What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-28 compared with 2024-03-26 · 316 added, 424 removed, 105 unchanged (88% of the section changed)

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

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.

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 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

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

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

We synthesize novel versions of classic psychedelics,

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

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

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.

anxiety, addiction, and other psychiatric disorders.

Leveraging our unique discovery and development platform, the Psybrary™, which

houses proprietary information on the use and development of existing and novel molecules for specific mental health indications, Enveric

seeks to develop a robust intellectual property portfolio of novel drug candidates.

lead program, the EVM301 Series, and its lead drug candidate, EB-003, are intended to offer a first-in-class, new approach to the treatment

of difficult-to-address mental health disorders, mediated by the promotion of neuroplasticity and without also inducing hallucinations

in the patient.

Enveric unveiled its EVM401 Series on February 25, 2025, which is intended to broaden Enveric’s pipeline with additional

non-hallucinogenic molecules and strengthen its ability to target addiction and neuropsychiatric disorders for patients with limited

Previously, Enveric was developing the EVM201 Series, and its drug candidate EB-002 (formerly EB-373), for the treatment of

neuropsychiatric disorders.

The EVM201 Series comprised next generation synthetic prodrugs of the active metabolite, psilocin.

Enveric out-licensed the EVM201 Series program to MycoMedica Life Sciences, who will seek to develop, manufacture, and commercialize

EB-002, in exchange for certain development and milestone payments to Enveric (discussed below).

Neuroplastogens

our amalgamation with MagicMed in September 2021, we have continued to pursue the development of MagicMed’s proprietary library,

the Psybrary™, which we believe will help us to identify and develop the right drug candidates needed to address mental health

challenges, including depression, anxiety, and addiction disorders.

We synthesize novel phenylalkylamines and indolethylamines, using

a mixture of chemistry and synthetic biology, resulting in the expansion of the Psybrary™, which currently includes 20 patent families

with claims covering a million potential molecular structures, over one thousand of which we have so far synthesized in sufficient quantities

to identify and hundreds of which we have screened for receptor binding and other relevant activities.

Company developed certain intellectual property rights around the trademark PsyAI™ for potential use.

On March 6, 2025, Enveric

announced it is soliciting Requests-For Proposals (“RFPs”) for the license or sale of its PsyAI™ trademark portfolio

as a means of maximizing value for an asset which is no longer strategic given the Company’s focus on drug development.

portfolio of US and Canadian trademark assets is held by its subsidiary, Enveric Biosciences Canada, Inc.

Enveric expects the period

for RFPs to remain open until August 31, 2025, with a decision to follow within three (3) months thereafter.

this stage, we have entered into several non-binding term sheets with strategic partners to out-license certain molecules from the Psybrary™.

Going forward, in order to build a pipeline of product candidates, we intend to both continue to internally develop new drug candidates

with associated intellectual property and to acquire, through in-licensing, additional intellectual property from pharmaceutical and

biotechnology companies and research institutions.

The in-licensed assets could include both research stage and clinical stage drug candidates.

we intend to pursue development of the EVM401 Series, our primary focus is to develop our lead asset EB-003 in the EVM301 Series.

development status of the product is shown in the table below:

health indication

Psychedelic-inspired

drug candidate

effected a 1-for-15 reverse stock split on January 27, 2025, which began trading on a split-adjusted basis on January 29, 2025, pursuant

to which every 15 shares of our issued and outstanding common stock were reclassified as one share of common stock.

No fractional shares

were issued as a result of the reverse stock split.

Any fractional shares that were to otherwise have resulted from the reverse stock

split were rounded up to the next whole number.

The reverse stock split had no impact on the par value of our common stock or the authorized

number of shares of our common stock.

Bid Price Deficiency

May 16, 2024, the Company received a letter from Nasdaq notifying the Company that for the prior 30 consecutive business days the bid

price for the Company’s common stock had closed below the minimum $1.00 per share requirement for continued listing on Nasdaq pursuant

to Nasdaq Listing Rule 5550(a)(2) (“Bid Price Rule”).

The deficiency letter did not result in the immediate delisting of

the Company’s common stock from Nasdaq.

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided an initial

period of 180 calendar days, until November 12, 2024, to regain compliance with the Bid Price Rule.

On November 20, 2024, Nasdaq issued

a delisting notice, indicating that the Company did not satisfy the Bid Price Rule by the compliance date and that unless the Company

requested an appeal of this determination before Nasdaq’s listing qualifications panel, our common stock would be scheduled for

delisting from Nasdaq and trading suspended.

We appealed the determination before Nasdaq’s listing qualifications panel and on

December 30, 2024, the Company received an extension until May 19, 2025, to regain compliance with Bid Price Rule.

On March 4, 2025,

the Company received notice from the Nasdaq Office of General Counsel that the Company regained

compliance with the Bid Price Rule.

Agreement with MycoMedica Life Sciences

November 7, 2024, Enveric executed a licensing agreement with MycoMedica Life Sciences, PBC (“MycoMedica”), out-licensing

the Company’s EVM201 program, including drug candidate EB-002.

Pursuant to the terms of licensing agreement, MycoMedica will seek

to develop, manufacture, and commercialize EB-002, formerly EB-373, a synthetic prodrug of the active metabolite psilocin, for the treatment

of neuropsychiatric disorders such as depression.

MycoMedica received an exclusive, global license to the formulations, drugs, method

of use, and medical devices developed by Enveric to utilize the compound.

MycoMedica assumed the responsibility for all future preclinical,

clinical, and commercial development on a royalty-bearing basis for all human and animal pharmaceutical applications.

As part of the

license agreement, Enveric received a modest upfront payment of $20,000 (recorded as other income), and if certain conditions are met,

will receive development and sales milestones potentially totaling up to $62 million, plus tiered single digit royalties on all future

MycoMedica has the option during the license term to buyout its milestone and royalty payment obligations at a predetermined amount

depending upon the stage of product development and commercialization at the time of the buyout.

Further, MycoMedica has the right to

purchase the licensed patents at a nominal amount upon a change of control of Enveric, although doing so does not relieve MycoMedica

of any of its payment obligations.

No royalties have been received to date.

Agreement with Aries Science and Technology

July 10, 2024, Akos Biosciences, Inc., a Delaware corporation (“Akos”), wholly-owned subsidiary of Enveric, entered into

an exclusive license agreement with Aries Science and Technology, LLC (“Aries”) pursuant to which Akos granted Aries a license

of Akos’s patented radiation dermatitis topical product.

The license allows Aries to use the patented formulation to develop pharmaceutical

or non-pharmaceutical products for treating radiation dermatitis suitable for administration to humans or animals.

The license is exclusive

(subject to certain exceptions contained in the Agreement), worldwide, royalty-bearing, and includes the right to sublicense.

will be eligible to receive aggregate milestone payments of up to $61 million, as well as tiered royalties on future sales, if all conditions

Aries has the option during the license term, to purchase the rights to each licensed product (on a licensed product-by-licensed

product basis) in the form of an exclusive (as to the applicable licensed product), fully paid, transferable right and license to the

licensed product.

No royalties have been received to date.

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.

September 1, 2023, the Company entered into a Distribution Agreement (“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 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.

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

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

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, 2024, the Company issued 111,200 shares of common stock for gross proceeds of $2,392,502 under the Distribution

Agreement, and charged offering costs of $583,713 to additional paid in capital on the consolidated balance sheet.

As of December 31,

2024 and 2023, there were deferred offering costs related to the Distribution Agreement of $0 and $171,944, respectively.

does not anticipate issuing further securities pursuant to the Distribution Agreement.

Park Equity Line

November 3, 2023, the Company entered into a Purchase Agreement (the “Lincoln Park Purchase Agreement”) and a registration

rights agreement (the “Registration Rights Agreement”), with Lincoln Park Capital Fund, LLC (“Lincoln Park”),

pursuant to which Lincoln Park has committed to purchase up to $10.0 million of the Company’s common stock subject to certain limitations

and satisfaction of the conditions set forth in the Lincoln Park Purchase Agreement.

the terms and subject to the conditions of the Lincoln Park Purchase Agreement, the Company has the right, but not the obligation, to

sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $10.0 million of the Company’s Common Stock (the “Purchase

However, such sales of Common Stock by the Company, if any, will be subject to important limitations set forth in the

Lincoln Park Purchase Agreement, including limitations on number of shares that may be sold.

Sales may occur from time to time, at the

Company’s sole discretion, over the 24-month period commencing on the date that the conditions to Lincoln Park’s purchase

obligation set forth in the Lincoln Park Purchase Agreement are satisfied, including that a registration statement on Form S-1 covering

the resale of the shares of the Company’s Common Stock that have been and may be issued to Lincoln Park under the Lincoln Park

Purchase Agreement, which the Company has filed with the SEC pursuant to the Registration Rights Agreement, is declared effective by

the SEC and a final prospectus relating thereto is filed with the SEC.

As required under the Lincoln Park Purchase Agreement, the Company

registered a resale of 76,032 shares of our common stock, plus the 9,294 commitment shares, 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.

As of July 30, 2024, there were no remaining

shares available to be issued in connection with this registration statement.

On September 4, 2024, the Company filed a new registration

statement on Form S-1, which was declared effective by the SEC on September 11, 2024.

The new Form S-1 registered an additional 326,667

shares of common stock that are available to be issued to Lincoln Park in connection with the Lincoln Park Purchase Agreement.

the year ended December 31, 2024, the Company had issued 159,366 shares of common stock, through the Lincoln Park Purchase Agreement

for gross cash proceeds of $1,083,709.

As of December 31, 2024 there were 243,334 remaining shares available to be issued in connection

with this amended registration statement.

The Company engaged in a best efforts public offering in the first quarter of 2025 (described

below), which restricts the use of the Lincoln Park Equity Line for a period of one year from February 3, 2025.

the purchase price per share to be paid by Lincoln Park for the shares of Common Stock that the Company may elect to sell to Lincoln

Park under the Lincoln Park Purchase Agreement, if any, will fluctuate based on the market prices of the Company’s Common Stock

at the time the Company elects to sell shares to Lincoln Park pursuant to the Lincoln Park Purchase Agreement, if any, it is not possible

for us to predict the number of shares of Common Stock that the Company will sell to Lincoln Park the purchase price per share that Lincoln

Park will pay for shares purchased from us or the aggregate gross proceeds that the Company will receive from those purchases by Lincoln

Direct Offerings

March and May 2024, the Company entered into a series of common stock purchase agreements (the “Purchase Agreements”) for

the issuance in a registered direct offering of an aggregate of 45,780 shares of the Company’s common stock to certain institutional

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

in certain inducement offer letters, dated December 28, 2023, between the Company and the institutional investors with respect to any

existing or future agreement by the Company to effect any issuance of shares.

The Company did not receive any net proceeds in connection

with the offering.

The offering was made to obtain a waiver of the variable rate transaction limitation as described above and further

described in the Purchase Agreements so the Company could utilize its equity line of credit with Lincoln Park, and enter into any future

agreements that involve a variable rate transaction and issue such shares thereunder.

The fair value of the shares issued for consideration

of waiving the variable rate transaction limitation was $322,453 and was charged to additional paid in capital, as it is direct and incremental

to the Distribution Agreement, on the unaudited condensed consolidated balance sheet as an offering cost related to the Distribution

The fair value of the shares issued for consideration of waiving the variable rate transaction limitation was $448,840 and

was recorded as deferred offering costs, as direct and incremental to the Purchase Agreement, within prepaid expenses and other current

assets on the unaudited condensed consolidated balance sheet related to the Purchase Agreement.

2025 Offering

January 30, 2025, the Company commenced a best efforts public offering (the “Offering”) of an aggregate of (i) 1,229,330

shares (the “Shares”) of common stock of the Company, (ii) 437,336 pre-funded warrants (the “Pre-Funded Warrants”)

to purchase 437,336 shares of common stock (the “Pre-Funded Warrant Shares”), (iii) 1,666,666 Series A warrants (the “Series

A Warrants”) to purchase 1,666,666 shares of common stock (the “Series A Warrant Shares”), and (iv) 1,666,666 Series

B warrants (the “Series B Warrants,” and together with the Series A Warrants, the “Warrants”) to purchase 1,666,666

shares of common stock (the “Series B Warrant Shares”).

Each Share or Pre-Funded Warrant was sold together with one Series

A Warrant to purchase one share of common stock and one Series B Warrant to purchase one share of common stock.

The offering price for

each Share and accompanying Warrants was $3.00, and the offering price for each Pre-Funded Warrant and accompanying Warrants was $2.9999.

The Pre-Funded Warrants have an exercise price of $0.0001 per share, are exercisable immediately and will expire when exercised in full.

Each Warrant has an exercise price of $3.00 per share and will be exercisable immediately upon issuance (“Initial Exercise Date”).

The Series A Warrants expire on the five-year anniversary of the Initial Exercise Date.

The Series B Warrants expire on the 18-month

anniversary of the Initial Exercise Date.

Offering closed on February 3, 2025.

The net proceeds of the Offering, after deducting the fees and expenses of the Placement Agent (as

defined below) and other offering expenses payable by the Company, but excluding the net proceeds, if any, from the exercise of the Warrants,

is approximately $4.2 million.

The Company intends to use the net proceeds from the Offering for working capital, EB-003 development,

and general corporate purposes.

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.

During the year ended December 31, 2024, we raised approximately

$8.0 million from the sales of Common Stock and warrants.

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

financed during the year ended December 31, 2024.

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 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.

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

We support an internal research and development team 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.

In January 2024, the Company reduced

its discovery team in Calgary and was primarily focused on the development of EB-002 and EB-003 pipeline assets (until we out-licensed

EB-002 to MycoMedica Lifesciences in November of 2024).

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 viability.

and Administrative Expenses

3 unchanged sentences

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

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

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.

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

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

$1.6 million and $2.2 million for the years ended December 31, 2024 and 2023, respectively.

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

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.

“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,

2023 and 2022, 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.

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.

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 RSU’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 RSA’s and 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.

of Operations

following table sets forth information comparing the components of net loss for the years ended December 31, 2024 and 2023:

For the Years Ended December 31,

the Years Ended December 31,

and administrative

and development

and amortization

operating expenses

General and administrative

Research and development

Impairment of intangible assets and goodwill

Depreciation and amortization

Total operating expenses

Loss from operations

(16,448,440 )

from operations

(16,448,440 )

Other (expense) income

Inducement expense, net

Change in fair value of warrant liabilities

Change in fair value of investment option liability

Change in fair value of derivative liability

Interest income (expense), net

Total other (expense) income

Net loss before income taxes

income (expense)

in fair value of warrant liabilities

in fair value of investment option liability

in fair value of derivative liability

other income (expense)

loss before income taxes

$ (9,566,057 )

$ (17,262,819 )

Income tax (expense) benefit

$ (9,574,987 )

$ (17,291,732 )

Trends or Uncertainties

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

have a material unfavorable impact on results of continuing operations.

Higher rates of price inflation, as compared to recent prior

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.

and Administrative Expenses

general and administrative expenses decreased to $8,852,021 for the year ended December 31, 2023 from $11,605,761 for the year ended

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

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.

general and administrative expenses decreased to $6,453,505 for the year ended December 31, 2024 from $8,852,021 for the year ended December

31, 2023, a decrease of $2,398,516, or 27%.

This change was primarily driven by decreases in consulting expenses of $1,067,245, salaries

and wages of $623,101, stock compensation expense of $508,785, accounting fees of $345,488, insurance expenses of $193,932, and software

expenses of $183,681.

This is offset by an increase in director fees of $223,700, public company fees of $182,643, and Delaware Franchise

Tax expenses of $81,421.

decrease in consulting fees was due to decreased outsourcing to contractors.

The decrease in salaries and wages was due to the reduction

The decrease in stock compensation expense was 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 accounting fees was due to a reduction

in technical accounting services.

The decrease in insurance expense was due to lower premiums as a result of lower payroll costs.

decrease in software expenses was due to the down-size in operations of Enveric Canada.

The increase in director fees was due to the

addition of a director to the Board during 2024 and cash payments made to each director during the year.

The increase in public company

fees was due to an increase in broker fees and other public company filing fees.

and Development Expenses

2 unchanged sentences

This decrease was primarily driven by decreased salaries and wages of $1,560,017,

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.

research costs of $1,346,647, CRO costs of $1,247,284, lab expenses of $158,514, tax incentive of $149,262, and rent of $86,098.

decrease in salaries and wages was due to the reduction in force as a result of the Company’s cost reduction plan.

in research costs and CRO costs was due to the completion of the Australia research and development project during the second quarter

The decrease in lab expenses was due to a reduction in research and development during 2024.

The decrease in tax incentives

was due to a tax credit received during 2024.

The decrease in rent was due to the expiration of the Company’s Canadian lease during

These decreases were slightly offset by an increase in consulting fees of $366,060.

The increase in consulting fees was due to

certain employees that were hired on a part-time consultant basis to perform certain research and development activities.

and Amortization Expense

2 unchanged sentences

in Fair Value of Warrant Liabilities

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 warrant liabilities for the year ended December 31, 2024 resulted in income of $24,370 as compared to $94,396 for the

year ended December 31, 2023.

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, 2024 compared to the year ended December 31, 2023, resulted

in the significant decrease to the change in fair value of warrant liabilities.

in Fair Value of Investment Option Liability

6 unchanged sentences

31, 2023, resulted in the significant decrease to the change in fair value of warrant liabilities.

was no inducement expense for the year ended December 31, 2024 as compared to $1,848,235 for the year ended December 31, 2023.

recorded were related to inducement incurred related to the conversion of warrants and investment options that occurred in December 2023.

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 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.

Company’s change in fair value of derivative liability is due to the May 2023 redemption which ceased the probability of occurrence

of the Akos spin-off and Akos Series A Preferred Stock redemption.

Company’s other income during the year ended December 31, 2024 relates to licensing income from the contract with MycoMedica Life

Concern, Liquidity and Capital Resources

18 unchanged sentences

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.

Management’s plan to alleviate the conditions that raise substantial doubt include raising additional working capital through public

or private equity or debt financings or other sources, and may include additional collaborations with third parties as well as disciplined

cash spending.

Adequate additional financing may not be available to us on acceptable terms, or at all.

Should the Company be unable

to raise sufficient additional capital, the Company may be required to undertake cost-cutting measures including delaying or discontinuing

certain operating activities.

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

2 unchanged sentences

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:

For the Years Ended December 31,

Net cash used in operating activities

the Years Ended December 31,

cash used in operating activities

$ (7,726,139 )

$ (14,094,411 )

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

cash provided by investing activities

cash provided by (used in) financing activities

of foreign exchange rate on changes on cash

decrease in cash

$ (15,435,907 )

cash used in operating activities was $7,726,139 during the year ended December 31, 2024, 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.

for non-cash items of $7,302,896, a decrease in prepaid expenses of $178,496, an increase in due to related parties of $232,891 and a

decrease in accounts payable and accrued liabilities of $834,630.

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 $16,929,063, an increase in prepaid expenses and other current assets of $374,058, an increase in accounts payable

for non-cash items of $13,919,661, an increase in prepaid expenses and other current assets 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 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 provided by investing activities was $0 during the year ended December 31, 2024.

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

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.

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

cash provided by financing activities was $7,673,834 during the year ended December 31, 2024, which consisted of $1,804,819 in proceeds

from the subscription receivable related to issuance of Inducement Warrants and the exercise of warrants and preferred investment options,

$2,676,980 in proceeds from the exercise of Inducement Warrants, $2,290,186 in proceeds from commons stock sold under the Distribution

Agreement, net of offering costs, $1,083,706 in proceeds from common stock sold under the Purchase Agreement, net of offering costs,

offset by the payment of offering costs previously accrued of $181,857.

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

of Series A Preferred Stock and the payment of offering costs previously accrued of $291,084.

Accounting Estimates

12 unchanged sentences

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.

Significant areas requiring management’s estimates and assumptions include

determining the fair value of transactions involving common stock, the valuation of warrants and preferred investment options, the valuation

of stock-based compensation and accruals associated with third party providers supporting research and development efforts.

Actual results

could differ from those estimates.

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