United states
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ AnnualANNUAL report under section 13 Or 15(d) of the securities exchange act of 1934
For the fiscal year endedJune 30, 20172019
☐ transitionTRANSITION report under section 13 Or 15(d) of the securities exchange act of 1934
For the transition period from Commission file number000-54478
| (Name of registrant in its charter) |
| Delaware | 45-2559340 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
Los Angeles, CA | 90067-2012 | |
| (Address of principal executive offices) | (Zip Code) |
+45 391 798401(510)203-4857
(Registrant’s telephone number, including area code)
DanDrit Biotech USA, Inc.
Stumpedyssevej 17, 2970
Hørsholm, Denmark
+45 391 79840
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
| ENOB |
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.0001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 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. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company or an emerging growth company. See the 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 | ☐ |
| Non-accelerated filer | Smaller reporting company | ☒ | |
Emerging growth 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 Act). ☐ Yes ☒ No
On December 31, 2016,2018, the aggregate market value of the voting and non-voting common equity held by non-affiliates was $5,472,912.
$ 71,923,880.
As of September 28, 2017,27, 2019, the number of shares outstanding of the registrant’s classes of common stock, outstanding par value $0.0001 per share (the “Common Stock”) was 13,727,538. 46,273,924.
DOCUMENTS INCORPORATED BY REFERENCE
Not applicable.
Portions of the registrant’s Proxy Statement for its 2019 Annual Meeting of stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K or will be filed by amendment.
CONTENTS
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Cautionary Language Regarding Forward-Looking Statements and Industry Data
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements are based upon our current assumptions, expectations and beliefs concerning future developments and their potential effect on our business. In some cases, you can identify forward-looking statements by the following words: “may,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential” or the negative of these terms or other comparable terminology, although the absence of these words does not necessarily mean that a statement is not forward-looking.
A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Annual Report. These forward-looking statements are all based on currently available operating, financial and competitive information and are subject to various 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 under "Management’s Discussion and Analysis of Financial Condition and Results of Operations". Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. Any or all of the forward-looking statements contained in this Annual Report and any other public statement made by us, including by our management, may turn out to be incorrect. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
All forward-looking statements speak only as of the date of this Annual Report. We undertake no obligation to update any forward-looking statements or other information contained herein. Stockholders and potential investors should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements in this report are reasonable, we cannot assure stockholders and potential investors that these plans, intentions or expectations will be achieved. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
Information regarding market and industry statistics contained in this report is included based on information available to us that we believe is accurate. It is generally based on academic and other publications that are not produced for purposes of securities offerings or economic analysis. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services. Except as required by U.S. federal securities laws, we have no obligation to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements.
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PART I
Unless otherwise indicated or the context otherwise requires, all references in this prospectus to “we,” “us,” “our” or the “Company” are to DanDrit Biotech USA,Enochian BioSciences, Inc., a Delaware corporation (“DanDrit USA”, “Registrant” or “Parent”Registrant”), together with its wholly owned subsidiary DanDrit Biotech A/S,subsidiaries, Enochian Biopharma, Inc., a Delaware corporation (“Enochian Biopharma”) and Enochian Biosciences Denmark ApS, a Danish limited company, organized under the Danish Act on Limited Companies of the Kingdom of Denmark (“DanDrit Denmark” or the “Subsidiary”).
Our Business
We are a pre-clinical stage biotechnology company committed to using our genetically modified cellular and immune-therapy technologies to prevent or potentially cure HIV and to potentially provide life-long cancer remission of some of the deadliest cancers. In the event our technologies are approved for use, we plan to do this by genetically modifying, or re-engineering, different types of cells, depending on the therapeutic area, and then injecting or reinfusing the re-engineered cells back into the patient to provide treatment. In some of our planned interventions, immunotherapy could be used.
The Company has developedHuman Immunodeficiency Virus, or HIV, and patented vaccines usedAcquired Immunodeficiency Syndrome, or AIDS
HIV attacks the body’s own immune system, specifically killing off CD4+ cells, or T-cells. Left untreated, HIV reduces the number of T-cells in initial clinical trials in Europethe body, leading to AIDs, a condition where the body cannot fight off common infections and Asia including MelCancerVac™ (MCV) for the treatment of cancer (one phase I/II trial in Denmark and two phase II trials in Denmark and Singapore). The Company has advanced candidate therapies, targeted initially at non-small-cell-lung-cancer (NSCLC) and colorectal cancer (sometimes referred to herein as CRC). MCV was developeddisease.
Currently there are over 30 antiretroviral drugs, or ART, approved by the CompanyU.S. Food and Drug Administration (“FDA”) to treat HIV patients but these drugs are expensive, require daily adherence and can have significant side effects over time. In addition, approximately 1 million people, including in 2001.high-income countries, continue to die from HIV/AIDS due to resistance to ART or lack of access. Today there are no treatments which can eliminate the reservoir of cells that contain HIV from the body. In September 2008, the Singapore government granted to DanDrit Denmark a named-patient compassionate use program of MCV. MCV was evaluated in three single-arm Phase II clinical trials in cancer where MCV demonstrated potential efficacy. Subsequent to this, the Company was a participant to designing a randomized trial with stage IV colorectal cancer patients.other words, treatment is life-long.
Our only productThere have been several efforts to cure HIV by re-engineering a person’s own T-cells so that such cells no longer express C-C chemokine receptor type 5, also known as CCR5, which is MCVan essential co-receptor for HIV to enter T-cells. A mutation that blocks expression of CCR5 on T-cells occurs in a small percentage of people with no known adverse effects. The “Berlin patient”, and currently theremore recently the “London patient” are HIV- positive persons who developed cancer and were treated with a bone marrow transplant with cells derived from persons with a naturally occurring deletion of CCR5. The Berlin and London patients seems to be effectively cured from HIV providing a proof of concept that HIV can be cured. However, because the transplanted cells come from another person, such transplants are highly toxic and can result in death in a significant proportion of patients. Given the success with these two patients, several researchers and companies have attempted to replicate the experience of such patients by genetically modifying the T-cells of the HIV-positive patients themselves and reinfusing them with T-cells that do not express CCR5. Because the transplanted cells are from the same person, the risks to the patient are much lower. The uptake, or engraftment of the modified, reinfused cells, however, has not been optimal, leading to a failure to achieve a cure. In addition, the transplant conditioning that has been used is no abilitymyeloablative chemotherapy, wiping out the patient’s immune system, which has inherent risks and can have long term side-effects including the risk of developing cancer.
ENOB-HV-01 is a novel, proprietary approach with the potential to market MCV other thanovercome the Singapore compassionate use programfailures of recent efforts. The intervention:
1) provides gene-modified, reinfused cells with a competitive advantage over non-modified cells in the HIV-positive person, with the potential to significantly increase engraftment; and 2) avoids the MyTomorrows compassionate use program.need for myeloablative chemotherapy and, in fact, could potentially be given on an outpatient basis. Initial in vivo studies demonstrated that hypothesis. ENOB-HV-01 is now undergoing additional in vivo and in vitro studies intended to support an INTERACT meeting request with the US FDA in the early part of the 2020 calendar year.
Our current strategy is focused on conducting clinical trials We are also developing ENOB-HV-11 and ENOB-HV-12 that will utilize a novel cellular- and immunotherapy approach that could potentially provide for a preventative vaccine and a therapeutic vaccine, respectively. Initial in advanced colorectal cancer. Our clinical development strategy is to continue our research and development of MCV including but not limited to a randomized multicenter Phase III clinical trial to determinevitro studies have demonstrated the ability of MCVthe approach to prevent recidivismpromote a robust immune response. In vivo studies have been developed and are expected to begin in stage IV colorectal patients with no evidencethe early part of disease (NED) after resection of metastasis and chemotherapy. the 2020 calendar year.
Recent Developments
On April 21, 2017, the Company engaged a consultant to improve the efficacy of the Company’s vaccine protocol MCV. The compensation to the consultant was $75,000 plus 200,000 common shares of the Company’s stock valued at $490,000.
On April 21, 2017, the Company engaged a consultant to improve the efficacy of the Company’s vaccine protocol MCV. The compensation to the consultant was $5,000 per month plus 100,000 warrants to purchase common shares at $1.30 per share expiring April 21, 2022 valued at $115,754.
In July 2017, DanDrit USA executed a non-binding letter of intent for the acquisition of a biotechnology company with certain intellectual property rights in the field of HIV. The Company is currently undergoing due diligence on the target entity.
Our Intellectual Property
The Company filed its first Patent Cooperation Treaty (PCT) patent application on November 29, 2002 with priority claimed from 2001 with the Danish application, shortly after our formation.
The Company may continue to patent its innovations, such as novel dendritic cell production systems or dendritic cell quality control. To support potential income streams the Company may patent non-core applications of its dendritic cell technologies so as to secure future revenue streams from out-licensing activity.
Patents
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AllCancer
Based on learning from peer-reviewed publications of Phase I/IIa trials we have designed an innovative dendritic-cell based therapeutic vaccination platform that could potentially be used to induce life-long remissions from some of the above patents deadliest solid tumors. We plan to initially target pancreatic cancer, triple negative breast cancer, glioblastoma, and renal cell carcinoma. The platform might also allow for non-specific immune enhancement that could have impact against a broad array of solid tumors. As with HIV, our approach could potentially allow for outpatient therapy without ablating or significantly impairing the patient’s immune system, as many current approaches require.
Our Product Candidates
We are protected by relevant international extensions.focused on the development of human therapeutics for infectious diseases and cancers. We are advancing a focused pipeline of innovative gene therapies that have been developed internally. We have proprietary preclinical and discovery stage programs in HIV/AIDS and cancer immunotherapy.
A summary table of our key development programs as of September 2019 is provided below:
ENOB-HV-01 Autologous Cell Therapy
Our lead candidate, ENOB-HV-01 is being developed to improve on the hypothesis that an allogeneic bone marrow transplant procedure could represent a potential curative treatment for HIV. ENOB-HV-01 seeks instead to develop a method of bone marrow transplant using autologous (the patient’s own cells) CD34+ cells, which could have significant advantages over allogeneic bone marrow transplants. The prevailing hypothesis is that an autologous treatment could become available to most patients suffering from HIV/AIDS, and there is no need for matched donors and no risk of “Graft versus Host Disease” (when the immune system of the treated patient rejects and destroys the transplanted cells).
ENOB-HV-01 as it is being developed seeks to silence the CCR5 gene in cells of a patient’s immune system to make these cells permanently resistant to HIV infection, by mimicking the naturally occurring CCR5 delta-32 mutation that renders a population of individuals largely resistant to infection by the most common strains of HIV. The aim of this approach is to provide the patient with a population of HIV-resistant CD4 cells that can fight HIV and opportunistic infections.
Currently, we are conducting in vitro and in vivo proof-of-concept studies of ENOB-HV-01 through partnerships with The Scripps Institute, and other leading scientists and academic centers that we expect to lead to completion of the Chemistry, Manufacturing, and Control (“CMC”) requirements for an Investigational New Drug (“IND”) filing.
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Trademarks
ENOB- HV-11 (preventive) and ENOB-HV-12 (therapeutic) Vaccine
ENOB-HV-11 and ENOB-HV-12 are being developed as a preventative vaccine and therapeutic vaccine, respectively. We are advancing the preventative vaccine and a therapeutic vaccine program through partnerships with TFred Hutchinson Cancer Center and other leading scientists and academic centers that we expect to lead to completion of the Chemistry, Manufacturing, and Control (“CMC”) requirements for an Investigational New Drug (“IND”) filing.
ENOB-DB-01 MCV Vaccine Technology and ENOB-DC-01 Off-the-shelf DC Vaccine pulsed with MCV
A policyENOB-DB-01 was developed as a therapeutic cancer vaccine for long term maintenance and prevention of relapse for stage III and IV colon cancer patients. ENOB-DC-01 is being developed as an improvement on ENOB-DB-01 (formerly “MCV”), as a dendritic cell cancer vaccine designed to prevent relapse in colon cancer patients with no evidence of disease after resection and chemotherapy. We are currently in the discovery/research stage, and we believe a succession of strong clinical success in the field of checkpoint inhibitors has spawned a renewed interest in the development of cancer vaccines. We plan to use new clinical data to and existing data on ENOB-DB-01 to develop ENOB-DC-01.
ENOB-DC-11 Innovative DC Vaccine for Multiple Solid Tumors
ENOB-DC-11 is being developed as an off the shelf, universal, dendritic cell as a delivery system for more specifically tailored cancer treatments. In this approach, immature dendritic cells are differentiated from monocytes derived from bone marrow stem cells. During the production process, monocytes are genetically modified to elicit cellular, humoral and systemic immune response by activating the cytotoxic response pathway, reactive B cell response, which induces a pan-activated immune response against the “target” we are loading the dendritic cells with. The genetic modifications of these monocytes include a single chain proprietary/unique sequence that we have developed. The genetically modified monocytes then differentiate into immature dendritic cells that are pulsed with tumor lysate or neopeptides and matured with a proprietary cocktail that could be used as a therapeutic vaccine.
Initial in vitro studies show substantial increases in tumor-cell killing. We are currently in the pre-clinical phase of this product trademarkingline.
ENOB-DC-21 Non-specific vaccine for intratumoral injection
ENOB-DC-21 builds on insights gained from multiple avenues including the other cancer pipeline products discussed above. We are in the discovery/research phase of this product line.
Collaborations
We have established strategic partnerships with leading scientists and brandingcenters, such as The Scripps Institute and Fred Hutchinson Cancer Center, for several of our programs. We will continue to pursue partnerships when appropriate with selected philanthropic, pharmaceutical and biotechnology companies to fund internal research and development activities, and to assist in product development and commercialization. We are applying our technology platform to several commercial applications in which our products provide us and our strategic partners and collaborators with potential technical, competitive and economic advantages.
Collaborations
We have established strategic partnerships with leading scientists and centers for several of our programs. We will continue to pursue partnerships when appropriate with selected philanthropic, pharmaceutical and biotechnology companies to fund internal research and development activities, and to assist in product development and commercialization. We are applying our technology platform to several commercial applications in which our products provide us and our strategic partners and collaborators with potential technical, competitive and economic advantages.
To date, our operations have been funded by sales of our securities. Sales revenue will not support our current operations and we expect this to be the case until our therapies or products are approved for marketing in the United States and Europe. Even if we are successful in having our therapies or products approve, we cannot guarantee that a market for our products will develop. We may never be profitable.
Our Intellectual Property
Patents and licenses are important to our business. Our strategy is to file or license patent applications to protect technology, inventions and improvements to inventions that we consider important for the development of our business. We rely on a combination of patent, copyright, trademark, and trade secret laws, as well as continuing technological innovations, proprietary knowledge, and various third party agreements, including, without limitation, confidentiality agreements, materials transfer agreements, research agreements and licensing agreements, to establish and protect our proprietary rights. We aim to take advantage of all of the intellectual property rights that are available to us and seek protection of those rights so that we can fully exploit our innovations.
We also protect our proprietary information by requiring our employees, consultants, contractors and other advisors to execute nondisclosure and assignment of invention agreements upon commencement of their respective employment or engagement. Our patent filings are discussed briefly below.
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Pharmaceutical composition for inducing an immune response in a human or animal (2001 Denmark (DK), 2002 PCT)
This patent family, owned by the Company, is directed to certain melanoma cell lines and the use of an allogenic melanoma cell lysate (MCL)-pulsed autologous dendritic cell vaccine expressing at least one of six MAGE-A antigens to induce an immune response. This patent has been adoptedgranted in: Europe, USA, China, Australia, Singapore, Russia, and Hong Kong and is pending in Japan. The issued patents relating to ENO-4001 (previously known as “MCV”) begin to expire in November 2022, subject to any applicable patent term extension, patent term adjustment, or supplementary protection certificates that may be available in a country or jurisdiction.
Protocol for generating dendritic cells (2005 DK, 2008 PCT)
This patent family is directed to the generation of dendritic cells based on a blood sample by culturing monocytes at reduced temperatures. Dendritic cells exposed to tumor antigens followed by treatment with T(h) 1-polarizing differentiation signals have paved the way for the development of dendritic cell-based cancer vaccines. Issued claims are directed to a method of generating immature dendritic cells under certain temperature settings which by further activation has been shown to give a high yield of homogeneous and fully matured dendritic cells. The patent expiry date is December 2026 subject to any applicable patent term extension, patent term adjustment, or supplementary protection certificates that may be available in a country or jurisdiction. This patent has been issued in the USA, Canada, China, Eurasia, Russia, Europe, Israel, Mexico, Malaysia, and New Zealand. This patent is owned by the Company. Trademarks have been obtained for the following:Company and was not licensed from third parties.
MelCancerVac™
MelVaxin™
DanDrit™
CommercialTrade Secrets
and Proprietary Know-How
In addition to intellectual property protected by patents and copyrights, the Company has commercialwe have trade secrets and proprietary know-how relating to itsour products, production processes, knowhow and future strategies. Where it is expedient
In-Licensed Technology
On February 16, 2018, Enochian Biopharma, the Registrant’s wholly-owned subsidiary, entered into a License Agreement (the “License Agreement”) with Weird Science, LLC (“Weird Science”). The License Agreement contains, among other things, the following terms: (a) a perpetual, fully paid-up, royalty-free, sublicensable, and exclusive (including to share such secret information thisthe exclusion of Weird Science) worldwide license from Weird Science to Enochian Biopharma to use Weird Science’s intellectual property and technology for the prevention, treatment, and/or amelioration of and/or therapy for HIV in humans, and research and development exclusively relating to HIV in humans (the “Field”) worldwide; (b) a nonexclusive, royalty-free, sublicensable license from Enochian Biopharma to Weird Science to use the Enochian Technology to commercialize products outside of the Field worldwide; (c) a nonexclusive, royalty-free license from Enochian Biopharma to Weird Science to use the results of a study with syngeneic and humanized mice models outside the Field and, at Weird Science’s own expense, to prosecute patents relating to the results of the study, which Weird Science will own, and (d) a perpetual, fully paid-up, royalty-free, sublicensable, and sole and exclusive (including to the exclusion of Weird Science) worldwide license from Weird Science to Enochian Biopharma (which will be done under the protection of a confidentiality (or secrecy) agreement. Such agreements require the signing parties to keep the Company’s commercial secrets confidential unless:
Industry
Our lead products for NSCLC (17.35%) and CRC (8.25%) address 25.6% of all cancer deaths.
Cancer is one of the leading causeslicense described in (a) above) to use patent applications and patents related to the study results disclosed in (d) above solely in the Field, and to make, have made, use, sell, offer to sell and import inventions claimed in such patent applications and patents solely in the Field.
Competition
The biotechnology and pharmaceutical industries, including in the field of morbiditygene therapy, are characterized by rapidly advancing technologies, intense competition and mortality worldwide,a strong emphasis on intellectual property. While we believe that our technology platforms, strong intellectual property portfolio and scientific expertise in the gene therapy field provide us with approximately 14 millioncompetitive advantages, we face potential competition from many different sources, including larger and better-funded pharmaceutical and biotechnology companies, new cases in 2012 (source Ferlay J, Soerjomataram I, Ervik M, Dikshit R, Eser S, Mathers C et al. GLOBOCAN 2012 v1.0, Cancer Incidencemarket entrants and Mortality Worldwide: IARC Cancer Base No. 11). Thenew technologies.
We are aware of several companies focused on other methods for editing genes and regulating gene expression and a limited number of new casescommercial and academic groups pursuing the development of gene regulation and genome editing technology. The field of applied gene regulation and genome editing is expectedhighly competitive, and we expect competition to rise by about 70% over the next 2 decades. Cancer is the second leading cause of death globally,persist and was responsible for 8.8 million deaths in 2015. Globally, nearly 1 in 6 deaths is due to cancer (source: World Health Organization). The economic impact of cancer is significant and is increasing. The total annual economic cost of cancer in 2010 was estimated at approximately $1.16 trillion (source: Stewart BW, Wild CP, editors, World Cancer Report 2014).
The per-treatment price of chemotherapy for CRC in the United States is approximately $30,000. We expect that, if our vaccine is approved for use in CRC patients, the cost per-treatment will be approximately equal to the per-treatment cost of chemotherapy.
Governmental Regulation
MCV and any future product candidates that we will be developing will require approval of the FDA before they can be marketed in the U.S. Although our focus at this time is primarily on the U.S. market,intensify in the future similar approvals will need to be obtained from foreign regulatory agencies before we can market our currentseveral different sources, including pharmaceutical and proposed product candidates in other countries.biotechnology companies; academic and research institutions; and government agencies.
The process for filing andAccordingly, our competitors may succeed in obtaining patent protection, receiving FDA approval, to market therapeuticor commercializing competitive products before us. If we commence commercial product sales, we may be competing against companies with greater marketing and manufacturing capabilities, areas in which we have limited or no experience. In addition, any product candidate that we successfully develop may compete with existing products that have long histories of safe and effective use.
The competitive landscape that we are facing is both time-consumingas follows:
Gene therapy companies developing gene-based products in clinical trials. uniQure N.V.’s product for lipoprotein lipase deficiency and costly, with no certainty of a successful outcome. The historical failure rateGlaxoSmithKline plc’s, or GSK, product for companies seeking to obtain FDA approval of therapeutic products is high and, with the exception of Dendreon Corp.’s dendritic cell vaccine for the treatment of prostate cancer, no cancer stem cell or dendritic cell-based cancer vaccine has to date been approved by the FDA. This process includes conducting extensive pre-clinical research and clinical testing, which may take longer and cost more than we initially anticipatesevere combined immunodeficiency due to numerous factors, including without limitation, difficultyadenosine deaminase deficiency are approved in securing appropriate centersEurope. No other gene therapy products have yet been approved. Our competitors in this category may include, but not be limited to, conduct trials, difficultySangamo, uniQure N.V., bluebird bio, Inc., Regenxbio Inc., Shire, Pfizer, and GSK.
Cell therapy companies developing cell-based products. Our competitors in enrolling patients in conformity with required protocols in a timely manner, unexpected adverse reactions by patients in the trials to our proposed product candidatesthis category may include Novartis AG, Adaptimmune Therapeutics PLC, Atara Biotherapeutics, Inc., bluebird bio, Inc., Cellectis S.A., Juno Therapeutics, Inc., Kite Pharma, and changes in the FDA’s requirements for our testing during the course of that testing.
The time required to obtain FDA and other approvals is unpredictable but often can exceed five years following the commencement of clinical trials, depending upon the complexity of the product and other factors. Any analysis we perform of data from preclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. We may also encounter unexpected delays or increased costs due to a variety of reasons, including new government regulations from future legislation or administrative actions or from changes in FDA policy during the period of product development, clinical trials and FDA regulatory review.
Any delay or failure in our clinical trial program and in obtaining required approvals would have a material adverse effect on our ability to generate revenues from the particular product. Furthermore, any regulatory approval to market a product may be subject to limitations on the indicated uses for which we may market the product. These limitations may limit the size of the market for the product.
Environmental Matters
We are subject to a broad range of federal, state, local and foreign environmental laws and regulations which govern, among other things, air emissions, wastewater discharges and the handling, storage disposal and release of wastes and hazardous substances. It is our policy to comply with applicable environmental requirements at all of our facilities. We are also subject to laws, such as the Comprehensive Environmental Response, Compensation and Liability Act, that may impose liability retroactively and without fault for releases or threatened releases of hazardous substances at on-site or off-site locations. We are subject to similar requirements in Denmark and other European countries.
Research and Development
Research and development costs are charged to operations as incurred and consist primarily of clinical trial costs related to manufacturing costs, consulting costs, contract research and development costs, and compensation costs.
Discovery and preclinical research and development expenses include costs for substantial external scientific personnel, technical and regulatory advisers, and others, costs of laboratory supplies used in our internal research and development projects, travel, regulatory compliance, and expenditures for preclinical and clinical trial operation and management when we are actively engaged in clinical trials. Because we are pre-revenue company, we do not allocate research and development costs on a project basis. We adopted this policy, in part, due to the unreasonable cost burden associated with accounting at such a level of detail and our limited number of financial and personnel resources.
Expenses for Company-sponsored research and development for the year ended June 30, 2017 and year ended June 30, 2016 were $62,763 and $804,188, respectively.Iovance Biotechnologies, Inc.
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Competition
For ENOB-HV-01, we are aware of two companies developing a gene therapy for HIV/AIDS: Sangamo and American Gene Technology.
For ENOB-HV-11 and ENOB-HV-12, we are aware of a few biotech companies developing an HIV vaccine such as Geovax, Biosantech SA, FIT Biotech, among a few others.
ThereFor ENO--DC-11, the competitive landscape is extensive competitionmore complex.
Immunotherapy is an active area of research and a number of immune-related products have been identified in recent years that are alleged to modulate the immune system. Many of these products utilize dendritic cells, a form of immune cell that presents cancer target peptides to T cells and that can in turn result in T cell activation. More recently, bi-specific antibodies and checkpoint inhibitors (for instance PD-1/PD-L1 antibodies) have been identified as having utility in the biopharmaceutical industrytreatment of cancer. Bi-specific antibodies commonly target both the cancer peptide and the technologyT cell receptors (“TCR”), thus bringing both cancer cells and T cells into close proximity to maximize the chance of TCR binding and hence an immune response to the cancer cells. Checkpoint inhibitors on the other hand work by targeting receptors that inhibit T cell effectiveness and proliferation and essentially activate T cells. Other immunotherapies that are being actively investigated include antibody-drug complexes, TCR-mimic antibodies, oncolytic viruses, and cancer vaccines. A variety of cell-based autologous and allogeneic approaches are also being researched and developed.
CAR-T in solid tumors
In addition to hematological malignancies, there are a growing number of pharmaceutical, biotechnology, and academic institutions researching and developing autologous and allogeneic chimeric antigen receptor T cell (“CAR-T”) therapies in the solid tumor setting. These CAR-T cell therapies are at a variety of stages of preclinical and clinical development, as well as directed towards a broad target spectrum. Two Car-T therapies has been approved for treatment of leukemia
CARs&TCR-mimics targeting peptide-HLA complexes
Most CAR-T therapies in development are directed towards antigen targets. However, competitors are also developing a CAR-T that selectively binds to the peptide-HLA (pHLA) complex (the natural binding site for endogenous TCR). Furthermore, competitors are also looking at pHLA antibodies or TCR mimic antibodies that can either be engineered in T cells or developed as standalone antibody therapies in cancer indications (including solid tumors).
TCRTcells
Competitors are developing TCR T cells (including affinity engineered T cells) that are directed towards a multitude of targets. Juno Therapeutics has developed an engineered TCR therapeutic candidate where the end TCR is developing rapidly. If newly developed products ofpurported to have enhanced affinity through stem-cell selection.
Other cell-based approaches
In addition to all the adoptive cell therapy approaches above, our competitors are more efficient, cheaper, more patient-friendly, safer,also investigating the potential of GammaDelta T cell, CAR-NK cell, NK cell, NKT cell and CTLs either in a preclinical or better placed than the Company’s vaccine candidates, or if the Company’s competitors develop drugs that reduce or eliminate the need for the Company’s vaccine candidates, such competition could reduce or eliminate the Company’s commercial opportunities. Many of the Company’s competitors have substantially greater financial, technicalclinical setting (both hematologic malignancies and human resources than DanDrit and significantly more experience than DanDrit withsolid tumors).
Manufacturing
Our intent is to rely on contract manufacturing organizations (“CMOs”), to produce our preclinical and clinical researchproduct candidates in accordance with FDA and EMA mandated regulations, also known as current good manufacturing practices, (“cGMPs”). We employ a technical operations staff in the areas of process development, analytical development, quality control, quality assurance, project management, and manufacturing, which will facilitate appropriate oversight of our CMOs, support of our regulatory filings and execution of clinical trials.
Government Regulation
FDA Review and Approval
Any products we develop will require regulatory review and allowance to proceed prior to conducting clinical trials and additional regulatory approvals prior to commercialization. In the United States, the Federal Food, Drug and Cosmetic Act and the Public Health Service Act and their implementing regulations govern, among other things, biopharmaceutical testing, manufacturing, safety, efficacy, labeling, storage, record keeping, advertising, and other promotional practices.
Obtaining FDA approval is a costly and time-consuming process. Generally, FDA approval requires that preclinical studies be conducted in the laboratory and in obtaining regulatory approvalanimal model systems to gain preliminary information on efficacy and to identify any major safety concerns. The results of pharmaceutical products.
The Company’s drugs may face competitionthese studies are then submitted as a resultpart of many factors, includingan IND, which the route of administration (e.g. oral administration vs. injection), the availabilityFDA must review and cost of production, efficiencyallow before human clinical trials can start. The IND includes a detailed description of the Company’s partners’proposed clinical investigations. An independent Institutional Review Board (“IRB”) must also review the clinical protocol.
A company must submit an IND for each investigational medical product and specific indication(s), and must conduct clinical studies to demonstrate the safety and efficacy of the product necessary to obtain FDA approval. The FDA receives reports on the progress of each phase of clinical testing and may require the modification, suspension, or termination of clinical trials if an unwarranted risk ispresented to patients.
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To obtain FDA approval prior to marketing a biopharmaceutical product in the United States typically requires several phases of clinical trials to demonstrate the safety and sales effortsefficacy of the product candidate. Clinical trials are the means by which experimental treatments are tested in humans and are conducted following preclinical testing. Clinical trials may be conducted within the United States or in foreign countries. If clinical trials are conducted in foreign countries, the products under development as well as the trials are subject to regulations of the FDA and/or its regulatory counterparts in the other countries. Upon successful completion of clinical trials, approval to market the treatment for a particular patient population may be requested from the FDA in the United States and/or its counterparts in other countries.
Clinical trials for therapeutic products are normally conducted in three phases. Phase 1 clinical trials are typically conducted with a small number of patients to evaluate safety, determine a safe dosage range, identify side effects, and, if possible, gain early evidence of effectiveness. Phase 2 clinical trials are conducted with a larger group of patients to evaluate effectiveness of an investigational product for a defined patient population, and to determine common short-term side effects and risks associated with the drug. Phase 3 clinical trials involve large scale, multi-center, comparative trials that are conducted to evaluate the overall benefit-risk relationship of the investigational product and to provide an adequate basis for product labeling. In some special cases where the efficacy testing of a product may present a special challenge to testing in humans, such as in the case of a vaccine to protect healthy humans from a life-threatening disease that is not a naturally occurring threat, effectiveness testing may be required in animals. For certainadvanced therapies that meet eligibility criteria for expedited program Designations, clinical development may be expedited.
Clinical trials involve the administration of the biologic product candidate to healthy volunteers or patients under the supervision of qualified investigators which generally are physicians not employed by, or under, the control of the trial sponsor. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria and the parameters to be used to monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND. Clinical trials must be conducted and monitored in accordance with the FDA’s regulations comprising the Good Clinical Practice (“GCP”) requirements, including the requirement that all research subjects provide informed consent.
Further, each clinical trial must be reviewed and approved by an IRB at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers items such as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject, or their legal representative, reviews and approves the study protocol, and must monitor the clinical trial until completed. Clinical trials involving recombinant DNA also must be reviewed by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees basic and clinical research that utilizes recombinant DNA at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment.
After completion of clinical trials of a new product, FDA marketing approval must be obtained. If the product is regulated as a biologic, a Biologics License Application, or BLA, is required. If the product is classified as a new drug, a New Drug Application, or NDA is required. The NDA or BLA must include results of product development activities, preclinical studies, and clinical trials in addition to detailed chemistry, manufacturing and control information.
Applications submitted to the FDA are subject to an unpredictable and potentially prolonged approval process. Despite good-faith communication and collaboration between the applicant and the FDA during the development process, the FDA may ultimately decide, upon final review of the data, that the application does not satisfy its criteria for approval or requires additional product development or further preclinical or clinical studies. Even if FDA regulatory approval(s) are obtained, a marketed product is subject to continual review, and later discovery of previously unknown problems or failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions.
Before marketing approval for a product can be secured, the facility in which the product is manufactured must be inspected by the FDA and must comply with the FDA’s current Good Manufacturing Practices, (“cGMP”) regulations. In addition, after marketing approval is secured, the manufacturing facility must be inspected periodically for cGMP compliance by FDA inspectors, and, if the facility is located in California, by inspectors from the Food and Drug Branch of the California Department of Health Services.
Sponsors of clinical trials are required to register, and report results for, all controlled, clinical investigations, other than Phase 1 investigations, of a product subject to FDA regulation. Trial registration may require public disclosure of certain confidential commercial development data.
Under the Orphan Drug Act, the FDA may grant orphan designation to a product intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making a product available in the United States for this type of disease or condition will be recovered from sales of the product. Orphan designation must be requested before submitting an NDA or BLA. Orphan designation does not convey any advantage in or shorten the duration of the regulatory review and approval process. If a product that has orphan designation subsequently receives the first FDA approval for such product for the disease or condition for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same product for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity. Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity or obtain approval for the same product but for a different indication for which the orphan product has exclusivity. If a product designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan product exclusivity.
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Fraud and Abuse, Data Privacy and Security, and Transparency Laws and Regulations
Although we currently do not have any products on the market, we may also be subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which we conduct our business. These additional healthcare regulations could affect our current and future arrangements with healthcare professionals, principal investigators, consultants, customers and third-party payors. Such laws potentially applicable to our operations include:
• The federal Anti-Kickback Statute makes it illegal for any person or entity, including a prescription drug manufacturer (or a party acting on its behalf), to knowingly and willfully, directly or indirectly, overtly or covertly, solicit, receive, offer, or pay any remuneration that is intended to induce the referral of business, including the purchase, order, or lease of any good, facility, item or service for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. The term “remuneration” has been broadly interpreted to include anything of value. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the Anti-Kickback Statute has been violated. The Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act, collectively the Affordable Care Act or ACA, among other things, amended the intent requirement of the federal Anti-Kickback Statute such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate, in order to commit a violation.
• Federal false claims and false statement laws, including the federal civil False Claims Act, which may be enforced through whistleblower or qui tam actions, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, for payment to, or approval by, federal programs, including Medicare and Medicaid, claims for items or services, including drugs, that are false or fraudulent or not provided as claimed. Entities can be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers, promoting a product off-label, or for providing medically unnecessary services or items.
• The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, require certain types of individuals and entities to protect the privacy, security, and electronic exchange of certain patient data. • The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to payments or other transfers of value made to physicians and teaching hospitals, and applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by the physicians and their immediate family members.
• Analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by third party payors, including private insurers. Additionally, we may be subject to state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government. Further, we may be subject to state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians, other healthcare providers and healthcare entities, or marketing expenditures, as well as state and foreign laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
If our operations are found to be in violation of any of these federal, state, local or foreign laws or regulations, we may be subject to penalties, including without limitation, administrative or civil penalties, imprisonment, damages, fines, disgorgement, individual imprisonment, exclusion from participation in government healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional integrity obligations, or the curtailment or restructuring of our operations.
Reimbursement and Health Reform
Significant uncertainty exists as to the coverage and reimbursement status of any product candidate that receives regulatory approval. In the United States and markets in other countries, sales of our product candidates, if approved, will depend, in part, on the extent to which third-party payors provide coverage and establish adequate reimbursement levels.
In the United States, third-party payors include federal and state healthcare programs, government authorities, private managed care providers, private health insurers and other organizations. Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical drug products and medical services, in addition to questioning their safety and efficacy. Such payors may limit coverage to specific drug products on an approved list, also known as a formulary, which might not include all the FDA-approved drugs for a particular indication.
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Moreover, the process for determining whether a third-party payor will provide coverage for a drug product may be separate from the process for setting the price of a drug product or for establishing the Company’s products. DanDrit has limited or no previous experience in these areas. The Company’s inabilityreimbursement rate that such a payor will pay for the drug product. A payor’s decision to compete effectively would haveprovide coverage for a material adverse effect on the Company’ business, financial condition, results of operations and future growth opportunities. At this time, the Companydrug product does not representimply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a significant presencedrug product does not assure that other payors will also provide coverage for the drug product.
There are ongoing efforts by governmental and third-party payers to contain or reduce the costs of healthcare through various reform measures. For example, in the biopharmaceutical industry.United States, the Federal government passed comprehensive healthcare reform legislation, the Affordable Care Act, or ACA, in 2010. With respect to pharmaceutical products, the ACA, among other things, expanded and increased industry rebates for drugs covered by Medicaid and made changes to the coverage requirements under Medicare Part D, Medicare’s prescription drug benefits program. Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the ACA. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of any certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA have been signed into law, including the repeal, effective January 1, 2019, of the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain fees mandated by the ACA, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. Moreover, the Bipartisan Budget Act of 2018, among other things, amends the ACA, effective January 1, 2019, to increase from 50% to 70% the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. Congress may consider other legislation to repeal or repeal and replace elements of the ACA. We continue to evaluate the effect that the ACA and its possible repeal and replacement has on our business.
In addition, drug pricing by pharmaceutical companies continues to be under increased scrutiny. Specifically, there have been several recent U.S. Congressional inquiries and proposed federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the out of-pocket cost of prescription drugs, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies. At the federal level, the Trump administration’s budget proposal for fiscal year 2020 contains additional drug price control measures that could be enacted during the 2020 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid and to eliminate cost sharing for generic drugs for low-income patients. While any proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our current product candidates and those for which we may receive regulatory approval in the future.
Further, third-party payers are increasingly challenging the price of medical products and services. If purchasers or users of our products are not able to obtain adequate reimbursement for the cost of using our products, they may forego or reduce their use. Significant uncertainty exists as to the reimbursement status of newly approved healthcare products, and whether adequate third-party coverage will be available.
We also are subject to various federal, state and local laws, regulations, and recommendations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research. The extent of government regulation that might result from any future legislation or administrative action cannot be accurately predicted.
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Employees
The Company currently has 3As of June 30, 2019, we had 8 full-time employees. We believe that we have good relations with our employees.
Facilities and Offices Corporate Information
The Company’s corporate headquarters are located atStumpedyssevej 17, 2970 Hørsholm, Denmark. We lease approximately 1,108 square feet at our Symbion location which is used for work and storage of cells and biological material in freezers, and the lease terminates on September 30, 2017. The Company has an office in New York which is a virtual office space that can be terminated by the Company with one month’s notice.
Corporate History
DanDrit USA was originallywere incorporated in Delaware on January 18, 2011 in the state of Delaware under the name “Putnam Hills Corp.” as a vehicle to pursue a business combination through the acquisition of, or merger with, an operating business. We filed a Registration Statement on Form 10 with the U.S. Securities and Exchange Commission, or the SEC, on August 12, 2011.
On February 12, 2014, in accordance with the terms and conditions ofpursuant to a Share Exchange Agreement, we completed the acquisition of approximatelyRegistrant acquired 100% of the issued and outstanding capital stock of DanDrit Denmark and asAs a result, the Registrant changed its name to DanDrit Biotech USA, Inc. and became DanDrit Denmark’s parent company. In connection with thiscompany (the “Share Exchange”). Prior to the Share Exchange, the Registrant and an existing shareholder agreed to cancel 4,400,000 out of 5,000,000 shares of common stock of DanDrit Denmark outstanding, and the Registrant issued 1,440,000 shares of Common Stock for legal and consulting services related to the Share Exchange and a future public offering. At the time of the Share Exchange each outstanding share of common stock of DanDrit Denmark was exchanged for 1.498842 shares of DanDrit USA’s common stock, par value $0.0001 per share (“Common Stock”)Stock, for an aggregatea total of 6,000,000 shares, including 185,053 shares of Common Stock, reserved for issuance,resulting in accordance with Section 708,040,000 shares of the Danish Companies Act and the Articles of Association of DanDrit Denmark, to the DanDrit Denmark stockholders who did not consent toCommon Stock outstanding immediately following the Share Exchange, andincluding the Escrow Shares, which are deemed issued and outstanding for accounting purposes. In addition, in connection with the Share Exchange (1) the sole stockholder priorpurposes (See also Note 1 to the Share Exchange agreedConsolidated Financial Statements).
On February 16, 2018, we completed our acquisition of Enochian Biopharma pursuant to cancel 4,400,000an acquisition agreement, dated January 12, 2018, by and among the Registrant, its wholly owned subsidiary DanDrit Acquisition Sub, Inc., Enochian Biopharma and Weird Science (the “Acquisition Agreement”), with Enochian Biopharma surviving as a wholly owned subsidiary of the Registrant. As consideration for the acquisition, the stockholders of Enochian Biopharma received (i) 18,081,962 shares of outstanding Common Stock owned by it and (2)(ii) the board of directors and executive management of DanDrit Denmark were appointedright to serve as the Board of Directors and executive management of DanDrit USA, respectively, effectivereceive Contingent Shares pro rata upon the resignationexercise or conversion of the sole officer and director of DanDrit USA priorwarrants which were outstanding at closing (See also Note 3 to the closing of the Share Exchange.Consolidated Financial Statements).
In June 2015, DanDrit USA’s Board of Directors, orOn March 2, 2018, we changed our name from “DanDrit Biotech USA, Inc.” to Enochian BioSciences, Inc.” We began trading on the Board, approved a change to its fiscal year end fromNASDAQ Capital Market on December 31 to June 30. 10, 2018 under the ticker “ENOB.”
Our website is http://www.enochianbio.com. We make available free of charge, on or through our internet site, our annual, quarterly, and current reports and any amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Information contained in our website is not part of, nor incorporated by reference into, this report.
Emerging Growth Company
As a companyCompany with less than $1.0 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, enacted in April 2012. An “emerging growth company” may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:
| ● | Reduced disclosure about our executive compensation arrangements; |
| ● | No non-binding shareholder advisory votes on executive compensation or golden parachute arrangements; |
| ● | Exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting; and |
| ● | Reduced disclosure of financial information in this |
Each of the foregoing exemptions is currently available to us. We may take advantage of these exemptions until the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act, which such fifth anniversary will occur on June 30, 2019 or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenues as of the end of a fiscal year, if we are deemed to be a large accelerated filer under the rules of the SEC, or if we issue more than $1.0 billion of non-convertible debt over a three-year-period.2020. The JOBS Act permits an emerging growth company to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies; provided, however, that an emerging growth company may elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have not elected to opt out of the transition period.
Because we have elected to take advantage of certain of the reduced disclosure obligations and may elect to take advantage of other reduced reporting requirements in future filings, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.
NotAs a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, the Company is not required for smaller reporting companies.to provide the information required by this Item.
There are no unresolved SEC staff comments.
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The Company hascurrently leases the following three (3) leases:properties:
Location Use Terms
Los Angeles, CA 90036 | ||||
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| 2080 Century Park East, Suite 906 Los Angeles, CA 90067 | The Company entered into a Lease Agreement for our corporate headquarters located at Century City Medical Plaza, 2080 Century Park East, Suite 906, Los Angeles CA, 90067. We have a ten-year lease for approximately 2,453 square feet at this location. In February 2019, we extended our corporate headquarters to encompass the adjoining suite for approximately 1,101 square feet, bringing the total workspace to 3,554 square feet. The new base rent for this leased premises increases by 3% each year over the term, and ranges from $17,770 per month as of the date of the amendment until the end of the first year to $ 23,185.82 per month for the tenth year. All other terms remain the same. The additional suite was in the form of an |
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. We are not currently a party to in any legal proceeding that we believe would have a material adverse effect on our business, financial condition or operating results.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our Common Stock is quotedtrades on the OTCQB. The following table sets forthNasdaq Capital Market under the range of high and low bid quotations on the Common Stock for the quarterly periods indicated, as reported by the National Quotation Bureau, Inc. The quotations are inter-dealer prices without retail mark-ups, mark downs or commissions and may not represent actual transactions.symbol “ENOB”.
| Fiscal Year Ended June 30, 2017 | High | Low | ||||||
| Third Quarter | $ | 2.75 | $ | 0.75 | ||||
| Fourth Quarter | $ | 2.65 | $ | 1.30 | ||||
| First Quarter | $ | 1.90 | $ | 0.70 | ||||
| Second Quarter | $ | 2.45 | $ | 1.15 | ||||
| Fiscal Year Ended June 30, 2016 | High | Low | ||||||
| Third Quarter | $ | 6.25 | $ | 4.00 | ||||
| Fourth Quarter | $ | 5.00 | $ | 3.00 | ||||
| First Quarter | $ | 3.90 | $ | 1.50 | ||||
| Second Quarter | $ | 3.50 | $ | 1.25 | ||||
Holders of Common Stock
As of June 30, 2019 the Company had 45,273,924 shares of Common Stock issued and outstanding. On July 3, 2019, the Company issued 500,000 shares of Common Stock in accordance with the Acquisition Agreement. As of September 28, 201727, 2019, we had 13,727,53846,273,924 shares of Common Stock issued and outstanding and approximately 89215 stockholders of record. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
Dividends
The Company has not declared or paid any cash dividends on its Common Stock and does not intend to declare or pay any cash dividend in the foreseeable future. The payment of dividends, if any, is within the discretion of the Board and will depend on the Company’s earnings, if any, its capital requirements and financial condition and such other factors as the Board may consider.
Sales of Unregistered Securities
On April 21, 2017, the Company issued 200,000 shares of Common Stock to a consultant in consideration for services relating to the improvement of the efficacy of the Company’s vaccine protocol.
On April 21, 2017, the Company issued five-year warrants to purchase 100,000 shares at $1.30 per share to a consultant to assist in the development of a new science based on immune therapy.
On May 15, 2017, the Company completed a private placement offering of units, with each unit consisting of one share of Common Stock and two warrants to purchase one share of Common Stock at a strike price of $1.30 per share (each, a “Unit”), for $1.30 per Unit. In total, the Company issued and sold 2,700,000 shares of Common Stock and warrants to acquire 5,400,000 shares of Common Stock for total proceeds to the Company of $3,510,000.
On July 12, 2017, Company completed a private placement offering of 1,231,561 Units for total proceeds to the Company of $1,601,029.
The private placements above were made directly by the Company in reliance upon Section 4(a)(2), Regulation D and/or Regulation S and no underwriter or placement agent was engaged by the Company.
Securities Authorized for Issuance under Equity Compensation Plans
On February 6, 2014, the Board adopted the Company’s 2014 Equity Incentive Plan. As of the date of this report, no awards have been made from the plan.
Item 6. Selected Financial Data
The registrantRegistrant is a smaller reporting company and is not required to provide this information.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements, and the related notes to those statements included elsewhere in this report. In addition to the historical financial information, the following discussion and analysis containscontain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements.
The Company has conducted three single-arm Phase II clinical trials inOur Business
We are a pre-clinical stage biotechnology company committed to using our genetically modified cellular and immune-therapy technologies to prevent or potentially cure HIVand to potentially provide life-long cancer with its dendritic cell vaccine MCV. The three clinical trials generated data indicating prospects in a larger and different clinical setting. The FDA has not reviewed MCV. Therefore, any assessmentremission of its safety or efficacy only reflects the opinionsome of the Company. Furthermore, it does not indicate that MCV will achieve favorable results in any later stage trialsdeadliest cancers. We do this by genetically modifying, or thatre-engineering, different types of cells, depending on the FDAtherapeutic area and then injecting or comparable agency will ultimately determine that MCVreinfusing the re-engineered cells back into the patient to provide treatment. In some of our interventions, immunotherapy is safe and effective for purposes of granting marketing approval.
The Company has designed a randomized trial with 174 stage IV colorectal cancer patients after surgical resection and chemotherapy. The Company has not yet begun the trial.used.
To date, our operations have been funded by sales of our securities, loans and, to a lesser extent, by sales of our products.securities. Sales of our products alonerevenue will not support our current operations, and we expect this to be the case until our MCV vaccine istherapies or products are approved for marketing in the United States and Europe. Even if we are successful in having MCVour therapies or products approved for sale in the United States and Europe, we cannot guarantee that a market for the product will develop. We may never be profitable.
Change in Fiscal Year EndAcquisition
In June 2015,On January 12, 2018, the Board approvedRegistrant, Acquisition Sub, Enochian Biopharma, and Weird Science entered into the Acquisition Agreement, pursuant to which on February 16, 2018, Enochian Biopharma became a change to its fiscal year end from December 31 to June 30. In viewwholly-owned subsidiary of this change, this Annual Report compares the financial statements as of andRegistrant. As consideration for the years endedAcquisition, the stockholders of Enochian Biopharma received, in the aggregate, (i) 18,081,962 shares of the Common Stock of the Registrant and (ii) the right to receive shares of Common Stock pro rata upon the exercise or conversion of up to 6,488,122 warrants which were outstanding at closing. As of June 30, 20172019 and June 30, 2016.2018, there were 1,938,122, and 6,488,122 shares of Common Stock, respectively, that are contingently issuable in connection with the Acquisition of Enochian Biopharma (the “Contingent Shares”).
As a condition of the Acquisition, Enochian Biopharma, as licensee, entered into an intellectual property license agreement with Weird Science, as licensor, which contained: (a) a perpetual, fully paid-up, royalty-free, sublicensable, and sole and exclusive (including to the exclusion of Weird Science) worldwide license from Weird Science to Enochian Biopharma covering all Intellectual Property Rights of Weird Science in the Field (defined below) to research, develop, use, sell, have sold, make, have made, offer for sale, import and otherwise commercialize products and to otherwise use and practice the intellectual property and technology of Weird Science solely for the prevention, treatment, and/or amelioration of and/or therapy exclusively for HIV in humans, and research and development exclusively relating to HIV in humans (the “Field”) worldwide; (b) a nonexclusive license from Enochian Biopharma to Weird Science to use the results of a certain study related to the Field, at Weird Science’s own expense, to prosecute patents which would be owned by Weird Science; and (c) a perpetual, fully paid-up, royalty-free, sublicensable, and sole and exclusive (including to the exclusion of Weird Science) worldwide license from Weird Science to Enochian Biopharma (which will be part of the license described in (a) above) to use such patent applications and patents solely in the Field, and to make, have made, use, sell, offer to sell and import inventions claimed in such patent applications and patents solely in the Field. Weird Science also irrevocably assigned to Company all rights, title, and interest in certain study results to the extent within the Field and all inventions, improvements or discoveries made or reduced to practice in the performance of such study to the extent within the Field (including all intellectual property therein).
In connection with the Acquisition, the Registrant, Weird Science and RS Group ApS, a significant stockholder of the Registrant (“RS Group”) entered into (a) an Investor Rights Agreement, which provides for (A) nomination rights of each of Weird Science and RS Group to nominate a single director each, (B) both Weird Science and RS Group to nominate 3 mutually agreed directors, (C) both Weird Science and RS Group to consent to any increase in the number of directors, (D) restrictions on transfer of securities held by both other than pursuant to certain permitted transferees agreeing to be bound thereunder, and (E) demand and piggy- back registration rights for the former stockholders of Enochian Biopharma with respect to the shares of Registrant’s common stock issued in connection with the Acquisition and; (b) a Standstill & Lock-Up Agreement, which subject to customary terms and limitations provides for (Y) restrictions on Weird Science and its affiliates from acquiring any Common Stock other than as provided in the Acquisition Agreement or such that they would own greater than 50% of such shares of Common Stock issued and outstanding and (Z) restrictions on sale of one half of the securities owned by Weird Science and RS Group for twelve months and the other half for 24 months subject to customary permitted dispositions and transfers.
Also, simultaneously with closing of the Acquisition, the Registrant completed a private placement offering for a total of 1,677,130 shares of Common Stock at a price of $8.00 per share for aggregate proceeds of $13,417,040, and, certain of our warrant holders exercised warrants to purchase 2,400,000 shares of Common Stock, for total proceeds to the Company of $3,295,000.
Share Exchange
On February 12, 2014, the Company closed a Share Exchange in accordance with the terms and conditions of a Share Exchange Agreement and as a result became DanDrit Denmark’s parent company. In connection with the Share Exchange, each outstanding share of common stock of DanDrit Denmark was exchanged for 1.498842 shares of DanDrit USA’s Common Stock for an aggregate of 6,000,000 shares, including 185,053 shares of Common Stock reserved for issuance, in accordance with Section 70 of the Danish Companies Act and the Articles of Association of DanDrit Denmark, to the DanDrit Denmark shareholders who did not consent to the Share Exchange and deemed issued and outstanding for accounting purposes. In addition, in connection with the Share Exchange (1) the sole shareholder prior to the Share Exchange agreed to cancel 4,400,000 shares of outstanding Common Stock owned by it and (2) the board of directors and executive management of DanDrit Denmark were appointed to serve as the Board of Directors and executive management of DanDrit USA, respectively effective upon the resignation of the sole officer and director of DanDrit USA prior to the closing of the Share Exchange.
Recent Developments
On April 21, 2017, the Company engaged a consultant to improve the efficacy of the Company’s vaccine protocol MCV. The compensation to the consultant was $75,000 plus 200,000 common shares of the Company’s stock valued at $490,000.
On April 21, 2017, the Company engaged a consultant to improve the efficacy of the Company’s vaccine protocol MCV. The compensation to the consultant was $5,000 per month plus 100,000 warrants to purchase common shares at $1.30 per share expiring April 21, 2022 valued at $115,754.
In July 2017, DanDrit USA executed a non-binding letter of intent for the acquisition of a biotechnology company with certain intellectual property rights in the field of HIV.
RESULTS OF OPERATIONS
Year ended June 30, 20172019 compared to the year ended June 30, 2016.2018.
The following table sets forth our revenues, expenses and net income for the years ended June 30, 20172019 and 2016.2018. The financial information below is derived from our audited consolidated financial statements included elsewhere in this report.Annual Report.
| For the Year Ended | ||||||||
| June 30, | ||||||||
| 2017 | 2016 | |||||||
| Net Sales | $ | - | $ | 42,769 | ||||
| Cost of Goods Sold | - | 5,275 | ||||||
| Gross Profit (Loss) | - | 37,494 | ||||||
| Operating Expenses: | ||||||||
| General and administrative expenses | 1,560,332 | 1,229,865 | ||||||
| Research and Development expenses | 62,763 | 804,188 | ||||||
| Depreciation and Amortization | 14,528 | 27,395 | ||||||
| Consulting expenses | 1,012,804 | 96,976 | ||||||
| Total Operating Expense | 2,650,427 | 2,158,424 | ||||||
| Income (Loss) from Operations | (2,650,427 | ) | (2,120,930 | ) | ||||
| Other Income (Expense) | ||||||||
| Interest (Expense) | (11,210 | ) | (2,364 | ) | ||||
| Interest (Expense), Related Party | (15,049 | ) | - | |||||
| Gain (loss) on currency transactions | 218,979 | (74,732 | ) | |||||
| Gain on derivative liability | - | - | ||||||
| Interest and other income | - | - | ||||||
| Total Other Income (Expense) | 192,720 | (77,096 | ) | |||||
| Loss Before Income Taxes | (2,457,707 | ) | (2,198,026 | ) | ||||
| Income Tax Expense (Benefit) | (64,877 | ) | (462,787 | ) | ||||
| Net Loss | (2,392,830 | ) | (1,735,239 | ) | ||||
| BASIC AND DILUTED LOSS PER SHARE | $ | (0.20 | ) | $ | (0.18 | ) | ||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED | 12,266,441 | 9,533,290 | ||||||
| For the Year Ended | ||||||||
| June 30, | ||||||||
| 2019 | 2018 | |||||||
| (As Revised) | ||||||||
| Revenues | $ | — | $ | — | ||||
| Cost of Goods Sold | $ | — | $ | — | ||||
| Gross profit (Loss) | $ | — | $ | — | ||||
| Operating Expenses | ||||||||
| General and administrative expenses | 8,271,540 | 3,899,718 | ||||||
| Research and development expenses | 2,498,107 | 616,961 | ||||||
| Depreciation and amortization | 71,709 | 18,484 | ||||||
| Consulting expenses | 148,676 | 794,166 | ||||||
| Total Operating Expense | $ | 10,990,032 | $ | 5,329,329 | ||||
| LOSS FROM OPERATIONS | $ | (10,990,032 | ) | $ | (5,329,329 | ) | ||
| Other Income (Expense) | ||||||||
| Change in fair value of contingent consideration | (7,073,579 | ) | (1,375,000 | ) | ||||
| Interest expense | (43 | ) | (143,262 | ) | ||||
| (Loss) gain on currency transactions | (26,313 | ) | 290,407 | |||||
| Other income expense, forgiveness of debt | — | 87,817 | ||||||
| Interest income | 73,487 | 45,816 | ||||||
| Total Other Expense | (7,026,448 | ) | (1,094,222 | ) | ||||
| Loss Before Income Taxes | (18,016,480 | ) | (6,423,551 | ) | ||||
| Income Tax Benefit | $ | — | $ | (111,716 | ) | |||
| NET LOSS | $ | (18,016,480 | ) | $ | (6,311,835 | ) | ||
| BASIC AND DILUTED LOSS PER SHARE | $ | (0.48 | ) | $ | (0.29 | ) | ||
| WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK | ||||||||
| OUTSTANDING - BASIC AND DILUTED | 37,552,062 | 21,940,489 | ||||||
| For the Year Ended | ||||||||
| June 30, | ||||||||
| 2017 | 2016 | |||||||
| (Net Loss) | $ | (2,392,830 | ) | $ | (1,735,239 | ) | ||
| (Currency Translation, Net of Taxes) | (211,461 | ) | 20,701 | |||||
| (Other Comprehensive Loss) | $ | (2,604,291 | ) | $ | (1,714,538 | ) | ||
| For the Year Ended | ||||||||
| June 30, | ||||||||
| 2019 | 2018 | |||||||
| (As Revised) | ||||||||
| Net Loss | $ | (18,016,480 | ) | $ | (6,311,835 | ) | ||
| Currency translation | (103,862 | ) | (147,153 | ) | ||||
| Other Comprehensive Loss | $ | (18,120,342 | ) | $ | (6,458,988 | ) | ||
Revenues
Comparison of the Years ended June 30, 2017
We are a development-stage biotechnology company, and June 30, 2016
Revenues
Our net saleswe do not anticipate earning any revenues until our therapies or products are approved for the year ended June 30, 2017 were $0 as compared to June 30, 2016, where net sales were $42,769. The decrease in 2017 is attributable to no compassionate use sales of lysate in 2017. marketing and sale.
Cost of Goods SoldExpenses
Our cost of goods sold for the year ended June 30, 2017 were $0 as compared to June 30, 2016, where cost of goods sold were $5,275, representing a year over year decrease in cost of goods sold of $5,275 or 100%. The decrease was due to our manufacturing of lysate in 2016.
Gross Profit Loss
Gross profitoperating expenses for the years ended June 30, 2017 was $0 compared to a gross loss of $37,494 during the same period in 2016, representing a decrease in the gross profit (loss) of $37,494. The change in gross losses are a result of compassionate use sales in 2017.
Expenses
Our operating expense for the year ended June 30, 2017 totaled $2,650,427, 2019 and 2018 were $10,990,032 and $5,329,329, respectively, representing an increase of 492,003$5,660,703, or 22.8% compared to $2,158,424 for the year ended June 30, 2016.106.2%. The largest contributor to the operating expenses for the year ended June 30, 2017 is2019 was the increase in consulting expenses.general and administrative expenses in connection with the continued growth in our research and development efforts, the increase in personnel from 4 to 8 full-time employees resulting in an increase in salaries and related expenses, and the non-cash compensation expense.
General and administrative expenseexpenses for the yearyears ended June 30, 2017 was $1,560,332, compared to $1,229,865 for the year ended June 30, 2016,2019 and 2018 were $8,271,540 and $3,899,718, respectively, representing an increase of $330,467,$4,371,822, or 26.9%112.1%. General and administrative expenses include audit and non-cash compensation expense, board compensation, filing fees, corporate taxes, security expenses, legal fees, office leases, insurance, patent fees, salaries, non-cash compensation expense and travel expenses. The net increase was primarily due primarily to the increase in non-cash compensation expense of $1,867,030, an increase salaries and related expenses of $836,876, and an increase in legal expenses.security expenses of $780,015.
DepreciationResearch and amortizationdevelopment expenses for the yearyears ended June 30, 20172019, and 2016June 30, 2018, were $14,528$2,498,107 and $27,395,$616,961, respectively, representing a decreasean increase of $12,867$1,881,146 or 47%approximately 304.9%. The increase was primarily attributable to R&D consulting fees of $1,500,000, with the balance of expenditures related to the development of and pre-clinical studies for ENOB-HV01 and ENOB-HV11/12, and related consumables cost, reagent cost, and general laboratory expenses
| 14 |
Consulting expenses for the years, ended June 30, 2017 totaled $1,012,804 compared2019 and 2018 were $148,676 and $794,166, respectively, representing a decrease of $645,490, or 81.3%. The decrease is primarily related to $96,976 forthe one-time consulting fees during the year ended June 30, 2016, representing an increase2018 in connection with the acquisition of $915,828, or 944%. The increase is mainly attributable to increased use of the consulting firm, APE Invest A/S, a firm of one of the Directors of the Company and a consultant study on MCV.Enochian BioPharma, Inc.
Other Expense
Other income (expense) net
Net expense for the years ended June 30, 20172019 and 2016 were $192,7202018 was $(7,026,448) and $(77,096)$(1,094,222), respectively, representing an increase of $269,816$5,932,226 or 350%542.1%. ThisThe increase was due primarily to the increasechange in gains on currency transactions.
the fair value of the Contingent Consideration of $5,698,579.
Net Loss
Net loss for the years ended June 30, 20172019 and June 30, 20162018 was $2,392,830$18,016,480 and $1,735,239,$6,311,835, respectively, representing an increase in the loss of $657,591,$11,704,645, or 37.9%185.4%. The increase in the net loss for the year ended June 30, 2017 iswas primarily due to the increase in general administrative expenses of the operating expenses$4,371,822, and consulting expenses and a decrease in the current tax benefit for Danish research and development tax credits.efforts in the amount of $1,881,146, along with the change in fair value of the Contingent Consideration of $5,698,579.
Liquidity and Capital Resources
We have historically satisfied our capital and liquidity requirements through funding from our largest shareholders, the issuance of convertible notes (which over time have been converted into sharesthe issuance and exercise of our Common Stock)warrants, and the sale of our Common Stock. At June 30, 2017 and June 30, 2016,We anticipate continuing to incur operating losses for at least the next several years. While we hadexpect our rate of cash andusage to increase in the future, in particular, to support our product development endeavors, we believe that the available cash held in escrow of $3,941,711 and $23,368 and working capital / (deficit) of $1,209,461 and $(775,750), respectively.resources will enable us to maintain our currently planned operations through at least the next twelve months from the date the financial statements are issued.
On May 15, 2017, the Company completed a private placement offering of units, with each unit consisting of one share of the Company’s Common Stock and two warrants to purchase one share of Common Stock at a strike price of $1.30 per share (each, a “Unit”), for $1.30 per Unit. In total, the Company issued and sold 2,700,000 shares of Common Stock and warrants to acquire 5,400,000 shares of Common Stock for total proceeds to the Company of $3,510,000.
On July 12, 2017, Company completed a private placement offering of 1,231,561 Units for total proceeds to the Company of $1,601,029.
The private placements were made directly by the Company in reliance upon Section 4(a)(2), Regulation D and/or Regulation S and no underwriter or placement agent was engaged by the Company.
We may alsohowever need additional funds for (a) purchase of equipment and, (b) research and development, specifically to open an Investigational New Drug Application (“IND”) (The first step in the drug review process by the FDA) for ENOB-HV01 and to continue our research and development of ENOB-HV11/12, and possible future strategic acquisitions of businesses, products or technologies complementary to our business. If additional funds are required, we may raise such funds from time to time through public or private sales of our equity or debt securities. Financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could materially adversely impact our growth plans and our financial condition and results of operations.
As of June 30, 2017 and 2016, the outstanding balance of $38,235 and $38,235 for professional fees paid by a shareholder and amounts advanced to2019, the Company are reportedhad $12,282,224 in cash and working capital of $11,384,571 as notes payable - related party. The $38,235 notes payable were acquiredcompared to $15,600,865 in the reverse acquisition. The amounts are unsecured, non-interest bearingcash and have no stipulated repayment terms.
A 6% promissory note payable to NLBDIT 2010 Enterprises, LLC, an entity controlled by a shareholderworking capital of the Company, was acquired by the Company in the reverse acquisition, payable on February 12, 2014 upon the completion date of the Share Exchange. As$14,888,293 as of June 30, 20172018, a decrease of 21.3 % and 2016, the outstanding balance on the note, including accrued interest, was $49,58123.5 %, respectively. The decrease is primarily due to an increase in research and $47,223, respectively. During the years ended June 30, 2017development costs of $1,881,146, an increase in payroll costs of $837,876, and 2016 the Company recorded related party interest on the notean increase in other general and administrative costs of $2,358 and $2,354, respectively.$3,499,711.
Private Placements
On July 1, 2016, the Company entered intoFebruary 16, 2018, we completed a non-interest bearing convertible note for $60,150, with an entity controlled by a shareholderprivate placement offering of the Company. The note matures December 31, 2017. The note is convertible into1,677,130 shares of Common Stock at $2.00a price of $8.00 per share. As the Common Stock was trading at $2.05 on August 24, 2016,share for total proceeds to the Company bifurcated the intrinsic value of the beneficial conversion feature and recorded a discount of $15,038. As the note is non-interest bearing$13,417,040.
The private placements were made directly by the Company imputedin reliance upon Section 4(a)(2) and/or Regulation S, and no underwriter or placement agent was engaged by the interest at 3% and further recorded a discount of $2,639. The discount is being amortized to expense usingCompany.
No private placements were offered in the effective interest method through the December 31, 2017 maturity. For twelve monthsfiscal year ended June 30, 2017 and2019.
Warrant Exercises
On February 16, 2018, certain of our warrant holders exercised warrants to purchase 2,400,000 shares of Common Stock for total proceeds to the Company of $3,295,000.
On December 27, 2018, certain of our warrant holders exercised warrants to purchase 1,307,693 shares of Common Stock for total proceeds to the Company of $1,700,000.
On June 30, 2016, interest expense27, 2019, certain of $11,045 and $0, respectively, was recordedour warrant holders exercised warrants to purchase 3,242,307 shares of Common Stock for total proceeds to the amortizationCompany of the discount. $ 4,319,999.
On July 19, 2016, the Company entered into a non-interest bearing convertible note for $60,150, with an entity controlled by a shareholder of the Company. The note matures December 31, 2017. The note is convertible into shares of Common Stock at $2.00 per share. As the note is non-interest bearing the Company imputed the interest at 3% and further recorded a discount of $2,555. The discount will be amortized to expense using the effective interest method through the December 31, 2017 maturity. For the twelve months ended June 30, 2017 and June 30, 2016, interest expense of $1,655 and $0, respectively, was recorded for the amortization of the discount.
Cash Flows
On August 24, 2016, the Company entered into a non-interest bearing convertible note for $90,225. Later the convertible note was acquired by an entity controlled by a board member and shareholder of the Company. The note matures December 31, 2017. The note is convertible into shares of Common Stock at $2.00 per share. As the Company’s Common Stock was trading at $2.05 on August 24, 2016 the Company bifurcated the intrinsic value of the beneficial conversion feature and recorded a discount of $2,256. As the note is non-interest bearing the Company imputed the interest at 3% and further recorded a discount of $3,577. The discount will be amortized to expense using the effective interest method through the December 31, 2017 maturity. For twelve months ended June 30, 2017 and June 30, 2016, interest expense of $3,615 and $0, respectively, was recorded for the amortization of the discount.
On September 21, 2016, the Company entered into a non-interest bearing convertible note for $150,375. Later the convertible note was acquired by an entity controlled by a board member and shareholder of the Company. The note matures December 31, 2017. The note is convertible into shares of Common Stock at $2.00 per share. As the note is non-interest bearing the Company imputed the interest at 3% and further recorded a discount of $5,630. The discount will be amortized to expense using the effective interest method through the December 31, 2017 maturity. For the twelve months ended June 30, 2017 and June 30, 2016, interest expense of $3,382 and $0, respectively, was recorded for the amortization of the discount.
On March 9, 2017, the Company entered into a non-interest bearing convertible note for $52,770, with an entity controlled by a shareholder of the Company. The note matured June 30, 2017. The note is convertible into shares of Common Stock at $2.00 per share. As the note is non-interest bearing the Company imputed the interest at 3% and further recorded a discount of $486. The discount will be amortized to expense using the effective interest method through the June 30, 2017 maturity. For the twelve months ended June 30, 2017 and June 30, 2016, interest expense of $486 and $0, respectively, was recorded for the amortization of the discount.
The Company has recorded $1,600,355 in advances – related party for funds received as of June 30, 2017 in connections with the July 12, 2017 private placement.
Cash Flows
Year ended June 30, 20172019 compared to the year ended June 30, 20162018
Following is a summary of the Company’s cash flows (used by) provided by operating, investing, and financing activities:
| For the Year Ended | ||||||||
| June 30, | ||||||||
2019
| 2018 (As Revised) | |||||||
| Net Cash Used by Operating Activities | $ | (8,507,341 | ) | $ | (4,338,269 | ) | ||
| Net Cash Used by Investing Activities | $ | (716,669 | ) | $ | (575,732 | ) | ||
| Net Cash Provided by Financing Activities | $ | 6,020,000 | $ | 16,712,715 | ||||
| Loss on Currency Translation | $ | (114,631 | ) | $ | (139,561 | ) | ||
| Net decrease in Cash and Cash Equivalents | $ | (3,318,641 | ) | $ | 11,659,153 | |||
CashAt June 30, 2019 we had cash and cash equivalents of $12,282,224, a decrease of $3,318,641, or 21.3%, when compared to the June 30, 2018 balance of $15,600,865.This decrease was primarily due to cash used fromby operating activities as we expand our operations and continue growing our research and development activities, partially offset by an increase in net cash provided by financing activities, as a result of exercised warrants by certain of our shareholders.
We plan to use our cash and cash equivalents to fund research and development, specifically to open an IND for ENOB-HV01 and to continue our research and development of ENOB-HV11/12.
Net cash used by operating activities for the years ended June 30, 2019 and 2018 was $8,507,341 and $4,338,269, respectively, representing an increase of $4,169,072, or 96.1%. The largest contributors to the operating expenses for the year ended June 30, 2017 was $1,177,478, representing a decrease of $294,811 compared to2019 were the cash usedincrease in research and development expenses, the increase in personnel resulting from operating activities of $1,472,289 for the year ended June 30, 2016. This decrease was primarily due toincreases in salaries and related costs, and the increase in non-cash compensation and consulting expenses in 2017. expense.
Changes in assets and liabilities as of June 30, 20172019 compared to June 30, 20162018 included the following:
For the year ended June 30, 2017,2019, other receivables decrease $471,641decreased $119,832 primarily for research and development tax credits, related party payablesprepaid expenses increased $137,643,$160,940 primarily due to an insurance prepayment, accounts payable decreased $652,785$29,946, and accrued expenses increased $9,369. $269,940.
For the year ended June 30, 20162018 other receivables increased $263,293decreased $108,005 primarily for research and development tax credits prepaid expenses decreased $138,841, related party payables decreased $268,678,$87,817, accounts payable increased $574,975decreased $119,575 and accrued expenses increased $203,927.decreased $161,321.
CashNet cash used inby investing activities for the years ended June 30, 2019 and 2018 was $(196,140)$716,669 and $575,732, respectively, representing an increase of $140,937, or 24.5%. The increase is primarily due to the purchase of equipment for the Company’s laboratory and the setup of the offices in the Los Angeles Corporate Headquarters of approximately $687,000 offset by the reduction of transactions related to the acquisition of approximately $546,000.
Net cash provided by financing activities for the years ended June 30, 2019 and 2018 was $6,020,000 and $16,712,715, respectively, representing a decrease of $10,692,715, or 64.0%. The decrease was primarily due to the Company not seeking funding through private placements during the year ended June 30, 2017, as compared to cash used in investing activities of $(1,052,989)2019. The financing for the fiscal year ended June 30, 2016. From time to time the Company’s Danish counsel holds cash balance2019, resulted in escrow on behalf of the Company.warrants exercised by our warrant holders.
During the year ended June 30, 2017, the Company loaned $196,140 to a biopharmaceutical company pursuant to a promissory note for up to $500,000 executed by the Company. The note matures on July 13, 2020, bears interest of 5% per annum and can be repaid early without penalty. The Company may accelerate payment under the note upon certain events of default provided therein, whereby all amounts owed will become immediately due and payable. The loan is a long-term debt obligation as defined in Item 303(a)(5)(ii)(A) of Regulation S-K that is material to the Company.
Off-Balance Sheet Arrangements
Cash provided by financing activities was $5,506,601 for the year ended June 30, 2017 as compared to cash provided by financing activities of $0 for the year ended June 30, 2016. During the Year ended June 30, 2017 the Company received $1,582,931 in related party notes payable, of which $1,600,355 was converted to Common Stock in the July 12, 2017 private placement. The Company also received $413,670 in convertible notes payable and $3,510,000 in a private placement of Common Stock.
Off Balance Sheet Arrangements
As of June 30, 2017,2019, and 2016,2018, we had no off-balance sheet arrangements. We are not aware of any material transactions, which are not disclosed in our consolidated financial statements.
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 consolidated 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. In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are not choosing to “opt out”“opt-out” of this provision. Section 107 of the JOBS Act provides that our decision to opt outopt-out of the extended transition period for complying with new or revised accounting standards is irrevocable. As a result of our election, not to “opt out”“opt-out” of Section 107, the Company’s financial statements may not be comparable to companies that comply with public company effective dates.
Our most critical accounting estimates include:
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, 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 sixnine years.
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” and amortizedAssets.” Intangible assets are recorded at cost. Patent costs consist of costs incurred to acquire the patents on a straight line basis over the estimated useful life of twenty years. Costs incurred in relation to patent applications are capitalized costs and amortized over the estimated useful life of theunderlying patent. If it is determined that a patent will not be issued, the related remaining capitalized patent application 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.
Revenue RecognitionIndefinite life intangible assets include license agreements and Sales— The Company’s sales of its MelCancerVac colorectal cancer treatment have been limited to a compassionate use basis in Singapore after stage IIA trials and the vaccine is not currently approved for sale for any other use or location.goodwill. The Company accounts for revenue recognitionindefinite life intangible assets in accordance with SEC Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (SAB 101), FASB ASC 605 Revenue Recognition. The Company recognizes revenue when rights350, “Goodwill and risk of ownership have passed toOther Intangible Assets.” License agreements cost represent the customer, when there is persuasive evidence of an arrangement, product has been shipped or delivered to the customer, the price and terms are finalized, and collectionFair Value of the resulting receivable is reasonably assured. Productslicense agreement on the date acquired and are primarily shipped FOB shipping point at which time title passes totested annually for impairment. The fair value analysis performed on the customer.license agreements and the fair value analysis performed on goodwill supported that both indefinite life intangible assets are not impaired as of June 30, 2019.
Fair Value Added Tax -In Denmark, Value Added Tax (“VAT”) of 25%Financial Instruments - The Company accounts for fair value measurements for financial assets and financial liabilities in accordance with FASB ASC Topic 820. The authoritative guidance, which, 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 the 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. |
Unless otherwise disclosed, the fair value of the invoice amount is collected in respect ofCompany’s financial instruments including cash, accounts receivable, prepaid expenses, investments, accounts payable, accrued expenses, capital lease obligations, and notes payable approximate their recorded values due to their short-term maturities.
Stock Options and Warrants - The Company has granted stock options to certain employees, officers, and directors that were subsequently converted to Grant Warrants. During the sales of goods on behalf of tax authorities. The VAT collected is not revenue of the Company; instead, the amount is recorded as a liability on the balance sheet until such VAT is paid to the authorities. VAT of 25% is also paid to Danish and EU vendors on invoices. These amounts are refundable from the respective governmental authority and recorded as other receivablesyears presented in the accompanying consolidated financial statements.statements, the Company has granted stock options and warrants. The Company accounts for options and warrants in accordance with the provisions of FASB ASC Topic 718, Compensation – Stock Compensation. Non-cash compensation costs for employee compensation and consulting fees for the years ended June 30, 2019 and 2018 were $2,124,967 and $257,937, respectively (see Note 8).
Stock-Based Compensation —The Company records stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation Non-Employees. 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 employees 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 employees required service period, which is generally the vesting period. (See Note 8)
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.
Recently Enacted Accounting Standards
For a description of accounting changes and recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see “Note 1: Recent Accounting Pronouncements” in the financial statements included elsewhere in this Annual Report.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The registrantRegistrant is a smaller reporting company and is not required to provide this information.
Item 8. Financial Statements and Supplementary Data
DANDRIT BIOTECH USA,
ENOCHIAN BIOSCIENCES, INC. AND SUBSIDIARYSUBSIDIARIES
Index to Consolidated Financial Statements
4397 South Albright Drive, Salt Lake City, UT 84124REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(801) 277-2763 Phone ● (801) 277-6509 Fax
To the Board of Directors and Shareholders of Enochian Biosciences, Inc.:
DANDRIT BIOTECH USA, INC. AND SUBSIDIARYOpinion on the Financial Statements
Stumpedyssevej 17, 2970
Hørsholm, Denmark
We have audited the accompanying consolidated balance sheets of DanDrit Biotech USA,Enochian Biosciences, Inc. and Subsidiary (“the Company”) as of June 30, 20172019 and 2016,2018, the related consolidated statements of operations, other comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two-year period ended June 30, 2019 and the related consolidatednotes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2019 and 2018, and the results of its operations consolidated other comprehensive income, consolidated stockholders’ equity (deficit) and consolidatedits cash flows for each ofthe years in the two-year period ended June 30, 2017 and 2016. 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedthe Company’s financial statements based on our audit.
audits.We conducted our auditare a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with standardsthe U.S. federal securities laws and the applicable rules and regulations of the Public Company Accounting Oversight Board (United States).Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.misstatement, whether due to error or fraud. The companyCompany is not required to have, nor were we engaged to perform, an audit of its internal controlscontrol over financial reporting for the years ended June 30, 2017 and 2016. Our audit included consideration reporting. As part of our audits, we are required to obtain an understanding of internal controlscontrol over financial reporting, as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’sCompany’s internal controls control over financial reporting forreporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the years ended June 30, 2017risks of material misstatement of the financial statements, whether due to error or fraud, and 2016. An audit includesperforming procedures that respond to those risks. Such procedures included examining on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated presentation of the financial statement presentation. statements. We believe that our audit providesaudits provide a reasonable basis for our opinion.
In our opinion, based on our audit, the consolidated financial statements audited by us present fairly, in all material respects, the consolidated financial position of DanDrit Biotech USA, Inc. and Subsidiary as of June 30, 2017 and 2016, and the consolidated results of their operations and their consolidated cash flows for the for the years ended June 30, 2017 and 2016, in conformity with generally accepted accounting principles in the United States of America.
/s/ Gregory Sadler, Gibb & Associates, LLC
September 28, 2017We have served as the Company’s auditor since 2018.
Salt Lake City, Utah UT
September 27, 2019
| F-1 |
DANDRIT BIOTECH USAENOCHIAN BIOSCIENCES INC. AND SUBSIDIARYSUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| For the Year Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| For the Year Ended | 2019 | 2018 | ||||||||||||||
| June 30, 2017 | June 30, 2016 | (As Revised) | ||||||||||||||
| ASSETS | ||||||||||||||||
| Current Assets: | ||||||||||||||||
| Cash | $ | 3,941,712 | $ | 23,368 | $ | 12,282,224 | $ | 15,600,865 | ||||||||
| Other receivables | 223,777 | 695,418 | 20,794 | 122,866 | ||||||||||||
| Prepaid expenses | 33,391 | 13,693 | 191,969 | 38,284 | ||||||||||||
| Total Current Assets | 4,198,880 | 732,479 | 12,494,987 | 15,762,015 | ||||||||||||
| Property and Equipment, net accumulated depreciation | - | - | ||||||||||||||
| Property and equipment, net | 687,517 | 27,402 | ||||||||||||||
| OTHER ASSETS: | ||||||||||||||||
| Definite life intangible assets | 124,393 | 135,743 | ||||||||||||||
| Deposits | 2,739 | 2,609 | ||||||||||||||
| Loan Receivable | 196,140 | - | ||||||||||||||
| OTHER ASSETS | ||||||||||||||||
| Definite life intangible assets, net | 93,299 | 111,489 | ||||||||||||||
| Indefinite life intangible assets | 154,824,000 | 154,824,000 | ||||||||||||||
| Goodwill | 11,640,000 | 11,640,000 | ||||||||||||||
| Deposits and other assets | 137,550 | 137,550 | ||||||||||||||
| Total Other Assets | 323,272 | 138,352 | 166,694,849 | 166,713,039 | ||||||||||||
| Total Assets | 4,522,152 | 870,831 | ||||||||||||||
| TOTAL ASSETS | $ | 179,877,353 | $ | 182,502,456 | ||||||||||||
The accompanying notes are an integral part of these financial statements.
| F-2 |
DANDRIT BIOTECH USA
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARYSUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
| For the Year Ended | ||||||||
| June 30, 2017 | June 30, 2016 | |||||||
| LIABILITIES | ||||||||
| Current Liabilities: | ||||||||
| Notes payable - related party, current portion | 1,688,171 | 102,882 | ||||||
| Accounts payable - trade | 434,973 | 1,087,758 | ||||||
| Accounts payable - related party | 235,000 | 97,357 | ||||||
| Convertible notes payable-related party, (net of discounts of $11,997 and $0, respectively) | 401,673 | - | ||||||
| Accrued expenses | 229,601 | 220,232 | ||||||
| Total Current Liabilities | 2,989,418 | 1,508,229 | ||||||
| Total Liabilities | 2,989,418 | 1,508,229 | ||||||
| STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||
| Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding | - | - | ||||||
| Common stock; par value 0.0001, 100,000,000 shares authorized, 12,433,290 shares issued and outstanding at June 30, 2017; 9,533,290 shares issued and outstanding at June 30, 2016 | 1,243 | 953 | ||||||
| Additional paid-in capital | 29,872,183 | 25,098,050 | ||||||
| Accumulated Deficit | (28,693,524 | ) | (26,300,694 | ) | ||||
| Other comprehensive income (Loss), net | 352,832 | 564,293 | ||||||
| Total Stockholders' Equity (Deficit) | 1,532,734 | (637,398 | ) | |||||
| Total Liabilities and Stockholders’ (Deficit) | $ | 4,522,152 | $ | 870,831 | ||||
| For the Year Ended | ||||||||
| June 30, | ||||||||
| 2019 | 2018 | |||||||
| LIABILITIES | (As Revised) | |||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable – trade | $ | 538,563 | $ | 571,809 | ||||
| Accounts payable - non-trade | 235,000 | 235,000 | ||||||
| Accrued expenses | 336,853 | 66,913 | ||||||
| Total Current Liabilities | 1,110,416 | 873,722 | ||||||
| NON-CURRENT LIABILITIES: | ||||||||
| Contingent Consideration Liability | 5,667,000 | 22,891,000 | ||||||
| Total Liabilities | $ | 6,777,416 | $ | 23,764,722 | ||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding | $ | — | $ | — | ||||
| Common stock, par value $0.0001, 100,000,000 shares authorized, 45,273,924 shares issued and outstanding at June 30, 2019; 36,163,924 issued and outstanding at June 30, 2018 | 4,527 | 3,616 | ||||||
| Additional paid-in capital | 225,765,432 | 193,283,798 | ||||||
| Accumulated deficit | (52,771,840 | ) | (34,755,360 | ) | ||||
| Other comprehensive income | 101,818 | 205,680 | ||||||
| Total Stockholders’ Equity | 173,099,937 | 158,737,734 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 179,877,353 | $ | 182,502,456 | ||||
The accompanying notes are an integral part of these financial statements.
| F-3 |
DANDRIT BIOTECH USAENOCHIAN BIOSCIENCES INC. AND SUBSIDIARYSUBSIDIARIES
CONSOLIDATED STATEMENTSTATEMENTS OF OPERATIONS
| For the Year Ended | ||||||||
| June 30, | June 30, | |||||||
| 2017 | 2016 | |||||||
| Net Sales | $ | - | $ | 42,769 | ||||
| Cost of Goods Sold | - | 5,275 | ||||||
| Gross Profit (Loss) | - | 37,494 | ||||||
| Operating Expenses: | ||||||||
| General and administrative expenses | 1,560,332 | 1,229,865 | ||||||
| Research and development expenses | 62,763 | 804,188 | ||||||
| Depreciation and Amortization | 14,528 | 27,395 | ||||||
| Consulting expenses | 1,012,804 | 96,976 | ||||||
| Total Operating Expense | 2,650,427 | 2,158,424 | ||||||
| Loss from Operations | (2,650,427 | ) | (2,120,930 | ) | ||||
| Other Income (Expense) | ||||||||
| Interest and other (expense) | (11,210 | ) | (10 | ) | ||||
| Interest (expense) – related party | (15,049 | ) | (2,354 | ) | ||||
| Gain (loss) on currency transactions | 218,979 | (74,732 | ) | |||||
| Interest and other income | - | - | ||||||
| Total Other Income (Expense) | 192,720 | (77,096 | ) | |||||
| Loss Before Income Taxes | (2,457,707 | ) | (2,198,026 | ) | ||||
| Income Tax Expense (Benefit) | (64,877 | ) | (462,787 | ) | ||||
| Net Loss | (2,392,830 | ) | (1,735,239 | ) | ||||
| BASIC AND DILUTED LOSS PER SHARE | $ | (0.20 | ) | $ | (0.18 | ) | ||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING- BASIC AND DILUTED | 12,266,441 | 9,533,290 | ||||||
| WEIGHTED AVERAGE BASIC AND DILUTED LOSS PER SHARE | $ | (0.20 | ) | $ | (0.18 | ) | ||
| For the Year Ended | ||||||||
| June 30, | ||||||||
| 2019 | 2018 | |||||||
| (As Revised) | ||||||||
| Revenues | $ | — | $ | — | ||||
| Cost of Goods Sold | $ | — | $ | — | ||||
| Gross profit (Loss) | $ | — | $ | — | ||||
| Operating Expenses | ||||||||
| General and administrative expenses | 8,271,540 | 3,899,718 | ||||||
| Research and development expenses | 2,498,107 | 616,961 | ||||||
| Depreciation and amortization | 71,709 | 18,484 | ||||||
| Consulting expenses | 148,676 | 794,166 | ||||||
| Total Operating Expense | $ | 10,990,032 | $ | 5,329,329 | ||||
| LOSS FROM OPERATIONS | $ | (10,990,032 | ) | $ | (5,329,329 | ) | ||
| Other Income (Expense) | ||||||||
| Change in fair value of contingent consideration | (7,073,579 | ) | (1,375,000 | ) | ||||
| Interest expense | (43 | ) | (143,262 | ) | ||||
| Gain (loss) on currency transactions | (26,313 | ) | 290,407 | |||||
| Other income (expense), forgiveness of debt | — | 87,817 | ||||||
| Interest income | 73,487 | 45,816 | ||||||
| Total Other Expense | (7,026,448 | ) | (1,094,222 | ) | ||||
| Loss Before Income Taxes | (18,016,480 | ) | (6,423,551 | ) | ||||
| Income Tax Benefit | $ | — | $ | (111,716 | ) | |||
| NET LOSS | $ | (18,016,480 | ) | $ | (6,311,835 | ) | ||
| BASIC AND DILUTED LOSS PER SHARE | $ | (0.48 | ) | $ | (0.29 | ) | ||
| WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK | ||||||||
| OUTSTANDING - BASIC AND DILUTED | 37,552,062 | 21,940,489 | ||||||
The accompanying notes are an integral part of these financial statements.
| F-4 |
DANDRIT BIOTECH USAENOCHIAN BIOSCIENCES INC. AND SUBSIDIARYSUBSIDIARIES
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE LOSS
| For the Year Ended | ||||||||
| June 30, | June 30, | |||||||
| 2017 | 2016 | |||||||
| (Net Loss) | $ | (2,392,830 | ) | $ | (1,735,239 | ) | ||
| (Currency Translation, Net of Taxes) | (211,461 | ) | 20,701 | |||||
| (Other Comprehensive Loss) | $ | (2,604,291 | ) | $ | (1,714,538 | ) | ||
| For the Year Ended | ||||||||
| June 30, | ||||||||
| 2019 | 2018 | |||||||
| (As Revised) | ||||||||
| Net Loss | $ | (18,016,480 | ) | $ | (6,311,835 | ) | ||
| Currency Translation, Net of Taxes | (103,862 | ) | (147,153 | ) | ||||
| Other Comprehensive Loss | $ | (18,120,342 | ) | $ | (6,458,988 | ) | ||
The accompanying notes are an integral part of these financial statements.
| F-5 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARYSUBSIDIARIES
CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS' (DEFICIT)EQUITY
For the Years Ended June 30, 2017, June 30, 2016,2019 and June 30, 20152018
| Additional | Accumulated | Other | ||||||||||||||||||
| Common Stock | Paid in | Earnings | Comprehensive | |||||||||||||||||
| Shares | Amount | Capital | (Deficit) | Income (loss) | ||||||||||||||||
| BALANCE, June 30, 2015 | 9,533,290 | $ | 953 | $ | 25,098,050 | $ | (24,565,455 | ) | $ | 543,592 | ||||||||||
| Equity Adjustment for Foreign Currency Translation for the year ended June 30, 2016. | - | - | - | - | 20,701 | |||||||||||||||
| Net Loss for the year Ended June 30, 2016 | - | - | - | (1,735,239 | ) | - | ||||||||||||||
| BALANCE, June 30, 2016 | 9,533,290 | $ | 953 | $ | 25,098,050 | $ | (26,300,694 | ) | $ | 564,293 | ||||||||||
| Imputed intrinsic value and interest for the Convertible Notes issued July 1, 2016, July 21, 2016, August 24, 2016, September 21, 2016, and March 9, 2017 | - | - | 32,182 | - | - | |||||||||||||||
| Options to purchase 900,000 common shares at $2.00 per share issued as compensation to officers and director on September 15, 2016. | - | - | 626,487 | - | - | |||||||||||||||
| Warrants to purchase 100,000 common shares at $1.30 per share for consulting services April 21, 2017 | - | - | 115,754 | - | - | |||||||||||||||
| Common shares issued on June 9, 2017 in connection with a consulting agreement. | 200,000 | 20 | 489,980 | - | - | |||||||||||||||
| Private placement of 2,700,000 units at $1.30 per unit. Units consists of 2,700,000 common shares, and warrants to purchase 5,400,000 common shares at $1.30 per share | 2,700,000 | 270 | 3,509,730 | - | - | |||||||||||||||
| Equity Adjustment for Foreign Currency Translation for the Year Ended June 30, 2017 | - | - | - | - | (211,461 | ) | ||||||||||||||
| Net Loss for the Year Ended June 30, 2017 | - | - | - | (2,392,830 | ) | - | ||||||||||||||
| BALANCE, June 30, 2017 | 12,433,290 | $ | 1,243 | $ | 29,872,183 | $ | (28,693,524 | ) | $ | (352,832 | ) | |||||||||
| # of Shares | Common Shares | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total | |||||||||||||||||||
| July 1, 2017 | 12,433,290 | $ | 1,243 | $ | 29,622,183 | $ | (28,443,525 | ) | $ | 352,833 | $ | 1,532,734 | ||||||||||||
| Common stock issued as compensation | 62,687 | 6 | 112,830 | — | — | 112,836 | ||||||||||||||||||
| Private placement of units | 1,231,561 | 123 | 1,600,906 | 1,601,029 | ||||||||||||||||||||
| Stock-based compensation | 63,717 | — | — | 63,717 | ||||||||||||||||||||
| Stock issued in exchange for services | 18,750 | 2 | 104,998 | — | — | 105,000 | ||||||||||||||||||
| Stock issued related to conversion of convertible promissory note | 258,544 | 26 | 423,076 | — | — | 423,102 | ||||||||||||||||||
| Stock issued pursuant to warrants exercised | 2,400,000 | 240 | 3,294,760 | — | — | 3,295,000 | ||||||||||||||||||
| Stock issued pursuant to private placement | 1,677,130 | 168 | 13,416,872 | — | — | 13,417,040 | ||||||||||||||||||
| Stock issued pursuant to Acquisition Agreement | 18,081,962 | 1,808 | 144,653,888 | — | — | 144,655,696 | ||||||||||||||||||
| Imputed intrinsic value and interest for Convertible Notes | — | — | (5,765 | ) | — | — | (5,765 | ) | ||||||||||||||||
| Amortization of the interest on Convertible notes on December 1, 2017 | — | — | (3,667 | ) | — | — | (3,667 | ) | ||||||||||||||||
| Comprehensive Loss | ||||||||||||||||||||||||
| Net Loss | — | — | — | (6,311,835 | ) | — | (6,311,835 | ) | ||||||||||||||||
| Other Comprehensive Loss | — | |||||||||||||||||||||||
| Foreign Currency Translation Adjustment | — | — | — | — | (147,153 | ) | (147,153 | ) | ||||||||||||||||
| July 1, 2018 (As Revised) | 36,163,924 | $ | 3,616 | $ | 193,283,798 | $ | (34,755,360 | ) | $ | 205,680 | $ | 158,737,734 | ||||||||||||
| F-6 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
For the Years Ended June 30, 2019 and June 30, 2018
| # of Shares | Common Shares | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total | |||||||||||||||||||
| July 1, 2018 (As Revised) | 36,163,924 | $ | 3,616 | $ | 193,283,798 | $ | (34,755,360 | ) | $ | 205,680 | $ | 158,737,734 | ||||||||||||
| Stock issued pursuant to warrants exercised | 4,550,000 | 455 | 6,019,545 | — | — | 6,020,000 | ||||||||||||||||||
| Contingent Share issued pursuant to Acquisition Agreement | 4,550,000 | 455 | 24,297,123 | — | — | 24,297,578 | ||||||||||||||||||
| Stock-based compensation | 2,124,967 | — | — | 2,124,967 | ||||||||||||||||||||
| Stock issued in exchange for services | 10,000 | 1 | 39,999 | — | — | 40,000 | ||||||||||||||||||
| Net Loss | — | — | — | (18,016,480 | ) | — | (18,016,480 | ) | ||||||||||||||||
| Other Comprehensive Loss | ||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | (103,862 | ) | (103,862 | ) | ||||||||||||||||
| June 30, 2019 | 45,273,924 | $ | 4,527 | $ | 225,765,432 | $ | (52,771,840 | ) | $ | 101,818 | $ | 173,099,937 | ||||||||||||
The accompanying notes are an integral part of these financial statements.
DANDRIT BIOTECH USAENOCHIAN BIOSCIENCES INC. AND SUBSIDIARYSUBSIDIARIES
CONSOLIDATED STATEMENTSTATEMENTS OF CASH FLOWS
| For the Year Ended | ||||||||
| June 30, | ||||||||
| 2019 | 2018 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | (As Revised) | |||||||
| NET LOSS | $ | (18,016,480 | ) | $ | (6,311,835 | ) | ||
| ADJUSTMENT TO RECONCILE NET LOSS TO NET | ||||||||
| CASH USED IN OPERATING ACTIVITIES: | ||||||||
| Depreciation and amortization | 71,709 | 18,484 | ||||||
| Change in contingent consideration liability | 7,073,578 | 1,375,000 | ||||||
| Non-cash stock-based compensation expense | 2,164,967 | 281,545 | ||||||
| Loss on forgiveness on note receivable | — | 457,813 | ||||||
| Gain on forgiveness of debt, related party | — | (87,817 | ) | |||||
| Accretion of discount on notes payable | — | 11,997 | ||||||
| CHANGES IN ASSETS AND LIABILITIES: | ||||||||
| Other receivables | 119,831 | 108,005 | ||||||
| Prepaid expenses/deposits | (160,940 | ) | (138,841 | ) | ||||
| Accounts payable | (29,946 | ) | 119,575 | |||||
| Accrued interest on notes receivable | — | (10,874 | ) | |||||
| Accrued Expenses | 269,940 | (161,321 | ) | |||||
| NET CASH USED BY OPERATING ACTIVITIES | $ | (8,507,341 | ) | $ | (4,338,269 | ) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Net cash used for acquisition of Enochian BioPharma Inc. | — | (294,933 | ) | |||||
| Notes receivable | — | (250,799 | ) | |||||
| Purchase of property and equipment | (716,669 | ) | (30,000 | ) | ||||
| NET CASH USED BY INVESTING ACTIVITIES | (716,669 | ) | (575,732 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceed from the issuance of common stock | — | 16,712,715 | ||||||
| Proceeds from exercise of warrants | 6,020,000 | — | ||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | $ | 6,020,000 | $ | 16,712,715 | ||||
| Gain (loss) on currency translation | $ | (114,631 | ) | $ | (139,561 | ) | ||
| NET CHANGE IN CASH EQUIVALENTS | $ | (3,318,641 | ) | $ | 11,659,153 | |||
| CASH, BEGINNING OF PERIOD | $ | 15,600,865 | $ | 3,941,712 | ||||
| CASH, END OF PERIOD | $ | 12,282,224 | $ | 15,600,865 | ||||
| For the Year Ended | ||||||||
| June 30, | June 30, | |||||||
| 2017 | 2016 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net (Loss) | $ | (2,392,830 | ) | $ | (1,735,239 | ) | ||
| Adjustments to reconcile net (loss) to net cash provided (used) by operations: | ||||||||
| Depreciation and amortization | 14,528 | 27,395 | ||||||
| Non-cash compensation | 1,232,241 | - | ||||||
| Accretion of discount on notes payable | 20,185 | - | ||||||
| Accrued Interest on Notes Payable – Related Party | 2,358 | 2,354 | ||||||
| Changes in assets and liabilities: | ||||||||
| (Increase) decrease in other receivable, | 471,641 | (263,293 | ) | |||||
| (Increase) decrease in prepaid expenses & deposits | (19,828 | ) | (13,730 | ) | ||||
| Increase (decrease) in accounts payable | (652,785 | ) | 574,975 | |||||
| Increase (decrease) in accounts payable – related party | 137,643 | (268,678 | ) | |||||
| Increase (decrease) in accrued expenses | 9,369 | 203,927 | ||||||
| Total Adjustments | 1,215,352 | 262,950 | ||||||
| Net Cash (Used) by Operating Activities | (1,177,478 | ) | (1,472,289 | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Net decrease (increase) in cash held in escrow | - | 1,052,989 | ||||||
| Net decrease (increase) in notes receivable | (196,140 | ) | - | |||||
| Net Cash Used by Investing Activities | (196,140 | ) | 1,052,989 | |||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from notes payable - related party | 1,582,931 | - | ||||||
| Proceeds from convertible notes payable – related party | 413,670 | - | ||||||
| Proceeds from issuance of common stock units | 3,510,000 | - | ||||||
| Net Cash Provided by Financing Activities | 5,506,601 | - | ||||||
| (Gain) loss on Currency Translation | (214,639 | ) | 21,523 | |||||
| Net Increase (Decrease) in Cash and Cash Equivalents | 3,918,344 | (397,777 | ) | |||||
| Cash and Cash Equivalents at Beginning of Period | 23,368 | 421,145 | ||||||
| Cash and Cash Equivalents at End of Period | 3,941,712 | 23,368 | ||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash paid during the year for | ||||||||
| Interest | 21,560 | - | ||||||
| Income Taxes | 64,003 | - | ||||||
| SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Discount for imputed interest on non-interest bearing Convertible Notes Payable | $ | 14,888 | $ | - | ||||
| Discount for beneficial conversion feature of Convertible Notes Payable | 17,294 | - | ||||||
| Amortization of discount on convertible notes payable | 20,185 | - | ||||||
| Compensation for the issuance of warrants for consulting | 115,754 | |||||||
| Compensation for the issuance of stock options to officers and directors | 626,487 | - | ||||||
| Compensation for the issuance of stock for consulting services | 490,000 | - | ||||||
The accompanying notes are an integral part of these financial statements.
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash Paid during the year for: | ||||||||
| Interest | $ | 43 | $ | 143,235 | ||||
| Income Taxes | $ | — | $ | — | ||||
| SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING | ||||||||
| AND FINANCING ACTIVITIES | ||||||||
| Contingent Shares issued pursuant with the Acquisition Agreement | $ | 24,297,579 | $ | — | ||||
| Discount for imputed interest on non-interest bearing Convertible Notes Payable | $ | — | $ | (9,432 | ) | |||
| Issuance of stock for compensation | $ | — | $ | 112,837 | ||||
| Compensation for the issuance of stock to officers and directors | $ | 2,124,967 | $ | 63,717 | ||||
| Convertible Notes payable converted to 258,544 Common Shares | $ | — | $ | 401,673 | ||||
| Compensation for the issuance of stock for consulting services | $ | 40,000 | $ | 105,000 | ||||
| Common stock issued and contingent consideration shares of Common Stock to acquire Enochian BioPharma, Inc. | $ | — | $ | 166,469,000 | ||||
The accompanying notes are an integral part of these financial statements.
| F-9 |
DANDRIT BIOTECH USAENOCHIAN BIOSCIENCES INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Basis of Presentation -– DanDrit Biotech USA,Enochian BioSciences, Inc., (“DanDrit USA”Enochian”, or “Registrant”, and together with its subsidiaries, the “Company”, “we”, or “us”, or “Parent”) (formerly Putnam Hills Corp) was originally incorporated in the State of Delaware on January 18, 2011 as a vehicle to pursue a business combination through the acquisition of, or merger with, an operating business.
DanDrit BioTech A/S, a Danish corporation was incorporated on April 1, 2001 (“DanDrit Denmark”) a 96.92% owned subsidiary of the Company. The Company engages in the research and development, manufacturing and clinical trials of pharmaceutical and biological products for the human treatment of HIV and cancer
Year End- In June 2015, DanDrit USA’s Board with the intent to manufacturer said products. The Registrant was originally incorporated in the State of Directors (the “Board”) approved a changeDelaware on January 18, 2011. On March 2, 2018, the Registrant amended its articles of incorporation changing the name of the Company to its fiscal year end from December 31 to June 30. Enochian BioSciences, Inc.
Reverse Acquisition-Subsidiaries
Enochian Biopharma Inc. (“Enochian Biopharma”) was incorporated on May 19, 2017 in [Delaware] and is a 100% owned subsidiary of the Registrant. Enochian Biopharma owns a perpetual, fully paid-up, royalty-free, sublicensable, 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 “Field”). The accompanying financial statements include the accounts of Enochian Biopharma from the date of the acquisition which was completed on February 16, 2018.
Enochian Biosciences Denmark ApS, a Danish corporation was incorporated on April 1, 2001 (“Enochian Denmark”). On February 12, 2014, pursuant toin accordance with the terms and conditions of the Share Exchange Agreement, (the "Share Exchange Agreement"), DanDrit USA completed the acquisition ofCompany acquired Enochian Denmark and it became a 100% owned subsidiary of the issued and outstanding capitalRegistrant subject to 185,053 shares of common stock of DanDrit Denmarkthe Registrant held in escrow according to Danish law (the “Share Exchange”“Escrow Shares”). As of June 30, 2019, there are 92, 237, Escrow Shares remaining.
Acquisition of Enochian Biopharma - On January 12, 2018, the Registrant, Acquisition Sub, Enochian Biopharma and asWeird Science entered into the Acquisition Agreement, pursuant to which on February 16, 2018, Enochian Biopharma became a result became DanDrit Denmark’s parent company. Prior towholly owned subsidiary of the Share Exchange there were 5,000,000Registrant. As consideration for the Acquisition, the stockholders of Enochian Biopharma received (i) 18,081,962 shares of the common stock, par value $.0001 per share (the “Common Stock”) of Parent outstanding. Parent and an existing shareholder agreed to cancel 4,400,000 shares of its Common Stock of the Registrant and issued 1,440,000(ii) the right to receive earn-out shares of Common Stock for legal(“Contingent Shares”) pro rata upon the exercise or conversion of warrants, which were outstanding at closing. As of June 30, 2019, and consulting services related toJune 30, 2018, 1,938,122 and 6,488,122 Contingent Shares, respectively are contingently issuable in connection with the Share Exchange and a future public offering. At the timeAcquisition of the Share Exchange each outstanding share of common stock of DanDrit Denmark was exchanged for 1.498842 shares of Common Stock, for a total of 6,000,000 shares, resulting in 8,040,000 shares of Common Stock outstanding immediately following the Share Exchange, including 185,053 shares of Common Stock reserved for issuance in accordance with Section 70 of the Danish Companies Act and the Articles of Association of DanDrit Denmark to the DanDrit Denmark shareholders who have not consented to the Share Exchange (the “Non-Consenting Shareholders”), and deemed issued and outstanding for accounting purposes.Enochian Biopharma.
Consolidation- For the years ended June 30, 20172019 and 2016,2018, the consolidated financial statements include the accounts and operations of the DanDritRegistrant, Enochian Biosciences Denmark ApS and the accounts and operations of DanDrit USA.Enochian BioPharma. All material inter-company transactions and accounts have been eliminated in the consolidation.
Functional Currency / Foreign currency translation- The functional currency of DanDritEnochian 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 years ended June 30, 20172019 and 2016.2018. 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 institution in theinstitutions in Denmark and in the United States in excess of federally insured States amounts at June 30, 20172019 and 20162018 of $3,441,711$12,282,224 and $0,$15,600,865, 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, 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 sixten years (See Note 3)4).
DANDRIT BIOTECH USAENOCHIAN BIOSCIENCES INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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” and amortized. Intangible assets are recorded at cost. Patent costs consist of costs incurred to acquire the patents on a straight line basis over the estimated useful life of twenty years. Costs incurred in relation to patent applications are capitalized cost and amortized over the estimated useful life of theunderlying patent. If it is determined that a patent will not be issued, the related remaining capitalized patent application 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 cost represent the Fair Value of the license agreement on the date acquired and are tested annually for impairment. The fair value analysis performed on the license agreements, and the fair value analysis performed on goodwill supported that both indefinite life intangible assets are not impaired as of June 30, 2019. (See Note 5)
Impairment of Long-Lived Assets -Long-lived assets, such as property, plant, and equipment and patents 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 expectation 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 by 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 is their respective fair values.
Revenue Recognition and Sales- The Company’s sales of its MelCancerVac colorectal cancer treatment have been limited to a compassionate use basis in Singapore after stage IIA trials and is not approved for current sale for any other use or location. The Company accounts for revenue recognition in accordance with the Securities and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (SAB 101), FASB ASC 605 Revenue Recognition. The Company recognizes revenue when rights and risk of ownership have passed to the customer, when there is persuasive evidence of an arrangement, product has been shipped or delivered to the customer, the price and terms are finalized, and collections of the resulting receivable is reasonably assured. Products are primarily shipped FOB shipping point at which time title passes to the customer.
Value Added Tax -In Denmark, Value Added Tax (“VAT”) of 25% of the invoice amount is collected in respect of the sales of goods on behalf of tax authorities. The VAT collected is not revenue of the Company; instead, the amount is recorded as a liability on the balance sheet until such VAT is paid to the authorities. VAT of 25% is also paid to Danish and EU vendors on invoices. These amounts are refundable from the respective governmental authority and recorded as other receivables in the accompanying financial statements.
Research and Development Expenses -The Company expenses research and development expensescosts incurred in formulating, improving, validating and creating alternative or modified processes related to and expanding the use of our MAGE –A dendrite cell cancer therapy.the HIV and Cancer therapies and technologies for use in the prevention, treatment, amelioration of and/or therapy for HIV and Cancer. Research and development expenses were included in operating expenses for the year ended June 30, 20172019 and year ended June 30, 2016 with the amount of $62,7632018 amounted to $2,498,107 and $804,188,$616,961, respectively.
Income Taxes- The Company accounts for income taxes in accordance with FASB ASC Topic 740 Accounting for Income Taxes. This statementTaxes, which requires an asset and liability approach for accounting for income taxes. (See Note 7)
DANDRIT BIOTECH USA
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Loss Per Share- The Company calculates earnings/(loss) (losses) per share in accordance with FASB ASC 260 Earnings Per Share. Basic earnings per common share (EPS) are based on the weighted average number of common shares of Common Stock outstanding during each period. Diluted earnings per common share are based on shares outstanding (computed as under basic EPS) and potentially dilutive common shares. Potential common shares of Common Stock included in the diluted earnings per share calculation include in-the-money stock options that have been granted but have not been exercised. The shares of Common Stock outstanding at June 30, 2019 and 2018 were 45,273,924 and 36,163,924, respectively. Because of the net loss for the twelve months ended June 30, 20172019 and June 30, 2016,2018, the dilutive shares for both periods were excluded from the Diluted EPS calculation as the effect of these potential common shares of Common Stock is anti-dilutive. As of June 30, 2019 and 2018 there were 4,393,005 and 12,976,244, respectively, potential dilutive shares that needed to be considered as common share equivalents.
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. The authoritative guidance, which, 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 the 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. |
Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, accounts receivable, prepaid expenses, investments, accounts payable, accrued expenses, capital lease obligations and notes payable approximates their recorded values due to their short-term maturities.
The following table sets forth the liabilities at June 30, 2019 and 2018, which is recorded on the balance sheet at fair value on a recurring basis by level within the fair value hierarchy. As required, these are classified based on the lowest level of input that is significant to the fair value measurement:
| Fair Value Measurements at Reporting Date Using | ||||||||||
Quoted Prices in Active Markets for Identical Assets Inputs | Significant Other Observable Inputs | Significant Other Unobservable | ||||||||
| (Level 1) | (Level 2) | (Level 3) | ||||||||
| Contingent Consideration Liability | — | — | 5,667,000 | |||||||
| The roll forward of the contingent consideration liability is as follows: | ||||||||||
| Balance June 30, 2018 | $ | 22,891,000 | ||||||||
| Contingent Shares issued pursuant to the Acquisition Agreement | $ | (24,297,579 | ) | |||||||
| Fair value adjustment | $ | 7,073,579 | ||||||||
| Balance June 30, 2019 | $ | 5,667,000 | ||||||||
| F-12 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Stock Options and Warrants - -The CompaniesCompany has granted stock options to certain employees, officers and directors. See Note 10.directors that were subsequently converted to Grant Warrants. During the years presented in the accompanying consolidated financial statements, the Company has granted stock options and warrants. The Company accounts for options and warrants in accordance with the provisions of FASB ASC Topic 718, Compensation – Stock Compensation. Non-cash compensation costs of $1,232,241for employee compensation and $0 have been recognized for the vesting of options and warrants granted to employees and consultants with an associated recognized tax benefit of $0 and $0consulting fees for the years ended June 30, 20172019 and 2016, respectively.2018 were $2,124,967 and $257,937, respectively (see Note 8).
Stock-Based Compensation —The Company records stock-based compensation in accordance with ASC 718, 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 employees 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 employees required service period, which is generally the vesting period. For the year ended June 30, 2019, the Company issued 10,000 shares at a value of $40,000. For the year ended June 30, 2018, the Company issued 18,750 shares valued at $105,000 (See Note 8).
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.
DANDRIT BIOTECH USA INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Significant estimates include the fair value and potential impairment of intangible assets, depreciation of fixed assets, and fair value of equity instruments issued.
Recent Accounting Pronouncements- In May 2014,February 2016, the Financial Accounting Standards Board (FASB) FASB issued ASU No. 2016-02 - Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a new standard to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under U.S. generally accepted accounting principles. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, thecontract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either financing or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that reporting companies disclose the nature, amount, timing,is substantially equivalent to existing guidance for sales-type leases, direct financing leases and uncertainty of revenue and cash flows arising from contracts with customers. On July 9, 2015, the FASB agreed to delay the effective date by one year; accordingly, the newoperating leases. The standard is effective for usfiscal years beginning after January 1, 2019. The Company is in the first quarterprocess of 2018 and we expect to adopt it at that time. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. We have not yet selected a transition method, nor have we determinedevaluating the impact of thethis new standard on our consolidated financial statements.guidance.
In FebruaryOn March 30, 2016, the FASB issued changesASU 2016-09, Improvements to Employee Share-Based Payment Accounting. For public business entities, the accounting for leases that primarily affect presentation and disclosure requirements. The new standard will require the recognition of a right to use asset and underlying lease liability for operating leases with an initial life in excess of one year. This standardASU is effective for usannual reporting periods beginning inafter December 15, 2016, including interim periods within those annual reporting periods. For all other entities, the first quarterASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual reporting periods beginning after December 15, 2018. The Company’s adoption of 2019. Wethese SEC amendments did not have not yet determineda material effect on the impactCompany’s reporting of the new standard on our consolidated financial statements. position, results of operations, cash flows or stockholders’ equity.
Other recent accounting pronouncements issued by the FASB diddo not or are not believed to by management to have a material impact on the Company's present or future financial statements.
Reclassification -— Certain balances reported in the financial statements as of June 30, 2018 have been reclassified to conform with the headings used as of June 30, 2019 and including the reclassification of $257,937 of non-cash compensation expense to general and administrative expenses.
| F-13 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2--- REVISION OF FINANCIAL STATEMENTS
The Company discovered that it had incorrectly classified the intangible assets that were purchased as part of the acquisition of Enochian Biopharma, Inc. as finite-lived (amortizable), rather than indefinite-lived intangible assets (not amortized). ASC 350- Intangibles- Goodwill and Other requires that all intangible assets acquired in a business combination that are used in research and development activities (i.e., in-process research and development (IPR&D) assets) be capitalized as indefinite-lived intangible assets, regardless of whether they have an alternative future use. The impact of this change is that the reversal of the accumulated depreciation related to the intangible assets for the year ended June 30, 2018, would need to be evaluated to determine if the correction was material enough to require a restatement.
The Company has revised its previously issued consolidated financial statements for the year ended June 30, 2016, have been reclassified2018 to conformcorrect the error that occurred during that fiscal year. The Company’s Management assessed the materiality of the error identified in accordance with ASC 250-10-S99-2, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements and concluded based on qualitative and quantitative considerations that the effect of the correction in the period in which the related misstatement originated was not material.
The following table sets forth the impact on the lines impacted by the correction on the Company’s financial statements as of June 30, 2018.
For the year ended June 30, 2018 | Adjustments | For the year ended June 30, 2018 | ||||||||||
| (As Reported) | (As Revised) | |||||||||||
| Balance Sheet: | ||||||||||||
| Definite life intangible assets, net | $ | 111,489 | $ | 111,489 | ||||||||
| Indefinite life intangible assets | $ | 151,983,970 | $ | 2,840,030 | $ | 154,824,000 | ||||||
| Total Assets | $ | 179,662,426 | $ | 2,840,030 | $ | 182,502,456 | ||||||
| Statement of Operations: | ||||||||||||
| Depreciation & Amortization | $ | 2,858,514 | $ | (2,840,030 | ) | $ | 18,484 | |||||
| Total Operating Expense | $ | 8,169,359 | $ | (2,840,030 | ) | $ | 5,329,329 | |||||
| Loss Before Income Taxes | $ | (9,263,581 | ) | $ | (2,840,030 | ) | $ | (6,423,551 | ) | |||
| Net Income (Loss) | $ | (9,151,865 | ) | $ | (2,840,030 | $ | (6,311,835 | ) | ||||
| Basic & Diluted Loss per Share | $ | (0.42 | ) | $ | (0.13 | ) | $ | (0.29 | ) | |||
| Consolidated Statement of Other Comprehensive Income | ||||||||||||
| Other Comprehensive Income | $ | (9,299,018 | ) | $ | (2,840,030 | ) | $ | (6,458,988 | ) | |||
| Consolidated Statement of Changes to Shareholders’ Equity | ||||||||||||
| Accumulated Deficit | $ | (37,595,390 | ) | $ | (2,840,030 | ) | $ | (34,755,360 | ) |
| F-14 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 — ACQUISITION OF ENOCHIAN BIOPHARMA
On January 12, 2018, the Company entered into an acquisition agreement to acquire Enochian BioPharma which ultimately closed on February 16, 2018. The purpose of the acquisition was to allow the Company to increase its footprint to include the HIV drug development market. As consideration for the acquisition, the stockholders of Enochian BioPharma received: (i) 18,081,962 shares of Common Stock valued at their fair value of $8.00 per share (“Acquisition Shares”); (ii) the right to receive on a one to one basis on share of Common Stock for each share of Common Stock issued in the future related to the headingsexercise of any warrant or option outstanding at the agreement date (the “Contingent Consideration”); and classifications used(iii) approximately $297,000 in cash.
| Total consideration is as follows: | ||||
| Shares of Common Stock | $ | 144,656,000 | ||
| Contingent Consideration | 21,516,000 | |||
| Cash Consideration | 297,000 | |||
| Total Consideration | $ | 166,469,000 | ||
The Acquisition Shares issued equal 50% of the outstanding common shares of the company, post issuance and were fair valued based on the last third-party private placement for cash which occurred at or around the acquisition date due to a lack of trading volume in our stock. The Contingent Consideration could have resulted in a maximum future issuance of an additional 6,488,122 shares of Common Stock if all outstanding options and warrants are exercised. This contingent consideration liability is measured at fair value at inception and subsequently marked to fair value in future periods until the underlying options and warrants are completely exercised or expire. The Company valued the liability based off an option pricing model using the probability of conversion to determine the number of shares expected to be issued. As of June 30, 2019, there are 1,938,122 shares of Common Stock that are contingently issuable.
The significant assumptions for this valuation were as follows:
| June 30, 2019 | June 30, 2018 | February 18, 2018 | |||
| Stock Price | $4.50 | $8.00 | $8.00 | |||
| Exercise Price | $1.30 -$2.00 | $1.30 -$2.00 | $1.30 -$2.00 | |||
| Term | 0.55 - 3.05 years | 1.8 - 4.3 years | 1.55 - 4.05 years | |||
| Risk Free Rate | 2.46% - 2.57% | 2.17% - 2.54% | 2.43% - 2.54% |
The Contingent Consideration
The transaction was accounted for in accordance with the provisions of ASC 805-10 - Business Combinations. As a result of the transaction, both the pre-acquisition shareholders of the Company and the seller of Enochian own 50% of the Company, respectively. The Company determined it was the accounting acquirer in the June 30, 2017 financial statements.transaction as it retained the majority of the management and board positions. The Company retained a valuation specialist to advise management in the determination of the fair value of the various assets acquired and liabilities assumed. All fair value measurements of acquired assets are non-recurring in nature and classified as level 3 on the fair value hierarchy.
The following are the fair value of assets acquired and liabilities assumed as of the closing date of February 16, 2018:
| Cash and cash equivalents | $ | 2,000 | ||
| Other current assets | 3,000 | |||
| IPR&D intangible asset | 154,824,000 | |||
| Other intangible assets | 11,640,000 | |||
| Total Consideration | $ | 166,469,000 |
| F-15 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 23 — ACQUISITION OF ENOCHIAN BIOPHARMA (Continued)
The In-Process Research & Development (“IPR&D”) intangible asset was fair valued using a multi period excess earnings model and represents a perpetual, fully paid-up, royalty-free, sublicensable, 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.
Under ASC 805-10, acquisition-related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred but are accounted for as operating expenses in the periods in which the costs are incurred. Acquisition-related costs were $2,091,401 during the year ended June 30, 2018.
| F-16 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at June 30, 20172019 and 2016:2018:
| Useful Life | June 30, 2017 | June 30, 2016 | ||||||||
| Lab equipment and instruments | 4-6 | $ | 168,627 | $ | 163,959 | |||||
| Computer equipment | 4-6 | 57,754 | 56,155 | |||||||
| 226,381 | 220,114 | |||||||||
| Less Accumulated Depreciation | (226,381 | ) | (220,114 | ) | ||||||
| Net Property and Equipment | $ | - | $ | - | ||||||
| Useful Life | June 30, 2019 | June 30, 2018 | ||||||||||
| Lab equipment and Instruments | 4-7 | $ | 479,145 | $ | 202,197 | |||||||
| Leasehold improvements | 10 | $ | 194,788 | $ | — | |||||||
| Furniture fixtures and equipment | 4-7 | $ | 72,736 | $ | 58,977 | |||||||
| Total | $ | 746,669 | $ | 261,174 | ||||||||
| Less accumulated depreciation | $ | (59,152 | ) | $ | (233,772 | ) | ||||||
| Net Property and Equipment | $ | 687,517 | $ | 27,402 | ||||||||
Depreciation expense amounted to $0$56,555 and $0$2,597 for the years ended June 30, 20172019 and 2016,2018, respectively. The Company’s property and equipment is held as collateral on the notes payable related party.
DANDRIT BIOTECH USAENOCHIAN BIOSCIENCES INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 35 — DEFINITE-LIFE INTANGIBLE ASSETS AND GOODWILL
At June 30, 20172019 and 2016,2018, definite-life intangible assets, net of accumulated amortization, consistconsisted of patents on the Company’s products and processes of $124,393$93,299 and $135,743,$111,489, respectively. The patents are recorded at cost and amortized over twenty years from the date of application. Amortization expense for the year ended June 30, 20172019 and 20162018, was $19,781$15,154 and $27,396, including $0$18,484, respectively.
At June 30, 2019 and $12,048, respectively in losses on abandoned assets. 2018, indefinite life intangibles assets consisted of a licenses agreements 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 June 30, 2019 and 2018, definite-life intangible assets consisted of the following:
| Useful Life | June 30, 2018 | Period Change | Effect of Currency Translation | June 30, 2019 | ||||||||||||||
| Definite Life Intangible Assets | (As Revised) | |||||||||||||||||
| Patents | 20 Years | $ | 310,968 | $ | — | $ | (8,597 | ) | $ | 302,371 | ||||||||
| Less Accumulated Amortization | $ | (199,479 | ) | $ | (15,154 | ) | $ | 5,561 | $ | (209,072 | ) | |||||||
| Net Definite-Life Intangible Assets | $ | 111,489 | $ | (15,154 | ) | $ | (3,036 | ) | $ | 93,299 | ||||||||
| Indefinite Life Intangible Assets | ||||||||||||||||||
| License Agreement | $ | 154,824,000 | $ | 154,824,000 | ||||||||||||||
| Goodwill | $ | 11,640,000 | $ | 11,640,000 | ||||||||||||||
| Total | $ | 166,464,000 | $ | 166,464,000 | ||||||||||||||
| Total Indefinite Life Intangible Assets | $ | 166,464,000 | $ | 166,464,000 | ||||||||||||||
Expected future amortization expense for the years ended are as follows:
| Year ending June 30, | Year ending June 30, | |||||||||||||
| 2018 | $ | 14,794 | ||||||||||||
| 2019 | 14,794 | |||||||||||||
| 2020 | 14,835 | $ 15,154 | ||||||||||||
| 2021 | 14,794 | $ 15,154 | ||||||||||||
| 2022 | 14,794 | $ 15,154 | ||||||||||||
| 2023 | $ 15,154 | |||||||||||||
| Thereafter | 46,938 | $ 32,683 | ||||||||||||
| $ | 120,949 | $ 93,299 | ||||||||||||
NOTE 4 — NOTE RECEIVABLEDuring February 2018, the Company acquired a License Agreement (as licensee) to the HIV therapy being developed as ENOB-HV01 which consists of a perpetual, fully paid-up, royalty-free, sublicensable, 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. Because the License Agreement is considered, an IPR&D intangible asset is classified as an indefinite life asset that is tested annually for impairment.
On July 14, 2017,Impairment – Following the Company agreed to loan tofourth quarter of each year, management performs its annual test of impairment of intangible assets by performing a biopharmaceutical company up to $500,000 in exchange for a promissory note executed byquantitative assessment and determines if it is more than likely than not that, the Company. The note matures on July 13, 2020, bears interestfair value of 5% per annum and can be repaid early without penalty. The Company may accelerate payment under the note upon certain events of default provided therein, whereby all amounts owed will become immediately due and payable. The loanasset is a long-term debt obligation as defined in Item 303(a)(5)(ii)(A) of Regulation S-K that is materialgreater than or equal to the Company. Ascarrying value of June 30, 2017, the Company has loanedasset. The results of the biopharmaceutical company $196,140 with up toquantitative assessment supported Management’s conclusion that an additional $303,860 agreed to be lent.
The following represents the future maturities of long-term receivablesimpairment adjustment was not required as of June 30, 2017:2019.
| Year ending June 30, | ||||
| 2018 | - | |||
| 2019 | - | |||
| 2020 | 196,140 | |||
| 2021 | - | |||
| 2022 | - | |||
| Thereafter | - | |||
| $ | 196,140 | |||
NOTE 5 — NOTES PAYABLE – RELATED PARTY
Notes payable to related parties consists of the following as of June 30, 2017 and 2016:
| June 30, 2017 | June 30, 2016 | |||||||
| Non-Interest Bearing Loan Payable Sunrise Financial Group Inc. | $ | 38,235 | $ | 38,235 | ||||
| Note Payable ML Group | - | 17,414 | ||||||
| Advances to purchase common shares in connection with private placement | 1,600,355 | - | ||||||
| 6% Promissory Note payable to NLBDIT 2010 Enterprises, LLC | 49,581 | 47,233 | ||||||
| Total Notes Payable – Related Party | 1,688,171 | 102,882 | ||||||
| Less Current Maturities | (1,688,171 | ) | (102,882 | ) | ||||
| Note Payables – Related Party Long Term | $ | - | $ | - | ||||
DANDRIT BIOTECH USA
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 — LEASES
Operating Leases —
NOTE 5 — NOTES PAYABLE – RELATED PARTY (continued)On November 13, 2017, the Registrant entered into a Lease Agreement for a term of five years and two months from November 1, 2017 with Plaza Medical Office Building, LLC, pursuant to which the Registrant agreed to lease approximately 2,325 rentable square feet (the “Plaza Lease”). The base rent for the Plaza Lease increases by 3% each year, and ranges from approximately $8,719 per month, for the first year to $10,107 per month for the two months of the sixth year. The equalized monthly lease payment for the term of the lease is $8,124. The Registrant is entitled to $70,800 in tenant improvement allowance in the form of free rent applied over 10 months in equal installments beginning in January 2018.
The following representsOn June 19, 2018, the future maturitiesRegistrant entered into a Lease Agreement for a term of long-term debt as of June 30, 2017:
| Year ending June 30, | ||||
| 2017 | 1,688,171 | |||
| 2018 | - | |||
| 2019 | - | |||
| 2020 | - | |||
| 2021 | - | |||
| Thereafter | - | |||
| $ | 1,688,171 | |||
As of June 30, 2017,ten years from September 1, 2018 with Century City Medical Plaza Land Co., Inc., pursuant to which the outstanding balance of $38,235 for professional fees paid by a shareholder and amounts advancedCompany agreed to lease approximately 2,453 rentable square feet (the “Century Lease”). On February 20, 2019, the Registrant entered into an Addendum to the Parent are reported as notes payable - related party.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 $38,235 notes payable were acquiredbase rent increases by 3% each year, and ranges from $17,770 per month for the remainder of the first year to $23,186 per month for the tenth year. The Company is entitled to $148,168 in the reverse acquisition. The amounts are unsecured, non-interest bearing and have no stipulated repayment terms.contributions toward tenant improvements.
A 6% promissory note payable to NLBDIT 2010 Enterprises, LLC, an entity controlled by a shareholder ofFor the Company, was acquired by the Company in the reverse acquisition, payable on February 12, 2014 upon the completion date of the Share Exchange. As of June 30, 2017 and 2016, the outstanding balance on the note, including accrued interest, was $49,581 and $47,233, respectively. During the yearyears ended June 30, 20172019 and 2018, the year ended June 30, 2016 the Company recorded related party interest on the note of $2,348lease expenses charged to general and $2,354,administrative expenses amounted to $395,528 and $15,685, respectively.
The Company has recorded $1,600,355 in advances – related partyBelow are the lease commitments for funds received as of June 30, 2017 in connections with the July 12, 2017 private placement. On July 12, 2017, the advances were converted into units at $1.30 per unit. The units consist of 1,231,043 common shares and warrants to purchase 2,462,086 common shares at $1.30 per share, expiring July 12, 2022.next 5 years:
| Year Ending June 30th | Lease Expense | |||||
| 2020 | $ | 328,490 | ||||
| 2021 | $ | 338,345 | ||||
| 2022 | $ | 348,495 | ||||
| 2023 | $ | 298,305 | ||||
| 2024 | $ | 246,004 | ||||
| Thereafter | $ | 1,106,435 | ||||
| Total | $ | 2,666,074 | ||||
NOTE 6 — CONVERTIBLE NOTES PAYABLE – RELATED PARTY
Convertible Notes payable to related parties consist of the following as of June 30, 2017 and June 30, 2016:
| June 30, 2017 | June 30, 2016 | |||||||
| Non-Interest Bearing Notes Payable Paseco ApS | $ | 120,300 | $ | - | ||||
| Non-Interest Bearing Notes Payable Equine Invest APS/Po-Ma Aps | 240,600 | - | ||||||
| Non-Interest Bearing Notes Payable TBC A/S | 52,770 | - | ||||||
| Less Discount | (11,997 | ) | - | |||||
| Total Convertible Notes Payable – Related Party | 401,673 | $ | - | |||||
| Less Current Maturities | (401,673 | ) | - | |||||
| Net Convertible Note Payables – Related Party Long Term | $ | - | - | |||||
The following represents the future maturities of short-term debt as of June 30, 2017:
| Year ending June 30, | ||||
| 2018 | 413,670 | |||
| 2019 | - | |||
| 2020 | - | |||
| 2021 | - | |||
| 2022 | - | |||
| Thereafter | - | |||
| 413,670 | ||||
DANDRIT BIOTECH USAENOCHIAN BIOSCIENCES INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 — CONVERTIBLE NOTES PAYABLE – RELATED PARTY (continued)
On July 1, 2016, the Company entered into a non-interest bearing convertible note for $60,150, with an entity controlled shareholder of the Company. The note matures December 31, 2017. The note is convertible into shares of Common Stock at $2.00 per share. As the Company’s Common Stock was trading at $2.05 on August 24, 2016, the Company bifurcated the intrinsic value of the beneficial conversion feature and recorded a discount of $15,038. As the note is non-interest bearing the Company imputed the interest at 3% and further recorded a discount of $2,639. The interest is being amortized to expense using the effective interest method through the December 31, 2017 maturity. For twelve months ended June 30, 2017 and June 30, 2016, interest expense of $11,045 and $0, respectively, was recorded for the amortization of the discount.
On July 19, 2016, the Company entered into a non-interest bearing convertible note for $60,150, with an entity controlled shareholder of the Company. The note matures December 31, 2017. The note is convertible into shares of Common Stock at $2.00 per share. As the note is non-interest bearing the Company imputed the interest at 3% and further recorded a discount of $2,555. The interest will be amortized to expense using the effective interest method through the December 31, 2017 maturity. For the twelve months ended June 30, 2017 and June 30, 2016, interest expense of $1,656 and $0, respectively, was recorded for the amortization of the discount.
On August 24, 2016, the Company entered into a non-interest bearing convertible note for $90,225. Later acquired by an entity controlled by a board member and shareholder of the Company. The note matures December 31, 2017. The note is convertible into shares of Common Stock at $2.00 per share. As the Company’s Common Stock was trading at $2.05 on August 24, 2016 the Company bifurcated the intrinsic value of the beneficial conversion feature and recorded a discount of $2,256. As the note is non-interest bearing the Company imputed the interest at 3% and further recorded a discount of $3,577. The interest will be amortized to expense using the effective interest method through the December 31, 2017 maturity. For twelve months ended June 30, 2017 and June 30, 2016, interest expense of $3,616 and $0, respectively, was recorded for the amortization of the discount.
DANDRIT BIOTECH USA INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 — CONVERTIBLE NOTES PAYABLE – RELATED PARTY (continued)
On September 21, 2016, the Company entered into a non-interest bearing convertible note for $150,375. Later acquired by an entity controlled by a board member and shareholder of the Company. The note matures December 31, 2017. The note is convertible into shares of Common Stock at $2.00 per share. As the note is non-interest bearing the Company imputed the interest at 3% and further recorded a discount of $5,630. The interest will be amortized to expense using the effective interest method through the December 31, 2017 maturity. For the twelve months ended June 30, 2017 and June 30, 2016, interest expense of $3,382 and $0, respectively, was recorded for the amortization of the discount.
On March 9, 2017, the Company entered into a non-interest bearing convertible note for $52,770 with an entity controlled by shareholder and board member of the Company. The note matures June 30, 2017. The note is convertible into shares of Common Stock at $2.00 per share. As the note is non-interest bearing the Company imputed the interest at 3% and further recorded a discount of $486. The interest will be amortized to expense using the effective interest method through the June 30, 2017 maturity. For the twelve months ended June 30, 2017 and June 30, 2016, interest expense of $486 and $0, respectively, was recorded for the amortization of the discount.
NOTE 7 — LEASES
Operating Leases — The Company leases laboratory and production space under an operating lease agreement which terminates on September 30, 2017. The lease calls for monthly payments of DKK 6,575 (approximately $1,009 at June 30, 2017).
The Company has an agreement for use of virtual office space at a rate of $450 per month on a month-to-month basis, which can be terminated by either party on one month’s notice.
For the twelve months ended June 30, 2017 and June 30, 2016 the lease expense charged to operations was $16,914 and $15,744, respectively.
NOTE 8 — INCOME TAXES
The Company accounts for income taxes in accordance with FASB ASC Topic 740, Accounting for Income Taxes; which requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carry forwards.carryforwards. The amount of and ultimate realization of the benefits from the deferred tax assets for income tax purposes is dependent, in part, upon the tax laws in effect, the Company’s future earnings, and other future events, the effects of which cannot be determined.
As of June 30, 20172019 and 2016,2018, the Company had net operating loss carryforwards of approximately $11,465,000$20,905,755 and $10,136,400,$5,110,796, respectively, giving rise to deferred tax assets of $2,522,287$4,454,946 and $2,230,008, respectively for Danish tax purposes which do not expire.
As of June 30, 2017 and 2016, the Company had net operating loss carryforwards of approximately $1,504,003 and $934,920, respectively, giving rise to deferred tax assets of $511,361 and $328,072,$1,138,005, respectively for United States tax purposes which expire in 2036.
The Company files Danish and U.S. income tax returns and they are generally no longer subject to tax examinations for years prior to 2008 for their Danish tax returns and 2012 for their U.S. tax returns.
DANDRIT BIOTECH USA INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — INCOME TAXES (continued)
The temporary differences, tax credits and carry forwards gave rise to the following deferred tax asset (liabilities) at June 30, 20172019 and 2016:2018:
| June 30, | ||||||||
| 2017 | 2016 | |||||||
| Excess of Tax over book depreciation Fixed assets | $ | 6,753 | $ | 7,660 | ||||
| Excess of Tax over book depreciation Patents | 4,975 | 870 | ||||||
| Net Operating Loss Carryforward | 3,033,648 | 2,558,080 | ||||||
| Valuation Allowance | (3,045,376 | ) | (2,566,610 | ) | ||||
| Total Deferred Tax Asset (Liabilities) | $ | - | $ | - | ||||
| June 30 | ||||||||
2019
| 2018 (As Revised) | |||||||
| Excess of Tax over book depreciation Fixed assets | $ | (13,985 | ) | $ | (19,065 | ) | ||
| Excess of Tax over book depreciation Patents | 3,017 | 3,879 | ||||||
| Stock/options Compensation | 454,643 | — | ||||||
| Depreciation and amortization | 11,876 | — | ||||||
| Net Operating Loss Carryforward | 4,454,946 | 1,138,005 | ||||||
| Valuation Allowance | (4,910,497 | ) | (1,122,819 | ) | ||||
| Total Deferred Tax Asset (Liabilities) | $ | — | $ | — | ||||
In accordance with prevailing accounting guidance, the Company is required to recognize and disclose any income tax uncertainties. The guidance provides a two-step approach to recognize and disclose any income tax uncertainties. The guidance provides a two-step approach to recognizing and measuring tax benefits and liabilities when realization of the tax position is uncertain. The first step is to determine whether the tax position meets the more-likely-than-not condition for recognition, and the second step is to determine the amount to be recognized based on the cumulative probability that exceeds 50%. The amount of and ultimate realization of the benefits from the deferred tax assets for income tax purposes is dependent, in part, upon the tax laws in effect, the Company’s future earnings, and other future events, the effects of which can be difficult to determine and can only be estimated. Management estimates that it is more likely than not that the Company will not generate adequate net profits to use the deferred tax assets; and consequently, a valuation allowance was recorded for all deferred tax assets.
A reconciliation of income tax expense at the federal statutory rate to income tax expense at the Company’s effective rate is as follows for the year ended June 30, 20172019 and the year ended June 30, 2016:2018:
| June 30, | ||||||||
| 2017 | 2016 | |||||||
| Computed Tax at Expected Statutory Rate | $ | (835,620 | ) | $ | (747,329 | ) | ||
| Non-US Income Taxed at Different Rates | 47,252 | 236,700 | ||||||
| Non-Deductible expenses / other items | 244,725 | 32,209 | ||||||
| Valuation allowance | 478,766 | 15,633 | ||||||
| Income Tax Expense | $ | (64,877 | ) | $ | (462,787 | ) | ||
| June 30 | ||||||||
| 2019 | 2018 | |||||||
| (As Revised) | ||||||||
| Computed tax at expected statutory rate | $ | (3,783,461 | ) | $ | (1,131,612 | ) | ||
| Non-US income taxed at different rates | (10,863 | ) | ||||||
| Non-deductible expenses / other items | 218,055 | |||||||
| Valuation allowance | 3,783,461 | 812,704 | ||||||
| Income Tax Expense | $ | — | $ | (111,716 | ) | |||
| F-20 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 — INCOME TAXES (Continued)
The components of income tax expense (benefit) from continuing operations for the year ended June 30, 20172019 and the year ended June 30, 20162018 consisted of the following:
| June 30, | June 30, | |||||||||||||||
| Current Tax Expense | 2017 | 2016 | 2019
| 2018 (As Revised) | ||||||||||||
| Danish Income Tax (Benefit) | $ | (64,877 | ) | $ | (462,787 | ) | $ | — | $ | (111,716 | ) | |||||
| Total Current Tax Expense (Benefit) | $ | (64,877 | ) | $ | (462,787 | ) | — | $ | (111,716 | ) | ||||||
| Deferred Income Tax Expense (Benefit) | ||||||||||||||||
| Excess of Tax over Book Depreciation Fixed Assets | 907 | 2,580 | ||||||||||||||
Deferred Income Tax Expense (Benefit) Excess of Tax over Book Depreciation Fixed Assets | $ | (13,985 | ) | $ | (19,065 | ) | ||||||||||
| Excess of Tax over Book Depreciation Patents | (4,105 | ) | 4,690 | 3,017 | 3879 | |||||||||||
| Stock/options Compensation | 454,643 | — | ||||||||||||||
| Depreciation and amortization | 11,876 | — | ||||||||||||||
| Net Operating Loss Carryforwards | (475,568 | ) | (22,903 | ) | 4,454,946 | 1,138,005 | ||||||||||
| Change in the Valuation allowance | 478,766 | 15,633 | (4,910,497 | ) | (1,122,819 | ) | ||||||||||
| Total Deferred Tax Expense | $ | - | $ | - | $ | — | $ | — | ||||||||
Deferred income tax expense/(benefit) results primarily from the reversal of temporary timing differences between tax and financial statement income.
DANDRIT BIOTECH USAENOCHIAN BIOSCIENCES INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 — LOSS PER SHARE
The following data shows the amounts used in computing loss per share and the effect on income and the weighted average number of shares of potential dilutive Common Stock for the years ended June 30, 2017 and 2016:
| For the Year Ended | For the Year Ended | |||||||
| June 30, | June 30, | |||||||
| 2017 | 2016 | |||||||
| Net (Loss) | $ | (2,392,830 | ) | $ | (1,735,239 | ) | ||
| Weighted average number of common shares used in basic earnings per share | 12,266,441 | 9,533,290 | ||||||
| Effect of dilutive securities, stock options and warrants | - | - | ||||||
| Weighted average number of common shares and potential dilutive common shares outstanding used in dilutive earnings per share | 12,266,441 | 9,533,290 | ||||||
The following Common Stock equivalents were not included in the calculation of dilutive common shares outstanding as the effect would be anti-dilutive.
For the years ended June 30, 2017 and 2016, the Company had 900,000 and zero (0) options outstanding to purchase common shares, respectively. The options vested upon grant, contain certain anti-dilution provisions that provide for anti-dilution in the sole discretion of the board and expire December 31, 2019.
For the years ended June 30, 2017 and 2016, the Company had 5,500,000 and zero (0) warrants outstanding to purchase common shares at $1.30 per share, respectively. Each warrant vested upon issuance and expires five years from issuance.
At June 30, 2017, the Company had five convertible notes payable totaling $413,670 which are convertible into 206,835 common shares.
At June 30, 2017, the Company had related party notes payable totaling $1,600,335 that were used to subsequently purchase 1,231,561 Units on July 12, 2017 consisting of 1,231,561 share of Common Stock and warrants to purchase 2,463,122 shares of Common Stock for $1.30 each share expiring July 12, 2022.
NOTE 108 — STOCKHOLDERS’ EQUITY
Common Stock— The CompanyRegistrant has 100,000,000 authorized shares of Common stockStock, par value $0.0001. As of June 30, 20172019 and 20162018 there were 12,433,29045,273,924 and 9,533,29036,163,924 shares of Common Stock issued and outstanding, respectively.
Voting-Holders of the Company’s Common Stock are entitled to one vote for eachper 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 the Company’s Common Stock are entitled to receive ratably such dividends as our 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 affairs of the Company, after payment of all of our debts and liabilities, the holders of the Company’s Common Stock will be entitled to share ratably in the distribution of any of our remaining assets.
Common Stock Issuances -
On July 12, 2017, the Registrant completed a private placement of 1,231,561 units, consisting of 1,231,561 shares of Common Stock and warrants to purchase 2,463,122 shares of Common Stock for $1,601,029 or $1.30 per Unit.
On August 30, 2017, the Registrant issued 62,687 shares of Common Stock to the CEO and recorded non-cash compensation expense of $112,837 with a cost basis of $1.80 per share.
On November 29, 2017, the Registrant issued 183,356 shares of Common Stock at a conversion price of $1.60 per share for the conversion of convertible promissory notes totaling $293,370.
On February 13, 2018, the Registrant issued 18,750 shares of Common Stock with a cost basis of $5.60 per share or $105,000 and a warrant to purchase 25,000 shares of Common stock, at a strike price of $8.00 per share, with a 3 year term for non-cash consulting compensation.
On February 16, 2018, the Registrant issued 75,188 shares of Common Stock at a conversion price of $1.60 per share for the conversion of convertible promissory notes totaling $120,300.
On February 16, 2018, the Registrant issued 2,400,000 shares of Common Stock pursuant to the exercise of warrants at strike prices ranging from $1.60 per share to $2.00 per share for total proceeds of $3,295,000.
On February 16, 2018, the Registrant issued 1,677,130 shares of Common Stock at a price of $8.00 per share pursuant to a private placement for total proceeds to the Registrant of $13,417,040.
On February 16, 2018, the Registrant issued 18,081,962 shares of Common Stock valued at the price of $8.00 per share pursuant to the Acquisition Agreement.
On August 28, 2018, the Registrant issued 10,000 shares of Common Stock valued at the price of $4.00 per share or $40,000 for non-cash consulting compensation.
On December 27, 2018, the Registrant issued 1,307,693 shares of Common Stock valued at the price of $1.30 per share pursuant to the exercise of warrants at strike price $1.30 per share for total proceeds of $1,700,001.
On December 27, 2018, the Registrant issued 1,307,693 shares of Common Stock valued at the price of $7.20 per share pursuant to the Acquisition Agreement. This was a non-cash transaction that impacted shareholders’ equity in the amount of $9,415,390.
On June 27, 2019, the Registrant issued 3,092,307 shares of Common Stock valued at the price of $1.30 pursuant to the exercise of warrants at strike price $1.30 per share for total proceeds of $4,019,999.
DANDRIT BIOTECH USA
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 108 — STOCKHOLDERS’ EQUITY (continued)
Common Stock Issuances- Pursuant to a private placement offeringOn June 27, 2019, the Company sold 2,700,000 units consisting of 2,700,000 common shares and warrants to purchase 5,400,000 common shares for $3,510,000 or $1.30 per unit. The warrants are exercisable at $1.30 per share expiring through May 15, 2022. The Company effected the issuances of theRegistrant issued 150,000 shares of Common Stock from April 21, 2017 to May 15, 2017.
On June 9, 2017, the Company issued 200,000 common shares valued at $490,000 in connection with a consulting agreement at $2.45 per share.
Share Exchange Agreement/Reverse Acquisition - On February 12, 2014, in accordance with the terms and conditionsprice of the Share Exchange Agreement, we completed the acquisition of approximately 100% of the issued and outstanding capital stock of DanDrit Denmark and as a result became DanDrit Denmark’s parent company. In connection with the Share Exchange, each outstanding share of common stock of DanDrit Denmark was exchanged for 1.498842 shares of DanDrit USA’s common stock, par value $0.0001 per share (the “Common Stock”) for an aggregate of 6,000,000 shares, including 185,053 shares of Common Stock reserved for issuance, in accordance with Section 70 of the Danish Companies Act and the Articles of Association of DanDrit Denmark,$2.00 pursuant to the DanDrit Denmark shareholders who did not consent to the Share Exchange and deemed issued and outstanding for accounting purposes. In addition, in connection with the Share Exchange (1) the sole shareholder prior to the Share Exchange agreed to cancel 4,400,000 sharesexercise of outstanding Common Stock owned by it and (2) the board of directors and executive management of DanDrit Denmark was appointed to serve as the Board of Directors and executive management of DanDrit USA effective upon the resignation of the sole officer and director of DanDrit USA prior to the closing of the Share Exchange.
Stock Options— On September 15, 2016, Parent’s Board of Directors approved the grant of stock options to employees, officers, and directors of the Company. The Board granted 300,000vested options at a strike price of $2.00 per share to eachfor total proceeds of Eric Leire, APE Invest A/S for Aldo Petersen and N.E. Nielson, in consideration$300,000.
On June 27, 2019, the Registrant issued 3,242,307 shares of their serviceCommon Stock valued at the price of $4.59 pursuant to the Company, for an aggregate of 900,000 options. The options vested upon grant, contain certain anti-dilution provisionsAcquisition Agreement. This was a non-cash transaction that provide for anti-dilutionimpacted shareholders’ equity in the sole discretionamount of $14,882,189.
Acquisition of Enochian Biopharma / Contingently issuable shares - On February 16, 2018, the board,Acquisition was completed when the Acquisition Sub merged with and expire December 31, 2019. into Enochian Biopharma, with Enochian Biopharma as the surviving corporation. As consideration for 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 pro rata upon the exercise or conversion of warrants which were outstanding at closing. As of June 30, 2019, 1,938,122 Contingent Shares are potentially issuable in connection with the Acquisition of Enochian Biopharma.
Recognition of Options
The Company recognizes compensation costs for stock option awards to employees 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:
| Enochian Biosciences Inc. | |||||||||||
| Expected term (in years) | 3-10 | ||||||||||
| Volatility | 91.86 - 98.15% | ||||||||||
| Risk free interest rate | 2.12- 3.23% | ||||||||||
| Dividend yield | 0% | ||||||||||
The Company recognized stock basedstock-based compensation expense related to the options of $626,487$2,124,967 and $0$257,937 for the years ended June 30, 20172019 and 2016,2018, respectively. At June 30, 2017,2019, the Company had approximately $0$659,868 of unrecognized compensation cost related to non-vested options.
DANDRIT BIOTECH USAENOCHIAN BIOSCIENCES INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 108 — STOCKHOLDERS’ EQUITY (continued)
Stock Grants -On September 15, 2016, the Board granted the right to acquire 300,000 shares of Common Stock at a strike price of $2.00 per share in what the Board originally described as “options” (the “Grants”) to each of Eric Leire, APE Invest A/S for Aldo Petersen and N.E. Nielson in consideration of their service to the Registrant. These Grants vested immediately and expire December 31, 2019. In October of 2017, the Registrant issued warrants to APE Invest A/S and N.E. Nielsen, and in January 2018, the Registrant issued a warrant to Eric Leire (each a “Grant Warrant” collectively the “Grant Warrants”) to evidence the Grants for an aggregate of 900,000 Grant Warrants. During the year ended June 30, 2019, there were 150,000 Grant Warrants exercised at the strike price of $2.00 per share or $300,000. There is a remaining balance of 500,000 Grant Warrants as of June 30, 2019.
Grant Warrants/ Plan Options
On February 6, 2014, the Board adopted the Registrant’s 2014 Equity Incentive Plan (the “Plan”), and the Registrant has reserved 1,206,000 shares of Common Stock for issuance in accordance with the terms of the Plan. To date the Registrant has granted options under the Plan (“Plan Options”) to purchase 501,761 shares of Common Stock. During the year ended June 30, 2019, the Registrant issued 15,000 at $6.15 per share or $92,250 of Restricted Stock Units (“RSUs”) in accordance with the terms of the Plan. The remaining compensation expense related to the RSUs at June 30, 2019 is $90,231.
A summary of the status of the Plan Options and Grant Warrants outstanding at June 30, 2019 is presented below:
| Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||
| Exercise Prices | Number Outstanding | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | ||||||||||||||||||||||
| $ | 2.00 | 500,000 | 0.50 | $ | 2.00 | 500,000 | 0.50 | $ | 2.00 | |||||||||||||||||||
| $ | 3.95 | 5,063 | 9.09 | $ | 3.95 | — | — | $ | — | |||||||||||||||||||
| $ | 5.72 | 13,113 | 9.34 | $ | 5.72 | — | — | $ | — | |||||||||||||||||||
| $ | 5.74 | 15,679 | 9.00 | $ | 5.74 | 15,679 | 9.23 | $ | 5.74 | |||||||||||||||||||
| $ | 5.80 | 7,759 | 9.28 | $ | 5.80 | — | — | $ | — | |||||||||||||||||||
| $ | 6.15 | 60,000 | 9.94 | $ | 6.15 | — | — | $ | — | |||||||||||||||||||
| $ | 6.25 | 18,346 | 9.69 | $ | 6.25 | — | — | $ | — | |||||||||||||||||||
| $ | 6.50 | 300,000 | 9.40 | $ | 6.50 | 300,000 | 9.40 | $ | 6.50 | |||||||||||||||||||
| $ | 6.95 | 4,317 | 9.78 | $ | 6.95 | — | — | $ | — | |||||||||||||||||||
| $ | 7.10 | 8,248 | 9.67 | $ | 7.10 | — | — | $ | — | |||||||||||||||||||
| $ | 8.00 | 69,235 | 8.82 | $ | 8.00 | 13,540 | 8.68 | $ | 8.00 | |||||||||||||||||||
| Total | $ | — | 1,001,760 | 4.96 | $ | 4.30 | 829,220 | 4.02 | $ | 3.80 | ||||||||||||||||||
| F-24 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — STOCKHOLDERS’ EQUITY (continued)
A summary of the status of the options outstanding at June 30, 2017 is presented below:
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Exercise Prices | Number Outstanding | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||||
| $ | 2.00 | 900,000 | 2.5 | $ | 2.00 | 900,000 | $ | 2.00 | ||||||||||||||
| Total | - | 900,000 | 2.5 | $ | 2.00 | 900,000 | $ | 2.00 | ||||||||||||||
A summary ofPlan Options and the status of the optionsGrant Warrants for the nine monthsyear ended June 30, 2017,2019, and changes during the period are presented below:
| June 30, 2017 | Weighted Average | Weighted Average | Weighted Average | |||||||||||||||||||||||||||
| Shares | Weighted Average Exercise Price | Average Remaining Life | Weighted Average Intrinsic Value | Shares | Exercise Price | Remaining Life | Intrinsic Value | |||||||||||||||||||||||
| Outstanding at beginning of period | 0 | $ | - | - | $ | - | 690,620 | $ | 2.00 | 2.00 | $2,275,000 | |||||||||||||||||||
| Granted | 900,000 | 2.00 | 2.5 | - | 461,140 | $ | 6.46 | 10.00 | - | |||||||||||||||||||||
| Exercised | - | - | - | - | (150,000 | ) | $ | 2.00 | 0.50 | - | ||||||||||||||||||||
| Forfeited | - | - | - | - | — | $ | — | — | - | |||||||||||||||||||||
| Expired | - | - | - | - | — | $ | — | — | - | |||||||||||||||||||||
| Outstanding at end of period | 900,000 | $ | 2.00 | 2.5 | $ | - | 1,001,760 | $ | 4.30 | 4.96 | $1,252,785 | |||||||||||||||||||
| Vested and expected to vest | 900,000 | $ | 2.00 | 2.5 | $ | - | 829,220 | $ | 3.80 | 4.02 | $1,250,000 | |||||||||||||||||||
| Exercisable end of period | 900,000 | $ | 2.00 | 2.5 | $ | - | 829,220 | 3.80 | 4.02 | $1,250,000 | ||||||||||||||||||||
At June 30, 2017,2019, all Grant Warrants are exercisable and 829,220 Plan options issued are exercisable. The total intrinsic value of options at June 30, 20172019 was $0.$1,252,785. Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) or at June 30, 20172019 (for outstanding options), less the applicable exercise price.
Common Stock Purchase Warrants
A summary of the status of common shares of Common Stock which can be purchased underlying the warrants outstanding at June 30, 20172019 is presented below:
| Equivalent Shares Underlying Warrants Outstanding | Equivalent Shares Exercisable | |||||||||||||||||||
| Exercise Prices | Equivalent Shares | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||
| $ | 1.30 | 5,500,000 | 4.9 | $ | 1.30 | 5,500,000 | $ | 1.30 | ||||||||||||
| Total | 5,500,000 | 4.9 | $ | 1.30 | 5,500,000 | $ | 1.30 | |||||||||||||
| Weighted Average | Weighted Average | Weighted Average | ||||||||||||||
| Shares | Exercise Price | Remaining Life | Intrinsic Value | |||||||||||||
| Outstanding at beginning of period | 5,838,122 | $ | 1.96 | 3.89 | ||||||||||||
| Granted | — | — | — | |||||||||||||
| Exercised | (4,400,000 | ) | 1.30 | — | ||||||||||||
| Cancelled/Expired | — | — | — | |||||||||||||
| Outstanding at end of period | 1,438,122 | $ | 1.42 | 3.00 | $4,521,990 | |||||||||||
| Exercisable end of period | 1,438,122 | $ | 1.42 | 3.00 | $4,521,990 | |||||||||||
| F-25 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — STOCKHOLDERS’ EQUITY (continued)
| Equivalent Shares Underlying Warrants Outstanding | Equivalent Shares Exercisable | |||||||||||||||||||||
| Exercise Prices | Equivalent Shares | Weight Average Remaining Contractual Life (years) | Weight Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||||
| $ | 1.30 | 1,413,122 | 3.02 | $ | 1.30 | 1,413,122 | $ | 1.30 | ||||||||||||||
| $ | 8.00 | 25,000 | 1.63 | $ | 8.00 | 25,000 | $ | 8.00 | ||||||||||||||
| Total | 1,438,122 | 3.00 | $ | 1.42 | 1,438,122 | $ | 1.42 | |||||||||||||||
At June 30, 2017,2019, the Company had 0 non-vested1,938,122 vested warrants. The Company recorded non-cash compensation expense of $115,754 and $0 for the year ended June 30, 2017 and 2016 related to the 100,000 warrants issued for consulting services on April 21, 2017. The warrants were valued using the Black-Scholes option pricing model using the following assumptions 5 year expected term, 188% volatility, 1.77% risk free interest rate and 0% dividend yield.
The exercise price of certain warrants and the number of shares underlying the warrants are subject to adjustment for stock dividends, subdivisions of the outstanding shares of Common Stock and combinations of the outstanding shares of Common Stock. For so long as the warrants remain outstanding, we are required to keep reserved from our authorized and unissued shares of Common Stock a sufficient number of shares to provide for the issuance of the shares underlying the warrants.
| Restricted Stock Units (RSUs) | ||||||||||||||||
| A summary of the status of Restricted Stock Units outstanding at June 30, 2019 is presented below: | ||||||||||||||||
| Weighted Average | Weighted Average | Weighted Average | ||||||||||||||
| Shares | Exercise Price | Remaining Life | Intrinsic Value | |||||||||||||
| Outstanding at beginning of period | $ | — | $ | — | $ | — | $ | — | ||||||||
| Granted | 15,000 | 6.15 | 2.94 | $ | — | |||||||||||
| Exercised | — | — | — | |||||||||||||
| Cancelled/Expired | — | — | — | |||||||||||||
| Outstanding at end of period | 15,000 | $ | 6.15 | 2.94 | $ | — | ||||||||||
| Exercisable end of period | — | $ | — | — | $ | — | ||||||||||
| Restricted Stock Units Outstanding | Restricted Stock Units Exercisable | |||||||||||||||||||||
| Grant Price | Stock Units | Weight Average Remaining Contractual Life (years) | Weight Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||||
| $ | 6.15 | 15,000 | 2.94 | $ | 6.15 | — | $ | — | ||||||||||||||
| Total | 15,000 | 2.94 | $ | 6.15 | — | $ | — | |||||||||||||||
Acquisition of DanDrit Denmark - At June 30, 2019 and 2018, the Registrant maintained a reserve of 92,237 and 129,596 Escrow Shares, respectively, all of which are reflected as issued and outstanding in the accompanying financial statements. The Escrow Shares are reserved to acquire the 92,237 and 129,596 shares held by non-consenting shareholders of DanDrit Denmark at June 30, 2019 and 2018, respectively, in accordance with Section 70 of the Danish Companies Act and the Articles of Association of DanDrit Denmark. During the year ended June 30, 2019, the Registrant issued 37,359 shares of Common Stock to such non-consenting shareholders of DanDrit Denmark.
DANDRIT BIOTECH USA
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 119 — COMMITMENTS AND CONTINGENCIES
Consulting Agreements – On February 16, 2018, the Registrant entered into a consulting agreement with Weird Science under which Weird Science was to provide ongoing medical services related to the development of the Company’s products for the treatment of HIV and cancer. In consideration for such consulting services, the Company was to pay up to $30,000 per month for the consulting services. On July 9, 2018, the consulting agreement was terminated (See Note 10).
On February 16, 2018, the Registrant entered into a consulting agreement with Carl Sandler, a board member and shareholder of the Registrant (through his holdings in Weird Science) for services related to clinical development and new business opportunities. In consideration for services actually rendered, the Registrant paid $10,000 per month for 6 months. For the year ended June 30, 2018, Carl Sandler was paid $45,000 for consulting services. For the year ended June 30, 2019, the Company paid the remaining $15,000 of the agreement. The agreement with Mr. Sandler terminated pursuant to its terms on August 16, 2018.This amount is included in “Consulting Expenses” in our Condensed Consolidated Statement of Operations (See Note 10).
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 autologous and allogenic cell therapy modalities for the prevention, treatment, amelioration of HIV in humans, and with the development of a genetically enhanced Allogenic Dendritic Cell for use as a wide spectrum platform for various diseases (including but not limited to cancers and infectious diseases). G-Tech is entitled to consulting fees for 20 months, with a monthly consulting fee of not greater than $130,000 per month (See Note 10).
Shares held for non-consenting shareholders–In connection with the Share Exchange agreement certain shareholders of DandritDanDrit Denmark had not been identified or did not consent to the exchange of shares. In accordance with Section 70 of the Danish Companies Act and the Articles of Association of DanDrit Denmark, the Non-Consenting Shareholders that did not exchange the DanDrit Denmark equity interests owned by such Non-Consenting Shareholders for shares of the Company, will be entitled to receive up to 185,053 shares of Common Stock of the Company that each such Non-Consenting Shareholder would have been entitled to receive if such shareholder had consented to the Share Exchange. During the year ended June 30, 2019, the Registrant issued 37,359 shares of Common Stock to such non-consenting shareholders of DanDrit Denmark. The 185,05392,237 remaining shares have been reflected as issued and outstanding in the accompanying financial statements.
Clinical Trial Agreements– The Company’s subsidiary, DanDrit Denmark, signed a contract of collaboration with the University Hospital IRCCS “San Martino” - IST – National Institute for Cancer Research, known as the San Martino Hospital of Genoa. Dr. Alberto Sobrero, the Head of the Medical Oncology Unit at the San Martino Hospital, is principal investigator of the randomized multicenter study. The collaboration relates to a Phase III adjuvant study of the Company’s vaccine in patients with no evident disease (“NED”) stage IV colorectal cancer (“CRC”). The primary goal of the study is to evaluate the efficacy of the Company’s MelCancerVac® (“MCV”) in stage IV CRC patients rendered disease free after the completion of standard treatments in accordance with local practices. In May 2017, this contract was terminated.
On April 28, 2015, the Company entered into a service agreement with Fondazione GISCAD per la RicercasuiTumori to support the Company in a clinical trial to be conducted in Italy. In May 2017, this contract was terminated.
Patient Name Use Program Agreements- On December 16, 2013, DanDrit Denmark entered into an agreement with a Dutch company (the “MCV Partner”) regarding a Patient Name Use Program (PNU) for the Company’s MCV. This program will allow DanDrit Denmark to sell MCV for a year of treatment (10 vaccines) to cancer patients through the MCV Partner. The MCV Partner offers a worldwide online platform providing access to non-registered medicines for patients with life threatening diseases. The MCV Partner is a turnkey solution and will be in charge of regulatory, recruitment, logistics, and pharmaco vigilance. The Company will pay the MCV Partner a royalty on a country to country basis for 20 years on MCV sales sold under the agreement. Either party may terminate the agreement with 180 day written notice.
On April 23, 2015, the Company entered into a collaboration agreement with Riyadh Pharma in Saudi Arabia to promote cooperation in the manufacturing and marketing of the Company’s dendritic cell cancer vaccine.
Manufacturing agreements -On January 28, 2014, the Company entered into an agreement with Cellin Technologies for the manufacture of the MCV Cancer vaccine.
On August 8, 2014, the Company entered into an agreement with Cellin Technologies for the manufacture of the Melanoma Cell Lysate.
Food and Drug Administration (FDA) -The FDA has extensive regulatory authority over biopharmaceutical products (drugs and biological products), manufacturing protocols and procedures and the facilities in which they will be manufactured. Any new bio product intended for use in humans is subject to rigorous testing requirements imposed by the FDA with respect to product efficacy and safety, possible toxicity and side effects. FDA approval for the use of new bio products (which can never be assured) requires several rounds of extensive preclinical testing and clinical investigations conducted by the sponsoring pharmaceutical company prior to sale and use of the product. At each stage, the approvals granted by the FDA include the manufacturing process utilized to produce the product. Accordingly, the Company’s cell systems used for the production of therapeutic or bio therapeutic products are subject to significant regulation by the FDA under the Federal Food, Drug and Cosmetic Act, as amended.
Product liability -The contract production services for therapeutic products offered exposes an inherent risk of liability as bio therapeutic substances manufactured, at the requestEmployment and to the specifications of customers, could foreseeably cause adverse effects. The Company seeks to obtain agreements from contract production customers indemnifying and defending the Company from any potential liability arising from such risk. There can be no assurance, however, that the Company will be successful in obtaining such agreements in the future or that such indemnification agreements will adequately protect the Company against potential claims relating to such contract production services. The Company may also be exposed to potential product liability claims by users of its products. A successful partial or completely uninsured claim against the Company could have a material adverse effect on the Company’s operations.
DANDRIT BIOTECH USA INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 — COMMITMENTS AND CONTINGENCIES (continued)
EmploymentService Agreements -– The Company has a director’s agreement with Mark Dybul, the Executive Vice-Chair where he fulfills the duties as prescribed by the Company’s bylaws and its Subsidiary havereceives annual compensation in the amount of $430,000, plus 300,000 options that vested immediately. The Company has an employment agreement with Luisa Puche, the Chief Financial officer with a base annual compensation of $200,000 plus 60,000 options and 15,000 options granted effective her employment date. The Company had an employment agreement with Eric Leire, the former Chief Executive Officer with a base compensation of $313,775. The Company also had a services agreement with Crossfield, Inc. an entity controlled by Robert Wolfe, the former acting Chief Financial officer with a base compensation of $240,000. As of January 7, and 9, 2019, respectively, Eric Leire and Robert Wolfe are no longer with the Company. The Company maintains employment agreements with officersother staff in the ordinary course of the Company.business.
Contingencies- The Company is from time to time involved in routine legal and administrative proceedings and claims of various types. While any proceedings or claim contains an element of uncertainty, management does not expect a material impact on our results of operations or financial position.
| F-27 |
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1210 — RELATED PARTY TRANSACTIONS
JARO HoldingOn December 29, 2017, the Registrant entered into a consulting agreement with RS Group ApS, isa company owned and controlled by a prior director2 directors, for consulting services from October 1, 2017 through March 31, 2018. In consideration for the consulting services in connection with the negotiation and structuring of the Company,acquisition of Enochian Biopharma, the Registrant paid RS Group ApS $367,222.
On February 16, 2018 the Registrant entered into a consulting agreement with Carl Sandler, who subsequently became a board member and it provided medical consultancyshareholder of the Registrant (through his holdings in Weird Science) for services related to clinical development and new business opportunities. In consideration for services actually rendered, the Company. During Registrant paid $10,000 per month for 6 months. For the year ended June 30, 20172019 and 2016,2018, Carl Sandler was paid $15,000 and $45,000 for consulting services, respectively. The agreement with Mr. Sandler terminated pursuant to its terms on August 16, 2018. This amount is included in “Consulting Expenses” in our Consolidated Statement of Operations.
On February 16, 2018, the Registrant entered into a consulting agreement with Weird Science, a significant shareholder of the Registrant, under which Weird Science was to provide ongoing medical services related to the development of the Company’s products for the treatment of HIV and cancer. In consideration for such consulting services, the Company recorded medical consultancy expense of $0, $44,620, respectively.was to pay up to $30,000 per month for the consulting services. On July 9, 2018, the consulting agreement was terminated (See Note 9).
DuringOn 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 autologous and allogenic cell therapy modalities for the prevention, treatment, amelioration of HIV in humans, and with the development of a genetically enhanced Allogenic Dendritic Cell for use as a wide spectrum platform for various diseases (including but not limited to cancers and infectious diseases). G-Tech is entitled to consulting fees for 20 months, with a monthly consulting fee of not greater than $130,000 per month. G-Tech is controlled by certain members of Weird Science. For the year ended June 30, 2017 and 2016, a law firm partially owned by2019, the Company’s former ChairmanCompany paid G-Tech $1,500,000. This amount is included in “Research & Development expenses in our Consolidated Statements of Operations (See Note 9).
NOTE 11 — SUBSEQUENT EVENTS
On July 3, 2019, the Board provided legal servicesRegistrant issued 500,000 shares of Common Stock valued at the price of $2.00 pursuant to the Company and recorded legal expenseexercise of $268,620 and $105,107, respectively. At June 30, 2017 and June 30, 2016, the Company had an escrow accountvested options at a strike price of $214,876 and $0 and with the DLA Piper Law Firm, previously the Lett Law Firm.$2.00 per share for total proceeds of $1,000,000.
APE Invest is owned by a former directorOn July 3, 2019, the Registrant issued 500,000 shares of Common Stock valued at the Company, and it provided consultancy servicesprice of $4.42 per share pursuant to the Company. During year ended June 30, 2017 and, 2016,Acquisition Agreement. This was a non-cash transaction that impacted shareholders’ equity in the Company recorded medical consultancy expenseamount of $280,000 and $0, respectively.
NOTE 13 — SUBSEQUENT EVENT$2,210,000.
In accordance with ASC 855-10, Company management reviewed all material events through the date of this report. The following material subsequent events occurred.
On July 11, 2017, the Company appointed Robert Wolfe as Chief Financial Officer.
On July 12, 2017, the Company completed a private placement offering of 1,231,561 Units consisting of 1,231,561 shares of Common Stock and warrants to purchase 2,463,122 shares of Common Stock for $1.30 each share expiring July 12, 2022, for total proceeds to the Company of $1,601,029.
On July 14, 2017, the Company agreed to loan a biopharmaceutical company up to $500,000 to fund pre-clinical study programs in exchange for a promissory note. The note matures on July 13, 2020, bears interest of 5% per annum and can be repaid early without penalty. The Company may accelerate payment under the note upon certain events of default provided therein, whereby all amounts owed will become immediately due and payable. The loan is a long-term debt obligation as defined in Item 303(a)(5)(ii)(A) of Regulation S-K that is material to the Company.
On August 30, 2017, the Company issued 62,687 common shares valued at $1.80 per share or $112,837 to Dr. Leire in connection with his employment agreement.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. 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 Officer has designed such disclosure controls and procedures to ensure that material information is made known to him, 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 used the “Internal Control over Financial Reporting Integrated Framework” issued by 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 Annual Report (the “Evaluation Date”). Based upon that evaluation, the Certifying Officer concluded that, as of June 30, 2017,2019, 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 SEC Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.
The Certifying Officers based their conclusion on the fact that the Company has identified material weaknesses in controls over financial reporting, detailed below. In order to reduce the impact of these weaknesses to an acceptable level, the Company has contracted with consultants with expertise in U.S. GAAP and SEC financial reporting standards to review and compile all financial information prior to filing that information with the SEC. However, even with the added expertise of these consultants, we still expect to be deficient in our internal controls over disclosure and procedures until sufficient capital is available to hire the appropriate internal accounting staff and individuals with requisite GAAP and SEC financial reporting knowledge. There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Management Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Management used the “Internal Control over Financial Reporting Integrated Framework” issued by COSO to conduct an extensive review of the Company’s internal controls over financial reporting to make that evaluation. As of June 30, 2017,2019, the Company had identified deficiencies in internal controls that constituted material weaknesses in internal controls. Due to these material weaknesses, managementManagement concluded that internal controls over financial reporting as of June 30, 20172019 were not effective, based on COSO’s framework.
The deficiencies are attributed to the fact that the Company does not have adequate resources to address complex accounting issues, as well as an inadequate number of persons to whom it can segregate accounting tasks within the Company so as to ensure the segregation of duties between those persons who approve and issue payment from those persons who are responsible to record and reconcile such transactions within the Company’s accounting system. These control deficiencies will be monitored, and attention will be given to the matter as we continue to accelerate through our current growth stage.
Management has concluded that these control deficiencies constitute a material weakness. In order to reduce the impact of these weaknesses to an acceptable level, we have contracted with consultants with expertise in U.S. GAAP and SEC financial reporting standards to review and compile all financial information prior to filing that information with the SEC. However, even with the added expertise of these consultants, we still expect to be deficient in our internal controls over disclosure and procedures until sufficient capital is available to hire the appropriate internal accounting staff and individuals with requisite GAAP and SEC financial reporting knowledge. There were no significant changes in our internal control over financial reporting or in other factors that occurred during our most recent fiscal year that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.
This Annual Report does not include attestation reports of the Company’s registered public accounting firms regarding internal controls over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange CommissionSEC that permit the Company to provide only management’s report in this Annual Report.
| 20 |
Changes in Internal Control over Financial Reporting
On March 10, 2016,During the Board acceptedyear ended June 30, 2019, we instituted the amicable resignation of Lone Degn from the Company as its Chief Financial Officer, effective March 10, 2016. changes in our management and board related to our internal control over financial reporting:
On March 30, 2017, the Board terminated Eric J. Leire as Chief Executive Officer and Chief Financial Officer of the Company, and Mr. Leire resigned, as a director of the Company. The Board also appointed Mr. Aldo Petersen, a Director of the Company, to serve as Chief Executive Officer and for Soren Degn to serve as Chief Financial Officer of the Company.
| ● | On January 7, 2019, the Board appointed Luisa Puche as the Chief Financial Officer; |
| ● | On October 30, 2018, the Board increased its size from six to seven directors. The additional director is considered independent under the listing standards of the Nasdaq Capital Market. |
On June 9, 2017, the Board accepted the amicable resignation of Aldo Petersen as the Chief Executive Officer and as a director of the Company and appointed Dr. Eric Leire to replace Mr. Petersen as the Chief Executive Officer.
On June 9, 2017, the Board also accepted the amicable resignation of Soren Degn as Chief Financial Officer of the Company.
On July 11, 2017, the Board appointed Robert Wolfe as the Chief Financial Officer.
Except as set forth above, there were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Effective July 11, 2017, the Company re-appointed Robert Wolfe as the Chief Financial Officer, and DanDrit Denmark entered into a CFO Service Agreement with Crossfield, Inc. a company owned by Mr. Wolfe, a copy of which is filed herewith as Exhibit 10.8. The agreement provides that the Company will pay a signing fee of $7,500 and $90,000 per year for a total of $97,500 subject to annual review and increases by the board of directors of DanDrit Denmark, as it deems appropriate. In addition, the CFO will be entitled to receive reimbursement of all reasonable costs and expenses incurred in connection with the performance of duties.Not Applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The following table identifies our current executive officersinformation required by this Item 10 will be included under the captions “Directors and directors, their ages, their respective officesExecutive Officers”, “Information as to Nominees and positions,Other Directors”, “Information Regarding Meetings and their respective dates of election or appointment.
Executive officers are appointed by and serve at the pleasureCommittees of the Board. Our Certificate of Incorporation provides for the annual election of directors. At each annual meeting of stockholders, our directors will be elected to serve until their respective successors have been elected and qualified.
There are no family relationships, as defined in subparagraph (d) of Item 401 of Regulation S-K, among any of our executive officers and directors. To the best of our knowledge, none of our directors or executive officers has, during the past ten years, been involved in any legal proceedings described in subparagraph (f) of Item 401 of Regulation S-K.
Background
The following is a brief summary of the background of each of our directors and executive officers.
Dr. Eric Patterson Leire, MD, MBA. Dr. Eric Leire has served as the Chief Executive Officer and a director of DanDrit Denmark since June 2017 and previously from April 2011 to March 2017. Dr. Leire also served for two years as Chief Executive Officer and director of DKTI A/S, a listed Danish investment company from September 2012. Prior to these roles Dr. Leire was a partner at BioFund Venture Capital, a Finnish biotech venture fund, from August 2006 through September 2010 and a partner at Medwell Capital Corp.Board”, a Canadian venture fund, from April 2010 through May 2011. Dr. Leire has worked globally for many international pharmaceutical organizations, including Schering-Plough, Pfizer, Inc., Boots Pharmaceuticals Company PLC, Harvard AIDS Institute and bioStrategies Group. Dr. Leire also served as the CEO of U.S. biotech companies APT Therapeutics and Paringenix and currently serves on the board of directors of Novicol Canada. Dr. Leire received his medical degree from the University of Medicine of Grenoble in 1980 and his MBA from ISA-HEC and the Kellogg School of Management at Northwestern University in 1991.
Mr. Robert Wolfe. Robert Wolfe has served as the Chief Financial Officer and Director from January 2014 to April 2015 and has served as Chief Financial Officer since July 2017. Concurrently, Mr. Wolfe is the Chairman and CEO for Advanced Oxygen Technologies Inc. since 1997, the President and CEO of Crossfield, Inc. since 1989. From 1992-1993 he was Vice President and partner for CFI, NY Ltd., a subsidiary of Corporate Financial Investments, PLC, London.
Mr. Renè Sindlev. Mr. Sindlev has served as a director of the Company since June 6, 2017. Mr. Sindlev is the owner of RS Group. ApS, RS Arving ApS, RS Family ApS, Dr Smood ApS, Dr Smood Group Inc., and RS newton ApS. Mr. Sindlev was owner and sold RS Aviation ApS and Gråbrødrestræde ApS. From 2002 to 2012 Mr. Sindlev was the Co-Founder and President of Pandora Jewelry America ApS, which was later sold and listed on NASDAQ DENMARK.
Mr. Torben Bjørn Christensen. Mr. Christensen has served as a director of the Company since June 6, 2017. Mr. Christensen is the Owner and CEO of 9 retail stores within Bike Sport and Boats (Boat Equipment), has 50 % ownership of J J Shipyard in Copenhagen, not less than 50% ownership of PO-Ma Invest and is the sole Owner of TBC Holding A/S. Mr. Christensen has either owned or worked at Gertsen & Olufsen, Scandinavisk Dentalservice, Industri Filter, Schur International, Flexibel Emballage Plast and A.P. Møller – Singapore. Mr. Christensen holds degrees in chemical engineering and economics.
Compliance“Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires executive officers, directors and persons who own more than 10% of a registered class of our equity securities to file reports of ownership with the Securities and Exchange Commission. Executive officers, directors and more than 10% shareholders are required by regulations to furnish us with copies of all Section 16(a) reports they file.
Based solely on our review of the copies of such forms received by us, we believe that during the fiscal year ended June 30, 2017 all filing requirements were timely satisfied except that the following executive officers and directors and 10% holders:
Code of Ethics
On July 12, 2012, the Company adopted a formal code of ethics statement for senior officers and directors (theAct”, “Code of Ethics”) that is designed to deter wrongdoing, “Corporate Governance” and to promote ethical conduct and full, fair, accurate, timely and understandable reports thatas otherwise set forth in the Company files or submits to the SEC and others. A form of the Code of Ethics is attached as an exhibit to this report. Requests for copies of the Code of Ethics should be sent in writing to DanDrit Biotech USA, Inc.,Stumpedyssevej 17, 2970 Hørsholm, Denmark, Attention: Eric Leire, Chief Executive Officer.
Corporate Governance
Our Board has not adopted procedures by which security holders may recommend nominees to our Board and that has not changed.
Insider Participation Concerning Executive Compensation
The Registrant is a smaller reporting companyCompany’s 2019 Proxy Statement and is not required to provide this information.incorporated herein by reference.
Director Independence
Our Board has determined that Mr. Torben Bjørn Christensen and Mr. Renè Sindlev are each independent as that term is defined in the listing standards of the NASDAQ. In making these determinations, our Board has concluded that neither Mr. Christensen nor Mr. Sindlev has an employment, business, family or other relationship which, in the opinion of our Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Item 11. Executive Compensation
The following table sets forth certainThis information with respect to compensation for year ended June 30, 2017 and the ended June 30, 2016 earned by or paid to our named executive officers.
| Stock | Option | |||||||||||||||||||
| Name and Principal Position | Year | Salary ($) | Awards ($) | Awards ($) | Total ($)(1) | |||||||||||||||
| Dr. Eric Leire, Chief Executive Officer | 2017 | 270,021 | 208,829 | (2) | - | 478,850 | ||||||||||||||
| 2016 | (3) | 360,029 | - | - | 360,029 | |||||||||||||||
| Robert Wolfe, Chief Financial Officer | 2017 | - | - | - | - | |||||||||||||||
| 2016 | (3) | - | - | - | - | |||||||||||||||
| Lone Degn, former Chief Financial Officer | 2017 | 95,665 | - | - | 95,665 | |||||||||||||||
| 2016 | (3) | - | - | - | - | |||||||||||||||
| Aldo Petersen, former Chief Executive Officer | 2017 | (4) | 520,000 | 208,829 | (2) | - | 728,829 | |||||||||||||
| 2016 | (3) | - | - | - | - | |||||||||||||||
| Soren Degn, former Chief Financial Officer | 2017 | - | - | - | - | |||||||||||||||
| 2016 | - | - | - | - | ||||||||||||||||
| N. E. Nielsen, former Director | 2017 | (5) | - | 208,829 | (2) | - | 208,829 | |||||||||||||
| 2016 | - | - | - | - | ||||||||||||||||
Employment Arrangements
Agreements with Named Executive Officers
During the years ended June 30, 2017 and June 30, 2016, we executed employments agreement with Dr. Leire and Ms. Degn.
Leire Employment Agreement
Effective June 1, 2017, the Company re-instated an Employment Agreement originally dated February 5, 2012 with Dr. Eric Leire to serve as Dandrit Denmark’s Managing Director, a copy of which is referenced herewith as Exhibit 10.4. Pursuant to the terms and conditions of the Employment Agreement, Dr. Leire will be employed by DanDrit Denmarkcontained in our definitive proxy statement for an indefinite term unless the agreement is earlier terminated as described below. The Employment Agreement provides that the Dr. Leire will receive a salaryour 2019 Annual Meeting of $313,775 per year, paid in equal monthly payments in arrears.
In additionShareholders, to his salary, Dr. Leire will be entitled to receive: (i) a company car at a value up of $762 per month (monthly lease value) and DanDrit Denmark shall defray all expenses in connectionfiled with the maintenance and use of the car; (ii) coverage of all expenses relating to Dr. Leire’s mobile phone, home computer, Internet connection as well as his home phone; (iii) coverage of all the expenses relating to Dr. Leire’s subscription to a fitness club; (iv) a bonus of up to $500,000 per year if Dr. Leire reaches certain conditions as specified in the Employment Agreement; and (v) coverage under the Company’s health care program.
The Company may terminate Dr. Leire’s employment with 6 months prior notice toSEC not later than 120 days after the end of a month. If DanDrit Denmark terminates Dr. Leire’s employment, he shall be entitledour fiscal year covered by this report, and incorporated herein by reference or, alternatively, by amendment to be released from his duty to work (in Danish “fritstillet”) during the notice period. Dr. Leire may terminate the employment at 3 months’ notice tothis Form 10-K under cover of Form 10-K/A no later than the end of a month. In case of material breach, the non-defaulting party can terminate the Employment Agreement without notice and can claim damages in accordance with the general Danish law of damages. If Dr. Leire suspends payments, or insolvency proceedings are commenced against his estate, DanDrit Denmark can terminate the employment without notice. The employment shall cease without notice to the end of the month in which Dr. Leire attains the age of 70. The Employment Agreement contains non-competition and non-solicitation clauses.
L. Degn Employment Agreement
Effective March 12, 2015, DanDrit Denmark entered into an Employment Agreement with Ms. Degn to serve as its Chief Financial Officer. Pursuant to the terms and conditions of the Employment Agreement, Ms. Degn will be employed by DanDrit Denmark for an indefinite term unless the agreement is earlier terminated as described below. The Employment Agreement provides that Ms. Degn will receive a salary of DKK 60,000 gross per month, to be paid monthly on the last business day of each month and subject to annual review and increases by the board of directors of DanDrit Denmark, as it deems appropriate.
In addition to her salary, Ms. Degn will be entitled to receive reimbursement of all reasonable costs and expenses incurred in connection with the performance of her duties in accordance with the terms of the Degn Employment Agreement In addition, DanDrit Denmark has agreed to contribute an amount equal to ten percent (10%) of Ms. Degn’s yearly salary to a pension fund or bank account established for such purpose.120-day period.
On March 10, 2016, the Company accepted the amicable resignation of Lone Degn from the Company as its Chief Financial Officer, effective March 10, 2016.
R. Wolfe CFO Service Agreement
Effective July 11, 2017, the Company re-appointed Robert Wolfe as the Chief Financial Officer, and DanDrit Denmark entered into a CFO Service Agreement with Crossfield, Inc. a company owned by Mr. Wolfe, a copy of which is filed herewith as Exhibit 10.8. The agreement provides that the Company will pay a signing fee of $7,500 and $90,000 per year for a total of $97,500 subject to annual review and increases by the board of directors of DanDrit Denmark, as it deems appropriate. In addition, the CFO will be entitled to receive reimbursement of all reasonable costs and expenses incurred in connection with the performance of duties.
Outstanding Equity Awards as of June 30, 2017
As of June 30, 2017, there were 300,000 options outstanding awarded to Eric Leire. The options have a strike price of $2.00 per share. The options vested upon grant, contain certain anti-dilution provisions that provide for anti-dilution in the sole discretion of the board and expire December 31, 2019.
Board Compensation
For the Year Ended June 30, 2017 the two directors N.E. Nielsen and APE Invest A/S for Aldo Petersen were each compensated with 300,000 options at a strike price of $2.00 per share. The options vested upon grant, contain certain anti-dilution provisions that provide for anti-dilution in the sole discretion of the board and expire December 31, 2019. The compensation options value was $208,829 each. For the year ended June 30, 2016, we did not compensate our directors, or issue any equity awards to our directors, for their services other than to reimburse them for out-of-pocket expenses incurred in connection with their attendance at meetings of the Board.
In order to attract and retain qualified independent directors, we may in the future adopt a compensation plan for non-employee directors that includes cash as well as equity-based compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, asThis information will be contained in our definitive proxy statement for our 2019 Annual Meeting of September 28, 2017, certain information regarding the beneficial ownership of the shares of Common Stock of DanDrit USA, of (i) our named executive officers, (ii) our directors and (iii) each person known to us who is knownShareholders, to be the beneficial owner of more than 5% of the shares of Common Stock in DanDrit USA. In accordancefiled with the rulesSEC not later than 120 days after the end of the SEC, “beneficial ownership” includes votingour fiscal year covered by this report, and incorporated herein by reference or, investment power with respect to securities. To our knowledge, except as indicated in the footnotesalternatively, by amendment to this table and pursuant to applicable community property laws,Form 10-K under cover of Form 10-K/A no later than the persons named in the table have sole voting and investment power with respect to all sharesend of Common Stock beneficially owned by them. Unless indicated otherwise, the address for the beneficial holders is c/o DanDrit Biotech USA, Inc.Stumpedyssevej 17, 2970 Hørsholm, Denmark.such 120-day period.
Beneficial ownership of the Common Stock is determined in accordance with the rules of the SEC and includes any shares of Common Stock over which a person exercises sole or shared voting or investment power, or of which a person has a right to acquire ownership at any time within 60 days. Except as otherwise indicated, we believe that the persons named in this table have sole voting and investment power with respect to all shares of Common Stock held by them. Applicable percentage ownership in the following table is based on 13,727,538 shares of Common Stock outstanding as of September 28, 2017 plus, any securities that the individuals included in this table have the right to acquire within 60 days of September 28, 2017.
| Dandrit Biotech USA Inc. | ||||||||
| Name of Beneficial Owner | Number of Shares | % Ownership | ||||||
| Directors/Officers: | ||||||||
| Eric Jean Marie Leire, Chief Executive Officer (1) | 371,302 | 1.63 | % | |||||
| Robert Wolfe, Chief Financial Officer | - | - | ||||||
| Renè Sindlev, Director (2) | 9,170,869 | 40.23 | % | |||||
| Torben Bjørn Christensen, Director (3) | 667,605 | 2.93 | % | |||||
| Aldo Petersen, former Chief Executive Officer and former Director (5) | 300,000 | 1.32 | % | |||||
| Soren Degn, former Chief Financial Officer | - | - | ||||||
| Lone Degn, former Chief Financial Officer | - | - | ||||||
| N. E Nielsen, former Chairman of the Board (6) | 300,000 | 1.32 | % | |||||
| Directors/Officers Total (7 persons): | 10,809,776 | 47.42 | % | |||||
| 5% Shareholders: | ||||||||
| RS Group ApS (2) | 9,170,869 | 40.23 | % | |||||
| Karsten Ree (4) | 3,700,000 | 16.23 | % | |||||
| 5% Shareholders Total: | 12,870,869 | 56.46 | % | |||||
| Total: | 14,509,776 | 63.65 | % | |||||
* Indicates less than 1%.
|
|
Item 13. Certain Relationships and Related Transactions and Director Independence
Described below are transactions or seriesThis information will be contained in our definitive proxy statement for our 2019 Annual Meeting of transactions that occurred from July 1, 2016 throughShareholders, to be filed with the date of this Annual Report (the “Reporting Period”) between us and our executive officers, directors orSEC not later than 120 days after the beneficial owners of 5% or moreend of our Common Stock,fiscal year covered by this report, and certain persons affiliated withincorporated herein by reference or, relatedalternatively, by amendment to these persons, including family members, in which they had or will have a direct or indirect material interest in an amount that exceedsthis Form 10-K under cover of Form 10-K/A no later than the lesserend of $120,000 or 1% of the average of our total assets as of year-end for the last two completed fiscal years, other than compensation arrangements that are otherwise required to be described under “Executive Compensation.”such 120-day period.
During the year ended June 30, 2017 and the year ended June 30, 2016, a law firm partially owned by the Registrant’s then Chairman of the Board provided legal services to the Company and recorded legal expense of $268,620 and $105,107, respectively.
On February 11, 2014, RS Group ApS, an entity controlled by Mr. Sindlev, purchased 395,000 shares of Common Stock. On September 29, 2015, RS Group ApS purchased 120,000 shares of Common Stock. On March 14, 2016, RS Group ApS purchased 555,869 shares of Common Stock, after which Mr. Sindlev became the beneficial owner of greater than 10% of Registrant’s outstanding Common Stock.
On March 7, 2017 TBC Invest A/S, an entity controlled by Torben Bjørn Christensen, a current director, purchased a convertible promissory note from the Company in the amount of $52,770. On or about the same date, Mr. Christensen, through Po-Ma ApS, an entity he also controls, privately purchased convertible promissory notes in the Amount of $90,225 and $150,375 from Equine Invest ApS, a stockholder of the Company. Both of these transactions took place prior to Mr. Christensen’s appointment as a director of the Company. Subsequently, the Company agreed to amend the notes by TBC Invest A/S and Po-Ma ApS to change the conversion rate from $2.00 per share to $1.60 per share. All of the notes mature on December 31, 2017 and do not accrue interest pursuant to the terms of the notes, as amended.
On April 21, 2017, RS Arving ApS, an entity controlled by Mr. Sindlev purchased 500,000 shares of Common Stock and 1,000,000 warrants to purchase shares of Common Stock for $650,000, and RS Group ApS, an entity controlled by Mr. Sindlev, purchased 2,200,000 shares of Common Stock and 4,400,000 warrants to purchase shares of Common Stock for $2,860,000 in the Registrant’s private placement offering more fully described in the its Current Report on Form 8-K, filed on May 1, 2017. RS Arving ApS subsequently assigned all of its shares and warrants to RS Group ApS, and RS Arving ApS no longer owns any shares or warrants.
Except as otherwise indicated herein, there have been no other related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404 and Item 407(a) of Regulation S-K.
Approval of Related Party Transactions
The Company has not adopted written policies and procedures for the review and approval of any transaction required to be reported under Item 404(a) of Regulation S-K. In approving these transactions, the Company follows the guidance of Section 144 of the Delaware General Corporation Law.
Item 14. Principal Accounting Fees and Services
The followingThis information sets forth fees billedwill be contained in our definitive proxy statement for our 2019 Annual Meeting of Shareholders, to us by Gregory & Associates, LLC duringbe filed with the years ended June 30, 2017 and June 30, 2016 for: (i) services rendered forSEC not later than 120 days after the auditend of our annual financial statementsfiscal year covered by this report, and incorporated herein by reference or, alternatively, by amendment to this Form 10-K under cover of Form 10-K/A no later than the reviewend of our quarterly financial statements, (ii) services that were reasonably related to the performance of the audit or review of our financial statements and that are not reported as audit fees, (iii) services rendered in connection with tax compliance, tax advice and tax planning, and (iv) all other fees for services rendered.such 120-day period.
Audit Fees
The aggregate fees billed by Gregory & Associates LLC for such professional services were $56,474 for the year ended June 30, 2017 and for the year ended June 30, 2016 were $55,800.
Audit-Related Fees
There were no fees billed Gregory & Associates LLC for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements for the year ended June 30, 2017 and for the year ended June 30, 2016.
Tax Fees
There were no fees billed by Gregory & Associates LLC for tax services for the years ended June 30, 2017 and June 30, 2016.
All Other Fees
The aggregate fees billed by Gregory & Associates for such professional services, including reading, consents and pro-formas associated with the Company’s contemplated transaction with OncoSynergy were $30,000 for the year ended June 30, 2017 and $0 for the year ended June 30, 2016.
Audit Committee’s Pre-Approval Process
The Board, which acts as the audit committee, approves all audit services.
PART IV
Item 15. Exhibits, Financial Statement Schedules
| 23 |
| 24 |
+ Agreement with management.
* Filed herewith.
** Furnished herewith.
| Filed |
| Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 15, 2018 and incorporated herein by reference. |
| (3) | Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 16, 2019 and incorporated herein by reference. |
| (4) | The description of securities set forth in Item 1 of the Company’s Form 8-A, as filed with the SEC on December 6, 2018, is hereby incorporated herein by reference. |
| (5) | Filed as an exhibit to the Company’s registration statement on Form S-1 filed with the SEC on February 14, 2014. |
| (6) | Filed as an exhibit to the Company’s Form 8-K filed with the SEC on May 1, 2017 and incorporated herein by reference. |
| (7) | Filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the SEC on November 17, 2017 and incorporated herein by reference. |
| (8) | Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 9, 2018 and incorporated herein by reference. |
| (9) | Filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the SEC on June 25, 2018 and incorporated herein by reference |
| (10) | Filed as an exhibit to the Company’s Annual Report on Form |
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: September | ||
| By: | /s/ | |
| (Principal Executive Officer) | ||
| By: | /s/ | |
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Dr. | September | |||
| Dr. | (Principal Executive Officer) | |||
| /s/ | Chief Financial Officer | September | ||
| (Principal Financial and Accounting Officer) | ||||
| /s/ René Sindlev | Director and Chairman of the Board | September | ||
| René Sindlev | ||||
| /s/ | Director | September | ||
| /s/ Carl Sandler | Director | September 27, 2019 | ||
| Carl Sandler | ||||
/s/ Luc Debruyne | Director | September 27, 2019 | ||
| Luc Debruyne |
| /s/ Evelyn D’An | Director | September 27, 2019 | ||
| Ms. Evelyn D’An |
| /s/ Mr. James Sapirstein | Director | September 27, 2019 | ||
| Mr. James Sapirstein |
27
| 26 |