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SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS
 3 Months Ended
Mar. 31, 2022
Equity [Abstract]  
SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS

5. 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 March 31, 2022, 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. During the three months ended March 31, 2021, holders of an aggregate of 3,275,407 shares of Series B Preferred Stock converted their shares into 3,275,407 shares of common stock. Following those conversions, no Series B Preferred stock shares remain outstanding.

 

Common Stock Activity

 

On February 15, 2022, the Company completed a public offering of 20,000,000 shares of Common Stock and warrants to purchase up to 20,000,000 shares of Common Stock for gross proceeds of approximately $10 million, before deducting underwriting discounts and commissions and other offering expenses. A.G.P./Alliance Global Partners acted as sole book-running manager for the offering. In addition, Enveric granted the underwriter a 45-day option to purchase up to an additional 3,000,000 shares of common stock and/or warrants to purchase up to an additional 3,000,000 shares of common stock at the public offering price, which the underwriter has partially exercised for warrants to purchase up to 3,000,000 shares of common stock. At closing, Enveric received net proceeds from the offering of approximately $9.1 million, after deducting underwriting discounts and commissions and estimated offering expenses with $5.8 million allocated to equity, $3.6 million to warrant liability and the remaining $0.3 million recorded as an expense.

 

During the three months ended March 31, 2022, a total of 44,932 shares of Common Stock were issued pursuant to the conversion of restricted stock units.

 

Stock Options

 

A summary of activity under the Company’s incentive plan for the three months ended March 31, 2022 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 at December 31, 2021   1,191,434   $1.58   $2.07    5.3   $34,333 
Forfeited   (50,000)   3.50    2.81    —    — 
Outstanding at March 31, 2022   1,141,434   $1.50   $2.03    4.9   $— 
                          
Exercisable at March 31, 2022   958,915   $1.50   $2.01    4.2   $— 

 

The Company’s stock based compensation expense, recorded within general and administrative expense, related to stock options for the three months ended March 31, 2022 and 2021 was $36,989 and $     , respectively. As of March 31, 2022, the Company had $319,895 in unamortized stock option expense, which will be recognized over a weighted average period of 1.8 years.

 

During the three months ended March 31, 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 income (loss).

 

Restricted Stock Awards

 

The Company’s activity in restricted common stock was as follows for the three months ended March 31, 2022:

 

   Number of shares   Weighted average fair value 
Non-vested at December 31, 2021   51,509   $2.83 
Granted   1,872,215   $0.67 
Forfeited   (35,000)  $2.93 
Vested   (10,032)  $3.05 
Non-vested at March 31, 2022   6,477   $1.93 

 

 

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

For the three months ended March 31, 2022 and 2021, the Company recorded $11,863 and $32,112, in stock-based compensation expense within general and administrative expense, related to restricted stock awards, respectively. As of March 31, 2022, unamortized stock-based compensation costs related to restricted share awards was $12,500, which will be recognized over a weighted average period of 0.5 years. The balance of Common Shares related to the vested restricted stock awards as of March 31, 2022 will be issued during the 2022 calendar year. There are 42,131 vested and unissued shares of restricted stock awards as of March 31, 2022.

 

Issuance of Restricted Stock Units

 

The Company’s activity in restricted stock units was as follows for the three months ended March 31, 2022:

 SCHEDULE OF RESTRICTED STOCK UNITS AND AWARDS ACTIVITY

   Number of shares   Weighted average fair value 
Non-vested at December 31, 2021   3,100,613   $2.52 
Granted   1,872,215   $0.67 
Forfeited   (134,794)  $3.99 
Vested   (44,932)  $3.99 
Non-vested at March 31, 2022   4,793,102   $1.75 

 

For the three months ended March 31, 2022 and 2021, the Company recorded $719,767 and $3,559,453, respectively, in stock-based compensation expense related to restricted stock units. As of March 31, 2022, the Company had unamortized stock-based compensation costs related to restricted stock units of $7,070,834 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 March 31, 2022, 44,932 shares of Common Stock have been issued in relation to vested restricted stock units and 2,785,820 restricted stock units are vested without shares of Common Stock being issued.

 

The following table summarizes the Company’s recognition of stock-based compensation for restricted stock units for the following periods:

 

         
   Three months ended March 31, 
Stock-based compensation for RSU  2022   2021 
General and administrative  $358,818   $3,559,453 
Research and development   360,949    — 
Total  $719,767   $3,559,453 

 

Warrants

 

On February 11, 2022, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with A.G.P./Alliance Global Partners (the “Underwriter”). Pursuant to the Underwriting Agreement, the Company agreed to sell, in a firm commitment offering, 20,000,000 shares of the Company’s common stock (“Common Stock”), $0.01 par value per share, and accompanying warrants to purchase up to an aggregate of 20,000,000 shares of its common stock (“Warrants”), as well as up to 3,000,000 additional shares of common stock and/or warrants to purchase an aggregate of up to 3,000,000 shares of its common stock that may be purchased by the Underwriter pursuant to a 45-day option granted to the Underwriter by the Company (the “Offering”). Each share of common stock is being sold together with a common warrant to purchase one share of common stock, at an exercise price of $0.55 per share. Such common warrants are immediately exercisable and will expire five years from the date of issuance. There is not expected to be any trading market for the common warrants issued in the Offering. The combined public offering price of each share of common stock and accompanying common warrant sold in the Offering was $0.50. On February 14, 2022, the Underwriter exercised its option to purchase an additional 3,000,000 warrants. 

 

The following table summarizes information about shares issuable under warrants outstanding at March 31, 2022:

 

   Warrant shares outstanding   Weighted average exercise price   Weighted average remaining life   Intrinsic value 
Outstanding at December 31, 2021   9,768,766   $2.62    3.4   $801,024 
Granted   23,000,000    0.55    —    — 
Outstanding at March 31, 2022   32,768,766   $1.17    4.4   $35,729 
                     
Exercisable at March 31, 2022   32,768,766   $1.17    4.4   $35,729 

 

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.

 

 

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS