0001513525 false 0001513525 2023-06-30 2023-06-30 iso4217:USD xbrli:shares iso4217:USD xbrli:shares

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (date of earliest event reported): June 30, 2023

 

Adial Pharmaceuticals, Inc.

(Exact name of registrant as specified in charter)

 

Delaware   001-38323   82-3074668
(State or other jurisdiction
of incorporation)
  (Commission
File Number)
  (IRS Employer
Identification No.)

 

1180 Seminole Trail, Ste 495
Charlottesville, VA 22901

(Address of principal executive offices and zip code)

 

(434) 422-9800

(Registrant’s telephone number including area code)

 

N/A

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

  

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

  Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbols   Name of each exchange on which registered
Common Stock   ADIL   The Nasdaq Stock Market LLC
(Nasdaq Capital Market)

 

Indicate by check mark whether the registrant is an emerging growth company as defined in in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 

 

 

 

Item 2.01 Completion of Acquisition or Disposition of Assets.

 

Adial Pharmaceuticals, Inc. (the “Company”) completed the sale of the assets and business of Purnovate, Inc. (“Purnovate”) to Adovate, LLC (formerly known as Adenomed, LLC) (collectively, “Adovate”) under that certain Option Agreement for the Acquisition of Purnovate, Inc. by Adenomed, LLC, dated as of January 27, 2023 (the “Option Agreement”), and related Option Exercise Agreement, dated May 8, 2023 (the “Option Exercise Agreement”), effective June 30, 2023.

 

This Form 8-K is being filed to provide the pro forma financial information required by Item 9.01(b) of Form 8-K.

 

Pursuant to the Option Agreement and Option Exercise Agreement, in consideration for the sale to Adovate of the assets and business of Purnovate: (i) the Company received a non-refundable option exercise fee and upfront payment of $450,000; (ii) Adovate will reimburse all approved Purnovate expenditures incurred and paid commencing December 1, 2022 through and including May 15, 2023, (iii) Adovate issued to the Company of 19.99% of the equity of Adovate; (iv) Adovate assumed the obligations of Company under that certain Equity Purchase Agreement by and among Company, Purnovate, the members of Purnovate, and Robert D. Thompson as the member’s representative, dated December 7, 2020 and amended January 25, 2021 (the “PNV EPA”); (v) Adovate assumed the Company’s obligations under that certain Employment Agreement, dated July 31, 2018, as amended, by and between Company and William Stilley; and (vi) the Company will receive low, single digit royalty payments on net sales, cash payments of up to approximately $11 million in development and approval milestones for each compound after payments to the prior members of Purnovate pursuant to the PNV EPA and cash payments of up to an aggregate of $50,000,000 upon the achievement of certain commercial milestones.

 

The foregoing summaries of the Option Agreement and Option Exercise Agreement do not purport to be complete and are subject to and are qualified in their entirety by reference to the full text of such documents attached as Exhibits 2.1 and 2.2, respectively, to this Current Report on Form 8-K, which are incorporated herein by reference.

 

Item 9.01. Financial Statements and Exhibits.

 

(d)Exhibits.

 

Exhibit No.   Description

2.1

 

  Option Agreement for the Acquisition of Purnovate, Inc. by Adenomed, LLC, dated as of January 27, 2023 (incorporated by reference Exhibit 2.1 to the Current Report on Form 8-K as filed by the Registrant with the Securities and Exchange Commission on February 1, 2023 (File No. 001-38323)
2.2   Option Exercise Agreement, dated May 8, 2023, by and between Adovate LLC and Adial Pharmaceuticals, Inc. (incorporated by reference Exhibit 2.2 to the Current Report on Form 8-K as filed by the Registrant with the Securities and Exchange Commission on May 10, 2023 (File No. 001-38323)

99.1

 

  Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2023; Unaudited Pro Forma Condensed Statements of Operations for the Three Months Ended March 31, 2023; and Unaudited Pro Forma Condensed Statements of Operations for the Year Ended Ended December 31, 2022
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

* * * 

 

1

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: August 18, 2023 ADIAL PHARMACEUTICALS, INC.
   
  By:  /s/ Cary J. Claiborne
  Name:  Cary J. Claiborne                  
  Title: President and Chief Executive Officer

 

 

2 

 

Exhibit 99.1

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

The following unaudited pro forma condensed consolidated balance sheet and statements of operations are based upon the historical consolidated financial statements of Adial Pharmaceuticals, Inc. (the “Company”). Unless the context indicates otherwise, any reference in this report to the “Company,” “we,” “us,” and “our” refers to Adial Pharmaceuticals, Inc. The unaudited pro forma condensed consolidated financial statements have been prepared to illustrate the effect of the sale by the Company of the business of the Company’s wholly owned subsidiary, Purnovate, Inc. (the “Purnovate Sale”) for consideration including: (i) upfront cash payments totaling $450,000 upon the Option exercise; (ii) the issuance by Buyer to Company of 19.9% of the equity of Buyer; (iii) the assumption by Buyer of contingent payments due the former shareholders of Purnovate, Inc.; (iv) the assumption by Buyer of the obligations of Company to contracted Purnovate employees; (v) low, single digit royalty payment on net sales of all Purnovate products; (vi) contingent cash payments of up to approximately $11 million based on the achievement in development and approval milestones for the each Purnovate compound to reach the milestones after payments to the prior members of Purnovate pursuant to the Company’s previous agreement with the prior members of Purnovate for the Purchase of Purnovate; (vii) contingent cash payments of up to an aggregate of $50,000,000 upon the achievement of certain commercial milestones by the Buyer; and (viii) cash reimbursement of Purnovate expenses incurred and paid from Dec. 1, 2022 to the option exercise date of May 16, 2023. The Buyer also assumed liabilities of Purnovate, including: (i) trade payables incurred for services or purchases by Purnovate exclusively for its research operations; and (ii) the lease for 1180 Seminole Trail, Suite 495, Charlottesville, VA 22901.

 

The unaudited pro forma condensed consolidated balance sheet as of March 31, 2023 reflects the pro forma effect as if the Purnovate Sale had been consummated on March 31, 2023. The unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2023 and the year ended December 31, 2022 include the Company’s historical consolidated statements of operations adjusted to reflect the pro forma effect as if the Purnovate Sale had been effective January 1, 2022 (the first day of our 2022 fiscal year). The historical consolidated financial statements referred to above for the Company were included in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 and Annual Report on Form 10-K for the year ended December 31, 2022. The accompanying unaudited pro forma condensed consolidated financial information and the historical consolidated financial information presented herein should be read in conjunction with the historical consolidated financial statements and notes thereto.

 

The unaudited pro forma condensed consolidated balance sheet and statements of operations include pro forma adjustments which reflect transactions and events that (a) are directly attributable to the Sale, (b) are factually supportable and (c) with respect to the statement of operations, have a continuing impact on consolidated results. The pro forma adjustments are described in the accompanying notes to the unaudited pro forma condensed consolidated financial statements.

 

The unaudited pro forma condensed consolidated financial information does not reflect future events that may occur after the Sale, including potential general and administrative cost savings. The unaudited pro forma condensed consolidated statements of operations are provided for informational purposes only and are not necessarily indicative of the results of operations that would have occurred if the Purnovate Sale had occurred on January 1, 2022 nor is it necessarily indicative of our future operating results. The pro forma adjustments are subject to change and are based upon currently available information.

 

On August 4, 2023, the Company effected a reverse stock split of its outstanding shares of common stock, trading on Nasdaq under the symbol ADIL, at a ratio of 1-for-25. All references to common stock, stock warrants to purchase common stock, stock options to purchase common stock, share data, per share data and related information contained in these unaudited pro forma condensed consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.

 

 

 

 

ADIAL PHARMACEUTICALS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2023

 

       Pro Forma         
   Historical   Adjustments       Pro Forma 
ASSETS
Current Assets:                
Cash and cash equivalents  $2,312,594   $450,000   (a)   $2,762,594 
Prepaid research and development   428,700    (428,700)  (b)     
Prepaid expenses and other current assets   223,356            223,356 
Asset payment receivable       757,390   (c)    757,390 
Total Current Assets   2,964,650    778,690        3,743,340 
                    
Fixed assets, net   48,492    (48,492)  (d)     
Intangible assets, net   4,336            4,336 
Acquired in-process research and development   455,000    (455,000)  (e)     
Right-to-use Asset   180,229    (180,229)  (f)     
Goodwill   248,971    (248,971)  (g)     
Equity method investment       1,727,897   (h)    1,727,897 
Total Assets  $3,901,678   $1,573,895       $5,475,573 
                    
LIABILITIES AND STOCKHOLDERS’ EQUITY                   
Current Liabilities:                   
Accounts payable  $530,141    (167,364)  (i)    362,777 
Accrued expenses   1,184,338    (37,290)  (j)    1,147,048 
Accrued expenses, related party   21,020            21,020 
Lease liability, current   58,751    (58,751)  (k)     
Other current liabilities   3,638            3,638 
Total Current Liabilities   1,797,888    (263,405)       1,534,483 
                    
Long-term Liabilities:                   
Contingent liabilities   506,000    (506,000)  (l)     
Lease liability, non-current   135,045    (135,045)  (k)     
Deferred tax liability   22,897    (21,382)  (m)    1,515 
Total Liabilities  $2,461,830   $(925,832)      $1,535,998 
                    
Stockholders’ Equity                   
Preferred Stock, 5,000,000 shares authorized with a par value of $0.001 per share, 0 shares outstanding at March 31, 2023                
Common Stock, 50,000,000 shares authorized with a par value of $0.001 per share, 1, shares issued and outstanding at March 31, 2023   1,140            1,140 
Additional paid in capital   68,019,075            68,019,075 
Accumulated deficit   (66,580,367)   2,499,727   (n)    (64,080,640)
Total Stockholders’ Equity   1,439,848    2,499,727        3,939,575 
Total Liabilities and Stockholders’ Equity  $3,901,678   $1,573,895       $5,475,573 

  

2

 

 

ADIAL PHARMACEUTICALS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31, 2023

 

       Pro Forma       
   Historical   Adjustments     Pro Forma 
Operating Expenses:                 
Research and development expenses  $676,435   $(310,819) (o)  $365,616 
General and administrative expenses   2,244,293    (341,134) (o)   1,903,159 
Total Operating Expenses   2,920,728    (651,953)     2,268,775 
                  
Loss From Operations   (2,920,728)   651,953      (2,268,775)
                  
Other Income (Expense)                 
Change in value of contingent liability   (14,000)   14,000  (p)    
Interest income   28,892          28,892 
Total other income (expense)   14,892    14,000      28,892 
                  
Income (Loss) Before Provision For Income Taxes   (2,905,836)   665,953      (2,239,883)
Provision for income taxes              
Loss from continuing operations  $(2,905,836)  $665,953     $(2,239,883)
Net Loss   (2,905,836)   665,953      (2,239,883)
                  
Net loss per share, basic and diluted  $(2.75)  $0.63     $(2.12)
                  
Weighted average shares, basic and diluted   1,058,542    1,058,542      1,058,542 

 

ADIAL PHARMACEUTICALS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31, 2022

 

       Pro Forma       
   Historical   Adjustments     Pro Forma 
Operating Expenses:                 
Research and development expenses  $4,176,998   $(2,226,690) (q)  $1,950,308 
General and administrative expenses   9,140,129    (230,569) (q)   8,909,560 
Total Operating Expenses   13,317,127    (2,457,259)     10,859,868 
                  
Loss From Operations   (13,317,127)   2,457,259      (10,859,868)
                  
Other Income (Expense)                 
Change in value of contingent liability   522,000    (522,000) (r)    
Interest income   63,209          63,209 
Total other income (expense)   585,209    (522,000)     63,209 
                  
Income (Loss) Before Provision For Income Taxes   (12,731,918)   1,935,259      (10,796,659)
Provision for income taxes   502          502 
Loss from continuing operations   (12,731,416)   1,935,259      (10,796,157)
Income from discontinued operations, net of taxes       2,045,858  (s)   2,045,858 
Net Loss  $(12,731,416)  $3,981,117     $(8,750,229)
                  
Net loss per share, basic and diluted  $(12.71)  $3.98     $(8.74)
                  
Weighted average shares, basic and diluted   1,001,505    1,001,505      1,001,505 

 

3

 

 

ADIAL PHARMACEUTICALS

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

 

Description of Transaction and Basis of Presentation

 

The unaudited pro forma condensed consolidated balance sheet and statements of operations are based upon the historical consolidated financial statements of Adial Pharmaceuticals, Inc. (the “Company”), which were included in its Quarterly Report on Form 10-Q for the three months ended March 31, 2023 and its Annual Report on Form 10-K for the year ended December 31, 2023. Unless the context indicates otherwise, any reference in this report to the “Company,” “we,” “us,” and “our” refers to Adial Pharmaceuticals, Inc.

 

On January 27, 2023, we executed an option agreement with Adovate, LLC (then Adenomed, LLC) (“Adovate”) which gave Adovate an option to purchase the business of the company’s wholly owned subsidiary, Purnovate, Inc. Adovate is a related party, the CEO, founder, and majority equity holder of Adovate being our former CEO and a current director. On exercise of the option, Adovate would acquire the business of Purnovate, including: (1) the rights to Purnovate’s lead drug candidate, along with any associated intellectual property, trade secrets, and know-how; (2) the transfer and benefit of all Purnovate vendor contracts and its operating lease, including prepayments and deposits; (3) all property and equipment of Purnovate; and (4) the rest of Purnovate’s business, including any intellectual property, trade secrets, or know-how. Consideration due on the exercise of the option were: (i) upfront cash payments totaling $450,000 upon the Option exercise; (ii) the issuance by Buyer to Company of 19.9% of the equity of Buyer; (iii) the assumption by Buyer of contingent payments due the former shareholders of Purnovate, Inc.; (iv) the assumption by Buyer of the obligations of Company to contracted Purnovate employees; (v) low, single digit royalty payments on net sales of all Purnovate products; (vi) contingent cash payments of up to approximately $11 million based on the achievement in development and approval milestones for each Purnovate compound to reach the milestones after payments to the prior members of Purnovate pursuant to the Company’s previous agreement with the prior members of Purnovate for the Purchase of Purnovate; (vii) contingent cash payments of up to an aggregate of $50,000,000 upon the achievement of certain commercial milestones by the buyer; and (viii) cash reimbursement of Purnovate expenses incurred and paid from Dec. 1, 2022 to the option exercise date of May 16, 2023. The Buyer also assumed operating liabilities of Purnovate, including: (ix) trade payables incurred for services or purchases by Purnovate exclusively for its research operations; and (x) the lease for 1180 Seminole Trail, Suite 495, Charlottesville, VA 22901.

 

On May 8, 2023, Adovate sent a letter exercising its option effective May 16, 2023 and made payment of the $450,000 in fees due on exercise. On June 30, 2023, Adovate issued to us the equity due under the option exercise and we executed documents confirming the transfer of Purnovate’s business as described above, completing the sale. The unaudited pro forma condensed consolidated statements of operations reflect the sale by the Company of the business of the Company’s wholly owned subsidiary, Purnovate, Inc., as if the sale had been consummated on January 1, 2022 (the first day of our 2022 fiscal year). The unaudited pro forma condensed consolidated balance sheet as of March 31, 2023 reflect such sale as if it had been consummated on that date.

 

Pro Forma Adjustments

 

Effective as of June 30, 2023 the Company completed the sale by the Company of the business of the Company’s wholly owned subsidiary, Purnovate, Inc. pursuant to the terms of an Option Agreement (the “Agreement”) dated as of January 27, 2023.

 

The following pro forma adjustments are included in the unaudited pro forma condensed consolidated balance sheet and/or the unaudited pro forma condensed consolidated statements of operations:

 

(a) Reflects the $150,000 option exercise fee and upfront payment of $300,000 due on exercise and paid on May 8, 2023, as described in (i) above.
   
(b) Deposits and prepaid expenses associated with vendor contracts which were transferred to the buyer on option exercise, as described in (2) above, at the values of these assets had buyer exercised its option on March 31, 2023.
   
(c) Reflects reimbursements of expenses due from buyer from December 1, 2022 to the option exercise date, as described in (viii) above, based on total reimbursable expenses had buyer exercised its option on March 31, 2023.
   
(d) Fixed assets, net of accumulated depreciation, including lab and office equipment and furnishings, which were transferred to Purnovate, as described in (3) above, with net of these assets on March 31, 2023.

 

4

 

 

(e) The rights to Purnovate’s ongoing lead drug development program, as described in (1) above.
   
(f) Right-to-use asset associated with lease transferred on option exercise, as described in (2) above, the value of the asset as it was on March 31, 2023.
   
(g) Goodwill of business of Purnovate sold, reflecting the rights in to all other Purnovate drug development programs, know-how, and the rest of its business, as described in (3) above.
   
(h) Fair value of equity issued in the buyer of Purnovate to Company in consideration of sale, due on option exercise, had the equity been issued on March 31, 2023.
   
(i) Accounts payable associated with transferred vendor contracts which were transferred to the buyer, as described in (ix) above, at the amount of the liabilities had buyer exercised its option on March 31, 2023.
   
(j) Accrued expenses associated with vendor contracts which were transferred to the buyer, as described in (ix) above, at the amount of the liabilities had buyer exercised its option on March 31, 2023.
   
(k) Liability associated with lease assumed by the buyer, as described in (x) above, at amount of the liability had the Buyer exercised its option on March 31, 2023.
   
(l) Contingent liability to former Purnovate shareholders assumed by the buyer, as described in (iii) above, at the amount of liability on March 31, 2023.
   
(m) Deferred tax liability which arose as a result of the acquisition of Purnovate.
   
(n) Gain on exercise of option, had buyer exercised its option on March 31, 2023.
   
(o) Reversal of expenses attributable to Purnovate operations in the three months ended March 31, 2023, which included the costs of Purnovate research and development activities, the wages salaries of Purnovate employees, the cost of the transferred lease, depreciation of the transferred equipment, and fees to Purnovate contractors.
   
(p) Reversal of expense due to net increase of the contingent consideration liability to former Purnovate shareholders in the three months ended March 31, 2023, which was assumed by the buyer on option exercise as described in (iii) above, had the option been exercised January 1, 2022.
   
(q) Reversal of expenses attributable to Purnovate operations in the year ended December 31, 2022, which included the costs of Purnovate research and development activities, the wages salaries of Purnovate employees, the cost of the transferred lease, depreciation of the transferred equipment, and fees to Purnovate contractors.
   
(r) Reversal of gain due to net increase of the contingent consideration liability to former Purnovate shareholders in the year ended December 31, 2022, which was assumed by the buyer on option exercise as described in (iii) above, had the option been exercised January 1, 2022.
   
(s) Gain on exercise of option, had buyer exercised its option on January 1, 2022.

 

 

5

 

 

v3.23.2
Cover
Jun. 30, 2023
Cover [Abstract]  
Document Type 8-K
Amendment Flag false
Document Period End Date Jun. 30, 2023
Entity File Number 001-38323
Entity Registrant Name Adial Pharmaceuticals, Inc.
Entity Central Index Key 0001513525
Entity Tax Identification Number 82-3074668
Entity Incorporation, State or Country Code DE
Entity Address, Address Line One 1180 Seminole Trail
Entity Address, Address Line Two Ste 495
Entity Address, City or Town Charlottesville
Entity Address, State or Province VA
Entity Address, Postal Zip Code 22901
City Area Code 434
Local Phone Number 422-9800
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock
Trading Symbol ADIL
Security Exchange Name NASDAQ
Entity Emerging Growth Company true
Elected Not To Use the Extended Transition Period false

Adial Pharmaceuticals (NASDAQ:ADIL)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Adial Pharmaceuticals Charts.
Adial Pharmaceuticals (NASDAQ:ADIL)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Adial Pharmaceuticals Charts.