”) received upon

exercise of such Warrant that number of Company Shares which the holder would have been entitled to receive as a result of the Amalgamation

if, immediately prior to the date of the Amalgamation (the “Effective Date”), such holder had been the registered holder of

the number of MagicMed Shares to which such holder would have been entitled if such holder had exercised such holder’s Warrants

immediately prior to the Effective Time (the foregoing collectively, the “Amalgamation”).

In aggregate, holders of MagicMed

Shares received 199,025 shares of Common Stock representing approximately 31.7% of the Common Stock following the consummation of the

Amalgamation.

The maximum number of shares of Common Stock to be issued by the Company as in respect of the Warrants and Converted Options

shall not exceed 148,083 shares of Common Stock.

The aggregate number of shares of Common Stock that the Company issued

in connection with the Amalgamation (collectively, the “Share Consideration”) was in excess of 20% of the Company’s

pre-transaction outstanding Common Stock.

Accordingly, the Company sought and received stockholder approval of the issuance of the Share

Consideration in the Amalgamation in accordance with the NASDAQ Listing Rules.

to the terms of the Amalgamation Agreement, the Company appointed, effective as of the Effective Time two individuals selected by MagicMed

2 unchanged sentences

Brad Thompson.

The Amalgamation Agreement contained representations and warranties,

closing deliveries and indemnification provisions customary for a transaction of this nature.

The closing of the Amalgamation was conditioned

upon, among other things, (i) the Share Consideration being approved for listing on Nasdaq, (ii) the effectiveness of a Registration

Statement on Form S-4 registering the Share Consideration (the “S-4 Registration Statement”) and (iii) the approval (a) of

the MagicMed stockholders of the Amalgamation and (b) of the Company’s stockholders of each of the Amalgamation and the issuance

of the Share Consideration in the Amalgamation.

The Amalgamation Agreement contained representations and warranties, closing

deliveries and indemnification provisions customary for a transaction of this nature.

The closing of the Amalgamation occurred on September

This transaction was

cash accretive to the Company, with an aggregate of $3,055,328 in cash being included in the net assets acquired.

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.

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.

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.

December Investment

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

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.

Direct and Public Offerings

January 14, 2021, the Company completed an offering of 2,221,334 shares of Common Stock and pre-funded warrants at approximately $4.50

per share and a concurrent private placement of warrants to purchase 1,666,019 shares of Common Stock at $4.95 per share, exercisable

immediately and terminating five years after the date of issuance for gross proceeds of approximately $10,000,000.

The net proceeds to

the Company after deducting financial advisory fees and other costs and expenses were approximately $8,800,087, with $4,617,087 of such

amount allocated to share capital and $4,846,000 allocated to warrant liability and the remaining $663,000 recorded as an expense.

February 11, 2021, the Company completed an offering of 3,007,026 shares of Common Stock and a concurrent private placement of warrants

to purchase 1,503,513 shares of Common Stock at $4.90 per share, exercisable immediately and terminating five year from the date of issuance

for gross proceeds of approximately $12,800,000.

The net proceeds to Enveric from the offering after deducting financial advisory fees

and other costs and expenses were approximately $11,624,401, with $7,016,401 of such amount allocated to share capital and $5,135,000

allocated to warrant liability and the remaining $527,000 recorded as an expense.

February 15, 2022, the Company completed a public offering of 20,000,000 shares of Common Stock and warrants to purchase up to

20,000,000 shares of Common Stock for gross proceeds of approximately $10 million, before deducting underwriting discounts and commissions

and other offering expenses.

A.G.P./Alliance Global Partners acted as sole book-running manager for the offering.

In addition, Enveric

granted the underwriter a 45-day option to purchase up to an additional 3,000,000 shares of common stock and/or warrants to purchase

up to an additional 3,000,000 shares of common stock at the public offering price, which the underwriter has partially exercised for

warrants to purchase up to 3,000,000 shares of common stock.

the securities being sold in the offering were offered by Enveric.

At closing, Enveric received net proceeds from the offering of approximately

$9.2 million, after deducting underwriting discounts and commissions and estimated offering expenses.

The Company intends to use the

net proceeds from this offering for working capital and to fund other general corporate purposes.

offering was made pursuant to an effective shelf registration statement on Form S-3 (No.

333-257690) previously filed with the U.S.

and Exchange Commission (the “SEC”) that was declared effective by the SEC on July 9, 2021, and to a prospectus supplement

and accompanying prospectus.

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 expect 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.

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

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

This transaction was cash accretive to the Company, with an aggregate of $3,055,328 in cash being included in the net assets

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

Flows for the Years Ended December 31, 2022 and 2021

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

Ended December 31,

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

the Years Ended December 31,

Net cash used in operating activities

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$ (11,457,671 )

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

Net cash provided by financing activities

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Net increase in cash

cash used in operating activities was $11,457,671 during the year ended December 31, 2021, which consisted primarily of a net

loss of $48,976,896 and non-cash income related to change in fair value of warrant liability of $9,327,326,

and non-cash income tax benefits of $7,454,805, offset by adjustments to reconcile net loss to cash used in operating activities,

which include, without limitation, impairment of intangible assets of $38,678,918, stock and options based compensation of $12,597,001, amortization of intangible assets of $643,333

and inducement expense of $1,125,291 and changes in operating assets consisting of decreases in prepaid expenses and other current

assets of $826,837 and increases in accounts payable and accrued liabilities of $383,199.

Net cash used in operating activities was $17,146,723 during the year ended

December 31, 2022, which consisted primarily of a net loss of $18,471,333, non-cash income related to change in fair value of warrant

liabilities of $4,315,236, change in fair value of investment option liability of $3,472,726, non-cash income tax benefit of $1,504,302,

offset by adjustments to reconcile net loss to cash used in operating activities, which include, without limitation, impairment of intangible

assets and goodwill of $7,453,662, stock-based compensation of $2,620,671, change in fair value of derivative liabilities $325,000, amortization

of intangible assets of $168,750, depreciation expense of $159,160, and amortization of right-of-use asset of $107,291, and changes in

operating assets consisting of decreases in accounts payable and accrued liabilities of $263,686 and right-of-use liability of $107,288

and an increase in prepaid expenses of $374,058.

cash used in operating activities was $11,457,671 during the year ended December 31, 2021, 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.

cash provided by investing activities was $2,190,609 during the year ended December 31, 2021, which consisted of $3,055,328 in cash provided

by the cash accretive acquisition of MagicMed, offset by $675,000 in cash used for the purchase of a license agreement and $189,719

cash used in equipment purchases.

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.

cash provided by financing activities was $24,899,659 during the year ended December 31, 2021, which consisted of $21,614,488 in cash

provided from the sales of common stock and $3,285,171 in cash provided by the exercise of cash warrants.

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.

$48,976,896, non-cash income related to change in fair value of warrant liability of $9,327,326, and non-cash income tax benefits of

$7,454,805, offset by adjustments to reconcile net loss to cash used in operating activities, which include, without limitation, impairment

of intangible assets of $38,678,918, stock and options based compensation of $12,597,001, amortization of intangible assets of $643,333

and inducement expense of $1,125,291 and changes in operating assets consisting of decreases in prepaid expenses and other current assets

of $826,837 and increases in accounts payable and accrued liabilities of $383,199.

cash used in investing activities was $584,165 during the year ended December 31, 2022, which consisted of the purchase of property and

cash provided by investing activities was $2,190,609 during the year ended December 31, 2021, which consisted of cash accretive acquisition

of MagicMed of $3,055,328, offset by the acquisition of intellectual property from Diverse Biotech, Inc.

of $675,000 and $189,719 cash

used in property and equipment purchases.

Net cash provided by financing activities was $18,180,137 during the year

ended December 31, 2022, which consisted of $17,222,099 in net proceeds from the sale of Common Stock and warrants and warrant exercises,

net of fees, and proceeds from the sale of redeemable non-controlling interest, net of offering costs, of $958,038.

Net cash provided by financing activities was $24,899,659 during the year

ended December 31, 2021, which consisted of $21,614,488 in cash provided from the sales of Common Stock and $3,285,171 in cash provided

by the exercise of cash warrants.

Accounting Policies and Significant Judgments and Estimates

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of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect

the reported amount of assets, liabilities, revenue, costs and expenses and related disclosures.

the reported amount of assets, liabilities, costs and expenses and related disclosures.

We base our assumptions, estimates and

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Accordingly, we evaluate our estimates and assumptions on an ongoing basis.

Our actual results may

differ from these estimates under different assumptions and conditions.

have identified certain accounting estimates which involve a significant level of estimation uncertainty and have had or are reasonably

likely to have a material impact on our financial conditions or results of operations.

believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial

There have been no changes to estimates during the periods presented in the filing.

Historically, changes in management estimates

have not been material.

preparation of the consolidated financial statements, in conformity with GAAP, requires management to make estimates and assumptions

that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated

financial statements, and the reported amounts of revenue and expenses during the reporting period.

Our most significant estimates include

impairment charges to intangible assets and goodwill, measurement of stock-based compensation expenses and the valuation of warrant derivative

Actual results could differ from these estimates.

Accounting Standards

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.

In December 2019, the Financial

Accounting Standards Board (“FASB”) issued ASU No.

2019-12, Income Taxes (Topic 740:

Simplifying the Accounting for Income

Taxes (“ASU 2019-12”), which removes certain exceptions to the general principles in Topic 740.

ASU 2019-12 is effective

for the fiscal years beginning after December 15, 2020, with early adoption permitted.

The adoption of this guidance did not have a material

impact on the Company’s consolidated financial statements.

In October 2020, the FASB

issued ASU 2020-10, “Codification Improvements.” The new accounting rules improve the consistency of the Codification by

including all disclosure guidance in the appropriate Disclosure Section (Section 50) that had only been included in the Other Presentation

Matters Section (Section 45) of the Codification.

Additionally, the new rules also clarify guidance across various topics including defined

benefit plans, foreign currency transactions, and interest expense.

The new accounting rules were effective for the Company in the first

quarter of 2021.

The adoption of the new accounting rules did not have a material impact on the Company’s consolidated financial

May 2021, the FASB issued ASU No.

2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50),

Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.

amendments in ASU No.

2021-04 provides guidance to clarify and reduce diversity in an issuer’s accounting for modifications or

exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification

The amendments in this ASU No.

2021-04 are effective for all entities for fiscal years beginning after December 15, 2021,

and interim periods within those fiscal years, with early adoption permitted, including interim periods within those fiscal years.

a result, the Company adopted ASU 2021-04 effective January 1, 2022.

The adoption of the new accounting rules did not have a material

impact on the Company’s consolidated financial statements.

Our most significant

estimates include determining the fair value of transactions involving common stock and the valuation of stock-based compensation, accruals

associated with third party providers supporting research and development efforts, estimated fair values of long lives assets used to

record impairment charges related to intangible assets, acquired in-process research and development (“IPR&D”) and goodwill,

accounting for preferred stock derivatives and non-controlling interest, and allocation

of purchase price in business acquisitions.

Our actual results may differ from these estimates under different assumptions and conditions.

Concentration

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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, 2021, the Company had greater

than $250,000 at US or Canadian financial institutions.

Currency Risk

inception through December 31, 2021, the reporting currency of the Company is the United States dollar while the functional currency

of the Company’s Canadian subsidiaries 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.

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.

2021 Registered Direct Offering

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.

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.

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.

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 1,666,019

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%.

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.

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.

Agreement with Alpha

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.

2021 Registered Direct Offering

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.

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.

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

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%.

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.

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

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.

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.

Registration Statement

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.

2022 underwritten public offering

February 15, 2022, the Company completed a public offering of 20,000,000 shares of Common Stock and warrants to purchase up to 20,000,000

shares of Common Stock for gross proceeds of approximately $10 million, before deducting underwriting discounts and commissions and other

offering expenses.

A.G.P./Alliance Global Partners acted as sole book-running manager for the offering.

In addition, Enveric granted

the underwriter a 45-day option to purchase up to an additional 3,000,000 shares of common stock and/or warrants to purchase up to an

additional 3,000,000 shares of common stock at the public offering price, which the underwriter has partially exercised for warrants

to purchase up to 3,000,000 shares of common stock.

the securities being sold in the offering were offered by Enveric.

At closing, Enveric received net proceeds from the offering of approximately

$9.2 million, after deducting underwriting discounts and commissions and estimated offering expenses.

The Company intends to use the

net proceeds from this offering for working capital and to fund other general corporate purposes.

offering was made pursuant to an effective shelf registration statement on Form S-3 (No.

333-257690) previously filed with the U.S.

and Exchange Commission (the “SEC”) that was declared effective by the SEC on July 9, 2021, and to a prospectus supplement

and accompanying prospectus.

The final prospectus supplement and accompanying prospectus relating to the offering were filed with the

SEC and are available on the SEC’s website located at http://www.sec.gov.

Bid Price Minimum

February 18, 2022, the Company received a letter from the Listing Qualifications Department of the Nasdaq indicating that, based upon

the closing bid price of the Company’s common stock for the 30 consecutive business day period between January 5, 2021, through

February 17, 2022, the Company did not meet the minimum bid price of $1.00 per share required for continued listing on The Nasdaq Capital

Market pursuant to Nasdaq Listing Rule 5550(a)(2).

The letter also indicated that the Company will be provided with a compliance period

of 180 calendar days, or until August 17, 2022, in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).

further provided that if, at any time during the 180-day period, the closing bid price of the Company’s common stock was at least

$1.00 for a minimum of 10 consecutive business days, Nasdaq would provide the Company with written confirmation that it had achieved

compliance with the minimum bid price requirement.

Quantitative and Qualitative Disclosure About Market Risk

which at times, may exceed the federal depository insurance coverage of $250,000 in the United States and $100,000 in Canada.

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, 2022, the Company had greater than $250,000 and $100,000 at US and Canadian financial institutions, respectively.

Liability and Preferred Investment Options

Company accounts for warrants and preferred investment options for shares of the Company’s common stock that are not indexed to

its own stock as liabilities at fair value on the balance sheet.

Such warrants and preferred investment options are subject to remeasurement

at each balance sheet date and any change in fair value is recognized as a component of other expense on the statement of operations

and comprehensive loss.

The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise

or expiration of such common stock warrants and preferred investment options.

At that time, the portion of the liability related to such

common stock warrants and preferred investment options will be reclassified to additional paid-in capital.

Non-controlling Interest

accounting guidance requires an equity instrument that is redeemable for cash or other assets to be classified outside of permanent equity

if it is redeemable (a) at a fixed or determinable price on a fixed or determinable date, (b) at the option of the holder, or (c) upon

the occurrence of an event that is not solely within the control of the issuer.

As a result of this feature, the Company recorded the

non-controlling interests as redeemable non-controlling interests and classified them in temporary equity within its consolidated balance

sheet initially at its acquisition-date estimated redemption value or fair value.

In addition, the Company has elected to recognize changes

in the redemption value immediately as they occur and adjust the carrying amount of the instrument by accreting the embedded derivative

at each reporting period over 12 months.

of Intangible Assets

Company tests its intangible assets for impairment at least annually and whenever events or circumstances change that indicate impairment

may have occurred.

A significant amount of judgment is involved in determining if an indicator of impairment has occurred.

Such indicators

may include, among others and without limitation:

a significant decline in the Company’s expected future cash flows;

significant decline in the Company’s stock price and market capitalization;

a significant adverse change in legal factors or in

the business climate of the Company’s segments;

unanticipated competition;

and slower growth rates.

If the fair value determined

is less than the carrying amount, an impairment loss is recognized in operating results.

Company tests goodwill for potential impairment at least annually, or more frequently if an event or other circumstance indicates that

the Company may not be able to recover the carrying amount of the net assets of the reporting unit.

The Company has determined that the

reporting unit is the entire company, due to the integration of all of the Company’s activities.

In evaluating goodwill for impairment,

the Company may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that

the fair value of a reporting unit is less than its carrying amount.

If the Company bypasses the qualitative assessment, or if the Company

concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs

a quantitative impairment test by comparing the fair value of a reporting unit with its carrying amount.

Quantitative and Qualitative Disclosures About Market Risk

Financial Statements and Supplementary Data

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis