Item 1.01. Entry into a Material Definitive
Agreement.
On January 26, 2021, Adial Pharmaceuticals,
Inc. (“Adial”) closed the acquisition (the “Acquisition”) contemplated by that certain Equity Purchase
Agreement, dated December 7, 2020, as amended, (the “Purchase Agreement”), by and among Adial, Purnovate, LLC (“Purnovate”),
each of the members of Purnovate (the “Members”) and Robert D. Thompson, as representative of the Members.
About Purnovate
Purnovate is a drug development company with
a platform focused on developing drug candidates for non-opioid pain reduction and other diseases and disorders potentially targeted
with adenosine analogs that are selective, potent, stable, and soluble. Purines are a class of chemical structures that include
adenosine, an important neurotransmitter. Purnovate uses innovative methods and technologies to enhance the drug properties of
purines (“Purines” + “Innovate” = Purnovate). With its proprietary purification and solubilizing platform
technologies it synthesizes and develops adenosine analogs to treat serious diseases and disorders with a focus on pain, cocaine
addiction, infectious disease, inflammation, cancer, asthma, and diabetes. Purnovate’s platform technologies are believed
to also offer opportunities to improve the characteristics of other classes of molecules outside of the adenosine chemistry space
and maybe even outside the purine chemistry space. All drug candidates developed using Purnovate’s platform technologies
are expected to be patently distinct new chemical entities (i.e., patentable compositions of matter). Purnovate operates a chemistry
and analytics laboratory in its 4,175 square feet leased laboratory and office space. Purnovate has been synthesizing new adenosine
analog chemical entities with promising potency, selectivity, stability, and solubility characteristics.
Dr. Thompson D. Thompson, Purnovate’s
Chief Executive Officer who is continuing employment with Purnovate and joining Adial as its Vice President of Chemistry after
the Acquisition, is a distinguished adenosine chemist that has been working in the field for over 35 years. He is an inventor on
over 20 adenosine analog patents covering tens of thousands of novel molecules and has authored dozens of scientific publications.
Purnovate, was formed in 2019 by Dr. Thompson,
William Stilley, Chief Executive Officer of Adial and a Member, Mikel Poulsen, a Member and consultant to Purnovate, and Cameron
Black, a Member
Material Terms of the Acquisition
In exchange for Purnovate, Adial paid the Members
an aggregate of $350,000 (the “Cash Consideration”) and issued to the Members an aggregate of 700,000 shares of Adial
restricted common stock (the “Stock Consideration”), which issuance will be exempt from registration pursuant to Section
4(a)(2) of the Securities Act of 1933, as amended. In addition, Members will receive (i) development milestone payments in an aggregate
amount of up to $2,100,000 for each compound developed, (ii) development milestone payments in an aggregate amount of up to $20,000,000
for each compound commercialized, and (iii) royalties of 3.0% of Net Sales (as such term is defined in the Purchase Agreement).
The Stock Consideration has been placed into escrow to secure certain indemnification and other obligations of Purnovate and the
Members in connection with the Acquisition.
The acquisition was effected by a merger (the
“Merger”) of Purnovate into Purnovate, Inc., a Delaware corporation and wholly owned subsidiary of Adial, which will
survive the Merger. In connection with the Merger, on January 20, 2021, Purnovate converted from a limited liability company to
a corporation and on January 25, 2021, the parties entered into an Amendment to the Purchase Agreement (the “Amendment”)
to provide for the mechanism of closing the Acquisition through a Merger.
The foregoing description of the Purchase Agreement
does not purport to be complete and is subject to, and are qualified in their entirety by reference to the provisions of such Purchase
Agreement which was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on December 10, 2020 and incorporated herein by reference. The foregoing description of the terms of the Amendment is
qualified in its entirety by reference to the provisions of such Amendment, which is attached hereto as Exhibit 10.2, and incorporated
herein by reference.
The representations, warranties and covenants
contained in the Purchase Agreement were made only for purposes of such agreement and as of specific dates, were solely for the
benefit of the parties to the Purchase Agreement, and may be subject to limitations agreed upon by the contracting parties. Accordingly,
the Purchase Agreement is incorporated herein by reference only to provide investors with information regarding the terms of the
Purchase Agreement, and not to provide investors with any other factual information regarding Adial, Purnovate or either of their
businesses, and should be read in conjunction with the disclosures in Adial’s periodic reports and other filings with the
Securities and Exchange Commission.