This prospectus relates to the offering
and resale by Keystone Capital Partners, LLC (“Keystone Capital” or the “Selling Stockholder”) of up to
2,842,198 shares of our common stock, par value $0.001 per share, which includes 175,000 shares of our common stock issued to the
Selling Stockholder as commitment shares (the “Commitment Shares”).
The shares of common stock being offered
by the Selling Stockholder have been or may be issued and sold to the Selling Stockholder pursuant to the common stock purchase
agreement, dated November 18, 2020, that we entered into with Keystone Capital (the “Purchase Agreement”). See
“The Keystone Capital Transaction” for a description of the Purchase Agreement and “Selling Stockholder”
for additional information regarding Keystone Capital. The prices at which Keystone Capital may resell the shares offered hereby
will be determined by the prevailing market price for the shares or in negotiated transactions. We are not selling any securities
under this prospectus and will not receive any of the proceeds from the sale of shares of common stock by the Selling Stockholder.
However, we may receive proceeds of up to $15 million from the sale of our common stock to the Selling Stockholder pursuant to
the Purchase Agreement, once the registration statement that includes this prospectus is declared effective.
The Selling Stockholder may sell or otherwise
dispose of the shares of common stock described in this prospectus in a number of different ways and at varying prices. See “Plan
of Distribution” for more information about how the Selling Stockholder may sell or otherwise dispose of the shares of common
stock being registered pursuant to this prospectus. The Selling Stockholder is an “underwriter” within the meaning
of Section 2(a)(11) of the Securities Act of 1933, as amended.
The Selling Stockholder will pay all brokerage
fees and commissions and similar expenses. We will pay the expenses (except brokerage fees and commissions and similar expenses)
incurred in registering the shares, including legal and accounting fees. See “Plan of Distribution.”
Our common stock and the warrants issued
in our initial public offering are listed on the Nasdaq Capital Market (“Nasdaq”) under the symbols “ADIL”
and “ADILW.” On December 14, 2020, the last reported sale price on Nasdaq of our common stock was $1.93 per share and
the last reported sale price on Nasdaq of our warrants was $0.34 per warrant.
We are an “emerging growth company”
as that term is used in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and, as such, elect to comply
with certain reduced public company reporting requirements for future filings.
You should read this prospectus, together
with additional information described under the headings “Where You Can Find Additional Information” and “Incorporation
of Certain Information by Reference” carefully before you invest in any of our securities.
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus and the documents incorporated
by reference into this prospectus include forward-looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, as amended, that relate to future events or our future financial performance
and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance
or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied
by these forward-looking statements. Words such as, but not limited to, “anticipate,” “aim,” “believe,”
“contemplate,” “continue,” “could,” “design,” “estimate,” “expect,”
“intend,” “may,” “might,” “plan,” “predict,” “poise,” “project,”
“potential,” “suggest,” “should,” “strategy,” “target,” “will,”
“would,” and similar expressions or phrases, or the negative of those expressions or phrases, are intended to identify
forward-looking statements, although not all forward-looking statements contain these identifying words. Although we believe that
we have a reasonable basis for each forward-looking statement contained in this prospectus and incorporated by reference into this
prospectus, we caution you that these statements are based on our projections of the future that are subject to known and unknown
risks and uncertainties and other factors that may cause our actual results, level of activity, performance or achievements expressed
or implied by these forward-looking statements, to differ. The section in this prospectus entitled “Risk Factors” and
the sections in our periodic reports, including the Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019
Form 10-K”) entitled “Business,” and in the 2019 Form 10-K and the Quarterly Reports on Form 10-Q for the quarters
ended September 30, June 30, 2020, and March 31, 2020 entitled “Risk Factor” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations,” as well as other sections in this prospectus and the documents
or reports incorporated by reference into this prospectus, discuss some of the factors that could contribute to these differences.
These forward-looking statements include, among other things, statements about:
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the extent to which our business may be adversely affected by the recent COVID-19 outbreak;
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our projected financial position and estimated cash burn rate;
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our estimates regarding expenses, future revenues and capital requirements;
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our need to raise substantial additional capital to fund our operations;
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the success, cost and timing of our clinical trials;
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our dependence on third parties in the conduct of our clinical trials;
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our ability to obtain the necessary regulatory approvals to market and commercialize our product candidates;
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the potential that results of preclinical and clinical trials indicate our current product candidates or any future product candidates we may seek to develop are unsafe or ineffective;
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the results of market research conducted by us or others;
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our ability to obtain and maintain intellectual property protection for our current product candidates;
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our ability to protect our intellectual property rights and the potential for us to incur substantial costs from lawsuits to enforce or protect our intellectual property rights;
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the possibility that a third party may claim we have infringed, misappropriated or otherwise violated their intellectual property rights and that we may incur substantial costs and be required to devote substantial time defending against these claims;
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our reliance on third-party suppliers and manufacturers;
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the success of competing therapies and products that are or become available;
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ability to sell shares of common stock to Keystone Capital pursuant to the terms of the Purchase Agreement and our ability to register and maintain the registration of the shares issued and issuable thereunder;
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our ability to expand our organization to accommodate potential growth and our ability to retain and attract key personnel;
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the potential for us to incur substantial costs resulting from product liability lawsuits against us and the potential for these product liability lawsuits to cause us to limit our commercialization of our product candidates;
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market acceptance of our product candidates, the size and growth of the potential markets for our current product candidates and any future product candidates we may seek to develop, and our ability to serve those markets; and
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the successful development of our commercialization capabilities, including sales and marketing capabilities.
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Our current product candidates are undergoing
clinical development and have not been approved by the Food and Drug Administration (“FDA”) or the European Commission.
These product candidates have not been, nor may they ever be, approved by any regulatory agency or competent authorities nor marketed
anywhere in the world.
We may not actually achieve the plans,
intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking
statements. Forward-looking statements should be regarded solely as our current plans, estimates and beliefs. We have included
important factors in the cautionary statements included in this document, particularly in the section entitled “Risk Factors”
of this prospectus that we believe could cause actual results or events to differ materially from the forward-looking statements
that we make. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time.
It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the
extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any
forward-looking statements we may make. Given these risks and uncertainties, readers are cautioned not to place undue reliance
on such forward-looking statements. All forward-looking statements are qualified in their entirety by this cautionary statement.
Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures
or investments we may make. You should read this prospectus and the documents that we have filed as exhibits to this prospectus
and incorporated by reference herein completely and with the understanding that our actual future results may be materially different
from the plans, intentions and expectations disclosed in the forward-looking statements we make. The forward-looking statements
contained in this prospectus are made as of the date of this prospectus and we do not assume any obligation to update any forward-looking
statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
PROSPECTUS SUMMARY
This summary highlights information
contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment
decision. Before investing in our securities, you should carefully read this entire prospectus, including our financial statements
and the related notes that are incorporated by reference into this prospectus and the information set forth under the headings
“Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
in each case included elsewhere in this prospectus. In this prospectus, unless the context otherwise requires, the terms “we,”
“us,” “our,” “Adial” and the “Company” refer to Adial Pharmaceuticals, Inc. Except
as disclosed in the prospectus, the financial statements and selected historical financial data and other financial information
included in, or incorporated by reference into, this prospectus are those of Adial Pharmaceuticals, Inc.
Overview
We are a clinical-stage biopharmaceutical
company currently focused on the development of a therapeutic agent for the treatment of alcohol use disorder (“AUD”)
using our lead investigational new drug product, AD04, a selective serotonin-3 antagonist (a “5-HT3 antagonist”). The
active ingredient in AD04 is ondansetron, which is also the active ingredient in Zofran®, an approved drug for treating
nausea and emesis. AUD is characterized by an urge to consume alcohol and an inability to control the levels of consumption. We
have commenced a Phase 3 clinical trial using AD04 for the potential treatment of AUD in subjects with certain target genotypes.
We believe our approach is unique in that it targets the serotonin system and individualizes the treatment of AUD, through the
use of genetic screening (i.e., a companion diagnostic genetic biomarker). We have created an investigational companion diagnostic
biomarker test for the genetic screening of patients with certain biomarkers that, as reported in the American Journal
of Psychiatry (Johnson, et. al. 2011 & 2013), we believe will benefit from treatment with AD04. Our strategy is to
integrate the pre-treatment genetic screening into AD04’s label to create a patient-specific treatment in one integrated
therapeutic offering. Our goal is to develop a genetically targeted, effective and safe product candidate to treat AUD by reducing
or eliminating the patients’ consumption of alcohol. We are also exploring expanding or portfolio in the field of addiction.
We have a worldwide, exclusive license
from the University of Virginia Patent Foundation (d.b.a the Licensing & Venture Group) (“UVA LVG”), which is the
licensing arm of the University of Virginia, to commercialize our investigational drug candidate, AD04, subject to FDA approval
of the product, based upon three separate patent application families, with patents issued in over 40 jurisdictions, including
three issued patents in the U.S. Our investigational agent has been used in several investigator-sponsored trials and we possess
or have rights to use toxicology, pharmacokinetic and other preclinical and clinical data that supports our Phase 3 clinical trial.
Our therapeutic agent was the product candidate used in a University of Virginia investigator sponsored Phase 2b clinical trial
of 283 patients. In this Phase 2b clinical trial, ultra-low dose ondansetron, the active pharmaceutical agent in AD04, showed a
statistically significant difference between ondansetron and placebo for both the primary endpoint and secondary endpoint, which
were reduction in severity of drinking measured in drinks per drinking day (1.71 drinks/drinking day; p=0.0042), and reduction
in frequency of drinking measured in days of abstinence/no drinking (11.56%; p=0.0352), respectively. Additionally, and importantly,
the Phase 2b results showed a significant decrease in the percentage of heavy drinking days (11.08%; p=0.0445) with a “heavy
drinking day” defined as a day with four (4) or more alcoholic drinks for women or five (5) or more alcoholic drinks for
men consumed in the same day.
The active pharmaceutical agent in AD04,
our lead investigational new drug product, is ondansetron (the active ingredient in Zofran®), which was granted
FDA approval in 1991 for nausea and vomiting post-operatively and after chemotherapy or radiation treatment and is now commercially
available in generic form. In studies of Zofran®, conducted as part of its FDA review process, ondansetron was given
acutely at dosages up to almost 100 times the dosage expected to be formulated in AD04 with the highest doses of Zofran® given
intravenously (“i.v.”), which results in approximately 160% of the exposure level as oral dosing. Even at high doses
given i.v. the studies found that ondansetron is well-tolerated and results in few adverse side effects at the currently marketed
doses, which reach more than 80 times the AD04 dose and are given i.v. The formulation dosage of ondansetron used in our drug candidate
in our Phase 3 clinical trial has the potential advantage that it contains a much lower concentration of ondansetron than the generic
formulation/dosage that has been used in prior clinical trials, is dosed orally, and is available with use of a companion diagnostic
genetic biomarker. Our development plan for AD04 is designed to demonstrate both the efficacy of AD04 in the genetically targeted
population and the safety of ondansetron when administered chronically at the AD04 dosage. However, to the best of our knowledge,
no comprehensive clinical study has been performed to date that has evaluated the safety profile of ondansetron at any dosage for
long-term use as anticipated in our Phase 3 clinical trial.
According to the National Institute of
Alcohol Abuse and Alcoholism (the “NIAAA”) and the Journal of the American Medical Association (“JAMA”),
in the United States alone, approximately 35 million people each year have AUD (such number is based upon the 2012 data provided
in Grant et. al. the JAMA 2015 publication and has been adjusted to reflect a compound annual growth rate of 1.13%, which is the
growth rate reported by U.S. Census Bureau for the general adult population from 2012-2017), resulting in significant health, social
and financial costs with excessive alcohol use being the third leading cause of preventable death and is responsible for 31% of
driving fatalities in the United States (NIAAA Alcohol Facts & Statistics). AUD contributes to over 200 different diseases
and 10% of children live with a person that has an alcohol problem. According to the American Society of Clinical Oncologists,
5-6% of new cancers and cancer deaths globally are directly attributable to alcohol. And, The Lancet published
that alcohol is the leading cause of death in people ages 15-49 globally. The Centers for Disease Control (the “CDC”)
has reported that AUD costs the U.S. economy about $250 billion annually, with heavy drinking accounting for greater than 75% of
the social and health related costs. Despite this, according to the article in the JAMA 2015 publication, only 7.7% of patients
(i.e., approximately 2.7 million people) with AUD are estimated to have been treated in any way and only 3.6% by a physician (i.e.,
approximately 1.3 million people). In addition, according to the JAMA 2017 publication, the problem in the United States appears
to be growing with almost a 50% increase in AUD prevalence between 2002 and 2013.
AUD is characterized by an urge to consume
alcohol and an inability to control the levels of consumption. Until the publication of the fifth revision of the Diagnostic
and Statistical Manual of Mental Disorders in 2013 (the “DSM-5”), AUD was broken into “alcohol dependence”
and “alcohol abuse.” More broadly, overdrinking due to the inability to moderate drinking is called alcohol addiction
and is often called “alcoholism,” sometimes pejoratively.
Since ondansetron is already manufactured
for generic sale, the active ingredient for AD04 is readily available from several manufacturers, and we have contracted with a
U.S. manufacturer to acquire ondansetron at a cost expected to be under $0.01 per dose. Clinical trial material (“CTM”)
has already been manufactured for the initial Phase 3 trial. The CTM has demonstrated good stability after four years with the
stability studies to date.
We have also developed the manufacturing
process at a third-party vendor to produce tablets at what we expect will serve for commercial scale production, also at a cost
expected to be less than $0.01 per dose. A proprietary packaging process has been developed, which appears to extend the stability
of the drug product. Packaging costs are expected to be less than $0.05 per dose. We do not have a written commitment for supply
of either the tablets or the packaging and believe that alternative suppliers are available to whom we can transfer the processes
that have been developed.
Methods for the companion diagnostic genetic
test have been developed as a blood test, and we established the test with a U.S. third-party vendor capable of supporting a Phase
3 clinical trial. Additionally, we have built validation and possible approval of the companion diagnostic into the Phase 3 program,
including that we plan to store blood samples for all patients in the event additional genetic testing is required by regulatory
authorities. Methods are intended to be transferred to third-party vendors in Europe for conduct of the ongoing initial Phase 3
trial.
Ultimately, we plan to explore the development
of AD04 in other addiction-related indications (e.g., opioid use disorder, other drug addictions, obesity, smoking cessation, eating
disorders and anxiety) and to build out our product portfolio with the intent that product portfolio expansions will be focused
on promising addiction therapies. Our vision is to create the world’s leading addiction related pharmaceutical company.
The ongoing Covid-19 pandemic risks delay
to our development efforts, disruption to our business operations, and other economic injuries. We may be eligible for a variety
of United State Federal government loans, some forgivable, to help support our operations during the pandemic. We have not, at
this time, received any such funding, but may in the future.
Corporate Information
ADial Pharmaceuticals, L.L.C. was formed
as a Virginia limited liability company in November 2010. ADial Pharmaceuticals, L.L.C. converted from a Virginia limited liability
company into a Virginia corporation on October 3, 2017, and reincorporated in Delaware on October 11, 2017 by merging the Virginia
corporation with and into Adial Pharmaceuticals, Inc., a Delaware corporation that was incorporated on October 5, 2017 as a wholly
owned subsidiary of the Virginia corporation. We refer to this as the corporate conversion/reincorporation. In connection with
the corporate conversion/reincorporation, each unit of ADial Pharmaceuticals, L.L.C. was first converted into shares of common
stock of the Virginia corporation and then converted into shares of common stock of Adial Pharmaceuticals, Inc., the members of
ADial Pharmaceuticals, L.L.C. became stockholders of Adial Pharmaceuticals, Inc. and Adial Pharmaceuticals, Inc. succeeded to the
business of ADial Pharmaceuticals, L.L.C.
Our principal executive offices are located
at 1180 Seminole Trail, Suite 495, Charlottesville, VA 22901, and our telephone number is (434) 422-9800. Our website address is www.adialpharma.com.
Information contained in our website does not form part of the prospectus and is intended for informational purposes only. This
prospectus contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks
and trade names referred to in this prospectus, including logos, artwork and other visual displays, may appear without the ®
or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest
extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not
intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship
of us by, any other companies.
Emerging Growth Company
We are an emerging growth company under
the JOBS ACT, which was enacted in April 2012. We shall continue to be deemed an emerging growth company until the earliest of:
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the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more;
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the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement;
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the date on which we have issued more than $1.0 billion in non-convertible debt, during the previous 3-year period, issued; or
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the date on which we are deemed to be a large accelerated filer.
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As an emerging growth company, we are subject
to reduced public company reporting requirements and are exempt from Section 404(b) of Sarbanes Oxley. Section 404(a) requires
issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and
procedures for financial reporting. Section 404(b) requires that the registered accounting firm shall, in the same report, attest
to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting.
As an emerging growth company, we are also
exempt from Section 14A (a) and (b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which
requires the shareholder approval, on an advisory basis, of executive compensation and golden parachutes.
We have elected to use the extended transition
period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay
the adoption of new or revised accounting standards that have different effective dates for public and private companies until
those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies
that comply with public company effective dates.
Additional Information
For additional information related to our
business and operations, please refer to the reports incorporated herein by reference, including our 2019 Form 10-K, our Quarterly
Reports on Form 10-Q for the quarterly periods ended March 31, 2020 as filed with the SEC on May 14, 2020, June 30, 2020 as filed
with the SEC on August 13, 2020, and September 30, 2020 as filed with the SEC on November 13, 2020 and our Current Reports on Form
8-K as filed with the SEC, as described in the section entitled “Incorporation of Documents by Reference” in this prospectus.
Risks Associated with Our Business and
this Offering
Our business and our ability to implement
our business strategy are subject to numerous risks, as more fully described in the section of this prospectus entitled “Risk
Factors” and under similarly titled headings of the documents incorporated herein by reference. You should read these risks
before you invest in our securities. We may be unable, for many reasons, including those that are beyond our control, to implement
our business strategy. In particular, risks associated with our business and this offering include:
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We have incurred net losses every year and quarter since our inception and anticipate that we will continue to incur net losses in the future.
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There is substantial doubt about our ability to continue as a going concern, which may affect our ability to obtain future financing and may require us to curtail our operations.
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The coronavirus pandemic could adversely impact our business, including our clinical trials.
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Global health crises may adversely affect
our planned operations.
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All of our current data for our lead product
candidate are the result of Phase 2 clinical trials conducted by third parties
and do not necessarily provide sufficient
evidence that our products are viable as potential pharmaceutical products.
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Our lead investigational product, AD04, is dependent on a successful development, approval, and commercialization of a genetic test, which is expected to be classified as a companion diagnostic.
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Our clinical trials may fail to demonstrate
adequately the safety and efficacy of AD04 or any future product candidates, which would likely prevent or delay regulatory approval
and commercialization.
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If we do not obtain the necessary regulatory
approvals in the United States and/or other countries, we will not be able to sell our product candidates.
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The issuance of common stock to the Selling Stockholder may cause substantial dilution to our existing stockholders and the sale of such shares acquired by the Selling Stockholder could cause the price of our common stock to decline.
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We have never paid dividends and have no plans to pay dividends on our common stock in the future.
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Summary of The Keystone Capital Transaction
On November 18, 2020, we entered into a
purchase agreement (the “Purchase Agreement”) and a registration agreement (the “Registration Rights Agreement”)
with Keystone Capital. Pursuant to the Purchase Agreement, we have the right to sell Keystone Capital the lesser of (i) $15,000,000
in shares of our common stock and (ii) the number of shares of common stock equal to the Exchange Cap (as defined below), subject
to certain limitations and conditions set forth in the Purchase Agreement. We have filed the registration statement that includes
this prospectus in accordance with our obligations under the Registration Rights Agreement.
Upon the satisfaction of the conditions
in the Purchase Agreement, including that a registration statement that we agreed to file with the SEC pursuant to the Registration
Rights Agreement is declared effective by the SEC and a final prospectus in connection therewith is filed with the SEC (such event,
the “Commencement”), we will have the right, but not the obligation, from time to time at our sole discretion over
the 24-month period from and after the Commencement, to direct Keystone Capital to purchase up to a fixed maximum amount of shares
of common stock as set forth in the Purchase Agreement on any trading day, so long as the conditions for delivery of a Fixed Purchase
notice set forth in the Purchase Agreement have been satisfied; provided, that Keystone Capital’s maximum commitment under
any single fixed purchase will not exceed $500,000. In addition to the conditions described elsewhere in this prospectus, we may
direct Keystone Capital to purchase shares in a Fixed Purchase on any trading day, so long as (i) the applicable Fixed Purchase
price per share for such Fixed Purchase, calculated as of the applicable purchase date for such Fixed Purchase, is not less than
$1.00 (subject to adjustment as provided in the Purchase Agreement for any reorganization, recapitalization, non-cash dividend,
stock split, or other similar transaction occurring after the date of the Purchase Agreement), (ii) at least two (2) trading days
have elapsed since the most recent prior Fixed Purchase notice was delivered to Keystone Capital and (iii) we have delivered and
Keystone Capital has received all shares of common stock purchased in all prior Fixed Purchases in accordance with the terms of
the Purchase Agreement.
The purchase price of the shares of our
common stock that may be sold to Keystone Capital under the Purchase Agreement will be based on the market price of our common
stock at the time of sale as computed under the Purchase Agreement. Specifically, the purchase price per share of the common stock
that may be sold to Keystone Capital under the Purchase Agreement in such fixed purchases equals ninety percent (90%) of the arithmetic
average of the closing sale prices for the Common Stock during the five (5) consecutive trading-day period ending on the fixed
purchase date for the fixed purchase, so long as the common stock is listed on The Nasdaq Capital Market or any nationally recognized
successor thereto (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction that occurs on or after the date of this Purchase Agreement). There is no upper limit on the price per share
that Keystone Capital could be obligated to pay for the common stock under the Purchase Agreement.
From and after Commencement, we will control
the timing and amount of any sales of our common stock to Keystone Capital. Actual sales of shares of our common stock to Keystone
Capital under the Purchase Agreement will depend on a variety of factors to be determined by us from time to time, including, among
others, market conditions, the trading price of the common stock and determinations by us as to the appropriate sources of funding
for our company and our operations.
Under the applicable rules of the Nasdaq
Stock Market LLC (“Nasdaq”), in no event may we issue more than 2,842,198 shares of our common stock (including the
175,000 Commitment Shares), which represents 19.99% of the shares of our common stock outstanding immediately prior to the execution
of the Purchase Agreement (the “Exchange Cap”), to Keystone Capital under the Purchase Agreement, unless (i) we obtain
stockholder approval to issue shares of our common stock in excess of the Exchange Cap or (ii) the average price of all applicable
sales of common stock to Keystone Capital under the Purchase Agreement equals or exceeds $1.8222, which represents the lower of
(i) the Nasdaq official closing price immediately preceding the execution of the Purchase Agreement and (ii) the average of the
five Nasdaq official closing prices for the common stock immediately preceding the execution of the Purchase Agreement, plus an
incremental amount such that the transactions contemplated by the Purchase Agreement are exempt from the Exchange Cap limitation
under applicable Nasdaq rules. In any event, the Purchase Agreement specifically provides that we may not issue or sell any shares
of our Common Stock under the Purchase Agreement if such issuance or sale would breach any applicable rules or regulations of the
Nasdaq. The Company has also limited the aggregate number of shares of common stock reserved for issuance under the Purchase Agreement
to 15,000,000 shares without subsequent approval from our board of directors.
In all instances, we may not sell shares
of our common stock to Keystone Capital under the Purchase Agreement if it would result in Keystone Capital beneficially owning
more than 4.99% of the common stock (the “Beneficial Ownership Cap”).
The net proceeds from sales, if any, under
the Purchase Agreement, will depend on the frequency and prices at which the Company sells shares to Keystone Capital. To the extent
the Company sells shares under the Purchase Agreement, the Company currently plans to use any proceeds therefrom for strategic
opportunities, increasing the staff and capabilities of the Company, working capital and other general corporate purposes.
There are no restrictions on future financings,
rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement or Registration Rights
Agreement other than a prohibition on entering into a “Variable Rate Transaction,” as defined in the Purchase Agreement,
and as more specifically described in the section of this prospectus entitled “The Keystone Capital Transaction.” Keystone
Capital has agreed not to cause, or engage in any manner whatsoever, any direct or indirect short selling or hedging of the common
stock.
As consideration for Keystone Capital’s
irrevocable commitment to purchase shares of Common Stock upon the terms of and subject to satisfaction of the conditions set forth
in the Purchase Agreement, concurrently with the execution and delivery of the Purchase Agreement, the Company issued to Keystone
Capital 175,000 Commitment Shares.
The Purchase Agreement and the Registration
Rights Agreement contain customary representations, warranties, conditions and indemnification obligations of the parties. The
representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of
specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by
the contracting parties.
The Company has the right to terminate
the Purchase Agreement at any time after Commencement, at no cost or penalty, upon five (5) trading days’ prior written notice
to Keystone Capital. Neither the Company nor Keystone Capital may assign or transfer its rights and obligations under the Purchase
Agreement, and no provision of the Purchase Agreement may be modified or waived by the parties.
We do not know what the purchase price
for our common stock will be or whether there will occur an exception to the Exchange Cap and therefore cannot be certain as to
the number of shares we might issue to Keystone Capital under the Purchase Agreement after the date of this prospectus. As of November
18, 2020, immediately prior to execution of the Purchase Agreement and issuance of the Commitment Shares to Keystone Capital, there
were 14,218,100 shares of our common stock outstanding, of 11,781,331 shares were held by non-affiliates. Although the Purchase
Agreement provides that we may sell up to an aggregate of $15,000,000 of our common stock to Keystone Capital, only 2,842,198 shares
of our common stock are being registered for resale under this prospectus, which represents (i) the 175,000 Commitment Shares we
issued to Keystone Capital upon execution of the Purchase Agreement and (ii) 2,667,198 shares of our common stock that we may issue
and sell to Keystone Capital in the future under the Purchase Agreement in accordance with the Exchange Cap, if and when we elect
to sell shares of our common stock to Keystone Capital under the Purchase Agreement. Depending on the market prices of our common
stock at the time we elect to issue and sell shares of our common stock to Keystone Capital under the Purchase Agreement, we may
need to register for resale under the Securities Act additional shares of our common stock in order to receive aggregate gross
proceeds equal to the $15,000,000 total commitment available to us under the Purchase Agreement. If all of such 2,842,198 shares
of our common stock offered hereby were issued and outstanding as of the date of this prospectus, such shares would represent approximately
16.7% of the total number of outstanding shares of common stock, and approximately 19% of the total number of outstanding shares
of common stock held by non-affiliates, in each case as of the date of this prospectus. If we elect to issue and sell to Keystone
Capital under the Purchase Agreement more than the 2,842,198 shares of our common stock being registered for resale by Keystone
Capital under this prospectus (assuming we have the right to do so under Nasdaq rules), which we have the right, but not the obligation,
to do, we must first register for resale under the Securities Act any such additional shares of our common stock, which could cause
additional substantial dilution to our stockholders. The number of shares of our common stock ultimately offered for sale by Keystone
Capital is dependent upon the number of shares purchased by Keystone Capital under the Purchase Agreement.
Issuances of our common stock to Keystone
Capital under the Purchase Agreement will not affect the rights or privileges of our existing stockholders, except that the economic
and voting interests of each of our existing stockholders will be diluted as a result of any such issuance. Although the number
of shares of our common stock that our existing stockholders own will not decrease, the shares of our common stock owned by our
existing stockholders will represent a smaller percentage of our total outstanding shares of our common stock after any such issuance
of shares of our common stock to Keystone Capital under the Purchase Agreement. There are substantial risks to our stockholders
as a result of the sale and issuance of common stock to Keystone Capital under the Purchase Agreement. See “Risk Factors.”
THE OFFERING
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Issuer
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Adial Pharmaceuticals, Inc.
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Common stock offered by the Selling Stockholder
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This prospectus covers the resale of a
total of up to 2,842,198 shares of our common stock, consisting of:
● 175,000
shares of common stock issued to Keystone Capital upon the execution of the Purchase Agreement as Commitment Shares; and
● 2,667,198
additional shares of common stock that we may sell to Keystone Capital pursuant to the Purchase Agreement from time to time after
the registration statement that includes this prospectus is declared effective.
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Offering price
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The Selling Stockholder will sell the shares at prevailing market prices or privately negotiated prices.
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Common stock outstanding immediately before
this offering
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14,393,100 shares
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Common stock outstanding after this offering
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17,060,298 shares(1)
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Use of proceeds
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The Selling Stockholder will receive all of the proceeds from the sale of the shares offered for sale by it under this prospectus. We will not receive proceeds from the sale of the shares by the Selling Stockholder. However, we may receive proceeds of up to $15.0 million from the sale of our common stock to the Selling Stockholder under the Purchase Agreement described above. Any proceeds from the Selling Stockholder that we receive under the Purchase Agreement are expected to be used for strategic opportunities, increasing the staff and capabilities of the Company, working capital and other general corporate purposes. See “Use of Proceeds.”
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Risk factors
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Investing in our common stock involves a high degree of risk. You should carefully read and consider the information on page 8 of this prospectus set forth under the headings “Risk Factors” and all other information set forth in this prospectus and the documents incorporated herein by reference before deciding to invest in our common stock.
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NASDAQ Capital Markets symbols
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Our common stock and the warrants issued in our initial public offering are listed on the NASDAQ Capital Market under the symbols “ADIL” and “ADILW”, respectively.
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Except as otherwise indicated herein, the
number of shares of our common stock to be outstanding after this offering is based on 14,393,100 shares of common stock outstanding
as of December 1, 2020, which includes the 175,000 Commitment Shares and excludes:
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8,649,625 shares of common stock issuable as of the date hereof upon the exercise of common stock warrants outstanding at a weighted average exercise price of $4.60 per share;
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2,668,866 shares of common stock issuable upon the exercise of stock options outstanding at a weighted-average exercise price of $2.48 per share; and
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2,171,382 shares of common stock available for future issuance under the 2017 Equity Incentive Plan.
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RISK FACTORS
Investing in our securities involves a
high degree of risk. Prior to making a decision about investing in our securities, you should carefully consider the specific risk
factors discussed in the sections entitled “Risk Factors” contained in our annual report on Form 10-K for the fiscal
year ended December 31, 2019 under the heading “Item 1A. Risk Factors,” and as described or may be described in any
subsequent quarterly report on Form 10-Q under the heading “Item 1A. Risk Factors,” as well as in any applicable prospectus
supplement and contained or to be contained in our filings with the SEC and incorporated by reference in this prospectus, together
with all of the other information contained in this prospectus, or any applicable prospectus supplement. For a description of these
reports and documents, and information about where you can find them, see “Where You Can Find Additional Information”
and “Incorporation of Certain Information by Reference.” If any of the risks or uncertainties described in our SEC
filings or any prospectus supplement or any additional risks and uncertainties actually occur, our business, financial condition
and results of operations could be materially and adversely affected. In that case, the trading price of our securities could decline
and you might lose all or part of the value of your investment.
Risks Related to this Offering
It is not possible to predict the
actual number of shares we will sell under the Purchase Agreement to the Selling Stockholder, or the actual gross proceeds resulting
from those sales.
Subject to certain limitations in the Purchase
Agreement and compliance with applicable law, we have the discretion to deliver notices to the Selling Stockholder at any time
throughout the term of the Purchase Agreement. The actual number of shares that are sold to the Selling Stockholder may depend
based on a number of factors, including the market price of the common stock during the sales period. Actual gross proceeds may
be less than $15.0 million, which may impact our future liquidity. Because the price per share of each share sold to the Selling
Stockholder will fluctuate during the sales period, it is not currently possible to predict the number of shares that will be sold
or the actual gross proceeds to be raised in connection with those sales.
Investors who buy shares at different
times will likely pay different prices.
Investors who purchase shares in this offering
at different times will likely pay different prices, and so may experience different levels of dilution and different outcomes
in their investment results. In connection with the Keystone Capital Transaction, we will have discretion, subject to market demand,
to vary the timing, prices, and numbers of shares sold to Keystone Capital. Similarly, Keystone Capital may sell such shares at
different time and at different prices. Investors may experience a decline in the value of the shares they purchase from the Selling
Stockholder in this offering as a result of sales made by us in future transactions to Keystone Capital at prices lower than the
prices they paid.
The issuance of common stock to the
Selling Stockholder may cause substantial dilution to our existing stockholders and the sale of such shares acquired by the Selling
Stockholder could cause the price of our common stock to decline.
We are registering for resale by the Selling
Stockholder up to 2,842,198 shares of common stock, consisting of 175,000 shares issued to the Selling Stockholder as Commitment
Shares upon execution of the Purchase Agreement, and an additional 2,667,198 shares of common stock that we may issue and sell
to the Selling Stockholder under the Purchase Agreement from time to time following Commencement. The number of shares of our common
stock ultimately offered for resale by the Selling Stockholder under this prospectus is dependent upon the number of shares issued
to the Selling Stockholder pursuant to the Purchase Agreement from and after Commencement. Depending on a variety of factors, including
market liquidity of our common stock, the issuance of shares to the Selling Stockholder may cause the trading price of our common
stock to decline.
The Selling Stockholder is irrevocably
bound to purchase up to 2,667,198 shares of our common stock being registered for resale herby and, following receipt by the Selling
Stockholder of shares of our common stock issued to the Selling Stockholder under the Purchase Agreement, the Selling Stockholder
may sell all, some or none of such shares. The sale of a substantial number of shares of our common stock by the Selling Stockholder
in this offering, or anticipation of such sales, could cause the trading price of our common stock to decline or make it more difficult
for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise desire.
Our need for future financing may
result in the issuance of additional securities, which will cause investors to experience dilution.
Our cash requirements may vary from those
now planned, depending upon numerous factors, including the results of future research and development activities. We expect our
expenses to increase if and when we initiate and conduct additional clinical trials, and seek marketing approval for our product
candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization
expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will need to obtain substantial additional
funding in connection with our continuing operations. There are no other commitments by any person for future financing. Our securities
may be offered to other investors at a price lower than the price per share offered to current stockholders, or upon terms which
may be deemed more favorable than those offered to current stockholders. In addition, the issuance of securities in any future
financing may dilute an investor’s equity ownership and have the effect of depressing the market price for our securities.
Moreover, we may issue derivative securities, including options and/or warrants, from time to time, to procure qualified personnel
or for other business reasons. The issuance of any such derivative securities, which is at the discretion of our board of directors,
may further dilute the equity ownership of our stockholders.
We have additional securities available
for issuance, which, if issued, could adversely affect the rights of the holders of our common stock.
Our Amended and Restated Certificate of
Incorporation, as amended, authorizes the issuance of 50,000,000 shares of our common stock and 5,000,000 shares of preferred stock.
In certain circumstances, the common stock, as well as the awards available for issuance under our equity incentive plans, can
be issued by our board of directors, without stockholder approval. Any future issuances of such stock would further dilute the
percentage ownership of us held by holders of preferred stock and common stock. In addition, the issuance of certain securities,
including pursuant to the terms of our stockholder rights plan, may be used as an “anti-takeover” device without further
action on the part of our stockholders, and may adversely affect the holders of the common stock.
Future sales of our common stock
could cause the market price for our common stock to decline.
We cannot predict the effect, if any, that
market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price
of our common stock prevailing from time to time. Sales of substantial amounts of shares of our common stock in the public market,
or the perception that those sales will occur, could cause the market price of our common stock to decline or be depressed.
The shares of common stock issued in connection
with this offering will be freely tradable without restriction or further registration under the Securities Act.
Because we will not declare
cash dividends on our common stock in the foreseeable future, stockholders must rely on appreciation of the value of our common
stock for any return on their investment.
We have never declared or paid cash dividends
on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of
our business and will not declare or pay any cash dividends in the foreseeable future. As a result, only appreciation of the price
of our common stock, if any, will provide a return to investors in this offering. See “Dividend Policy.”
Our management will have broad discretion
over the use of the net proceeds from our sale of shares of common stock to Keystone Capital, you may not agree with how we use
the proceeds and the proceeds may not be invested successfully.
Our management will have broad discretion
over the use of proceeds from this offering. We intend to use the net proceeds from this offering, primarily for strategic opportunities,
increasing the staff and capabilities of the Company, working capital and other general corporate purposes. Our management will
have considerable discretion in the application of the net proceeds, and you will not have the opportunity, as part of your investment
decision, to assess whether the proceeds are being used appropriately. The net proceeds, if any, may be used for corporate purposes
that do not improve our operating results or enhance the value of our common stock. The failure of our management to use these
funds effectively could have a material adverse effect on our business, cause the market price of our common stock to decline and
impair the commercialization of our products and/or delay the development of our product candidates. Pending their use, we may
invest the net proceeds from this offering in short-term, investment-grade, interest-bearing instruments and U.S. government securities.
These investments may not yield a favorable return to our stockholders.
THE KEYSTONE CAPITAL TRANSACTION
General
On November 18, 2020, we entered into the
Purchase Agreement and the Registration Rights Agreement with Keystone Capital. Pursuant to the terms of the Purchase Agreement,
Keystone Capital has agreed to purchase from us the lesser of (i) $15,000,000 in shares of our common stock and (ii) the number
of shares of common stock equal to the Exchange Cap, subject to certain limitations and conditions set forth in the Purchase Agreement.
Pursuant to the terms of the Registration Rights Agreement, we have filed with the SEC the registration statement that includes
this prospectus to register for resale under the Securities Act the shares that may be issued to Keystone Capital under the Purchase
Agreement.
We do not have the right to commence any
sales of our common stock to Keystone Capital under the Purchase Agreement until all of the conditions set forth in the Purchase
Agreement have been satisfied, including that the SEC has declared effective the registration statement that includes this prospectus
registering the resale by Keystone Capital of the shares of our common stock that may be issued and sold to Keystone Capital under
the Purchase Agreement. From and after Commencement, we will control the timing and amount of any sales of our common stock to
Keystone Capital. Actual sales of shares of our common stock to Keystone Capital under the Purchase Agreement will depend on a
variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price of the
common stock and determinations by us as to the appropriate sources of funding for our company and our operations.
The purchase price of the shares of our
common stock that may be sold to Keystone Capital under the Purchase Agreement will be based on the market price of our common
stock at the time of sale as computed under the Purchase Agreement. Specifically, the purchase price per share of the common stock
that may be sold to Keystone Capital under the Purchase Agreement in any fixed purchase equals ninety percent (90%) of the arithmetic
average of the closing sale prices for the Common Stock during the five (5) consecutive trading-day period ending on the fixed
purchase date for the fixed purchase, so long as the common stock is listed on The Nasdaq Capital Market or any nationally recognized
successor thereto (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction that occurs on or after the date of this Purchase Agreement). There is no upper limit on the price per share
that Keystone Capital could be obligated to pay for the common stock under the Purchase Agreement.
We do not know what the purchase price
for our common stock will be or whether there will occur an exception to the Exchange Cap and therefore cannot be certain as to
the number of shares we might issue to Keystone Capital under the Purchase Agreement after the date of this prospectus. As of November
18, 2020, immediately prior to execution of the Purchase Agreement and issuance of the Commitment Shares to Keystone Capital, there
were 14,218,100 shares of our common stock outstanding, of 11,781,331 shares were held by non-affiliates. Although the Purchase
Agreement provides that we may sell up to an aggregate of $15,000,000 of our common stock to Keystone Capital, only 2,842,198 shares
of our common stock are being registered for resale under this prospectus, which represents (i) the 175,000 Commitment Shares we
issued to Keystone Capital upon execution of the Purchase Agreement and (ii) 2,667,198 shares of our common stock that we may issue
and sell to Keystone Capital in the future under the Purchase Agreement in accordance with the Exchange Cap, if and when we elect
to sell shares of our common stock to Keystone Capital under the Purchase Agreement. Depending on the market prices of our common
stock at the time we elect to issue and sell shares of our common stock to Keystone Capital under the Purchase Agreement, we may
need to register for resale under the Securities Act additional shares of our common stock in order to receive aggregate gross
proceeds equal to the $15,000,000 total commitment available to us under the Purchase Agreement. If all of such 2,842,198 shares
of our common stock offered hereby were issued and outstanding as of the date of this prospectus, such shares would represent approximately
16.7% of the total number of outstanding shares of common stock, and approximately 19% of the total number of outstanding shares
of common stock held by non-affiliates, in each case as of the date of this prospectus. If we elect to issue and sell to Keystone
Capital under the Purchase Agreement more than the 2,842,198 shares of our common stock being registered for resale by Keystone
Capital under this prospectus (assuming we have the right to do so under Nasdaq rules), which we have the right, but not the obligation,
to do, we must first register for resale under the Securities Act any such additional shares of our common stock, which could cause
additional substantial dilution to our stockholders. The number of shares of our common stock ultimately offered for sale by Keystone
Capital is dependent upon the number of shares purchased by Keystone Capital under the Purchase Agreement.
Under the applicable rules of the Nasdaq
Stock Market LLC (“Nasdaq”), in no event may we issue more than 2,842,198 shares of our common stock (including the
175,000 Commitment Shares), which represents 19.99% of the shares of our common stock outstanding immediately prior to the execution
of the Purchase Agreement (also referred to as the Exchange Cap), to Keystone Capital under the Purchase Agreement, unless (i)
we obtain stockholder approval to issue shares of our common stock in excess of the Exchange Cap or (ii) the average price of all
applicable sales of common stock to Keystone Capital under the Purchase Agreement equals or exceeds $1.8222, which represents the
lower of (i) the Nasdaq official closing price immediately preceding the execution of the Purchase Agreement and (ii) the average
of the five Nasdaq official closing prices for the common stock immediately preceding the execution of the Purchase Agreement,
plus an incremental amount of $0.1122, such that the transactions contemplated by the Purchase Agreement are exempt from the Exchange
Cap limitation under applicable Nasdaq rules. In any event, the Purchase Agreement specifically provides that we may not issue
or sell any shares of our Common Stock under the Purchase Agreement if such issuance or sale would breach any applicable rules
or regulations of the Nasdaq. The Company has also limited the aggregate number of shares of common stock reserved for issuance
under the Purchase Agreement to 15,000,000 shares without subsequent approval from our board of directors.
The Purchase Agreement also prohibits us
from directing Keystone Capital to purchase any shares of our common stock if those shares, when aggregated with all other shares
of our common stock then beneficially owned by Keystone Capital, would result in Keystone Capital and its affiliates exceeding
the Beneficial Ownership Cap.
Issuances of our common stock to Keystone
Capital under the Purchase Agreement will not affect the rights or privileges of our existing stockholders, except that the economic
and voting interests of each of our existing stockholders will be diluted as a result of any such issuance. Although the number
of shares of our common stock that our existing stockholders own will not decrease, the shares of our common stock owned by our
existing stockholders will represent a smaller percentage of our total outstanding shares of our common stock after any such issuance
of shares of our common stock to Keystone Capital under the Purchase Agreement.
As consideration for Keystone Capital’s
irrevocable commitment to purchase shares of common stock upon the terms of and subject to satisfaction of the conditions set forth
in the Purchase Agreement, upon execution of the Purchase Agreement, the Company issued to Keystone Capital 175,000 Commitment
Shares.
The Purchase Agreement and the Registration
Rights Agreement contain customary representations, warranties, conditions and indemnification obligations of the parties. The
representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of
specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by
the contracting parties.
Neither the Company nor Keystone Capital
may assign or transfer its rights and obligations under the Purchase Agreement and no provision of the Purchase Agreement may be
modified or waived by the parties.
Purchase of Shares under the Purchase
Agreement
Under the Purchase Agreement, on any trading
day selected by us on which the conditions described below for delivery of a Fixed Purchase Notice have been satisfied, which we
refer to as the “purchase date,” we may direct Keystone Capital to purchase up to a fixed maximum amount of shares
of our common stock calculated in accordance with the terms of the Purchase Agreement on such purchase date, which we refer to
as a “Fixed Purchase.”
As stated above, the purchase price per
share of the common stock that may be sold to Keystone Capital under the Purchase Agreement in a Fixed Purchase equals ninety percent
(90%) of the arithmetic average of the closing sale prices for the common stock during the five (5) consecutive trading-day period
ending on the purchase date for the Fixed Purchase, so long as the common stock is listed on The Nasdaq Capital Market or any nationally
recognized successor thereto (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split
or other similar transaction that occurs on or after the date of this Purchase Agreement). In the event our common stock is no
longer listed on The Nasdaq Capital Market or any nationally recognized successor thereto, but is then listed on an “Eligible
Market” (as defined in the Purchase Agreement), the purchase price per share of the common stock that may be sold to Keystone
Capital under the Purchase Agreement in a Fixed Purchase shall equal ninety percent (90%) of the arithmetic average of the closing
sale prices for the common stock during the twenty (20) consecutive trading-day period ending on the purchase date for the Fixed
Purchase (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar
transaction that occurs on or after the date of this Purchase Agreement). There is no upper limit on the price per share that Keystone
Capital could be obligated to pay for the Common Stock under the Purchase Agreement. Notwithstanding the foregoing, Keystone Capital’s
maximum commitment under any single Fixed Purchase will not exceed $500,000.
In addition to the conditions described
elsewhere in this prospectus, we may direct Keystone Capital to purchase shares in a Fixed Purchase on any trading day, so long
as (i) the applicable Fixed Purchase price per share for such Fixed Purchase, calculated as of the applicable purchase date for
such Fixed Purchase, is not less than $1.00 (subject to adjustment as provided in the Purchase Agreement for any reorganization,
recapitalization, non-cash dividend, stock split, or other similar transaction occurring after the date of the Purchase Agreement),
(ii) at least two (2) trading days have elapsed since the most recent prior Fixed Purchase notice was delivered to Keystone Capital
and (iii) we have delivered and Keystone Capital has received all shares of common stock purchased in all prior Fixed Purchases
in accordance with the terms of the Purchase Agreement.
Conditions to Commencement and for Delivery
of Fixed Purchase Notices
The Company’s ability to deliver
Fixed Purchase notices to Keystone Capital under the Purchase Agreement are subject to the satisfaction, both at the time of Commencement
and at the time of delivery by the Company of any Fixed Purchase notice to Keystone Capital, of certain conditions, all of which
are entirely outside of Keystone Capital’s control, including the following:
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the accuracy in all material respects of the representations and warranties of the Company included in the Purchase Agreement;
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the Company having performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Purchase Agreement to be performed, satisfied or complied with by the Company;
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the registration statement that includes this prospectus (and any one or more additional registration statements filed with the SEC that include shares of common stock that may be issued and sold by the Company to Keystone Capital under the Purchase Agreement) having been declared effective under the Securities Act by the SEC, and Keystone Capital being able to utilize this prospectus (and the prospectus included in any one or more additional registration statements filed with the SEC under the Registration Rights Agreement) to resell all of the shares of common stock included in this prospectus (and included in any such additional prospectuses);
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the SEC shall not have issued any stop order suspending the effectiveness of the registration statement that includes this prospectus (or any one or more additional registration statements filed with the SEC that include shares of common stock that may be issued and sold by the Company to Keystone Capital under the Purchase Agreement) or prohibiting or suspending the use of this prospectus (or the prospectus included in any one or more additional registration statements filed with the SEC under the Registration Rights Agreement), and the absence of any suspension of qualification or exemption from qualification of the common stock for offering or sale in any jurisdiction;
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there shall not have occurred any event and there shall not exist any condition or state of facts, which makes any statement of a material fact made in the registration statement that includes this prospectus (or in any one or more additional registration statements filed with the SEC that include shares of common stock that may be issued and sold by the Company to Keystone Capital under the Purchase Agreement) untrue or which requires the making of any additions to or changes to the statements contained therein in order to state a material fact required by the Securities Act to be stated therein or necessary in order to make the statements then made therein (in the case of this prospectus or the prospectus included in any one or more additional registration statements filed with the SEC under the Registration Rights Agreement, in light of the circumstances under which they were made) not misleading;
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this prospectus, in final form, shall have been filed with the SEC under the Securities Act prior to Commencement, and all reports, schedules, registrations, forms, statements, information and other documents required to have been filed by the Company with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shall have been filed with the SEC;
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trading in the common stock shall not have been suspended by the SEC or the Nasdaq, the Company shall not have received any final and non-appealable notice that the listing or quotation of the common stock on the Nasdaq shall be terminated on a date certain (unless, prior to such date, the common stock is listed or quoted on any other Eligible Market, as such term is defined in the Purchase Agreement), and there shall be no suspension of, or restriction on, accepting additional deposits of the common stock, electronic trading or book-entry services by DTC with respect to the common stock;
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the Company shall have complied with all applicable federal, state and local governmental laws, rules, regulations and ordinances in connection with the execution, delivery and performance of the Purchase Agreement and the Registration Rights Agreement;
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the absence of any statute, regulation, order, decree, writ, ruling or injunction by any court or governmental authority of competent jurisdiction which prohibits the consummation of or that would materially modify or delay any of the transactions contemplated by the Purchase Agreement or the Registration Rights Agreement;
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the absence of any action, suit or proceeding before any arbitrator or any court or governmental authority seeking to restrain, prevent or change the transactions contemplated by the Purchase Agreement or the Registration Rights Agreement, or seeking material damages in connection with such transactions;
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all of the shares of common stock that may be issued pursuant to the Purchase Agreement shall have been approved for listing or quotation on the Nasdaq (or any Eligible Market as defined in the Purchase Agreement), subject only to notice of issuance;
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no condition, occurrence, state of facts or event constituting a material adverse effect shall have occurred and be continuing;
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the absence of any bankruptcy proceeding against the Company commenced by a third party, and the Company shall not have commenced a voluntary bankruptcy proceeding, consented to the entry of an order for relief against it in an involuntary bankruptcy case, consented to the appointment of a custodian of the Company or for all or substantially all of its property in any bankruptcy proceeding, or made a general assignment for the benefit of its creditors; and
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the receipt by Keystone Capital of the opinions, bring-down opinions and negative assurances from outside counsel to the Company in the forms mutually agreed to by the Company and Keystone Capital prior to the date of the Purchase Agreement.
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Termination of the Purchase Agreement
Unless earlier terminated as provided in
the Purchase Agreement, the Purchase Agreement will terminate automatically on the earliest to occur of:
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the first day of the month next following the 24-month anniversary of the effective date of the registration statement that includes this prospectus (which term may not be extended by the parties);
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the date on which Keystone Capital shall have purchased an aggregate of $15,000,000 of shares of common stock pursuant to the Purchase Agreement;
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the date on which the common stock shall have failed to be listed or quoted on the Nasdaq or any other Eligible Market; and
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the date on which the Company commences a voluntary bankruptcy case or any third party commences a bankruptcy proceeding against the Company, a custodian is appointed for the Company in a bankruptcy proceeding for all or substantially all of its property, or the Company makes a general assignment for the benefit of its creditors.
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We have the right to terminate the Purchase
Agreement at any time after Commencement, at no cost or penalty, upon five (5) trading days’ prior written notice to Keystone
Capital.
No Short-Selling or Hedging by Keystone
Capital
Keystone Capital has agreed that neither
it nor any of its affiliates shall engage in any direct or indirect short-selling or hedging of our common stock during any time
prior to the termination of the Purchase Agreement.
Prohibition on Variable Rate Transactions
Subject to specified exceptions included
in the Purchase Agreement, we are limited in our ability to enter into specified variable rate transactions during the term of
the Purchase Agreement. Such transactions include, among others, the issuance of convertible securities with a conversion or exercise
price that is based upon or varies with the trading price of our common stock after the date of issuance.
Effect of Performance of the Purchase
Agreement on our Stockholders
All shares registered in this offering
that may be issued or sold by us to Keystone Capital under the Purchase Agreement are expected to be freely tradable. Shares registered
in this offering may be sold by us to Keystone Capital over a period of up to 24 months commencing on the date of this registration
statement of which this prospectus is a part becomes effective. The resale by Keystone Capital of a significant amount of shares
registered in this offering at any given time, or the perception that these sales may occur, could cause the market price of our
common stock to decline and to be highly volatile. Sales of our common stock to Keystone Capital, if any, will depend upon market
conditions and other factors to be determined by us. We may ultimately decide to sell to Keystone Capital all, some or none of
the additional shares of our common stock that may be available for us to sell pursuant to the Purchase Agreement. If and when
we do sell shares to Keystone Capital, after Keystone Capital has acquired the shares, Keystone Capital may resell all, some or
none of those shares at any time or from time to time in its discretion. Therefore, sales to Keystone Capital by us under the Purchase
Agreement may result in substantial dilution to the interests of other holders of our common stock. In addition, if we sell a substantial
number of shares to Keystone Capital under the Purchase Agreement, or if investors expect that we will do so, the actual sales
of shares or the mere existence of our arrangement with Keystone Capital may make it more difficult for us to sell equity or equity-related
securities in the future at a time and at a price that we might otherwise wish to effect such sales. However, we have the right
to control the timing and amount of any additional sales of our shares to Keystone Capital and the Purchase Agreement may be terminated
by us at any time at our discretion without any cost to us.
Pursuant to the terms of the Purchase Agreement,
we have the right, but not the obligation, to direct Keystone Capital to purchase up to $15,000,000 of our common stock, subject
to certain limitations. We have registered only a portion of the shares issuable under the Purchase Agreement and, therefore, we
may seek to issue and sell to Keystone Capital under the Purchase Agreement more shares of our common stock than are offered under
this prospectus. If we choose to do so, we must first register for resale under the Securities Act any such additional shares,
which could cause additional substantial dilution to our stockholders. The number of shares ultimately offered for resale under
this prospectus is dependent upon the number of shares we direct Keystone Capital to purchase under the Purchase Agreement.
The following table sets forth the amount
of gross proceeds we would receive from Keystone Capital from our sale of shares of common stock to Keystone Capital under the
Purchase Agreement at varying purchase prices:
Assumed
Average
Purchase Price
Per Share
|
|
|
Number of
Registered Shares to
be Issued if Full
Purchase (1)
|
|
|
Percentage of
Outstanding Shares
Issued After Giving
Effect to the Issuance to
Keystone Capital (2)
|
|
|
Gross Proceeds from
the Sale of Shares to
Keystone Capital
Under the Purchase
Agreement
|
|
|
$
|
1.00
|
|
|
|
2,667,198
|
|
|
|
15.6
|
%
|
|
$
|
2,667,198
|
|
|
$
|
1.71
|
(3)
|
|
|
2,667,198
|
|
|
|
15.6
|
%
|
|
$
|
4,560,908
|
|
|
$
|
2.00
|
|
|
|
2,667,198
|
|
|
|
15.6
|
%
|
|
$
|
5,334,396
|
|
|
$
|
2.50
|
|
|
|
2,667,198
|
|
|
|
15.6
|
%
|
|
$
|
6,667,995
|
|
|
$
|
3.00
|
|
|
|
2,667,198
|
|
|
|
15.6
|
%
|
|
$
|
8,001,594
|
|
|
$
|
4.00
|
|
|
|
2,667,198
|
|
|
|
15.6
|
%
|
|
$
|
10,668,792
|
|
|
$
|
5.00
|
|
|
|
2,667,198
|
|
|
|
15.6
|
%
|
|
$
|
13,335,990
|
|
|
$
|
6.00
|
|
|
|
2,500,000
|
|
|
|
14.8
|
%
|
|
$
|
15,000,000
|
|
|
|
(1)
|
Although
the Purchase Agreement provides that we may sell up to $15,000,000 of our common stock to Keystone Capital, we are only registering
2,842,198 shares under this prospectus (which includes the 175,000 shares of common stock we issued to Keystone Capital as Commitment
Shares upon execution of the Purchase Agreement), which may or may not cover all of the shares we ultimately sell to Keystone
Capital under the Purchase Agreement. We have reserved 15,000,000 shares of common stock for issuance under the Purchase Agreement;
however, we will not issue more than an aggregate of 2,842,198 shares of our common stock unless (i) we obtain stockholder approval
to issue shares of our common stock in excess of the Exchange Cap or (ii) the average price of all applicable sales of common
stock to Keystone Capital under the Purchase Agreement equals or exceeds $1.8222. The number of registered shares to be issued
as set forth in this column (A) gives effect to the Exchange Cap, (B) is without regard for the Beneficial Ownership Cap, and
(C) does not include the 175,000 Commitment Shares already issued to Keystone Capital upon execution of the Purchase Agreement.
|
|
|
(2)
|
The
denominator is based on 14,393,100 shares of our common stock outstanding as of November 18, 2020, which includes the 175,000
Commitment Shares, and the number of shares set forth in the adjacent column that we would have sold to Keystone Capital, assuming
the average purchase price in the first column. The numerator is based on the number of shares of our common stock issuable under
the Purchase Agreement (that are the subject of this offering) at the corresponding assumed average purchase price set forth in
the first column.
|
|
|
(3)
|
The
closing sale price of our common stock on November 17, 2020.
|
USE OF PROCEEDS
This prospectus relates to shares of common
stock that may be offered and sold from time to time by Keystone Capital. We will not receive any proceeds from the resale of shares
of common stock by Keystone Capital.
We may receive up to $15,000,000 in gross
proceeds if we issue to Keystone Capital shares issuable pursuant to the Purchase Agreement. We estimate that the net proceeds
to us from the sale of our common stock to Keystone Capital pursuant to the Purchase Agreement would be up to $14,800,000 over
an approximately 24-month period, assuming that we sell the full amount of our common stock that we have the right, but not the
obligation, to sell to Keystone Capital under the Purchase Agreement, and after other estimated fees and expenses. See “Plan
of Distribution” elsewhere in this prospectus for more information.
Any proceeds from the Selling Stockholder
that we receive under the Purchase Agreement are currently expected to be used primarily for strategic opportunities, increasing
the staff and capabilities of the Company, working capital and other general corporate purposes. Pending these uses, we expect
to invest the net proceeds in short-term, interest-bearing securities. We have broad discretion in determining how the proceeds
of this offering will be used, and our discretion is not limited by the aforementioned possible uses. Our board of directors believes
the flexibility in application of the net proceeds is prudent. As we are unable to predict the timing or amount of potential issuances
of all of the additional shares issuable purchase to the Purchase Agreement, we cannot specify with certainty all of the particular
uses for the net proceeds that we will have from the sale of such additional shares. Accordingly, our management will have broad
discretion in the application of the net proceeds. We may use the proceeds for purposes that are not contemplated at the time of
this offering. It is possible that no shares will be issued under the Purchase Agreement.
We will incur all costs associated with
this prospectus and the registration statement of which it is a part.
DIVIDEND POLICY
We have never declared or paid any cash
dividends on our common stock and we do not currently intend to pay any cash dividends on our common stock in the foreseeable future.
We expect to retain all available funds and future earnings, if any, to fund the development and growth of our business rather
than to pay cash dividends on our common stock. Any future determination to pay dividends, if any, on our common stock will be
at the discretion of our board of directors and will depend on, among other factors, our results of operations, financial condition,
capital requirements and contractual restrictions.
SELLING STOCKHOLDER
This prospectus relates to the possible
resale from time to time by Keystone Capital of any or all of the shares of common stock that may be issued by us to Keystone Capital
under the Purchase Agreement. For additional information regarding the issuance of common stock covered by this prospectus, see
the section titled “Keystone Capital Transaction” above. We are registering the shares of common stock pursuant to
the provisions of the Registration Rights Agreement we entered into with Keystone Capital on November 18, 2020 in order to permit
the Selling Stockholder to offer the shares for resale from time to time. Except for the transactions contemplated by the Purchase
Agreement and the Registration Rights Agreement, Keystone Capital has not had any material relationship with us within the past
three years. As used in this prospectus, the term “selling stockholder” means Keystone Capital Partners, LLC.
The table below presents information regarding
the Selling Stockholder and the shares of common stock that it may offer from time to time under this prospectus. This table is
prepared based on information supplied to us by the Selling Stockholder, and reflects holdings as of November 18, 2020. The number
of shares in the column “Maximum Number of Shares of Common Stock to be Offered Pursuant to this Prospectus” represents
all of the shares of common stock that the Selling Stockholder may offer under this prospectus. The Selling Stockholder may sell
some, all or none of its shares in this offering. We do not know how long the Selling Stockholder will hold the shares before selling
them, and we currently have no agreements, arrangements or understandings with the Selling Stockholder regarding the sale of any
of the shares.
Beneficial ownership is determined in accordance
with Rule 13d-3(d) promulgated by the SEC under the Exchange Act, and includes shares of common stock with respect to which the
Selling Stockholder has voting and investment power. The percentage of shares of common stock beneficially owned by the Selling
Stockholder prior to the offering shown in the table below is based on an aggregate of 14,393,100 shares of our common stock outstanding
on November 18, 2020. Because the purchase price of the shares of common stock issuable under the Purchase Agreement is determined
on each Fixed Purchase Date, the number of shares that may actually be sold by the Company under the Purchase Agreement may be
fewer than the number of shares being offered by this prospectus. The fourth column assumes the sale of all of the shares offered
by the Selling Stockholder pursuant to this prospectus.
|
|
|
Number of Shares of
Common Stock Owned
Prior to Offering
|
|
|
Maximum
Number of
Shares of
Common
Stock to be
Offered
Pursuant to
|
|
|
Number of Shares of
Common Stock Owned
After Offering
|
|
|
Name of Selling Stockholder
|
|
Number(1)
|
|
|
Percent(2)
|
|
|
this Prospectus
|
|
|
Number(3)
|
|
|
Percent(2)(3)
|
|
|
Keystone Capital Partners, LLC(4)
|
|
|
175,000
|
|
|
|
*
|
|
|
|
2,842,198
|
|
|
|
0
|
|
|
|
*
|
|
|
|
*
|
Represents
beneficial ownership of less than 1% of the outstanding shares of our common stock.
|
|
|
(1)
|
This
number represents the 175,000 shares of common stock we issued to Keystone Capital on November 18, 2020 as Commitment Shares in
consideration for entering into the Purchase Agreement with us. In accordance with Rule 13d-3(d) under the Exchange Act, we have
excluded from the number of shares beneficially owned prior to the offering all of the shares that Keystone Capital may be required
to purchase under the Purchase Agreement, because the issuance of such shares is solely at our discretion and is subject to conditions
contained in the Purchase Agreement, the satisfaction of which are entirely outside of Keystone Capital’s control, including
the registration statement that includes this prospectus becoming and remaining effective. Furthermore, the Fixed Purchases of
common stock are subject to certain agreed upon maximum amount limitations set forth in the Purchase Agreement. Also, the Purchase
Agreement prohibits us from issuing and selling any shares of our common stock to Keystone Capital to the extent such shares,
when aggregated with all other shares of our common stock then beneficially owned by Keystone Capital, would cause Keystone Capital’s
beneficial ownership of our common stock to exceed the 4.99% Beneficial Ownership Cap. The Purchase Agreement also prohibits us
from issuing or selling shares of our common stock under the Purchase Agreement in excess of the 19.99% Exchange Cap, unless we
obtain stockholder approval to do so, or unless sales of common stock are made at a price equal to or greater than $1.8222 per
share, such that the Exchange Cap limitation would not apply under applicable Nasdaq rules. Neither the Beneficial Ownership Limitation
nor the Exchange Cap (to the extent applicable under Nasdaq rules) may be amended or waived under the Purchase Agreement.
|
|
|
(2)
|
Applicable
percentage ownership is based on 14,393,100 shares of our common stock outstanding as of November 18, 2020, which includes the
175,000 Commitment Shares.
|
|
|
(3)
|
Assumes
the sale of all shares being offered pursuant to this prospectus.
|
|
|
(4)
|
The
business address of Keystone Capital Partners, LLC is 139 Fulton Street, Suite 412, New York, NY 10038. Keystone Capital Partners,
LLC’s principal business is that of a private investor. Ranz Group, LLC, a Delaware limited liability company, is the managing
member of Keystone Capital Partners, LLC and the beneficial owner of 97% of the membership interests in Keystone Capital Partners,
LLC. Fredric G. Zaino is the managing member of Ranz Group, LLC and has sole voting control and investment discretion over securities
beneficially owned directly by Keystone Capital, LLC and indirectly by Ranz Group, LLC. We have been advised that none of Mr.
Zaino, Ranz Group, LLC or Keystone Capital Partners, LLC is a member of the Financial Industry Regulatory Authority, or FINRA,
or an independent broker-dealer, or an affiliate or associated person of a FINRA member or independent broker-dealer. The foregoing
should not be construed in and of itself as an admission by Mr. Zaino as to beneficial ownership of the securities beneficially
owned directly by Keystone Capital Partners, LLC and indirectly by Ranz Group, LLC.
|
PLAN OF DISTRIBUTION
The 2,842,198 shares of common stock offered
by this prospectus are being offered by the Selling Stockholder, Keystone Capital Partners, LLC. The shares may be sold or distributed
from time to time by the Selling Stockholder directly to one or more purchasers or through brokers, dealers, or underwriters who
may act solely as agents at market prices prevailing at the time of sale, at prices related to the prevailing market prices, at
negotiated prices, or at fixed prices, which may be changed. The sale of the shares of our common stock offered by this prospectus
could be effected in one or more of the following methods:
|
|
●
|
ordinary brokers’ transactions;
|
|
|
●
|
transactions involving cross or block trades;
|
|
|
●
|
through brokers, dealers, or underwriters who may act solely as agents;
|
|
|
●
|
“at the market” into an existing market for our common stock;
|
|
|
●
|
in other ways not involving market makers or established business markets, including direct sales to purchasers or sales effected through agents;
|
|
|
●
|
in privately negotiated transactions; or
|
|
|
●
|
any combination of the foregoing.
|
In order to comply with the securities
laws of certain states, if applicable, the shares may be sold only through registered or licensed brokers or dealers. In addition,
in certain states, the shares may not be sold unless they have been registered or qualified for sale in the state or an exemption
from the state’s registration or qualification requirement is available and complied with.
Keystone Capital is an “underwriter”
within the meaning of Section 2(a)(11) of the Securities Act.
Keystone Capital has informed us that it
intends to use one or more registered broker-dealers to effectuate all sales, if any, of our common stock that it has acquired
and may in the future acquire from us pursuant to the Purchase Agreement. Such sales will be made at prices and at terms then prevailing
or at prices related to the then current market price. Each such registered broker-dealer will be an underwriter within the meaning
of Section 2(a)(11) of the Securities Act. Keystone Capital has informed us that each such broker-dealer will receive commissions
from Keystone Capital that will not exceed customary brokerage commissions.
Brokers, dealers, underwriters or agents
participating in the distribution of the shares of our common stock offered by this prospectus may receive compensation in the
form of commissions, discounts, or concessions from the purchasers, for whom the broker-dealers may act as agent, of the shares
sold by the Selling Stockholder through this prospectus. The compensation paid to any such particular broker-dealer by any such
purchasers of shares of our common stock sold by the Selling Stockholder may be less than or in excess of customary commissions.
Neither we nor the Selling Stockholder can presently estimate the amount of compensation that any agent will receive from any purchasers
of shares of our common stock sold by the Selling Stockholder.
We know of no existing arrangements between
the Selling Stockholder or any other stockholder, broker, dealer, underwriter or agent relating to the sale or distribution of
the shares of our common stock offered by this prospectus.
We may from time to time file with the
SEC one or more supplements to this prospectus or amendments to the registration statement of which this prospectus forms a part
to amend, supplement or update information contained in this prospectus, including, if and when required under the Securities Act,
to disclose certain information relating to a particular sale of shares offered by this prospectus by the Selling Stockholder,
including the names of any brokers, dealers, underwriters or agents participating in the distribution of such shares by the Selling
Stockholder, any compensation paid by the Selling Stockholder to any such brokers, dealers, underwriters or agents, and any other
required information.
We will pay the expenses incident to the
registration under the Securities Act of the offer and sale of the shares of our common stock covered by this prospectus by the
Selling Stockholder. As consideration for its irrevocable commitment to purchase our common stock under the Purchase Agreement,
we have issued to Keystone Capital 175,000 shares of our common stock as Commitment Shares.
We also have agreed to indemnify Keystone
Capital and certain other persons against certain liabilities in connection with the offering of shares of our common stock offered
hereby, including liabilities arising under the Securities Act or, if such indemnity is unavailable, to contribute amounts required
to be paid in respect of such liabilities. Keystone Capital has agreed to indemnify us against liabilities under the Securities
Act that may arise from certain written information furnished to us by Keystone Capital specifically for use in this prospectus
or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons, we have
been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and
is therefore, unenforceable.
We estimate that the total expenses for
the offering will be approximately $200,000.
Keystone Capital has represented to us
that at no time prior to the date of the Purchase Agreement has Keystone Capital or its agents, representatives or affiliates engaged
in or effected, in any manner whatsoever, directly or indirectly, any short sale (as such term is defined in Rule 200 of Regulation
SHO of the Exchange Act) of our common stock or any hedging transaction, which establishes a net short position with respect to
our common stock. Keystone Capital has agreed that during the term of the Purchase Agreement, neither Keystone Capital, nor any
of its agents, representatives or affiliates will enter into or effect, directly or indirectly, any of the foregoing transactions.
We have advised the Selling Stockholder
that it is required to comply with Regulation M promulgated under the Exchange Act. With certain exceptions, Regulation M precludes
the Selling Stockholder, any affiliated purchasers, and any broker-dealer or other person who participates in the distribution
from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of
the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to
stabilize the price of a security in connection with the distribution of that security. All of the foregoing may affect the marketability
of the securities offered by this prospectus.
This offering will terminate on the date
that all shares of our common stock offered by this prospectus have been sold by the Selling Stockholder.
Our common stock is currently listed on
The Nasdaq Capital Market under the symbol “ADIL.”
DESCRIPTION OF OUR SECURITIES
General
The following description of our capital
stock and the provisions of our certificate of incorporation and our bylaws are summaries and are qualified by reference to the
certificate of incorporation and the bylaws. We have filed copies of these documents with the SEC as exhibits to our registration
statement of which this prospectus forms a part.
General
Our authorized capital stock consists of
50,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share.
Common Stock
Common stock outstanding. There
are 14,393,100 shares of our common stock outstanding on the date hereof.
Voting rights. The holders of common
stock are entitled to one vote per share on all matters to be voted upon by the stockholders, except on matters relating solely
to terms of preferred stock.
Dividend rights. Subject to preferences
that may be applicable to any outstanding preferred stock, the holders of common stock are entitled to receive ratably such dividends,
if any, as may be declared from time to time by the board of directors out of funds legally available therefor. See “Dividend
Policy.”
Rights upon liquidation. In the
event of our liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining
after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding.
Other rights. The holders of our
common stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions
applicable to our common stock.
Warrants
We have outstanding warrants to purchase
8,649,625 shares of common stock with exercise prices ranging from $0.0054 to $7.63 and expiration dates from July 31, 2023 to
December 31, 2031.
On July 31, 2018, we consummated our IPO
and issued an aggregate of 1,464,000 units, each unit consisting of one share of common stock, par value $0.001 per share, and
one warrant to purchase one share of common stock, at a public offering price of $5.00 per unit, before underwriting discounts
and expenses. We also issued 170,652 warrants not part of units pursuant the underwriter’s overallotment option. The warrants
issued in the IPO are exercisable at any time after their original issuance and at any time up to the date that is five years after
their original issuance. The warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us
a duly executed exercise notice and, at any time a registration statement registering the issuance of the shares of common stock
underlying the warrants under the Securities Act is effective and available for the issuance of such shares, or an exemption from
registration under the Securities Act is available for the issuance of such shares, by payment in full in immediately available
funds for the number of shares of common stock purchased upon such exercise. If a registration statement registering the issuance
of the shares of common stock underlying the warrants under the Securities Act is not effective or available and an exemption from
registration under the Securities Act is not available for the issuance of such shares, the holder may, in its sole discretion,
elect to exercise the warrant through a cashless exercise, in which case the holder would receive upon such exercise the net number
of shares of common stock determined according to the formula set forth in the warrant. No fractional shares of common stock will
be issued in connection with the exercise of a warrant. In lieu of fractional shares, we will pay the holder an amount in cash
equal to the fractional amount multiplied by the exercise price.
A holder will not have the right to exercise
any portion of the warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% of the number
of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined
in accordance with the terms of the warrants. However, any holder may increase or decrease such percentage to any other percentage
not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days following notice from
the holder to us. The exercise price per whole share of common stock purchasable upon exercise of the warrants is $6.25 per share
(based on the initial public offering price of $5.00 per unit) or 125% of public offering price of the common stock. The exercise
price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations,
reclassifications or similar events affecting our common stock and also upon any distributions of assets, including cash, stock
or other property to our stockholders. Subject to applicable laws, the warrants may be offered for sale, sold, transferred or
assigned without our consent. The warrants issued in the IPO are trading on The NASDAQ Capital Market under the symbol “ADILW.”
The warrants were issued in registered form under a warrant agent agreement between VStock Transfer, LLC, as warrant agent, and
us. The warrants shall initially be represented only by one or more global warrants deposited with the warrant agent, as custodian
on behalf of The Depository Trust Company (DTC) and registered in the name of Cede & Co., a nominee of DTC, or as otherwise
directed by DTC. In the event of a fundamental transaction, as described in the warrants and generally including any reorganization,
recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all
of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our
outstanding common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding
common stock, the holders of the warrants will be entitled to receive upon exercise of the warrants the kind and amount of securities,
cash or other property that the holders would have received had they exercised the warrants immediately prior to such fundamental
transaction.
The representative of the underwriters
in the IPO were issued warrants to purchase up to a total of 58,560 shares of common stock (4% of the shares of common stock sold
in this offering, excluding the over-allotment). The warrants are exercisable at any time, and from time to time, in whole or in
part, during the four-year period commencing one year from the effective date of the offering, which period shall not extend further
than five years from the effective date of the offering in compliance with FINRA Rule 5110(f)(2)(G)(i). The warrants are exercisable
at a per share price equal to $6.25 per share, or 125% of the public offering price per unit in the offering (based on the initial
offering price of $5.00 per unit). The representative (or permitted assignees under Rule 5110(g)(1)) will not sell, transfer,
assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will they engage in any hedging,
short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the
underlying securities for a period of 180 days from the effective date of the offering. In addition, the warrants provide for registration
rights upon request, in certain cases. In addition, the warrants provide for registration rights upon request, in certain cases.
The demand registration right provided will not be greater than five years from the effective date of the offering in compliance
with FINRA Rule 5110(f)(2)(G)(iv). The piggyback registration right provided will not be greater than seven years from the
effective date of the offering in compliance with FINRA Rule 5110(f)(2)(G)(v). We will bear all fees and expenses attendant to
registering the securities issuable on exercise of the warrants other than underwriting commissions incurred and payable by the
holders. The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances
including in the event of a stock dividend, extraordinary cash dividend or our recapitalization, reorganization, merger or consolidation.
However, the warrant exercise price or underlying shares will not be adjusted for issuances of shares of common stock at a price
below the warrant exercise price.
As of the date of this prospectus, 1,620,112
shares of common stock remain issuable upon the exercise of the warrants issued in the IPO, including representatives warrants.
On February 25, 2019, we closed a firm
commitment underwritten public offering pursuant to which we issued and sold 2,845,000 shares of our common stock together with
a number of warrants to purchase 2,133,750 shares of our common stock. The combined public offering price was $3.25 per share of
common stock and accompanying warrant. The warrants are exercisable upon issuance at a price of $4.0625 per share of common stock,
subject to adjustment in certain circumstances, and will expire on February 26, 2024. The warrants will be exercisable, at the
option of each holder, in whole or in part by delivering to us a duly executed exercise notice and, at any time a registration
statement registering the issuance of the shares of common stock underlying the warrants under the Securities Act is effective
and available for the issuance of such shares, or an exemption from registration under the Securities Act is available for the
issuance of such shares, by payment in full in immediately available funds for the number of shares of common stock purchased upon
such exercise. If a registration statement registering the issuance of the shares of common stock underlying the warrants under
the Securities Act is not effective or available and an exemption from registration under the Securities Act is not available for
the issuance of such shares, the holder may, in its sole discretion, elect to exercise the warrant through a cashless exercise,
in which case the holder would receive upon such exercise the net number of shares of common stock determined according to the
formula set forth in the warrant. Except as otherwise provided in the warrants or by virtue of such holder’s ownership of
shares of common stock, the holder of a warrant does not have the rights or privileges of a holder of our common stock, including
any voting rights, until the holder exercises the warrant. No fractional shares of common stock will be issued in connection with
the exercise of a warrant. In lieu of fractional shares, at our election, we will pay the holder an amount in cash equal to the
fractional amount multiplied by the fair market value of any such fractional shares or round up to the next whole share. The warrants
also provide that in the event of a fundamental transaction we are required to cause any successor entity to assume its obligations
under the warrants. In addition, the holder of the warrant will be entitled to receive upon exercise of the warrant the kind and
amount of securities, cash or property that the holder would have received had the holder exercised the warrant immediately prior
to such fundamental transaction. A holder will not have the right to exercise any portion of the warrant if the holder (together
with its affiliates) would beneficially own in excess of 4.99% (or, upon election of the holder, 9.99%) of the number of shares
of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in
accordance with the terms of the warrants. However, any holder may increase or decrease such percentage, provided that any increase
will not be effective until the 61st day after such election.
On June 11, 2020, the Company concluded
a registered direct offering of 2,820,000 shares of common stock and in a concurrent private placement the sale of warrants to
purchase 2,115,000 shares of common stock at an exercise price of $2.00 per share. The shares of common stock and accompanying
warrants were sold directly to the buyers at a combined at-the-market price of $1.85 for a share and three quarters warrant. Gross
proceeds of the offering, totaled $5,217,000, which after offering expenses, resulted in net proceeds of $4,657,215.
On May 15, 2020, the Company issued to
a consultant, in consideration for services, warrants for the purchase of 72,000 shares of common stock, with an exercise price
of $1.30 per share.
Preferred Stock
Our board of directors has the authority
to issue preferred stock in one or more classes or series and to fix the designations, powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, including dividend rights, conversion right, voting rights, terms of redemption,
liquidation preferences and the number of shares constituting any class or series, without further vote or action by the stockholders.
Although we have no present plans to issue any other shares of preferred stock, the issuance of shares of preferred stock, or the
issuance of rights to purchase such shares, could decrease the amount of earnings and assets available for distribution to the
holders of common stock, could adversely affect the rights and powers, including voting rights, of the common stock, and could
have the effect of delaying, deterring or preventing a change of control of us or an unsolicited acquisition proposal. To date,
no preferred stock has been issued.
Stockholder Registration Rights
We entered into a Registration Rights Agreement
with Keystone Capital for the shares of common stock that may be issued to Keystone Capital pursuant to the Purchase Agreement.
See the “Keystone Capital Transaction.”
Anti-Takeover Effects of Delaware Law
The provisions of Delaware law, our certificate
of incorporation and our bylaws described below may have the effect of delaying, deferring or discouraging another party from acquiring
control of us.
Section 203 of the Delaware General
Corporation Law
We are subject to Section 203 of the Delaware
General Corporation Law, which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder
for a period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:
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before such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
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upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
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on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least sixty-six and two-thirds percent (66 2/3%) of the outstanding voting stock that is not owned by the interested stockholder.
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In general, Section 203 defines business
combination to include the following:
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any merger or consolidation involving the corporation and the interested stockholder;
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any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;
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subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;
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any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or
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the receipt by the interested stockholder of the benefit of any loss, advances, guarantees, pledges or other financial benefits by or through the corporation.
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Certificate of Incorporation and Bylaws
Our certificate of incorporation and bylaws
provide that:
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our board of directors is divided into three classes, one class of which is elected each year by our stockholders with the directors in each class to serve for a three-year term;
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the authorized number of directors can be changed only by resolution of our board of directors;
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directors may be removed only by the affirmative vote of the holders of at least 60% of our voting stock, whether for cause or without cause;
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our bylaws may be amended or repealed by our board of directors or by the affirmative vote of sixty-six and two-thirds percent (66 2/3%) of our stockholders;
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stockholders may not call special meetings of the stockholders or fill vacancies on the board of directors;
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our board of directors will be authorized to issue, without stockholder approval, preferred stock, the rights of which will be determined at the discretion of the board of directors and that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that our board of directors does not approve;
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our stockholders do not have cumulative voting rights, and therefore our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors; and
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our stockholders must comply with advance notice provisions to bring business before or nominate directors for election at a stockholder meeting.
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Board Classification
Our board of directors is divided into
three classes, one class of which is elected each year by our stockholders. The directors in each class will serve for a three-year
term. For more information on the classified board, see “Management—Board of Directors and Executive Officers.”
The classification of our board of directors and the limitations on the ability of our stockholders to remove directors could make
it more difficult for a third-party to acquire, or discourage a third-party from seeking to acquire, control of us.
Potential Effects of Authorized but
Unissued Stock
We have shares of common stock and preferred
stock available for future issuance without stockholder approval. We may utilize these additional shares for a variety of corporate
purposes, including future public offerings to raise additional capital, to facilitate corporate acquisitions or payment as a dividend
on the capital stock.
The existence of unissued and unreserved
common stock and preferred stock may enable our board of directors to issue shares to persons friendly to current management or
to issue preferred stock with terms that could render more difficult or discourage a third-party attempt to obtain control of us
by means of a merger, tender offer, proxy contest or otherwise, thereby protecting the continuity of our management. In addition,
the board of directors has the discretion to determine designations, rights, preferences, privileges and restrictions, including
voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences of each series of preferred
stock, all to the fullest extent permissible under the Delaware General Corporation Law and subject to any limitations set forth
in our certificate of incorporation. The purpose of authorizing the board of directors to issue preferred stock and to determine
the rights and preferences applicable to such preferred stock is to eliminate delays associated with a stockholder vote on specific
issuances. The issuance of preferred stock, while providing desirable flexibility in connection with possible financings, acquisitions
and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or could discourage
a third party from acquiring, a majority of our outstanding voting stock.
Limitations of Director Liability
and Indemnification of Directors, Officers and Employees
Our certificate of incorporation limits
the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation
will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability for
any:
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breach of their duty of loyalty to us or our stockholders;
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act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
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unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or
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transaction from which the directors derived an improper personal benefit.
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These limitations of liability do not apply
to liabilities arising under the federal or state securities laws and do not affect the availability of equitable remedies such
as injunctive relief or rescission.
Our bylaws provide that we will indemnify
our directors and officers to the fullest extent permitted by law, and may indemnify employees and other agents. Our bylaws also
provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any
action or proceeding.
We have obtained a policy of directors’
and officers’ liability insurance.
We have entered into separate indemnification
agreements with our directors and officers. These agreements, among other things, require us to indemnify our directors and officers
for any and all expenses (including reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts,
witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees)
judgments, fines and amounts paid in settlement actually and reasonably incurred by such directors or officers or on his or her
behalf in connection with any action or proceeding arising out of their services as one of our directors or officers, or any of
our subsidiaries or any other company or enterprise to which the person provides services at our request provided that such person
follows the procedures for determining entitlement to indemnification and advancement of expenses set forth in the indemnification
agreement. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified
persons as directors and officers.
The limitation of liability and indemnification
provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors
for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers,
even though an action, if successful, might provide a benefit to us and our stockholders. Our results of operations and financial
condition may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant
to these indemnification provisions.
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers or persons controlling us, we have been informed that,
in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
At present, there is no pending litigation
or proceeding involving any of our directors or officers as to which indemnification is required or permitted, and we are not aware
of any threatened litigation or proceeding that may result in a claim for indemnification.
Requirements for Advance Notification
of Stockholder Nominations and Proposals
Our Bylaws establish advance notice procedures
with respect to stockholder proposals and nomination of candidates for election as directors.
Limits on Special Meetings
Special meetings of the stockholders may
be called at any time only by the board of directors, Chairman or our Chief Executive Officer, subject to the rights of the holders
of any series of preferred stock.
Election and Removal of Directors
Directors are elected by a plurality of
the votes of shares present in person or represented by proxy at a meeting and entitled to vote generally on the election of directors.
Our stockholders may remove directors only with the vote of sixty percent (60%) of the stockholders, whether for cause or without
cause. Our board of directors may appoint a director to fill a vacancy, including vacancies created by the expansion of the board
of directors. This system of electing and removing directors may discourage a third party from making a tender offer or otherwise
attempting to obtain control of us, because it generally makes it more difficult for stockholders to replace a majority of our
directors. Our certificate of incorporation and bylaws do not provide for cumulative voting in the election of directors.
Amendments to Our Governing Documents
Generally, the amendment of our certificate
of incorporation requires approval by our board of directors and a majority vote of stockholders. Any amendment to our bylaws requires
the approval of either a majority of our board of directors or approval of at least sixty-six and two-thirds (66 2/3%) of the votes
entitled to be cast by the holders of our outstanding capital stock in elections of our board of directors.
Exclusive Forum Selection
Our certificate of incorporation provides
that to the fullest extent permitted by law, unless we consent in writing to the selection of an alternative forum, the Court of
Chancery of the State of Delaware shall be the sole and exclusive forum for (1) any derivative action or proceeding brought
on behalf of our company, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers,
employees or stockholders to our company or our stockholders, (3) any action asserting a claim against our company or any
director, officer or employee of our company arising pursuant to any provision of the General Corporation Law of the State of Delaware
or our certificate of incorporation or bylaws, or (4) any action asserting a claim arising against our company or any director
or officer or other employee of our company governed by the internal affairs doctrine. This exclusive forum provision would not
apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for
which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims,
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created
by the Exchange Act or the rules and regulations thereunder. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction
for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules
and regulations thereunder. Although our certificate contains the choice of forum provision described above, it is possible that
a court could rule that such a provision is inapplicable for a particular claim or action or that such provision is unenforceable.
Investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
Listing
Our common stock is listed for trading
on The NASDAQ Capital Market under the symbol “ADIL.” Our warrants issued in connection with our initial public offering
in July 2018 are currently listed on The NASDAQ Capital Market under the symbol “ADILW.”
Transfer Agent and Registrar
The transfer agent and registrar for our
common stock offered in this offering is VStock Transfer, LLC. Its address is 18 Lafayette Place, Woodmere, New York 11598. Its
telephone number is (212) 828-8436.
LEGAL MATTERS
The validity of the shares of our common
stock being offered by this prospectus have been passed upon for us by Gracin & Marlow, LLP, New York, New York.
EXPERTS
The financial statements of Adial Pharmaceuticals,
Inc. as of December 31, 2019 and 2018 and for each of the years in the two year period ended December 31, 2019 incorporated by
reference in this Registration Statement have been so included in reliance on the report of Friedman LLP, an independent registered
public accounting firm, (such report includes an explanatory paragraph regarding our ability to continue as a going concern), given
on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a
registration statement on Form S-1 under the Securities Act, with respect to the securities being offered by this prospectus. This
prospectus does not contain all of the information in the registration statement and its exhibits. For further information with
respect to us and the securities offered by this prospectus, we refer you to the registration statement and its exhibits. Statements
contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete,
and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement.
Each of these statements is qualified in all respects by this reference. The SEC maintains an internet website that contains reports,
proxy statements, and other information about registrants, like us, that file electronically with the SEC. The address of that
website is www.sec.gov. The information contained in, or that can be accessed through, the SEC’s website is not incorporated
by reference in, and is not part of, this prospectus or any prospectus supplement.
We are subject to the information
and periodic reporting requirements of the Exchange Act, and we file periodic reports, proxy statements and other information with
the SEC. These periodic reports, proxy statements and other information are available at the website of the SEC referred to above.
We maintain a website at https://ir.adialpharma.com/sec-filings. You may access our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a)
or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is
electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website
is not incorporated by reference in, and is not part of, this prospectus.
INCORPORATION OF CERTAIN INFORMATION
BY REFERENCE
The SEC allows us to “incorporate
by reference” information from other documents that we file with it, which means that we can disclose important information
to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus.
Information in this prospectus supersedes information incorporated by reference that we filed with the SEC prior to the date of
this prospectus.
We incorporate by reference into this prospectus
and the registration statement of which this prospectus is a part the information or documents listed below that we have filed
with the SEC (Commission File No. 001-37544):
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Our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on March 20, 2020;
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Our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 filed with the SEC on November 13, 2020;
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Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 filed with the SEC on August 13, 2020;
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Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed with the SEC on May 14, 2020;
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Our Current Reports on Form 8-K filed with the SEC on February 6, 2020, March 6, 2020, May 20, 2020, May 27, 2020, June 8, 2020, June 10, 2020, June 11, 2020, June 12, 2020, July 21, 2020, July 31, 2020, August 6, 2020 (other than as indicated therein), August 25, 2020, September 2, 2020, September 18, 2020, September 22, 2020, September 22, 2020, September 28, 2020, September 30, 2020, October 1, 2020, October 21, 2020 (other than as indicated therein), November 3, 2020 (other than as indicated therein) and November 24, 2020; and
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We also incorporate by reference any future
filings (other than current reports furnished under Item 2.02 or Item 7.01 of Form 8-K and exhibits filed on such form that are
related to such items unless such Form 8-K expressly provides to the contrary) made with the SEC pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act, including those made on or after the date of this prospectus
but prior to the termination of the offering (i.e., until the earlier of the date on which all of the securities registered hereunder
have been sold or the registration statement of which this prospectus forms a part has been withdrawn). Information in such
future filings updates and supplements the information provided in this prospectus. Any statements in any such future filings will
automatically be deemed to modify and supersede any information in any document we previously filed with the SEC that is incorporated
or deemed to be incorporated herein by reference to the extent that statements in the later filed document modify or replace such
earlier statements.
We will furnish without charge to each
person, including any beneficial owner, to whom a prospectus is delivered, upon written or oral request, a copy of any or all of
the documents incorporated by reference into this prospectus but not delivered with the prospectus, including exhibits that are
specifically incorporated by reference into such documents. You should direct any requests for documents to:
Adial Pharmaceuticals, Inc.
1180 Seminole Trail, Suite 495
Charlottesville, VA 22901
Telephone (434) 422-9800
Attention: Corporate Secretary
You may also access these documents, free
of charge, on the SEC’s website at www.sec.gov or on our website at https://ir.adialpharma.com/sec-filings.
The information contained in, or that can be accessed through, our website is not incorporated by reference in, and is not part
of, this prospectus or any accompanying prospectus supplement.
In accordance with Rule 412 of the Securities
Act, any statement contained in a document incorporated by reference herein shall be deemed modified or superseded to the extent
that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement.
You should rely only on information contained
in, or incorporated by reference into, this prospectus and any prospectus supplement. We have not authorized anyone to provide
you with information different from that contained in this prospectus or incorporated by reference into this prospectus. We are
not making offers to sell the securities in any jurisdiction in which such an offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such an offer
or solicitation.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our directors and officers are indemnified
to the fullest extent permitted under Delaware law. We also maintain insurance which protects our officers and directors against
any liabilities incurred in connection with their service in such a capacity.
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing,
or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other
than the payment by us of expenses incurred or paid by a director, officer or controlling person of ours in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities
being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
Up to 2,842,198 Shares of
Common Stock
PROSPECTUS
Adial Pharmaceuticals (NASDAQ:ADIL)
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