SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS

12 Months Ended

Dec. 31, 2021

Equity [Abstract]

SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS

NOTE 7 - SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS 

Authorized Capital

The holders of the Company’s common stock (“Common Stock”) are entitled to one vote per share. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of legally available funds. Upon the liquidation, dissolution, or winding up of the Company, holders of common stock are entitled to share ratably in all assets of the Company that are legally available for distribution. As of December 31, 2021 and December 31, 2020, 100,000,000 shares of common stock were authorized under the Company’s articles of incorporation.

On December 30, 2020, the Company amended its articles of incorporation to designate and authorize 20,000,000 shares of preferred stock. The Company issued Series B preferred stock (“Series B Preferred Stock), which has a certificate of designation authorizing issuance of 3,600,000 preferred shares. The Series B Preferred Stock is convertible by the holder at any time into common stock at a rate of one to one.

Common Stock Activity

During the year ended December 31, 2020, the Company issued 433,047 shares of common stock to various vendors in connection with the payment of accounts payable of $756,523. The shares were valued at the book value of the accounts payable, as that value was more readily determinable.

On July 21, 2020, the Company issued 239,326 shares of common stock in exchange for the February 2019 Note (face value of $66,000), the March 2019 Note (face value of $150,000) and related party advances in the amount of $22,000. Given that the holder of these notes and advances is a related party, this was treated as a capital transaction and no gain or loss was recognized. 

On September 25, 2020, the Company issued 36,871 shares of its common stock for gross proceeds of $250,000 and net proceeds of $227,500.

During the year ended December 31, 2020, 571,987 shares of Common Stock, valued at $1,900,546 were issued to Tikkun Pharma Inc. as consideration for their assignment of rights to certain skin care treatment assets and intellectual property rights to certain formulations. The aggregate purchase price was $1,944,689, including cash considerations of $44,143.

On January 14, 2021, the Company completed an offering of 2,221,334 shares of Common Stock and pre-funded warrants at approximately $4.50 per share and a concurrent private placement of warrants to purchase 1,666,019 shares of Common Stock at $4.95 per share, exercisable immediately and terminating five years after the date of issuance for gross proceeds of approximately $10,000,000. The net proceeds to the Company after deducting financial advisory fees and other costs and expenses were approximately $8,800,087, with $4,617,087 of such amount allocated to share capital and $4,846,000 allocated to warrant liability and the remaining $663,000 recorded as an expense.

On February 11, 2021, the Company completed an offering of 3,007,026 shares of Common Stock and a concurrent private placement of warrants to purchase 1,503,513 shares of Common Stock at $4.90 per share, exercisable immediately and terminating five year from the date of issuance for gross proceeds of approximately $12,800,000. The net proceeds to Enveric from the offering after deducting financial advisory fees and other costs and expenses were approximately $11,624,401, with $7,016,401 of such amount allocated to share capital and $5,135,000 allocated to warrant liability and the remaining $527,000 recorded as an expense.

On September 16, 2021, the Company, in connection with the Amalgamation Agreement entered into on May 24, 2021, acquired MagicMed Industries Inc., and its wholly owned subsidiary MagicMed USA, Inc. The Company issued a total of 9,951,217 shares of Common Stock, valued at $39,042,282 on the date of closing. See Note 3 for further details.

During the year ended December 31, 2021, a total of 2,643,047 Common Shares were issued pursuant to exercise of warrants to purchase Common Stock for cash proceeds totaling $3,285,171.

During the year ended December 31, 2021, a total of 134,246 Common Shares were issued pursuant to cashless exercise of options to purchase Common Stock.

During the year ended December 31, 2021, a total of 1,015,315 Common Shares as inducement for the conversion of certain warrants and options. The Company recognized an inducement expense of $1,125,291 in relation to these issuances.

During the year ended December 31, 2021, the Company issued 14,121 shares to a consultant in exchange for services valued at $33,467.

During the year ended December 31, 2021, the Company issued a total of 221,653 shares of Common Stock pursuant to exercise of put rights contained in warrants originally issued by Ameri and assumed by the Company.

Issuance and Conversion of Series B Preferred Shares

On December 8, 2020, the Company issued 221,225 shares of its Series B preferred stock for gross proceeds of $300,000 and net proceeds of $260,500.

During the year ended December 31, 2020, the Company issued a total of 250,000 shares of Common Stock pursuant to the conversion of 250,000 shares of Series B Preferred Stock.

During the year ended December 31, 2021, the Company issued a total of 3,275,407 shares of Common Stock pursuant to the conversion of 3,275,407 shares of Series B Preferred Stock.

Stock Options

A summary of activity under the Company’s incentive plan for the years ended December 31, 2021 and 2020 is presented below:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding – January 1, 2020		797,373		$	1.99	$	0.72		5.0	$	—
Granted		378,800		$	0.94		5.22
Expired forfeited, or cancelled		(246,408	)	$	1.94		0.88
Outstanding – December 31, 2020		929,765		$	1.53	$	2.50		6.1	$	2,537,245
Granted		124,100		$	2.98	$	2.32
Options assumed pursuant to acquisition of MagicMed		973,840		$	1.34	$	1.84
Exercised		(143,796	)	$	0.23	$	5.69
Expired forfeited, or cancelled		(692,475	)	$	1.69	$	1.62
Outstanding – December 31, 2021		1,191,434		$	1.58	$	2.07		5.3	$	34,333
Exercisable at December 31, 2021		958,915		$	1.50	$	2.01		4.5	$	13,733

During the year ended December 31, 2021, 143,976 options were exercised via a cashless exercise resulting in the issuance of 134,246 shares of common stock.

Options granted during the years ended December 31, 2021 and 2020 were valued using the Black Scholes model with the following assumptions:

	December 31, 2021			December 31, 2020
Term (years)	$	2.5 to 7.0		$	1.5 to 4.2
Stock price	$	2.04 to 3.50		$	5.92
Exercise price	$	2.04 to 3.50		$	0.23 to 2.71
Dividend yield		0	%		0	%
Expected volatility		76% to 79	%		84.7	%
Risk free interest rate		1.1% to 1.6%	%		0.37	%

The above assumptions are determined by the Company as follows:

● Stock price – Based on closing price of the Company’s common stock on the date of grant.

● Weighted average risk-free interest rate —Based on the daily yield curve rates for U.S. Treasury obligations with maturities, which correspond to the expected term of the Company’s stock options.

● Dividend yield —The Company has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future.

● Expected volatility —Based on the historical volatility of comparable companies in a similar industry.

● Expected term —The Company has had no stock options exercised since inception. The expected option term represents the period that stock-based awards are expected to be outstanding based on the simplified method provided in Staff Accounting Bulletin (“SAB”) No. 107, Share-Based Payment, which averages an award’s weighted-average vesting period and expected term for “plain vanilla” share options.

The Company’s stock-based compensation expense related to stock options for the years ended December 31, 2021 and 2020 was $60,856 and $1,977,155, respectively. As of December 31, 2021, the Company had $497,384 in unamortized stock option expense with a weighted average amortization period equal to 2.6 years.

During the first quarter 2021, the Company exchanged options to purchase 560,404 shares of common stock for 325,410 restricted stock units and 42,125 restricted stock awards. In connection with this exchange, the Company recognized $298,714 in inducement expense related to the increase in fair value of the new awards over the old awards, which is included in other expenses on the Company’s consolidated statement of operations and comprehensive loss.

Restricted Stock Awards

The Company’s activity in restricted common stock was as follows for the year ended December 31, 2021 (there was no restricted common stock issued for the year ended December 31, 2020):

	Number of shares			Weighted average fair value
Non–vested at January 1, 2021		—		$	—
Granted		125,733		$	3.57
Vested		(74,224	)	$	4.09
Non–vested at December 31, 2021		51,509		$	2.83

For the year ended December 31, 2021 and 2020, the Company recorded $231,631 and $—, in stock-based compensation expense related to restricted stock awards, respectively. As of December 31, 2021, unamortized stock-based compensation costs related to restricted share awards was $24,263, which will be recognized over a weighted average period of 0.6 years. An aggregate of 42,125 Common Shares have been issued in relation to vested restricted stock awards. The balance of Common Shares related to the vested restricted stock awards as of December 31, 2021 will be issued during the subsequent calendar year.

Issuance of Restricted Stock Units

The Company’s activity in restricted stock units was as follows for the year ended December 31, 2021 (there were no restricted stock units issued for the year ended December 31, 2020):

	Number of shares			Weighted average fair value
Non–vested at January 1, 2021		—		$	—
Granted		6,258,377		$	3.44
Forfeited		(371,944	)	$	3.04
Vested		(2,785,820	)	$	4.52
Non–vested at December 31, 2021		3,100,613		$	2.52

For the year ended December 31, 2021 and 2020, the Company recorded $12,304,514 and $—, respectively, in stock-based compensation expense related to restricted stock units, with $11,463,870 included as a component of general and administrative expenses and $840,644 included as a component of research and development costs in the consolidated statement of operations. As of December 31, 2021, the Company had unamortized stock-based compensation costs related to restricted stock units of $7,774,089 which will be recognized over a weighted average period of 3.4 years and unamortized stock-based costs related to restricted stock units. As of December 31, 2021, no shares of Common Stock have been issued in relation to vested restricted stock units.

As of the end of the fiscal year ended December 31, 2021, there were 5,886,433 shares of common stock underlying outstanding restricted stock units, of which (i) 2,785,820 shares are underlying vested restricted stock units and issuable, subject to certain conditions for settlement, which includes either termination of employment with the Company or a change of control, and of which 297,635 shares may not be issued until the Enveric Biosciences, Inc. 2020 Long-Term Equity Incentive Plan (the “Long-Term Incentive Plan”), which currently has no shares available for issuance and is short of shares to cover all of the outstanding restricted stock units, is amended to increase the number of shares authorized for issuance of awards under the Long-Term Incentive Plan upon approval by the Company’s stockholders and (ii) 3,100,613 shares are issuable upon the vesting of such restricted stock units, subject to achievement of vesting conditions, certain conditions of settlement which includes either termination of employment with the Company or a change of control, and further subject to the increase in the number of shares authorized for issuance of awards under the Long-Term Incentive Plan upon approval by the Company’s stockholders.

Warrants

The following table summarizes information about shares issuable under warrants outstanding at December 31, 2021:

	Warrant shares outstanding			Weighted average exercise price		Weighted average remaining life		Intrinsic value
Outstanding at January 1, 2021		3,730,805		$	2.05		5.2	$	8,923,797
Granted		4,146,146		$	4.20
Assumed pursuant to acquisition of MagicMed		5,913,672		$	1.31
Exercised		(3,253,714	)	$	1.01
Exchanged for common stock		(768,143	)	$	4.65
Outstanding at December 31, 2021		9,768,766		$	2.62		3.4	$	801,024

The warrants assumed pursuant to the acquisition of MagicMed contain certain down round features, which were not triggered by the February 2022 public offering, that would require adjustment to the exercise price upon certain events when the offering price is less than the stated exercise price.

All outstanding warrants are exercisable.

Warrants exchanged for Common Stock consist of an aggregate of 221,653 shares of Common Stock being issued in exchange for an aggregate of 109,372 warrants issued by Ameri and containing put rights that were exercised by the Holder and an aggregate of 973,190 shares of Common Stock being issued in exchange for an aggregate of 658,771 warrants containing certain terms wherein management determined it to be beneficial to the Company to exchange Common Shares for these warrants.

The aggregate of 221,653 Common Shares issued in exchange for the aggregate of 109,372 warrants issued by Ameri and containing put rights were issued in lieu of cash payments, in accordance with the terms of the put rights contained in the warrants.

The aggregate of 973,190 shares of common stock issued in exchange for certain outstanding warrants to purchase an aggregate of 658,771 shares of the Company’s common stock at an exercise price of $4.66 were issued pursuant to exchange agreements with the holders of such warrants. The Company believes that these exchanges are beneficial to the Company because the reacquired warrants contained provisions that required the Company to repurchase the warrants for cash at the holder’s option and/or “full ratchet” anti-dilution adjustments that may result in a reduction in the exercise price of such warrants and an increase in the number of shares issuable upon exercise thereof under certain circumstances. The Company has cancelled all of the warrants reacquired in such exchanges and they will not be reissued. In connection with this exchange, the Company recognized $826,577 in inducement expense related to the increase in fair value of the new awards over the old awards, which is included in other expenses on the Company’s consolidated statement of operations and comprehensive loss.

The following table summarizes information about shares issuable under warrants outstanding at December 31, 2020:

	Number of Shares			Weighted Average Exercise Price (USD)		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (USD)
Outstanding – January 1, 2020		303,891		$	1.99		1.06		—
Granted		3,701,730		$	0.94
Expired forfeited, or cancelled		(274,816	)	$	1.94
Outstanding – December 31, 2020		3,730,805		$	2.05		5.2	$	8,923,797
Exercisable at December 31, 2020		3,730,805		$	2.05		5.2	$	8,923,797