U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from ________ to ________
Commission file number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification Number) | |
| (Address of principal executive offices) | (Zip Code) |
+1
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
| The |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of May 12, 2023, the number of shares of the registrant’s common stock outstanding was .
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
- INDEX -
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, the financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.
The results for the periods ended March 31, 2023, are not necessarily indicative of the results of operations for the full year. These financial statements and related footnotes should be read in conjunction with the financial statements and footnotes thereto included in the Company’s Form 10-K for the fiscal year ended June 30, 2022, filed with the Securities and Exchange Commission on February 27, 2023.
1
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | June 30, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Prepaids and other assets | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| OTHER ASSETS: | ||||||||
| Definite life intangible assets, net | ||||||||
| Indefinite life intangible assets, net | ||||||||
| Goodwill | ||||||||
| Deposits and other assets | ||||||||
| Operating lease right-of-use assets | ||||||||
| Total Other Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable – trade | $ | $ | ||||||
| Accrued expenses | ||||||||
| Other current liabilities | ||||||||
| Contingent consideration liability | ||||||||
| Notes payable, net | ||||||||
| Convertible notes payable | ||||||||
| Current portion of operating lease liabilities | ||||||||
| Total Current Liabilities | ||||||||
| NON-CURRENT LIABILITIES: | ||||||||
| Notes payable, net | ||||||||
| Operating lease liabilities, net of current portion | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred stock, $ par value; shares authorized; shares issued and outstanding | ||||||||
| Common stock, par value $, shares authorized, shares issued and outstanding at March 31, 2023, and shares issued and outstanding at June 30, 2022 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Accumulated other comprehensive loss | ( |
) | ( |
) | ||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
2
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Research and development | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expense) | ||||||||||||||||
| Loss on extinguishment of contingent consideration | ( | ) | ||||||||||||||
| Change in fair value of contingent consideration | ( | ) | ( | ) | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest and other income (expense) | ( | ) | ( | ) | ||||||||||||
| Total Other Income (Expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss Before Income Taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income Tax (Provision) Benefit | ( | ) | ||||||||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| BASIC AND DILUTED NET LOSS PER SHARE | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING - BASIC AND DILUTED | ||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
3
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other Comprehensive (Loss) | ||||||||||||||||
| Foreign currency translation, net of taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
See accompanying notes to the unaudited condensed consolidated financial statements.
4
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
|
||||||||||||||||||||||||
| # of Shares | Common Shares | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total | |||||||||||||||||||
| July 1, 2022 | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
| Stock issued pursuant to warrants exercised | ||||||||||||||||||||||||
| Contingent shares issued pursuant to acquisition agreement | ||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Net loss | — | ( |
) | ( |
) | |||||||||||||||||||
| Foreign currency translation adjustment | — | ( |
) | ( |
) | |||||||||||||||||||
| September 30, 2022 | ( |
) | ( |
) | ||||||||||||||||||||
| Shares issued in lieu of interest on $1.2 million notes payable extension | ||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Net loss | — | ( |
) | ( |
) | |||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||
| December 31, 2022 | ( |
) | ( |
) | ||||||||||||||||||||
| Shares and warrants issued pursuant to private placement offering | ||||||||||||||||||||||||
| Restricted shares issued for services rendered | ||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Net loss | — | ( |
) | ( |
) | |||||||||||||||||||
| Foreign currency translation adjustment | — | ( |
) | ( |
) | |||||||||||||||||||
| March 31, 2023 | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
| # of Shares | Common Shares | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total | |||||||||||||||||||
| July 1, 2021 | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Net loss | — | ( |
) | ( |
) | |||||||||||||||||||
| Foreign currency translation adjustment | — | ( |
) | ( |
) | |||||||||||||||||||
| September 30, 2021 | ( |
) | ( |
) | ||||||||||||||||||||
| Stock issued pursuant to warrants exercised | ||||||||||||||||||||||||
| Shares issued pursuant to LPC purchase agreement | ||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Shares issued for fully vested RSUs | ||||||||||||||||||||||||
| Restricted shares converted to shares for services rendered | ( |
) | ||||||||||||||||||||||
| Net loss | — | ( |
) | ( |
) | |||||||||||||||||||
| Foreign currency translation adjustment | — | ( |
) | ( |
) | |||||||||||||||||||
| December 31, 2021 | ( |
) | ( |
) | ||||||||||||||||||||
| Contingent shares issued pursuant to acquisition agreement | ||||||||||||||||||||||||
| Shares issued pursuant to LPC purchase agreement | ||||||||||||||||||||||||
| Shares issued for fully vested RSUs | ( |
) | ||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Net loss | — | ( |
) | ( |
) | |||||||||||||||||||
| Foreign currency translation adjustment | — | ( |
) | ( |
) | |||||||||||||||||||
| March 31, 2022 | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
5
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
(UNAUDITED)
| For the Nine Months Ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: | ||||||||
| Depreciation and amortization | ||||||||
| Loss on extinguishment of contingent consideration liability | ||||||||
| Change in contingent consideration liability | ||||||||
| Stock based compensation expense | ||||||||
| Amortization of discount on notes payable | ||||||||
| Changes in assets and liabilities: | ||||||||
| Other receivables | ||||||||
| Prepaid expenses/deposits | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ( | ) | ||||
| Other current liabilities | ( | ) | ( | ) | ||||
| Operating leases, net | ( | ) | ( | ) | ||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Repayment of finance agreement | ( | ) | ( | ) | ||||
| Proceeds from 2023 private placement | ||||||||
| Proceeds from LPC equity agreement | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| Effect of exchange rates on cash | ( | ) | ||||||
| NET CHANGE IN CASH | ( | ) | ( | ) | ||||
| CASH, BEGINNING OF PERIOD | ||||||||
| CASH, END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income Taxes | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Contingent shares issued pursuant to acquisition agreement | $ | $ | ||||||
| Finance agreement entered into in exchange for prepaid assets | $ | $ | ||||||
| Shares issued in lieu of interest on $1.2 million notes payable extension | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statement.
6
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business – Enochian Biosciences Inc., (“Enochian,” or “Registrant”, and together with its subsidiaries, the “Company”, “we” or “us”) engages in the research and development of pharmaceutical and biological products for the treatment of Cancer, HIV, and HBV and other infectious diseases with the intent to manufacture said products.
Going Concern - These
financial statements have been prepared on a going concern basis, which assumes that the Company will continue to realize its assets
and discharge its liabilities in the normal course of business. The Company has not generated any revenue, has incurred substantial
recurring losses from continuing operations and has an accumulated deficit of $
Basis of Presentation – The Company prepares consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and follows the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The accompanying financial statements are unaudited. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2023, and 2022 and for the periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s June 30, 2022, audited financial statements. The results of operations for the periods ended March 31, 2023, and 2022 are not necessarily indicative of the operating results for the full year.
Consolidation – For the three and nine months ended March 31, 2023, and 2022, the condensed consolidated financial statements include the accounts and operations of the Registrant and its subsidiaries. All material inter-company transactions and accounts have been eliminated in the consolidation.
Accounting Estimates – The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimated. Significant estimates include the fair value and potential impairment of intangible assets, and fair value of equity instruments issued.
Functional Currency & Foreign Currency Translation – The functional currency of Enochian Denmark is the Danish Kroner (“DKK”). The Company’s reporting currency is the U.S. Dollar for the purpose of these financial statements. The Company’s balance sheet accounts are translated into U.S. dollars at the period-end exchange rates and all revenue and expenses are translated into U.S. dollars at the average exchange rates prevailing during the periods ended March 31, 2023, and 2022. Translation gains and losses are deferred and accumulated as a component of other comprehensive income in stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are included in the statement of operations as incurred.
7
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
– The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash
equivalents. The Company had balances held in financial institutions in Denmark and in the United States in excess of federally
insured amounts at March 31, 2023, and June 30, 2022, of $
Property and Equipment – Property and equipment are stated at cost. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized and depreciated upon being placed in service. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed for financial statement purposes on a straight-line basis over the estimated useful lives of the assets, which range from four to ten years (see Note 4.)
Intangible Assets – The Company has both definite and indefinite life intangible assets.
Definite life intangible assets include patents. The Company accounts for definite life intangible assets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, “Goodwill and Other Intangible Assets”. Intangible assets are recorded at cost. Patent costs consist of costs incurred to acquire the underlying patent. If it is determined that a patent will not be issued, the related remaining capitalized patent costs are charged to expense. Intangible assets are amortized on a straight-line basis over their estimated useful life. The estimated useful life of patents is twenty years from the date of application.
Indefinite life intangible assets include license agreements and goodwill. The Company accounts for indefinite life intangible assets in accordance with ASC 350, “Goodwill and Other Intangible Assets”. License agreement costs represent the fair value of the license agreement on the date acquired and are tested annually for impairment, as well as whenever events or changes in circumstances indicate the carrying value may not be recoverable.
Goodwill – Goodwill is not amortized but is evaluated for impairment annually as of June 30th of each fiscal year or whenever events or changes in circumstances indicate the carrying value may not be recoverable.
Impairment of Goodwill and Indefinite Lived Intangible Assets – We test for goodwill impairment at the reporting unit level, which is one level below the operating segment level. Our detailed impairment testing involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit and is based on discounted cash flows or relative market-based approaches. If the carrying value of the reporting unit exceeds its fair value, we record an impairment loss for such excess. The annual fair value analysis performed on goodwill supported that goodwill was not impaired as of June 30, 2022, and no impairment is deemed necessary as of March 31, 2023 (see Note 5.)
For indefinite-lived intangible
assets, such as licenses acquired as an IPR&D asset, on an annual basis we determine the fair value of the asset and record
an impairment loss, if any, for the excess of the carrying value of the asset over its fair value. For the year ended June 30,
2022, the carrying value of the licenses acquired as an IPR&D asset exceeded its fair value. Therefore, the Company recorded
an impairment loss of $
The carrying value of IPR&D
and goodwill at March 31, 2023, was $
8
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impairment of Long-Lived Assets – Long-lived assets, such as property and equipment, definite and indefinite life intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and would no longer be depreciated. The depreciable basis of assets that are impaired and continue in use are their respective fair values.
Leases – In accordance with ASC Topic 842, “Leases”, the Company determined the initial classification and measurement of its right-of-use assets and lease liabilities at the lease commencement date and thereafter. The lease terms include any renewal options and termination options that the Company is reasonably assured to exercise, if applicable. The present value of lease payments is determined by using the implicit interest rate in the lease, if that rate is readily determinable; otherwise, the Company develops an incremental borrowing rate based on the information available at the commencement date in determining the present value of the future payments.
Rent expense for operating leases is recognized on a straight-line basis, unless the operating lease right of use assets have been impaired, over the reasonably assured lease term based on the total lease payments and is included in operating expenses in the condensed consolidated statements of operations. For operating leases that reflect impairment, the Company will recognize the amortization of the operating lease right-of-use assets on a straight-line basis over the remaining lease term with rent expense still included in general and administrative expenses in the unaudited condensed consolidated statements of operations.
The Company has elected the practical expedient to not separate lease and non-lease components. The Company’s non-lease components are primarily related to property maintenance, insurance, and taxes, which vary based on future outcomes, and thus are recognized in general and administrative expenses when incurred (see Note 6.)
Research and Development
Expenses – The Company expenses research and development costs incurred in formulating, improving, validating, and creating
alternative or modified processes related to and expanding the use of the potential Oncology, HIV and HBV therapies and technologies
for use in the prevention, treatment, amelioration of and/or therapy for Oncology, HIV and HBV. Research and development expenses
for the three and nine months ended March 31, 2023, amounted to $
Income Taxes – The Company accounts for income taxes in accordance with FASB ASC Topic 740, “Accounting for Income Taxes”, which requires an asset and liability approach for accounting for income taxes.
9
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments – The Company accounts for fair value measurements for financial assets and financial liabilities in accordance with FASB ASC Topic 820, “Fair Value Measurements”. The authoritative guidance, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability (see Note 3.)
Stock Options and Restricted Share Units – The Company has granted stock options, restricted share units (“RSUs”) and warrants. The Company accounts for stock-based awards in accordance with the provisions of FASB ASC Topic 718, “Compensation - Stock Compensation”.
Stock-Based Compensation – The Company records stock-based compensation in accordance with ASC Topic 718, “Compensation - Stock Compensation”. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to consultants and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the required service period, which is generally the vesting period. Stock based compensation costs for the vesting of options, stock awards, and RSUs granted for the three and nine months ended March 31, 2023, were $ and $, respectively. Stock-based compensation costs for the vesting of the options and RSUs granted for the three and nine months ended March 31, 2022, were $ and $, respectively. (See Note 8.)
Recently Adopted Accounting Pronouncements – Recent accounting pronouncements issued by the FASB do not or are not believed by management to have a material impact on the Company’s present or future financial statements.
10
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – GOING CONCERN
The Company’s condensed
consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern,
which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company
has incurred substantial recurring losses from continuing operations, has used cash in the Company’s continuing operations,
and is dependent on additional financing to fund operations. The Company incurred a net loss of approximately $
NOTE 3 — FAIR VALUE MEASUREMENTS
The Company accounts for fair value measurements for financial assets and financial liabilities in accordance with FASB ASC Topic 820, “Fair Value Measurements”. The authoritative guidance among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| ● | Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities; |
| ● | Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and |
| ● | Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
There were no Level 1, 2 or 3 assets, nor any Level 1, 2 or 3 liabilities measured at fair value on a recurring basis as of March 31, 2023.
11
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 — PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
| Useful Life | March 31, 2023 | June 30, 2022 | ||||||||||
| Lab Equipment and Instruments | $ | $ | ||||||||||
| Leasehold Improvements | ||||||||||||
| Furniture, Fixtures and Equipment | ||||||||||||
| Total | ||||||||||||
| Less Accumulated Depreciation | ( |
) | ( |
) | ||||||||
| Net Property and Equipment | $ | $ | ||||||||||
Depreciation expense amounted
to $
NOTE 5 —INTANGIBLE ASSETS
At March 31, 2023, and June
30, 2022, definite-life intangible assets, net of accumulated amortization, consisted of patents on the Company’s products
and processes of $
At March 31, 2023, and 2022, indefinite life intangible assets consisted of a license agreement classified as In-Process Research and Development (“IPR&D”) intangible assets, which are not amortizable until the intangible asset provides economic benefit, and goodwill.
12
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At March 31, 2023, and June 30, 2022, definite and indefinite-life intangible assets consisted of the following:
| Useful Life | June
30, 2022 |
Period Change | Effect of Currency Translation | March
31, 2023 | ||||||||||||||
| Definite Life Intangible Assets | ||||||||||||||||||
| Patents | $ | $ | $ | $ | ||||||||||||||
| Less Accumulated Amortization | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
| Net Definite-Life Intangible Assets | $ | $ | ( |
) | $ | $ | ||||||||||||
| Indefinite Life Intangible Assets | ||||||||||||||||||
| License Agreement | $ | — | $ | |||||||||||||||
| Goodwill | — | — | ||||||||||||||||
| Total Indefinite Life Intangible Assets | $ | — | $ | |||||||||||||||
Expected future amortization expense is as follows:
| Year ending June 30, | ||||||
| 2023 | $ | |||||
| 2024 | ||||||
| 2025 | ||||||
| 2026 | ||||||
| Total | $ | |||||
During February 2018, the Company acquired a License Agreement (as licensee) to an HIV therapy which consists of a perpetual, fully paid-up, royalty-free, sub-licensable, and sole and exclusive worldwide license to research, develop, use, sell, have sold, make, have made, offer for sale, import and otherwise commercialize certain intellectual property in cellular therapies for the prevention, treatment, amelioration of and/or therapy exclusively for HIV in humans, and research and development exclusively relating to HIV in humans (the “HIV License Agreement”). Because the HIV License Agreement is considered an IPR&D intangible asset it is classified as an indefinite life asset that is tested annually for impairment.
Impairment – Following
the fourth quarter of each year, management performs its annual test of impairment of intangible assets by performing a quantitative
assessment and determines if it is more likely than not that the fair value of the asset is greater than or equal to the carrying
value of the asset. The results of the quantitative assessment indicated that the carrying value of the licenses acquired as an
IPR&D asset exceeded its fair value, due to the sublicensing of ENOB HV-01, which required a different valuation approach and
changes in other factors impacting the fair value of the asset. Therefore, an impairment adjustment of $
13
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 — LEASES
Operating
Leases —
The Company identified and assessed the following significant assumptions in recognizing the right-of-use asset and corresponding liabilities:
Expected lease term
— The expected lease term includes both contractual lease periods and, when applicable, cancelable option periods when it
is reasonably certain that the Company would exercise such options. The Company’s lease has a remaining lease term of 53
months. As of March 31, 2023, the weighted-average remaining term is
Incremental borrowing
rate — The Company’s lease agreements do not provide an implicit rate. As the Company does not have any external
borrowings for comparable terms of its leases, the Company estimated the incremental borrowing rate based on the U.S. Treasury
Yield Curve rate that corresponds to the length of each lease. This rate is an estimate of what the Company would have to pay if
borrowing on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment.
As of March 31, 2023, the weighted-average discount rate is
Lease and non-lease components — In certain cases the Company is required to pay for certain additional charges for operating costs, including insurance, maintenance, taxes, and other costs incurred, which are billed based on both usage and as a percentage of the Company’s share of total square footage. The Company determined that these costs are non-lease components, and they are not included in the calculation of the lease liabilities because they are variable. Payments for these variable, non-lease components are considered variable lease costs and are recognized in the period in which the costs are incurred.
14
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Below are the lease commitments for the next 5 years:
| Year Ending June 30th | Lease Expense | |||||
| 2023 | $ | |||||
| 2024 | ||||||
| 2025 | ||||||
| 2026 | ||||||
| 2027 | ||||||
| Less imputed interest | ( |
) | ||||
| Total | $ | |||||
Sublease Agreement
In accordance with ASC Topic 842, the Company treated the sublease as a separate lease, as the Company was not relieved of the primary obligation under the original lease. The Company continued to account for the Century City Medical Plaza lease as a lessee and in the same manner as prior to the commencement date of the sublease. The Company accounted for the sublease as a lessor of the lease. The sublease was classified as an operating lease, as it does not meet the criteria of a sales-type or direct financing lease.
On April 18, 2023, the Company
entered into a sublease termination Agreement with One Health Labs (the “Subtenant”), whereby the Subtenant and the
Company agreed to terminate the sublease effective as of April 30, 2023. The Subtenant agreed to pay the Company $
The Company recognized operating income from the sublease on a straight-line basis in its statements of operations over the sublease term.
During the three and nine months ended March 31, 2023 and 2022, the net operating lease expenses were as follows:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating Lease Expense | $ | $ | $ | $ | ||||||||||||
| Sub lease Income | ( | ) | ( | ) | ||||||||||||
| Total Net Lease Expense | $ | $ | $ | $ | ||||||||||||
Lease expense charged to
general and administrative expenses for the three and nine months ended March 31, 2023, amounted to $
15
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 — NOTES PAYABLE
Convertible Notes Payable
— On February 6, 2020, the Company issued two Convertible Notes (the “Convertible Notes”) to Paseco ApS (the
“Holder”), a Danish limited company and an existing stockholder of the Company each with a face value amount of $
The conversion price was
equal to $
Effective December 30, 2022
(the “Effective Date”), the Company amended and restated the Convertible Notes (the “Amended and Restated Secured
Notes”). Pursuant to the Amended and Restated Secured Notes, the due date was extended to
As of March 31, 2023 and
2022, the Company recorded accrued interest in the amount of zero and $
Note Payable —
On March 30, 2020 (the “Issuance Date”), the Company issued a Promissory Note in the principal amount of $
16
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On February 11, 2021, the
Company entered into an amendment to the Promissory Note that extended the Maturity Date to
On May 17, 2022, the Company
entered into a second amendment to the Promissory Note that extended the Maturity Date to
Effective December 30, 2022, the Company entered into a third amendment to the Promissory Note. Pursuant to the third amendment, the Company’s obligations under the Promissory Note were secured by the Security Agreement. To secure the Company’s obligations under each of the Amended and Restated Secured Notes and the Promissory Note, the Company entered into a Security Agreement with the Holder, pursuant to which the Company granted a lien on all assets of the Company (the “Collateral”) for the benefit of the Holder. Upon an Event of Default (as defined in the Amended and Restated Secured Notes and Promissory Note, respectively) the Holder may, among other things, collect or take possession of the Collateral, proceed with the foreclosure of the security interest in the Collateral or sell, lease, or dispose of the Collateral.
For the three and nine months
ended March 31, 2023, discount amortization of $
Finance Agreement —
On November 30, 2022, the Company entered into a premium finance agreement (the “Agreement”) related to insurance,
which resulted in a prepaid expense with a principal amount of $
For the three and nine months
ended March 31, 2023, the Company recorded interest expense related to the Agreement in the amount of $
Total interest expense recorded
for the three and nine months ended March 31, 2023, was $
17
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — STOCKHOLDERS’ EQUITY
Preferred Stock —The Company has authorized shares of Preferred Stock, par value $ per share. At March 31, 2023, and June 30, 2022, there were zero shares issued and outstanding.
Common Stock —The Company has authorized shares of Common Stock, par value $ per share. At March 31, 2023, and June 30, 2022, there were and shares issued and outstanding, respectively.
Voting — Holders of Common Stock are entitled to one vote for each share held of record on each matter submitted to a vote of stockholders, including the election of directors, and do not have any right to cumulate votes in the election of directors.
Dividends — Holders of Common Stock are entitled to receive ratably such dividends as the Board from time to time may declare out of funds legally available.
Liquidation Rights — In the event of any liquidation, dissolution or winding up of the affairs of the Company, after payment of all debts and liabilities, the holders of Common Stock will be entitled to share ratably in the distribution of any of the remaining assets.
In the three and nine months ended March 31, 2023 there were and shares of Common Stock issued, respectively.
Purchase Agreement with Lincoln Park Capital
On July 8, 2020, we entered
into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”),
pursuant to which the Company was able to sell and issue to Lincoln Park, and Lincoln Park was obligated to purchase, up to $
In consideration for entering into the Purchase Agreement, we issued shares of Common Stock to Lincoln Park as a commitment fee on July 21, 2020.
During the nine months ended
March 31, 2023, we did t
sell any shares of Common Stock to Lincoln Park under the Purchase Agreement. During the three and nine months ended March 31, 2022,
we issued and shares
of Common Stock to Lincoln Park under the Purchase Agreement for a purchase price of $
March 2023 Private Placement
In
March 2023, the Company issued
shares of Common Stock and warrants to purchase
shares of common stock (“Purchase Warrants”) resulting in proceeds of $
18
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — STOCKHOLDERS’ EQUITY (Continued)
2017 Warrants
On July 14, 2022, certain
of our warrant holders exercised warrants to purchase shares of Common Stock for total proceeds to the Company of $
Acquisition of Enochian
Biopharma Inc. / Contingently issuable shares — On February 16, 2018, the acquisition of Enochian Biopharma was completed.
As part of the acquisition, the stockholders of Enochian Biopharma received (i) 18,081,962 shares of Common Stock, and (ii) the right
to receive contingent shares of Common Stock (“Contingent Shares”) pro rata upon the exercise or conversion of warrants, which
were outstanding at closing. As of December 31, 2022,
Acquisition of Enochian Denmark — At March 31, 2023, and June 30, 2022, the Company maintained a reserve of shares of Common Stock of the Registrant held in escrow according to Danish law (the “Escrow Shares”), all of which are reflected as issued and outstanding in the accompanying financial statements. The Escrow Shares are reserved to acquire the shares of Enochian Denmark held by non-consenting shareholders of Enochian Denmark on both March 31, 2023, and June 30, 2022, in accordance with Section 70 of the Danish Companies Act and the Articles of Association of DanDrit Denmark. There have been shares of Common Stock issued to non-consenting shareholders of Enochian Denmark as of March 31, 2023. During the three and nine months ended March 31, 2023, the Company issued zero shares of Common Stock to such non-consenting shareholders of Enochian Denmark.
19
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — STOCKHOLDERS’ EQUITY (Continued)
Stock-based Compensation
The Company recognizes compensation costs for stock option awards to employees and directors based on their grant-date fair value. The value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model. The weighted-average assumptions used to estimate the fair values of the stock options granted using the Black-Scholes option-pricing model are as follows in the three months ended March 31, 2023:
| Enochian Biosciences Inc. | ||||
| Expected term (in years) | – | |||
| Volatility | %- | % | ||
| Risk free interest rate | %- | % | ||
| Dividend yield | % | |||
The Company recognized stock-based compensation expense of $ and $ for the three and nine months ended March 31, 2023, respectively. The Company recognized stock-based compensation expense related to the options of $ and $ for the three and nine months ended March 31, 2022, respectively. At March 31, 2023, the Company had approximately $ of unrecognized compensation cost related to non-vested options.
Plan Options
On February 6, 2014, the Board adopted the Company’s 2014 Equity Incentive Plan (the “2014 Plan”), and the Company had reserved shares of Common Stock for issuance in accordance with the terms of the 2014 Plan.
On October 30, 2019, the Board approved and on October 31, 2019, the Company’s stockholders adopted Enochian’s 2019 Equity Incentive Plan (the “2019 Plan”), which replaced the 2014 Plan. The 2019 Plan authorized options to be awarded to not exceed the sum of (1) 6,000,000 new shares, and (2) the number of shares available for the grant of awards as of the effective date under the 2014 Plan plus any options related to awards that expire, are terminated, surrendered, or forfeited for any reason without issuance of shares under the 2014 Plan after the effective date of the 2019 Plan.
Pursuant to the 2019 Plan, the Company granted options to purchase and shares of Common Stock to employees with a three-year vesting period during the three and nine months ended March 31, 2023, respectively. For the three and nine months ended March 31, 2022, the Company granted options to purchase and shares of Common Stock to employees with a three-year vesting period, respectively. One million shares were subject to performance based vesting criteria, and as of March 31, 2023, no expense has been recognized based on the assessment that these shares are not probable of vesting. As performance criteria for Years 2 and 3 are not probable, the Company has deemed forfeited the remaining two-thirds of the performance-based options as of March 31, 2022. One-third of these options were forfeited as of June 30, 2022.
During the three and nine months ended March 31, 2023, the Company granted options to purchase zero and shares of Common stock to employees with a six-month vesting period, respectively. For the three and nine months ended March 31, 2022, the Company did t grant options to purchase shares of Common Stock to employees with a six-month vesting period.
During the three and nine months ended March 31, 2023, the Company granted options to purchase zero and shares of Common stock to employees with a one-year vesting period, respectively. For the three and nine months ended March 31, 2022, the Company granted options to purchase zero and shares of Common Stock to employees with a one-year vesting period, respectively.
During the three and nine months ended March 31, 2023, the Company granted options to purchase and shares of Common Stock, to the Board of Directors and Scientific Advisory Board Members with a one-year vesting period, respectively. For the three and nine months ended March 31, 2022, the Company granted options to purchase and shares of Common Stock to members of the Board of Directors and Scientific Advisory Board with a one-year vesting period, respectively.
20
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — STOCKHOLDERS’ EQUITY (Continued)
During the three and nine months ended March 31, 2023, the Company granted options to purchase shares of Common Stock for consulting services with a one-year vesting period. For the three and nine months ended March 31, 2022, the Company granted options to purchase zero and shares of Common Stock with immediate vesting, issued options to purchase zero and shares of Common Stock with a one-year vesting period, and issued options to purchase zero and shares of Common Stock with a three-year vesting period for consulting services, respectively.
All of the above options are exercisable at the market price of the Company’s Common Stock on the date of the grant.
At March 31, 2023 the Company had options available to be issued under the 2019 Plan.
A summary of the status of the Plan Options outstanding at March 31, 2023, is presented below:
| Options Outstanding | Options Exercisable | ||||||||||||||||||||||||||||
| Exercise Price Ranges | Number Outstanding | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | |||||||||||||||||||||||
| $ | – | $ | $ | ||||||||||||||||||||||||||
| $ | – | $ | $ | ||||||||||||||||||||||||||
| $ | – | $ | $ | ||||||||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||||||||
A summary of the status of the Plan Options at March 31, 2023, and changes since July 1, 2022, are presented below:
| Shares | Weighted Average Exercise Price |
Average Remaining Life | Weighted Average Intrinsic Value | ||||||||||||||
| Outstanding at beginning of period | $ | $ | |||||||||||||||
| Granted | $ | ||||||||||||||||
| Exercised | $ | ||||||||||||||||
| Forfeited | ( |
) | $ | ||||||||||||||
| Expired/Canceled | $ | ||||||||||||||||
| Outstanding at end of period | $ | $ | |||||||||||||||
| Exercisable at end of period | $ | $ | |||||||||||||||
At March 31, 2023, the Company had exercisable Plan Options outstanding. The total intrinsic value of options exercisable at March 31, 2023, was zero. Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) and at March 31, 2023 (for outstanding options), less the applicable exercise price.
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — STOCKHOLDERS’ EQUITY (Continued)
Common Stock Purchase Warrants
A summary of the warrants outstanding at March 31, 2023 and changes since July 1, 2022, are presented below:
| Shares | Weighted
Average Exercise Price | Weighted
Average Remaining Life | ||||||||||
| Outstanding at beginning of period | $ | |||||||||||
| Granted | $ | |||||||||||
| Exercised | ( | ) | $ | — | ||||||||
| Cancelled/Expired | $ | — | ||||||||||
| Outstanding and exercisable at end of period | $ | |||||||||||
Restricted Stock Units (RSUs)
The Company recognized stock-based compensation expense related to RSUs of zero for both the three and nine months ended March 31, 2023. The Company recognized stock-based compensation expense related to the RSUs of $ and $ for the three and nine months ended March 31, 2022, respectively.
Restricted Stock Awards (RSA)
The Company recognized stock-based compensation expense related to RSAs of $ for the three and nine months ended March 31, 2023, respectively for a grant of shares of restricted stock made to a consultant as consideration for consulting services. The Company recognized stock-based compensation expense related to RSAs of zero for both the three and nine months ended March 31, 2022.
22
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 — COMMITMENTS AND CONTINGENCIES
Commitments
On July 9, 2018, the Company
entered into a consulting agreement with G-Tech Bio, LLC, a California limited liability company (“G-Tech”) to assist
the Company with the development of the gene therapy and cell therapy modalities for the prevention, treatment, and amelioration
of HIV in humans, and with the development of a genetically enhanced Dendritic Cell for use as a wide spectrum platform for various
diseases (including but not limited to cancers and infectious diseases) (the “G-Tech Agreement”). G-Tech was entitled
to consulting fees for 20 months, with a monthly consulting fee of not greater than $
On January 31, 2020, the Company entered into a Statement of Work and License Agreement (the “HBV License Agreement”) by and among the Company, G-Tech, and G Health Research Foundation, a not for profit entity organized under the laws of California doing business as Seraph Research Institute (“SRI”) (collectively the “HBV Licensors”), whereby the Company acquired a perpetual, sublicensable, exclusive license (the “HBV License”) for a treatment under development (the “Treatment”) aimed to treat Hepatitis B Virus (HBV) infections.
The HBV License Agreement
states that in consideration for the HBV License, the Company shall provide cash funding for research costs and equipment and certain
other in-kind funding related to the Treatment over a 24 month period, and provides for an up-front payment of $
The cash funding for research
costs pursuant to the HBV License Agreement consisted of monthly payments amounting to $144,500 that covered scientific staffing
resources to complete the project as well as periodic payments for materials and equipment needed to complete the project. There
were no payments made after January 31, 2022. During the three and nine months ended March 31, 2023 the Company paid a total of zero ,
and during the three and nine months ended March 31, 2022, the Company paid $
On April 18, 2021, the Company entered into a Statement of Work and License Agreement (the “Development License Agreement”), by and among the Company, G-Tech and SRI (collectively, the “Development Licensors”), whereby the Company acquired a perpetual sublicensable, exclusive license (the “Development License”) to research, develop, and commercialize certain formulations which are aimed at preventing and treating pan-coronavirus or the potential combination of the pan-coronavirus and pan-influenza, including the SARS-coronavirus that causes COVID-19 and pan-influenza (the “Prevention and Treatment”).
The Development License
Agreement was entered into pursuant to the existing Framework Agreement between the parties dated November 15, 2019. The Development
License Agreement states that in consideration for the Development License, the Company shall provide cash funding for research
costs and equipment and certain other in-kind funding related to the Prevention and Treatment over a 24-month period. Additionally,
the Development License Agreement provides for an up-front payment of $
23
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Development License
Agreement provides for cooperation related to the development of intellectual property related to the Prevention and Treatment and
for a 3% royalty to G Tech on any net sales that may occur under the Development License Agreement. For both the three and nine
months ended March 31, 2023, the Company paid zero
related to this Development License Agreement. During the three and nine months ended March 31, 2022 the Company paid zero
and $
On August 25, 2021, the
Company entered into an ALC Patent License and Research Funding Agreement in the HIV Field (the “ALC License Agreement”)
with Serhat Gümrükcü and SRI (collectively, the “ALC Licensors”) whereby the ALC Licensors granted the
Company an exclusive, worldwide, perpetual, fully paid-up, royalty-free license, with the right to sublicense, proprietary
technology subject to a U.S. patent application, to make, use, offer to sell, sell or import products for use solely for the
prevention, treatment, amelioration of or therapy exclusively for HIV in humans, and research and development exclusively relating
to HIV in humans; provided the ALC Licensors retained the right to conduct HIV research in the field. Pursuant to the ALC License
Agreement, the Company granted a non-exclusive license back to the ALC Licensors, under any patents or other intellectual property
owned or controlled by the Company, to the extent arising from the ALC License, to make, use, offer to sell, sell or import products
for use in the diagnosis, prevention, treatment, amelioration or therapy of any (i) HIV Comorbidities and (ii) any other diseases or
conditions outside the HIV Field. The Company made an initial payment to SRI of $
G-Tech and SRI are controlled by Serhat Gümrükcü and Anderson Wittekind, shareholders of the Company.
Shares held for non-consenting shareholders – The remaining shares of Common Stock related to the Acquisition of Enochian Denmark have been reflected as issued and outstanding in the accompanying financial statements. There were zero shares of Common Stock issued to such non-consenting shareholders during the three and nine months ended March 31, 2023 (see Note 8.)
Service Agreements – This consulting agreement was terminated as of October 31, 2022. The Company maintains employment agreements with other staff in the ordinary course of business.
Contingencies
Securities Class Action Litigation. On July 26, 2022 and July 28, 2022, securities class action complaints (the former, the “Chow Action” and the latter, the “Manici Action”) were filed by purported stockholders of ours in the United States District Court for the Central District of California against us and certain of our current and former officers and directors. The complaints allege, among other things, that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, by making false and misleading statements and omissions of material fact in connection with the Company’s relationship with Serhat Gümrükcü and its commercial prospects. The complaints seek unspecified damages, interest, fees, and costs. On November 22, 2022, the Manici Action was voluntarily dismissed without prejudice, but the Chow action remains pending. The defendants did not respond to the complaint in the Manici action and have not yet responded to the complaint in the Chow action. The Company intends to contest this matter but expresses no opinion as to the likelihood of a favorable outcome.
24
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Federal Derivative Litigation. On September 22, 2022, Samuel E. Koenig filed a shareholder derivative action in the United States District Court for the Central District of California. On January 19, 2023, John Solak filed a substantially similar shareholder derivative action in the United States District Court for the District of Delaware. Both derivative actions recite similar underlying facts as those alleged in the Securities Class Action Litigation. The actions, filed on behalf of the Company, name Serhat Gümrükcü and certain of the Company’s current and former directors as defendants. The actions also name the Company as a nominal defendant. The actions allege violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and also set out claims for breach of fiduciary duty, contribution and indemnification, aiding and abetting, and gross mismanagement. Plaintiffs do not quantify any alleged injury, but seek damages, disgorgement, restitution, and other costs and expenses. On January 24, 2023, the United States District Court for the Central District of California stayed the Koenig matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. On April 6, 2023, the United States District Court for the District of Delaware stayed the Solak matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. The defendants have not yet responded to either complaint. The Company intends to contest these matters but expresses no opinion as to the likelihood of favorable outcomes.
State Derivative Litigation. On October 20, 2022, Susan Midler filed a shareholder derivative action in the Superior Court of California, Los Angeles County, reciting similar underlying facts as those alleged in the Securities Class Action Litigation. The action, filed on behalf of the Company, names Serhat Gümrükcü and certain of the Company’s current and former directors as defendants. The action also names the Company as a nominal defendant. The action sets out claims for breaches of fiduciary duty, contribution and indemnification, aiding and abetting, and gross mismanagement. Plaintiff does not quantify any alleged injury, but seeks damages, disgorgement, restitution, and other costs and expenses. On January 20, 2023, the Court stayed the Midler matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. The Court also set a status conference for November 6, 2023. The defendants have not yet responded to the complaint. The Company intends to contest this matter but expresses no opinion as to the likelihood of a favorable outcome.
On October 21, 2022, the Company filed a Complaint in the Superior Court of the State of California for the County of Los Angeles against Serhat Gümrükcü, William Anderson Wittekind (“Wittekind”), G-Tech Bio LLC (“G Tech”), SG & AW Holdings LLC (“SG & AW”), and SRI. The Complaint alleges that the defendants engaged in a “concerted, deliberate scheme to alter, falsify, and misrepresent to the Company the results of multiple studies supporting its [Hepatitis B] and SARS-CoV-2/influenza pipelines.” Specifically, “Defendants manipulated negative results to reflect positive outcomes from various studies, and even fabricated studies out of whole cloth.” As a result of the defendants’ conduct, the Company claims that it “paid approximately $25 million to Defendants and third-parties that it would not otherwise have paid.” On April 21, 2023, defendants Wittekind, G Tech, SG & AW, and SRI filed a demurrer with respect to some, but not all, of the Company’s claims, as well as a motion to strike.
On December 28, 2022, the Company received a demand letter on behalf of Weird Science LLC (“Weird Science”), William Anderson Wittekind, the William Anderson Wittekind 2020 Annuity Trust, the William Anderson Wittekind 2021 Annuity Trust, the Dybul 2020 Angel Annuity Trust, and the Ty Mabry 2021 Annuity Trust alleging that the Company breached the February 16, 2018 Investor Rights Agreement between the Company, Weird Science, and RS Group ApS. Specifically, the demand letter alleges that the Company “breached its obligations under the Investor Rights Agreement to provide the requisite thirty days’ notice” to Holders of Registrable Securities in connection with SEC Form S-3 filings on July 13, 2020 and February 11, 2022 and demands over $64 million in damages. The Company denies these allegations and intends to vigorously defend against this claim.
On March 1, 2021, former Enochian BioSciences Chief Financial Officer, Robert Wolfe and his company, Crossfield, Inc., filed a Complaint in the U.S. District Court for the District of Vermont against the Company, Enochian BioSciences Denmark ApS, and certain directors and officers. In the Complaint, Mr. Wolfe and Crossfield, Inc. asserted claims for abuse of process and malicious prosecution, alleging, inter alia, that the Company lacked probable cause to file and prosecute an earlier action, and sought millions of dollars of compensatory damages, as well as punitive damages. The allegations in the Complaint relate to an earlier action filed by the Company and Enochian BioSciences Denmark ApS in the Vermont Superior Court, Orange Civil Division. On March 3, 2022, the court partially granted the Company’s motion to dismiss, dismissing the abuse of process claim against all defendants and all claims against Mark Dybul and Henrik Grønfeldt-Sørensen. On November 29, 2022, the Company filed a motion for summary judgment with respect to the sole remaining claim of malicious prosecution. The Company denies the allegations set forth in the Complaint and will continue to vigorously defend against the remaining claim.
25
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 — RELATED PARTY TRANSACTIONS
On March 17, 2023, RS Bio ApS, a Danish
entity, participated in the Private Placement and purchased of common stock and warrants to purchase shares of
Common Stock resulting in proceeds to the Company of $
There were
NOTE 11 — SUBSEQUENT EVENTS
On
April 11, 2023, the Company received final proceeds of $
26
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statement Notice
Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance, or achievements of Enochian Biosciences Inc. (“Enochian,” and together with its subsidiaries, the “Company”, “we” or “us”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our actual future results and trends may differ materially depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K as filed with the SEC on February 27, 2023. The Company’s plans and objectives are based, in part, on assumptions involving the continued expansion of the business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.
Our Business
We are a biotechnology company committed to developing advanced cell and gene therapies to promote stronger immune system responses potentially for long-term or life-long cancer remission in some of the deadliest cancers, and potentially to treat or cure serious infectious diseases such as Human Immunodeficiency Virus (HIV) and potentially Hepatitis B virus (HBV) infection.
Our product development strategy is anchored in the use of “non-self” or allogeneic cells that enhance the immune response that we seek to elicit.
Over the past several years, Enochian BioSciences has evolved from a company with a single product candidate as a potential cure for HIV (ENOB-HV01), adding two additional pipeline candidates for HIV (ENOB-HV12 and ENOB-HV21), a pipeline for HBV (ENOB-HB01), and with a significant expansion into cancer immune therapies to address high unmet needs from difficult-to- treat solid tumors (ENOB-DC11.)
The oncology platform is now at the forefront of our development activities, beginning with pancreatic cancer and potentially other solid tumors with poor treatment and short life expectancy.
Many operational aspects of our platforms can be quickly adapted to multiple disease states from a single therapeutic approach, potentially streamlining and accelerating development, and regulatory process, as well as manufacturing operations. Moreover, because our product candidates do not require specialized delivery devices, our potentially groundbreaking interventions could have worldwide applicability.
The Company responds quickly to new data and perceived development opportunities and risks assessments. Based on the maturation of our pipelines, the Company makes business decisions to prioritize the programs that could move more rapidly through development and commercial processes.
Therapeutic Platforms
The Company’s general approach with gene- and/or cell-therapy is to enhance the immune system to allow a person to better fight diseases. The Company is leveraging general principles and advances in the knowledge of the immune response to genetically or otherwise engineered cells with enhanced attributes to promote the recognition and elimination of diseased cells.
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Advanced Allogeneic Cell Therapy
The strategic benefit of cell therapy platforms is to potentially allow for manufacture of large, “off-the-shelf” banks of therapeutic cells that could be accessed on demand by health care professionals to potentially decrease the time between diagnosis and treatment.
In addition, because we focus on cells from donors the strategy could potentially enhance the ability of the therapeutic candidates to induce a more robust response once injected into patients. The human immune system is designed to recognize and distinguish “self” from “non-self” and destroy “otherness” such as bacteria, viruses, and damaged or diseased cells such as cancer cells. Alloreactivity (reacting against another person’s cells) is the most powerful response the immune system generates. Several of our technologies take advantage of the alloreactivity to hyper stimulate a person’s immune response to better attack a chronic infection (e.g., HIV) or solid tumor.
In certain treatments (e.g., HIV and cancer), cells taken from healthy donors are sometimes genetically modified to introduce signaling molecules that are designed to enhance the ability of specific immune cells to recognize diseased cells, and to help recruit other cells that will destroy cancer or virus infected cells.
The Company believes that the combination of off-the-shelf allogeneic cells, combined with genetic modifications designed to enhance immune signaling, could potentially generate therapeutic candidates that have unique attributes that will increase the likelihood of success.
Cell Therapy enabling technology
In addition to the platform described above, Enochian BioSciences has an innovative gene therapy approach to enhance the selection and engraftment (uptake) of cells carrying therapeutic attributes. Enhanced uptake or engraftment could play a critical role in some cases to increase the likelihood of therapeutic benefit. This technology was initially developed for autologous cell therapy from a person living with HIV, and genetically modifying those cells so they cannot be infected with most variants of HIV plus a gene modification to enhance uptake. We have sublicensed under a profit-sharing agreement our technology to potentially increase engraftment for potential use in CAR-T therapy as a potential cure for HIV.
HBV Gene Therapy
Enochian BioSciences is exploring various approaches for gene therapy design elements to potentially eliminate virus-infected cells with an innovative use of the allogenic cell model molecular mechanism that co-opts the virus’ machinery to induce the death of infected cells rather than reproducing and causing more infection to exacerbate disease.
Oncology:
ENOB-DC11: Genetically modified Allogeneic Dendritic Cell Therapeutic Vaccine as Potential Product for Long-term Remission of Solid Tumors – Starting with Pancreatic Cancer
Allogeneic Cell Therapy Platform –moderately Advanced Pre-Clinical
Based on learning from peer-reviewed publications of Phase I/IIa trials, we have designed an innovative therapeutic vaccination platform that could potentially be used to induce life-long remission from some of the deadliest solid tumors. The survival rate in pancreatic cancer is currently only 5 to 10 percent at 5 years.
Initial preclinical in vitro and proof of concept in vivo studies have been encouraging. The platform might also allow for non-specific immune enhancement that could have impact against a broad array of solid tumors. We initially plan to target pancreatic cancer. However, we intend to seek IND approval to include safety assessment in a wide range of solid tumors in phase 1/2a, and narrow down to a few promising candidates such as pancreatic, triple negative breast, oral cancers, mesothelioma etc., based on early clinical signals. As with HIV, our approach would potentially allow for outpatient therapy without wiping out or significantly impairing the patient’s immune system, as many current approaches require.
Enochian BioSciences has initiated a collaboration with Dr. Anahid Jewett from UCLA to study further the in vitro and in vivo effectiveness of the approach in pancreatic cancer. Dr. Jewett created an innovative pancreatic cancer mouse model that mimics the human immune system in combination with implanted human cancer cells. Early results show promising substantial tumor size reduction. With reproducible outcome in human pancreatic tumor animal studies, we are now fully committed to process development IND submission early/mid 2024. If successful, clinical trials in humans could be possible by the first half of 2024.
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ENOB-DC12--XX: Genetically modified Allogeneic Dendritic Cell Therapeutic Vaccine as Potential Product for Long-term Remission of Additional Indications
The technology is a platform that could potentially be adapted to other solid tumors first line and/or salvage therapy, by itself or, potentially, in combination with other cancer treatments. Additional indications are being evaluated strategically to balance risk and opportunity to advance therapeutic development quickly in cancer indications with few treatment options.
Infectious Diseases:
HIV:
ENOB-HV12: HIV Therapeutic Vaccines for Potential Long-term Remission/Cure
Allogeneic Cell Therapy Platform - Advanced Pre-Clinical Stage; Non-Human Primate Studies Ongoing.
In persons living with HIV who are controlling the spread of virus with anti-retroviral (ARV) treatment, boosting the immune system in a different way than the virus already has through infection, could allow for control of HIV after stopping ARVs.
Enochian BioSciences is developing ENOB-HV12 that utilizes a novel cellular and immunotherapy approach that could potentially provide therapeutic vaccines for HIV (ENOB-HV12). A non-human primate study of the therapeutic vaccine in primates at the Fred Hutchinson Cancer Research Center is ongoing. Animals began receiving the first injections of the potential therapeutic vaccine in August, 2022. Preliminary results could potentially be available by mid-2023. A Pre-IND request could be submitted by late 2023 to early 2024 with IND submission and the beginning of Phase I clinical trials by mid- to late 2024.
ENOB-HV01: Autologous Transplant with Genetically Modified Cells:
FDA INTERACT Meeting Held February 2020 - Advanced Pre-Clinical Stage
We have pioneered a novel enabling technology (ALDH gene modification) that we believe will allow sufficient engraftment of the CCR5 gene-modified Hematopoietic Stem Cell (HSC) to eliminate the need for Antiretroviral Treatment (ART.)
Management conducted a successful FDA INTERACT Meeting in alignment with the Company’s experimental plan. Although in vitro and in vivo studies have demonstrated promising results, further development of ENOB-HV01 at this time was deemed costly and a long-term undertaking. While the Company plans to return to full development of the approach when resources are available, it has become less attractive and been deprioritized for business reasons, while pipelines that could move more quickly have been prioritized (e.g., DC11). Therefore, a business decision was made to sub-license the ALDH gene modification.
ENOB-HV01 was sub-licensed to Caring Cross with a profit share arrangement. Caring Cross is developing a CAR-T approach that they believe, when combined with Enochian Biosciences ALDH gene modification, could enhance engraftment of their CAR-T cell therapy and enhance their likelihood of success.
ENOB-HV21: Immunotherapy with Allogeneic NK/GDT Cells
Allogeneic Cell Therapy Platform -Pre-IND conducted - Advanced Pre-Clinical with Human Data through a Collaboration
We are also exploring ENOB-HV21, an innovative treatment for HIV with allogeneic Natural Killer (NK) and Gamma Delta T-Cells (GDT). It is believed that the GDT cells, a small subset of immune cells that can be infected with HIV, could both be infected by, and be a key factor in controlling the virus. The initial scientific findings were presented during the American Society of Gene & Cell Therapy (ASCGT) Annual Meeting in 2021. Enochian BioSciences has an exclusive license to use the underlying patent to develop ENOB-HV21 for potential treatment or cure of HIV. A successful investigator-initiated Pre-IND was completed in October 2021. However, due to a shift in priorities to the Oncology pipeline, Enochian BioSciences does not plan to pursue the IND and potential clinical trial in the medium to long term.
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HBV:
ENOB-HB01: Potential Cure for HBV
HBV Gene Therapy -Pre-Clinical
ENOB-HB01 is in an early pre-clinical phase as we explore various approaches for gene therapy design elements. If those explorations are successful, it is possible we could begin the regulatory process at the earliest in the first half of 2024. However, our highest priority is currently the oncology platform, beginning with pancreatic cancer.
Corporate History
We were incorporated under the laws of the State of Delaware on January 18, 2011, under the name Putnam Hills Corp. and in 2014 we merged with and changed our name to DanDrit Biotech USA, Inc. In 2018, we acquired Enochian Biopharma and changed our name to Enochian BioSciences Inc.
Going Concern and Management’s Plans
The financial statements included elsewhere herein for the period ended March 31, 2023, were prepared under the assumption that we would continue our operations as a going concern, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business. As of March 31, 2023, we had cash and cash equivalents of $2,948,042, an accumulated deficit of $220,831,001, and total liabilities of $12,602,576. We have incurred losses from continuing operations, have used cash in our continuing operations, and are dependent on additional financing to fund operations. These conditions raise substantial doubt about our ability to continue as a going concern for one year after the date the financial statements are issued. The financial statements included elsewhere herein do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
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Management has reduced overhead and administrative costs by streamlining the organization to focus around two of its therapies (oncology and a HIV therapeutic vaccine). The Company has tailored its workforce to focus on these therapies. In addition, management has extended its $1.2 million convertible notes 12 months out to be payable on February 28, 2024, and the Company was able to secure $2.7 million in additional funding through a Private Placement and intends to attempt to secure additional required funding through equity or debt financing. However, there can be no assurance that the Company will be able to obtain any sources of funding. Such additional funding may not be available or may not be available on reasonable terms, and, in the case of equity financing transactions, could result in significant additional dilution to our stockholders. If we do not obtain required additional equity or debt funding, our cash resources will be depleted and we could be required to materially reduce or suspend operations, which would likely have a material adverse effect on our business, stock price and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained. If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that could result in our stockholders losing some or all of their investment in us.
Funding that we may receive during fiscal 2023 is expected to be used to satisfy existing and future obligations and liabilities and working capital needs, to support commercialization of our products and conduct the clinical and regulatory work to develop our product candidates, and to begin building working capital reserves.
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Results of Operations for the three and nine months ended March 31, 2023, compared to the three and nine months ended March 31, 2022
The following table sets forth our revenues, expenses, and net loss for the three and nine months ended March 31, 2023, and 2022. The financial information below is derived from our unaudited condensed consolidated financial statements.
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||||||||||
| March 31, | Increase/(Decrease) | March 31, | Increase/(Decrease) | |||||||||||||||||||||||||||||
| 2023 | 2022 | $ | % | 2023 | 2022 | $ | % | |||||||||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||||||||||
| General and administrative | 3,796,057 | 2,790,456 | 1,005,601 | 36 | % | 12,365,960 | 11,169,724 | 1,196,236 | 11 | % | ||||||||||||||||||||||
| Research and development | 239,137 | 1,212,380 | (973,243 | ) | (80 | )% | 3,170,471 | 6,605,038 | (3,434,567 | ) | (52 | )% | ||||||||||||||||||||
| Depreciation and amortization | 28,242 | 31,720 | (3,478 | ) | (11 | )% | 85,487 | 95,258 | (9,771 | ) | (10 | )% | ||||||||||||||||||||
| Total Operating Expenses | 4,063,436 | 4,034,556 | 28,880 | 1 | % | 15,621,918 | 17,870,020 | (2,248,102 | ) | (13 | )% | |||||||||||||||||||||
| LOSS FROM OPERATIONS | (4,063,436 | ) | (4,034,556 | ) | (28,880 | ) | 1 | % | (15,621,918 | ) | (17,870,020 | ) | 2,248,102 | (13 | )% | |||||||||||||||||
| Other Income (Expenses) | ||||||||||||||||||||||||||||||||
| Change in fair value of contingent consideration | — | (2,078,994 | ) | 2,078,994 | (100 | )% | — | (5,070,891 | ) | 5,070,891 | (100 | )% | ||||||||||||||||||||
| Loss on extinguishment of contingent consideration | — | — | — | 0 | % | (419,182 | ) | — | (419,182 | ) | (100 | )% | ||||||||||||||||||||
| Interest expense | (122,289 | ) | (95,206 | ) | (27,083 | ) | 28 | % | (310,766 | ) | (278,327 | ) | (32,439 | ) | 12 | % | ||||||||||||||||
| Interest and other income (expense) | (142,571 | ) | 7,291 | (149,862 | ) | (2,055 | )% | (133,938 | ) | 22,897 | (156,835 | ) | (685 | )% | ||||||||||||||||||
| Total Other Income (Expenses) | (264,860 | ) | (2,166,909 | ) | 1,902,049 | (88 | )% | (863,886 | ) | (5,326,321 | ) | 4,462,435 | (84 | )% | ||||||||||||||||||
| Loss Before Income Taxes | (4,328,296 | ) | (6,201,465 | ) | 1,873,169 | (30 | )% | (16,485,804 | ) | (23,196,341 | ) | 6,710,537 | (29 | )% | ||||||||||||||||||
| Income Tax (Provision) Benefit | — | — | — | 0 | % | — | (34 | ) | 34 | (100 | )% | |||||||||||||||||||||
| NET LOSS | $ | (4,328,296 | ) | $ | (6,201,465 | ) | $ | 1,873,169 | (30 | )% | $ | (16,485,804 | ) | $ | (23,196,375 | ) | $ | 6,710,571 | (29 | )% | ||||||||||||
Revenues
We are a pre-revenue, pre-clinical biotechnology company. We have never generated revenues and have incurred losses since inception. We do not anticipate earning any revenues until our therapies or products are approved for marketing and sale.
Expenses
Our operating expenses for the three months ended March 31, 2023, and 2022, were $4,063,436 and $4,034,556 respectively, representing an increase of $28,880, or approximately 1%. The increase in operating expenses primarily relates to an increase in general and administrative expenses of $1,005,601 partially offset by a decrease in research and development expenses of $973,243.
Our operating expenses for the nine months ended March 31, 2023, and 2022, were $15,621,918 and $17,870,020, respectively, representing a decrease of $2,248,102 or approximately 13%. The decrease in operating expenses primarily relates to a decrease in research and development expenses of $3,434,567, partially offset by an increase in general and administrative expenses of $1,196,236.
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General and administrative expenses for the three months ended March 31, 2023, and 2022, were $3,796,057 and $2,790,456, respectively, representing an increase of $1,005,601 or approximately 36%. The variance is primarily related to increases in accounting related expenses of $443,212, legal expenses of $378,421 and stock-based compensation of $498,529, partially offset by decreases in recruiting fees of $140,708.
General and administrative expenses for the nine months ended March 31, 2023, and 2022, were $12,365,960 and $11,169,724, respectively, representing an increase of $1,196,236 or approximately 11%. The variance primarily relates to increases in legal expenses of $2,611,749, accounting related expenses of $579,249, and compensation and related expenses of $981,671, partially offset by a decrease in stock-based compensation of $2,426,777, security costs of $405,000 and recruiting fees of $281,407.
Research and development expenses for the three months ended March 31, 2023, and 2022, were $239,137 and $1,212,380, respectively, representing a decrease of $973,243 or approximately 80%. The variance is primarily driven by a decrease of $730,000 in collaboration expenses with CDMO and CRO partners, and $219,500 R&D consulting expenses incurred in the prior period for abandoned product candidates.
Research and development expenses for the nine months ended March 31, 2023, and 2022, were $3,170,471 and $6,605,038, respectively, representing a decrease of $3,434,567 or approximately 52%. The variance is primarily driven by a decrease of $2,578,754 in expenses related to collaboration partner expenses for abandoned product candidates, $537,434 in R&D consulting expenses, and $228,185 in lab related expenses.
The Company recorded other expense of $264,860 for the three months ended March 31, 2023, compared to other expense of $2,166,909 for the three months ended March 31, 2022, representing a decrease in other expense of $1,902,049 or 88%. The variance is primarily due to the change in fair value of the contingent consideration liability expense of $2,078,994 incurred in the prior period. The contingent consideration liability was settled in the period ending September 30, 2022.
The Company recorded other expense of $863,886 for the nine months ended March 31, 2023, compared to other expense of $5,326,321 for the nine months ended March 31, 2022, representing a decrease in other expense of $4,462,435 or 84%. The variance is primarily due to the change in fair value of the contingent consideration liability expense of $5,070,891, in the prior period net of a loss of $419,182 related to the extinguishment of the contingent consideration liability during the period ending September 30, 2022.
Net Loss
Net loss for the three months ended March 31, 2023, and 2022, was $4,328,296 and $6,201,465, respectively, representing a decrease in loss of $1,873,169 or approximately 30%. The decrease in net loss was primarily due to a decrease in expense related to the change in fair value of contingent consideration of $2,078,994.
Net loss for the nine months ended March 31, 2023, and 2022, was $16,485,804 and $23,196,375, respectively, representing a decrease in loss of $6,710,571 or approximately 29%. The decrease in net loss was primarily due to a decrease in research and development expenses of $3,434,567, and a decrease in expense related to the change in fair value of contingent consideration of $5,070,891, partially offset by a loss of $419,182 related to the extinguishment of the contingent consideration liability and an increase in general and administrative expenses of $1,196,236.
Liquidity and Capital Resources
We have historically satisfied our capital and liquidity requirements through funding from stockholders, the sale of our Common Stock and warrants, and debt financing. We have never generated any sales revenue to support our operations and we expect this to continue until our therapies or products are approved for marketing in the United States and/or Europe. Even if we are successful in having our therapies or products approved for sale in the United States and/or Europe, we cannot guarantee that a market for the therapies or products will develop. We may never be profitable.
As noted above under the heading “Going Concern and Management’s Plans,” through March 31, 2023, we have incurred substantial losses. We will need additional funds for (a) research and development, (b) increases in personnel, and (c) the purchase of equipment, specifically to advance towards an Investigational New Drug Application (IND) following Pre-IND readouts from the FDA for ENOB-DC11, ENOB-HV-12, ENOB-HV-01, ENOB-HV-21 and ENOB-HB-01. The availability of any required additional funding cannot be assured. In addition, an adverse outcome in legal or regulatory proceedings in which we are currently involved or in the future may be involved could adversely affect our liquidity and financial position. We may raise such funds from time to time through public or private sales of our equity or debt securities. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could materially adversely affect our growth plans and our financial condition and results of operations.
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As of March 31, 2023, the Company had $2,948,042 in cash and working capital of $(7,846,438) as compared to $9,172,142 in cash and working capital of $3,114,170 as of June 30, 2022, a decrease of 68% and 352%, respectively.
Assets
Total assets at March 31, 2023, were $78,730,729 compared to $84,632,663 as of June 30, 2022. The decrease in total assets was primarily due to the decrease in cash of $6,224,100. The change in cash is primarily attributed to $3,170,471 in research and development costs related primarily to CDMO and CRO costs, along with approximately $9,358,307 in general and administrative expenses, net of non-cash items, partially offset by an increase in accounts payable of $3,069,487 due to the timing of cash payments, funding totaling $1,625,000 related to warrants exercised and $2,483,000 cash received from a private placement during the period.
Liabilities
Total liabilities at March 31, 2023, were $12,602,576 compared to $12,013,815 as of June 30, 2022. The increase in total liabilities was primarily related to an increase of $3,069,487 in accounts payable due to the timing of cash payments, partially offset by the reduction in the contingent consideration liability of $2,343,318.
The following is a summary of the Company’s cash flows (used in) or provided by operating, investing, and financing activities:
| Nine
Months Ended March 31, 2023 |
Nine
Months Ended March 31, 2022 | |||||||
| Net Cash Used in Operating Activities | $ | (9,512,937 | ) | $ | (12,681,849 | ) | ||
| Net Cash Used in Investing Activities | (23,633 | ) | (5,156 | ) | ||||
| Net Cash Provided by Financing Activities | 3,267,008 | 3,180,274 | ||||||
| Effect of exchange rates on cash | 45,462 | (6,762 | ) | |||||
| Change in Cash and Cash Equivalents | $ | (6,224,100 | ) | $ | (9,513,493 | ) | ||
Cash Flows
Cash used in operating activities for the nine months ended March 31, 2023, and 2022 was ($9,512,937) and ($12,681,849), respectively. Cash used in operating activities during the current period included $3,170,471 in research and development expenses for related CDMO and CRO costs, along with approximately $9,358,307 in general and administrative expenses, net of non-cash items, partially offset by an increase in accounts payable of $3,069,487 due to the timing of cash payments.
Cash provided by financing activities for the nine months ended March 31, 2023, was $3,267,008 as compared to cash provided by financing activities of $3,180,274 during the nine months ended March 31, 2022. During the nine months ended March 31, 2023, the Company received financing from the exercise of warrants held by shareholders of $1,625,000 and $2,483,000 from a private placement that was partially offset by repayments of a financing agreement of $840,992.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
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Significant Accounting Policies and Critical Accounting Estimates
The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.
For a summary of our accounting policies, see Note 1 to the unaudited condensed consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, the Company is not required to provide the information required by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”) are responsible for establishing and maintaining disclosure controls and procedures for the Company. The Certifying Officers have designed such disclosure controls and procedures to ensure that material information is made known to them, particularly during the period in which this Report was prepared.
The Certifying Officers are responsible for establishing and maintaining adequate internal control over financial reporting for the Company and used the “Internal Control over Financial Reporting Integrated Framework” issued by the Committee of Sponsoring Organizations (“COSO”) to conduct an extensive review of the Company’s “disclosure controls and procedures” (as defined in the Exchange Act, Rules 13a-15(e) and 15-d-15(e)) as of the end of each of the periods covered by this Report (the “Evaluation Date”). Based upon that evaluation, the Certifying Officers concluded that, as of March 31, 2023, our disclosure controls and procedures were not effective in ensuring that the information we were required to disclose in reports that we file or submit under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. The deficiency is attributed to the Company not having adequate resources to address complex accounting matters. This control deficiency will be monitored, and attention will be given to this matter as we grow.
The Certifying Officers based their conclusion on the fact that the Company has identified a material weakness in controls over financial reporting, detailed above. We expect to be deficient in our disclosure controls and procedures until sufficient capital is available to hire the appropriate internal accounting staff.
Changes in Internal Controls
There have been no changes in our internal controls over financial reporting during the three months ended March 31, 2023, that have materially affected or are reasonably likely to materially affect our internal controls.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
Securities Class Action Litigation. On July 26, 2022 and July 28, 2022, securities class action complaints (the former, the “Chow Action” and the latter, the “Manici Action”) were filed by purported stockholders of ours in the United States District Court for the Central District of California against us and certain of our current and former officers and directors. The complaints allege, among other things, that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, by making false and misleading statements and omissions of material fact in connection with the Company’s relationship with Serhat Gümrükcü and its commercial prospects. The complaints seek unspecified damages, interest, fees, and costs. On November 22, 2022, the Manici Action was voluntarily dismissed without prejudice, but the Chow action remains pending. The defendants did not respond to the complaint in the Manici action and have not yet responded to the complaint in the Chow action. The Company intends to contest this matter but expresses no opinion as to the likelihood of a favorable outcome.
Federal Derivative Litigation. On September 22, 2022, Samuel E. Koenig filed a shareholder derivative action in the United States District Court for the Central District of California. On January 19, 2023, John Solak filed a substantially similar shareholder derivative action in the United States District Court for the District of Delaware. Both derivative actions recite similar underlying facts as those alleged in the Securities Class Action Litigation. The actions filed on behalf of the Company, name Serhat Gümrükcü and certain of the Company’s current and former directors as defendants. The actions also name the Company as a nominal defendant. The actions allege violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and also set out claims for breach of fiduciary duty, contribution, and indemnification, aiding and abetting, and gross mismanagement. Plaintiffs do not quantify any alleged injury, but seek damages, disgorgement, restitution, and other costs and expenses. On January 24, 2023, the United States District Court for the Central District of California stayed the Koenig matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. On April 6, 2023, the United States District Court for the District of Delaware stayed the Solak matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. The defendants have not yet responded to either complaint. The Company intends to contest these matters but expresses no opinion as to the likelihood of favorable outcomes.
State Derivative Litigation. On October 20, 2022, Susan Midler filed a shareholder derivative action in the Superior Court of California, Los Angeles County, reciting similar underlying facts as those alleged in the Securities Class Action Litigation. The action, filed on behalf of the Company, names Serhat Gümrükcü and certain of the Company’s current and former directors as defendants. The action also names the Company as a nominal defendant. The action sets out claims for breaches of fiduciary duty, contribution, and indemnification, aiding and abetting, and gross mismanagement. Plaintiff does not quantify any alleged injury, but seeks damages, disgorgement, restitution, and other costs and expenses. On January 20, 2023, the Court stayed the Midler matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. The Court also set a status conference for November 6, 2023. The defendants have not yet responded to the complaint. The Company intends to contest this matter but expresses no opinion as to the likelihood of a favorable outcome.
On October 21, 2022, the Company filed a Complaint in the Superior Court of the State of California for the County of Los Angeles against Serhat Gümrükcü, Wittekind, G Tech, SG & AW, and SRI. The Complaint alleges that the defendants engaged in a “concerted, deliberate scheme to alter, falsify, and misrepresent to the Company the results of multiple studies supporting its [Hepatitis B] and SARS-CoV-2/influenza pipelines.” Specifically, “Defendants manipulated negative results to reflect positive outcomes from various studies, and even fabricated studies out of whole cloth.” As a result of the defendants’ conduct, the Company claims that it “paid approximately $25 million to Defendants and third-parties that it would not otherwise have paid.” On April 21, 2023, defendants Wittekind, G Tech, SG & AW, and SRI filed a demurrer with respect to some, but not all, of the Company’s claims, as well as a motion to strike.
On December 28, 2022, the Company received a demand letter on behalf of Weird Science LLC (“Weird Science”), William Anderson Wittekind, the William Anderson Wittekind 2020 Annuity Trust, the William Anderson Wittekind 2021 Annuity Trust, the Dybul 2020 Angel Annuity Trust, and the Ty Mabry 2021 Annuity Trust alleging that the Company breached the February 16, 2018 Investor Rights Agreement between the Company, Weird Science, and RS Group ApS. Specifically, the demand letter alleges that the Company “breached its obligations under the Investor Rights Agreement to provide the requisite thirty days’ notice” to Holders of Registrable Securities in connection with SEC Form S-3 filings on July 13, 2020 and February 11, 2022 and demands over $64 million in damages. The Company denies these allegations and intends to vigorously defend against this claim.
On March 1, 2021, former Enochian BioSciences Chief Financial Officer, Robert Wolfe and his company, Crossfield, Inc., filed a Complaint in the U.S. District Court for the District of Vermont against the Company, Enochian BioSciences Denmark ApS, and certain directors and officers. In the Complaint, Mr. Wolfe and Crossfield, Inc. asserted claims for abuse of process and malicious prosecution, alleging, inter alia, that the Company lacked probable cause to file and prosecute an earlier action, and sought millions of dollars of compensatory damages, as well as punitive damages. The allegations in the Complaint relate to an earlier action filed by the Company and Enochian BioSciences Denmark ApS in the Vermont Superior Court, Orange Civil Division. On March 3, 2022, the court partially granted the Company’s motion to dismiss, dismissing the abuse of process claim against all defendants and all claims against Mark Dybul and Henrik Grønfeldt-Sørensen. On November 29, 2022, the Company filed a motion for summary judgment with respect to the sole remaining claim of malicious prosecution. The Company denies the allegations set forth in the Complaint and will continue to vigorously defend against the remaining claim.
36
Item 1A. Risk Factors.
Risk factors that may affect our business and financial results are discussed within Item 1A ”Risk Factors” of our annual report for the fiscal year ended June 30, 2022, on Form 10-K (“2022 Form 10-K”) filed with the SEC on February 27, 2023. There have been no material changes to the disclosures relating to this item from those set forth in our 2022 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
| (a) | Exhibits required by Item 601 of Regulation S-K. |
| ** | Filed herewith. |
| *** | Furnished herewith. |
| † | Schedules and similar attachments to this Exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of such omitted materials to the SEC upon request. |
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: May 12, 2023 | ENOCHIAN BIOSCIENCES INC. | |
| By: | /s/ Mark Dybul | |
| Mark Dybul | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Luisa Puche | |
| Luisa Puche | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
38
Exhibit 31.1
OFFICER’S CERTIFICATE
PURSUANT TO SECTION 302
I, Mark Dybul, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2023, of Enochian Biosciences Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: May 12, 2023 | By: | /s/ Mark Dybul |
| Name: | Mark Dybul | |
| Title: | Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
OFFICER’S CERTIFICATE
PURSUANT TO SECTION 302
I, Luisa Puche, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2023, of Enochian Biosciences Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: May 12, 2023 | By: | /s/ Luisa Puche |
| Name: | Luisa Puche | |
| Title: | Chief Financial Officer (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Enochian Biosciences Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2023 as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: May 12, 2023 | By: | /s/ Mark Dybul |
| Name: | Mark Dybul | |
| Title: | Chief Executive Officer (Principal Executive Officer) |
A signed original of this written statement required by Section 906, or other document authentications, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the U.S. Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Enochian Biosciences Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2023, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to her knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: May 12, 2023 | By: | /s/ Luisa Puche |
| Name: | Luisa Puche | |
| Title: | Chief Financial Officer (Principal Financial Officer) |
A signed original of this written statement required by Section 906, or other document authentications, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the U.S. Securities and Exchange Commission or its staff upon request.
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Mar. 31, 2023 |
Jun. 30, 2022 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, par value | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 100,000,000 | 100,000,000 |
| Common Stock, shares issued | 57,983,591 | 53,007,082 |
| Common stock, shares outstanding | 57,983,591 | 53,007,082 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Operating Expenses | ||||
| General and administrative | $ 3,796,057 | $ 2,790,456 | $ 12,365,960 | $ 11,169,724 |
| Research and development | 239,137 | 1,212,380 | 3,170,471 | 6,605,038 |
| Depreciation and amortization | 28,242 | 31,720 | 85,487 | 95,258 |
| Total Operating Expenses | 4,063,436 | 4,034,556 | 15,621,918 | 17,870,020 |
| LOSS FROM OPERATIONS | (4,063,436) | (4,034,556) | (15,621,918) | (17,870,020) |
| Other Income (Expense) | ||||
| Loss on extinguishment of contingent consideration | (419,182) | |||
| Change in fair value of contingent consideration | (2,078,994) | (5,070,891) | ||
| Interest expense | (122,289) | (95,206) | (310,766) | (278,327) |
| Interest and other income (expense) | (142,571) | 7,291 | (133,938) | 22,897 |
| Total Other Income (Expense) | (264,860) | (2,166,909) | (863,886) | (5,326,321) |
| Loss Before Income Taxes | (4,328,296) | (6,201,465) | (16,485,804) | (23,196,341) |
| Income Tax (Provision) Benefit | (34) | |||
| NET LOSS | $ (4,328,296) | $ (6,201,465) | $ (16,485,804) | $ (23,196,375) |
| BASIC AND DILUTED NET LOSS PER SHARE | $ (0.08) | $ (0.12) | $ (0.30) | $ (0.44) |
| WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING - BASIC AND DILUTED | 55,974,605 | 52,638,823 | 55,524,511 | 52,391,698 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Income Statement [Abstract] | ||||
| Net Loss | $ (4,328,296) | $ (6,201,465) | $ (16,485,804) | $ (23,196,375) |
| Other Comprehensive (Loss) | ||||
| Foreign currency translation, net of taxes | (2,110) | (2,677) | (1,949) | (10,660) |
| Comprehensive Loss | $ (4,330,406) | $ (6,204,142) | $ (16,487,753) | $ (23,207,035) |
THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Accounting Policies [Abstract] | |
| THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 — THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business – Enochian Biosciences Inc., (“Enochian,” or “Registrant”, and together with its subsidiaries, the “Company”, “we” or “us”) engages in the research and development of pharmaceutical and biological products for the treatment of Cancer, HIV, and HBV and other infectious diseases with the intent to manufacture said products.
Going Concern - These financial statements have been prepared on a going concern basis, which assumes that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated any revenue, has incurred substantial recurring losses from continuing operations and has an accumulated deficit of $220,831,001 as of March 31, 2023. The continuation of the Company as a going concern is dependent upon (i) its ability to successfully obtain FDA approval of its product candidates, (ii) its ability to obtain any necessary debt and/or equity financing, and (iii) its ability to generate profits from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Basis of Presentation – The Company prepares consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and follows the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The accompanying financial statements are unaudited. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2023, and 2022 and for the periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s June 30, 2022, audited financial statements. The results of operations for the periods ended March 31, 2023, and 2022 are not necessarily indicative of the operating results for the full year.
Consolidation – For the three and nine months ended March 31, 2023, and 2022, the condensed consolidated financial statements include the accounts and operations of the Registrant and its subsidiaries. All material inter-company transactions and accounts have been eliminated in the consolidation.
Accounting Estimates – The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimated. Significant estimates include the fair value and potential impairment of intangible assets, and fair value of equity instruments issued.
Functional Currency & Foreign Currency Translation – The functional currency of Enochian Denmark is the Danish Kroner (“DKK”). The Company’s reporting currency is the U.S. Dollar for the purpose of these financial statements. The Company’s balance sheet accounts are translated into U.S. dollars at the period-end exchange rates and all revenue and expenses are translated into U.S. dollars at the average exchange rates prevailing during the periods ended March 31, 2023, and 2022. Translation gains and losses are deferred and accumulated as a component of other comprehensive income in stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are included in the statement of operations as incurred.
Cash and Cash Equivalents – The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The Company had balances held in financial institutions in Denmark and in the United States in excess of federally insured amounts at March 31, 2023, and June 30, 2022, of $2,594,707 and $8,805,495, respectively.
Property and Equipment – Property and equipment are stated at cost. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized and depreciated upon being placed in service. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed for financial statement purposes on a straight-line basis over the estimated useful lives of the assets, which range from four to ten years (see Note 4.)
Intangible Assets – The Company has both definite and indefinite life intangible assets.
Definite life intangible assets include patents. The Company accounts for definite life intangible assets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, “Goodwill and Other Intangible Assets”. Intangible assets are recorded at cost. Patent costs consist of costs incurred to acquire the underlying patent. If it is determined that a patent will not be issued, the related remaining capitalized patent costs are charged to expense. Intangible assets are amortized on a straight-line basis over their estimated useful life. The estimated useful life of patents is twenty years from the date of application.
Indefinite life intangible assets include license agreements and goodwill. The Company accounts for indefinite life intangible assets in accordance with ASC 350, “Goodwill and Other Intangible Assets”. License agreement costs represent the fair value of the license agreement on the date acquired and are tested annually for impairment, as well as whenever events or changes in circumstances indicate the carrying value may not be recoverable.
Goodwill – Goodwill is not amortized but is evaluated for impairment annually as of June 30th of each fiscal year or whenever events or changes in circumstances indicate the carrying value may not be recoverable.
Impairment of Goodwill and Indefinite Lived Intangible Assets – We test for goodwill impairment at the reporting unit level, which is one level below the operating segment level. Our detailed impairment testing involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit and is based on discounted cash flows or relative market-based approaches. If the carrying value of the reporting unit exceeds its fair value, we record an impairment loss for such excess. The annual fair value analysis performed on goodwill supported that goodwill was not impaired as of June 30, 2022, and no impairment is deemed necessary as of March 31, 2023 (see Note 5.)
For indefinite-lived intangible assets, such as licenses acquired as an IPR&D asset, on an annual basis we determine the fair value of the asset and record an impairment loss, if any, for the excess of the carrying value of the asset over its fair value. For the year ended June 30, 2022, the carrying value of the licenses acquired as an IPR&D asset exceeded its fair value. Therefore, the Company recorded an impairment loss of $93,253,000 during the year ended June 30, 2022. No additional impairment is deemed necessary as of March 31, 2023 (see Note 5.)
The carrying value of IPR&D and goodwill at March 31, 2023, was $61,571,000 and $11,640,000, respectively.
Impairment of Long-Lived Assets – Long-lived assets, such as property and equipment, definite and indefinite life intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and would no longer be depreciated. The depreciable basis of assets that are impaired and continue in use are their respective fair values.
Leases – In accordance with ASC Topic 842, “Leases”, the Company determined the initial classification and measurement of its right-of-use assets and lease liabilities at the lease commencement date and thereafter. The lease terms include any renewal options and termination options that the Company is reasonably assured to exercise, if applicable. The present value of lease payments is determined by using the implicit interest rate in the lease, if that rate is readily determinable; otherwise, the Company develops an incremental borrowing rate based on the information available at the commencement date in determining the present value of the future payments.
Rent expense for operating leases is recognized on a straight-line basis, unless the operating lease right of use assets have been impaired, over the reasonably assured lease term based on the total lease payments and is included in operating expenses in the condensed consolidated statements of operations. For operating leases that reflect impairment, the Company will recognize the amortization of the operating lease right-of-use assets on a straight-line basis over the remaining lease term with rent expense still included in general and administrative expenses in the unaudited condensed consolidated statements of operations.
The Company has elected the practical expedient to not separate lease and non-lease components. The Company’s non-lease components are primarily related to property maintenance, insurance, and taxes, which vary based on future outcomes, and thus are recognized in general and administrative expenses when incurred (see Note 6.)
Research and Development Expenses – The Company expenses research and development costs incurred in formulating, improving, validating, and creating alternative or modified processes related to and expanding the use of the potential Oncology, HIV and HBV therapies and technologies for use in the prevention, treatment, amelioration of and/or therapy for Oncology, HIV and HBV. Research and development expenses for the three and nine months ended March 31, 2023, amounted to $239,137 and $3,170,471, respectively. Research and development expenses for the three and nine months ended March 31, 2022, amounted to $1,212,380, and $6,605,038, respectively.
Income Taxes – The Company accounts for income taxes in accordance with FASB ASC Topic 740, “Accounting for Income Taxes”, which requires an asset and liability approach for accounting for income taxes.
Fair Value of Financial Instruments – The Company accounts for fair value measurements for financial assets and financial liabilities in accordance with FASB ASC Topic 820, “Fair Value Measurements”. The authoritative guidance, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability (see Note 3.)
Stock Options and Restricted Share Units – The Company has granted stock options, restricted share units (“RSUs”) and warrants. The Company accounts for stock-based awards in accordance with the provisions of FASB ASC Topic 718, “Compensation - Stock Compensation”.
Stock-Based Compensation – The Company records stock-based compensation in accordance with ASC Topic 718, “Compensation - Stock Compensation”. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to consultants and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the required service period, which is generally the vesting period. Stock based compensation costs for the vesting of options, stock awards, and RSUs granted for the three and nine months ended March 31, 2023, were $ and $, respectively. Stock-based compensation costs for the vesting of the options and RSUs granted for the three and nine months ended March 31, 2022, were $ and $, respectively. (See Note 8.)
Recently Adopted Accounting Pronouncements – Recent accounting pronouncements issued by the FASB do not or are not believed by management to have a material impact on the Company’s present or future financial statements.
|
GOING CONCERN |
9 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| GOING CONCERN | NOTE 2 – GOING CONCERN
The Company’s condensed consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has incurred substantial recurring losses from continuing operations, has used cash in the Company’s continuing operations, and is dependent on additional financing to fund operations. The Company incurred a net loss of approximately $4,328,296 and $16,485,804 for the three and nine months ended March 31, 2023, respectively. As of March 31, 2023, the Company had cash and cash equivalents of $2,948,042 and an accumulated deficit of $220,831,001. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the financial statements are issued. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. Management intends to raise additional funds for (a) research and development, (b) increases in personnel, and (c) the purchase of equipment, specifically to advance the Company’s potential products through the regulatory process. The Company may raise such funds from time to time through public or private sales of equity or debt securities. Such financing may not be available on acceptable terms, or at all, and the failure to raise capital when needed could materially adversely affect the Company’s growth plans and its financial condition and results of operations.
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FAIR VALUE MEASUREMENTS |
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| Fair Value Disclosures [Abstract] | ||||||||||
| FAIR VALUE MEASUREMENTS | NOTE 3 — FAIR VALUE MEASUREMENTS
The Company accounts for fair value measurements for financial assets and financial liabilities in accordance with FASB ASC Topic 820, “Fair Value Measurements”. The authoritative guidance among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
There were no Level 1, 2 or 3 assets, nor any Level 1, 2 or 3 liabilities measured at fair value on a recurring basis as of March 31, 2023.
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PROPERTY AND EQUIPMENT |
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| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT | NOTE 4 — PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
Depreciation expense amounted to $26,662, and $80,915 for the three and nine months ended March 31, 2023, respectively, and $27,990 and $83,787 for the three and nine months ended March 31, 2022, respectively.
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INTANGIBLE ASSETS |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INTANGIBLE ASSETS | NOTE 5 —INTANGIBLE ASSETS
At March 31, 2023, and June 30, 2022, definite-life intangible assets, net of accumulated amortization, consisted of patents on the Company’s products and processes of $41,095 and $44,268, respectively. The patents are recorded at cost and amortized over twenty years from the date of application. Amortization expense for the three and nine months ended March 31, 2023, was $1,580 and $4,572, respectively. Amortization expense for the three and nine months ended March 31, 2022, was $3,730 and $11,471, respectively.
At March 31, 2023, and 2022, indefinite life intangible assets consisted of a license agreement classified as In-Process Research and Development (“IPR&D”) intangible assets, which are not amortizable until the intangible asset provides economic benefit, and goodwill.
At March 31, 2023, and June 30, 2022, definite and indefinite-life intangible assets consisted of the following:
Expected future amortization expense is as follows:
During February 2018, the Company acquired a License Agreement (as licensee) to an HIV therapy which consists of a perpetual, fully paid-up, royalty-free, sub-licensable, and sole and exclusive worldwide license to research, develop, use, sell, have sold, make, have made, offer for sale, import and otherwise commercialize certain intellectual property in cellular therapies for the prevention, treatment, amelioration of and/or therapy exclusively for HIV in humans, and research and development exclusively relating to HIV in humans (the “HIV License Agreement”). Because the HIV License Agreement is considered an IPR&D intangible asset it is classified as an indefinite life asset that is tested annually for impairment.
Impairment – Following the fourth quarter of each year, management performs its annual test of impairment of intangible assets by performing a quantitative assessment and determines if it is more likely than not that the fair value of the asset is greater than or equal to the carrying value of the asset. The results of the quantitative assessment indicated that the carrying value of the licenses acquired as an IPR&D asset exceeded its fair value, due to the sublicensing of ENOB HV-01, which required a different valuation approach and changes in other factors impacting the fair value of the asset. Therefore, an impairment adjustment of $93,253,000 was recorded in the year ended June 30, 2022. No additional impairment is deemed necessary as of March 31, 2023. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
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LEASES |
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| LEASES | NOTE 6 — LEASES
Operating Leases — On November 13, 2017, the Company entered into a Lease Agreement for a term of five years and two months from November 1, 2017, with Plaza Medical Office Building, LLC, a California limited liability company, as landlord, (the “Landlord”), pursuant to which the Company agreed to lease from the Landlord approximately 2,325 rentable square feet. The base rent increased by 3% each year, and ranged from approximately $8,719 per month for the first year to $10,107 per month for the two months of the sixth year. The lease was terminated early without penalties or additional costs as of September 30, 2022, that released an accrual of $70,800 related to leasehold improvements that was not utilized.
On June 19, 2018, the Company entered into a Lease Agreement for a term of ten years from September 1, 2018, with Century City Medical Plaza Land Co., Inc., pursuant to which the Company agreed to lease approximately 2,453 rentable square feet. On February 20, 2019, the Company entered into an Addendum to the original Lease Agreement with an effective date of December 1, 2019, where it expanded the lease area to include another 1,101 square feet for a total rentable 3,554 square feet. The base rent increases by 3% each year, and ranges from $17,770 per month for the first year to $23,186 per month for the tenth year. The equalized monthly lease expense for the term of the lease is $20,050. The Company subleased the space as of June 25, 2022 through April 30, 2023 (see subsection below “Sublease Agreement” for details.)
The Company identified and assessed the following significant assumptions in recognizing the right-of-use asset and corresponding liabilities:
Expected lease term — The expected lease term includes both contractual lease periods and, when applicable, cancelable option periods when it is reasonably certain that the Company would exercise such options. The Company’s lease has a remaining lease term of 53 months. As of March 31, 2023, the weighted-average remaining term is 4.42 years.
Incremental borrowing rate — The Company’s lease agreements do not provide an implicit rate. As the Company does not have any external borrowings for comparable terms of its leases, the Company estimated the incremental borrowing rate based on the U.S. Treasury Yield Curve rate that corresponds to the length of each lease. This rate is an estimate of what the Company would have to pay if borrowing on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment. As of March 31, 2023, the weighted-average discount rate is 4.03%.
Lease and non-lease components — In certain cases the Company is required to pay for certain additional charges for operating costs, including insurance, maintenance, taxes, and other costs incurred, which are billed based on both usage and as a percentage of the Company’s share of total square footage. The Company determined that these costs are non-lease components, and they are not included in the calculation of the lease liabilities because they are variable. Payments for these variable, non-lease components are considered variable lease costs and are recognized in the period in which the costs are incurred.
Below are the lease commitments for the next 5 years:
Sublease Agreement
On June 20, 2022, the Company entered into a sublease Agreement with One Health Labs (the “Subtenant”), whereby the Subtenant agreed to lease 3,554 square feet of space currently rented by the Company in Century City Medical Plaza as of June 25, 2022, for a period of 3.5 years with an option to renew for the remaining term of the lease that ends as of June 19, 2028. The base rent was $17,770 per month plus $750 towards utility fees that were part of the original lease agreement and would increase by 3% each year over the term of the sub-lease. The Company received a total of $57,022 on July 1, 2022 after execution of the sublease to cover the first month rent, utility fee and deposit. The first sublease payment began on August 1, 2022.
In accordance with ASC Topic 842, the Company treated the sublease as a separate lease, as the Company was not relieved of the primary obligation under the original lease. The Company continued to account for the Century City Medical Plaza lease as a lessee and in the same manner as prior to the commencement date of the sublease. The Company accounted for the sublease as a lessor of the lease. The sublease was classified as an operating lease, as it does not meet the criteria of a sales-type or direct financing lease.
On April 18, 2023, the Company entered into a sublease termination Agreement with One Health Labs (the “Subtenant”), whereby the Subtenant and the Company agreed to terminate the sublease effective as of April 30, 2023. The Subtenant agreed to pay the Company $139,460 along with the security deposit of $35,540 for a total termination fee of $175,000, to permit early termination of the sublease.
The Company recognized operating income from the sublease on a straight-line basis in its statements of operations over the sublease term.
During the three and nine months ended March 31, 2023 and 2022, the net operating lease expenses were as follows:
Lease expense charged to general and administrative expenses for the three and nine months ended March 31, 2023, amounted to $45,789 and $79,829, respectively. Lease expense charged to general and administrative expenses for the three and nine months ended March 31, 2022, amounted to $85,027 and $253,223, respectively. |
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NOTES PAYABLE |
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Mar. 31, 2023 | |
| Debt Disclosure [Abstract] | |
| NOTES PAYABLE | NOTE 7 — NOTES PAYABLE
Convertible Notes Payable — On February 6, 2020, the Company issued two Convertible Notes (the “Convertible Notes”) to Paseco ApS (the “Holder”), a Danish limited company and an existing stockholder of the Company each with a face value amount of $600,000, convertible into shares of Common Stock, $ par value per share. The outstanding principal amount of the Convertible Notes was due and payable on February 6, 2023. Interest on the Convertible Notes commenced accruing on the date of issuance at six percent (6%) per annum, computed on the basis of twelve 30-day months, and is compounded monthly on the final day of each calendar month based upon the principal and all accrued and unpaid interest outstanding as of such compound date. The interest was payable in cash on a semi-annual basis.
The conversion price was equal to $12.00 per share of Common Stock. The Holder did not exercise the conversion feature that expired on February 6, 2021. The Company evaluated the Convertible Notes in accordance with ASC 470-20 and identified that they each contain an embedded conversion feature that shall not be bifurcated from the host document (i.e., the Convertible Notes) as they are not deemed to be readily convertible into cash. All proceeds received from the issuance have been recognized as a liability on the balance sheet.
Effective December 30, 2022 (the “Effective Date”), the Company amended and restated the Convertible Notes (the “Amended and Restated Secured Notes”). Pursuant to the Amended and Restated Secured Notes, the due date was extended to February 28, 2024, unless the Company consummates a public offering or private placement prior to the maturity date (a “Qualified Offering”) and the Holder elects to convert the outstanding principal balance into Common Stock at the price being paid by the investors in such Qualified Offering. The interest was increased to twelve percent (12%) per annum, which was prepaid by the Company in full on the date of amendment through the issuance of shares of the Company’s Common Stock which is comprised of shares for accrued interest up to the Effective Date and shares related to the prepayment of interest through the extension date of the Amended and Restated Secured Notes using the closing market price on the Effective date, of $. The obligations of the Company under the Amended and Restated Secured Notes were secured by a security agreement (the “Security Agreement”). The Company evaluated the Secured Notes and conversion feature to determine the appropriate accounting treatment based on the terms of the agreement. In accordance with ASC 480-Distinguising Liabilities from Equity, the Company determined that the Secured Notes embody an obligation that may require the Company to settle with the issuance of a variable number of shares, where the monetary value of the obligation is based predominantly on a fixed monetary amount $1,200,000 known at inception. Accordingly, the Company recorded the Secured Notes as share settled debt. The total value of the shares issued was $204,392 which included $174,090 of prepaid interest and $30,302 for accrued interest as of December 30, 2022.
As of March 31, 2023 and 2022, the Company recorded accrued interest in the amount of zero and $12,030, which is included in accrued expenses, respectively. For the three and nine months ended March 31, 2023 the interest expense related to the Convertible Notes amounted to $37,155 and $73,608, respectively. For the three and nine months ended March 31, 2022 the interest expense related to the Convertible Notes amounted to $18,151 and $54,604 respectively. The Convertible Notes balance as of March 31, 2023 and 2022, was $1,200,000.
Note Payable — On March 30, 2020 (the “Issuance Date”), the Company issued a Promissory Note in the principal amount of $5,000,000 (the “Promissory Note”) to the Holder. The principal amount of the Promissory Note was originally payable on November 30, 2021 (the “Maturity Date”). The Promissory Note bore interest at a fixed rate of 6% per annum, computed based on the number of days between the Issuance Date and the Maturity Date, which was prepaid by the Company in full on the Issuance Date through the issuance of shares of the Company’s Common Stock based on the closing market price on that date for a total value of $501,370. The Company evaluated the Promissory Note and PIK interest in accordance with ASC 470-Debt and ASC 835-Interest, respectively. Pursuant to ASC 470-20, proceeds received from the issuance are to be recognized at their relative fair value, thus the liability is shown net of the corresponding discount of $493,192, which is the relative fair value of the shares issued for the PIK interest on the closing date using the effective interest method. The discount of $493,192 will be accreted over the life of the Promissory Note.
On February 11, 2021, the Company entered into an amendment to the Promissory Note that extended the Maturity Date to November 30, 2022. All other terms of the Promissory Note remained the same. The change in Maturity Date required an additional year of interest at the fixed rate of 6% per annum, which was prepaid by the Company in full on the date of the amendment through the issuance of shares of the Company’s Common Stock based on the closing market price on that date for a total value of $298,178.
On May 17, 2022, the Company entered into a second amendment to the Promissory Note that extended the Maturity Date to November 30, 2023 and increased the interest rate from 6% to 12% per annum. All other terms of the Promissory Note remained the same. The change in Maturity Date required an additional year of interest at the fixed rate of 12% per annum. Pursuant to the amendment, the Company prepaid interest for the period November 30, 2022 until May 30, 2023 on the date of the amendment through the issuance of shares of the Company’s Common Stock based on the closing market price on that date for a total value of $299,178. All other accrued interest payable from May 30, 2023 to the Maturity Date shall be payable by the Company on May 30, 2023, at the option of the Holder either (i) in cash or (ii) in non-assessable shares of the Company’s Common Stock, valued at the closing sale price of the Common Stock on the Nasdaq Capital Market on May 30, 2023.
Effective December 30, 2022, the Company entered into a third amendment to the Promissory Note. Pursuant to the third amendment, the Company’s obligations under the Promissory Note were secured by the Security Agreement. To secure the Company’s obligations under each of the Amended and Restated Secured Notes and the Promissory Note, the Company entered into a Security Agreement with the Holder, pursuant to which the Company granted a lien on all assets of the Company (the “Collateral”) for the benefit of the Holder. Upon an Event of Default (as defined in the Amended and Restated Secured Notes and Promissory Note, respectively) the Holder may, among other things, collect or take possession of the Collateral, proceed with the foreclosure of the security interest in the Collateral or sell, lease, or dispose of the Collateral.
For the three and nine months ended March 31, 2023, discount amortization of $74,621 and $223,863 was charged to interest expense. For the three and nine months ended March 31, 2022, discount amortization of $74,274 and $222,822 was charged to interest expense. The Promissory Note balance, net of discount at March 31, 2023 is $4,801,011.
Finance Agreement — On November 30, 2022, the Company entered into a premium finance agreement (the “Agreement”) related to insurance, which resulted in a prepaid expense with a principal amount of $1,139,875 at 6.69% interest per annum. The repayment of the Agreement will be made in nine equal monthly installments of $96,220. For the three and nine months ended March 31, 2023, the Company made repayments of $374,367 and $840,992, respectively. For the three and nine months ended March 31, 2022, the Company made repayments of $222,167 and $449,765, respectively, which relates to the prior year’s insurance policy.
For the three and nine months ended March 31, 2023, the Company recorded interest expense related to the Agreement in the amount of $10,513 and $13,295, respectively. This amount is reflected in other income and expenses.
Total interest expense recorded for the three and nine months ended March 31, 2023, was $122,289 and $310,766, respectively. Total interest expense recorded for the three and nine months ended March 31, 2022, was $95,206 and $278,327, respectively. |
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| STOCKHOLDERS’ EQUITY | NOTE 8 — STOCKHOLDERS’ EQUITY
Preferred Stock —The Company has authorized shares of Preferred Stock, par value $ per share. At March 31, 2023, and June 30, 2022, there were zero shares issued and outstanding.
Common Stock —The Company has authorized shares of Common Stock, par value $ per share. At March 31, 2023, and June 30, 2022, there were and shares issued and outstanding, respectively.
Voting — Holders of Common Stock are entitled to one vote for each share held of record on each matter submitted to a vote of stockholders, including the election of directors, and do not have any right to cumulate votes in the election of directors.
Dividends — Holders of Common Stock are entitled to receive ratably such dividends as the Board from time to time may declare out of funds legally available.
Liquidation Rights — In the event of any liquidation, dissolution or winding up of the affairs of the Company, after payment of all debts and liabilities, the holders of Common Stock will be entitled to share ratably in the distribution of any of the remaining assets.
In the three and nine months ended March 31, 2023 there were and shares of Common Stock issued, respectively.
Purchase Agreement with Lincoln Park Capital
On July 8, 2020, we entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which the Company was able to sell and issue to Lincoln Park, and Lincoln Park was obligated to purchase, up to $20,000,000 of shares of Common Stock from time to time through August 1, 2023.
In consideration for entering into the Purchase Agreement, we issued shares of Common Stock to Lincoln Park as a commitment fee on July 21, 2020.
During the nine months ended March 31, 2023, we did t sell any shares of Common Stock to Lincoln Park under the Purchase Agreement. During the three and nine months ended March 31, 2022, we issued and shares of Common Stock to Lincoln Park under the Purchase Agreement for a purchase price of $451,700 and $3,500,039, respectively. As of October 17, 2022, we no longer had access to this Purchase Agreement as we are no longer able to use the registration statement on Form S-3 that registered the shares issuable to Lincoln Park under the Purchase Agreement.
March 2023 Private Placement
In March 2023, the Company issued shares of Common Stock and warrants to purchase shares of common stock (“Purchase Warrants”) resulting in proceeds of $2,483,000 in a private placement offering (“Private Placement”). The Company effected the issuances of the shares of Common Stock from March 13, 2023 to March 29, 2023. The Purchase Warrants were immediately exercisable and had an exercise term of five years with an exercise price of $ per share. The combined purchase price for one share of common stock and one Purchase Warrant was $ per share. The private placement was made directly by the Company to persons who are not U.S. persons in reliance upon Regulation S of the Securities Act of 1933. No underwriter or placement agent was engaged by the Company for this private placement.
2017 Warrants
On July 14, 2022, certain of our warrant holders exercised warrants to purchase shares of Common Stock for total proceeds to the Company of $1,625,000, with corresponding earn-out distribution of the same number of shares in connection with the acquisition of Enochian BioPharma, Inc. This non-cash earn-out distribution impacted stockholders’ equity in the amount of $2,762,500 based on the share price on July 14, 2022 of $. The Company recorded a loss on extinguishment of contingent consideration liability of $419,182 during the quarter ended December 31, 2022 which reflects the difference between the fair value of the shares and the contingent consideration liability at the time of extinguishment. As of December 31, 2022, all outstanding 2017 Warrants were exercised and there is no further contingent consideration liability balance remaining as of the end of this period.
Acquisition of Enochian Biopharma Inc. / Contingently issuable shares — On February 16, 2018, the acquisition of Enochian Biopharma was completed. As part of the acquisition, the stockholders of Enochian Biopharma received (i) 18,081,962 shares of Common Stock, and (ii) the right to receive contingent shares of Common Stock (“Contingent Shares”) pro rata upon the exercise or conversion of warrants, which were outstanding at closing. As of December 31, 2022, no further Contingent Shares are issuable.
Acquisition of Enochian Denmark — At March 31, 2023, and June 30, 2022, the Company maintained a reserve of shares of Common Stock of the Registrant held in escrow according to Danish law (the “Escrow Shares”), all of which are reflected as issued and outstanding in the accompanying financial statements. The Escrow Shares are reserved to acquire the shares of Enochian Denmark held by non-consenting shareholders of Enochian Denmark on both March 31, 2023, and June 30, 2022, in accordance with Section 70 of the Danish Companies Act and the Articles of Association of DanDrit Denmark. There have been shares of Common Stock issued to non-consenting shareholders of Enochian Denmark as of March 31, 2023. During the three and nine months ended March 31, 2023, the Company issued zero shares of Common Stock to such non-consenting shareholders of Enochian Denmark.
Stock-based Compensation
The Company recognizes compensation costs for stock option awards to employees and directors based on their grant-date fair value. The value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model. The weighted-average assumptions used to estimate the fair values of the stock options granted using the Black-Scholes option-pricing model are as follows in the three months ended March 31, 2023:
The Company recognized stock-based compensation expense of $ and $ for the three and nine months ended March 31, 2023, respectively. The Company recognized stock-based compensation expense related to the options of $ and $ for the three and nine months ended March 31, 2022, respectively. At March 31, 2023, the Company had approximately $ of unrecognized compensation cost related to non-vested options.
Plan Options
On February 6, 2014, the Board adopted the Company’s 2014 Equity Incentive Plan (the “2014 Plan”), and the Company had reserved shares of Common Stock for issuance in accordance with the terms of the 2014 Plan.
On October 30, 2019, the Board approved and on October 31, 2019, the Company’s stockholders adopted Enochian’s 2019 Equity Incentive Plan (the “2019 Plan”), which replaced the 2014 Plan. The 2019 Plan authorized options to be awarded to not exceed the sum of (1) 6,000,000 new shares, and (2) the number of shares available for the grant of awards as of the effective date under the 2014 Plan plus any options related to awards that expire, are terminated, surrendered, or forfeited for any reason without issuance of shares under the 2014 Plan after the effective date of the 2019 Plan.
Pursuant to the 2019 Plan, the Company granted options to purchase and shares of Common Stock to employees with a three-year vesting period during the three and nine months ended March 31, 2023, respectively. For the three and nine months ended March 31, 2022, the Company granted options to purchase and shares of Common Stock to employees with a three-year vesting period, respectively. One million shares were subject to performance based vesting criteria, and as of March 31, 2023, no expense has been recognized based on the assessment that these shares are not probable of vesting. As performance criteria for Years 2 and 3 are not probable, the Company has deemed forfeited the remaining two-thirds of the performance-based options as of March 31, 2022. One-third of these options were forfeited as of June 30, 2022.
During the three and nine months ended March 31, 2023, the Company granted options to purchase zero and shares of Common stock to employees with a six-month vesting period, respectively. For the three and nine months ended March 31, 2022, the Company did t grant options to purchase shares of Common Stock to employees with a six-month vesting period.
During the three and nine months ended March 31, 2023, the Company granted options to purchase zero and shares of Common stock to employees with a one-year vesting period, respectively. For the three and nine months ended March 31, 2022, the Company granted options to purchase zero and shares of Common Stock to employees with a one-year vesting period, respectively.
During the three and nine months ended March 31, 2023, the Company granted options to purchase and shares of Common Stock, to the Board of Directors and Scientific Advisory Board Members with a one-year vesting period, respectively. For the three and nine months ended March 31, 2022, the Company granted options to purchase and shares of Common Stock to members of the Board of Directors and Scientific Advisory Board with a one-year vesting period, respectively.
During the three and nine months ended March 31, 2023, the Company granted options to purchase shares of Common Stock for consulting services with a one-year vesting period. For the three and nine months ended March 31, 2022, the Company granted options to purchase zero and shares of Common Stock with immediate vesting, issued options to purchase zero and shares of Common Stock with a one-year vesting period, and issued options to purchase zero and shares of Common Stock with a three-year vesting period for consulting services, respectively.
All of the above options are exercisable at the market price of the Company’s Common Stock on the date of the grant.
At March 31, 2023 the Company had options available to be issued under the 2019 Plan.
A summary of the status of the Plan Options outstanding at March 31, 2023, is presented below:
A summary of the status of the Plan Options at March 31, 2023, and changes since July 1, 2022, are presented below:
At March 31, 2023, the Company had exercisable Plan Options outstanding. The total intrinsic value of options exercisable at March 31, 2023, was zero. Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) and at March 31, 2023 (for outstanding options), less the applicable exercise price.
Common Stock Purchase Warrants
A summary of the warrants outstanding at March 31, 2023 and changes since July 1, 2022, are presented below:
Restricted Stock Units (RSUs)
The Company recognized stock-based compensation expense related to RSUs of zero for both the three and nine months ended March 31, 2023. The Company recognized stock-based compensation expense related to the RSUs of $ and $ for the three and nine months ended March 31, 2022, respectively.
Restricted Stock Awards (RSA)
The Company recognized stock-based compensation expense related to RSAs of $ for the three and nine months ended March 31, 2023, respectively for a grant of shares of restricted stock made to a consultant as consideration for consulting services. The Company recognized stock-based compensation expense related to RSAs of zero for both the three and nine months ended March 31, 2022.
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COMMITMENTS AND CONTINGENCIES |
9 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | NOTE 9 — COMMITMENTS AND CONTINGENCIES
Commitments
On July 9, 2018, the Company entered into a consulting agreement with G-Tech Bio, LLC, a California limited liability company (“G-Tech”) to assist the Company with the development of the gene therapy and cell therapy modalities for the prevention, treatment, and amelioration of HIV in humans, and with the development of a genetically enhanced Dendritic Cell for use as a wide spectrum platform for various diseases (including but not limited to cancers and infectious diseases) (the “G-Tech Agreement”). G-Tech was entitled to consulting fees for 20 months, with a monthly consulting fee of not greater than $130,000 per month. Upon the completion of the 20 months, the monthly consulting fee of $25,000 continued for scientific consulting and knowledge transfer on existing HIV experiments until the services were no longer being rendered or the G-Tech Agreement is terminated. As of May 25, 2022, the consultant was no longer able to render services, therefore no expense was incurred for the three and nine months ended March 31, 2023. For the three and nine months ended March 31, 2022, $75,000 and $225,000 was charged to research and development expenses in our Condensed Consolidated Statements of Operations related to this consulting agreement.
On January 31, 2020, the Company entered into a Statement of Work and License Agreement (the “HBV License Agreement”) by and among the Company, G-Tech, and G Health Research Foundation, a not for profit entity organized under the laws of California doing business as Seraph Research Institute (“SRI”) (collectively the “HBV Licensors”), whereby the Company acquired a perpetual, sublicensable, exclusive license (the “HBV License”) for a treatment under development (the “Treatment”) aimed to treat Hepatitis B Virus (HBV) infections.
The HBV License Agreement states that in consideration for the HBV License, the Company shall provide cash funding for research costs and equipment and certain other in-kind funding related to the Treatment over a 24 month period, and provides for an up-front payment of $1.2 million within 7 days of January 31, 2020, along with additional payments upon the occurrence of certain benchmarks in the development of the technology set forth in the HBV License Agreement, in each case subject to the terms of the HBV License Agreement. Additionally, the HBV License Agreement provides for cooperation related to the development of intellectual property related to the Treatment and for a 2% royalty to G-Tech on any net sales that may occur under the HBV License. On February 6, 2020, the Company paid the $1.2 million up-front payment. The HBV License Agreement contains customary representations, warranties, and covenants of the parties with respect to the development of the Treatment and the HBV License.
The cash funding for research costs pursuant to the HBV License Agreement consisted of monthly payments amounting to $144,500 that covered scientific staffing resources to complete the project as well as periodic payments for materials and equipment needed to complete the project. There were no payments made after January 31, 2022. During the three and nine months ended March 31, 2023 the Company paid a total of zero , and during the three and nine months ended March 31, 2022, the Company paid $144,500 and $1,011,500, respectively, for scientific staffing resources, research and development and Investigational New Drug (IND) enabling studies. During the three and nine months ended March 31, 2023, the Company paid zero for any type of milestone. During the three and nine months ended March 31, 2022 the Company paid zero and $1,500,000, respectively, for the milestone completion of a Pre-IND process following receipt of written comments in accordance with the HBV License Agreement. The Company has filed a claim against the HBV Licensors, which includes certain payments it made related to this license (see Contingencies sub-section below).
On April 18, 2021, the Company entered into a Statement of Work and License Agreement (the “Development License Agreement”), by and among the Company, G-Tech and SRI (collectively, the “Development Licensors”), whereby the Company acquired a perpetual sublicensable, exclusive license (the “Development License”) to research, develop, and commercialize certain formulations which are aimed at preventing and treating pan-coronavirus or the potential combination of the pan-coronavirus and pan-influenza, including the SARS-coronavirus that causes COVID-19 and pan-influenza (the “Prevention and Treatment”).
The Development License Agreement was entered into pursuant to the existing Framework Agreement between the parties dated November 15, 2019. The Development License Agreement states that in consideration for the Development License, the Company shall provide cash funding for research costs and equipment and certain other in-kind funding related to the Prevention and Treatment over a 24-month period. Additionally, the Development License Agreement provides for an up-front payment of $10,000,000 and a $760,000 payment for expenditures to date prior to the effective date related to research towards the Prevention and Treatment within 60 days of April 18, 2021. The amounts were paid on June 18, 2021 and June 25, 2021, respectively. The Development License Agreement provides for additional payments upon the occurrence of certain benchmarks in the development of the technology set forth in the Development License Agreement, in each case subject to the terms of the Development License Agreement.
The Development License Agreement provides for cooperation related to the development of intellectual property related to the Prevention and Treatment and for a 3% royalty to G Tech on any net sales that may occur under the Development License Agreement. For both the three and nine months ended March 31, 2023, the Company paid zero related to this Development License Agreement. During the three and nine months ended March 31, 2022 the Company paid zero and $150,000 related to the Prevention and Treatment research. The Company is no longer pursuing any product candidates that relate to this license. The Company has filed a claim against the Development Licensors to recover all monies it paid related to this license (see Contingencies sub-section below).
On August 25, 2021, the Company entered into an ALC Patent License and Research Funding Agreement in the HIV Field (the “ALC License Agreement”) with Serhat Gümrükcü and SRI (collectively, the “ALC Licensors”) whereby the ALC Licensors granted the Company an exclusive, worldwide, perpetual, fully paid-up, royalty-free license, with the right to sublicense, proprietary technology subject to a U.S. patent application, to make, use, offer to sell, sell or import products for use solely for the prevention, treatment, amelioration of or therapy exclusively for HIV in humans, and research and development exclusively relating to HIV in humans; provided the ALC Licensors retained the right to conduct HIV research in the field. Pursuant to the ALC License Agreement, the Company granted a non-exclusive license back to the ALC Licensors, under any patents or other intellectual property owned or controlled by the Company, to the extent arising from the ALC License, to make, use, offer to sell, sell or import products for use in the diagnosis, prevention, treatment, amelioration or therapy of any (i) HIV Comorbidities and (ii) any other diseases or conditions outside the HIV Field. The Company made an initial payment to SRI of $600,000 and agreed to fund future HIV research conducted by the ALC Licensors, as mutually agreed to by the parties. On September 10, 2021, pursuant to the ALC License Agreement, the Company paid the initial payment of $600,000.
G-Tech and SRI are controlled by Serhat Gümrükcü and Anderson Wittekind, shareholders of the Company.
Shares held for non-consenting shareholders – The remaining shares of Common Stock related to the Acquisition of Enochian Denmark have been reflected as issued and outstanding in the accompanying financial statements. There were zero shares of Common Stock issued to such non-consenting shareholders during the three and nine months ended March 31, 2023 (see Note 8.)
Service Agreements – This consulting agreement was terminated as of October 31, 2022. The Company maintains employment agreements with other staff in the ordinary course of business.
Contingencies
Securities Class Action Litigation. On July 26, 2022 and July 28, 2022, securities class action complaints (the former, the “Chow Action” and the latter, the “Manici Action”) were filed by purported stockholders of ours in the United States District Court for the Central District of California against us and certain of our current and former officers and directors. The complaints allege, among other things, that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, by making false and misleading statements and omissions of material fact in connection with the Company’s relationship with Serhat Gümrükcü and its commercial prospects. The complaints seek unspecified damages, interest, fees, and costs. On November 22, 2022, the Manici Action was voluntarily dismissed without prejudice, but the Chow action remains pending. The defendants did not respond to the complaint in the Manici action and have not yet responded to the complaint in the Chow action. The Company intends to contest this matter but expresses no opinion as to the likelihood of a favorable outcome.
Federal Derivative Litigation. On September 22, 2022, Samuel E. Koenig filed a shareholder derivative action in the United States District Court for the Central District of California. On January 19, 2023, John Solak filed a substantially similar shareholder derivative action in the United States District Court for the District of Delaware. Both derivative actions recite similar underlying facts as those alleged in the Securities Class Action Litigation. The actions, filed on behalf of the Company, name Serhat Gümrükcü and certain of the Company’s current and former directors as defendants. The actions also name the Company as a nominal defendant. The actions allege violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and also set out claims for breach of fiduciary duty, contribution and indemnification, aiding and abetting, and gross mismanagement. Plaintiffs do not quantify any alleged injury, but seek damages, disgorgement, restitution, and other costs and expenses. On January 24, 2023, the United States District Court for the Central District of California stayed the Koenig matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. On April 6, 2023, the United States District Court for the District of Delaware stayed the Solak matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. The defendants have not yet responded to either complaint. The Company intends to contest these matters but expresses no opinion as to the likelihood of favorable outcomes.
State Derivative Litigation. On October 20, 2022, Susan Midler filed a shareholder derivative action in the Superior Court of California, Los Angeles County, reciting similar underlying facts as those alleged in the Securities Class Action Litigation. The action, filed on behalf of the Company, names Serhat Gümrükcü and certain of the Company’s current and former directors as defendants. The action also names the Company as a nominal defendant. The action sets out claims for breaches of fiduciary duty, contribution and indemnification, aiding and abetting, and gross mismanagement. Plaintiff does not quantify any alleged injury, but seeks damages, disgorgement, restitution, and other costs and expenses. On January 20, 2023, the Court stayed the Midler matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. The Court also set a status conference for November 6, 2023. The defendants have not yet responded to the complaint. The Company intends to contest this matter but expresses no opinion as to the likelihood of a favorable outcome.
On October 21, 2022, the Company filed a Complaint in the Superior Court of the State of California for the County of Los Angeles against Serhat Gümrükcü, William Anderson Wittekind (“Wittekind”), G-Tech Bio LLC (“G Tech”), SG & AW Holdings LLC (“SG & AW”), and SRI. The Complaint alleges that the defendants engaged in a “concerted, deliberate scheme to alter, falsify, and misrepresent to the Company the results of multiple studies supporting its [Hepatitis B] and SARS-CoV-2/influenza pipelines.” Specifically, “Defendants manipulated negative results to reflect positive outcomes from various studies, and even fabricated studies out of whole cloth.” As a result of the defendants’ conduct, the Company claims that it “paid approximately $25 million to Defendants and third-parties that it would not otherwise have paid.” On April 21, 2023, defendants Wittekind, G Tech, SG & AW, and SRI filed a demurrer with respect to some, but not all, of the Company’s claims, as well as a motion to strike.
On December 28, 2022, the Company received a demand letter on behalf of Weird Science LLC (“Weird Science”), William Anderson Wittekind, the William Anderson Wittekind 2020 Annuity Trust, the William Anderson Wittekind 2021 Annuity Trust, the Dybul 2020 Angel Annuity Trust, and the Ty Mabry 2021 Annuity Trust alleging that the Company breached the February 16, 2018 Investor Rights Agreement between the Company, Weird Science, and RS Group ApS. Specifically, the demand letter alleges that the Company “breached its obligations under the Investor Rights Agreement to provide the requisite thirty days’ notice” to Holders of Registrable Securities in connection with SEC Form S-3 filings on July 13, 2020 and February 11, 2022 and demands over $64 million in damages. The Company denies these allegations and intends to vigorously defend against this claim.
On March 1, 2021, former Enochian BioSciences Chief Financial Officer, Robert Wolfe and his company, Crossfield, Inc., filed a Complaint in the U.S. District Court for the District of Vermont against the Company, Enochian BioSciences Denmark ApS, and certain directors and officers. In the Complaint, Mr. Wolfe and Crossfield, Inc. asserted claims for abuse of process and malicious prosecution, alleging, inter alia, that the Company lacked probable cause to file and prosecute an earlier action, and sought millions of dollars of compensatory damages, as well as punitive damages. The allegations in the Complaint relate to an earlier action filed by the Company and Enochian BioSciences Denmark ApS in the Vermont Superior Court, Orange Civil Division. On March 3, 2022, the court partially granted the Company’s motion to dismiss, dismissing the abuse of process claim against all defendants and all claims against Mark Dybul and Henrik Grønfeldt-Sørensen. On November 29, 2022, the Company filed a motion for summary judgment with respect to the sole remaining claim of malicious prosecution. The Company denies the allegations set forth in the Complaint and will continue to vigorously defend against the remaining claim.
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RELATED PARTY TRANSACTIONS |
9 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY TRANSACTIONS | NOTE 10 — RELATED PARTY TRANSACTIONS
On March 17, 2023, RS Bio ApS, a Danish entity, participated in the Private Placement and purchased of common stock and warrants to purchase shares of Common Stock resulting in proceeds to the Company of $1,000,000. Mr. Rene Sindlev, the Chairman of the Company’s Board of Directors, holds the sole voting and disposition power of the shares owned by RS Bio ApS. The Board of Directors (excluding Mr. Sindlev) approved the participation of certain officers and directors of the Company in the Private Placement on identical terms as the other investors of the Private Placement (see Note 8).
There were no payments made to G-Tech by the Company for the three and nine months ended March 31, 2023. For the three and nine months ended March 31, 2022, the Company paid G-Tech $354,500 and 3,891,500, respectively, which included payments for consulting agreements related to HIV, and contractual costs related to the HBV License, the Development License, the ALC License (see Note 9), and security expenses.
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SUBSEQUENT EVENTS |
9 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 11 — SUBSEQUENT EVENTS
On April 11, 2023, the Company received final proceeds of $228,000 in connection with the March 2023 Private Placement, whereby the Company issued shares of Common Stock and warrants to purchase shares of Common Stock. The Company received a total of $2,711,000 in connection with the March 2023 Private Placement, whereby the Company issued a total of shares of Common Stock and warrants to purchase shares of Common Stock (see Note 8).
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THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
9 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Accounting Policies [Abstract] | |
| Business | Business – Enochian Biosciences Inc., (“Enochian,” or “Registrant”, and together with its subsidiaries, the “Company”, “we” or “us”) engages in the research and development of pharmaceutical and biological products for the treatment of Cancer, HIV, and HBV and other infectious diseases with the intent to manufacture said products.
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| Going Concern | Going Concern - These financial statements have been prepared on a going concern basis, which assumes that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated any revenue, has incurred substantial recurring losses from continuing operations and has an accumulated deficit of $220,831,001 as of March 31, 2023. The continuation of the Company as a going concern is dependent upon (i) its ability to successfully obtain FDA approval of its product candidates, (ii) its ability to obtain any necessary debt and/or equity financing, and (iii) its ability to generate profits from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
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| Basis of Presentation | Basis of Presentation – The Company prepares consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and follows the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The accompanying financial statements are unaudited. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2023, and 2022 and for the periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s June 30, 2022, audited financial statements. The results of operations for the periods ended March 31, 2023, and 2022 are not necessarily indicative of the operating results for the full year.
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| Consolidation | Consolidation – For the three and nine months ended March 31, 2023, and 2022, the condensed consolidated financial statements include the accounts and operations of the Registrant and its subsidiaries. All material inter-company transactions and accounts have been eliminated in the consolidation.
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| Accounting Estimates | Accounting Estimates – The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimated. Significant estimates include the fair value and potential impairment of intangible assets, and fair value of equity instruments issued.
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| Functional Currency & Foreign Currency Translation | Functional Currency & Foreign Currency Translation – The functional currency of Enochian Denmark is the Danish Kroner (“DKK”). The Company’s reporting currency is the U.S. Dollar for the purpose of these financial statements. The Company’s balance sheet accounts are translated into U.S. dollars at the period-end exchange rates and all revenue and expenses are translated into U.S. dollars at the average exchange rates prevailing during the periods ended March 31, 2023, and 2022. Translation gains and losses are deferred and accumulated as a component of other comprehensive income in stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are included in the statement of operations as incurred.
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| Cash and Cash Equivalents | Cash and Cash Equivalents – The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The Company had balances held in financial institutions in Denmark and in the United States in excess of federally insured amounts at March 31, 2023, and June 30, 2022, of $2,594,707 and $8,805,495, respectively.
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| Property and Equipment | Property and Equipment – Property and equipment are stated at cost. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized and depreciated upon being placed in service. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed for financial statement purposes on a straight-line basis over the estimated useful lives of the assets, which range from four to ten years (see Note 4.)
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| Intangible Assets | Intangible Assets – The Company has both definite and indefinite life intangible assets.
Definite life intangible assets include patents. The Company accounts for definite life intangible assets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, “Goodwill and Other Intangible Assets”. Intangible assets are recorded at cost. Patent costs consist of costs incurred to acquire the underlying patent. If it is determined that a patent will not be issued, the related remaining capitalized patent costs are charged to expense. Intangible assets are amortized on a straight-line basis over their estimated useful life. The estimated useful life of patents is twenty years from the date of application.
Indefinite life intangible assets include license agreements and goodwill. The Company accounts for indefinite life intangible assets in accordance with ASC 350, “Goodwill and Other Intangible Assets”. License agreement costs represent the fair value of the license agreement on the date acquired and are tested annually for impairment, as well as whenever events or changes in circumstances indicate the carrying value may not be recoverable.
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| Goodwill | Goodwill – Goodwill is not amortized but is evaluated for impairment annually as of June 30th of each fiscal year or whenever events or changes in circumstances indicate the carrying value may not be recoverable.
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| Impairment of Goodwill and Indefinite Lived Intangible Assets | Impairment of Goodwill and Indefinite Lived Intangible Assets – We test for goodwill impairment at the reporting unit level, which is one level below the operating segment level. Our detailed impairment testing involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit and is based on discounted cash flows or relative market-based approaches. If the carrying value of the reporting unit exceeds its fair value, we record an impairment loss for such excess. The annual fair value analysis performed on goodwill supported that goodwill was not impaired as of June 30, 2022, and no impairment is deemed necessary as of March 31, 2023 (see Note 5.)
For indefinite-lived intangible assets, such as licenses acquired as an IPR&D asset, on an annual basis we determine the fair value of the asset and record an impairment loss, if any, for the excess of the carrying value of the asset over its fair value. For the year ended June 30, 2022, the carrying value of the licenses acquired as an IPR&D asset exceeded its fair value. Therefore, the Company recorded an impairment loss of $93,253,000 during the year ended June 30, 2022. No additional impairment is deemed necessary as of March 31, 2023 (see Note 5.)
The carrying value of IPR&D and goodwill at March 31, 2023, was $61,571,000 and $11,640,000, respectively.
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| Impairment of Long-Lived Assets | Impairment of Long-Lived Assets – Long-lived assets, such as property and equipment, definite and indefinite life intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and would no longer be depreciated. The depreciable basis of assets that are impaired and continue in use are their respective fair values.
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| Leases | Leases – In accordance with ASC Topic 842, “Leases”, the Company determined the initial classification and measurement of its right-of-use assets and lease liabilities at the lease commencement date and thereafter. The lease terms include any renewal options and termination options that the Company is reasonably assured to exercise, if applicable. The present value of lease payments is determined by using the implicit interest rate in the lease, if that rate is readily determinable; otherwise, the Company develops an incremental borrowing rate based on the information available at the commencement date in determining the present value of the future payments.
Rent expense for operating leases is recognized on a straight-line basis, unless the operating lease right of use assets have been impaired, over the reasonably assured lease term based on the total lease payments and is included in operating expenses in the condensed consolidated statements of operations. For operating leases that reflect impairment, the Company will recognize the amortization of the operating lease right-of-use assets on a straight-line basis over the remaining lease term with rent expense still included in general and administrative expenses in the unaudited condensed consolidated statements of operations.
The Company has elected the practical expedient to not separate lease and non-lease components. The Company’s non-lease components are primarily related to property maintenance, insurance, and taxes, which vary based on future outcomes, and thus are recognized in general and administrative expenses when incurred (see Note 6.)
|
| Research and Development Expenses | Research and Development Expenses – The Company expenses research and development costs incurred in formulating, improving, validating, and creating alternative or modified processes related to and expanding the use of the potential Oncology, HIV and HBV therapies and technologies for use in the prevention, treatment, amelioration of and/or therapy for Oncology, HIV and HBV. Research and development expenses for the three and nine months ended March 31, 2023, amounted to $239,137 and $3,170,471, respectively. Research and development expenses for the three and nine months ended March 31, 2022, amounted to $1,212,380, and $6,605,038, respectively.
|
| Income Taxes | Income Taxes – The Company accounts for income taxes in accordance with FASB ASC Topic 740, “Accounting for Income Taxes”, which requires an asset and liability approach for accounting for income taxes.
|
| Loss Per Share |
|
| Fair Value of Financial Instruments | Fair Value of Financial Instruments – The Company accounts for fair value measurements for financial assets and financial liabilities in accordance with FASB ASC Topic 820, “Fair Value Measurements”. The authoritative guidance, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability (see Note 3.)
|
| Stock Options and Restricted Share Units | Stock Options and Restricted Share Units – The Company has granted stock options, restricted share units (“RSUs”) and warrants. The Company accounts for stock-based awards in accordance with the provisions of FASB ASC Topic 718, “Compensation - Stock Compensation”.
|
| Stock-Based Compensation | Stock-Based Compensation – The Company records stock-based compensation in accordance with ASC Topic 718, “Compensation - Stock Compensation”. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to consultants and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the required service period, which is generally the vesting period. Stock based compensation costs for the vesting of options, stock awards, and RSUs granted for the three and nine months ended March 31, 2023, were $ and $, respectively. Stock-based compensation costs for the vesting of the options and RSUs granted for the three and nine months ended March 31, 2022, were $ and $, respectively. (See Note 8.)
|
| Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements – Recent accounting pronouncements issued by the FASB do not or are not believed by management to have a material impact on the Company’s present or future financial statements.
|
PROPERTY AND EQUIPMENT (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of property and equipment |
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INTANGIBLE ASSETS (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of life intangible assets |
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| Schedule of expected future amortization expense |
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LEASES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease commitments |
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| Schedule of net operating lease expenses |
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STOCKHOLDERS’ EQUITY (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of weighted-average assumptions used to estimate the fair values of the stock options granted |
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| Summary of stock options outstanding |
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| Summary of stock option activity |
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| Summary of common stock purchase warrants outstanding |
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THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Jun. 30, 2022 |
|
| Accounting Policies [Abstract] | |||||
| Accumulated deficit | $ 220,831,001 | $ 220,831,001 | $ 204,345,197 | ||
| Cash held in financial institutions | 2,594,707 | 2,594,707 | 8,805,495 | ||
| Goodwill impairment loss | 93,253,000 | ||||
| IPR&D | 61,571,000 | 61,571,000 | 61,571,000 | ||
| Goodwill | 11,640,000 | 11,640,000 | $ 11,640,000 | ||
| Research and development expense | 239,137 | $ 1,212,380 | $ 3,170,471 | $ 6,605,038 | |
| Potential dilutive shares | 5,410,460 | 7,201,108 | |||
| Stock-based compensation | $ 1,076,203 | $ 577,676 | $ 2,922,166 | $ 5,348,943 | |
GOING CONCERN (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Jun. 30, 2022 |
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
| Net loss | $ 4,328,296 | $ 6,201,465 | $ 16,485,804 | $ 23,196,375 | |
| Cash and cash equivalents | 2,948,042 | 2,948,042 | $ 9,172,142 | ||
| Accumulated deficit | $ 220,831,001 | $ 220,831,001 | $ 204,345,197 | ||
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Property, Plant and Equipment [Abstract] | ||||
| Depreciation expense | $ 26,662 | $ 27,990 | $ 80,915 | $ 83,787 |
INTANGIBLE ASSETS (Details) - USD ($) |
9 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Jun. 30, 2022 |
|
| Finite-Lived Intangible Assets [Line Items] | ||
| Definite-life intangible assets | $ 41,095 | $ 44,268 |
| Period Change | (4,572) | |
| Effect of Currency Translation | 1,399 | |
| Indefinite Life Intangible Assets | 73,211,000 | 73,211,000 |
| Period Changes | ||
| Patents [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Useful Life | 20 years | |
| Definite-life intangible assets | $ 289,581 | 279,257 |
| Period Change | ||
| Effect of Currency Translation | 10,324 | |
| Accumulated Amortization [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Period Change | (4,572) | |
| Effect of Currency Translation | (8,925) | |
| Accumulated Amortization | (248,486) | (234,989) |
| Licensing Agreements [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Indefinite Life Intangible Assets | 61,571,000 | 61,571,000 |
| Period Changes | ||
| Goodwill [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Indefinite Life Intangible Assets | $ 11,640,000 | $ 11,640,000 |
INTANGIBLE ASSETS (Details 1) - USD ($) |
Mar. 31, 2023 |
Jun. 30, 2022 |
|---|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| 2023 | $ 7,894 | |
| 2024 | 11,067 | |
| 2025 | 11,067 | |
| 2026 | 11,067 | |
| Total | $ 41,095 | $ 44,268 |
INTANGIBLE ASSETS (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Jun. 30, 2022 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||
| Definite-life intangible assets | $ 41,095 | $ 41,095 | $ 44,268 | ||
| Amortization expense | 1,580 | $ 3,730 | 4,572 | $ 11,471 | |
| Goodwill impairment loss | $ 93,253,000 | ||||
| Impairment of intangible asset | $ 0 | $ 0 | |||
LEASES (Details) |
Mar. 31, 2023
USD ($)
|
|---|---|
| Leases | |
| 2023 | $ 60,001 |
| 2024 | 246,004 |
| 2025 | 253,384 |
| 2026 | 260,985 |
| 2027 | 313,836 |
| Less imputed interest | (98,775) |
| Total | $ 1,035,435 |
LEASES (Details 1) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Leases | ||||
| Operating Lease Expense | $ 99,099 | $ 85,027 | $ 239,759 | $ 253,223 |
| Sub lease Income | (53,310) | (159,930) | ||
| Total Net Lease Expense | $ 45,789 | $ 85,027 | $ 79,829 | $ 253,223 |
LEASES (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | |||||
|---|---|---|---|---|---|---|---|---|
Nov. 13, 2017 |
Apr. 18, 2023 |
Jun. 20, 2022 |
Jun. 19, 2018 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Leases | ||||||||
| Lease premises, description | On November 13, 2017, the Company entered into a Lease Agreement for a term of five years and two months from November 1, 2017, with Plaza Medical Office Building, LLC, a California limited liability company, as landlord, (the “Landlord”), pursuant to which the Company agreed to lease from the Landlord approximately 2,325 rentable square feet. The base rent increased by 3% each year, and ranged from approximately $8,719 per month for the first year to $10,107 per month for the two months of the sixth year. The lease was terminated early without penalties or additional costs as of September 30, 2022, | On June 19, 2018, the Company entered into a Lease Agreement for a term of ten years from September 1, 2018, with Century City Medical Plaza Land Co., Inc., pursuant to which the Company agreed to lease approximately 2,453 rentable square feet. On February 20, 2019, the Company entered into an Addendum to the original Lease Agreement with an effective date of December 1, 2019, where it expanded the lease area to include another 1,101 square feet for a total rentable 3,554 square feet. The base rent increases by 3% each year, and ranges from $17,770 per month for the first year to $23,186 per month for the tenth year. The equalized monthly lease expense for the term of the lease is $20,050. | ||||||
| Weighted-average remaining term | 4 years 5 months 1 day | 4 years 5 months 1 day | ||||||
| Weighted-average discount rate | 4.03% | 4.03% | ||||||
| Sublease agreement description | On June 20, 2022, the Company entered into a sublease Agreement with One Health Labs (the “Subtenant”), whereby the Subtenant agreed to lease 3,554 square feet of space currently rented by the Company in Century City Medical Plaza as of June 25, 2022, for a period of 3.5 years with an option to renew for the remaining term of the lease that ends as of June 19, 2028. The base rent was $17,770 per month plus $750 towards utility fees that were part of the original lease agreement and would increase by 3% each year over the term of the sub-lease. The Company received a total of $57,022 on July 1, 2022 after execution of the sublease to cover the first month rent, utility fee and deposit. The first sublease payment began on August 1, 2022. | |||||||
| Lease payment | $ 139,460 | |||||||
| Security deposit | 35,540 | |||||||
| Termination fee | $ 175,000 | |||||||
| General and administrative expense | $ 45,789 | $ 85,027 | $ 79,829 | $ 253,223 | ||||
STOCKHOLDERS' EQUITY (Details) - Enochian Biosciences [Member] |
9 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Dividend yield | 0.00% |
| Minimum [Member] | |
| Expected term (in years) | 5 years 3 months 18 days |
| Volatility | 84.66% |
| Risk free interest rate | 2.70% |
| Maximum [Member] | |
| Expected term (in years) | 6 years 6 months |
| Volatility | 91.47% |
| Risk free interest rate | 4.24% |
STOCKHOLDERS' EQUITY (Details 3) - Common Stock Purchase Warrants [Member] - $ / shares |
9 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2023 |
Jun. 30, 2022 |
|
| Option Indexed to Issuer's Equity [Line Items] | ||
| Outstanding at beginning of period | 1,250,000 | |
| Weighted average exercise price, Outstanding at beginning of period | $ 1.30 | |
| Weighted Average remaining life, Outstanding | 4 years 11 months 23 days | 1 year 7 days |
| Granted | 1,089,036 | |
| Weighted average exercise price, Granted | $ 1.14 | |
| Weighted Average remaining life, Granted | 4 years 11 months 23 days | |
| Exercised | (1,250,000) | |
| Weighted average exercise price, Exercised | $ 1.30 | |
| Cancelled/Expired | ||
| Weighted average exercise price, Expired | ||
| Outstanding at end of period | 1,089,036 | 1,250,000 |
| Weighted average exercise price, Outstanding at end of period | $ 1.14 | $ 1.30 |
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 10, 2021 |
Feb. 06, 2020 |
Jul. 09, 2018 |
Aug. 25, 2021 |
Jan. 31, 2020 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Jun. 30, 2022 |
Nov. 15, 2019 |
|
| Net Investment Income [Line Items] | |||||||||||
| Up-front payment | $ 10,000,000 | ||||||||||
| Payment for expenditures | $ 760,000 | ||||||||||
| Prevention and Treatment research | $ 0 | $ 0 | $ 0 | $ 150,000 | |||||||
| Initial payment | $ 600,000 | ||||||||||
| Paid initial payment | $ 600,000 | ||||||||||
| Remaining shares | 17,414 | 17,414 | 17,414 | ||||||||
| Number of shares issued for shareholders | 0 | 0 | |||||||||
| Compensation description | The Company had a consulting agreement for services of a Senior Medical Advisor for up to $210,000 per year on a part-time basis. | ||||||||||
| G Tech [Member] | License Agreement [Member] | |||||||||||
| Net Investment Income [Line Items] | |||||||||||
| Payment for license | $ 1,200,000 | $ 1,200,000 | |||||||||
| Royalty Percentage | 2.00% | ||||||||||
| Milestone payments | $ 0 | 0 | $ 0 | 1,500,000 | |||||||
| Consulting Agreement [Member] | G Tech [Member] | |||||||||||
| Net Investment Income [Line Items] | |||||||||||
| Consulting expenses | $ 130,000 | ||||||||||
| Payment for scientific staffing resources | $ 0 | $ 144,500 | $ 0 | $ 1,011,500 | |||||||
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|---|
Mar. 17, 2023 |
May 17, 2022 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Related Party Transaction [Line Items] | ||||||
| Proceeds from common stock | $ 299,178 | |||||
| Related Party Costs | $ 0 | $ 354,500 | $ 0 | $ 3,891,500 | ||
| R S Bio Aps [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Number of shares purchased | 877,193 | |||||
| Proceeds from common stock | $ 1,000,000 | |||||
| R S Bio Aps [Member] | Common Stock And Warrants [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Number of shares purchased | 438,597 | |||||
SUBSEQUENT EVENTS (Details Narrative) - USD ($) |
9 Months Ended | ||
|---|---|---|---|
Apr. 11, 2023 |
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Subsidiary, Sale of Stock [Line Items] | |||
| Proceeds from private placement | $ 2,483,000 | ||
| Private Placement March 2023 [Member] | |||
| Subsidiary, Sale of Stock [Line Items] | |||
| Proceeds from private placement | $ 228,000 | ||
| Shares issued | 200,000 | ||
| Number of share warrant purchases | 100,000 | ||
| Received private placement | $ 2,711,000 | ||
| Private Placement March 2023 [Member] | Common Stocks [Member] | |||
| Subsidiary, Sale of Stock [Line Items] | |||
| Shares issued | 2,378,070 | ||
| Number of share warrant purchases | 1,189,036 | ||