Annual report pursuant to Section 13 and 15(d)

Shareholders' Equity

v3.22.1
Shareholders' Equity
12 Months Ended
Dec. 31, 2021
Stockholders' Equity Note [Abstract]  
SHAREHOLDERS' EQUITY

10 — 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, an 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 year ended December 31, 2021, the Company issued 1,645,907 shares of common stock under the Keystone equity purchase agreement for total proceeds of $3,850,000.

 

During the year ended December 31, 2021, the Company issued 2,566,669 shares of common stock for total proceeds of $7,900,007 under securities purchase agreements.

 

During the year ended December 31, 2021, the Company issued 713,000 shares of common stock to consultants for services rendered and to employees at a total cost of $1,980,900, 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 December 31, 2021, the Company had issued 694,993 shares and had outstanding 3,445,624 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, leaving 3,359,383 available for issue.

 

Stock Options

 

The following table provides the stock option activity for the years ended December, 2021 and 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                                           3.38                2.38  
Issued     1,255,000               1.44       1.13  
Cancelled     (247,600 )             3.27       2.04  
Outstanding December 31, 2020     2,668,866                8.09     $ 2.48     $ 1.13  
Issued     1,132,000               2.47       2.37  
Exercised     (215,556 )             2.18       0.89  
Outstanding December 31, 2021     3,585,310       7.80     $ 2.64     $ 2.02  
Outstanding December 31, 2021, vested and exercisable     2,172,922       7.40     $ 2.78     $ 2.08  

 

At December 31, 2021, the intrinsic value totals of the outstanding options were $1,648,200.

 

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

 

    December  31,
2021
 
 
Fair Value per Share $ 2.21-4.52  
Expected Term    1.00-5.75 years  
Expected Dividend $  
Expected Volatility    108.35-110.69 %
Risk free rate    0.07-1.26 %

 

During the year ended December 31, 2021, 1,132,000 options to purchase shares of common stock were granted at a fair value of $2,700,075, an approximate weighted average fair value of $2.39 per option, to be amortized over a service a weighted average period of 2.93 years at December 31, 2021. As of December 31, 2021, $2,765,191 in unrecognized compensation expense will be recognized over a remaining service period of 1.8 years.

 

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

 

    Year ended December 31,  
    2021     2020  
Research and development options expense     304,421       252,173  
Total research and development expenses     304,421       252,173  
General and administrative options expense     1,955,096       1,168,281  
Stock and warrants issued to consultants and employees     1,980,900       710,792  
Total general and administrative expenses     3,935,996       1,879,073  
Total stock-based compensation expense   $ 4,240,417     $ 2,131,246  

 

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     2,206,705               1.98      
 
 
Exercised     (226,354 )           $ 1.99      
 
 
Outstanding December 31, 2020     8,649,625       3.46     $ 4.60       0.02  
Issued     53,146               2.26      
 
 
Exercised     (712,500 )           $ 2.00      
 
 
Outstanding December 31, 2021     7,990,271       2.63     $ 4.82       0.14  

 

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 year ended December 31, 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 ranging from 3.00 to 5.75 years. In the year ended December 31, 2021, the Company recognized $212,927 in expense associated with these warrants, with $11,103 remaining to be recognized at December 31, 2021.

 

During the years ended December 31, 2021 and 2020, 712,500 and 226,354 warrants to purchase shares of common stock were exercised for total proceeds of $1,424,998 and $450,008, respectively.