ADIL

Business Context and Reporting Period

Company: Adial Pharmaceuticals, Inc. (ADIL)
Filing Type: Form 8-K (Current Report)
Date of Report: June 11, 2026
Event: Completion of the acquisition of Azora Therapeutics, Inc. ("Azora") via a tax-free reorganization. The transaction involved a reverse merger structure where Azora became a wholly-owned subsidiary of Adial, followed by a merger into a second Adial subsidiary.

Key Financial Metrics and Capital Structure

Financing (PIPE):

• Initial Closing: Agreed to sell Pre-Funded Warrants for an aggregate purchase price of $26.8 million at $2.7489 per warrant.
• Net Proceeds: Expected to be approximately $25.3 million after fees and expenses.
• Milestone Closings: Additional funding of up to $26.8 million available upon achievement of clinical milestones (first human dosing of AT177) or stock price milestones (VWAP ≥ 400% of purchase price).

Debt Extinguishment:

• Guaranteed and exchanged $5.5 million in principal amount of Azora convertible promissory notes for Pre-Funded Warrants.

Equity Issuance (Merger Consideration):

• Common Stock: 437,474 shares issued to Azora stockholders.
• Series A Preferred Stock: 12,930.617 shares issued, convertible into 12,930,617 shares of Common Stock.
• Warrants: Up to 35,342,844 shares of Common Stock issuable via Initial Closing and Milestone Warrants.

Ownership Structure (Post-Transaction, Fully Diluted):

• Former Azora Equityholders: ~51.0%
• PIPE Investors: ~34.2%
• Former Adial Equityholders: ~7.7%
• Former Azora Noteholders: ~7.1%

Financial Statements: The filing does not provide current revenue, profit, or cash flow metrics for the combined entity. Financial statements of the acquired business and pro forma information are not included and will be filed within 71 days.

Material Changes and Corporate Actions

Acquisition and Merger:

• Adial acquired Azora Therapeutics, Inc. on June 11, 2026.
• Pre-Merger Adial shareholders will hold approximately 13.1% of the company immediately post-merger (before PIPE financing), dropping to 7.7% after the full financing and warrant exercise.

Executive and Board Changes:

• Appointments: Matt Davidson, Ph.D. (former Azora CEO) appointed as Chief Development Officer and Class I Director. Wendy B. Young, Ph.D. appointed as Class III Director.
• Resignation: Tony Goodman resigned as Class I Director (not due to disagreement).
• Termination: Mr. Goodman's employment as Chief Operating Officer is expected to terminate ~60 days post-closing with severance.
• Compensation: Existing executives (CEO, CFO, COO) received discretionary bonuses ranging from $156,000 to $508,820. Employment agreements amended to enhance severance upon termination without cause within 24 months of the transaction.

Stockholder Proposals:

• Adial must hold a stockholder meeting to approve the conversion of Series A Preferred Stock, exercise of assumed options, exercise of PIPE warrants, and a "change of control" under Nasdaq rules.

Outlook, Risks, and Contingencies

Outlook and Milestones:

• Clinical: Future funding is contingent on the first human dosing of AT177 in a Phase 1 trial or IND acceptance.
• Market: Future funding is contingent on the stock price reaching 400% of the purchase price ($2.7489) for 10 consecutive trading days.

Risks and Restrictions:

• Lock-up Agreements: Officers, directors, and stockholders of Azora and Adial are subject to a 180-day lock-up on share sales. Series A Preferred Stock holders face a three-tiered lock-up schedule (180 days post-closing, post-approval, and post-milestone notice).
• Registration Rights: The Company must file a registration statement within 80 days of the Initial Closing. Failure to do so triggers liquidated damages of 1.0% per 30-day period (capped at 5.0%).
• Forward-Looking Statements: The filing contains forward-looking statements regarding the timing of closings, clinical trials, and financing, which are subject to risks and uncertainties.

Investor Verification Checklist

• Stockholder Approval: Verify the date and outcome of the stockholder meeting required to approve the conversion of Series A Preferred Stock and the exercise of PIPE warrants.
• Financing Closing: Confirm the actual closing date of the Initial Closing (expected June 12, 2026) and the receipt of the ~$25.3 million net proceeds.
• Pro Forma Financials: Review the upcoming amendment to this 8-K (due within 71 days) for the pro forma financial information and Azora's audited financial statements.
• Registration Statement: Monitor the filing of the Form S-3 registration statement required within 80 days to ensure liquidity for PIPE investors and Azora shareholders.
• Executive Retention: Confirm the finalization of the employment agreement with Dr. Davidson and the vesting schedule of the inducement awards (RSUs and Options).