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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended
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Sep. 30, 2021
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principal of Consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Management’s opinion is that all adjustments (consisting of normal accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2020 and related notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on April 1, 2021. The unaudited condensed consolidated financial statements represent the consolidation of the Company and its subsidiaries in conformity with U.S. GAAP. All intercompany transactions have been eliminated in consolidation. Use of Estimates The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and expenses during the periods reported. By their nature, these estimates are subject to measurement uncertainty and the effects on the financial statements of changes in such estimates in future periods could be significant. Significant areas requiring management’s estimates and assumptions include determining the fair value of transactions involving common stock and the valuation of stock-based compensation, accruals associated with third party providers supporting research and development efforts, estimated fair values of long lives assets used to record impairment charges related to intangible assets, acquired in-process research and development (“IPR&D), and goodwill, and allocation of purchase price in business acquisitions. Actual results could differ from those estimates. Enveric Biosciences, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements Foreign Currency Translation From inception through December 31, 2020, the reporting currency of the Company was the United States dollar while the functional currency of the Company was the Canadian dollar. From January 1, 2021 through September 30, 2021, the reporting currency of the Company remained the United States dollar, with a portion of transactions being denominated in Canadian dollars. As a result, the Company is subject to exposure from changes in the exchange rates of the Canadian dollar and the U.S. dollar. The Company has not entered into any financial derivative instruments that expose it to material market risk, including any instruments designed to hedge the impact of foreign currency exposures. The Company may, however, hedge such exposure to foreign currency exchange fluctuations in the future. Warrant Liability The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The Company accounts for warrants for shares of the Company’s common stock that are not indexed to its own stock as derivative liabilities at fair value on the unaudited condensed consolidated balance sheet. The Company accounts for common stock warrants with put options as liabilities under ASC 480. Such warrants are subject to remeasurement at each unaudited condensed consolidated balance sheet date and any change in fair value is recognized as a component of other expense on the unaudited condensed consolidated statement of operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of such common stock warrants. At that time, the portion of the warrant liability related to such common stock warrants will be reclassified to additional paid-in capital. Offering Costs The Company allocates offering costs to the different components of the capital raise on a pro rata basis. Any offering costs allocated to common stock are charged directly to additional paid-in capital. Any offering costs allocated to warrant liabilities are charged to general and administrative expenses on the Company’s unaudited condensed consolidated statement of operations. Net Loss per Share Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and warrants (using the treasury stock method) and convertible notes. The computation of basic net loss per share for the three and nine months ended September 30, 2021 and 2020 excludes potentially dilutive securities. The computations of net loss per share for each period presented is the same for both basic and fully diluted. Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share for the three and nine months ended September 30, 2021 and 2020 because the effect of their inclusion would have been anti-dilutive. SCHEDULE OF POTENTIALLY DILUTIVE SECURITIES
|  | For the three and nine months ended September 30, 2021 |  |  | For the three and nine months ended September 30, 2020 |
Warrants to purchase shares of common stock |  |  | 10,576,654 |  |  |  | 332,854 |
Convertible notes |  |  | - |  |  |  | 139,721 |
Restricted stock units |  |  | 5,775,171 |  |  |  | - |
Restricted stock awards |  |  | 28,861 |  |  |  | - |
Options to purchase shares of common stock |  |  | 1,147,334 |  |  |  | 797,372 |
Total potentially dilutive securities |  |  | 17,528,020 |  |  |  | 1,269,947 |
Enveric Biosciences, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements Fair Value Measurement The Company follows Accounting Standards Codification (“ASC”) 820–10 “Fair Value Measurement” of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification to measure the fair value of its financial instruments and disclosures about fair value of its financial instruments. ASC 820–10 establishes a framework for measuring fair value and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820–10 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The three (3) levels of fair value hierarchy defined by ASC 820–10 are described below:
Level 1 |  | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2 |  | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3 |  | Pricing inputs that are generally unobservable inputs and not corroborated by market data.
Financial assets or liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these instruments. The Company uses Level 3 of the fair value hierarchy to measure the fair value of its warrant liabilities. The Company revalues such liabilities at every reporting period and recognizes gains or losses as change in fair value of warrant liabilities in the unaudited condensed consolidated statements of operations that are attributable to the change in the fair value of the warrant liabilities. The following table provides the financial liabilities measured on a recurring basis and reported at fair value on the unaudited condensed consolidated balance sheet as of September 30, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value: SCHEDULE OF FAIR VALUE HIERARCHY OF VALUATION INPUTS ON RECURRING BASIS
|  | Level |  |  | September 30, 2021 |
Warrant liabilities – January Warrants |  |  | 3 |  |  | $ | 1,487,234 |
Warrant liabilities – February Warrants |  |  | 3 |  |  |  | 1,416,391 |
Put rights in warrants issued prior to and surviving amalgamation with Ameri |  |  | 2 |  |  |  | 262,491 |
Fair value as of September 30, 2021 |  |  |  |  |  | $ | 3,166,116 |
The Company had no assets or liabilities measured at fair value on December 31, 2020. Both the January and February Warrants are classified as Level 3, for which there is no current market for these securities such as the determination of fair value requires significant judgment or estimation. Changes in fair value measurement categorized within Level 3 of the fair value hierarchy are analysed each period based on changes in estimates or assumptions and recorded as appropriate. Initial measurement SCHEDULE OF BLACK SCHOLES VALUATION MODELS OF WARRANT LIABILITIES
|  | January Warrants |  |  | February Warrants |
|  | January 13, 2021 |  |  | February 12, 2021 |
Term (years) |  |  | 5.0 |  |  |  | 5.0 |
Stock price |  | $ | 4.21 |  |  | $ | 4.62 |
Exercise price |  | $ | 4.95 |  |  | $ | 4.90 |
Dividend yield |  |  | 0.0 | % |  |  | 0.0 | %
Expected volatility |  |  | 84.7 | % |  |  | 84.7 | %
Risk free interest rate |  |  | 0.5 | % |  |  | 0.5 | %
Number of shares |  |  | 1,821,449 |  |  |  | 1,714,005 |
Value (per share) |  | $ | 2.66 |  |  | $ | 3.00 |
Enveric Biosciences, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements Subsequent measurement The following table presents the changes in fair value of the warrant liabilities: SCHEDULE OF FAIR VALUE OF WARRANT LIABILITIES
|  | January Warrants |  |  | February Warrants |  |  | Total Warrant Liability |
Fair value as of December 31, 2020 |  | $ | - |  |  | $ | - |  |  | $ | - |
Initial value of warrant liability |  |  | 4,846,000 |  |  |  | 5,135,000 |  |  |  | 9,981,000 |
Change in fair value |  |  | (3,358,767 | ) |  |  | (3,718,609 | ) |  |  | (7,077,376 | )
Fair value of put rights in warrants issued prior to and surviving amalgamation with Ameri |  |  |  |  |  |  |  |  |  |  | 262,491 |
Fair value as of September 30, 2021 |  | $ | 1,487,234 |  |  | $ | 1,416,391 |  |  | $ | 3,166,116 |
The key inputs into the Black Scholes valuation model for the Level 3 valuations as of September 30, 2021 are below: SCHEDULE OF BLACK SCHOLES VALUATION MODELS OF WARRANT LIABILITIES
|  | January Warrants |  |  | February Warrants |
Term (years) |  |  | 4.3 |  |  |  | 4.3 |
Stock price |  | $ | 2.07 |  |  | $ | 2.07 |
Exercise price |  | $ | 4.95 |  |  | $ | 4.90 |
Dividend yield |  |  | 0.0 | % |  |  | 0.0 | %
Expected volatility |  |  | 77.1 | % |  |  | 76.7 | %
Risk free interest rate |  |  | 0.98 | % |  |  | 0.98 | %
Number of shares |  |  | 1,821,449 |  |  |  | 1,714,005 |
Value (per share) |  | $ | 0.82 |  |  | $ | 0.83 |
Certain warrants issued by Ameri prior to the December 30, 2020 amalgamation with the Company, and containing put rights, remain outstanding and operative, with the put rights contained therein representing a liability to the Company classified as Level 2, due to the pricing input per warrant share, prior to adjustment for the reverse split subsequent to issuance of the warrants, and the number of warrant shares being directly observable as of the reporting date. Business Combinations The Company accounts for business combinations under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification(“ASC”) 805 “Business Combinations” using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. For transactions that are business combinations, the Company evaluates the existence of goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. ASC 805-10 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. . All acquisition costs are expensed as incurred. Upon acquisition, the accounts and results of operations are consolidated as of and subsequent to the acquisition date. The estimated fair value of net assets acquired, including the allocation of the fair value to identifiable assets and liabilities, was determined using established valuation techniques. A fair value measurement is determined as the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. In the context of purchase accounting, the determination of fair value often involves significant judgments and estimates by management, including the selection of valuation methodologies, estimates of future revenues, costs and cash flows, discount rates, and selection of comparable companies. The estimated fair values reflected in the purchase accounting are subject to management’s judgment. Intangible Assets Intangible assets consist of in-process research and development acquired. The intangible assets are valued using the discounted cash flows method. The Company assesses the carrying value of its intangible assets for impairment each year. License agreements are recorded at cost and amortized over the life of the license. Intangible assets related to acquired IPR&D projects are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts. During the period the assets are considered indefinite-lived, they will not be amortized but will be tested for impairment. Impairment testing is performed at least annually or when a triggering event occurs that could indicate a potential impairment. If and when development is complete, which generally occurs when regulatory approval to market a product is obtained, the associated assets are deemed finite-lived and are amortized over a period that best reflects the economic benefits provided by these assets. Enveric Biosciences, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements Research and Development Research and development expenses are charged to operations as incurred. Research and development expenses include, among other things, internal and external costs associated with preclinical development, pre-commercialization manufacturing expenses, and clinical trials. The Company accrues for costs incurred as the services are being provided by monitoring the status of the trial or services provided and the invoices received from its external service providers. In the case of clinical trials, a portion of the estimated cost normally relates to the projected cost to treat a patient in the trials, and this cost is recognized based on the number of patients enrolled in the trial. As actual costs become known, the Company adjusts its accruals accordingly. Stock-Based Compensation The Company recognizes compensation expense for all equity-based payments in accordance with ASC 718 “Compensation – Stock Compensation” which addresses the accounting for stock-based payment transactions, requiring such transactions to be accounted for using the fair value method. Awards of shares for property or services are recorded at the more readily measurable of the estimated fair value of the stock award and the estimated fair value of the service. The Company uses the Black-Scholes option-pricing model to determine the grant date fair value of stock-based awards under ASC 718. The estimated fair value is amortized as a charged to earnings on a straight-line basis depending on the terms and conditions of the award, and the nature of the relationship of the recipient of the award to the Company. The Company records the grant date fair value in line with the period over which it was earned. For employees and consultants, this is typically considered to be the vesting period of the award . Under fair value recognition provisions, the Company accounts for forfeitures when they occur. Stock-based compensation expense recognized in the financial statements is reduced by the actual awards forfeited. Restricted stock units, restricted stock awards, and stock options are granted at the discretion of the Compensation Committee of the Company’s board of directors (the “Board of Directors”). These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods, typically over a 12 to 48-month period. Segment Reporting The Company determines its reporting units in accordance with FASB ASC 280, “Segment Reporting” (“ASC 280”). The Company evaluates a reporting unit by first identifying its operating segments under ASC 280. The Company then evaluates each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated. The Company has one operating segment and reporting unit. The Company is organized and operated as one business. Management reviews its business as a single operating segment, using financial and other information rendered meaningful only by the fact that such information is presented and reviewed in the aggregate. Long Lived Assets Property and equipment and intangible assets are recorded at cost. Major property additions, replacements, and betterments are capitalized, while maintenance and repairs that do not extend the useful lives of an asset or add new functionality are expensed as incurred. Depreciation and amortization are recorded using the straight-line method over the respective estimated useful lives of the Company’s long-lived assets. The estimated useful lives are typically 3 to 5 years for office furniture and equipment and are depreciated on a straight-line basis. The estimated useful life of the Company’s intellectual property is equal to the term of the related license, if applicable or 10 years and is amortized on a straight-line basis The Company reviews its long-lived assets for impairment whenever events or changes indicate that the carrying value of the long-lived assets may not be fully recoverable. In cases where the Company does not expect to recover its carrying costs, an impairment charge is recorded. The Company measures and records impairment losses on its long-lived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amount. Considerable judgment by management is necessary to estimate undiscounted future operating cash flows and fair values and, accordingly, actual results could vary significantly from such estimates. Goodwill The Company tests goodwill for potential impairment at least annually, or more frequently if an event or other circumstance indicates that the Company may not be able to recover the carrying amount of the net assets of the reporting unit. The Company has determined that the reporting unit is the entire company, due to the integration of all of the Company’s activities. In evaluating goodwill for impairment, the Company may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If the Company bypasses the qualitative assessment, or if the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs a quantitative impairment test by comparing the fair value of a reporting unit with its carrying amount. There was no impairment of goodwill for the three and nine months ended September 30, 2021. Income Taxes The Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse. The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liabilities. In management’s opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. As of September 30, 2021 and December 31, 2020, no liability for unrecognized tax benefits was required to be recorded. The Company’s policy for recording interest and penalties associated with tax audits is to record such items as a component of operating expenses. There were no amounts accrued for penalties and interest for the years ended December 31, 2020 and 2019. The Company does not expect its uncertain tax positions to change during the next twelve months. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position. The Company has identified its United States and Canadian federal tax return, its state and provincial tax returns in Florida, Alberta (Canada) and Ontario (Canada) as its “major” tax jurisdictions. The Company is in the process of filing its corporate tax returns for the years ended December 31, 2020 and December 31, 2019. Net operating losses for these periods will not be available to reduce future taxable income until the returns are filed. Recent Accounting Pronouncements In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12, Income Taxes (Topic 740: Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which removes certain exceptions to the general principles in Topic 740. ASU 2019-12 is effective for the fiscal years beginning after December 15, 2020, with early adoption permitted. The adoption of this guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements. In October 2020, the FASB issued ASU 2020-10, “Codification Improvements.” The new accounting rules improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50) that had only been included in the Other Presentation Matters Section (Section 45) of the Codification. Additionally, the new rules also clarify guidance across various topics including defined benefit plans, foreign currency transactions, and interest expense. The new accounting rules were effective for the Company in the first quarter of 2021. The adoption of the new accounting rules did not have a material impact on the Company’s unaudited condensed consolidated financial statements. Enveric Biosciences, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The amendments in ASU No. 2021-04 provides guidance to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this ASU No. 2021-04 are effective for all entities for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, including interim periods within those fiscal years. As a result, the Company will not be required to adopt ASU 2021-04 until January 1, 2022. The Company is currently evaluating the impact of the adoption of this principle on the Company’s unaudited condensed consolidated financial statements.

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