SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS

9 Months Ended

Sep. 30, 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 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 September 30, 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 65,509 shares of Series B Preferred Stock converted their shares into 65,509 shares of common stock. Following those conversions, no Series B Preferred stock shares remain outstanding.

Series C Preferred Shares

On May 3, 2022, the Board of Directors (the “Board”) declared a dividend of one one-thousandth of a share of the Company’s Series C Preferred Stock (“Series C Preferred Stock”) for each outstanding share of the Company’s Common Stock (the “Common Stock”) held of record as of 5:00 p.m. Eastern Time on May 13, 2022 (the “Record Date”). This dividend was based on the number of outstanding shares of Common Stock prior to the Reverse Stock Split. The outstanding shares of Series C Preferred Stock were entitled to vote together with the outstanding shares of the Company’s Common Stock, as a single class, exclusively with respect to a proposal giving the Board the authority, as it determines appropriate, to implement a reverse stock split within twelve months following the approval of such proposal by the Company’s stockholders (the “Reverse Stock Split Proposal”), as well as any proposal to adjourn any meeting of stockholders called for the purpose of voting on the Reverse Stock Split Proposal (the “Adjournment Proposal”).

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company held a special meeting of stockholders on July 14, 2022 (the “Special Meeting”) for the purpose of voting on, among other proposals, a Reverse Stock Split Proposal and an Adjournment Proposal. All shares of Series C Preferred Stock that were not present in person or by proxy at the Special Meeting were automatically redeemed by the Company immediately prior to the opening of the polls at Special Meeting (the “Initial Redemption”). All shares that were not redeemed pursuant to the Initial Redemption were redeemed automatically upon the approval by the Company’s stockholders of the Reverse Stock Split Proposal at the Special Meeting (the “Subsequent Redemption” and, together with the Initial Redemption, the “Redemption”). Each share of Series C Preferred Stock was entitled to receive $0.10 in cash for each 10 whole shares of Series C Preferred Stock immediately prior to the Redemption. As of June 30, 2022, there were 52,684.548 shares of Series C Preferred Stock issued and outstanding. As of September 30, 2022, both the Initial Redemption and the Subsequent Redemption have occurred. As a result, no shares of Series C Preferred Stock remain outstanding.

Common Stock Activity

On February 15, 2022, the Company completed a public offering of 400,000 shares of Common Stock and warrants to purchase up to 400,000 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 60,000 shares of Common Stock and/or warrants to purchase up to an additional 60,000 shares of Common Stock at the public offering price, which the underwriter has partially exercised for warrants to purchase up to 60,000 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.

On July 22, 2022, the Company entered into a securities purchase agreement (the “Registered Direct Securities Purchase Agreement”) with an institutional investor for the purchase and sale of 116,500 shares of the Company’s common stock, pre-funded warrants to purchase up to 258,500 shares of common stock (the “RD Pre-Funded Warrants”), and unregistered preferred investment options (the “RD Preferred Investment Options”) to purchase up to 375,000 shares of common stock (the “RD Offering”). The gross proceeds from the RD Offering were approximately $3,000,000. Subject to certain ownership limitations, the RD Pre-Funded Warrants became immediately exercisable at an exercise price equal to $0.0001 per share of common stock. On August 3, 2022, all of the issued RD Pre-Funded Warrants were exercised.

Concurrently with the RD Offering, the Company entered into a securities purchase agreement (the “PIPE Securities Purchase Agreement”) with institutional investors for the purchase and sale of 116,000 shares of common stock, pre-funded warrants to purchase up to 509,000 shares of common stock (the “PIPE Pre-Funded Warrants”), and preferred investment options (the “PIPE Preferred Investment Options”) to purchase up to 625,000 shares of the common stock in a private placement (the “PIPE Offering”). The gross proceeds from the PIPE Offering were approximately $5,000,000. Subject to certain ownership limitations, the PIPE Pre-Funded Warrants became immediately exercisable at an exercise price equal to $0.0001 per share of common stock. All of the issued PIPE Pre-Funded Warrants were exercised on various dates prior to August 18, 2022.

The RD offering and PIPE Offering closed on July 26, 2022, with aggregate gross proceeds of approximately $8 million. The aggregate net proceeds from the offerings, after deducting the placement agent fees and other estimated offering expenses, were approximately $7.1 million with $3.2 million allocated to equity, $4.3 million to investment option liability, and the remaining $0.4 million recorded as an expense.

During the nine months ended September 30, 2022, a total of 2,122 shares of Common Stock were issued pursuant to the conversion of restricted stock units.

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

Amendment to 2020 Long-Term Incentive Plan

On May 3, 2022, our Board adopted the First Amendment (the “Plan Amendment”) to the Enveric Biosciences, Inc. 2020 Long-Term Incentive Plan (the “Incentive Plan”) to (i) increase the aggregate number of shares available for the grant of awards by 146,083 shares to a total of 200,000 shares, and (ii) add an “evergreen” provision whereby the number of shares authorized for issuance pursuant to awards under the Incentive Plan will be automatically increased on the first trading date immediately following the date the Company issues any share of Common Stock (defined below) to any person or entity, to the extent necessary so that the number of shares of the Company’s Common Stock authorized for issuance under the Incentive Plan will equal the greater of (x) 200,000 shares, and (y) 15% of the total number of shares of the Company’s Common Stock outstanding as of such issuance date. The Plan Amendment was approved by the Company’s stockholders at a special meeting of the Company’s stockholders held on July 14, 2022.

A summary of activity under the Company’s incentive plan for the nine months ended September 30, 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		23,829		$	79.00	$	103.50		5.3	$	34,333
Forfeited		(1,000	)	$	175.00	$	140.50		—		—
Outstanding at September 30, 2022		22,829		$	75.00	$	101.50		4.3	$	—
Exercisable at September 30, 2022		19,690		$	74.93	$	101.00		3.8	$	—

The Company’s stock based compensation expense, recorded within general and administrative expense, related to stock options for the three months ended September 30, 2022 and 2021 was $48,697 and $4,683, respectively. The Company’s stock based compensation expense, recorded within general and administrative expense, related to stock options for the nine months ended September 30, 2022 and 2021 was $134,383 and $4,683, respectively. As of September 30, 2022, the Company had $222,501 in unamortized stock option expense, which will be recognized over a weighted average period of 1.3 years.

During the nine months ended September 30, 2021, the Company exchanged options to purchase 11,209 shares of common stock for 6,509 restricted stock units and 843 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 nine months ended September 30, 2022:

	Number of shares			Weighted average fair value
Non-vested at December 31, 2021		1,031		$	141.50
Forfeited		(700	)	$	146.50
Vested		(331	)	$	130.40
Non-vested at September 30, 2022		—		$	—

For the three months ended September 30, 2022 and 2021, the Company recorded $6,250 and $23,995, respectively, in stock-based compensation expense within general and administrative expense, related to restricted stock awards. For the nine months ended September 30, 2022 and 2021, the Company recorded $24,363 and $80,109, respectively, in stock-based compensation expense within general and administrative expense, related to restricted stock awards. As of September 30, 2022, there were no unamortized stock-based compensation costs related to restricted share awards. The balance of Common Shares related to the vested restricted stock awards as of September 30, 2022 will be issued during the 2022 calendar year. There are 974 vested and unissued shares of restricted stock awards as of September 30, 2022.

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Issuance of Restricted Stock Units

The Company’s activity in restricted stock units was as follows for the nine months ended September 30, 2022:

	Number of shares			Weighted average fair value
Non-vested at December 31, 2021		62,013		$	126.00
Granted		37,445		$	33.50
Forfeited		(26,772	)	$	79.64
Vested		(7,569	)	$	140.60
Non-vested at September 30, 2022		65,117		$	92.02

For the three months ended September 30, 2022 and 2021, the Company recorded $590,190 and $458,308, respectively, in stock-based compensation expense related to restricted stock units. For the nine months ended September 30, 2022 and 2021, the Company recorded $1,932,553 and $4,710,225, respectively, in stock-based compensation expense related to restricted stock units, which is a component of both general and administrative and research and development expenses in the unaudited condensed consolidated statement of operations.

As of September 30, 2022, the Company had unamortized stock-based compensation costs related to restricted stock units of $5,858,048 which will be recognized over a weighted average period of 3.0 years and unamortized stock-based costs related to restricted stock units which will be recognized upon achievement of specified milestones.

As of September 30, 2022, 1,856 shares of Common Stock have been issued in relation to vested restricted stock units and 61,428 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 September 30,				Nine months ended September 30,
Stock-based compensation for RSU	2022		2021		2022		2021
General and administrative	$	357,756	$	315,929	$	1,138,080	$	4,592,748
Research and development		232,434		118,474		794,473		118,474
Total	$	590,190	$	434,403	$	1,932,553	$	4,711,222

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, 400,000 shares of the Company’s Common Stock and accompanying warrants to purchase up to an aggregate of 400,000 shares of its common stock (“February 2022 Warrants”), as well as up to 60,000 additional shares of common stock and/or warrants to purchase an aggregate of up to 60,000 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 was sold together with a common warrant to purchase one share of common stock, at an exercise price of $27.50 per share. Such common warrants were 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 $25.00. On February 14, 2022, the Underwriter exercised its option to purchase an additional 60,000 warrants.

In connection with the Registered Direct (“RD”) Offering and the Private Investment in Public Entity (“PIPE”) Offering entered into on July 22, 2022, the Company entered into Warrant Amendment (the “Warrant Amendments”) with the investors in both offerings to amend certain existing warrants to purchase up to an aggregate of 122,000 shares of Common Stock that were previously issued to the investors, with an exercise price of $27.50 per share (subsequent to the 1-for-50 reverse stock split that occurred on July 14, 2022) and expiration date of February 15, 2027. Pursuant to the Warrant Amendments, the previously issued warrants were amended, effective upon the closing of the offerings, so that the amended warrants have a reduced exercise price of $7.78 per share and expire five and one-half years following the closing of the offerings. In connection with this transaction, the Company determined the fair value of the February 2022 Warrants immediately prior to the Warrant Amendment and the fair value of the amended warrants immediately after the Warrant Amendment. The incremental change in fair value was deemed to be $251,357, which was included as equity issuance costs related to the RD and PIPE financing transactions.

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Preferred Investment Options

In connection with the Registered Direct Securities Purchase Agreement the Company issued unregistered preferred investment options to purchase up to 375,000 shares of common stock. Subject to certain ownership limitations, the RD Preferred Investment Options became immediately exercisable at an exercise price equal to $7.78 per share of common stock. The RD Preferred Investment Options are exercisable for five and one-half years from the date of issuance.

In connection with the PIPE Securities Purchase Agreement the Company issued unregistered preferred investment options to purchase up to 625,000 shares of the common stock. Subject to certain ownership limitations, PIPE Preferred Investment Options became immediately exercisable at an exercise price equal to $7.78 per share of common stock. The PIPE Preferred Investment Options are exercisable for five and one-half years from the date of issuance

On July 26, 2022, in connection with the RD Offering and PIPE Offering, the Company issued preferred investment options (the “Placement Agent Preferred Investment Options”) to an entity to purchase up to 70,000 shares of the common stock for acting as a placement agent. The Placement Agent Preferred Investment Options have substantially the same terms as the RD Preferred Investment Options and the PIPE Preferred Investments Options, except the Placement Agent Preferred Investment Options have an exercise price of $10.00 per share. The Placement Agent Preferred Investment Options are exercisable for five years from the date of the commencement of the RD Offering and PIPE Offering.

The following table summarizes information about shares issuable under warrants outstanding at September 30, 2022:

	Warrant shares outstanding			Weighted average exercise price		Weighted average remaining life		Intrinsic value
Outstanding at December 31, 2021		195,463		$	131.00		3.4	$	801,024
Issued		1,227,500		$	10.31			$	—
Exercised		(767,500	)	$	—		—	$	—
Outstanding at September 30, 2022		655,463		$	58.36		3.8	$	5,514
Exercisable at September 30, 2022		655,463		$	58.36		3.8	$	5,514

The warrants assumed pursuant to the acquisition of MagicMed contain certain down round features, which were not triggered by the February 2022 public offering or the July 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.

The following table summarizes information about investment options outstanding at September 30, 2022:

	Investment options outstanding		Weighted average exercise price		Weighted average remaining life		Intrinsic value
Outstanding at January 1, 2021		—	$	—		—	$	—
Issued		1,070,000	$	7.93		5.5		—
Outstanding at September 30, 2021		1,070,000	$	7.93		5.3	$	—
Exercisable at September 30, 2021		1,070,000	$	7.93		5.3	$	—

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS