Quarterly report pursuant to Section 13 or 15(d)

Shareholders' Equity

v3.21.1
Shareholders' Equity
3 Months Ended
Mar. 31, 2021
Stockholders' Equity Note [Abstract]  
SHAREHOLDERS' EQUITY

9 — SHAREHOLDERS’ EQUITY


Common Stock Issuances


On January 26, 2021, 669,980 unregistered shares of common stock were issued to the shareholders of Purnovate, Inc., including William B. Stilley, the Company’s CEO and entities controlled by James Newman, a Director, in consideration of purchase of Purnovate, Inc., at a total cost of $1,060,150 (See Note 4.)


On February 8, 2021, option to purchase 10,000 shares of common stock at an exercise price of $1.45 per share was exercised for total proceeds of $14,500.


On February 25, 2021, previously registered warrants to purchase 712,500 shares at an exercise fee of $2.00 per share were exercised for a total of $1,425,000.


During the three months ended March 31, 2021, the Company issued 1,007,296 shares of common stock to under the Keystone equity purchase agreement for total proceeds of $2,350,000.


During the three months ended March 31, 2021, the Company issued 350,000 shares of common stock to consultants for services rendered and to employees at a total cost of $850,900.


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 March 31, 2021, the Company had issued 1,159,438 shares and had outstanding 3,437,180 options to purchase shares of our common stock under the 2017 Equity Incentive Plan, as well as 139,686 options to purchase shares of common stock that were issued before this plan was adopted.


Stock Options


The following table provides the stock option activity for the three months ended March 31, 2021:


    Total
Options
Outstanding
    Weighted
Average
Remaining
Term
(Years)
    Weighted
Average
Exercise
Price
    Weighted
Average
Fair Value
at Issue
 
Outstanding December 31, 2020     2,668,866       8.09     $ 2.48     $ 1.13  
Issued     918,000               2.96       2.41  
Exercised     (10,000 )             1.45       0.66  
Cancelled                              
Outstanding March 31, 2021     3,576,866       8.38     $ 2.61     $ 1.94  
Outstanding March 31, 2021, vested and exercisable     1,493,019       7.69     $ 2.87     $ 2.08  

At March 31, 2021, the intrinsic value totals of the outstanding options were $1,335,934.


The Company used the Black Scholes valuation model to determine the fair value of the options issued, using the following key assumptions for the three months ended March 31, 2021:


    March 31,
2021
 
Fair Value per Share   $ 2.21-3.11  
Expected Term     5.75 years  
Expected Dividend   $  
Expected Volatility     109.29-109.64 %
Risk free rate     0.41-0.49 %

During the three months ended March 31, 2021, 918,000 options to purchase shares of common stock were granted at a fair value of $2,213,409, an approximate weighted average fair value of $2.41 per option, to be amortized over a service a weighted average period of three years. As of March 31, 2021, $4,116,593 in unrecognized compensation expense will be recognized over a weighted average remaining service period of 1.72 years.


The components of stock-based compensation expense included in the Company’s Statements of Operations for the three months ended March 31, 2021 and 2020 are as follows:


    Three months ended 
March 31,
 
    2021     2020  
Research and development options expense   $ 66,632     $ 86,439  
Total research and development expenses     66,632       86,439  
General and administrative options and warrants expense    

407,156

      255,568  
Stock issued to consultants and employees     850,900       228,626  
Total general and administrative expenses     1,258,116       484,194  
Total stock-based compensation expense   $

1,324,688

    $ 570,633  

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, 2020     8,649,625       3.46     $ 4.60     $ 0.02  
Issued     20,100               1.99          
Exercised     (712,500 )             2.00          
Outstanding March 31, 2021     7,957,225       3.13     $ 4.83     $ 0.02  

This table includes warrants to purchase 91,705 shares of common stock issued to consultants, including the 20,100 issued in the three months ended March 31, 2021, with a total fair value of $140,254 at time of issue, calculated using the Black Scholes model assuming an underlying security values of ranging between $1.30 and $2.03, volatility rate ranging between 103.8% and 109.64%, a risk-free rate of 0.49%, and an expected term of 5.75 years. In the three months ended March 31, 2021, the Company recognized $34,461 in expense associated with these warrants with $53,103 remaining to be recognized.


During the three months ended March 31, 2021, 712,500 warrants to purchase shares of common stock were exercised for total proceeds of $1,425,000.