Quarterly report pursuant to Section 13 or 15(d)

Shareholders' Equity

v3.20.2
Shareholders' Equity
9 Months Ended
Sep. 30, 2020
Equity [Abstract]  
SHAREHOLDERS' EQUITY

6 — SHAREHOLDERS' EQUITY

  

Common Stock Issuances

 

On January 22, 2019, the Company issued 250,000 unregistered shares of common stock upon the exercise of a warrant to purchase 300,000 shares of common stock at an exercise price of $3.75 per share for a cash payment of $468,750 and the cashless exercise of the remaining warrant.

 

On January 31, 2019, the Company issued 22,311 unregistered shares of common stock upon the full cashless exercise of a warrant to purchase 65,130 shares of common stock at an exercise price of $4.99 per share.

 

On February 22, 2019, the Company concluded a follow-on offering of 2,475,000 shares of common stock and warrants to purchase 1,856,250 shares of common stock at an exercise price of $4.0625 per share. The shares of common stock and accompanying warrants were sold to the public at a price of $3.25 per share and warrant. The underwriters were granted an over-allotment option to purchase up to 371,250 shares of common stock and warrants to purchase 278,437 shares of common stock at a price of $3.25 per share of common stock and warrant. The underwriters partially exercised their over-allotment option by purchasing 370,000 shares of common stock and warrants to purchase 277,500 shares common stock. Gross proceeds of the offering, totaled $9,246,249, which after offering expenses, resulted in net proceeds of $8,195,673. 

 

On March 3, 2020, the Compensation Committee of Board of Directors of the Company awarded the Company's executive officers, William B. Stilley, Chief Executive Officer, and Joseph Truluck, Chief Financial Officer, performance bonuses for 2019, partially paid in common stock of the Company to preserve cash, of $42,000 and $21,000 in cash, respectively, and 54,167 and 27,084 shares of the Company's common stock, respectively, which shares are subject to a six-month contractual restriction on sale. Of the $180,002 total cost of these bonuses, $150,000 were recognized in the year ended December 31, 2019 as expected under these executives' contracts, and the remaining $30,002 in bonus was recognized upon Board approval.

 

On June 11, 2020, the Company concluded a registered direct offering of 2,820,000 shares of common stock and in a concurrent private placement the sale of warrants to purchase 2,115,000 shares of common stock at an exercise price of $2.00 per share. The shares of common stock and accompanying warrants were sold directly to the buyers at a combined at-the-market price of $1.85 for a share and three quarters warrant. Gross proceeds of the offering, totaled $5,217,000, which after offering expenses, resulted in net proceeds of $4,657,215. 

 

On July 31, 2020, warrants to purchase 1,354 shares at an exercise price of $0.005 per share were exercised for a cash payment of $8.

 

On September 21, 2020, the Company concluded a private placement of 357,143 unregistered shares of common stock and above market price of $1.40 per share. Gross proceeds of the offering, totaled $500,000, with no material expenses.

 

On September 29, 2020, previously registered warrants to purchase 225,000 shares at an exercise fee of $2.00 per share were exercised for a total of $450,000.

 

During the nine months ended September 30, 2020, the Company issued 446,251 shares of common stock to consultants for services rendered and to employees at a total cost of $655,827.

 

 

2017 Equity Incentive Plan

 

On October 9, 2017, the Company adopted the Adial Pharmaceuticals, Inc. 2017 Equity Incentive Plan (the "2017 Equity Incentive Plan"); which became effective on July 31, 2018. Initially, the aggregate number of shares of our common stock that may be issued pursuant to stock awards under the 2017 Equity Incentive Plan was 1,750,000 shares. On September 1, 2020, by a vote of the shareholders, the number of shares issuable under the 2017 Equity Incentive Plan was increased to 5,500,000. At September 30, 2020, the Company had issued 799,438 shares and had outstanding 2,529,180 options to purchase shares of our common stock under the 2017 Equity Incentive Plan.

 

Stock Options

 

The following table provides the stock option activity for the nine months ended September 30, 2020:

 

    Total
Options
Outstanding
    Weighted
Average
Remaining
Term
(Years)
    Weighted
Average
Exercise
Price
    Weighted
Average
Fair Value
at Issue
 
Outstanding December 31, 2019     1,661,466       9.14       3.38       2.38  
Issued     1,255,000               1.44       1.13  
Cancelled     (247,600 )             3.27       2.04  
Outstanding September 30, 2020     2,668,866       8.34       2.48       1.78  
Outstanding September 30, 2020, vested and exercisable     1,037,227       7.85     $ 2.63     $ 2.22  

 

At September 30, 2020, the intrinsic value totals of the outstanding options were $1,051,006.

 

The Company used the Black Scholes valuation model to determine the fair value of the options issued, using the following key assumptions for the nine months ended September 30, 2020:

 

    September 30, 
2020
 
Fair Value per Share   $ 1.36-1.48  
Expected Term     5.75 years  
Expected Dividend   $  
Expected Volatility     102.39-103.83 %
Risk free rate     0.49-0.72 %

 

During the nine months ended September 30, 2020, 1,255,000 options to purchase shares of common stock were granted at a fair value of $1,420,505, an approximate weighted average fair value of $1.13 per option, to be amortized over a service a weighted average period of three years. As of September 30, 2020, $2,688,650 in unrecognized compensation expense will be recognized over a weighted average remaining service period of 1.82 years.

 

The components of stock-based compensation expense included in the Company's Statements of Operations for the three and nine months ended September 30, 2020 and 2019 are as follows:

 

    Three months ended 
September 30,
    Nine months ended 
September 30,
 
    2020     2019     2020     2019  
Research and development options expense     56,458       99,612       196,976       241,315  
Total research and development expenses     56,458       99,612       196,976       241,315  
General and administrative options expense     291,727       214,007       878,864       511,664  
Stock and warrants issued to consultants and employees     329,807       71,250       685,238       380,354  
Total general and administrative expenses     621,534       285,257       1,564,102       892,018  
Total stock-based compensation expense   $ 677,992     $ 384,869     $ 1,761,078     $ 1,133,333  

  

Stock Warrants

 

The following table provides the activity in warrants for the respective periods.

 

   

Total

Warrants

    Weighted
Average
Remaining
Term
(Years)
   

Weighted

Average

Exercise

Price

    Average
Intrinsic
Value
 
Outstanding December 31, 2019     6,669,274       4.23     $ 5.38       0.03  
Issued     2,187,000               1.98          
Exercised     (226,354 )             1.99          
Outstanding September 30, 2020     8,629,920       4.88     $ 4.61       0.08  

 

This table includes warrant to purchase 72,000 shares of common stock issued to a consultant, with a total fair value of $73,914 at time of issue, calculated using the Black Scholes model assuming an underlying security value of $1.30 and volatility rate of 103.83%, a risk-free rate of 0.49%, and an expected term of 5.75 years.

 

During the nine months ended September 30, 2020, 226,354 warrants to purchase shares of common stock were exercised for total proceeds of $450,008.