|6 Months Ended|
Jun. 30, 2018
8 — STOCKHOLDERS’ DEFICIT
On October 1, 2017, ADial Pharmaceuticals, LLC converted from a Virginia limited liability company to a Virginia corporation, APL Conversion Corp. On October 11, 2017, APL Conversion Corp. was merged into Adial Pharmaceuticals, Inc., a Delaware corporation. The Certificate of Incorporation of Adial Pharmaceuticals, Inc. authorizes the issuance of fifty million (50,000,000) shares of common stock and five million (5,000,000) shares of preferred stock. No shares of preferred stock have been issued or designated by Adial Pharmaceuticals, Inc. Three million, two hundred sixty-eight thousand five (3,268,005) shares of common stock were issued to the former equity unit holders of ADial Pharmaceuticals, LLC following the limited liability company’s conversion to a Virginia corporation and subsequent reincorporation by merger in Delaware in the following ratios and total amounts:
Options and warrants for the purchase of units of ADial Pharmaceuticals, LLC were converted to options and warrants to purchase shares of APL Conversion Corp. in the conversion and Adial Pharmaceuticals, Inc. assumed the options and warrants in the merger. Options for purchase of 937,000 Class A units, warrants for purchase of 723,916 Class A units, and warrants for purchase of 1,870,469 Class B units were converted to options and warrants exercisable for an aggregate of six hundred fifty-six thousand eight hundred thirty-seven (656,837) shares of common stock of Adial Pharmaceuticals, Inc. and were assumed in proportion to the number of shares to be issued to former unit holders of the class of units underlying the option or warrant, with the exercise price of the newly issued options or warrants being divided by the same ratio.
For financial reporting purposes, this merger transaction was recorded as a reorganization of ADial Pharmaceuticals, LLC which has adopted the capital structure and now operates under the name of Adial Pharmaceuticals, Inc. Accordingly, all references to the former member’s initial capital contribution in ADial Pharmaceuticals, LLC been retroactively adjusted to reflect the equivalent number of Adial Pharmaceuticals, Inc. shares of common stock. Additionally, upon completion of the conversion, the Company calculated a net adjustment to deferred income tax asset, which was deemed immaterial, and reclassified $10.7 million from accumulated deficit to additional paid in capital.
On April 1, 2018, the Company issued 292,309 shares of common stock to Company officers and a director in compensation for termination, by mutual agreement of the Performance Bonus Plan. At the time of this issuance, the company recognized an equity-based compensation expense of $1,461,545 (See Note 9).
The following table provides the activity in stock options for the six months ended June 30, 2018.
At June 30, 2018, the numbers of vested options were 53,046.
At June, 2018, the exercise price of the options was above the fair value of shares of common stock, so intrinsic value totals of the outstanding options were $0.
The total value of options granted in 2017 was $842,221, and the total value of option granted in 2018 was $0. During the six months ended June 30, 2018 and 2017, total equity-based compensation expense from the options issued was $139,090 and $60,818, respectively. As of June 30, 2018, $567,241 in further compensation expense resulting from issued options remained to be recognized.
The following is a summary of Warrants outstanding:
There were no warrants issued, exercised or expired for the six months ended June 30, 2018 and 2017. In the six months ended June 30, 2018, 300,000 warrants were issued, no warrants were exercised or expired. Warrants were issued on July 31, 2018 in connection with the IPO, see Notes 2 and 11.
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef