SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS

9 Months Ended

Sep. 30, 2023

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 September 30, 2023, 100,000,000 shares of common stock and 20,000,000 shares of Preferred Stock were authorized under the Company’s articles of incorporation.

Equity Distribution Agreement

On September 1, 2023, the Company entered into the Distribution Agreement, with Canaccord, pursuant to which the Company may offer and sell from time to time, through Canaccord as sales agent and/or principal, shares of common stock of the Company, par value $0.01 per share having an aggregate offering price of up to $10.0 million. Due to the offering limitations applicable to the Company and in accordance with the terms of the Distribution Agreement, the Company may offer Common Stock having an aggregate gross sales price of up to $2,392,514 pursuant to the prospectus supplement dated September 1, 2023 (the “Prospectus Supplement”). Subject to the terms and conditions of the Distribution Agreement, Canaccord may sell the Common Stock by any method permitted by law deemed to be an “at-the-market offering”. The Company will pay Canaccord a commission equal to 3.0% of the gross sales price of the Common Stock sold through Canaccord under the Distribution Agreement and has also agreed to reimburse Canaccord for certain expenses. The Company may also sell Common Stock to Canaccord as principal for Canaccord’s own account at a price agreed upon at the time of sale. Any sale of Common Stock to Canaccord as principal would be pursuant to the terms of a separate terms agreement between the Company and Canaccord.

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the three and nine months ended September 30, 2023, the Company has issued no shares of common stock through the Distribution Agreement. The Company had capitalized deferred offering costs of $125,800 related to establishing the Distribution Agreement with Canaccord and the Purchase Agreement with Lincoln Park and no reductions to additional paid in capital.

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 $10.0 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, 2023, a total of 103,641 shares of Common Stock were issued pursuant to the conversion of restricted stock units. 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.

Stock Options

Amendment to 2020 Long-Term Incentive Plan

On May 3, 2022, our board of directors (“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 shareholders at a special meeting of the Company’s shareholders held on July 14, 2022.

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A summary of activity under the Company’s incentive plan for the nine months ended September 30, 2023, 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, 2022		48,329		$	37.05	$	44.82		4.1	$	—
Forfeited		(16,476	)	$	5.79	$	5.80		—	$	—
Outstanding at September 30, 2023		31,852		$	53.18	$	74.04		3.4	$	—
Exercisable at September 30, 2023		24,626		$	63.72	$	86.52		3.0	$	—

The Company’s stock-based compensation expense, recorded within general and administrative expense in the condensed consolidated statement of operations and comprehensive loss, related to stock options for the three months ended September 30, 2023, and 2022 was $44,606 and $48,697, 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, 2023 and 2022 was $147,067 and $134,383, respectively. As of September 30, 2023, the Company had $93,697 in unamortized stock option expense, which will be recognized over a weighted average period of 1 year.

Restricted Stock Awards

For the three months ended September 30, 2023, and 2022, the Company recorded $0 and $6,250, respectively, in stock-based compensation expense within general and administrative expense, related to restricted stock awards. For the nine months ended September 30, 2023 and 2022, the Company recorded $0 and $24,363, respectively, in stock-based compensation expense within general and administrative expense, related to restricted stock awards. As of September 30, 2023, there were no unamortized stock-based compensation costs related to restricted share awards. During the three months ended September 30, 2023, the Company settled the 708 vested and unissued shares for cash of $14,250. As of September 30, 2023, there are 0 vested and unissued shares of restricted stock awards.

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO 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, 2023:

	Number of shares			Weighted average fair value
Non-vested at December 31, 2022		64,053		$	92.57
Granted		182,500		$	2.73
Vested		(62,636	)	$	19.80
Forfeited		(35,666	)	$	27.45
Non-vested at September 30, 2023		148,251		$	28.39

For the three months ended September 30, 2023, and 2022, the Company recorded $328,253 and $590,190, respectively, in stock-based compensation expense related to restricted stock units. For the nine months ended September 30, 2023 and 2022, the Company recorded $1,638,365 and $1,932,553 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 condensed consolidated statement of operations and comprehensive loss. As of September 30, 2023, the Company had unamortized stock-based compensation costs related to restricted stock units of $2,388,221 which will be recognized over a weighted average period of 2.3 years and unamortized stock-based costs related to restricted stock units which will be recognized upon achievement of specified milestones. As of September 30, 2023, 20,847 restricted stock units are vested without shares of common stock being issued, with all of these shares due as of September 30, 2023.

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,
	2023		2022		2023		2022
Stock-based compensation expense for RSUs:
General and administrative	$	101,607	$	357,756	$	946,851	$	1,138,080
Research and development		226,646		232,434		691,514		794,473
Total	$	328,253	$	590,190	$	1,638,365	$	1,932,553

Warrants

The following table summarizes information about shares issuable under warrants outstanding on September 30, 2023:

	Warrant shares outstanding			Weighted average exercise price		Weighted average remaining life		Intrinsic value
Outstanding at December 31, 2022		655,463		$	58.36		3.6	$	5,514
Expired		(45,570	)	$	111.50		—	$	—
Outstanding at September 30, 2023		609,893		$	50.46		2.9	$	—
Exercisable at September 30, 2023		609,893		$	50.46		2.9	$	—

The warrants assumed pursuant to the acquisition of MagicMed contain certain down round features, which were not triggered by the February 2022 public offering and July 2022 RD 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Preferred Investment Options

The following table summarizes information about investment options outstanding on September 30, 2023:

	Investment options outstanding		Weighted average exercise price		Weighted average remaining life		Intrinsic value
Outstanding at December 31, 2022		1,070,000	$	7.93		5.1	$	—
Outstanding at September 30, 2023		1,070,000	$	7.93		4.3	$	—
Exercisable at September 30, 2023		1,070,000	$	7.93		4.3	$	—