EDGAR 10-K Filing

Company CIK: 1527728
Filing Year: 2023
Filename: 1527728_10-K_2023_0001731122-23-000271.json

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ITEM 1. BUSINESS
Item 1 Business

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ITEM 1A. RISK FACTORS
Item 1A Risk Factors

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B Unresolved Staff Comment

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ITEM 2. PROPERTIES
Item 2. Properties
The Company currently leases the following properties:
Location
Use
Terms
5901 W. Olympic Blvd, Suite 419
Los Angeles, CA 90036
Physical office space
On November 13, 2017, the Company entered into a Lease Agreement for a term of five years and two months from November 1, 2017. The Leased Premises consist of approximately 2,325 rentable square feet. The base rent for such leased premises increases by 3% each year over the term, 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 Company was entitled to $70,800 in tenant improvement allowance in the form of free rent applied over 10 months in equal installments from January 2018. The lease was terminated early without penalties or additional costs as of September 30, 2022.
1927 Paseo Rancho Castilla, Los Angeles, CA 90032
Headquarters
As of August 26, 2022, the Company entered into a short-term lease with option to extend at the new premier incubator, LA BioSpace on the California State University, Los Angeles campus located at 1927 Paseo Rancho Castilla, Los Angeles, CA 90032.
2080 Century Park East, Suite 906
Los Angeles, CA 90067
The Company entered into a Lease Agreement on June 19, 2018 for our corporate headquarters located at Century City Medical Plaza. We have a ten-year lease that was 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 $23,186 per month for the tenth year. The additional suite was in the form of an amendment to the original lease and will expire on the same date as the original lease. The Company was entitled to a total of $148,168 in contributions toward tenant improvements for both spaces.
On June 25, 2022, the Company subleased the 3,554 square feet for a period of 3.5 years with an option to renew for the remaining term of the lease that ends as of June 19, 2028. The base rent is $17,770 per month and will increase by 3% each year over the term of the sub-lease.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
Securities Class Action Litigation. On July 26, 2022 and July 28, 2022, securities class action complaints were filed by purported stockholders of ours in the United States District Court for the Central District of California against us and certain of our current and former officers and directors. The complaints allege, among other things, that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, by making false and misleading statements and omissions of material fact in connection with the Company’s relationship with Serhat Gümrükcü and its commercial prospects. The complaints seek unspecified damages, interest, fees, and costs. The defendants have not yet responded to the complaints.
Federal Derivative Litigation. On September 22, 2022, Samuel E. Koenig filed a shareholder derivative action in the United States District Court for the Central District of California. On January 19, 2023, John Solak filed a substantially similar shareholder derivative action in the United States District Court for the District of Delaware. Both derivative actions recite similar underlying facts as those alleged in the Securities Class Action Litigation. The actions, filed on behalf of the Company, name Serhat Gümrükcü and certain of the Company’s current and former directors as defendants. The actions also name the Company as a nominal defendant. The actions allege violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and also set out claims for breach of fiduciary duty, contribution and indemnification, aiding and abetting, and gross mismanagement. Plaintiffs do not quantify any alleged injury, but seek damages, disgorgement, restitution, and other costs and expenses. On January 24, 2023, the United States District Court for the Central District of California stayed the Koenig matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. The defendants have not yet responded to either complaint.
State Derivative Litigation. On October 20, 2022, Susan Midler filed a shareholder derivative action in the Superior Court of California, Los Angeles County, reciting similar underlying facts as those alleged in the Securities Class Action Litigation. The action, filed on behalf of the Company, names Serhat Gümrükcü and certain of the Company’s current and former directors as defendants. The action also names the Company as a nominal defendant. The action sets out claims for breaches of fiduciary duty, contribution and indemnification, aiding and abetting, and gross mismanagement. Plaintiff does not quantify any alleged injury, but seeks damages, disgorgement, restitution, and other costs and expenses. The defendants have not yet responded to the complaint.
On October 21, 2022, the Company filed a Complaint in the Superior Court of the State of California for the County of Los Angeles against Serhat Gümrükcü, William Anderson Wittekind, G Tech Bio LLC, SG & AW Holdings LLC, and Seraph Research Institute. The Complaint alleges that the defendants engaged in a “concerted, deliberate scheme to alter, falsify, and misrepresent to the Company the results of multiple studies supporting its [Hepatitis B] and SARS-CoV-2/influenza pipelines.” Specifically, “Defendants manipulated negative results to reflect positive outcomes from various studies, and even fabricated studies out of whole cloth.” As a result of the defendants’ conduct, the Company claims that it “paid approximately $25 million to Defendants and third-parties that it would not otherwise have paid.” The defendants have not yet answered the allegations set forth in the Company’s Complaint.
On December 28, 2022, the Company received a demand letter on behalf of Weird Science LLC (“Weird Science”), William Anderson Wittekind, the William Anderson Wittekind 2020 Annuity Trust, the William Anderson Wittekind 2021 Annuity Trust, the Dybul 2020 Angel Annuity Trust, and the Ty Mabry 2021 Annuity Trust alleging that the Company breached the February 16, 2018 Investor Rights Agreement between the Company, Weird Science, and RS Group ApS. Specifically, the demand letter alleges that the Company “breached its obligations under the Investor Rights Agreement to provide the requisite thirty days’ notice” to Holders of Registrable Securities in connection with SEC Form S-3 filings on July 13, 2020 and February 11, 2022 and demands over $64 million in damages. The Company denies these allegations and intends to vigorously defend against this claim.
On March 1, 2021, former Enochian BioSciences Chief Financial Officer, Robert Wolfe and his company, Crossfield, Inc., filed a Complaint in the U.S. District Court for the District of Vermont against the Company, Enochian BioSciences Denmark ApS, and certain directors and officers. In the Complaint, Mr. Wolfe and Crossfield, Inc. asserted claims for abuse of process and malicious prosecution, alleging, inter alia, that the Company lacked probable cause to file and prosecute an earlier action, and sought millions of dollars of compensatory damages, as well as punitive damages. The allegations in the Complaint relate to an earlier action filed by the Company and Enochian BioSciences Denmark ApS in the Vermont Superior Court, Orange Civil Division.
On March 3, 2022, the court partially granted the Company’s motion to dismiss, dismissing the abuse of process claim against all defendants and all claims against Mark Dybul and Henrik Grønfeldt-Sørensen. On November 29, 2022, the Company filed a motion for summary judgment with respect to the sole remaining claim of malicious prosecution. The Company denies the allegations set forth in the Complaint and will continue to vigorously defend against the remaining claim.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Holders of our Common Stock
Our Common Stock trades on the Nasdaq Capital Market under the symbol “ENOB”.
As of February 27, 2023, the Company had 55,705,521 shares of Common Stock issued and outstanding and approximately 190 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.
Recent Sales of Unregistered Securities
None.
Company Purchases of Equity Securities
None.
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.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
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 contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements.
Our Business
Enochian BioSciences Inc. is a biotechnology company committed to developing advanced allogeneic cell and gene therapies to promote stronger immune system responses potentially for long-term or life-long cancer remission in some of the deadliest cancers, and potentially to treat or cure serious infectious diseases such as HIV and Hepatitis B virus (HBV) infection.
To date, our operations have been funded by sales of our securities and debt financing. We have never generated any sales revenue and we expect this to continue until our therapies or products are approved for marketing in the United States and/or Europe. Even if we are successful in having our therapies or products approved for sale in the United States and/or Europe, we cannot guarantee that a market for the therapies or products will develop. We may never be profitable.
Recent Developments
On July 15, 2022, certain of our warrant holders exercised warrants to purchase 1,250,000 shares of Common Stock for total proceeds to the Company of $1,625,000, with corresponding earn-out distribution in the same amount in connection with the acquisition of Enochian BioPharma, Inc., which was distributed on October 12, 2022, based on the share price on that date of $2.21. This non-cash transaction impacted stockholders’ equity in the amount of $2,762,500 (see Note 11 of the Financial Statements.)
Subsequent to June 30, 2022, the Company became involved in a number of legal proceedings. Please see above Item 3 - Legal Proceedings for details of such matters.
Regaining Compliance with Nasdaq Listing Requirements
On each of October 17, 2022, November 23, 2022, and February 16, 2022, we received a notice, or the Notices, from the Listing Qualifications Department of Nasdaq stating that we were not in compliance with Nasdaq Listing Rule 5250(c)(1), or the “Rule”, because we did not timely file our Form 10-K for the period ended June 30, 2022 and our Form 10-Q for the periods ended September 30, 2022 and December 31, 2022 with the SEC. The Rule requires listed companies to timely file all required periodic financial reports with the SEC. Today we filed our Form 10-K for the period ended June 30, 2022 but have not yet filed our Form 10-Q for the periods ended September 30, 2022 nor December 31, 2022, and therefore we have not regained compliance with the Rule. We were unable to file the Annual Report on Form 10-K for the period ended June 30, 2022 and the Quarterly Report on Form 10-Q for the periods ended September 30, 2022 and December 31, 2022 by their initial deadlines, due to the reasons described in the Notifications of Late Filing on Form 12b-25, filed with the SEC on September 29, 2022 and November 15, 2022. While we were able to file the Annual Report on Form 10-K for the period ended June 30, 2022 within the extension period provided pursuant to Nasdaq rules, we have not yet filed the Form 10-Q for the periods ended September 30, 2022 and December 31, 2022, and there can be no assurance that we will be able to remain in compliance with the Rule or with other Nasdaq listing requirements in the future.
If we are unable to regain compliance with the Rule or with any of the other continued listing requirements, Nasdaq may take steps to delist our securities, which could have adverse consequences, including a limited availability of market quotations for our securities, reduced liquidity for our securities, a limited amount of news and analyst coverage and a decreased ability to issue additional securities or obtain additional financing in the future.
Going Concern and Management’s Plans
The financial statements included elsewhere herein for the year ended June 30, 2022, were prepared under the assumption that we would continue our operations as a going concern, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business. As of June 30, 2022, we had cash and cash equivalents of $9,172,142, an accumulated deficit of $204,345,197, and total liabilities of $12,013,815. We have incurred losses from continuing operations, have used cash in our continuing operations, and are dependent on additional financing to fund operations. These conditions raise substantial doubt about our ability to continue as a going concern for one year after the date the financial statements are issued. The financial statements included elsewhere herein do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
Management has reduced overhead and administrative costs by streamlining the organization to focus around two of its therapies (oncology and HIV therapeutic vaccine). The Company has tailored its workforce to focus on these therapies. In addition, management has extended its $1.2 million convertible notes 12 months out to be payable on February 28, 2024, and the Company intends to attempt to secure additional required funding through equity or debt financing. However, there can be no assurance that the Company will be able to obtain any sources of funding. Such additional funding may not be available or may not be available on reasonable terms, and, in the case of equity financing transactions, could result in significant additional dilution to our stockholders. If we do not obtain required additional equity or debt funding, our cash resources will be depleted and we could be required to materially reduce or suspend operations, which would likely have a material adverse effect on our business, stock price and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained. If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that could result in our stockholders losing some or all of their investment in us.
Funding that we may receive during fiscal 2023 is expected to be used to satisfy existing and future obligations and liabilities and working capital needs, to support commercialization of our products and conduct the clinical and regulatory work to develop our product candidates, and to begin building working capital reserves.
COVID-19
The COVID-19 pandemic continues to evolve. COVID-19 may cause delays in our research activities. To date, the COVID-19 pandemic has not materially affected our operations. However, it has caused delays in the conduct of experiments due to limitations in resources and supply chain issues, in particular for those conducting experiments. There have also been increases in the cost to conduct animal studies due to staffing and other limitations.
The full extent to which the COVID-19 pandemic may impact our business and operations is subject to future developments, which are uncertain and difficult to predict.
We continue to monitor the impact of the COVID-19 pandemic on our business and operations and will seek to adjust our activities as appropriate.
RESULTS OF OPERATIONS
Year ended June 30, 2022 compared to the year ended June 30, 2021.
The following table sets forth our revenues, expenses and net income for the years ended June 30, 2022 and 2021. The financial information below is derived from our audited consolidated financial statements included elsewhere in this Annual Report.
For the Years Ended
June 30,
Increase/(Decrease)
$
%
Operating Expenses
General and administrative
$ 14,329,801
$ 7,557,990
6,771,811
%
Research and development
8,372,800
15,720,262
(7,347,461 )
(47 )%
Indefinite life intangible assets impairment charge
93,253,000
93,253,000
%
Depreciation and amortization
123,590
123,535
%
Total Operating Expenses
116,079,191
23,401,787
92,677,404
%
LOSS FROM OPERATIONS
(116,079,191 )
(23,401,787 )
(92,677,404 )
(396 )%
Other Income
(Expenses)
Change in fair value of contingent consideration
2,896,627
(3,048,033 )
5,944,660
(195 )%
Interest expense
(372,844 )
(379,608 )
6,764
(2 )%
Gain (loss) on currency transactions
(32,634 )
32,643
(100 )%
Interest and other income
122,041
13,179
108,862
%
Total Other Income (Expenses)
2,645,833
(3,447,096 )
6,092,929
(177 )%
Loss Before Income
Taxes
(113,433,358 )
(26,848,883 )
(86,584,475 )
%
Income Tax (Expense)
Benefit
(34 )
125,276
(125,310 )
(100 )%
NET LOSS
$ (113,433,392 )
$ (26,723,607 )
(86,709,785 )
%
For the Years Ended
June 30,
Increase/(Decrease)
$
%
Net Loss
$ (113,433,392 )
$ (26,723,607 )
$ (86,709,785 )
(324 )%
Other Comprehensive Income (Loss)
Foreign Currency Translation, net of taxes
(19,602 )
30,582
(50,184 )
(164 )%
Other Comprehensive Loss
$ (113,452,994 )
$ (26,693,025 )
$ (86,759,969 )
(325 )%
Revenues
We are a pre-clinical stage pre-revenue biotechnology company. We have never generated revenues and have incurred losses since inception. We do not anticipate earning any revenues until our therapies or products are approved for marketing and sale.
Operating Expenses
Our operating expenses for the years ended June 30, 2022 and 2021 were $116,079,191 and $23,401,787, respectively, representing an increase of $92,677,404 or 396%. The largest contributors to the increase in operating expenses for the year ended June 30, 2022, were the non-cash intangible asset impairment of $93,253,000 (see Note 4 to the Financial Statements) and the increase in general and administrative expenses of $6,771,811 partially offset by the decrease in research and development expenses of $7,347,462 compared to the year ended June 30, 2021.
General and administrative expenses for the years ended June 30, 2022 and 2021, were $14,329,801 and $7,557,990, respectively, representing an increase of $6,771,811, or 90%. The increase in general and administrative expenses is primarily related to increases of $4,045,804 in stock-based compensation, $1,485,613 in salaries and related costs, $353,853 related to recruiting expenses, and $351,928 in legal fees.
Research and development expenses for the years ended June 30, 2022, and 2021, were $8,372,800 and $15,720,262, respectively, representing a decrease of $7,347,461 or 47%. The decrease in research and development expenses is primarily related to $10,760,000 in fees related to the Coronavirus and Influenza License Agreement that was incurred in the prior period. The decrease was partially offset by increases in costs with CDMO and CRO partners totaling $3,093,160.
Other Income (Expenses)
Net other income (expenses) for the years ended June 30, 2022 and 2021 was $2,645,833 and $(3,447,096), respectively, representing an increase of $6,092,929 or 177%. The increase in other income was due primarily to the change in the fair value of the contingent consideration in the amount of $5,944,660, which resulted from the mark to market adjustment on the remaining contingent consideration liability and the contingent shares issued during the period.
Net Loss
Net loss for the years ended June 30, 2022 and June 30, 2021 was $113,433,392 and $26,723,607, respectively, representing an increase in net loss of $86,709,785 or 324%. The increase in net loss was primarily due to the non-cash intangible asset impairment of $93,253,000, and $6,771,811 increase in general and administrative expenses, offset by a decrease in research and development costs of $7,347,462 and an approximate increase in the change in fair value of contingent consideration of $5,944,660.
Liquidity and Capital Resources
We have historically satisfied our capital and liquidity requirements through funding from stockholders, the sale of our Common Stock and warrants, and debt financing. We have never generated any sales revenue to support our operations and we expect this to continue until our therapies or products are approved for marketing in the United States and/or Europe. Even if we are successful in having our therapies or products approved for sale in the United States and/or Europe, we cannot guarantee that a market for the therapies or products will develop. We may never be profitable.
As noted above under the heading “Going Concern and Management’s Plans,” through June 30, 2022, we have incurred substantial losses. We may need additional funds for (a) research and development, (b) increases in personnel, and (c) the purchase of equipment, specifically to advance towards an Investigational New Drug Application (IND) following Pre-IND readouts from the FDA for ENOB-DC11, ENOB-HV-12, ENOB-HV-01, ENOB-HV-21 and ENOB-HB-01. The availability of any required additional funding cannot be assured. In addition, an adverse outcome in legal or regulatory proceedings in which we are currently involved or in the future may be involved could adversely affect our liquidity and financial position. 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. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could materially adversely affect our growth plans and our financial condition and results of operations.
As of June 30, 2022, the Company had $9,172,142 in cash and working capital of $3,114,170 as compared to $20,664,410 in cash and working capital of $19,013,100 as of June 30, 2021. The decrease in cash of $11,492,268 is primarily due to the cost of operations primarily related to general and administrative expenses of $8,715,609, net of non-cash items, in addition to research and development costs of $8,372,800, partially offset by funding totaling $4,811,312 related to drawdowns from the LPC equity line, and the exercise of warrants and options during the period.
Equity
On July 8, 2020, we entered into a purchase agreement (the “LPC Purchase Agreement”) with Lincoln Park Capital Fund, LLC, (“LPC”), pursuant to which LPC is committed to buy, and we had the right, but not the obligation, to sell to LPC up to an aggregate of $20,000,000 of our Common Stock, subject to certain limitations and conditions set forth in the LPC Purchase Agreement, including a limitation on the number of shares of Common Stock we can put to LPC and the pricing parameters for the sales. For the year ended June 30, 2022, the Company issued 497,340 shares of Common Stock for proceeds of $4,676,399 (see Note 8 of the Financial Statements.) As of October 17, 2022, we no longer have access to this Purchase Agreement.
Pursuant to a private placement offering, the Company issued 1,275,719 shares of Common Stock resulting in proceeds of $5,000,800. The Company effected the issuances of the shares of Common Stock from March 15, 2021 to June 9, 2021. The private placement was made directly by the Company in reliance upon Regulation S of the Securities Act of 1933. No underwriter or placement agent was engaged by the Company for this private placement (see Note 8 of the Financial Statements.)
On June 14, 2021, the Company and certain institutional investors entered into a securities purchase agreement (the “Purchase Agreement”), pursuant to which the Company agreed to sell to such investors an aggregate of 3,866,668 shares of Common Stock, in a registered direct offering, for gross proceeds of approximately $29 million (the “Financing”). The purchase price for each share of Common Stock was $7.50. The Company agreed not to issue or enter into any agreement to issue Common Stock from June 14, 2021 until ninety (90) days after the closing of the Financing. The Company entered into a letter agreement dated June 14, 2021 (the “Letter Agreement”) with H.C. Wainwright & Co., LLC, as exclusive placement agent (the “Placement Agent”), pursuant to which the Placement Agent agreed to act as the exclusive placement agent for the Financing. The Company agreed to pay the Placement Agent an aggregate fee equal to 7.0% of the gross proceeds raised in the Financing. The Company also agreed to pay the Placement Agent certain expenses. The Company paid $2,090,000 in commissions and incurred offering expenses, and issuance costs of $66,011, resulting in net proceeds of $26,843,999 in connection with the Financing. The Financing closed on June 16, 2021 (see Note 8 of the Financial Statements.)
Warrant Exercises
For the year ended June 30, 2021, the Company issued 63,122 shares of Common Stock for total proceeds of $82,056 upon the exercise of warrants. On December 24, 2021, certain of our warrant holders exercised warrants to purchase 100,000 shares of Common Stock for total proceeds to the Company of $130,000.
Debt
On February 6, 2020, the Company issued two Convertible Notes (the “Convertible Notes”) to Paseco APS (the “Holder”), a Danish limited company and an existing stockholder of the Company each with a face value amount of $600,000, convertible into shares of Common Stock. The Holder did not exercise the conversion feature that expired on February 6, 2021. The outstanding principal amount of the Convertible Notes was due and payable on February 6, 2023. Interest on the Convertible Notes commenced accruing on the date of issuance at six percent (6%) per annum, computed on the basis of twelve 30-day months, and is compounded monthly on the final day of each calendar month based upon the principal and all accrued and unpaid interest outstanding as of such compound date. The interest was payable in cash on a semi-annual basis. For the years ended June 30, 2022 and 2021, the interest expense amounted to $72,875 and $72,967, respectively. Effective December 30, 2022, Company amended and restated the Convertible Notes (the “Amended and Restated Secured Notes”). Pursuant to the Amended and Restated Secured Notes, the due date was extended to February 28, 2024, and the interest was increased to twelve percent (12%) per annum, which was prepaid by the Company in full on the date of amendment through the issuance of 198,439 shares of the Company’s Common Stock based on the closing market price on that date, of $1.03, which included 29,419 shares for interest accrued through December 30, 2022, and the obligations of the Company under the Amended and Restated Secured Notes were secured by a security Agreement (the “Security Agreement”). (see Note 6 to the Financial Statements.)
On March 30, 2020 (the “Issuance Date”), the Company issued a Promissory Note in the principal amount of $5,000,000 (the “Promissory Note”) to the “Holder”. The principal amount of the Promissory Note was payable on November 30, 2021, and bore interest at a fixed rate of 6% per annum, which was prepaid by the Company in full on the date of issuance through the issuance of 188,485 shares of the Company’s Common Stock based on the closing market price on that date, valued at $501,370. On February 11, 2021, the Company and the Holder amended the original Promissory Note to extend the maturity date to November 30, 2022. The Company prepaid in full all accrued interest from November 30, 2021 to the new maturity date November 30, 2022, through the issuance of 74,054 shares of Common Stock based on the closing market price on that date, valued at $299,178. On May 17, 2022, the Company entered into a second amendment to the Promissory Note that extended the maturity date out to November 30, 2023 and increased the interest rate from 6% to 12% per annum. The Company prepaid six months of interest through May 31, 2023, through issuance of 47,115 shares of Common Stock based on the closing market price on that date, valued at $299,178. All other terms of the Promissory Note remained the same. Effective December 30, 2022, the Company entered into a third amendment to the Promissory Note. Pursuant to the third amendment, the Company’s obligations under the Promissory Note were secured by the Security Agreement. (see Note 6 to the Financial Statements.)
To secure the Company’s obligations under each of the Amended and Restated Secured Notes and the Promissory Note, the Company entered into a Security Agreement with the Holder, pursuant to which the Company granted a lien on all assets of the Company (the “Collateral”) for the benefit of the Holder. Upon an Event of Default (as defined in the Amended and Restated Secured Notes and Promissory Note, respectively) the Holder may, among other things, collect or take possession of the Collateral, proceed with the foreclosure of the security interest in the Collateral or sell, lease or dispose of the Collateral.
Cash Flows
Year ended June 30, 2022 compared to the year ended June 30,
Following is a summary of the Company’s cash flows provided by (used in) operating, investing, and financing activities:
For the Years Ended
June 30,
Net Cash Used in Operating Activities
$ (15,732,336 )
$ (20,610,723 )
Net Cash Used in Investing Activities
(5,156 )
(48,892 )
Net Cash Provided by Financing Activities
4,250,464
32,601,553
Effect of exchange rates on cash
(5,240 )
26,111
Net Increase (Decrease) in Cash
$ (11,492,268 )
$ 11,968,049
At June 30, 2022, we had cash and cash equivalents of $9,172,142, a decrease of $11,492,268, when compared to the June 30, 2021 balance of $20,664,410. This decrease was primarily due to cash used in operating activities, partially offset by cash provided by financing activities.
We plan to use our cash and cash equivalents to fund research and development, specifically to open an Investigational New Drug Application (IND) following Pre-IND readouts from the FDA (the first step in the drug review process by the FDA) for ENOB-DC11, ENOB-HV-12, ENOB-HV-01, ENOB-HV-21 and ENOB-HB-01. These activities will require an increase in selling, general and administrative costs, and research and development costs to support the expected growth. As additional funds are required, we may raise such funds from time to time through public or private sales of our equity or debt securities.
Cash used in operating activities represents the cash receipts and disbursements related to all of our activities other than investing and financing activities. Operating cash flow is derived by adjusting our net income for non-cash items and changes in operating assets and liabilities. Net cash used in operating activities for the years ended June 30, 2022 and 2021 was $15,732,336 and $20,610,723, respectively, representing a decrease of $4,878,387. The decrease is primarily related to the increase in our net loss as adjusted for non-cash items, and by changes in our operating assets and liabilities of $1,415,111.
Net cash used in investing activities for the years ended June 30, 2022 and 2021 was $(5,156) and $(48,892), respectively, representing a decrease of $43,736. The decrease is primarily due to less purchases of equipment in the current year.
Net cash provided by financing activities for the years ended June 30, 2022 and 2021 was $4,250,464 and $32,601,553, respectively, representing a decrease of $28,351,089. The net cash provided by financing activities in the current year consists primarily of $4,676,399 in proceeds from issuance of Common Stock related to equity line draws. The prior year net cash from financing activities primarily consisted of $26,843,998 of net proceeds from the issuance of Common Stock as part of a direct offering, $5,000,800 of proceeds from the issuance of Common Stock through a private placement, and $1,221,350 of proceeds from issuance of Common Stock related to equity line draws.
Off-Balance Sheet Arrangements
As of June 30, 2022, and 2021, 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
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses. On an on-going basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. Our most critical accounting estimates are detailed below, and our significant accounting policies are more fully described in Note 1 of the accompanying consolidated financial statements.
Intangible Assets - The Company has both definite and indefinite life intangible assets.
Definite life intangible assets relate to patents. The Company accounts for definite life intangible assets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Goodwill and Other Intangible Assets. Intangible assets are recorded at cost. Patent costs capitalized consist of costs incurred to acquire the underlying patent. If it is determined that a patent will not be issued, the related remaining capitalized patent costs are charged to expense. Definite life 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 acquired in a business combination. The Company accounts for indefinite life intangible assets in accordance with ASC 350. License agreement costs represent the fair value of the license agreement on the date acquired and are tested annually for impairment.
Goodwill - Goodwill is not amortized but is evaluated for impairment annually as of June 30 or whenever events or changes in circumstances indicate the carrying value may not be recoverable.
Impairment of Goodwill and Indefinite Lived Intangible Assets - We test for goodwill impairment at the reporting unit level, which is one level below the operating segment level. Our detailed impairment testing involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit and is based on discounted cash flows or relative market-based approaches. If the carrying value of the reporting unit exceeds its fair value, we record an impairment loss for such excess. The annual fair value analysis performed on goodwill supported that goodwill is not impaired as of June 30, 2022 (see Note 4 to the financial statements.)
For indefinite-lived intangible assets, such as licenses acquired as an In-Process Research and Development (“IPR&D”) asset, on an annual basis we determine the fair value of the asset and record an impairment loss, if any, for the excess of the carrying value of the asset over its fair value. For the year ended June 30, 2022, the carrying value of the licenses acquired as an IPR&D asset exceeded its fair value, due to changes in the projected economic benefits to be realized from these assets. Therefore, the Company recorded an impairment loss of $93,253,000 during the year ended June 30, 2022 (see Note 4 to the financial statements.)
The carrying value of IPR&D and goodwill at June 30, 2022, were $61,571,000 and $11,640,000, respectively.
Fair Value of Financial Instruments - The Company accounts for fair value measurements for financial assets and financial liabilities in accordance with FASB ASC Topic 820, Fair Value Measurement. Under the authoritative guidance, 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 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
● Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;
● Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
● Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
There were no assets that use Level 1, 2 or 3 inputs, nor any liabilities that use Level 1 or 2 inputs as of June 30, 2022.
Liabilities that use Level 3 inputs held as of June 30, 2022 consisted of a contingent consideration liability related to the February 16, 2018 acquisition of Enochian BioPharma Inc. (the “Acquisition”). 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 pro rata upon the exercise of warrants, which were outstanding at closing. The contingent consideration liability was recorded at fair value of $21,516,000 at the time of the Acquisition and is subsequently remeasured to fair value at each reporting date. At June 30, 2022, 1,250,000 contingent shares are issuable in connection with the Acquisition.
The fair value of the contingent consideration liability is estimated using an option-pricing model. The key inputs to the model are all contractual or observable with the exception being volatility, which is computed based on the value of the Company’s underlying stock. The key inputs to valuing the contingent consideration liability on the date of acquisition and as of June 30, 2022 include the Company’s stock price, the exercise price of the warrants of $1.30 per share, the risk-free rate, the expected volatility of the Company’s common stock and the digital call rate. The fair value measurements are highly sensitive to changes in these inputs and significant changes in these inputs could result in a significantly higher or lower fair value (see Note 1 to the Financial Statements.)
Stock-Based Compensation - The Company has granted stock options, restricted share units (“RSUs”) and warrants to certain employees, officers, directors, and consultants. The Company accounts for options in accordance with the provisions of FASB ASC Topic 718, Compensation - Stock Compensation. Stock based compensation costs for the vesting of options and RSUs granted to certain employees, officers, directors, and consultants for the years ended June 30, 2022 and 2021 were $5,490,602 and $1,444,798, respectively (see Note 8 to the Financial Statements).
The Company recognizes compensation costs for stock option awards to employees, officers and directors based on their grant-date fair value. The value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model. The weighted-average assumptions used to estimate the fair value of the stock options granted using the Black-Scholes option-pricing model are the expected term of the award, the underlying stock price volatility, the risk-free interest rate, and the expected dividend yield.
The Company records stock-based compensation for services received from non-employees 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 consultants and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the consultants’ required service period, which is generally the vesting period (see Note 8 to the Financial Statements.)
Recently Enacted Accounting Standards
For a description of 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.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The Registrant is a smaller reporting company and is not required to provide this information.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at June 30, 2022 and 2021
Consolidated Statements of Operations for the Years Ended June 30, 2022 and 2021
Consolidated Statements of Comprehensive Loss for the Years Ended June 30, 2022 and 2021
Consolidated Statement of Stockholders’ Equity for the Years Ended June 30, 2022 and 2021
Consolidated Statements of Cash Flows for the Years Ended June 30, 2022 and 2021
Notes to the Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Enochian Biosciences, Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Enochian Biosciences, Inc. (“the Company”) as of June 30, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two-year period ended June 30, 2022 and the related notes (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, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2022, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph Regarding Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are 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 the U.S. federal securities laws and the applicable rules and regulations of the 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 financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Indefinite-Lived Intangible Asset Impairment Assessment
Critical Audit Matter Description
The Company has an indefinite-lived intangible asset related to an acquired license treated as an in-process research and development asset (“IPR&D”). As of June 30, 2022, the carrying value of the asset is $61,571,000, post an impairment charge of $93,253,000 taken during the year. To assess the carrying value of the IPR&D asset for impairment, management estimated the fair value of IPR&D on its elected assessment date of June 30, 2022, using a multi-period excess earnings method, which is a specific discounted cash flow method. The determination of the fair value requires management to make significant estimates including, but not limited to, the discount rate used in the model, the total addressable market for each potential drug, market penetration assumptions, and for the estimated timing of commercialization of the drugs. Changes in these assumptions could have a significant impact on the fair value of the IPR&D.
How the Critical Audit Matter was Addressed in the Audit
We identified the impairment testing of the IPR&D asset as a critical audit matter because of the significant estimates and assumptions management makes related to determining the fair value of the IPR&D asset. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate such significant estimates and assumptions. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.
Our audit procedures related to the following:
● Tested and evaluated the methods, data and significant assumptions used in developing the IPR&D fair value.
● Evaluating the reasonableness and consistency of the selected valuation methodology and assumptions utilized by the Company including the Company’s intent and ability to carry out a particular course of action.
● Identified significant assumptions used by the Company and evaluated each assumption used to develop the estimate, both individually and in combination with other significant assumptions.
● Testing the completeness and accuracy of underlying data used in the fair value estimate.
● Evaluated the changes to the valuation model from the prior year including changes related to data inputs and significant assumptions used.
● Developed an independent expectation for comparison to the Company’s estimate of fair value of the IPR&D asset.
● Evaluated evidence from events or transactions occurring after the measurement date of June 30, 2022, related to the accounting estimate.
In addition, professionals with specialized skill and knowledge were utilized by the Firm to assist in the performance of these procedures.
Goodwill Impairment Assessment
Critical Audit Matter Description
As of June 30, 2022, the carrying value of goodwill was $11,640,000. As described in note 1 to the consolidated financial statements, the Company tests goodwill for impairment annually at the reporting unit level, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a reporting unit is less than it’s carrying amount. To assess the carrying value of the goodwill for impairment, management estimated the fair value of goodwill on its elected assessment date of June 30, 2022, using a discounted cash flow model. The determination of the fair value requires management to make significant estimates and assumptions.
How the Critical Audit Matter was Addressed in the Audit
We identified the evaluation of the impairment analysis for goodwill as a critical audit matter because of the significant estimates and assumptions management makes in determining the fair value of the goodwill. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of such estimates and assumptions. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.
Our audit procedures related to the following:
● Tested and evaluated the methods, data and significant assumptions used in developing the fair value of goodwill.
● Evaluating the reasonableness and consistency of the selected valuation methodology and assumptions utilized by the Company including the Company’s intent and ability to carry out a particular course of action.
● Identified significant assumptions used by the Company and evaluated each assumption used to develop the estimate, both individually and in combination with other significant assumptions.
● Testing the completeness and accuracy of underlying data used in the fair value estimate.
● Evaluated the changes to the valuation model from the prior year including changes related to data inputs and significant assumptions used.
● Developed an independent expectation for comparison to the Company’s estimate of fair value of goodwill.
● Evaluated evidence from events or transactions occurring after the measurement date of June 30, 2022, related to the accounting estimate.
In addition, professionals with specialized skill and knowledge were utilized by the Firm to assist in the performance of these procedures.
/s/ Sadler, Gibb & Associates, LLC
We have served as the Company’s auditor since 2018.
Draper, UT
February 27, 2023
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30,
ASSETS
CURRENT ASSETS:
Cash
$ 9,172,142
$ 20,664,410
Prepaids and other assets
392,996
234,583
Total Current Assets
9,565,138
20,898,993
Property and equipment, net
586,536
719,364
OTHER ASSETS
Definite life intangible assets, net
44,268
65,906
Indefinite life intangible assets, net
61,571,000
154,824,000
Goodwill
11,640,000
11,640,000
Deposits and other assets
68,635
20,984
Operating lease rights-of-use assets
1,157,086
1,435,978
Total Other Assets
74,480,989
167,986,868
TOTAL ASSETS
$ 84,632,663
$ 189,605,225
The accompanying notes are an integral part of these consolidated financial statements.
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
June 30,
LIABILITIES
CURRENT LIABILITIES:
Accounts payable - trade
$ 1,401,867
$ 320,559
Accrued expenses
1,031,462
1,182,323
Other current liabilities
220,685
90,602
Contingent consideration liability
2,343,318
-
Convertible notes payable
1,200,000
-
Current portion of operating lease liabilities
253,636
292,409
Total Current Liabilities
6,450,968
1,885,893
NON-CURRENT LIABILITIES:
Contingent consideration liability
-
6,037,945
Convertible notes payable
-
1,200,000
Notes payable, net
4,577,148
4,579,114
Operating lease liabilities, net of current portion
985,699
1,239,334
Total Non-Current Liabilities
5,562,847
13,056,393
Total Liabilities
12,013,815
14,942,286
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, 53,007,082 shares issued and outstanding at June 30, 2022; 52,219,661 shares issued and outstanding at June 30, 2021
5,302
5,222
Additional paid-in capital
276,989,179
265,580,356
Accumulated deficit
(204,345,197 )
(90,911,805 )
Accumulated other comprehensive (loss)
(30,436 )
(10,834 )
Total Stockholders’ Equity
72,618,848
174,662,939
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$ 84,632,663
$ 189,605,225
The accompanying notes are an integral part of these consolidated financial statements.
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended
June 30,
Operating Expenses
General and administrative $ 14,329,801 $ 7,557,990
Research and development 8,372,800 15,720,262
Indefinite life intangible assets impairment charge 93,253,000 -
Depreciation and amortization 123,590 123,535
Total Operating Expenses 116,079,191 23,401,787
LOSS FROM OPERATIONS (116,079,191 ) (23,401,787 )
Other Income (Expenses)
Change in fair value of contingent consideration 2,896,627 (3,048,033 )
Interest expense (372,844 ) (379,608 )
Gain (loss) on currency transactions (32,634 )
Interest and other income 122,041 13,179
Total Other Income (Expenses) 2,645,833 (3,447,096 )
Loss Before Income Taxes (113,433,358 ) (26,848,883 )
Income Tax (Expense) Benefit (34 ) 125,276
NET LOSS $ (113,433,392 ) $ (26,723,607 )
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (2.16 ) $ (0.57 )
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING - BASIC AND DILUTED 52,528,024 47,167,262
The accompanying notes are an integral part of these consolidated financial statements.
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the Years Ended
June 30,
Net Loss
$ (113,433,392 )
$ (26,723,607 )
Other Comprehensive Income (Loss)
Foreign currency translation, net of taxes
(19,602 )
30,582
Other Comprehensive Loss
$ (113,452,994 )
$ (26,693,025 )
The accompanying notes are an integral part of these consolidated financial statements.
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
For the Years Ended June 30, 2022 and June 30, 2021
# of Shares Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total
Balance June 30, 2020 46,497,409 $ 4,650 $ 230,497,225 $ (64,188,198 ) $ (41,416 ) $ 166,272,261
Issuance of commitment shares related to LPC purchase agreement 139,567 (14 ) - - -
Stock issued pursuant to warrants exercised 63,122 82,050 - - 82,056
Contingent shares issued pursuant to acquisition agreement 63,122 192,516 - - 192,522
Shares issued pursuant to 2021 private placement 1,275,719 5,000,672 - - 5,000,800
Shares issued in lieu of interest on $5 million notes payable extension 74,054 298,171 - - 298,178
Shares issued pursuant to LPC purchase agreement 200,000 1,221,330 - - 1,221,350
Shares issued pursuant to direct offering, net of issuance costs 3,866,668 26,843,612 - - 26,843,999
Shares issued for fully vested RSUs 5,000 - - - - -
Restricted shares converted to shares for services rendered 35,000 146,996 - - 147,000
Stock-based compensation - - 1,297,798 - - 1,297,798
Net loss - - - (26,723,607 ) - (26,723,607 )
Foreign currency translation gain - - - - 30,582 30,582
Balance June 30, 2021 52,219,661 5,222 265,580,356 (90,911,805 ) (10,834 ) 174,662,939
Stock issued pursuant to warrants exercised 100,000 129,990 - - 130,000
Contingent shares issued pursuant to acquisition agreement 100,000 797,990 - - 798,000
Shares issued in lieu of interest on $5 million notes payable extension 47,115 299,173 - - 299,178
Shares issued pursuant to LPC purchase agreement 497,340 4,676,349 - - 4,676,399
Shares issued for fully vested RSUs 6,266 9,810 - - 9,811
Shares issued pursuant to options exercised 1,700 - 4,913 - - 4,913
Restricted shares converted to shares for services rendered 35,000 252,346 - - 252,350
Stock-based compensation - - 5,238,252 - - 5,238,252
Net loss - - - (113,433,392 ) - (113,433,392 )
Foreign currency translation loss - - - - (19,602 ) (19,602 )
Balance June 30, 53,007,082 $ 5,302 $ 276,989,179 $ (204,345,197 ) $ (30,436 ) $ 72,618,848
The accompanying notes are an integral part of these consolidated financial statements.
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
June 30,
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (113,433,392 ) $ (26,723,607 )
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES :
Depreciation and amortization 123,590 123,534
Change in fair value of contingent consideration (2,896,627 ) 3,048,033
Non-cash stock-based compensation expense 5,490,602 1,444,798
Indefinite life intangible assets impairment charge 93,253,000 -
Amortization of discount on note payable 297,212 296,505
Loss on disposal of fixed assets 18,168 -
Changes in assets and liabilities:
Other receivables 1,594
Prepaid expenses/deposits 461,310 733,739
Accounts payable 1,081,308 (272,318 )
Other current liabilities 24,056 30,004
Operating leases, net (13,516 ) (3,440 )
Accrued expenses (139,641 ) 711,687
NET CASH USED IN OPERATING ACTIVITIES (15,732,336 ) (20,610,723 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,156 ) (48,892 )
NET CASH USED IN INVESTING ACTIVITIES (5,156 ) (48,892 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of finance agreement (560,848 ) (546,651 )
Proceeds from exercise of warrants 130,000 82,056
Proceeds from exercise of options 4,913 -
Proceeds from 2021 private placement - 5,000,800
Proceeds from direct offering, net of issuance costs - 26,843,998
Proceeds from LPC equity agreement 4,676,399 1,221,350
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,250,464 32,601,553
Effect of exchange rates on cash (5,240 ) 26,111
NET INCREASE (DECREASE) IN CASH (11,492,268 ) 11,968,049
CASH, BEGINNING OF PERIOD 20,664,410 8,696,361
CASH, END OF PERIOD $ 9,172,142 $ 20,664,410
The accompanying notes are an integral part of these consolidated 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 $ 79,716 $ 89,224
Income Taxes $ 34 $ 37
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Contingent Shares issued pursuant to Acquisition Agreement $ 798,000 $ 192,522
Shares issued in lieu of interest expense on note payable $ (299,178 ) $ (298,178 )
Finance agreement entered into in exchange for prepaid assets $ 666,875 $ 607,250
The accompanying notes are an integral part of these consolidated financial statements.
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business- Enochian BioSciences Inc., (“Enochian”, or “Registrant”, and together with its subsidiaries, the “Company”, “we” or “us”) engages in the research and development of pharmaceutical and biological products for the treatment of HIV, HBV, and cancer with the intent to manufacture said products.
Going Concern - These financial statements have been prepared on a going concern basis, which assumes that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated any revenue, has incurred substantial recurring losses from continuing operations and has an accumulated deficit of $204,345,197 as of June 30, 2022. The continuation of the Company as a going concern is dependent upon (i) its ability to successfully obtain FDA approval of its product candidates, (ii) its ability to obtain any necessary debt and/or equity financing, and (iii) its ability to generate profits from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Basis of Presentation- The Company prepares consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and follows the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).
Consolidation - For the years ended June 30, 2022 and 2021, the consolidated financial statements include the accounts and operations of the Registrant, and its wholly owned subsidiaries. All material inter-company transactions and accounts have been eliminated in the consolidation.
Reclassification - Certain amounts in the prior period financial statements have been reclassified to conform to the current presentation. For the year ended June 30, 2021, we reclassified lab expenses of $182,140 from general and administrative expenses to research and development expenses.
Accounting Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimated. Significant estimates include the fair value and potential impairment of intangible assets, the fair value of the contingent consideration liability, and the fair value of equity instruments issued.
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. As of June 30, 2022 and June 30, 2021, 1,250,000 and 1,350,000 shares of Common Stock, respectively, remain contingently issuable in connection with the acquisition of Enochian BioPharma in February 2018 (the “Contingent Shares”).
Enochian Biosciences Denmark ApS, a Danish corporation was incorporated on April 1, 2001 (“Enochian Denmark”). On February 12, 2014, in accordance with the terms and conditions of a Share Exchange Agreement, the Company acquired Enochian Denmark and it became a 100% owned subsidiary of the Registrant subject to 185,053 shares of common stock of the Registrant held in escrow according to Danish law (the “Escrow Shares”). As of June 30, 2022, there are 17,414 Escrow Shares remaining (see Note 8).
COVID-19 Update
The COVID-19 pandemic continues to evolve. COVID-19 may cause delays in our research activities. To date, the COVID-19 pandemic has not materially affected our operations. However, it has caused delays in the conduct of experiments due to limitations in resources and supply chain issues, in particular for those third-parties conducting experiments. There have also been increases in the cost to conduct animal studies due to staffing and other limitations.
The full extent to which the COVID-19 pandemic may impact our business and operations is subject to future developments, which are uncertain and difficult to predict. We continue to monitor the impact of the COVID-19 pandemic on our business and operations and will seek to adjust our activities as appropriate.
In addition, the pandemic could result in significant and prolonged disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect the financial resources available to us.
Functional Currency and Foreign Currency Translation - The functional currency of Enochian Denmark is the Danish Kroner (“DKK”). Enochian Denmark’s reporting currency is the U.S. Dollar for the purpose of these financial statements. Enochian Denmark’s consolidated balance sheet accounts are translated into U.S. dollars at the period-end exchange rates and all revenue and expenses are translated into U.S. dollars at the average exchange rates prevailing during the years ended June 30, 2022 and 2021. 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’s cash balances at June 30, 2022, and 2021, are $9,172,142 and $20,664,410, respectively. The Company had balances held in financial institutions in Denmark and in the United States in excess of federally insured amounts at June 30, 2022 and 2021 of $8,805,495, and $20,287,212, respectively.
Property and Equipment - Property and equipment are stated at cost. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized and depreciated upon being placed in service. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed for financial statement purposes on a straight-line basis over the estimated useful lives of the assets, which range from four to ten years (see Note 3).
Intangible Assets - The Company has both definite and indefinite life intangible assets.
Definite life intangible assets relate to patents. The Company accounts for definite life intangible assets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Goodwill and Other Intangible Assets. Intangible assets are recorded at cost. Patent costs capitalized consist of costs incurred to acquire the underlying patent. If it is determined that a patent will not be issued, the related remaining capitalized patent costs are charged to expense. Definite life 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 acquired in a business combination. The Company accounts for indefinite life intangible assets in accordance with ASC 350. License agreement costs represent the fair value of the license agreement on the date acquired and are tested annually for impairment or whenever events or changes in circumstances indicate the fair value of the license is less than the carrying amount.
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Goodwill - Goodwill is not amortized but is evaluated for impairment annually as of June 30 or whenever events or changes in circumstances indicate the carrying value of the reporting unit may be less than the fair value of the reporting unit.
Impairment of Goodwill and Indefinite Lived Intangible Assets - We test for goodwill impairment at the reporting unit level, which is one level below the operating segment level. Our detailed impairment testing involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit and is based on discounted cash flows or relative market-based approaches. If the carrying value of the reporting unit exceeds its fair value, we record an impairment loss for such excess. The annual fair value analysis performed on goodwill supported that goodwill is not impaired as of June 30, 2022 (see Note 4.)
For indefinite-lived intangible assets, such as licenses acquired as an IPR&D asset, on an annual basis we determine the fair value of the asset and record an impairment loss, if any, for the excess of the carrying value of the asset over its fair value. For the year ended June 30, 2022, the carrying value of the licenses acquired as an IPR&D asset exceeded its fair value. Therefore, the Company recorded an impairment loss of $93,253,000 during the year ended June 30, 2022 (see Note 4.)
The carrying value of IPR&D and goodwill at June 30, 2022, were $61,571,000 and $11,640,000, respectively.
Impairment of Long-Lived Assets - Long-lived assets, such as property and equipment and definite life intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized 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 are their respective fair values.
Leases - In accordance with ASC Topic 842, the Company determined the initial classification and measurement of its right-of-use assets and lease liabilities at the lease commencement date and thereafter. The lease terms include any renewal options and termination options that the Company is reasonably assured to exercise, if applicable. The present value of lease payments is determined by using the implicit interest rate in the lease, if that rate is readily determinable; otherwise, the Company develops an incremental borrowing rate based on the information available at the commencement date in determining the present value of the future payments.
Effective June 25, 2022, the Company entered into a sub-lease agreement (see Note 5.) Pursuant to ASC 842, the Company treats the sublease as a separate lease, as the Company was not relieved of the primary obligation under the original lease. The Company continues to account for the Century City Medical Plaza lease as a lessee and in the same manner as prior to the commencement date of the sublease. The Company accounts for the sublease as a lessor of the lease. The sublease is classified as an operating lease, as it does not meet the criteria of a sales-type or direct financing lease.
Rent expense for operating leases is recognized on a straight-line basis, unless the operating lease right-of-use assets have been impaired, over the reasonably assured lease term based on the total lease payments and is included in general and administrative expenses in the consolidated statements of operations. For operating leases that reflect impairment, the Company will recognize the amortization of the operating lease right-of-use assets on a straight-line basis over the remaining lease term with rent expense still included in general and administrative expenses in the consolidated statements of operations.
The Company has elected the practical expedient to not separate lease and non-lease components. The Company’s non-lease components are primarily related to property maintenance, insurance and taxes, which vary based on future outcomes, and thus are recognized in general and administrative expenses when incurred (see Note 5.)
Research and Development Expenses - The Company expenses research and development costs incurred in formulating, improving, validating, and creating alternative or modified processes related to and expanding the use of the HIV, HBV, and Oncology therapies and technologies for use in the prevention, treatment, amelioration of and/or therapy for HIV, HBV, and Oncology. Research and development expenses for the year ended June 30, 2022 and 2021 amounted to $8,372,800 and $15,720,262, respectively.
Income Taxes - The Company accounts for income taxes in accordance with FASB ASC Topic 740 Accounting for Income Taxes, which requires an asset and liability approach for accounting for income taxes (see Note 7.)
Loss Per Share - The Company calculates earnings (loss) 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 shares of Common Stock outstanding during each period. Diluted earnings per common share are based on shares outstanding (computed as for basic EPS) and potentially dilutive common shares. Potential 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, 2022 and 2021 were 53,007,082 and 52,219,661, respectively. Because of the net loss for each of years ended June 30, 2022 and June 30, 2021, dilutive shares for both periods were excluded from the diluted EPS calculation, as the effect of these potential shares of Common Stock is anti-dilutive. The Company had 6,807,820 and 4,011,653 potential shares of Common Stock excluded from the diluted EPS calculation for the years ended June 30, 2022 and 2021, respectively.
Fair Value of Financial Instruments - The Company accounts for fair value measurements for financial assets and financial liabilities in accordance with FASB ASC Topic 820, Fair Value Measurements. Under the authoritative guidance, 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 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
● Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;
● Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
● Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
There were no assets that use Level 1, 2 or 3 inputs, nor any liabilities that use Level 1 or 2 inputs as of June 30, 2022.
Liabilities that use Level 3 inputs held as of June 30, 2022 consisted of a contingent consideration liability related to the February 16, 2018 acquisition of Enochian BioPharma (the “Acquisition”). 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 pro rata upon the exercise of warrants, which were outstanding at closing. The contingent consideration liability was recorded at fair value of $21,516,000 at the time of the Acquisition and is subsequently remeasured to fair value at each reporting date. At June 30, 2022, 1,250,000 contingent shares are issuable in connection with the Acquisition.
The fair value of the contingent consideration liability is estimated using an option-pricing model. The key inputs to the model are all contractual or observable with the exception being volatility, which is computed, based on the Company’s underlying stock. The key inputs to valuing the contingent consideration liability on the date of acquisition and as of June 30, 2022, include the Company’s stock price on the valuation date of $1.93; the exercise price of the warrants of $1.30, the risk-free rate of 0.00%, the expected volatility of the Company’s Common Stock of 109.0%, and the digital call rate of 97%. Fair Value measurements are highly sensitive to changes in these inputs and significant changes in these inputs could result in a significantly higher or lower fair value.
Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, accounts receivable, prepaid expenses, accounts payable, accrued expenses, and notes payable approximate their recorded values due to their short-term nature.
The following table sets forth the liabilities at June 30, 2022 and 2021, which are recorded on the balance sheet at fair value on a recurring basis by level of input 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:
Summary of 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 Inputs
(Level 1) (Level 2) (Level 3)
Contingent Consideration Liability at June 30, 2022 $ - $ - $ 2,343,318
The roll forward of the contingent consideration liability is as follows:
Balance June 30, 2021 - - 6,037,945
Contingent Shares issued pursuant to the Acquisition Agreement
(798,000 )
Fair value adjustment - - (2,896,627 )
Balance June 30, 2022 $ - $ - $ 2,343,318
Stock Options and 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. Stock-based compensation costs related to employee compensation and consulting fees for the years ended June 30, 2022 and 2021 were $5,490,602 and $1,444,798, respectively (see Note 8).
Stock-Based Compensation -The Company records stock-based compensation for services received from non-employees in accordance with ASC 718. All transactions in which goods or services are the consideration received for the issuance of equity instruments are measured based on the grant-date fair value. Equity instruments issued for goods or services 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 consultants’ required service period, which is generally the vesting period.
New Accounting Pronouncements Not Yet Adopted - Recent accounting pronouncements issued by the FASB that have not yet been adopted by the Company are not expected to have a material impact on the Company’s present or future consolidated financial statements.
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - GOING CONCERN
The Company’s consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has incurred substantial recurring losses from continuing operations, has used cash in the Company’s continuing operations, and is dependent on additional financing to fund operations. We incurred a net loss of approximately $113,433,392 and $26,723,607 for the years ended June 30, 2022 and 2021. As of June 30, 2022, the Company had cash and cash equivalents of $9,172,142 and an accumulated deficit of $204,345,198 204,345,197. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the financial statements are issued. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. Management intends to raise additional funds for (a) research and development, (b) increases in personnel, and (c) the purchase of equipment, specifically to advance the Company’s potential products through the regulatory process. We may raise such funds from time to time through public or private sales of our equity or debt securities. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could materially adversely affect our growth plans and our financial condition and results of operations.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at June 30, 2022 and 2021:
Summary of property and equipment
Useful Life June 30, 2022 June 30, 2021
Lab equipment and instruments 4-7 $ 546,524 $ 583,421
Leasehold improvements 224,629 224,629
Furniture, fixtures, and equipment 4-7 172,861 171,975
Total
944,014 980,025
Less accumulated depreciation
(357,478 ) (260,661 )
Net Property and Equipment
$ 586,536 $ 719,364
Depreciation expense amounted to $108,595 and $107,647 for the years ended June 30, 2022 and 2021, respectively. The Company disposed of property and equipment with a net book value totaling $18,168 resulting in a loss on disposal of $18,168.
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - INTANGIBLE ASSETS AND GOODWILL
At June 30, 2022 and 2021, definite-life intangible assets, net of accumulated amortization, consisted of patents on the Company’s products and processes of $44,268 and $65,906, 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, 2022 and 2021 was $14,995 and $15,888, respectively.
At June 30, 2022 and 2021, indefinite life intangible assets consisted of a license agreement classified as In-Process Research and Development (“IPR&D”) intangible assets, which are not amortizable until the intangible assets provide economic benefit, and goodwill.
At June 30, 2022 and 2021, definite-life and indefinite-life intangible assets consisted of the following:
Schedule of life intangible assets
Useful Life June 30, 2021 Period Change Effect of Currency Translation June 30, 2022
Definite Life Intangible Assets
Patents 20 Years $ 316,115 $ - (36,858 ) $ 279,257
Less Accumulated Amortization
(250,209 ) (14,995 ) 30,215 (234,989 )
Net Definite-Life Intangible Assets
$ 65,906 $ (14,995 ) $ (6,643 ) $ 44,268
Indefinite Life Intangible Assets
License Agreement
$ 154,824,000 $ (93,253,000 ) $ - $ 61,571,000
Goodwill
11,640,000 - - 11,640,000
Total Indefinite Life Intangible Assets
$ 166,464,000 $ (93,253,000 ) $ - $ 73,211,000
Expected future amortization expense is as follows:
Schedule of expected future amortization expense
Years ended June 30,
$ 11,067
11,067
11,067
11,067
Total
$ 44,268
During February 2018, the Company acquired a License Agreement (as licensee) to the HIV therapy being developed as ENOB-HV-01 which consists of a perpetual, fully paid-up, royalty-free, sub-licensable, and sole and exclusive worldwide license to research, develop, use, sell, have sold, make, have made, offer for sale, import and otherwise commercialize certain intellectual property in cellular therapies for the prevention, treatment, amelioration of and/or therapy exclusively for HIV in humans, and research and development exclusively relating to HIV in humans. Because the HIV License Agreement is considered an IPR&D intangible asset, it is classified as an indefinite life asset that is tested annually for impairment.
Impairment - Following the fourth quarter of each year, management performs its annual test of impairment of intangible assets by performing a quantitative assessment and determines if it is more likely than not that the fair value of the asset is greater than or equal to the carrying value of the asset. The results of the quantitative assessment indicated that the carrying value of the licenses acquired as an IPR&D asset exceeded its fair value, due to the sublicensing of ENOB HV-01, which required a different valuation approach and the significant decrease in our market capitalization value. Therefore, an impairment adjustment of $93,253,000 was recorded as of June 30, 2022.
NOTE 5 - LEASES
Operating Leases - 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 increased by 3% each year, and ranged from approximately $8,719 per month, for the first year to $10,107 per month for the two months of the sixth year. The lease was terminated early without penalties or additional costs as of September 30, 2022.
On June 19, 2018, the Registrant entered into a lease agreement for a term of ten years from September 1, 2018 with Century City Medical Plaza Land Co., Inc., pursuant to which the Company agreed to lease approximately 2,453 rentable square feet. On February 20, 2019, the Registrant entered into an Addendum to the original lease agreement with an effective date of December 1, 2019, where it expanded the leased area to include another 1,101 square feet for a total rentable 3,554 square feet. The base rent increases by 3% each year, and ranges from $17,770 per month as of the date of the amendment to $23,186 per month for the tenth year. The equalized monthly lease payment for the term of the lease is $20,050. The Company subleased the space as of June 25, 2022 (see subsection below “Sublease Agreement” for details.)
The Company identified and assessed the following significant assumptions in recognizing the right-of-use assets and corresponding liabilities:
Expected lease term - The expected lease term includes both contractual lease periods and, when applicable, cancelable option periods when it is reasonably certain that the Company would exercise such options. The Company’s leases have remaining lease terms between 6 months and 62 months. As of June 30, 2022, the weighted-average remaining term is 4.95 years.
Incremental borrowing rate - The Company’s lease agreements do not provide an implicit rate. As the Company does not have any external borrowings for comparable terms of its leases, the Company estimated the incremental borrowing rate based on the U.S. Treasury Yield Curve rate that corresponds to the length of each lease. This rate is an estimate of what the Company would have to pay if borrowing on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment. As of June 30, 2022, the weighted-average discount rate is 4%.
Lease and non-lease components - In certain cases the Company is required to pay for certain additional charges for operating costs, including insurance, maintenance, taxes, and other costs incurred, which are billed based on both usage and as a percentage of the Company’s share of total square footage. The Company determined that these costs are non-lease components and they are not included in the calculation of the lease liabilities because they are variable. Payments for these variable, non-lease components are considered variable lease costs and are recognized in the period in which the costs are incurred.
Below are the lease commitments for the next 5 years:
Lease commitments
Years Ending June 30 Lease Expense
$ 298,305
246,004
253,384
260,985
313,836
Thereafter -
Less imputed interest (133,178 )
Total $ 1,239,336
Sublease Agreement
On June 20, 2022, the Company entered into a sublease Agreement with One Health Labs (the “Subtenant”), whereby the Subtenant agreed to lease 3,554 square feet of space currently rented by the Company in Century City Medical Plaza as of June 25, 2022 for a period of 3.5 years with an option to renew for the remaining term of the lease that ends as of June 19, 2028. The base rent is $17,770 per month plus $750 towards utility fees that are part of the original lease agreement and will increase by 3% each year over the term of the sub-lease. The Company received a total of $57,021.67 on July 1, 2022 after execution of the sublease to cover the first month rent, utility fee and deposit. The first sublease payment began on August 1, 2022.
In accordance with ASC Topic 842, the Company treats the sublease as a separate lease, as the Company was not relieved of the primary obligation under the original lease. The Company continues to account for the Century City Medical Plaza lease as a lessee and in the same manner as prior to the commencement date of the sublease. The Company accounts for the sublease as a lessor of the lease. The sublease is classified as an operating lease, as it does not meet the criteria of a sales-type or direct financing lease.
The Company will recognize operating income from the sublease on a straight-line basis in its statements of operations over the lease term.
During the year ended June 30, 2022 and 2021, the net operating lease expenses were as follows :
Schedule of net operating lease expenses
Years ended June 30,
Operating Lease Expense $ 356,073 $ 339,094
Sublease income (2,962 ) -
Total Net Lease Expense $ 353,111 $ 339,094
NOTE 6 - NOTES PAYABLE
Convertible Notes Payable- On February 6, 2020, the Company issued two Convertible Notes (the “Convertible Notes”) to Paseco APS (the “Holder”), a Danish limited company and an existing stockholder of the Company each with a face value amount of $600,000, convertible into shares of Common Stock, $0.0001 par value per share. The outstanding principal amount of the Convertible Notes was due and payable on February 6, 2023. Interest on the Convertible Notes commenced accruing on the date of issuance at six percent (6%) per annum, computed on the basis of twelve 30-day months, and is compounded monthly on the final day of each calendar month based upon the principal and all accrued and unpaid interest outstanding as of such compound date. The interest was payable in cash on a semi-annual basis.
The holder of the Convertible Notes had the right at any time prior to the date that is twelve months from issuance to convert all or any part of the outstanding and unpaid principal and all unpaid interest into shares of the Company’s Common Stock. The conversion price was equal to $12.00 per share of Common Stock. The Holder did not exercise the conversion feature that expired on February 6, 2021. The Company evaluated the Convertible Notes in accordance with ASC 470-20 and identified that they each contain an embedded conversion feature that shall not be bifurcated from the host document (i.e., the Convertible Notes) as they are not deemed to be readily convertible into cash. All proceeds received from the issuance have been recognized as a liability on the balance sheet. The Convertible Notes balance as of June 30, 2022 and June 30, 2021, was $1,200,000. As of June 30, 2022 and 2021, the Company recorded accrued interest in the amount of $24,181, which is included in accrued expenses. For the years ended June 30, 2022 and 2021, the interest expense related to the Convertible Notes amounted to $72,875 and $72,967 respectively. Effective December 30, 2022, the Company amended and restated the Convertible Notes (the “Amended and Restated Secured Notes”). Pursuant to the Amended and Restated Secured Notes, the due date was extended to February 28, 2024, and the interest was increased to twelve percent (12%) per annum, which was prepaid by the Company in full on the date of amendment through the issuance of 198,439 shares of the Company’s Common Stock based on the closing market price on that date, of $1.03, which included 29,419 shares for interest accrued through December 30, 2022, and the obligations of the Company under the Amended and Restated Secured Notes were secured by a security Agreement (the “Security Agreement”).
Note Payable- On March 30, 2020 (the “Issuance Date”), the Company issued a Promissory Note in the principal amount of $5,000,000 (the “Promissory Note”) to the Holder. The principal amount of the Promissory Note was originally payable on November 30, 2021 (the “Maturity Date”). The Promissory Note bore interest at a fixed rate of 6% per annum, computed based on the number of days between the Issuance Date and the Maturity Date, which was prepaid by the Company in full on the Issuance Date through the issuance of 188,485 shares of the Company’s Common Stock based on the closing market price on that date for a total value of $501,370. The Company evaluated the Promissory Note and PIK interest in accordance with ASC 470-Debt and ASC 835-Interest, respectively. Pursuant to ASC 470-20, proceeds received from the issuance are to be recognized at their relative fair value, thus the liability is shown net of the corresponding discount of $493,192, which is the relative fair value of the shares issued for the PIK interest on the closing date using the effective interest method. The discount of $493,192 will be accreted over the life of the Promissory Note.
On February 11, 2021, the Company entered into an amendment to the Promissory Note in the principal amount of $5,000,000 that extended the Maturity Date to November 30, 2022. All other terms of the Promissory Note remained the same. The change in Maturity Date required an additional year of interest at the fixed rate of 6% per annum, which was prepaid by the Company in full on the date of the amendment through the issuance of 74,054 shares of the Company’s Common Stock based on the closing market price on that date for a total value of $298,178.
On May 17, 2022, the Company entered into a second amendment to the Promissory Note that extended the Maturity Date out to November 30, 2023 and increased the interest rate from 6% to 12% per annum. All other terms of the Promissory Note remained the same. The change in Maturity Date required an additional year of interest at the fixed rate of 12% per annum. Pursuant to the amendment, the Company prepaid interest for the period November 30, 2022 until May 30, 2023 on the date of the amendment through the issuance of 47,115 shares of the Company’s Common Stock based on the closing market price on that date for a total value of $299,178. All other accrued interest payable from May 30, 2023 to the Maturity Date shall be payable by the Company on May 30, 2023, at the option of the Holder either (i) in cash or (ii) in non-assessable shares of the Company’s Common Stock, valued at the closing sale price of the Common Stock of the Nasdaq Capital Market on May 30, 2023. For the year ended June 30, 2022 and 2021, discount amortization of $297,212 and $296,506 was charged to interest expense. The Promissory Note balance, net of discount at June 30, 2022 is $4,577,148. Effective December 30, 2022, the Company entered into a third amendment to the Promissory Note. Pursuant to the third amendment, the Company’s obligations under the Promissory Note were secured by the Security Agreement.
To secure the Company’s obligations under each of the Amended and Restated Secured Notes and the Promissory Note, the Company entered into a Security Agreement with the Holder, pursuant to which the Company granted a lien on all assets of the Company (the “Collateral”) for the benefit of the Holder. Upon an Event of Default (as defined in the Amended and Restated Secured Notes and Promissory Note, respectively) the Holder may, among other things, collect or take possession of the Collateral, proceed with the foreclosure of the security interest in the Collateral or sell, lease, or dispose of the Collateral.
Finance Agreement - On November 30, 2021, the Company entered into a premium finance agreement (the “Agreement”) with a principal amount of $666,875 at 3.99% interest per annum. The repayment of the Agreement will be made in nine equal monthly installments of $56,469. The remaining balance at June 30, 2022 is $166,625; the amount is reflected in other current liabilities. For the year ended June 30, 2022, the Company recorded total interest expense in the amount of $5,565 related to the Agreement. This amount is reflected in other income and expenses.
Total interest expense recorded for the years ended June 30, 2022 and 2021, was $372,844 and $379,608, respectively.
NOTE 7 - 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 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, 2022 and 2021, the Company had net operating loss carryforwards of approximately $244,899,881 and $51,327,066, respectively, giving rise to deferred tax assets of $71,299,011 and $13,536,884 respectively. The net operating loss carryforwards generated prior to January 1, 2018 expire over various dates from 2031 to 2036. All subsequent net operating loss carryforwards are indefinite.
The Company files Danish and U.S. income tax returns and these returns are generally no longer subject to tax examinations for years prior to 2018 for the Danish tax returns and 2017 for the U.S. tax returns.
The temporary differences, tax credits and carry forwards gave rise to the following deferred tax assets (liabilities) at June 30, 2022 and 2021:
Summary of deferred tax asset (liabilities)
June
Excess of tax over book depreciation of fixed assets $ 6,406 $ (6,100 )
Excess of tax over book depreciation of patents 5,716 5,449
Stock/options compensation 2,831,137 1,192,741
Depreciation and amortization 118,020 81,140
Net operating loss carryforwards 71,299,011 13,536,884
Change in tax rate - -
Valuation allowance (74,260,290 ) (14,810,114 )
Total Deferred Tax Assets (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 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, 2022 and 2021:
Summary of reconciliation of income tax expense at federal statutory rate
Years ended June 30,
Computed tax at expected statutory rate $ (59,450,176 ) $ (7,070,732 )
Non-US income taxed at different rates - (125,276 )
Non-deductible expenses / other items -
Valuation allowance 59,450,176 7,070,732
Income Tax Expense (Benefit) $ 34 $ (125,276 )
The components of income tax expense (benefit) from continuing operations for the years ended June 30, 2022 and 2021 consisted of the following:
Summary of components of income tax expense (benefit) from continuing operations
Years ended June 30,
Current Income Tax Expense
Danish income tax (benefit) $ - $ (125,276 )
Total Current Tax Expense (Benefit) $ - $ (125,276 )
Deferred Income Tax Expense (Benefit)
Excess of tax over book depreciation of fixed assets $ 6,406 $ (6,100 )
Excess of tax over book depreciation of patents 5,716 5,449
Stock/options compensation 2,831,137 1,192,741
Depreciation and amortization 118,020 81,140
Net operating loss carryforwards 13,536,884 13,536,884
Change in tax rate - -
Change in the valuation allowance (74,260,290 ) (14,810,114 )
Total Deferred Tax Expense $ - $ -
Deferred income tax expense (benefit) results primarily from the reversal of temporary timing differences between tax and financial statement income.
NOTE 8 - STOCKHOLDERS’ EQUITY
Preferred Stock - The Company has 10,000,000 authorized shares of Preferred Stock, par value $0.0001 per share. At June 30, 2022 and 2021, there were zero shares issued and outstanding.
Common Stock - The Company has 100,000,000 authorized shares of Common Stock, par value $0.0001 per share. At June 30, 2022 and 2021, there were 53,007,082 and 52,219,661 shares issued and outstanding, respectively.
Voting - Holders of Common Stock are entitled to one vote for each share held of record on each matter submitted to a vote of stockholders, including the election of directors, and do not have any right to cumulate votes in the election of directors.
Dividends - Holders of Common Stock are entitled to receive ratably such dividends as the Company’s Board of Directors from time to time may declare out of funds legally available.
Liquidation Rights - In the event of any liquidation, dissolution or winding-up of the affairs of the Company, after payment of all of our debts and liabilities, the holders of Common Stock will be entitled to share ratably in the distribution of any of our remaining assets.
Purchase Agreement with Lincoln Park Capital
On July 8, 2020, we entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which the Company may sell and issue to Lincoln Park, and Lincoln Park is obligated to purchase, up to $20,000,000 of shares of our Common Stock from time to time through August 1, 2023.
In consideration for entering into the Purchase Agreement, we issued 139,567 shares of Common Stock to Lincoln Park as a commitment fee on July 21, 2020.
During the years ended June 30, 2022 and June 30, 2021 we issued 497,340 and 200,000 shares of Common Stock to Lincoln Park under the Purchase Agreement for a purchase price of $4,676,399 and $1,221,350, respectively. At June 30, 2022, an amount of $14,102,251 remained available under the Purchase Agreement. As of October 17, 2022, we no longer have access to this Purchase Agreement as we are no longer able to use the registration statement on Form S-3.
Common Stock Issuances
On June 17, 2022, the Company issued 47,115 shares of Common Stock valued at $299,178 based on the closing price on that date, issued in lieu of prepaid interest related to an amendment that extended the maturity date of the Unsecured Note to November 30, 2023 (see Note 6).
During the period ending June 30, 2022, the Company issued 497,340 shares of Common Stock at an average price of $9.25 per share pursuant to the Purchase Agreement with Lincoln Park for total proceeds to the Company of $4,676,399.
On April 4, 2022, the Company issued 1,700 shares of Common Stock valued at the price of $2.89 per share pursuant to the exercise of vested stock options for total proceeds of $4,913.
On January 11, 2022, the Company issued 6,266 shares of Common Stock related to restricted share units that vested on January 07, 2022, at a value of $40,561.
On December 28, 2021, there were 35,000 restricted share units issued that immediately vested and were converted into shares of Common Stock in exchange for consulting services valued at $252,350.
On December 24, 2021, the Company issued 100,000 shares of Common Stock valued at the price of $1.30 per share pursuant to the exercise of vested warrants for total proceeds of $130,000, with corresponding earn-out distribution in the same amount in connection with the acquisition of Enochian BioPharma, Inc., which was distributed on March 31, 2022, based on the share price on December 23, 2021 of $7.98. This non-cash transaction impacted stockholders’ equity in the amount of $798,000.
On June 30, 2021, the Company issued 5,000 shares of Common Stock related to restricted share units that vested on January 7, 2021. These shares were expensed during the period.
On June 16, 2021, the Company issued 3,866,668 shares of Common Stock at a price of $7.50 per share pursuant to a Registered Direct Purchase Agreement for total proceeds to the Company of $26,843,998 net of $2,156,012 of issuance costs.
In June 2021, the Company issued 200,000 shares of Common Stock at an average price of $5.42 per share pursuant to the Purchase Agreement with Lincoln Park for total proceeds to the Company of $1,221,350.
From March 18, 2021 through June 9, 2021, the Company issued 1,275,719 shares of Common Stock at a price of $3.92 per share pursuant to a private placement for total proceeds to the Company of $5,000,800.
On February 18, 2021, there were 35,000 restricted share units issued that immediately vested and were converted into shares of Common Stock in exchange for consulting services valued at $147,000.
On February 11, 2021, the Company issued 74,054 shares of Common Stock valued at $298,178 based on the closing price on that date, issued in lieu of prepaid interest related to an amendment that extended the maturity date of an Unsecured Note to November 30, 2022 (see Note 6).
On December 14, 2020, the Company issued 63,122 shares of Common Stock valued at the price of $1.30 per share pursuant to the exercise of vested warrants for total proceeds of $82,056.
On December 14, 2020, the Company issued 63,122 shares of Common Stock valued at the price of $3.05 per share in connection with the acquisition of Enochian Biopharma Inc. This non-cash transaction impacted stockholders’ equity in the amount of $192,522.
Acquisition of Enochian Biopharma / Contingently issuable shares
On February 16, 2018, the acquisition of Enochian Biopharma was completed. As part of the acquisition, the stockholders of Enochian Biopharma received (i) 18,081,962 shares of Common Stock, and (ii) the right to receive Contingent Shares of Common Stock pro rata upon the exercise or conversion of warrants, which were outstanding at closing. As of June 30, 2022, 1,250,000 Contingent Shares are potentially issuable (see Note 1).
Acquisition of Enochian Denmark
At June 30, 2022 and 2021, the Company maintained a reserve of 17,414 Escrow Shares, all of which are reflected as issued and outstanding in the accompanying financial statements. The Escrow Shares are reserved to acquire the shares of Enochian Denmark held by non-consenting shareholders of Enochian Denmark on both June 30, 2022 and 2021, in accordance with Section 70 of the Danish Companies Act and the Articles of Association of DanDrit Denmark. There have been 167,639 shares of Common Stock issued to non-consenting shareholders of Enochian Denmark as of June 30, 2022. During the years ended June 30, 2022 and 2021, the Company issued zero 0 and 59,835 shares of Common Stock, respectively, to such non-consenting shareholders of Enochian Denmark.
Stock-based Compensation
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. In the year ended June 30, 2022, the weighted-average assumptions used to estimate the grant date fair values of the stock options granted using the Black-Scholes option-pricing model are as follows:
Summary of weighted-average assumptions used to estimate the fair values of the stock options granted
Enochian Biosciences Inc.
Expected term (in years)
5.0 - 6.50
Volatility
82.29% - 90.39%
Risk free interest rate
0.77%- 3.02%
Dividend yield
0%
The Company recognized stock-based compensation expense related to all equity instruments of $5,490,602 and $1,444,798 for the years ended June 30, 2022 and 2021, respectively. At June 30, 2022, the Company had approximately $6,235,329 of unrecognized compensation cost related to non-vested options.
Plan Options
On February 6, 2014, the Board adopted the Company’s 2014 Equity Incentive Plan (the “2014 Plan”), and the Company reserved 1,206,000 shares of Common Stock for issuance in accordance with the terms of the 2014 Plan.
On October 30, 2019, the Board approved and on October 31, 2019, the Company’s stockholders adopted Enochian’s 2019 Equity Incentive Plan (the “2019 Plan”), which replaced the 2014 Plan. The 2019 Plan authorized options to be awarded to not exceed the sum of (1) 6,000,000 new shares, and (2) the number of shares available for the grant of awards as of the effective date under the 2014 Plan plus any options related to awards that expire, are terminated, surrendered, or forfeited for any reason without issuance of shares under the 2014 Plan after the effective date of the 2019 Plan.
Pursuant to the 2019 Plan, the Company granted options to purchase 3,219,200 shares to employees with a three-year vesting period during the year ended June 30, 2022. One million of those shares are subject to performance based vesting criteria, and as of June 30, 2022, no expense has been recognized on this option based on the assessment that these shares are not probable of vesting. As performance criteria for Year 1 was not probable, one-third of this amount was forfeited. During previous quarters, this option was assessed as probable of vesting, such that approximately $1.9 million of expense was reversed in the quarter ended June 30, 2022. For the year ended June 30, 2021, the Company granted options to purchase 31,700 shares with a three-year vesting period under the 2019 Plan.
During the year ended June 30, 2022 and 2021, the Company granted options to purchase 65,000 and 0 zero shares of Common stock, respectively, to employees with a one-year vesting period.
During the years ended June 30, 2022 and 2021, the Company granted options to purchase 103,668 and 184,509 shares, respectively, to the Board of Directors and Scientific Advisory Board Members with a one-year vesting period.
During the years ended June 30, 2022, and 2021, the Company granted options to purchase 60,000 and 0 zero shares, respectively, for consulting services with a three-year vesting period.
During the years ended June 30, 2022, and 2021, the Company granted options to purchase 29,642 and 0 zero shares, respectively, for consulting services with a one-year vesting period.
During the years ended June 30, 2022 and 2021, the Company granted options to purchase 21,979 and 15,000 shares, respectively, for consulting services with immediate vesting.
All of the above options are exercisable at the market price of the Company’s Common Stock on the date of the grant.
To date the Company has granted options under the Plan (“Plan Options”) to purchase 4,828,642 shares of Common Stock.
A summary of the Plan Options outstanding at June 30, 2022 is presented below:
Summary of stock options outstanding
Options Outstanding
Options Exercisable
Exercise
Price Ranges
Number Outstanding
Weighted Average Remaining Contractual Life (years)
Weighted Average Exercise Price
Number Exercisable
Weighted Average Remaining Contractual Life (years)
Weighted Average Exercise Price
$ 2.00-4.50
264,057
7.62
$ 3.27
233,431
7.41
$ 3.19
$ 4.51-6.50
3,193,369
8.70
$ 4.83
488,372
6.72
$ 6.18
$ 6.51-12.00
850,393
8.27
$ 8.04
543,067
7.56
$ 7.92
Total
4,307,820
8.55
$ 5.37
1,264,869
7.21
$ 6.38
A summary of changes since July 1, 2021 are presented below:
Summary of stock option activity
Weighted Average Weighted Average Weighted Average
Shares Exercise Price Remaining Life Intrinsic Value
Outstanding at July 1, 2021 1,329,153 $ 6.24 8.42 $ 511,239
Granted 3,499,489 5.00
Exercised (1,700 ) 2.89
Forfeited (519,122 ) 5.16
Expired/Canceled -
Outstanding at June 30, 4,307,820 $ 5.37 8.55 $ -
Exercisable at June 30, 1,264,869 $ 6.38 7.21 $ -
At June 30, 2022, the Company has 1,264,869 exercisable Plan Options. The total intrinsic value of options exercisable at June 30, 2022 was 0 zero. Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) and at June 30, 2022 (for outstanding options), less the applicable exercise price.
Common Stock Purchase Warrants
A summary of the warrants outstanding at June 30, 2022, and changes in the warrants in the year ended June 30, 2022 are presented below:
Summary of common stock purchase warrants outstanding
Weighted Average Weighted Average
Underlying Shares Exercise Price Remaining Life
Outstanding at July 1, 2021 1,350,000 $ 1.30 1.02
Granted - - -
Exercised (100,000 ) 1.30 -
Cancelled/Expired - - -
Outstanding at June 30, 1,250,000 $ 1.30 0.03
Exercisable at June 30, 1,250,000 $ 1.30 0.03
Summary of common stock purchase warrants
Outstanding Equivalent Shares Exercisable
Exercise Prices Underlying Shares Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price
$ 1.30 1,250,000 0.03 $ 1.30 1,250,000 $ 1.30
Restricted Stock Units (RSUs)
The Company recognized stock-based compensation expense related to RSUs of $258,559 and $147,000 for the years ended June 30, 2022 and 2021, respectively. At June 30, 2022, the Company had approximately zero unrecognized compensation cost related to restricted stock units.
A summary of Restricted Stock Units outstanding at June 30, 2021 and changes in the RSUs in the year ended June 30, 2022 are presented below
Summary of restricted stock units outstanding
Shares Weighted Average Issuance
Price Weighted Average Remaining Life Weighted Average Intrinsic
Value
Outstanding at July 1, 2021 5,000 $ 6.15 .52 $ -
Granted 36,266 7.23 - -
Exercised (41,266 ) 7.10 - -
Cancelled/Expired - - - -
Outstanding at June 30, 2022 - $ - - $ -
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Commitments
Consulting Agreements - On July 9, 2018, the Company entered into a consulting agreement with G-Tech Bio, LLC, a California limited liability company (“G-Tech”) to assist the Company with the development of the gene therapy and cell therapy modalities for the prevention, treatment, and amelioration of HIV in humans, and with the development of a genetically enhanced Dendritic Cell for use as a wide spectrum platform for various diseases (including but not limited to cancers and infectious diseases) (the “G-Tech Agreement”). G-Tech was entitled to consulting fees for 20 months with a monthly consulting fee of not greater than $130,000 per month. Upon the completion of the 20 months, a monthly consulting fee of $25,000 continued for scientific consulting and knowledge transfer on existing HIV experiments until the services were no longer being rendered or the G-Tech Agreement is terminated. G Tech is controlled by certain members of Weird Science. For the years ended June 30, 2022 and 2021, $275,000 was charged to research and development expenses in the accompanying consolidated statements of operations related to this consulting agreement. As of May 25, 2022, the consultant was no longer able to render services.
On January 31, 2020, the Company entered into a Statement of Work and License Agreement (the “HBV License Agreement”) by and among the Company, and G-Tech, and G Health Research Foundation, a not for profit entity organized under the laws of California doing business as Seraph Research Institute (“SRI”) (collectively the “Licensors”), whereby the Company acquired a perpetual, sublicensable, exclusive license (the “HBV License”) for a treatment under development (the “Treatment”) aimed to treat Hepatitis B Virus (HBV) infections.
The HBV License Agreement states that in consideration for the HBV License, the Company shall provide cash funding for research costs and equipment and certain other in-kind funding related to the Treatment over a 24 month period, and provides for an up-front payment of $1.2 million within 7 days of January 31, 2020, along with additional payments upon the occurrence of certain benchmarks in the development of the technology set forth in the HBV License Agreement, in each case subject to the terms of the HBV License Agreement. Additionally, the HBV License Agreement provides for cooperation related to the development of intellectual property related to the Treatment and for a 2% royalty to G-Tech on any net sales that may occur under the HBV License. On February 6, 2020, the Company paid the $1.2 million up-front payment. The HBV License Agreement contains customary representations, warranties, and covenants of the parties with respect to the development of the Treatment and the HBV License.
The cash funding for research costs pursuant to the HBV License Agreement consisted of monthly payments amounting to $144,500 that covered scientific staffing resources to complete the project as well as periodic payments for materials and equipment needed to complete the project. There were no payments made after January 31, 2022. During the years ended June 30, 2022 and 2021, the Company paid a total of $1,011,500 and $2,409,000, respectively, for scientific staffing resources, R&D and IND Enabling studies. During the year ended June 30, 2022, the Company paid $1,500,000 in August 2021 for the milestone completion of a Pre-Investigational New Drug (IND) process following receipt of written comments in accordance the HBV License Agreement. The Company has filed a claim against the Licensors, which includes certain payments it made related to this license (see Contingencies sub-section below).
On April 18, 2021, the Company entered into a Statement of Work and License Agreement (the “License Agreement”), by and among the Company, and G Tech and SRI (collectively, the “Licensors”), whereby the Company acquired a perpetual sublicensable, exclusive license (the “Development License”) to research, develop, and commercialize certain formulations which are aimed at preventing and treating pan-coronavirus or the potential combination of the pan-coronavirus and pan-influenza, including the SARS-coronavirus that causes COVID-19 and pan-influenza (the “Prevention and Treatment”).
The License Agreement was entered into pursuant to the existing Framework Agreement between the parties dated November 15, 2019. The License Agreement states that in consideration for the Development License, the Company shall provide cash funding for research costs and equipment and certain other in-kind funding related to the Prevention and Treatment over a 24-month period. Additionally, the License Agreement provides for an up-front payment of $10,000,000 and a $760,000 payment for expenditures to date prior to the effective date related to research towards the Prevention and Treatment within 60 days of April 18, 2021. The License Agreement provides for additional payments upon the occurrence of certain benchmarks in the development of the technology set forth in the License Agreement, in each case subject to the terms of the License Agreement.
The License Agreement provides for cooperation related to the development of intellectual property related to the Prevention and Treatment and for a 3% royalty to G Tech on any net sales that may occur under the License Agreement. For the year ended June 30, 2022 and June 30, 2021, the Company paid $150,000 and $10,760,000 related to the Prevention and Treatment research. The Company is no longer pursuing any product candidates that relate to this license. The Company has filed a claim against the Licensors to recover all monies it paid related to this license (see Contingencies sub-section below.).
On August 25, 2021, the Company entered into an ALC Patent License and Research Funding Agreement in the HIV Field (the”ALC License Agreement”) with Gümrükcü and SRI and its principals (collectively, the “Licensors”) whereby the Licensors granted the Company an exclusive, worldwide, perpetual, fully paid-up, royalty-free license, with the right to sublicense, his proprietary technology subject to a U.S. patent application, to make, use, offer to sell, sell or import products for use solely for the prevention, treatment, amelioration of or therapy exclusively for HIV in humans, and research and development exclusively relating to HIV in humans; provided the Licensors retained the right to conduct HIV research in the field. Pursuant to the ALC License Agreement, the Company granted a non-exclusive license back to the Licensors, under any patents or other intellectual property owned or controlled by the Company, to the extent arising from the ALC License, to make, use, offer to sell, sell or import products for use in the diagnosis, prevention, treatment, amelioration or therapy of any (i) HIV Comorbidities and (ii) any other diseases or conditions outside the HIV Field. The Company made an initial payment to SRI of $600,000 and agreed to fund future HIV research conducted by the Licensors, as mutually agreed to by the parties. On September 10, 2021, pursuant to the ALC License Agreement, the Company paid the initial payment of $600,000.
G-Tech and SRI are controlled by Serhat Gümrükcü and Anderson Wittekind, shareholders of the Company.
Shares held for non-consenting stockholders - The 17,414 remaining shares of Common Stock related to the Acquisition of Enochian Denmark have been reflected as issued and outstanding in the accompanying financial statements. There were zero shares of Common Stock issued to such non-consenting stockholders during the year ended June 30, 2022 (see Note 8.)
Service Agreements - The Company has a consulting agreement for services of a Senior Medical Advisor for up to $210,000 per year on a part-time basis. This consulting agreement was terminated as of October 31, 2022. The Company maintains employment agreements with other staff in the ordinary course of business.
Contingencies
Securities Class Action Litigation. On July 26, 2022 and July 28, 2022, securities class action complaints were filed by purported stockholders of ours in the United States District Court for the Central District of California against us and certain of our current and former officers and directors. The complaints allege, among other things, that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, by making false and misleading statements and omissions of material fact in connection with the Company’s relationship with Serhat Gümrükcü and its commercial prospects. The complaints seek unspecified damages, interest, fees, and costs. The defendants have not yet responded to the complaints.
Federal Derivative Litigation. On September 22, 2022, Samuel E. Koenig filed a shareholder derivative action in the United States District Court for the Central District of California. On January 19, 2023, John Solak filed a substantially similar shareholder derivative action in the United States District Court for the District of Delaware. Both derivative actions recite similar underlying facts as those alleged in the Securities Class Action Litigation. The actions, filed on behalf of the Company, name Serhat Gümrükcü and certain of the Company’s current and former directors as defendants. The actions also name the Company as a nominal defendant. The actions allege violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and also set out claims for breach of fiduciary duty, contribution and indemnification, aiding and abetting, and gross mismanagement. Plaintiffs do not quantify any alleged injury, but seek damages, disgorgement, restitution, and other costs and expenses. On January 24, 2023, the United States District Court for the Central District of California stayed the Koenig matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. The defendants have not yet responded to either complaint.
State Derivative Litigation. On October 20, 2022, Susan Midler filed a shareholder derivative action in the Superior Court of California, Los Angeles County, reciting similar underlying facts as those alleged in the Securities Class Action Litigation. The action, filed on behalf of the Company, names Serhat Gümrükcü and certain of the Company’s current and former directors as defendants. The action also names the Company as a nominal defendant. The action sets out claims for breaches of fiduciary duty, contribution, and indemnification, aiding and abetting, and gross mismanagement. Plaintiff does not quantify any alleged injury, but seeks damages, disgorgement, restitution, and other costs and expenses. The defendants have not yet responded to the complaint.
On October 21, 2022, the Company filed a Complaint in the Superior Court of the State of California for the County of Los Angeles against Serhat Gümrükcü, William Anderson Wittekind, G Tech Bio LLC, SG & AW Holdings LLC, and Seraph Research Institute. The Complaint alleges that the defendants engaged in a “concerted, deliberate scheme to alter, falsify, and misrepresent to the Company the results of multiple studies supporting its [Hepatitis B] and SARS-CoV-2/influenza pipelines.” Specifically, “Defendants manipulated negative results to reflect positive outcomes from various studies, and even fabricated studies out of whole cloth.” As a result of the defendants’ conduct, the Company claims that it “paid approximately $25 million to Defendants and third-parties that it would not otherwise have paid.” The defendants have not yet answered the allegations set forth in the Company’s Complaint.
On December 28, 2022, the Company received a demand letter on behalf of Weird Science LLC (“Weird Science”), William Anderson Wittekind, the William Anderson Wittekind 2020 Annuity Trust, the William Anderson Wittekind 2021 Annuity Trust, the Dybul 2020 Angel Annuity Trust, and the Ty Mabry 2021 Annuity Trust alleging that the Company breached the February 16, 2018 Investor Rights Agreement between the Company, Weird Science, and RS Group ApS. Specifically, the demand letter alleges that the Company “breached its obligations under the Investor Rights Agreement to provide the requisite thirty days’ notice” to Holders of Registrable Securities in connection with SEC Form S-3 filings on July 13, 2020 and February 11, 2022 and demands over $64 million in damages. The Company denies these allegations and intends to vigorously defend against this claim.
On March 1, 2021, former Enochian BioSciences Chief Financial Officer, Robert Wolfe and his company, Crossfield, Inc., filed a Complaint in the U.S. District Court for the District of Vermont against the Company, Enochian BioSciences Denmark ApS, and certain directors and officers. In the Complaint, Mr. Wolfe and Crossfield, Inc. asserted claims for abuse of process and malicious prosecution, alleging, inter alia, that the Company lacked probable cause to file and prosecute an earlier action, and sought millions of dollars of compensatory damages, as well as punitive damages. The allegations in the Complaint relate to an earlier action filed by Company and Enochian BioSciences Denmark ApS in the Vermont Superior Court, Orange Civil Division. On March 3, 2022, the court partially granted the Company’s motion to dismiss, dismissing the abuse of process claim against all defendants and all claims against Mark Dybul and Henrik Grønfeldt-Sørensen. On November 29, 2022, the Company filed a motion for summary judgment with respect to the sole remaining claim of malicious prosecution. The Company denies the allegations set forth in the Complaint and will continue to vigorously defend against the remaining claim.
ENOCHIAN BIOSCIENCES INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - RELATED PARTY TRANSACTIONS
The Company paid G-Tech $4,031,500 and $13,804,000, which included payments for consulting agreements related to HIV, and contractual costs related to the HBV License, the Development License and the ALC License (see Note 9), and security expenses, for the years ended June 30, 2022 and 2021, respectively.
The Company leased office space from landlord affiliated with G-Tech from May 15, 2022 to August 31, 2022, on a month-to-month basis for a total of $43,750, of which $18,750 relates to the current period. The amount has been recorded in accrued expenses. The Company paid amount in full in August 2022.
NOTE 11 - SUBSEQUENT EVENTS
On July 15, 2022, certain of our warrant holders exercised warrants to purchase 1,250,000 shares of Common Stock for total proceeds to the Company of $1,625,000, with corresponding earn-out distribution in the same amount in connection with the acquisition of Enochian BioPharma, Inc., which was distributed on October 12, 2022, based on the share price on that date of $2.21. This non-cash transaction impacted stockholders’ equity in the amount of $2,762,500.
Subsequent to June 30, 2022, the Company became involved in a number of legal proceedings. Please see Note 9 above and Item 3 - Legal Proceedings for details of such matters.
As of December 30, 2022, the Company entered into amended and restated secured convertible promissory notes (see Note 6.)
On December 30, 2022, the Company entered into a security agreement with the Holder (see Note 6.)

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Principal Executive Officer and Principal Financial Officer (the “Certifying Officers”) are responsible for establishing and maintaining disclosure controls and procedures for the Company. The Certifying Officers have designed such disclosure controls and procedures to ensure that material information is made known to the Certifying Officers, particularly during the period in which this Report was prepared.
The Certifying Officers conducted a 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 the period covered by this Annual Report (the “Evaluation Date”). Based upon that evaluation, the Certifying Officers concluded that, as of June 30, 2022, our disclosure controls and procedures were not effective in ensuring that the information we were required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms.
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 the Committee of Sponsoring Organizations (“COSO”) to conduct a review of the Company’s internal controls over financial reporting. As of June 30, 2022, Management concluded that internal controls over financial reporting was not effective, based on COSO’s framework. The deficiency is attributed to the Company not having adequate resources to address complex accounting matters. This control deficiency will be monitored, and attention will be given to this matter as we grow.
This Annual Report does not include an attestation report from the Company’s registered public accounting firm regarding internal controls over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the SEC that permit the Company to provide only management’s report in this Annual Report.
Changes in Internal Control over Financial Reporting
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.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
Not Applicable.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Identification of Directors
The following is a description of the business experience, qualifications, skills and educational background of each of our directors, including each director’s relevant business experience:
Mr. Renè Sindlev. Mr. Sindlev, age 61, has served as the Chairman of the Board of Directors since June 2017. Mr. Sindlev has been successfully self-employed since 1985 from the age of 23. He has been an investor and entrepreneur since 1997 through his holding companies including RS Group ApS, RS Arving ApS, RS Family ApS, RS Aviation ApS and RS Bio ApS. In January of 2014, Mr. Sindlev established Dr. Smood Group of companies in both Denmark and the United States-a retail-chain of USDA Certified Organic health restaurants, an on-line e-commerce platform and several beverage companies. Since 2014 he has served as its chairman. Mr. Sindlev has previously founded, owned, developed, and sold more than 28 companies in the jewelry, aviation charter, real estate and biosciences businesses, such as World of Watches, Pandora A/S, RS Aviation ApS, MyFamily Office ApS, Enochian Biosciences Inc among many others. In 2002, Mr. Sindlev co-founded Pandora A/S and served as its President & Board Member, and as an advisor to the board before and after its IPO on Nasdaq Copenhagen in 2010. Mr. Sindlev co-founded Enochian Biosciences Inc. in February 2018 as an early biotech investor in DanDrit Biotech, Inc. We believe Mr. Sindlev’s experience as an entrepreneur in successfully building start-up companies from the ground up qualifies him to serve as a director and Chairman of the Board.
Dr. Mark Dybul. Dr. Dybul, age 59, was appointed our Chief Executive Officer (CEO) and principal executive officer, effective July 1, 2021. Prior to the appointment, he served as Executive Vice Chair of the Board since January of 2019 and as a director since February of 2018. Dr. Dybul served as a Professor in the Department of Medicine at Georgetown University Medical Center as of July 2017 and was the Faculty Co-Director of the Center for Global Health and Quality until he became Enochian BioSciences’ CEO. Dr. Dybul has worked on HIV and public health for nearly 30 years as a clinician, scientist, teacher, and administrator, most recently as the Executive Director of the Global Fund to Fight AIDS, Tuberculosis and Malaria from 2013 through May of 2017. Prior to joining the Global Fund, he was a principal architect and ultimately the head of the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR), the largest international health initiative in history dedicated to a single disease, which achieved historic prevention, care, and treatment goals on time and on budget. During his tenure, the program’s funding grew from approximately $500 million to $6.5 billion annually. After serving as Chief Medical Officer, Assistant, Deputy and Acting Director, he was appointed as its leader in 2006, becoming U.S. Global AIDS Coordinator, with the rank of Ambassador at the level of an Assistant Secretary of State. He served until early 2009. Earlier in his career, after graduating from Georgetown Medical School in Washington D.C., Dr. Dybul joined the National Institute of Allergy and Infectious Diseases, as a research fellow under director Dr. Anthony Fauci, where he conducted basic and clinical studies on HIV virology, immunology, and treatment optimization, including the first randomized, controlled trial with combination antiretroviral therapy in Africa. Dr. Dybul has written extensively in scientific and policy literature, and has received several honorary degrees and awards, including a Doctor of Science, Honoris Causa, from Georgetown University. Dr. Dybul is a member of the National Academy of Medicine. We believe Dr. Dybul’s extensive experience in HIV and public health, as well as from being an educator and administrator qualifies him to serve as director and Chief Executive Officer.
Carol L. Brosgart, MD. Dr. Brosgart, age 71, has served as a Director since December of 2019. Dr. Brosgart serves on the boards of public and privately held biotech companies and public, not-for-profit, domestic and global health organizations. She is also a member of the Board of Directors of Galmed Pharmaceuticals, Ltd. (headquartered in Tel Aviv, Israel); Abivax, (headquartered in Paris, France), Merlin (headquartered in Doylestown, PA) and Eradivir (headquartered in West Lafayette, Indiana). She also is the Chair of Enochian’s Scientific Advisory Board on HBV Cure and is the Chair of the Scientific Advisory Committee for Hepion (formerly ContraVir), a biotechnology company working in the area of HBV Cure, NASH and Hepatocellular Carcinoma. Previously, she served as a member of Tobira Therapeutics’ Board of Directors from September 2009 until Allergan acquired Tobira in November 2016; and,she was formerly on the following biotechnology Boards: Juvaris, a vaccine company, until Bayer Company acquired its assets; and on the Boards of Intrivo Diagnostics and Mirum Pharmaceuticals. She is a scientific advisor and consultant to a number of biotechnology companies in the areas of liver disease and infectious diseases (Dynavax, Hepion, immgenuity, Mirum Pharmaceuticals, Moderna, and Pardes Biosciences). Dr. Brosgart serves as a Board member for the non-profit organization, Berkeley Community Scholars (headquartered in California). She serves on the Steering Committee of the HBV Cure Group and is also member of the Liver Forum, both at the Forum for Collaborative Research at UC Berkeley School of Public Health. She is a member of the Board of the Hepatitis B Foundation (HBF); serves on the Medical and Scientific Advisory Committee of the Hepatitis B Foundation; and,she is the Research Integrity Officer for the Hepatitis B Foundation and the Baruch S. Blumberg Institute. Dr. Brosgart also serves on the National Advisory Committee of Hepatitis B United. She served for many years on the Boards of the SF AIDS Foundation and the Pangaea Global AIDS Foundation. She is active in the public policy arena for the following professional organizations: AASLD and IDSA/HIVMA. Dr. Brosgart served as Senior Advisor on Science and Policy to the Division of Viral Hepatitis at the CDC and the Viral Hepatitis Action Coalition at the CDC Foundation from 2011 to 2014. Dr. Brosgart has also served as a member on the faculty of the School of Medicine at the University of California, San Francisco for the past four decades, where she is a Clinical Professor of Medicine, Biostatistics and Epidemiology in the Division of Global Health and Infectious Diseases. Previous positions include, serving as Chief Medical Officer at biotechnology company Alios BioPharma, Inc. Prior to Alios, Dr. Brosgart served as Senior Vice President and Chief Medical Officer of Children’s Hospital & Research Center in Oakland, California, from 2009 until February 2011. Previously, she served for eleven years, from 1998 until 2009, at the biopharmaceutical company Gilead Sciences, Inc., where she held a number of senior management roles, most recently as Vice President, Public Health and Policy and earlier as Vice President, Clinical Research and Vice President, Medical Affairs and Global Medical Director, Hepatitis. She led the clinical development and FDA approval of a number of agents at Gilead, including Viread™ and Hepsera™. Prior to Gilead, Dr. Brosgart worked for more than 20 years in clinical care, research, and teaching at several Bay Area medical centers. She was the founder and Medical Director of the East Bay AIDS Center at Alta Bates Medical Center in Berkeley, California, from 1987 until 1998 and served as the Medical Director of Central Health Center, Oakland, California, of the Alameda County Health Care Services Agency from 1978 until 1987. Dr. Brosgart received a B.S. in Community Medicine from the University of California, Berkeley and received an M.D. from the University of California, San Francisco. Her residency training was in pediatrics, public health, and preventive medicine at UCSF and UC Berkeley School of Public Health. She has published extensively in the areas of HIV, HBV, CMV, and liver disease. We believe Dr. Brosgart’s extensive clinical experience in HIV and HBV, her significant clinical research and regulatory experience, and her service in senior management and on numerous public and private boards in the biotechnology industry qualify her to serve as a director.
Mr. Gregg Alton. Mr. Alton, age 56, has served as a director since December 2019. Mr. Alton joined the Board after serving for 20 years at the biopharmaceutical company Gilead Sciences, Inc. At Gilead, Mr. Alton served as interim Chief Executive Officer, responsible for the company’s strategy, growth and operations. As Chief Patient Officer, he led Gilead’s patient outreach and engagement initiatives and the company’s efforts to facilitate access to its medicines around the world. He oversaw the corporate and medical affairs functions and developing world access programs, as well as its digital patient solutions and patient-centered outcomes groups and commercial operations in certain countries. Mr. Alton joined Gilead in 1999 and held a number of positions at the company with experience in legal, medical affairs, policy and commercial. He previously served as general counsel. Prior to joining Gilead, he was an attorney at the law firm of Cooley Godward, LLP, where he specialized in mergers and acquisitions, corporate partnerships and corporate finance transactions for healthcare and information technology companies. Mr. Alton is a member of the Board of Directors of Corcept Therapeutics, Brii Biosciences, Novavax, Inc., the Hepatitis Fund and the Boys and Girls Clubs of Oakland. Mr. Alton serves as a board observer for GARDP. He also serves on the U.S. government’s President’s Advisory Council on HIV/AIDS, and the advisory board for the UC Berkeley College of Letters & Science. Mr. Alton received a bachelor’s degree in legal studies from the University of California at Berkeley and a law degree from Stanford University. We believe Mr. Alton’s decades of experience in senior management at a large pharmaceutical company, along with his legal and governance experience qualifies him to serve as a director.
Mr. James Sapirstein. Mr. Sapirstein, age 61, has served as a director since March of 2018. Mr. Sapirstein joined the Board after having served over thirty-seven years in the pharmaceutical industry. He is currently the Chairman, President and CEO of First Wave BioPharma (formerly AzurRx BioPharma) and has served as the CEO of ContraVir Pharmaceuticals, Inc. (now Hepion), which is a company specializing in the Hepatitis B space. After beginning his career in 1984 with Eli Lilly, he accepted a position at Hoffmann-LaRoche in 1987, where he served for almost a decade as part of its commercial teams in the US and abroad. He held a number of positions at Hoffmann-LaRoche, before moving to Bristol Myers Squibb (BMS) in 1996 as the Director of International Marketing in the Infectious Disease group. While at BMS, he worked on several important HIV/AIDS projects including Secure the Future. Later, Mr. Sapirstein started his career in smaller biotech companies when he joined Gilead Sciences, Inc. (GILD) in order to lead the Global Marketing team in its launch of Viread (tenofovir). In 2002, he accepted the position of Executive Vice President Metabolic and Endocrinology for Serono Laboratories before becoming the founding CEO of Tobira Therapeutics in 2006. In 2012, after several years in the infectious diseases space, Mr. Sapirstein became the CEO of Alliqua Therapeutics at Alliqua, Inc. He is also a Board Director for the Emerging Companies Section Governing group of the Biotechnology Innovation Organization (BIO) and the Chairman Emeritus of BIO’s New Jersey Chapter (BioNJ). Mr. Sapirstein received his MBA from Fairleigh Dickinson University and his B.Pharm. from Rutgers University. We believe Mr. Sapirstein’s extensive experience as a biotechnology executive and as a board member in the biopharma industry and industry associations qualifies him to serve as a director.
Mr. Henrik Grønfeldt-Sørensen. Mr. Grønfeldt-Sørensen, age 50, has served as a director since October of 2017, has been the Chief Executive Officer of RS Group ApS, RS Arving ApS and RS Family ApS since October of 2012, and he has served as a director of Dr. Smood Group, Inc. since January of 2014. RS Group of Companies is a family office in Denmark with global investments within the real estate, charter business, food & beverage, and biosciences industries. Mr. Grønfeldt-Sørensen has over 10 years’ experience in different CEO & management positions; Danske Bank in Denmark, and the Danish Bank Nykredit in France. Mr. Grønfeldt-Sørensen holds an eMBA from University of Monaco (2011). We believe Mr. Grønfeldt-Sørensen’s significant experience in corporate management and in investor relations qualifies him to serve as a director.
Ms. Jayne McNicol. Ms. McNicol, age 57, has served as a director and chair of our audit committee since May of 2021. Since May 2017, Ms. McNicol has been the Chief Financial Officer of the California Life Sciences Association, a nonprofit, membership-based trade association that empowers the life sciences community to deliver innovative solutions for healthier lives. Previously, from July 2001 to April 2017, Ms. McNicol was a Partner of Assurance Services at Ernst & Young LLP serving public and private life sciences companies primarily in the San Francisco Bay Area. Prior to this, Ms. McNicol served in positions of increasing responsibility at Ernst & Young and its predecessor, Arthur Young, initially in Bristol, England and later in the San Francisco Bay Area. Ms. McNicol is a Certified Public Accountant with the California Board of Accountancy and a Chartered Accountant with the Institute of Chartered Accountants in England and Wales. She holds a Bachelor of Arts degree in English from the University of Leeds, England. We believe Ms. McNicol’s significant experience in financial management within the life sciences industry qualifies her to serve as a director and chair of our audit committee.
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.
The Board and Board Committees
The Board. The Board met 5 times for meetings during fiscal 2022, and also acts by written consent. Four of such meetings were regularly scheduled meetings and other special Board meetings and telephonic calls were held as needed. During fiscal year 2022, each incumbent director attended 75% or more of the Board meetings for the periods during which each such director served. Directors are not required to attend annual meetings of our stockholders.
Audit Committee and Audit Committee Financial Experts
The Audit Committee has been structured to comply with the requirements of Rule 10A-3(b)(1) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the listing standards of NASDAQ, and each member and former member of the Audit Committee complied with such requirements and standards. The members of the Audit Committee are currently Jayne McNicol (Chair), James Sapirstein and Gregg Alton.
The Audit Committee oversees and reports to our Board on various auditing and accounting-related matters, including, among other things, the maintenance of the integrity of our financial statements, reporting process and internal controls; the selection, evaluation, compensation, and retention of our independent registered public accounting firm; legal and regulatory compliance, including our disclosure controls and procedures; and oversight over our risk management policies and procedures. The Audit Committee appoints and sets the compensation for the independent registered public accounting firm annually and reviews and evaluates such auditor. This external auditor reports directly to the Audit Committee. The Audit Committee establishes our hiring policies regarding current and former partners and employees of the external auditor. In addition, the Audit Committee pre-approves all audit and non-audit services undertaken by the external auditor and any outside consultants engaged in work related to the Company’s financial reporting. The Audit Committee has direct responsibility for overseeing the work of the external auditor engaged for the purpose of preparing or issuing an auditor’s report or performing other audits, review or attest services, including the resolution of disagreements between the external auditor and management. The Audit Committee meets at least once per fiscal quarter to fulfill its responsibilities under its charter and in connection with the review of the Company’s quarterly and annual financial statements.
The Board has determined that each member of the Audit Committee has the appropriate level of financial understanding and industry specific knowledge to be able to perform the duties of the position; and they are financially literate and have the requisite financial sophistication as required by the applicable listing standards of NASDAQ. The Board has determined that both Ms. McNicol and Mr. Alton are “audit committee financial experts” as defined by applicable SEC and Nasdaq rules.
The Audit Committee met 4 times during fiscal 2022, which meetings were all attended by each member during his or her period of service, and the Committee also acts by written consent. The Audit Committee operates under a charter that was adopted by our Board and is posted on our website at www.enochianbio.com.
The Audit Committee reviewed and discussed the audited financial statements for the 2022 fiscal year with management, and with Sadler, Gibb & Associates, LLC (“Sadler”), the Company’s independent registered public accounting firm. Further, the Audit Committee also discussed with Sadler the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) and the SEC. The Audit Committee reviewed permitted services under rules of the SEC as currently in effect and discussed with Sadler its independence from management and the Company, including the matters in the written disclosures and the letter from Sadler required by the applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence.
Based on its review of the financial statements and the aforementioned discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022 for filing with the SEC.
THE AUDIT COMMITTEE
Jayne McNicol (Chair)
James Sapirstein
Gregg Alton
Nominating and Corporate Governance Committee
The members of our Nominating and Corporate Governance Committee are currently Carol L. Brosgart, M.D. and Gregg Alton (Chair).
The Nominating and Corporate Governance Committee, as permitted by, and in accordance with, its charter, is responsible for matters related to the selection of directors for appointment and/or election to the Board. This includes establishing criteria for, identifying and recommending potential candidates for nomination to serve on the Board, and establishing criteria to consider recommendations from the stockholders of the Company. The Nominating and Corporate Governance Committee considers and makes recommendations with respect to the independence of all directors.
The Nominating and Corporate Governance Committee is also responsible for maintaining compliance with applicable corporate governance requirements under the Exchange Act and the listing standards of NASDAQ. The Nominating and Corporate Governance Committee oversees the evaluation of the Board, including with respect to corporate governance, and develops and recommends to the Board corporate governance guidelines.
The Nominating and Corporate Governance Committee acted 1 time during fiscal 2022 by written consent. The Nominating and Corporate Governance Committee operates under a charter that was adopted by our Board and is posted on our website at www.enochianbio.com.
Compensation Committee
The members of our Compensation Committee are currently James Sapirstein (Chair) and Carol L. Brosgart, M.D.
The Compensation Committee, as permitted by, and in accordance with, its charter, is responsible for assisting the Board in fulfilling its responsibilities relating to matters of human resources and compensation, including equity compensation, and to establish a plan of continuity and development for our senior management. The Compensation Committee periodically assesses compensation of our executive officers in relation to companies of comparable size, industry, and complexity, taking the performance of the Company and such other companies into consideration. All decisions with respect to the compensation of our principal executive officer are determined and approved solely by the Compensation Committee. All decisions with respect to other executive compensation, including incentive-compensation and equity-based plans are first approved by the Compensation Committee and then submitted, together with the Compensation Committee’s recommendation, to the members of the Board for final approval. In addition, the Compensation Committee will, as appropriate, review and approve public or regulatory disclosure relating to compensation, including the Compensation Disclosure and Analysis, and any metrics for performance measurements. The Compensation Committee has the authority to retain and compensate any outside adviser as it determines necessary to permit it to carry out its duties and engaged such a consultant in connection with the Company’s compensation for the 2022 fiscal year.
The Board has determined that each member of the Compensation Committee is a “nonemployee director” as that term is defined under Rule 16b-3 of the Exchange Act and an “outside director” as that term is defined in Treasury Regulation Section 1.162-27(e)(3). The Compensation Committee meets periodically and at least annually in connection with determining the compensation of management for each fiscal year.
The Compensation Committee met 2 times during fiscal year 2022 and acted by written consent 4 times. The Compensation Committee operates under a charter that was adopted by our Board and is posted on our website at www.enochianbio.com.
The Compensation Committee has considered the potential risks arising from the Company’s compensation for all employees and does not believe the risks from those compensation practices are reasonably likely to have a material adverse effect on the Company.
Executive Officers Who Are Not Directors
Luisa Puche. Ms. Puche, age 60, is our Chief Financial Officer and principal financial officer. Prior to becoming our Chief Financial Officer in January of 2019, Ms. Puche served as a senior accounting and financial advisor and president of Puche Group, LLC, since 2015 where she served in a variety of advisory capacities for both public and private organizations, such as technical accounting consultations, complex technical implementations, M&A transactions, IT Risk assessments and SOX 404 implementations. Previously, Ms. Puche served in various senior executive roles at Brightstar Corp., a global distributor and service provider in the wireless industry, with public reporting requirements, including as Vice President and Global Controller and Interim Chief Accounting Officer. During her tenure at Brightstar, she was responsible for financial reporting from 55 countries, and was instrumental in various key transactions including the $1.6 billion sale of Brightstar to SoftBank. Ms. Puche also worked at Ernst & Young for 10 years. Ms. Puche holds a Bachelor’s of Accounting from Florida International University.
François Binette. On October 18, 2022, the Company appointed Francois Binette PhD, age 59, as Chief Operating Officer of the Company, effective November 1, 2022. Dr. Binette has served as the Company’s Executive VP for Research & Development since April 2022. Dr. Binette has over 25 years of product development expertise in advanced therapies and regenerative medicine. From 2016 to just prior to joining the Company, Dr. Binette was at Lineage Cell Therapeutics, Inc (NYSE:LCTX), a leading company in the field of pluripotent stem cell therapy development with a global footprint focused on ophthalmology, cancer vaccines, and spinal cord injuries, where he served as the Senior Vice President R&D, Global Head of Product Development and led the CNS franchise as well as general pipeline development, contributing to one of the largest non-cancer cell therapy corporate partnership deals with Genentech worth over $650 million in upfront and milestone payments. During his first industry appointment at Genzyme Tissue Repair in Cambridge, he helped pioneer Carticel™ for cartilage repair, the first FDA BLA-approved cell therapy product for human use. He then led R&D for Biosyntech, a startup biomaterials company in Montreal applying its proprietary platform for various tissue engineering and drug delivery applications. Dr. Binette then joined the DePuy Franchise of Johnson and Johnson (NYSE:JNJ), the second largest orthopedic business worldwide where he led several innovative regenerative medicine combination product development initiatives from discovery to approved clinical trials in US and Europe. Dr. Binette received his PhD from Laval University in Québec City, followed with post-doctoral training at the Sanford-Burnham institute, and Harvard Medical School.
Delinquent Section 16(a) Reports
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. Based solely on our review of the copies of such forms received by us, we believe that during the fiscal year ended June 30, 2022, all filing requirements were timely satisfied, except (i) late Form 4’s were filed for Rene Sindlev on December 22, 2021 and January 4, 2022, (ii) late Form 4’s were filed for Henrik Gronfeldt-Sorensen on December 22, 2021 and January 4, 2022, (iii) late Form 4’s were filed for Carl Sandler on December 22, 2021, January 7, 2022 and February 23, 2022, (iv) a late Form 4 was filed for Jayne McNicol on June 13, 2022, (v) late Form 4’s were filed for Carol Brosgart on December 21, 2021 and January 3, 2022, (vi) a late Form 4 was filed for Gregg Alton on December 22, 2021, (vii) late Form 4’s were filed for Mark Dybul on July 22, 2021, and (viii) late Form 4’s were filed for Luisa Puche on November 23, 2021 and January 11, 2022.
Code of Ethics
Our Board has adopted a Code of Ethics and Conduct (our “Code of Ethics”). Our Code of Ethics sets forth standards of conduct applicable to our employees, officers and directors to promote honest and ethical conduct, proper disclosure in our periodic filings, and compliance with applicable laws, rules and regulations. Our Code of Ethics is available to view at our website, www.enochianbio.com by clicking on Investors/Media-Corporate Governance. We intend to provide disclosure of any amendments or waivers of our Code of Ethics on our website within four business days following the date of the amendment or waiver.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Name and Principal Position Year Salary ($) Bonus Stock
Awards ($) Option Awards
($)(1) Non-equity
incentive
plan
compensation ($) Other
Compensation
($) Total
($)
Mark Dybul, M.D. (2) $ 850,000 $ 100,000 $ - $ 9,801,000 $ - $ - $ 10,751,000
Chief Executive Officer $ 430,000 $ - $ - $ - $ - $ - $ 430,000
Luisa Puche $ 293,750 $ 110,000 $ 9,812 $ 375,780 $ - $ - $ 795,592
Chief Financial Officer $ 275,000 $ - $ - $ - $ - $ - $ 275,000
(1) Amounts shown do not reflect compensation actually received by the executive officer. Instead, the amounts shown are the total grant date valuations of stock option grants awarded during the year as determined pursuant to ASC Topic 718. The valuations are expensed for financial reporting purposes over the vesting period of the grant.
(2) Effective July 1, 2021, Dr. Dybul was appointed our Chief Executive Officer. He previously served as our Executive Vice Chair.
Arrangements with Named Executive Officers
During the fiscal year ended June 30, 2022, we had agreements in place with Dr. Dybul and Ms. Puche. A description of each agreement is set forth below.
Mark R. Dybul, M.D. Since January 7, 2019, when Dr. Dybul became our principal executive officer by virtue of his appointment as Executive Vice-Chair of the Board, Dr. Dybul received compensation as Executive Vice Chair of the Board under his Amended and Restated Director’s Agreement, as amended on May 1, 2019 (the “Director Agreement”), which called for cash compensation of $430,000 per annum, and the grant of options to purchase 300,000 shares of common stock, which was granted on November 21, 2018. The Director Agreement did not provide for any payments or other benefits upon a change in control. Dr. Dybul was given a one-time grant of options to purchase 450,000 shares of common stock at a strike price of $8.00 per share on June 11, 2020.
On October 30, 2019, the Compensation Committee approved and presented to the Board an employment agreement whereby Dr. Dybul would serve as the Company’s Chief Executive Officer (the “Employment Agreement”) which was recommended by the Board for approval by our stockholders. On October 31, 2019, our stockholders approved the Employment Agreement via written consent. Effective July 1, 2021, Dr. Dybul and the Company entered into the Executive Employment Agreement in connection with his appointment to Chief Executive Officer. The Employment Agreement was subsequently amended on December 12, 2022, effective January 1, 2023. The following is a summary of the Employment Terms and other material terms of the Employment Agreement, as amended.
Term. Dr. Dybul will serve as Chief Executive Officer for a term of three (3) years with automatic yearly renewal terms thereafter unless terminated at least 90 days before the expiry of a term.
Duties. Dr. Dybul will perform duties consistent with the position of Chief Executive Officer, as directed by and reporting to the Board, where he shall remain a director but without further compensation for Board service. Dr. Dybul will devote a substantial majority of his business time and attention to the performance of his duties with the Company, but he will be able to hold positions with charitable organizations approved by the Board, and serve on boards of up to five non-competitive entities, with prior approval by the Board required for publicly traded companies.
Place of Employment and Expenses. Dr. Dybul shall work out of the Company’s headquarters in Los Angeles, commuting as needed. Dr. Dybul shall be reimbursed for reasonable expenses for accommodations in Los Angeles and a company car.
Cash Compensation. Dr. Dybul shall be entitled to a base salary of Five Hundred Fifty Thousand Dollars ($550,000) per year. Dr. Dybul shall be eligible for a bonus of up to $800,000 per year in the sole discretion of the Compensation Committee and in accordance with any short-term incentive plan adopted by the Company.
Benefits. Dr. Dybul shall receive benefits provided to similarly situated employees of the Company and five (5) weeks vacation per year.
Termination. The Employment Agreement may be terminated by the Company for “Cause” or by Dr. Dybul without “Good Reason” (each as defined therein), in which case Dr. Dybul will only receive accrued compensation and benefits. In the event the Company terminates the Employment Agreement without Cause or Dr. Dybul terminates the Agreement with Good Reason, Dr. Dybul will receive his base salary for one (1) year and vesting of one (1) year’s worth of unvested options.
Change in Control. Upon a change in control, the option grant described below shall immediately vest, and Dr. Dybul shall have the right to terminate the Employment Agreement for Good Reason.
Restrictive Covenants. Dr. Dybul shall be subject to restrictive covenants set forth in that certain Confidential and Proprietary Information Agreement attached to the Employment Agreement, which are independent of the obligations set forth in the Employment Agreement. The restrictive covenants include non-compete, non-solicitation and non-disparagement obligations for one (1) year, provided that the Company shall continue to pay his base salary for such one (1) year period.
Description of the Option Grant. Upon appointment to Chief Executive Officer, Dr. Dybul was awarded an option to purchase 3,000,000 shares of the Company’s common stock at an exercise price equivalent to the closing price per share quoted on the NASDAQ Stock Market on the trading day prior to the grant date. The option has a ten-year term, subject to continued employment, and 2,000,000 of the shares will vest ratably on July 1, 2022, July 1, 2023 and July 1, 2024. One-third of the remaining 1,000,000 shares are subject to vesting at the end of each of the three years beginning with the year ending June 30, 2022, based upon the achievement by the Company of certain benchmarks.
Luisa Puche. Pursuant to her offer letter from the Company, dated December 28, 2018 (the “Offer Letter”), Ms. Puche received an annual base salary of $200,000, and is eligible for a discretionary cash bonus, with a target of 40% of her base salary. Ms. Puche also received a grant of options to purchase 60,000 shares of Common Stock and 15,000 restricted stock units, each vesting in equal increments over three years. The Offer Letter provides for at will employment; provided however, that upon termination of Ms. Puche’s employment by the Company without cause, or for a termination of employment by Ms. Puche for good reason, she will receive six months’ salary and COBRA eligibility. Additionally, if the termination without cause or for good reason occurs within 12 months of a change in control, Ms. Puche will also be entitled to a pro-rata bonus and immediate vesting of any unvested options or restricted stock units. Ms. Puche had a base salary of $300,000 for the fiscal year 2022. Effective October 18, 2022, Ms. Puche received an increase in base salary to $350,000 following the completion of the 2022 fiscal year and 80,000 options, vesting in equal increments over three years.
Francois Binette. Pursuant to his offer letter from the Company, dated February 22, 2022, Mr. Binette was hired as the Company’s Executive VP for Research & Development starting April 2022 with an annual base salary of $375,000, and is eligible for a discretionary cash bonus, with a target of 40% of his base salary. Mr. Binette also received a grant of options to purchase 65,000 shares of Common Stock, vesting on the first anniversary of the date of hire. On October 18, 2022, Mr. Binette was appointed as Chief Operating Officer of the Company, effective November 1, 2022, and pursuant to an amendment to his offer letter, received an increase in base salary to $420,000 and 40,000 options, vesting in equal increments over three years.
Outstanding Equity Awards as of June 30, 2022
The following table provides information concerning outstanding equity awards held by our named executive officers as of June 30, 2022.
Option Awards Stock Awards
Name Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable Option
Exercise
Price
($) Option
Expiration
Date Number of
Shares
or Shares of
Stock That
Have
Not
Vested
(#) Market
Value of
Shares or
Shares of
Stock
That
Have
Not
Vested
($)
Mark R. Dybul, M.D.
Chief Executive Officer 7,563 - $ 8.00 02/27/2028 - -
5,226 - $ 5.74 09/18/2028 - -
300,000 - $ 6.50 11/21/2028 - -
450,000 - $ 8.00 06/11/2030 - -
- 3,000,000 $ 4.57 07/19/2031 - -
Luisa Puche
Chief Financial Officer 60,000 - $ 6.15 06/06/2029 - -
- 60,000 $ 8.58 10/26/2031 - -
Board Compensation
The table below sets forth the compensation earned by directors, all of whom are non-employees for services during the fiscal year ended June 30, 2022:
Name Fees Earned
or Paid in Cash ($) Stock Awards ($) Option Awards
($) (1) All Other Compensation
($) Total
($)
René Sindlev $ 100,000 $ - $ 53,396 $ - $ 153,396
James Sapirstein 77,500 - 52,071 - 129,571
Carl Sandler (2) 45,000 - 52,075 - 97,075
Carol Brosgart 69,938 - 52,993 - 122,931
Gregg Alton 77,500 - 52,993 - 130,493
Henrik Grønfeldt-Sørensen 60,000 - 74,066 - 134,066
Jayne McNicol 75,000 - 53,227 - 128,227
Total $ 504,938 $ - $ 390,821 $ - $ 895,759
(1) Amounts shown are not intended to reflect value actually received by the directors. Instead, the amounts shown are the total fair value of option awards granted in fiscal 2022 for financial statement reporting purposes, as determined pursuant to Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC Topic 718. These values are amortized as equity compensation expense over the vesting period of the grants.
(2) Mr. Carl Sandler resigned from the Board of Directors effective March 25, 2022. Compensation reflects 3 quarters of payments. Equity grants issued to Mr. Sandler during the fiscal year remain available to exercise through their expiration date.
Narrative to Director’s Compensation Table
Our director compensation program reflects competitive practices for a NASDAQ listed company. The resulting compensation package for our directors and for committee service (for members who qualify as independent under the rules of The Nasdaq Capital Market) as of the date hereof is set forth in the table below. In addition, our directors are awarded annual options to purchase common stock valued at $75,000.
Compensation Element Value
Retainer-Board Chair $ 100,000
Retainer-Board Members $ 60,000
Audit Committee Chair Fee $ 15,000
Compensation Committee Chair Fee $ 10,000
Nominating Committee Chair Fee $ 10,000
Audit Committee Member Fee $ 7,500
Compensation Committee Member Fee $ 5,000
Nominating Committee Member Fee $ 4,000

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following sets forth information regarding the beneficial ownership of our common stock as of February 27, 2023 by:
● each person to be known by us to be the beneficial owner of more than 5% of our common stock;
● each of our named executive officers;
● each of our directors; and
● all of our current executive officers and directors as a group.
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 55,705,521 shares of Common Stock outstanding as of February 27, 2023, excluding 2,500,000 shares of Common Stock issuable only upon the exercise of warrants by other warrant holders (see footnotes 2 and 6 to the table below), plus any securities that the individuals included in this table have the right to acquire within 60 days of February 27, 2023.
To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of Common Stock beneficially owned by them. Unless indicated otherwise, the address for the beneficial holders is c/o Enochian BioSciences Inc. 1927 Paseo Rancho Castilla, Los Angeles, CA, U.S.A.
Enochian BioSciences Inc.
Name of Beneficial Owner Number of Shares % Ownership
Directors/Officers:
Renè Sindlev, Chairman of the Board (1) 9,715,490 18.31 %
Mark Dybul, Chief Executive Officer (2) 1,495,937 2.75 %
Luisa Puche, Chief Financial Officer (3) 96,266 *%
Francois Binette, Chief Operating Officer (7) - -
Carol Brosgart, Director 50,507 *%
Gregg Alton, Director 50,507 *%
James Sapirstein, Director 85,895 *%
Jayne McNicol, Director 26,498 *%
Henrik Grønfeldt-Sørensen, Director (4) 91,434 *%
Directors/Officers Total (9 persons): 11,612,534 21.18 %
5% Shareholders who are not Directors or Officers:
RS Bio ApS 9,668,351 18.24 %
Serhat Gümrükcü (5) 12,526,552 23.63 %
Anderson Wittekind (6) 5,352,046 10.10 %
5% Shareholders who are not Directors or Officers Total: 27,546,949 51.97 %
Total: 29,491,132 55.64 %
* Indicates less than 1%.
(1) Includes 9,668,351 shares of Common Stock owned of record by RS Bio ApS, a Danish entity, and options to purchase 47,139 shares of Common Stock exercisable within 60 days of February 22, 2023 owned of record by Mr. Sindlev. Mr. Sindlev, our Chairman of the Board, holds the sole voting and disposition power of the shares owned by RS Bio ApS.
(2) Includes 66,481 shares of Common Stock and options to purchase 1,429,456 shares of Common Stock exercisable within 60 days of February 22, 2023.
(3) Includes 16,266 shares of Common Stock and options to purchase 80,000 shares of Common Stock exercisable within 60 days of February 22, 2023.
(4) Includes 50,000 shares of Common Stock and options to purchase 41,434 shares of Common Stock exercisable within 60 days of February 22, 2023. Mr. Grønfeldt-Sørensen, our Director, holds the sole voting and disposition power of the shares owned by Greenfield Holding ApS. Excludes 9,668,351 shares of Common Stock owned of record by RS Bio ApS, a Danish entity, of which Mr. Grønfeldt-Sørensen is an officer but over which he exercises no voting or disposition power. Mr. Sindlev holds the sole voting and disposition power of the shares owned by RS Bio ApS.
(5) Includes 88,121 shares of Common Stock held in a joint investment account with his spouse, and excludes 5,352,046 shares owned by Mr. Gümrükcü’s spouse, to which Mr. Gümrükcü disclaims beneficial ownership.
(6) Includes 97,032 shares of Common Stock owned of record by Weird Science, LLC, and 3,615,757 shares owned of record by Mr. Wittekind, 88,121 shares held in a joint investment account with his spouse, and 1,450,568 shares held in trust over which Mr. Wittekind has sole voting and disposition power. Mr. Wittekind is a member and a manager of Weird Science and has sole voting and disposition power. Excludes 1,250,000 shares of Common Stock issuable only upon the exercise of warrants that remain outstanding as contingent consideration to Weird Science, and 12,526,552 shares of Common Stock controlled by Mr. Wittekind’s spouse, to which Mr. Wittekind exercises no voting or disposition power.
(7) Mr. Binette was appointed Chief Operating Officer on October 18, 2022.
Equity Incentive Plan Information
The following table provides information, as of June 30, 2022, regarding the number of shares of Company common stock that may be issued pursuant to our 2014 Equity Incentive Plan and 2019 Equity Incentive Plan.
Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders: 4,307,820 $ 5.37 2,835,906 (1)
Equity compensation plans not approved by security holders - - -
Total 4,307,820 $ 5.37 2,835,906 (1)
(1) On February 6, 2014, the Board adopted the Company’s 2014 Equity Incentive Plan (the “2014 Plan”), and the Company had reserved 1,206,000 shares of Common Stock for issuance in accordance with the terms of the Plan. On October 30, 2019, the Board approved and on October 31, 2019, the Company’s stockholders adopted the Enochian BioSciences’ 2019 Equity Incentive Plan (the “2019 Plan”), which became effective on December 12, 2019 (the “Effective Date”) and replaced the 2014 Plan. The 2019 Plan authorized options to be awarded to not exceed the sum of (1) 6,000,000 new shares, (2) the number of shares available under the 2014 Plan for the grant of awards as of the Effective Date, and (3) shares underlying outstanding awards granted under the 2014 Plan that, after the Effective Date, expire or are terminated, surrendered or forfeited for any reason without the issuance of shares. The remaining shares available for grant related to the 2014 Plan was 655,769. As of the Effective Date, this amount along with the new 6,000,000 shares totaled 6,655,769 shares available for grant immediately after the Effective Date.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions and Director Independence
Transactions with Related Persons
Consulting Agreements - On July 9, 2018, the Company entered into a consulting agreement with G-Tech Bio, LLC, a California limited liability company (“G-Tech”) to assist the Company with the development of the gene therapy and cell therapy modalities for the prevention, treatment, and amelioration of HIV in humans, and with the development of a genetically enhanced Dendritic Cell for use as a wide spectrum platform for various diseases (including but not limited to cancers and infectious diseases) (the “G-Tech Agreement”). G-Tech was entitled to consulting fees for 20 months with a monthly consulting fee of not greater than $130,000 per month. Upon the completion of the 20 months, a monthly consulting fee of $25,000 continued for scientific consulting and knowledge transfer on existing HIV experiments until the services were no longer being rendered or the G-Tech Agreement is terminated. G Tech is controlled by certain members of Weird Science. For the years ended June 30, 2022 and 2021, $275,000 was charged to research and development expenses in the accompanying consolidated statements of operations related to this consulting agreement. As of May 25, 2022, the consultant was no longer able to render services.
On January 31, 2020, the Company entered into a Statement of Work and License Agreement (the “HBV License Agreement”) by and among the Company, and G-Tech, and G Health Research Foundation, a not for profit entity organized under the laws of California doing business as Seraph Research Institute (“SRI”) (collectively the “Licensors”), whereby the Company acquired a perpetual, sublicensable, exclusive license (the “HBV License”) for a treatment under development (the “Treatment”) aimed to treat Hepatitis B Virus (HBV) infections.
The HBV License Agreement states that in consideration for the HBV License, the Company shall provide cash funding for research costs and equipment and certain other in-kind funding related to the Treatment over a 24 month period, and provides for an up-front payment of $1.2 million within 7 days of January 31, 2020, along with additional payments upon the occurrence of certain benchmarks in the development of the technology set forth in the HBV License Agreement, in each case subject to the terms of the HBV License Agreement. Additionally, the HBV License Agreement provides for cooperation related to the development of intellectual property related to the Treatment and for a 2% royalty to G-Tech on any net sales that may occur under the HBV License. On February 6, 2020, the Company paid the $1.2 million up-front payment. The HBV License Agreement contains customary representations, warranties, and covenants of the parties with respect to the development of the Treatment and the HBV License.
The cash funding for research costs pursuant to the HBV License Agreement consisted of monthly payments amounting to $144,500 that covered scientific staffing resources to complete the project as well as periodic payments for materials and equipment needed to complete the project. There were no payments made after January 31, 2022. During the years ended June 30, 2022 and 2021, the Company paid a total of $1,011,500 and $2,409,000, respectively, for scientific staffing resources, R&D and IND Enabling studies. During the year ended June 30, 2022, the Company paid $1,500,000 in August 2021 for the milestone completion of a Pre-Investigational New Drug (IND) process following receipt of written comments in accordance the HBV License Agreement. The Company has filed a claim against the Licensors, which includes certain payments it made related to this license.
On April 18, 2021, the Company entered into a Statement of Work and License Agreement (the “License Agreement”), by and among the Company, and G Tech and SRI (collectively, the “Licensors”), whereby the Company acquired a perpetual sublicensable, exclusive license (the “Development License”) to research, develop, and commercialize certain formulations which are aimed at preventing and treating pan-coronavirus or the potential combination of the pan-coronavirus and pan-influenza, including the SARS-coronavirus that causes COVID-19 and pan-influenza (the “Prevention and Treatment”).
The License Agreement was entered into pursuant to the existing Framework Agreement between the parties dated November 15, 2019. The License Agreement states that in consideration for the Development License, the Company shall provide cash funding for research costs and equipment and certain other in-kind funding related to the Prevention and Treatment over a 24-month period. Additionally, the License Agreement provides for an up-front payment of $10,000,000 and a $760,000 payment for expenditures to date prior to the effective date related to research towards the Prevention and Treatment within 60 days of April 18, 2021. The License Agreement provides for additional payments upon the occurrence of certain benchmarks in the development of the technology set forth in the License Agreement, in each case subject to the terms of the License Agreement.
The License Agreement provides for cooperation related to the development of intellectual property related to the Prevention and Treatment and for a 3% royalty to G Tech on any net sales that may occur under the License Agreement. For the year ended June 30, 2022 and June 30, 2021, the Company paid $150,000 and $10,760,000 related to the Prevention and Treatment research. The Company is no longer pursuing any product candidates that relate to this license. The Company has filed a claim against the Licensors to recover all monies it paid related to this license.
On August 25, 2021, the Company entered into an ALC Patent License and Research Funding Agreement in the HIV Field (the”ALC License Agreement”) with Dr. Gümrükcü and SRI (collectively, the “Licensors”) whereby the Licensors granted the Company an exclusive, worldwide, perpetual, fully paid-up, royalty-free license, with the right to sublicense, his proprietary technology subject to a U.S. patent application, to make, use, offer to sell, sell or import products for use solely for the prevention, treatment, amelioration of or therapy exclusively for HIV in humans, and research and development exclusively relating to HIV in humans; provided the Licensors retained the right to conduct HIV research in the field. Pursuant to the ALC License Agreement, the Company granted a non-exclusive license back to the Licensors, under any patents or other intellectual property owned or controlled by the Company, to the extent arising from the ALC License, to make, use, offer to sell, sell or import products for use in the diagnosis, prevention, treatment, amelioration or therapy of any (i) HIV Comorbidities and (ii) any other diseases or conditions outside the HIV Field. The Company made an initial payment to SRI of $600,000 and agreed to fund future HIV research conducted by the Licensors, as mutually agreed to by the parties. On September 10, 2021, pursuant to the ALC License Agreement, the Company paid the initial payment of $600,000.
G-Tech and SRI are controlled by Dr. Serhat Gümrükcü and Anderson Wittekind, shareholders of the Company.
Compensation of Named Executive Officers and Directors
For information regarding compensation of named executive officers and directors, please see “Item 11. Executive Compensation.”
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.
Director Independence
The NASDAQ listing standards provide that an independent director is one who the Board affirmatively determines is free of any relationship that would interfere with that individual’s exercise of independent judgment. The Board has determined that Mr. Sapirstein, Mr. Alton, Dr. Brosgart and Ms. McNicol are each independent as defined in the listing standards of NASDAQ. In making such determinations, the Board has concluded that none of these directors 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.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services
The following information sets forth fees billed to us by Sadler, Gibb & Associates, LLC (“Sadler”) during the years ended June 30, 2022 and June 30, 2021 for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements (“Audit Fees”), (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 (“Audit-Related Fees”), (iii) services rendered in connection with tax compliance, tax advice and tax planning (“Tax Fees”), and (iv) services rendered by Sadler other than the foregoing (“Other Fees”).
Audit Fees
For the fiscal year ended June 30, 2022 Sadler billed an aggregate of $86,000 in Audit Fees. For the fiscal year ended June 30, 2021, Sadler billed an aggregate of $91,975 in Audit Fees.
Audit-Related Fees
For the fiscal year ended June 30, 2022 Sadler billed an aggregate of $13,500 in Audit-Related Fees. For the fiscal year ended June 30, 2021, Sadler billed an aggregate of $2,000 in Audit-Related Fees.
Tax and Other Fees
None.
Audit Committee’s Pre-Approval Process
The Audit Committee, which has been in place since March 28, 2018, pre-approves all audit and permissible non-audit services on a case-by-case basis. In its review of non-audit services, the Audit Committee considers whether the engagement could compromise the independence of our independent registered public accounting firm, and whether it is in our best interests to engage our independent registered public accounting firm to perform the services. The Audit Committee does not delegate its responsibilities to pre-approve services performed by our independent registered public accounting firm to management. The Audit Committee may delegate, and has delegated, pre-approval authority to one or more of its members. The member or members to whom such authority is delegated must report any pre-approval decisions to the Audit Committee at its next scheduled meeting.
During the year ended June 30, 2022, all services performed by Sadler were pre-approved by the Audit Committee.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules
Exhibit No.
Description
Incorporated by Reference
3.1
Certificate of Incorporation
Incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 15, 2018.
3.2
Bylaws
Incorporated herein by reference to exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 16, 2019.
4.1
Form of Warrant
Incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the SEC on May 1, 2017.
4.2
Promissory Note
Incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the SEC on March 31, 2020.
4.3*
Amendment No.2 to Promissory Note, dated May 17, 2022
4.4
Amendment No.3 to Promissory Note, effective December 30,
Incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the SEC on February 23, 2023.
4.5
Form of Amended and Restated Senior Secured Convertible Promissory Note, amended effective December 31, 2022
Incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the SEC on February 23, 2023.
4.6
Description of Securities
Incorporated herein by reference to Exhibit 4.1 to the Company’s Form 10-K filed with the SEC on September 30, 2020.
10.1
Form of License Agreement
Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on January 17, 2018.
10.2
2019 Equity Incentive Plan
Incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 10, 2020.
10.3
Statement of Work and License Agreement
Incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on February 3, 2020.
10.4
Note Purchase Agreement
Incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on March 31, 2020.
10.5
Lease Agreement by and between the Company and Plaza Medical Office Building, LLC dated November 13, 2017
Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 17, 2017.
10.6
General Office Lease by and between the Registrant and Century City Medical Plaza Land Co., Inc. dated June 19, 2018
Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on June 25, 2018.
10.7
Consulting Agreement by and between the Company and G-Tech Bio, LLC July 9, 2018
Incorporated herein by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K/A filed with the SEC on September 30, 2019.
10.8
Offer Letter from the Company to Luisa Puche, dated December 28, 2018
Incorporated herein by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K/A filed with the SEC on September 30, 2019.
10.09
Purchase Agreement, dated July 8, 2020, by and between the Company and Lincoln Park Capital Fund, LLC
Incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 14, 2020.
10.10
Registration Rights Agreement, dated July 8, 2020, by and between the Company and Lincoln Park Capital Fund, LLC
Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 14, 2020.
10.11
Form of Subscription Agreement
Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 24, 2021.
10.12
Statement of Work and License Agreement, dated April 18, 2021, by and among the Company, G-Tech Bio, LLC, and G Health Research Foundation
Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 22, 2021.
10.13
Employment Agreement, dated August 11, 2021, by and between the Company and Dr. Mark Dybul
Incorporated herein by reference to Exhibit to 10.1 the Company’s Current Report on Form 8-K/A, filed with the SEC on August 16, 2021.
10.14
Amendment to Employment Agreement between Mark Dybul, M.D. and Enochian BioSciences Inc., dated December 12, 2022
Incorporated herein by reference to Exhibit to 10.1 the Company’s Current Report on Form 8-K, filed with the SEC on December 16, 2022.
10.15
Security Agreement, effective December 30, 2022, by and between the Company and Paseco ApS
Incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the SEC on February 23, 2023.
21.1*
List of subsidiaries of the Company
23.1*
Consent of Sadler, Gibb & Associates
31.1*
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
31.2*
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
32.1**
Certification of Principal Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
32.2**
Certification of Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
101.INS
XBRL Instance Document*
101.SCH
XBRL Taxonomy Extension Schema*
101.CAL
XBRL Taxonomy Extension Calculation Linkbase*
101.DEF
XBRL Taxonomy Extension Definition Linkbase*
101.LAB
XBRL Taxonomy Extension Label Linkbase*
101.PRE
XBRL Taxonomy Extension Presentation Linkbase*
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) *
*
Provided herewith.
**
Furnished herewith.