Quarterly report pursuant to Section 13 or 15(d)

Shareholders' Equity

v3.21.2
Shareholders' Equity
9 Months Ended
Sep. 30, 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 and nine months ended September 30, 2021, the Company issued 205,762 and 1,645,907 shares of common stock under the Keystone equity purchase agreement for total proceeds of $500,000 and $3,850,000, respectively.

 

During the three and nine months ended September 30, 2021, the Company issued 1,666,668 and 2,366,669 shares of common stock for total proceeds of $5,000,004 and $7,100,007 under securities purchase agreements, respectively.

 

During the three and nine months ended September 30, 2021, the Company issued 170,000 and 620,000 shares of common stock to consultants for services rendered and to employees at a total cost of $548,100 and $1,674,000, respectively.

 

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 27, 2021, by a vote of the shareholders, the number of shares issuable under the 2017 Equity Incentive Plan was increased to 7,500,000. At September 30, 2021, the Company had issued 489,437 shares and had outstanding 3,561,180 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 the 2017 Equity Incentive Plan was adopted.

 

Stock Options

 

The following table provides the stock option activity for the nine months ended September 30, 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     1,042,000               2.95       2.40  
Exercised     (10,000 )             1.45       0.66  
Cancelled    
     
 
     
 
     
 
 
Outstanding September 30, 2021     3,700,866       7.78     $ 2.62     $ 1.96  
Outstanding September 30, 2021, vested and exercisable     2,069,005       7.40     $ 2.76     $ 2.02  

 

At September 30, 2021, the intrinsic value totals of the outstanding options were $6,367,096.

 

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, 2021:

 

    September 30,
2021
 
Fair Value per Share   $ 2.21-3.20  
Expected Term     1.00-5.75 years  
Expected Dividend   $  
Expected Volatility     109.29-110.27 %
Risk free rate     0.07-0.49 %

 

During the nine months ended September 30, 2021, 1,042,000 options to purchase shares of common stock were granted at a fair value of $2,505,573, an approximate weighted average fair value of $2.40 per option, to be amortized over a service a weighted average period of 2.61 years. As of September 30, 2021, $3,272,012 in unrecognized compensation expense will be recognized over a weighted average remaining service period of 1.81 years.

 

The components of stock-based compensation expense included in the Company’s Statements of Operations for the nine months ended September 30, 2021 and 2020 are as follows:

 

    Three months ended 
September 30,
    Nine months ended 
September 30,
 
    2021     2020     2021     2020  
Research and development options expense     79,604       56,458       223,413       196,976  
Total research and development expenses     79,604       56,458       223,413       196,976  
General and administrative options expense     468,281       291,727       1,289,192       878,864  
Stock and warrants issued to consultants and employees     640,992       329,807       1,844,254       685,238  
Total general and administrative expenses     1,109,273       621,534       3,133,446       1,564,102  
Total stock-based compensation expense   $ 1,188,877     $ 677,992     $ 3,356,859     $ 1,761,078  

 

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     53,146               2.21          
Exercised     (712,500 )             2.00          
Outstanding September 30, 2021     7,990,271       3.11     $ 5.17     $ 0.42  

 

This table includes warrants to purchase 144,851 shares of common stock issued to consultants, including the 53,146 shares of common stock issued during the nine months ended September 30, 2021, with a total fair value of $149,581 at time of issue, calculated using the Black Scholes model assuming an underlying security values of ranging between $1.30 and $2.62, volatility rate ranging between 103.8% and 110.24%, a risk-free rate ranging between 0.43% and 0.49%, and an expected term of 5.75 years. In the three and nine months ended September 30, 2021, the Company recognized $92,892 and $170,254 in expense associated with these warrants, respectively, with $55,502 remaining to be recognized at September 30, 2021.