SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS

12 Months Ended

Dec. 31, 2022

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 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, 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 year ended December 31, 2021, holders of an aggregate of 3,275,407 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”).

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 December 31, 2022, both the Initial Redemption and the Subsequent Redemption have occurred. As a result, no shares of Series C Preferred Stock remain outstanding. As of December 31, 2022, there are 100,000 shares of Series C Preferred Stock authorized for future issuances.

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.

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 year ended December 31, 2022, a total of 1,223 and 899 shares of Common Stock were issued pursuant to the conversion of restricted stock awards and restricted stock units, respectively.

On January 14, 2021, the Company completed an offering of 44,427 shares of Common Stock and pre-funded warrants at approximately $225.00 per share and a concurrent private placement of warrants to purchase 33,321 shares of Common Stock at $247.50 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 60,141 shares of Common Stock and a concurrent private placement of warrants to purchase 1,503,513 shares of Common Stock at $245.00 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 199,025 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 55,861 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 2,685 Common Shares were issued pursuant to cashless exercise of options to purchase Common Stock.

During the year ended December 31, 2021, a total of 20,307 Common Shares were issued 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 283 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 4,434 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

During the year ended December 31, 2021, the Company issued a total of 65,509 shares of Common Stock pursuant to the conversion of 3,275,407 shares of Series B Preferred Stock.

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO 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 years ended December 31, 2022 and 2021 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, 2020		18,596		$	76.50	$	125.00		6.1	$	2,537,245
Granted		2,482		$	149.00	$	116.00		—	$	—
Options assumed pursuant to acquisition of MagicMed		19,477		$	67.00	$	92.00		—	$	—
Exercised		(2,876	)	$	11.50	$	284.50		—	$	—
Expired, forfeited, or cancelled		(13,850	)	$	84.50	$	81.00		—	$	—
Outstanding at December 31, 2021		23,829		$	79.00	$	103.50		5.3	$	34,333
Granted		25,500		$	3.07	$	2.58		—		—
Forfeited		(1,000	)	$	175.00	$	140.50		—		—
Outstanding at December 31, 2022		48,329		$	37.05	$	44.82		4.1	$	—
Exercisable at December 31, 2022		20,774		$	74.65	$	100.49		3.7	$	—

During the years ended December 31, 2022 and 2021, — and 2,876 options were exercised via a cashless exercise resulting in the issuance of — and 2,685 shares of common stock.

Options granted during the years ended December 31, 2022 and 2021 were valued using the Black Scholes model with the following assumptions:

	December 31, 2022			December 31, 2021
Term (years)		5.5			2.5 - 7.0
Stock price	$	3.07			$102.00 - $175.00
Exercise price	$	3.07			$102.00 - $175.00
Dividend yield		—	%		—	%
Expected volatility		112	%		76% - 79	%
Risk free interest rate		3.9	%		1.1% - 1.6	%

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, recorded within general and administrative expense, related to stock options for the years ended December 31, 2022 and 2021 was $180,042 and $60,856, respectively. As of December 31, 2022, the Company had $240,850 in unamortized stock option expense, which will be recognized over a weighted average period of 1.9 years.

During the year ended December 31, 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 loss.

Restricted Stock Awards

The Company’s activity in restricted common stock was as follows for the years ended December 31, 2022 and 2021:

	Number of shares			Weighted average fair value
Non-vested at December 31, 2020		—		$	—
Granted		2,516		$	178.50
Vested		(1,485	)	$	204.50
Non-vested at December 31, 2021		1,031		$	141.50
Forfeited		(700	)	$	146.50
Vested		(331	)	$	130.40
Non-vested at December 31, 2022		—		$	—

For the years ended December 31, 2022 and 2021, the Company recorded $24,363 and $231,631, respectively, in stock-based compensation expense within general and administrative expense, related to restricted stock awards. As of December 31, 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 December 31, 2022 will be issued during the 2023 calendar year. There are 708 vested and unissued shares of restricted stock awards as of December 31, 2022.

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Issuance of Restricted Stock Units

The Company’s activity in restricted stock units was as follows for the year ended December 31, 2022:

	Number of shares			Weighted average fair value
Non-vested at December 31, 2020		—		$	—
Granted		125,169		$	172.00
Forfeited		(7,439	)	$	152.00
Vested		(55,717	)	$	226.00
Non-vested at December 31, 2021		62,013		$	126.00
Granted		37,445		$	33.50
Forfeited		(26,772	)	$	79.64
Vested		(8,633	)	$	130.55
Non-vested at December 31, 2022		64,053		$	92.57

For the years ended December 31, 2022 and 2021, the Company recorded $2,416,266 and $12,304,514, 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 consolidated statement of operations and comprehensive loss.

As of December 31, 2022, the Company had unamortized stock-based compensation costs related to restricted stock units of $3,225,701 which will be recognized over a weighted average period of 2.8 years and unamortized stock-based costs related to restricted stock units which will be recognized upon achievement of specified milestones.

As of December 31, 2022, 1,856 shares of Common Stock have been issued in relation to vested restricted stock units and 62,492 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:

	Year ended December 31,
Stock-based compensation for RSUs	2022		2021
General and administrative	$	1,389,359	$	11,463,870
Research and development		1,026,907		840,644
Total	$	2,416,266	$	12,304,514

As of the end of the fiscal years ended December 31, 2022 and 2021, there were 126,545 and 117,730 shares of common stock underlying outstanding restricted stock units, of which (i) 62,492 and 55,717 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 (ii) 64,053 and 62,013 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.

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Warrants

The following table summarizes information about shares issuable under warrants outstanding at December 31, 2022 and 2021:

	Warrant shares outstanding			Weighted average exercise price		Weighted average remaining life		Intrinsic value
Outstanding at December 31, 2020		74,617		$	102.50		5.2	$	8,923,797
Issued		82,923		$	210.00		—	$	—
Assumed pursuant to acquisition of MagicMed		118,274		$	65.50		—	$	—
Exercised		(64,988	)	$	50.50		—	$	—
Exchanged for common stock		(15,363	)	$	232.50		—	$	—
Outstanding at December 31, 2021		195,463		$	131.00		3.4	$	801,024
Issued		1,227,500		$	10.31		—	$	—
Exercised		(767,500	)	$	—		—	$	—
Exchanged for common stock		—		$	—		—	$	—
Outstanding at December 31, 2022		655,463		$	58.36		3.6	$	5,514
Exercisable at December 31, 2022		655,463		$	58.36		3.6	$	5,514

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.

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

During the year ended December 31, 2021, warrants exchanged for Common Stock consisted of an aggregate of 4,434 shares of Common Stock being issued in exchange for an aggregate of 2,188 warrants issued by Ameri and containing put rights that were exercised by the Holder and an aggregate of 19,464 shares of Common Stock being issued in exchange for an aggregate of 13,176 warrants containing certain terms wherein management determined it to be beneficial to the Company to exchange Common Shares for these warrants.

The aggregate of 4,434 Common Shares issued in exchange for the aggregate of 2,188 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 19,464 shares of common stock issued in exchange for certain outstanding warrants to purchase an aggregate of 13,176 shares of the Company’s common stock at an exercise price of $233.00 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.

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO 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 investment options outstanding at December 31, 2022 (there were no investment options issued for the year ended December 31, 2021):

	Investment options outstanding		Weighted average exercise price		Weighted average remaining life		Intrinsic value
Outstanding at January 1, 2022		—	$	—		—	$	—
Issued		1,070,000	$	7.93		—		—
Outstanding at December 31, 2022		1,070,000	$	7.93		5.1	$	—
Exercisable at December 31, 2022		1,070,000	$	7.93		5.1	$	—

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS