Shareholders' Equity

6 Months Ended

Jun. 30, 2023

Shareholders' Equity [Abstract]

SHAREHOLDERS’ EQUITY

9 — SHAREHOLDERS’ EQUITY

Standby Equity Purchase Agreement

On May 31, 2023, the Company entered into an Equity Purchase Agreement with Alumni Capital, LLC (“Alumni”). This agreement constituted a standby equity purchase agreement (a “SEPA”). Pursuant to the SEPA, the Company has the right, but not the obligation, to sell to Alumni up to $3,000,000 of newly issued shares, subject to increase to $10,000,000 at the option of the Company, at the Company’s request at any time during the commitment period, which commenced on May 31, 2023 and will end on the earlier of (i) December 31, 2024, or (ii) the date on which Alumni shall have made payment of advances requested by the Company totaling up to the commitment amount of $3,000,000. Each sale the Company requests under the SEPA (a “Purchase Notice”) may be for a number of shares of common stock with an aggregate value of up $500,000, and up to $2,000,000 provided certain conditions concerning the average daily trading value are met. The SEPA provides for shares to be sold to Alumni at 95% of the lowest daily volume weighted average price during the three days after a Purchase Notice is issued to Alumni. The Company determined that the SEPA contains put option elements and forward share issuance elements that fail to meet equity classification under ASC 815-40, Contracts in an Entity’s Own Equity; the put option is recorded at fair value at inception and each reporting date thereafter. Forward contracts to issue shares created on the occurrence of a Purchase Notice will be measured at fair value, with changes in fair value recognized in net loss upon closing of the Purchase Notice and sale of the Company’s stock.

Upon the Company’s entry into and subject to the terms and conditions set forth in the SEPA, 7,983 shares of common stock were issued to Alumni as consideration for its irrevocable commitment to purchase shares of common stock, pursuant to the SEPA, as shown in the consolidated statement of shareholders’ equity. The fair value of these shares of $51,901 was recorded as a finance (other) expense in the consolidated statements of operations. At June 30, 2023, no Purchase Notices had been issued under the SEPA.

Common Stock Issuances

On February 23, 2023, the Company entered into a securities purchase agreement (the “2023 Purchase Agreement”) with an accredited institutional investor (the “Investor”) providing for the issuance of 73,144 shares of the Common Stock, par value $0.001 (the “Common Stock”). Pursuant to the 2023 Purchase Agreement, the Investor purchased the Shares for an aggregate purchase price of $750,000 with net proceeds of $609,613, after placement agent fees and expenses. Pursuant to the Purchase Agreement, an aggregate of 73,144 Shares were issued to the Investor.

The Company issued to the Placement Agent a warrant (the “Placement Agent Warrants”) to purchase up to an aggregate of 7,317 shares of common stock, representing 10% of the aggregate number of shares of Common Stock sold pursuant to the Purchase Agreement. The Placement Agent Warrants have an exercise price equal to $10.25 and are exercisable two months after the closing date and expire five years after the date of issuance. The total estimated fair value of the Placement agent warrant was $58,540.

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. On October 13, 2022, by a vote of the shareholders, the number of shares issuable under the 2017 Equity Incentive Plan was increased to 380,000. At June 30, 2023, the Company had issued 138,531 shares and had outstanding 203,312 options to purchase shares of our common stock under the 2017 Equity Incentive Plan, as well as 5,587 options to purchase shares of common stock that were issued before the 2017 Equity Incentive Plan was adopted, leaving 38,157 available for issue.

Stock Options

The following table provides the stock option activity for the six months ended June 30, 2023:

	Total Options Outstanding			Weighted Average Remaining Term (Years)		Weighted Average Exercise Price		Weighted Average Fair Value at Issue
Outstanding December 31, 2022		172,676			7.21	$	62.00	$	47.75
Issued		39,800					7.50		6.00
Cancelled		(3,577	)				49.50		40.25
Outstanding June 30, 2023		208,899			7.44	$	52.00	$	40.00
Outstanding June 30, 2023, vested and exercisable		148,562			6.51	$	62.50	$	47.75

At June 30, 2023, the intrinsic value total of the outstanding options was zero dollars.

During the six months ended June 30, 2023, 39,800 options to purchase shares of common stock were granted with a total value of $243,157. As of June 30, 2023, $1,301,501 in unrecognized compensation expense will be recognized over a weighted average remaining service period of 2.25 years.

The components of stock-based compensation expense included in the Company’s Statements of Operations for the three and six months ended June 30, 2023 and 2022 are as follows:

	Three months ended  June 30,				Six months ended  June 30,
	2023		2022		2023		2022
Research and development options expense		40,636		52,438		89,549		128,828
Total research and development expenses		40,636		52,438		89,549		128,828
General and administrative options expense		269,627		573,378		618,156		1,064,177
Stock and warrants issued to consultants and employees		427,317		473,906		489,452		890,329
Total general and administrative expenses		696,944		1,047,284		1,107,608		1,954,506
Total stock-based compensation expense	$	737,580	$	1,099,722	$	1,197,157	$	2,083,334

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, 2022		486,726			3.04	$	100.75	$	0.25
Issued		7,317			5.00		10.25		0.00
Exercised		(433	)				0.13		0.23
Outstanding June 30, 2023		493,610			2.56	$	99.5	$	0.00