What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-03-26 compared with 2023-03-31 · 410 added, 573 removed, 119 unchanged (89% of the section changed)

Management’s discussion and analysis of financial condition and results of operations

to the “Company,” “our,” “us,” or “we” in this section titled “Management’s

Discussion and Analysis of Financial Condition and Results of Operations of Enveric” refer to Enveric Biosciences, Inc.

The following

discussion and analysis of our financial condition and results of operations should be read together with our financial statements and

related notes appearing elsewhere in this Annual Report on Form 10-K.

Some of the information contained in this discussion and analysis

or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business

and related financing, includes forward-looking statements involving risks and uncertainties and should be read together with the “Risk

Factors” and the “Cautionary Statement Regarding Forward-Looking Statements” sections of this Annual Report on Form

Such risks and uncertainties could cause actual results to differ materially from the results described in or implied by the forward-looking

statements contained in the following discussion and analysis.

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

to the “Company,” “Enveric” “our,” “us,” or “we” in this section titled

“Management’s Discussion and Analysis of Financial Condition and Results of Operations of Enveric” refer to

Enveric Biosciences, Inc.

The following discussion and analysis of our financial condition and results of operations should be read

together with our financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.

information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including

information with respect to our plans and strategy for our business and related financing, includes forward-looking statements

involving risks and uncertainties and should be read together with the “Risk Factors” and the “Cautionary

Statement Regarding Forward-Looking Statements” sections of this Annual Report on Form 10-K.

Such risks and uncertainties

could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained

in the following discussion and analysis.

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

anxiety, and addiction disorders.

Leveraging our unique discovery and development platform, the Psybrary™, we have created a robust

intellectual property portfolio of new chemical entities for specific mental health indications.

Our lead program, the EVM201 Series,

comprises next generation synthetic prodrugs of the active metabolite, psilocin.

We are developing the first product from the EVM201

Series – EB-002 – for the treatment of psychiatric disorders.

We are also advancing its second program, the EVM301 Series

– EB 003 – expected to offer a first-in-class, new approach to the treatment of difficult-to-address mental health disorders,

mediated by the promotion of neuroplasticity without also inducing hallucinations in the patient.

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

1 unchanged sentence

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.

We synthesize novel versions of classic psychedelics,

such as psilocybin, DMT, mescaline and MDMA, using a mixture of chemistry and synthetic biology, resulting in

the expansion of the Psybrary™, which includes 15 patent families with over a million potential variations and hundreds of synthesized

Within the Psybrary™ we have three different types of molecules, Generation 1 (classic psychedelics), Generation 2 (pro-drugs),

and Generation 3 (new chemical entities).

The Company has created over 1,000 novel psychedelic molecular compounds and derivatives (“Psychedelic

Derivatives”) that are housed in the Psybrary™.

Our current focus is develop our lead molecules EB-002 and EB-003 and to

out-license other molecules from the Psybrary™.

May 11, 2022, the Company announced plans to transfer and spin-off its cannabinoid clinical development pipeline assets to Akos Biosciences,

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

which was incorporated on April 13, 2022, by way of dividend to Enveric shareholders (the “Spin-Off”).

As of May 12, 2023,

the holders of the Company’s Akos Series A Preferred Stock, par value $0.01 per share (“Akos Series A Preferred Stock”)

have exercised this right to force redemption of all of the Akos Series A Preferred Stock for $1,000 per share, plus accrued but unpaid

dividends of $52,057 for a total of $1,052,057.

The Company made full payment on May 19, 2023.

March 21, 2023, the Company established Enveric Therapeutics, Pty.

(“Enveric Therapeutics”), an Australia-based subsidiary,

to support the Company’s plans to advance its EVM201 Series towards the clinic.

Enveric Therapeutics will oversee the Company’s

preclinical, clinical, and regulatory activities in Australia, including ongoing interactions with the local Human Research Ethics Committees

(HREC) and the Therapeutic Goods Administration (“TGA”), Australia’s regulatory authority.

March 23, 2023, we issued a press release announcing the selection of Australian CRO, Avance Clinical, in preparation for Phase 1 Study

of EB-002, our lead candidate targeting the treatment of anxiety disorders.

Under the agreement, Avance Clinical will manage the Phase

1 clinical trial of EB-002 in coordination with our newly established Australian subsidiary, Enveric Therapeutics Pty, Ltd.

1 clinical trial is designed as a multi-cohort, dose-ascending study to measure the safety and tolerability of EB-002.

EB-002, a next-generation

proprietary psilocin prodrug, has been recognized as a New Chemical Entity (NCE) by Australia’s Therapeutic Goods Administration

(TGA) and is currently in preclinical development targeting the treatment of anxiety disorder.

The total cost of the Avance Clinical

contract is approximately 3,000,000 AUD, which translates to approximately $2,000,000 as of December 31, 2023.

As of December 31, 2023,

the Company has paid $1,036,940 of the Avance Clinical contract costs and has accrued $523,284 recorded as accrued liabilities and $239,320

as accounts payable.

For the year ended December 31, 2023, the Company has expensed $1,751,444 in research and development expenses.

December 28, 2023, we issued a press release announcing the selection of EB-003 as the lead development candidate from our EVM 301 Series.

Our next step is to advance EB-003 into formal pre-clinical studies in support of a future IND filing.

in Force/Restructuring

May 2023, the Company entered into a cost reduction plan, including a reduction in force of approximately 35% of its full-time employees

to streamline its operations and conserve cash resources.

Additionally, contracts with seven consultants that were focused on the Akos

cannabinoid spin-out were terminated.

The Company recognized severance charges of $453,059 through December 31, 2023.

The plan included

a focus on progressing the Company’s existing non-cannabinoid pipeline while reducing the rate of spend and managing cash flow.

As of December 31, 2023, the Company has completed the reduction in force, with such severance expenses recorded in salaries and wages

and legal accounts.

June 16, 2023, the Company entered into a separation agreement with Avani Kanubaddi, the Company’s President and Chief Operating

Officer (the “Kanubaddi Separation Agreement”).

Kanubaddi’s 2023 salary and benefits of $550,974 was accrued and

will be paid out in twelve equal monthly installments beginning in July 2023.

Upon termination, any unvested time-based RSU’s became

fully vested.

The Company accelerated expense recognized related to these shares that vested upon termination of $231,273.

11,278 market performance-based RSUs previously granted that were subject to the original terms and conditions of Mr.

employment agreement were forfeited during the year ended December 31, 2023.

Distribution Agreement

September 1, 2023, the Company entered into a Distribution Agreement, with Canaccord Genuity, LLC (“Canaccord”), pursuant

to which the Company may offer and sell from time to time, through Canaccord as sales agent and/or principal, shares of common stock

of the Company, par value $0.01 per share having an aggregate offering price of up to $10.0 million.

Due to the offering limitations

applicable to the Company and in accordance with the terms of the Distribution Agreement, the Company may offer common stock having an

aggregate gross sales price of up to $2,392,514 pursuant to the prospectus supplement dated September 1, 2023 (the “Prospectus

Supplement”).

Subject to the terms and conditions of the Distribution Agreement, Canaccord may sell the common stock by any method

permitted by law deemed to be an “at-the-market offering”.

The Company will pay Canaccord a commission equal to 3.0% of the

gross sales price of the common stock sold through Canaccord under the Distribution Agreement and has also agreed to reimburse Canaccord

for certain expenses.

The Company may also sell common stock to Canaccord as principal for Canaccord’s own account at a price agreed

upon at the time of sale.

Any sale of common stock to Canaccord as principal would be pursuant to the terms of a separate terms agreement

between the Company and Canaccord.

the year ended December 31, 2023, the Company has issued no shares of common stock through the Distribution Agreement.

Inducement Letters (as defined below) prohibit the Company from entering into any variable rate transaction as defined in the Inducement

Letters, including the issuance of (1) any variable priced debt or equity securities or (2) transactions whereby the Company may issue

securities at a future determined price, such as through an at-the-market offering or an equity line of credit.

The variable rate transaction

restriction expires after six-months from the closing date of December 28, 2023 for the Inducement Letters for an issuance through an

at-the-market offering, and one-year for the remaining variable rate transactions.

March 8, 2024, the Company entered into a series of common stock purchase agreements for the issuance in a registered direct

offering of 228,690 shares of the Company’s common stock, par value $0.01 per share to the Holders (as defined below) of the

Inducement Warrants (as defined below).

The issuance was made in exchange for the permanent and irrevocable waiver of the variable rate transaction

limitation solely with respect to the entry into and/or issuance of shares of common stock in an at-the-market offering contained in

the Inducement Letters.

November 3, 2023, the Company entered into an equity line by entering into a Purchase Agreement with Lincoln Park Capital Fund, LLC (“Lincoln

Park”), pursuant to which the Company may offer and sell from time to time over a 24-month period, shares of common stock of the

Company, par value $0.01 per share, to receive gross proceeds of up to $10.0 million.

As required under the Purchase Agreement, the Company

registered a resale of 1,140,477 shares of our common stock by Lincoln Park on a registration statement on Form S-1 dated November 8,

2023, which was declared effective by the SEC on December 5, 2023.

Subject to the SEC rules and regulations, the Company may register

additional shares of our common stock for resale with the SEC pursuant to the Purchase Agreement.

December 28, 2023, the Company entered into warrant exercise inducement offer letters (the “Inducement Letters”) with

certain holders (the “Holders”) of the February 2022 Post-Modification Warrants and RD and PIPE preferred investment

options to purchase shares of the Company’s common stock (the “Existing Warrants and Investment Options”) pursuant

to which the Holders agreed to exercise for cash their Existing Warrants and Investment Options to purchase 1,122,000 shares of the

Company’s common stock, in the aggregate, at a reduced exercised price of $1.37 per share (from an original exercise price of

$7.78 per share), in exchange for the Company’s agreement to sell and issue new warrants (the “Inducement

Warrants”) to purchase up to 2,244,000 shares of the Company’s common stock (the “Inducement Warrant

Shares”), and the Holders to make a cash payment of $0.125 per Inducement Warrant share for total proceeds of $280,500.

The Company received aggregate gross

proceeds of $1,817,640 from the exercise of the Existing Warrants and Investment Options by the Holders and the sale of the

Inducement Warrants on January 2, 2024.

As of December 31, 2023, the exercised and unsettled Existing Warrants and Investment

Options by the Holders and the sale of the Inducement Warrants are included in the consolidated balance sheet as a subscription

Due to the beneficial ownership limitation provisions, 704,000 shares of Existing Warrants and Investment Options

exercised were initially unissued and held in abeyance for the benefit of the Holder until notice is received from the Holder that

the shares may be issued in compliance with such limitation.

Subsequent to December 31, 2023, the Company issued all 704,000 shares

of common stock of the 704,000 shares of Existing Warrants and Investment Options exercised that were held in abeyance due to the

beneficial ownership limitation provisions.

The Company engaged Roth Capital Partners, LLC (“Roth”) to act as its

financial advisor in connection with the transactions summarized above and will pay Roth approximately $144,000 for its services, in

addition to reimbursement for certain expenses.

Roth was also issued warrants to purchase up to 67,320 shares of common stock.

Roth Warrants have the same terms as the Inducement Warrants.

The grant date fair value of these Roth Warrants was estimated to be

$77,991 on December 28, 2023 and were charged to additional paid in capital as issuance costs.

The Company also incurred legal fees

of $17,254 related to the transactions above that were charged to additional paid in capital as issuance costs.

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

During the years ended December 31, 2023 and 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 during the year ended December 31, 2023.

and Development Expenses

15 unchanged sentences

External efforts include work with consultants and increasingly substantial work at CROs and

We support an internal research and development team and our facility in Calgary, Alberta, Canada.

We support an internal research and development team at our facility in Calgary, Alberta, Canada.

To move these programs forward

along our development timelines, a large portion (approximately 75%) of our staff are research and development employees.

the numerous risks and uncertainties associated with product development, however, we cannot determine with certainty the duration and

completion costs of these or other current or future preclinical studies and clinical trials.

The duration, costs and timing of clinical

trials and development of our product candidates will depend on a variety of factors, including the uncertainties of future clinical

and preclinical studies, uncertainties in clinical trial enrollment rates and significant and changing government regulation.

the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability

and commercial viability.

2024, the Company reduced its discovery team in Calgary and is primarily focused on the development of EBV 002 and EBV 003 pipeline assets.

Sixty percent of the staff are focused on these development activities after the reduction in discovery team.

Because of the numerous

risks and uncertainties associated with product development, however, we cannot determine with certainty the duration and completion

costs of these or other current or future preclinical studies and clinical trials.

The duration, costs and timing of clinical trials

and development of our product candidates will depend on a variety of factors, including the uncertainties of future clinical and preclinical

studies, uncertainties in clinical trial enrollment rates and significant and changing government regulation.

In addition, the probability

of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial

and Administrative Expenses

and administrative expenses consist principally of salaries, benefits and related costs such as share-based compensation for personnel

and administrative expenses consist principally of salaries, benefits and related costs such as stock-based compensation for personnel

and consultants in executive, finance, business development, corporate communications and human resource functions, facility costs not

1 unchanged sentence

relation costs, training and conference costs, insurance costs and legal fees.

anticipate that our general and administrative expenses will increase in the future as they relate to audit, legal, regulatory, and tax-related

services associated with maintaining compliance with exchange listing and Securities and Exchange Commission requirements, director and

officer liability insurance, investor relations costs and other costs associated with being a public company.

anticipate that our general and administrative expenses will decrease in the future due to the reduction in force during the year ended

December 31, 2023, which is expected to reduce expenses related to salaries and benefits, director and office liability insurance, and

other employee-related costs.

of Intangible Assets and Goodwill

4 unchanged sentences

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 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.

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.

Beginning 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

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 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 an impairment of goodwill of approximately

$1.5 million for the year ended December 31, 2022.

There was no impairment of intangible assets or goodwill recorded for the year ended

December 31, 2023.

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

1 unchanged sentence

$2.2 million and $2.6 million for the years ended December 31, 2023 and 2022, respectively.

based compensation consists of restricted stock units (“RSU”), restricted stock awards (“RSA”) and options to

purchase shares of the Company’s common stock.

The Company follows Accounting Standards Codification (“ASC”) 718, Compensation

- Stock Compensation, which addresses the accounting for stock-based payment transactions, requiring such transactions to be accounted

for using the fair value method.

The fair value of RSU or RSA awards is determined by the closing price per share of the Company’s

common stock on the date of the award.

The Company uses the Black-Scholes option pricing model to determine the grant date fair value

of options issued.

and RSA’s may contain vesting conditions that include, without limitation, any or all of the following:

immediate vesting, vesting

over a defined time period, vesting based on specific volume weighted average price levels being achieved by the Company’s common

stock as publicly traded within specified measurement periods, and vesting based on the achievement of specific performance milestones.

Options contain vesting conditions that provide for vesting over a defined time period.

fair value of RSU’s, RSA’s and options, is charged to expense, on a straight line basis over the vesting periods defined

in the award agreements, except for the fair value which is attributable to achievement a specific performance milestones, which are

charged to expense upon achievement of such milestones.

compensation consists of restricted stock units (“RSU”) and options to purchase shares of the Company’s common stock.

The Company follows Accounting Standards Codification (“ASC”) 718, Compensation - Stock Compensation, which addresses the

accounting for stock-based payment transactions, requiring such transactions to be accounted for using the fair value method.

value of RSU or restricted stock awards (“RSAs”) is determined by the closing price per share of the Company’s common stock on the date of the award.

The Company uses the Black-Scholes option pricing model to determine the grant date fair value of options issued.

may contain vesting conditions that include, without limitation, any or all of the following:

immediate vesting, vesting over a defined

time period, vesting based on specific volume weighted average price levels being achieved by the Company’s common stock as publicly

traded within specified measurement periods, and vesting based on the achievement of specific performance milestones.

Options contain

vesting conditions that provide for vesting over a defined time period.

fair value of RSU’s and options, is charged to expense, on a straight line basis over the vesting periods defined in the award

agreements, except for the fair value which is attributable to achievement of a specific performance milestones, which are charged to

expense upon achievement of such milestones.

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

13 unchanged sentences

in ASC 820-10.

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

operating expenses include, without limitation, research and development, employee compensation and payroll taxes, employee benefits,

insurance costs, facility costs, laboratory supplies, office expenses, conference and meeting costs, travel expenses, cyber costs, financial

statement preparation services, tax compliance, various consulting and director fees, legal services, auditing fees, stock-based compensation,

impairment of intangible assets, depreciation of equipment and amortization of intangible assets.

These expenses have increased in connection

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

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.

liabilities with an initial fair value of approximately $8.3 million were recorded during the year ended December 31, 2022, 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.

the year-end December 31, 2023, there were no derivative liabilities issued.

During the years ended December 31, 2023 and 2022, an aggregate

decrease in value of derivative liabilities of approximately $1.0 million and $7.5 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.

Company accounts for the inducement to exercise warrants in accordance with ASC Subtopic 470-20-40 “Debt with Conversion and Other

Options” (“ASC 470-20-40”).

ASC 470-20-40 requires the recognition through earnings of an inducement charge equal to

the fair value of the consideration delivered in excess of the consideration issuable under the original conversion terms.

the Company recognized a loss on the warrant inducement for the issuance of new warrants.

The inducement warrants were determined to

be equity classified and the fair value was determined using the Black-Scholes valuation model.

The grant date fair value of the Inducement

Warrants was estimated to be $2,599,552 on December 28, 2023 and the proceeds of $280,500, which were received on January 2, 2024, for

the issuance of the Inducement Warrants is reflected as inducement expense, within other expenses on the Company’s consolidated

statement of operations and comprehensive loss.

of Operations

10 unchanged sentences

(27,415,106 )

Other income (expense)

Inducement expense

Other (expense) income

Inducement expense, net

Change in fair value of warrant liabilities

1 unchanged sentence

Change in fair value of derivative liability

Interest expense

Total other income

Interest income (expense), net

Total other (expense) income

Net loss before income taxes

1 unchanged sentence

$ (19,957,393 )

Income tax benefit

(18,471,333 )

(48,976,896 )

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

Income tax (expense) benefit

$ (17,291,732 )

$ (18,471,333 )

Net loss per share - basic and diluted

Weighted average shares outstanding, basic and diluted

Trends or Uncertainties

2 unchanged sentences

Higher rates of price inflation, as compared to recent prior

levels of price inflation have caused a general increase the cost of labor and materials.

In addition, there is an increased risk of

the Company experiencing labor shortages as a result of a potential inability to attract and retain human resources due to increased

levels of price inflation have caused a general increase in the cost of labor and materials.

In addition, there is an increased risk

of the Company experiencing labor shortages as a result of a potential inability to attract and retain human resources due to increased

labor costs resulting from the current inflationary environment.

2 unchanged sentences

December 31, 2022, a decrease of $2,753,740, or 24%.

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.

This change was primarily driven by decreases in insurance expenses of $1,112,059,

salaries and wages of $626,573, transaction expenses of $735,043, stock compensation expense of $351,898, marketing expense of $390,851,

and legal fees of $532,563.

This is offset by an increase in consulting expenses of $381,786, Delaware Franchise Tax expenses of $247,389,

and accounting fees of $255,872.

The decrease in insurance expense was due to a reduction in director and officer liability insurance

related to the Company’s reduction in force and restructuring during the year ended December 31, 2023.

The decrease in salaries

and wages was due to the reduction in force during the year ended December 31, 2023.

The decrease in transaction expenses was due to

the expenses related to non-recurring capital raises during the year ended December 31, 2022.

The decrease in stock compensation expense

was due primarily to a reduction in expense related to restricted stock units as a result of forfeitures and decreased value of new grants

as a result of lower stock prices.

The decrease in marketing and legal expenses was due to the termination of marketing efforts surrounding

the Akos cannabinoid spin-off.

The increase in consulting expenses was due to increased outsourcing to contractors as a result of the

reduction in force during 2023.

The increase in Delaware Franchise Tax expenses was due to taxes and penalty fees related to the 2022

franchise tax return.

The increase in accounting fees was due to internal control deficiency remediation efforts related to deficiencies

identified in 2022 and technical accounting services related to 2023 transactions.

and Development Expenses

research and development expense for the year ended December 31, 2023 was $7,252,437 as compared to $8,027,773 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.

31, 2022 with a decrease of $775,336, or approximately 10%.

This decrease was primarily driven by decreased salaries and wages of 1,608,437,

product development of $443,158, and lab expenses of $321,773, and increase in tax incentive of $141,185.

This is slightly offset by

an increase in CRO costs of $1,674,958.

The decrease in salaries and wages was primarily due to the reduction in force as a result of

the cost reduction plan that the Company entered into in May 2023 and the increase in CRO costs is due to contract in Australian Subsidiary

Research and Development that began in March 2023.

of intangible assets and goodwill

was no impairment of intangible assets and goodwill for the year ended December 31, 2023 as compared to $7,453,662 for the year ended

December 31, 2022, as all recognized indefinite lived intangible assets and goodwill were fully impaired as of December 31, 2022.

and Amortization Expense

1 unchanged sentence

with a decrease of $16,072, or approximately 5%.

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, 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.

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,

Change in fair value of warrant liabilities for the year ended December

31, 2023 resulted in income of $94,396 as compared to $4,315,236 for the year ended December 31, 2022.

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.

The significant decrease in the Company’s stock price during the year ended December

31, 2023 compared to the year ended December 31, 2022, 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

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 investment option liability for the year ended December 31, 2023 resulted in income of $208,752 as compared to $3,472,726

for the year ended December 31, 2022.

The change in fair value of investment option liability 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.

The significant decrease in the Company’s stock price during the year ended December 31, 2023 compared to the year ended December

31, 2022, resulted in the significant decrease to the change in fair value of warrant liabilities.

in Fair Value of Derivative Liability

Company’s change in fair value of derivative liability increased by $1,052,000 for the year ended December 31, 2023, 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.

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.

to the termination of the planned spin-off of Akos and redemption of the underlying preferred stock in May 2023.

expense was $1,848,235 for the year ended December 31, 2023.

The expenses recorded were related to inducement incurred related to the

conversion of warrants and investment options that occurred in December 2023.

The Company did not incur such expenses in the prior period.

Tax (Expense) Benefi t

tax expense was $28,913 for the year ended December 31, 2023, which primarily related to state excise taxes, compared to an income tax benefit of 1,486,060 for the year ended December

31, 2022 or a change of $1,514,973.

For the year ended December 31, 2022, the Company recognized a benefit for the reversal of the deferred

tax liability for the indefinite lived intangible assets upon impairment, which is the primary reason for the change.

Concern, Liquidity and Capital Resources

1 unchanged sentence

are anticipated in the development of its business.

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

Further, the Company had operating cash outflows of $14,094,411 for the year ended

December 31, 2023.

10 unchanged sentences

cash of $2,287,977 and working capital of $1,238,027.

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.

The Company’s current cash on hand is insufficient to satisfy its operating

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

These conditions raise substantial doubt regarding

the Company’s ability to continue as a going concern for a period of one year after the date the financial statements are issued.

Management’s plan to alleviate the conditions that raise substantial doubt include reducing the Company’s rate of spend,

managing its cash flow, advancing its programs, and raising additional working capital through public or private equity or debt financings

or other sources, which includes the Equity Distribution Agreement with Canaccord for proceeds of up to $2.4 million, the Purchase Agreement

with Lincoln Park, and the Inducement Letters and resulting sales of common stock under the Existing Warrants for net cash proceeds of

$1.5 million received in January 2024, and the exercise of warrants to purchase 1,954,000 shares of common stock for gross cash proceeds

of approximately $2.7 million in February 2024, and may include collaborations with additional third parties as well as disciplined cash

spending, to increase the Company’s cash runway.

The Inducement Letters included variable rate transaction limitation, which prohibit

the issuance of shares under the Purchase Agreement with Lincoln Park until December 28, 2024.

Adequate additional financing may not

be available to the Company 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

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), Amalco will be an indirect wholly-owned

subsidiary of the Company.

The Amalgamation was completed on September 16, 2021.

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

to the Company Board of Directors, Dr.

Joseph Tucker and Dr.

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 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

a going concern for a period of one year after the date of the financial statements.

The Company’s consolidated financial statements

do not include any adjustments that might result from the outcome of this uncertainty.

in Force/Restructuring

May 2023, the Company entered into a cost reduction plan, including a reduction in force of approximately 35% of its full-time employees

to streamline its operations and conserve cash resources.

Additionally, contracts with seven consultants that were focused on the Akos

cannabinoid spin-out were terminated.

The plan included a focus on progressing the Company’s existing non-cannabinoid pipeline

while reducing the rate of spend and managing cash flow.

As of December 31, 2023, the Company has completed the reduction in force, with

such severance expenses recorded in salaries and wages and legal accounts.

The Company recognized severance charges of approximately

$1,004,033 through December 31, 2023, with $572,628 of these charges paid and the reversal of Avani Kanubaddi’s 2023 performance

bonus of $129,760 as of December 31, 2023.

Additionally,

on June 16, 2023, the Company entered into the Kanubaddi Separation Agreement with Avani Kanubaddi, the Company’s President and

Chief Operating Officer.

Upon termination, any unvested time-based RSU’s became fully vested.

Kanubaddi’s 2023 salary

and benefits was accrued and were agreed to be paid out in twelve equal monthly installments beginning in July 2023, as well as his 2023

performance bonus in the amount of $129,760.

As of December 31, 2023, the performance metrics were not achieved and the accrued bonus

was reversed.

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

1 unchanged sentence

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

the Years Ended December 31,

For the Years Ended December 31,

Net cash used in operating activities

1 unchanged sentence

$ (17,146,723 )

Net cash (used in) provided by investing activities

Net cash provided by financing activities

Effect of foreign exchange

Net increase in cash

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

$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.

Net cash provided by (used in) investing activities

Net cash (used in) provided by financing activities

Effect of Foreign Exchange Rate on Changes on Cash

Net (decrease) increase in cash

$ (15,435,907 )

cash used in operating activities was $14,094,411 during the year ended December 31, 2023, which consisted primarily of a net loss adjusted

for non-cash items of $13,919,661, an increase in prepaid expenses of $6,857, a decrease in accounts payable and accrued liabilities

of $103,848, and a decrease in right-of-use operating lease asset and obligation of $64,045.

cash used in operating activities was $17,146,723 during the year ended December 31, 2022, which consisted primarily of a net loss adjusted

for non-cash items of $16,929,063, an increase in prepaid expenses and other current assets of $374,058, an increase in accounts payable

and accrued liabilities of $263,686, and a decrease in right-of-use operating lease asset and obligation of $107,288.

cash provided by investing activities was $11,667 during the year ended December 31, 2023, which consisted of the purchase of property

and equipment, offset by proceeds from sale of property and equipment.

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

cash used in financing activities was $1,343,141 during the year ended December 31, 2023, which consisted of $1,052,057 from the redemption

of Series A Preferred Stock and $291,084 for equity distribution offering costs.

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.

Accounting Estimates

5 unchanged sentences

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

We base our assumptions, estimates and

judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated

financial statements are prepared.

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

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

of Credit Risk

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 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

information required by this Item 8 is included at the end of this Annual Report on Form 10-K beginning on page F-1.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Our critical accounting estimates are those estimates

that involve a significant level of uncertainty at the time the estimate was made, and changes in them have had or are reasonably likely

to have a material effect on our financial condition or results of operations.

Accordingly, actual results could differ materially from

our estimates.

We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances,

and we evaluate these estimates on an ongoing basis.

Our most critical accounting estimates include determining the accruals associated

with third party providers supporting research and development efforts and the fair value of the inducement warrants.

Research and Development Expenses

part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development

This process involves reviewing purchase orders, open contracts, reconciling payments and invoices and communicating with our

personnel and suppliers to identify services that have been performed on our behalf.

It also includes the research and development vendors

providing us milestone and percentage completion reports on the statuses within each active purchase order and contract along with estimating

the level of service performed and the associated cost incurred for the services when we have not yet been invoiced or otherwise notified

of the actual cost.

Our vendors invoice us in various ways via advance payments, as contractual milestones are met or monthly in arrears

for services performed.

make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances

known to us at that time.

We periodically confirm the accuracy of our estimates with the service providers and adjust if necessary.

significant estimates in our accrued research and development expenses include the costs incurred for services performed by clinical,

pre-clinical, and CMC vendors in connection with research and development activities for which we have not yet been invoiced.

contract with these vendors to conduct clinical, pre-clinical, or CMC research and development services on our behalf.

We base our expenses

on our estimates of the services received and efforts expended pursuant to quotes and contracts with the research and development vendors.

The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows.

There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of

the research and development expense.

In accruing service fees, we estimate the time period over which services will be performed and

the level of effort to be expended in each period.

If the actual timing of the performance of services or the level of effort varies

from our estimate, we adjust the accrual or amount of prepaid expense accordingly.

Non-refundable advance payments for goods and services

that will be used in future research and development activities are expensed when the activity has been performed or when the goods have

been received rather than when the payment is made.

we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing

of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts

that are too high or too low in any particular period.

To date, there have been no material differences between our estimates of such

expenses and the amounts actually incurred.

Value of Inducement Warrants

inducement warrants are measured at estimated fair value using the Black Scholes valuation model.

Inherent in this model are assumptions

related to expected stock price volatility, expected life, risk-free interest rate and dividend yield.

We estimate the volatility of

our common stock at the date of issuance based on the historical implied volatility of our own stock price that matches the expected

remaining life of the warrants.

The risk-free interest rate is based on the U.S.

Treasury zero-coupon yield curve on the measurement

date for a maturity similar to the expected remaining life of the inducement warrants.

The expected life of the inducement warrants is

assumed to be equivalent to their remaining contractual term.

The dividend rate is based on our historical rate, which we anticipate

to remain at zero.

The assumptions used in calculating the estimated fair value of the inducement warrants represent our best estimates.

However, these estimates involve inherent uncertainties and the application of management judgment.

As a result, if factors change and

different assumptions are used, the inducement warrants estimated fair value could be materially different.

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