Azora Therapeutics, Inc. (DE) S-3, filed Apr 20, 2021
Azora Therapeutics, Inc. (DE) (AZR)
As filed with the Securities and Exchange Commission on April 19, 2021
Registration Statement No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
ADIAL PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 82-3074668 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
Adial Pharmaceuticals, Inc.
1180 Seminole Trail, Suite 495
Charlottesville, VA 22901
(434) 422-9800
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive office)
William B. Stilley, III
President and Chief Executive Officer
Adial Pharmaceuticals, Inc.
1180 Seminole Trail, Suite 495
Charlottesville, VA 22901
(434) 422-9800
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Leslie Marlow, Esq.
Hank Gracin, Esq.
Patrick J. Egan, Esq.
Gracin & Marlow, LLP
The Chrysler Building
405 Lexington Avenue, 26th Floor
New York, NY 10174
Telephone: (212) 907-6457
Facsimile: (212) 208-4657
Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. ☐
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ☐
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Non-accelerated filer ☒ |
Smaller reporting company ☒ Emerging growth company ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
| Title of each class of securities to be registered | Amount to be registered | Proposed maximum offering price per share | Proposed maximum aggregate offering price | Amount of registration fee | ||||||||||||
| Common Stock, par value $0.001 per share | 700,001 | (1) | $ | 2.23 | (2) | $ | 1,561,002 | (2) | $ | 170.31 | ||||||
| (1) | Pursuant to Rule 416 under the Securities Act, this registration statement covers an indeterminate number of shares that may be issued upon stock splits, stock dividends or similar transactions. |
| (2) | Estimated in accordance with Rule 457(c) under the Securities Act of 1933, as amended, solely for the purpose of calculating the registration fee, based on the average of the high and low prices of shares of the registrant’s common stock, as reported on the Nasdaq Capital Market on April 15, 2021, a date within five business days prior to the initial filing of this registration statement on April 19, 2021. |
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion, dated April 19, 2021
PROSPECTUS
ADIAL PHARMACEUTICALS, INC.
700,001 Shares of Common Stock
This prospectus relates to the resale from time to time of up to 700,001 shares of Adial Pharmaceuticals, Inc. common stock, par value $0.001 per share, by the selling stockholders identified in this prospectus or in supplements to this prospectus or its transferees. The shares offered for resale consist of an aggregate of 97,001 shares of common stock that were purchased by the selling stockholders on March 12, 2021 in a private placement transaction pursuant to the terms of securities purchase agreements, dated March 11, 2021, we entered into with each of the selling stockholders, as investors in such private placement transaction (collectively, the “Securities Purchase Agreements”), and an aggregate of 603,000 shares that two of the selling stockholders have committed to purchase and that will be issued and sold to them in a second tranche of purchases under the Securities Purchase Agreements, which second tranche purchase will occur on the second business day following the effective date of the registration statement of which this prospectus forms a part. We are filing the registration statement on Form S-3, of which this prospectus forms a part, to fulfill our contractual obligations with the selling stockholders to provide for the resale by the selling stockholders of all of the shares of common stock that have been and will be purchased by them in both tranches of purchases in the private placement transaction pursuant to the Securities Purchase Agreements. See “Selling Stockholders” beginning on page 11 of this prospectus for more information about the selling stockholders. The registration of the shares of common stock to which this prospectus relates does not require the selling stockholders to sell any of its shares of our common stock.
We are not offering any shares of common stock under this prospectus and will not receive any proceeds from the sale or other disposition of the shares covered hereby; however, we have received an aggregate of $291,003 from the sale of an aggregate of 97,001 shares that the selling stockholders have purchased in the first tranche purchase under the Securities Purchase Agreements, and we expect to receive an additional aggregate amount of $1,809,000 from the sale of an aggregate of 603,000 additional shares that two of the selling stockholders are committed to purchase in the second tranche purchase under the Securities Purchase Agreements on the second business day following the effective date of the registration statement of which this prospectus forms a part.
The selling stockholders may from time to time sell, transfer or otherwise dispose of any or all of their shares of common stock in a number of different ways at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale or at negotiated prices, as described in more detail in this prospectus. We will bear all costs, expenses and fees in connection with the registration of the shares of common stock included in this prospectus. The selling stockholders will pay or assume discounts, commissions, fees of underwriters, selling brokers or dealer managers and similar expenses, if any, incurred for the sale of shares of our common stock included in this prospectus. For more information, see “Plan of Distribution” beginning on page 19 of this prospectus for more information about how the selling stockholders may sell their shares of common stock.
No underwriter or other person has been engaged to facilitate the sale of the shares of common stock in this offering. The selling stockholders, individually but not severally, and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act.
Our common stock is listed on the Nasdaq Capital Market under the symbol “ADIL.” Our warrants that we issued in our initial public offering are listed on the Nasdaq Capital Market under the symbol “ADILW.” On April 15, 2021, the last reported sale price of our common stock and our warrants on the Nasdaq Capital Market was $2.19 per share and $0.61 per warrant, respectively.
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.
An investment in our shares of common stock involves a high degree of risk. Before deciding whether to invest in our common stock, you should consider carefully the risks and uncertainties described in the section captioned “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission on March 22, 2021 and other filings we make with the Securities and Exchange Commission from time to time, which are incorporated by reference herein in their entirety, together with other information in this prospectus and the information incorporated by reference herein.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is ____, 2021
TABLE OF CONTENTS
You may only rely on the information contained in this prospectus or that we have referred you to. We have not authorized anyone to provide you with different information. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the securities offered by this prospectus. This prospectus and any future prospectus supplement do not constitute an offer to sell or a solicitation of an offer to buy any securities in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this prospectus or any prospectus supplement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in our affairs since the date of this prospectus or such prospectus supplement or that the information contained by reference to this prospectus or any prospectus supplement is correct as of any time after its date.
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Company References
In this prospectus, “Adial,” “the Company,” “we,” “us,” and “our” refer to Adial Pharmaceuticals, Inc., a Delaware corporation, unless the context otherwise requires.
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This summary highlights some information about us and selected information contained elsewhere in this prospectus and in the documents we incorporate by reference. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus and the documents incorporated by reference carefully, especially the risks of investing in our common stock discussed under and incorporated by reference in “Risk Factors” on page 7 of this prospectus, along with our consolidated financial statements and notes to those consolidated financial statements and the other information incorporated by reference in this prospectus, before making an investment decision.
Overview
We are a clinical-stage biopharmaceutical company focused on the development of therapeutics for the treatment or prevention of addiction and related disorders. Our lead investigational new drug product, AD04, is being developed as a therapeutic agent for the treatment of alcohol use disorder (“AUD”). In January 2021, we expanded our portfolio in the field of addiction with the acquisition of Purnovate, LLC, and we continue to explore opportunities to expand our portfolio in the field of addiction and related disorders, both through internal development and through acquisitions. Our vision is to create the world’s leading addiction focused pharmaceutical company.
AUD is characterized by an urge to consume alcohol and an inability to control the levels of consumption. We have commenced the landmark ONWARD™ pivotal Phase 3 clinical trial using AD04 for the potential treatment of AUD in subjects with certain target genotypes. As of this filing, all 25 planned clinical sites were actively enrolling patients, and the ONWARD trial was more than 50% enrolled. The trial is expected to be completed by the first quarter of 2022. 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 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 Food and Drug Administration (“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 landmark ONWARD pivotal 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, which is also 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 (and expected to be used by us in our Phase 3 clinical trials) 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 ongoing and planned clinical trials.
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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 ONWARD 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 (i.e., greater than 1 million tablets per batch), 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 third-party vendor capable of supporting the ONWARD 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.
Private Placement
On March 11, 2021, we entered into Securities Purchase Agreements (the “Securities Purchase Agreements”) with each of Bespoke Growth Partners, Inc. (“Bespoke”), a company controlled by Mark Peikin, our non-executive Chief Strategy Officer (who is neither an executive officer nor director of our company), three entities (Ivy Cottage Group, LLC, James W. Newman Roth IRA and Rountop Limited Partnership, LLP, collectively, the “Newman Entities”) controlled by James W. Newman, Jr., a member of our Board of Directors (“Newman”), and Keystone Capital Partners, LLC (“Keystone”) (collectively, the “selling stockholders,” and each a “selling stockholder”), pursuant to which the selling stockholders have agreed to purchase, an aggregate of 700,001 shares of our common stock at a purchase price of $3.00 per share, for aggregate gross proceeds of $2,100,003. On March 12, 2021, we sold an aggregate of 97,001 shares of our common stock for $3.00 per share to the selling stockholders for aggregate gross proceeds to us of $291,003, as follows: (i) 33,667 shares were purchased by Bespoke for a total purchase price of $101,001, (ii) 30,000 shares were purchased by the Newman Entities for a total purchase price of $90,000, and (iii) 33,334 shares were purchased by Keystone for a total purchase price of $100,002. Under the terms of the Securities Purchase Agreements, two of the selling stockholders agreed to purchase an aggregate of 603,000 additional shares of our common stock at a price of $3.00 per share in a second tranche purchase that will occur on the second business day after the effective date of the registration statement of which this prospectus is a part, as follows: (i) Bespoke agreed to purchase 303,000 additional shares of our common stock in the second tranche purchase for a total purchase price of $909,000, and (ii) Keystone agreed to purchase 300,000 additional shares of our common stock in the second tranche purchase for a total purchase price of $900,000.
In connection with the Securities Purchase Agreements, we entered into Registration Rights Agreements (“Registration Rights Agreements”), dated March 11, 2021, with each of the selling stockholders pursuant to which we are obligated to file a registration statement with the Securities and Exchange Commission (the “SEC”) no later than April 21, 2021, which is thirty (30) days following the date upon which we filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and use all commercially reasonable efforts to have such registration statement declared effective by the SEC within thirty (30) days after the registration statement is filed (or, in the event of a “full review” by the SEC, within sixty (60) days after the registration statement is filed). We are filing this registration statement, of which this prospectus forms a part, to fulfill our contractual obligations under the Registration Rights Agreements with the selling stockholders to provide for the resale by the selling stockholders of the shares of common stock offered hereby.
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The shares of our common stock issued, and the shares to be issued, under the Securities Purchase Agreements were, and will be, sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. The selling stockholders are accredited investors who have purchased the securities as an investment in the private placement, which did not involve a general solicitation.
Summary Risk Factors
Our business faces significant risks and uncertainties of which investors should be aware before making a decision to invest in our common stock. If any of the following risks are realized, our business, financial condition and results of operations could be materially and adversely affected. The following is a summary of the more significant risks relating to our Company. A more detailed description of our risk factors set forth under the caption “Risk Factors” beginning on page 7.
Risks Relating to our Company
| ● | We have a limited operating history with which to compare, have incurred significant losses since our inception, and expect to incur substantial and increasing losses for the foreseeable future. | |
| ● | We currently have no product revenues and may not generate revenue at any time in the near future, if at all. | |
| ● | We and our independent registered accounting firm has expressed substantial doubt about our ability to continue as a going concern. | |
| ● | We will need to secure additional financing, which may not be available to us on favorable terms, if at all. | |
| ● | We have identified weaknesses in our internal controls, and it cannot be assured that these weaknesses will be effectively remediated or that additional material weaknesses will not occur in the future. | |
| ● | We rely on a license to use various technologies that are material to our business and there is no guarantee that such license agreements won’t be terminated, or that other rights necessary to commercialize our products will be available to us on acceptable terms or at all. | |
| ● | Our business is dependent upon the success of our lead product candidate, AD04, which requires significant additional clinical testing before we can seek regulatory approval and potentially launch commercial sales. | |
| ● | The active ingredient of our product candidate, ondansetron, is currently available in generic form and has been shown to have adverse effects on patients. | |
| ● | Coronavirus or other global health crises could adversely impact our business, including our clinical trials. | |
| ● | While there exists a large body of evidence supporting the safety of our primary API, ondansetron, under short-term use, there are currently no long-term use clinical safety data available. | |
| ● | 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. | |
| ● | The FDA and/or EMA may not accept our planned Phase 3 endpoints for final approval of AD04 and may determine additional clinical trials are required for approval of AD04. |
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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, which may not attain regulatory approval. | |
| ● | We have limited experience as a company conducting clinical trials, any may experience delays in our clinical trials and may fail to demonstrate adequately the safety and efficacy of AD04 or any future product candidates. | |
| ● | Our product candidate and the product candidates of Purnovate are in the early stages of development and there is uncertainty as to market acceptance of our technology and product candidates. |
Risks Relating to our Acquisition of Purnovate
| ● | The combined company may not experience the anticipated strategic benefits of the Acquisition and we may be unable to successfully integrate the Purnovate businesses. | |
| ● | Purnovate has a limited operating history upon which to evaluate its ability to commercialize its products. |
Risks Relating to our Business and Industry
| ● | We must obtain and maintain regulatory approvals in every jurisdiction in which we intend to sell our product candidate and the regulatory approval in one jurisdiction does not guarantee the approval in another jurisdiction. | |
| ● | AD04 and any future product candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial potential or result in significant negative consequences such as incurring product liability lawsuits | |
| ● | We will continue to be subject to ongoing and extensive regulatory requirements even after regulatory approval, and compliance with such regulatory requirements cannot be assured. | |
| ● | Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements. | |
| ● | We have no experience selling, marketing or distributing products and have no internal capability to do so. | |
| ● | We may not be successful in establishing and maintaining strategic partnerships. | |
| ● | We have limited protection for our intellectual property. Our licensed patents and proprietary rights may not prevent us from infringing on the rights of others or prohibit potential competitors from commercializing products. | |
| ● | We may be involved in lawsuits to protect or enforce the patents of our licensors, which could be expensive, time-consuming and unsuccessful. | |
| ● | We rely on key executive officers and scientific, regulatory and medical advisors, and their knowledge of our business and technical expertise would be difficult to replace. | |
| ● | Certain of our officers may have a conflict of interest. |
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Risks Related to our Securities and Investing in our Securities
| ● | Certain of our shareholders have sufficient voting power to make corporate governance decisions that could have a significant influence on us and the other stockholders. | |
| ● | We have never paid dividends and have no plans to pay dividends in the foreseeable future. | |
| ● | Our failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a de-listing of our common stock. | |
| ● | Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future, and as a result, investors in our common stock could incur substantial losses. | |
| ● | Our need for future financing may result in the issuance of additional securities which will cause investors to experience dilution. | |
| ● | Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management. | |
| ● | Our Certificate of Incorporation and our bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain types of state actions that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees. | |
| ● | If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline. |
Implications of Being an Emerging Growth Company
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and therefore we intend to take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal controls over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions until we are no longer an “emerging growth company.” In addition, the JOBS Act provides that an “emerging growth company” can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards under the JOBS Act. This election 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. We will remain an “emerging growth company” until the earlier of (1) the last day of the fiscal year: (a) following the fifth anniversary of the completion of our initial public offering; (b) in which we have total annual gross revenue of at least $1.07 billion; or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeded $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. References herein to “emerging growth company” have the meaning associated with that term in the JOBS Act.
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 then 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 converted into shares of common stock of the Virginia corporation and then 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 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.
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THE OFFERING
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Common Stock offered by us in this offering |
We are not selling any shares of common stock pursuant to this prospectus. | |
|
Common Stock offered by the selling stockholders |
Up to 700,001 shares of common stock. | |
| Terms of the offering | The selling stockholders will determine when and how they will sell the common stock offered in this prospectus, as described in “Plan of Distribution” on page 19 of this prospectus. | |
| Use of Proceeds | The selling stockholders will receive all of the proceeds from the sale of shares of common stock offered from time to time pursuant to this prospectus. Accordingly, we will not receive any proceeds from the sale of shares of common stock that may be sold from time to time pursuant to this prospectus; however, we have received aggregate gross proceeds of $291,003 from the sale of an aggregate of 97,001 to the selling stockholders on March 12, 2021 under the Securities Purchase Agreements and expect to receive aggregate gross proceeds of $1,809,000 from the sale of an aggregate of 603,000 additional shares, which two of the selling stockholders have committed to purchase in a second tranche purchase that will occur on the second business day following the effective date of the registration statement of which this prospectus forms a part. We intend to use the proceeds that we receive for working capital purposes, acquisitions and other strategic purposes. See “Use of Proceeds” on page 9 of this prospectus. | |
| Risk factors | You should read the “Risk Factors” section of this prospectus on page 7 and the information incorporated by reference therein for a discussion of factors to consider before deciding to purchase shares of our common stock. | |
| Nasdaq Capital Market symbol | Our common stock is listed on the Nasdaq Capital Market under the symbol “ADIL.” Our warrants are listed on the Nasdaq Capital Market under the symbol “ADILW.” On April 15, 2021, the last reported sale price of our common stock and warrants on the Nasdaq Capital Market was $2.19 per share and 0.61 per warrant, respectively. |
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An investment in our common stock involves a high degree of risk. Before deciding whether to invest in our common stock, you should consider carefully the risks and uncertainties described in the section captioned “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on March 22, 2021 and other filings we make with the SEC from time to time, which are incorporated by reference herein in their entirety, together with other information in this prospectus and the information incorporated by reference herein. For a description of these reports and documents, and information about where you can find them, see “Where You Can Find More Information” and “Incorporation of Certain Documents By Reference.” Additional risks not presently known or that we presently consider to be immaterial could subsequently materially and adversely affect our and the information incorporated by reference herein. If any of these risks actually occurs, our business, financial condition, results of operations or cash flow could suffer materially. In such event, the trading price of our common stock could decline, and you might lose all or part of your investment.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference herein contain forward-looking statements that are based on current management expectations. Statements other than statements of historical fact included in this prospectus, including statements about us and the future growth and anticipated operating results and cash expenditures, are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). When used in this prospectus the words “anticipate,” “objective,” “may,” “might,” “should,” “could,” “can,” “intend,” “expect,” “believe,” “estimate,” “predict,” “potential,” “plan” or the negative of these and similar expressions identify forward-looking statements. These statements reflect our current views with respect to uncertain future events and are based on imprecise estimates and assumptions and subject to risk and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. While we believe our plans, intentions and expectations reflected in those forward-looking statements are reasonable, these plans, intentions or expectations may not be achieved. Our actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained in, or incorporated by reference into, this prospectus for a variety of reasons. Those risks and uncertainties include, among others:
| ● | our ability to implement our business plan; |
| ● | our ability to raise additional capital to meet our liquidity needs; |
| ● | our ability to generate product revenues; |
| ● | our ability to achieve profitability; |
| ● | our ability to satisfy U.S. (including FDA) and international regulatory requirements; |
| ● | our ability to obtain market acceptance of our technology and products; |
| ● | our ability to compete in the market; |
| ● | our ability to advance our clinical trials; |
| ● | our ability to fund, design and implement clinical trials; |
| ● | our ability to demonstrate that our lead product candidate is safe for human use and effective for indicated uses; |
| ● | our ability to gain acceptance of physicians and patients for use of our lead product; |
| ● | our dependency on third-party researchers, manufacturers and payors; |
| ● | our ability to establish and maintain strategic partnerships, including for the distribution of our lead product and any future products that we may acquire; |
| ● | our ability to attract and retain a sufficient qualified personnel; |
| ● | our ability our ability to obtain or maintain patents or other appropriate protection for the intellectual property; |
| ● | our dependency on the intellectual property licensed to us or possessed by third parties; |
| ● | our ability to adequately support future growth; |
| ● | potential product liability or intellectual property infringement claims; | |
| ● |
our ability to successfully integrate the Purnovate business into our business; and
| |
| ● | disruption or delay of our ongoing clinical trial, disruption of our corporate operations or those of our critical vendors, or general significant disruption to the global economy as a resulting of ongoing the COVID-19 pandemic. |
We urge investors to review carefully risks contained in the section of this prospectus entitled “Risk Factors” above as well as other risks and factors identified from time to time in our SEC filings in evaluating the forward-looking statements contained in this prospectus. We caution investors not to place significant reliance on forward-looking statements contained in this document; such statements need to be evaluated in light of all the information contained herein.
All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the risk factors and other cautionary statements set forth, or incorporated by reference, in this prospectus. Other than as required by applicable securities laws, we are under no obligation, and we do not intend, to update any forward-looking statement, whether as result of new information, future events or otherwise.
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The selling stockholders will receive all of the proceeds of the sale of shares of common stock offered from time to time pursuant to this prospectus. Accordingly, we will not receive any proceeds from the sale of shares of common stock that may be sold from time to time pursuant to this prospectus; however, we have received aggregate gross proceeds of $291,003 from the sale of an aggregate of 97,001 to the selling stockholders on March 12, 2021 under the Securities Purchase Agreements and expect to receive aggregate gross proceeds of $1,809,000 from the sale of an aggregate of 603,000 additional shares, which two of the selling stockholders have committed to purchase in a second tranche purchase that will occur on the second business day following the effective date of the registration statement of which this prospectus forms a part. We intend to use the proceeds that we receive for working capital purposes, acquisitions and other strategic purposes.
We will bear the out-of-pocket costs, expenses and fees incurred in connection with the registration of shares of our common stock to be sold by the selling stockholders pursuant to this prospectus. Other than registration expenses, the selling stockholders will bear underwriting discounts, commissions, placement agent fees or other similar expenses payable with respect to sales of shares of our common stock.
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We do not anticipate paying dividends on our common stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. We are not subject to any legal restrictions respecting the payment of dividends, except that we may not pay dividends if the payment would render us insolvent. Any future determination as to the payment of cash dividends on our common stock will be at our board of directors’ discretion and will depend on our financial condition, operating results, capital requirements and other factors that our board of directors considers to be relevant.
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This prospectus covers the resale or other disposition by the selling stockholders identified in the table below of up to an aggregate of 700,001 shares of our common stock issuable. These shares have been or will be acquired by the selling stockholders in the private placement transaction described above under the heading “Prospectus Summary –– Private Placement.”
On March 11, 2021, we entered into Securities Purchase Agreements with each of Bespoke, a company controlled by Mark Peikin, our non-executive Chief Strategy Officer, three entities (Ivy Cottage Group, LLC, James W. Newman Roth IRA and Rountop Limited Partnership, LLP) controlled by James W. Newman, Jr., a member of our Board of Directors since September 2014, and Keystone, pursuant to which the selling stockholders have agreed to purchase an aggregate of 700,001 shares of our common stock at a purchase price of $3.00 per share, for aggregate gross proceeds of $2,100,003.
On March 12, 2021, under the Securities Purchase Agreements we sold an aggregate of 97,001 shares of our common stock for $3.00 per share to the selling stockholders for aggregate gross proceeds to us of $291,003, as follows: (i) 33,667 shares were purchased by Bespoke for a total purchase price of $101,001, (ii) 30,000 shares were purchased by Newman for a total purchase price of $90,000, and (iii) 33,334 shares were purchased by Keystone for a total purchase price of $100,002.
Under the terms of the Securities Purchase Agreements, two of the selling stockholders agreed to purchase an aggregate of 603,000 additional shares of our common stock at a price of $3.00 per share in a second tranche purchase that will occur on the second business day after the effective date of the registration statement of which this prospectus is a part, as follows: (i) Bespoke agreed to purchase 303,000 additional shares of our common stock in the second tranche purchase for a total purchase price of $909,000, and (ii) Keystone agreed to purchase 300,000 additional shares of our common stock in the second tranche purchase for a total purchase price of $900,000.
Bespoke is a company controlled by Mark Peikin, our non-executive Chief Strategy Officer. In the last three years, Bespoke has been issued 250,000 shares of our common stock as compensation for services provided. Bespoke purchased 357,143 shares of our common stock on September 21, 2020 for an aggregate purchase price of $500,000 in a private placement transaction. None of the shares of common stock that were issued as compensation or purchased by Bespoke on September 21, 2020 are included in the registration statement of which this prospectus is a part.
On November 18, 2020, we entered into a Common Stock Purchase Agreement (the “Keystone Purchase Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”) with Keystone. Pursuant to the Keystone Purchase Agreement, we have the right to sell to Keystone Capital up to $15,000,000 of our common stock from time to time during the term of the Purchase Agreement. Upon signing the Keystone Purchase Agreement and the Registration Rights Agreement, we issued to Keystone 175,000 shares of common stock in consideration of its commitment to purchase our common stock at our direction from time to time under the Keystone Purchase Agreement. As of the date of this prospectus, we have sold an aggregate of 1,240,941 shares of common stock to Keystone in sales we made pursuant to the Keystone Purchase Agreement and received aggregate gross proceeds of $2,850,000 from such sales. All of such issuances and sales of our common stock to Keystone under the Keystone Purchase Agreement are made in reliance upon exemptions from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D thereunder, as well as exemptions from registration or qualification under applicable state securities laws. Pursuant to the Registration Rights Agreement, we filed a registration statement on Form S-1 with the SEC on December 4, 2020 to register the resale of shares of our common stock that have been or may be issued and sold to Keystone under the Keystone Purchase Agreement, which was declared effective by the SEC on December 15, 2020. Accordingly, none of the shares of common stock that have been or may be issued and sold to Keystone under the Keystone Purchase Agreement are included in the registration statement of which this prospectus is a part.
During the past three years, Mr. Newman has received options to purchase 105,580 shares of our common stock for services as a director. Mr. Newman participated in our initial public offering consummated in July 2018 and purchased 10,000 units at the initial public offering price of $5.00 per share and the James W. Newman Jr. Roth IRA purchased 10,000 units (the “Units”) in the initial public offering at a price of $5.00 per Unit. Also, upon completion of our initial public offering, Virga Ventures, LLC, an entity controlled by Mr. Newman was issued 92,000 units and warrants to purchase 92,000 units and Ivy Cottage Group, LLC was issued 20,000 units and warrants to purchase 20,000 units, both in connection with repayment of senior notes. Finally, upon completion of our initial public offering, $13,252 in convertible debt held by the Newman GST Trust, $9,614 in convertible debt held by Virga Ventures, LLC, and $2,293 in convertible debt held by Ivy Cottage Group, LLC was converted to 29,931 units, 21,715 units, and 5,178 units, respectively.
Other than as described herein and the documents incorporated by reference herein, we have not had a material relationship with any of the selling stockholders during the last three years.
The number of shares of common stock beneficially owned by the selling stockholders has been determined in accordance with Rule 13d-3 under the Exchange Act and includes, for such purpose, shares of common stock that the selling stockholders has the right to acquire within 60 days of April 15, 2021. The maximum number of shares of common stock and percentage of shares of common stock beneficially owned by the selling stockholders after the offering shown in the table below assumes all of the offered shares are sold by the selling stockholders and is based on an aggregate of 18,106,522 shares of our common stock, which includes an aggregate of 17,503,522 shares of our outstanding on April 15, 2021, and includes the 603,000 shares of common stock that two of the selling stockholders have committed to purchase in a second tranche purchase pursuant to the terms of the Securities Purchase Agreements.
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All information with respect to the ownership of the shares of common stock by the selling stockholders has been furnished by or on behalf of the selling stockholders. We believe, based on information supplied by the selling stockholders, that except as may otherwise be indicated in the footnotes to the table below, the selling stockholders have sole voting and dispositive power with respect to the shares of common stock reported as beneficially owned by it. Because the selling stockholders identified in the table may sell some or all of the shares of common stock beneficially owned by it and covered by this prospectus, and because there are currently no agreements, arrangements or understandings with respect to the sale of any of the shares of common stock, no estimate can be given as to the number of shares of common stock available for resale hereby that will be held by the selling stockholders upon termination of this offering. In addition, the selling stockholders may have sold, transferred or otherwise disposed of, or may sell, transfer or otherwise dispose of, at any time and from time to time, the shares of common stock they beneficially own in transactions exempt from the registration requirements of the Securities Act after the date on which they provided the information set forth in the table below. We have, therefore, assumed for the purposes of the following table, that the selling stockholders will sell all of the shares of common stock that it owns or may own beneficially that are covered by this prospectus, but will not sell any other shares of our common stock that they presently own that are not covered by this prospectus.
| Number of Shares of Common Stock Beneficially Owned Prior to | Maximum Number of Shares of Common Stock that may be Offered | Number of Shares of Common Stock Owned Beneficially Owned After | Percent Beneficial Ownership | |||||||||||||
| Name of Selling Stockholder | Offering | for Resale | Offering | Offering | ||||||||||||
| Bespoke Growth Partners, Inc.(1) | 390,810 | (2) | 336,667 | 357,143 | 1.97 | % | ||||||||||
| Keystone Capital Partners, LLC(3) | 266,979 | (4) | 333,334 | (5) | 233,645 | 1.29 | % | |||||||||
| Ivy Cottage Group, LLC(6)(9) | 111,585 | 10,000 | 101,585 | * | ||||||||||||
| James W. Newman Roth IRA(7)(9) | 34,644 | 10,000 | 24,644 | * | ||||||||||||
| Rountop Limited Partnership, LLP(8)(9) | 27,890 | 10,000 | 17,890 | * | ||||||||||||
| * | Represents beneficial ownership of less than 1% of the outstanding shares of our common stock. |
| (1) | The address for Bespoke Growth Partners, Inc. is 1875 N.W. Corporate Boulevard, Suite 290 Boca Raton, FL 33431. |
| (2) | The shares beneficially owned by Bespoke Growth Partners consist of 390,810 shares of common stock which include: (i) 33,667 shares of our common stock purchased by Bespoke on March 12, 2021 under the Securities Purchase Agreement for a total purchase price of $101,001, all of which shares are being registered for resale in the registration statement of which this prospectus is a part and (ii) 357,143 shares of our common stock owned by Bespoke, none of which 357,143 shares are being registered for resale in the registration statement of which this prospectus is a part. 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 303,000 additional shares of common stock that Bespoke has committed to purchase from us in a second tranche purchase under the Securities Purchase Agreement; however, we have included in the maximum number of shares of common stock that may be offered for resale the 303,000 additional shares of common stock that Bespoke has committed to purchase in a second tranche purchase pursuant to the terms of the Securities Purchase Agreement, because Bespoke’s obligation to purchase such 303,000 additional shares of common stock is subject to conditions set forth in the Securities Purchase Agreement, the satisfaction of which are entirely outside of Bespoke’s control, including the registration statement that includes this prospectus becoming and remaining effective. Such 303,000 additional shares that Bespoke has committed to purchase in a second tranche purchase subject to the terms and conditions of the Securities Purchase Agreement are, however, being registered for resale in the registration statement of which this prospectus is a part together with the 33,667 shares of common stock purchased by Bespoke on March 12, 2021 and beneficially owned by Bespoke immediately prior to this offering. |
| (3) | 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. |
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| (4) | The shares beneficially owned by Keystone prior to the offering consist of: (i) 33,334 shares of our common stock purchased by Keystone on March 12, 2021 under the Securities Purchase Agreement for a total purchase price of $100,002, all of which shares are being registered for resale in the registration statement of which this prospectus is a part, and (ii) 233,645 shares of our common stock purchased by Keystone in sales we made under the Keystone Purchase Agreement, none of which 233,645 shares are being registered for resale in the registration statement of which this prospectus is a part. 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 300,000 additional shares of common stock that Keystone has committed to purchase from us in a second tranche purchase under the Securities Purchase Agreement, because Keystone’s obligation to purchase such 300,000 additional shares of common stock is subject to conditions set forth in the Securities 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. Such 300,000 additional shares that Keystone has committed to purchase in a second tranche purchase subject to the terms and conditions of the Securities Purchase Agreement are, however, being registered for resale by Keystone in the registration statement of which this prospectus is a part together with the 33,334 shares of common stock purchased by Keystone on March 12, 2021 and beneficially owned by Keystone immediately prior to this offering. |
| (5) | The maximum number of shares that may be offered for resale by Keystone through this prospectus consist of: (i) 33,334 shares of our common stock purchased by Keystone on March 12, 2021 under the Securities Purchase Agreement for a total purchase price of $100,002 and (ii) the 300,000 additional shares of common stock that Keystone has committed to purchase from us in a second tranche purchase under the Securities Purchase Agreement that will occur on the second business day after the effective date of the registration statement of which this prospectus is a part. |
| (6) | The shares beneficially owned by Ivy Cottage Group, LLC include: (i) 45,221 shares of our common stock, including 10,000 shares of common stock purchase pursuant to the Securities Purchase Agreement, (ii) a warrant to acquire 1,186 shares of our common stock having an exercise price of $7.63 per share, (iii) a warrant to acquire 45,178 shares of our common stock having an exercise price of $6.25 per share, and (iv) a warrant to acquire 20,000 shares of our common stock having an exercise price of $5.00 per share. |
| (7) | The shares beneficially owned by the James W. Newman Roth IRA include: (i) 24,644 shares of common stock, including 10,000 shares of common stock purchase pursuant to the Securities Purchase Agreement and (ii) a warrant to acquire 10,000 shares of common stock having an exercise price of $6.25 per share. |
| (8) | The shares beneficially owned by Rountop Limited Partnership, LLP include: (i) 24,475 shares of our common stock, including 10,000 shares of common stock purchase pursuant to the Securities Purchase Agreement (ii) a warrant to acquire 2,707 shares of our common stock having an exercise price of $.0054 per share, and (iii) a warrant to acquire 708 shares of our common stock having an exercise price of $7.63 per share. An aggregate of 1,187 shares of common stock held by Rountop Limited Partnership, LLP that were issued to them in connection with the acquisition of Purnovate are subject to a lock-up and are held in escrow as collateral to secure certain of our rights in connection with the acquisition agreement until five (5) days after the effective date of a registration statement registering such shares with respect to thirty percent (30%) of such shares and on the one (1) year anniversary of the closing of the acquisition with respect to seventy percent (70%) of such shares. |
| (9) | The address for each of these selling stockholders is c/o Adial Pharmaceuticals, Inc., 1180 Seminole Trail, Suite 495, Charlottesville, Virginia 22901. James W. Newman, Jr., a member of our Board of Directors, is the sole member of Virga Ventures, LLC, the general partner of Ivy Cottage Group, LLC and Rountop Limited Partnership, LLP, and the securities held by the James W. Newman Roth IRA are held for the benefit of Mr. Newman. |
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DETERMINATION OF OFFERING PRICE
The prices at which the shares of common stock covered by this prospectus may actually be sold by the selling stockholders will be determined by prevailing market prices for shares of our common stock at the time of sale, by negotiations between the selling stockholders and buyers of our common stock or as otherwise described in “Plan of Distribution.”
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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
As of the date of this prospectus, 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
For a description of our capital stock, please see the Description of Securities included as Exhibit 4.19 to our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 22, 2021, which is incorporated by reference herein. See “Incorporation of Certain Documents by Reference” and “Where You Can Find More Information.”
Common stock outstanding. As of April 15, 2021, there were 17,503,522 shares of our common stock outstanding.
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. Stockholders do not have cumulative voting rights.
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.
Preferred Stock
There are no shares of our preferred stock outstanding as of the date of this prospectus.
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.
Warrants
At the date of this prospectus, we had outstanding warrants to purchase 7,957,225 shares of common stock at exercise prices ranging from $0.005 to $7.634 (with a weighted average exercise price of $4.83) and expiration dates from July 31, 2023 to December 31, 2031.
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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:
| ● | 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; | |
| 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 | ||
| ● | 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. |
In general, Section 203 defines business combination to include the following:
| ● | any merger or consolidation involving the corporation and the interested stockholder; | |
| ● | any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; | |
| ● | 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; | |
| ● | 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 | |
| ● | the receipt by the interested stockholder of the benefit of any loss, advances, guarantees, pledges or other financial benefits by or through the corporation. |
Certificate of Incorporation and Bylaws
Our certificate of incorporation and bylaws provide that:
| ● | 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; | |
| ● | the authorized number of directors can be changed only by resolution of our board of directors; | |
| ● | 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; | |
| ● | stockholders may not call special meetings of the stockholders or fill vacancies on the board of directors; | |
| ● | 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; | |
| ● | 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 | |
| ● | our stockholders must comply with advance notice provisions to bring business before or nominate directors for election at a stockholder meeting. |
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:
| ● | breach of their duty of loyalty to us or our stockholders; | |
| ● | act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; | |
| ● | unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or | |
| ● | 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.
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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.
Choice of Forum
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for:
| ● | any derivative action or proceeding brought on our behalf; | |
| ● | any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws; or | |
| ● | any action asserting a claim against us that is governed by the internal affairs doctrine. |
The exclusive forum provision does 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.
These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, employees, control persons, underwriters, or agents, which may discourage lawsuits against us and our directors, employees, control persons, underwriters, or agents. Additionally, a court could determine that the exclusive forum provision is unenforceable, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. If a court were to find these provisions of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, or results of operations.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is VStock Transfer, LLC. The transfer agent’s address is 18 Lafayette Place, Woodmere, New York 11598.
Warrant Agent
The warrant agent for the warrants issued in connection with our initial public offering in July 2018 is VStock Transfer, LLC.
Listing on the Nasdaq Capital Market
Our common stock is listed 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.”
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Registration Rights.
We have filed this registration statement with the SEC that includes this prospectus to register for resale under the Securities Act of 1933, the shares of common stock issued and to be issued pursuant to the terms of the Securities Purchase Agreements to satisfy our obligations in connection with Registration Rights Agreement that we entered into with the selling stockholders.
Each selling stockholder of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on the Principal Market or any other stock exchange, market or trading facility on which the securities are traded or in private transactions. The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale or at negotiated prices. A selling stockholder may use any one or more of the following methods when selling securities:
| ● | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| ● | block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| ● | an exchange distribution in accordance with the rules of the applicable exchange; |
| ● | privately negotiated transactions; |
| ● | settlement of short sales; |
| ● | in transactions through broker-dealers that agree with the selling stockholders to sell a specified number of such securities at a stipulated price per security; |
| ● | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
| ● | a combination of any such methods of sale; or |
| ● | any other method permitted pursuant to applicable law. |
The selling stockholders may also sell securities under Rule 144 or any other exemption from registration under the Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.
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In connection with the sale of the securities or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The selling stockholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The selling stockholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each selling stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.
We are required to pay certain fees and expenses incurred by us incident to the registration of the shares of common stock. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
We agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the selling stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the common stock by the selling stockholders or any other person. We will make copies of this prospectus available to the selling stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).
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Unless otherwise indicated in the applicable prospectus supplement, the validity of the shares of common stock offered hereby will be passed upon for us by Gracin & Marlow, LLP, New York, New York. If the validity of the securities offered hereby in connection with offerings made pursuant to this prospectus are passed upon by counsel for the underwriters, dealers or agents, if any, such counsel will be named in the prospectus supplement relating to such offering.
The financial statements of Adial Pharmaceuticals, Inc. as of December 31, 2020 and 2019 and for each of the years in the two year period ended December 31, 2020 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 MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other information with the SEC. Our public filings are available to the public at the SEC’s website at www.sec.gov.
Our website address is www.adialpharma.com. Through our website, we make available, free of charge, the following documents as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC: our Annual Reports on Form 10-K; our proxy statements for our annual and special stockholder meetings; our Quarterly Reports on Form 10-Q; our Current Reports on Form 8-K; Forms 3, 4 and 5 and Schedules 13G and 13D filed on behalf of our directors and our executive officers; and amendments to those documents. The information contained on, or that may be accessed through, our website is not part of, and is not incorporated into, this prospectus.
This prospectus is part of a registration statement on Form S-3 that we have filed with the SEC under the Securities Act. This prospectus does not contain all of the information in the registration statement. We have omitted certain parts of the registration statement, as permitted by the rules and regulations of the SEC. You may inspect and copy the registration statement, including exhibits, at the SEC’s website or our website.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to “incorporate by reference” the information we file with it which means that we can disclose important information to you by referring you to those documents instead of having to repeat the information in this prospectus. The information incorporated by reference is considered to be part of this prospectus, and later information that we file with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings made with the SEC (other than any portions of any such documents that are not deemed “filed” under the Exchange Act in accordance with the Exchange Act and applicable SEC rules) under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act including those made after (i) the date of the initial filing of the registration statement of which this prospectus is a part and prior to the termination of this offering and (ii) the date of this prospectus and before the completion of the offerings of the shares of our common stock included in this prospectus:
| ● | Our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on March 22, 2021 (File No. 001-38323); |
| ● | Our Current Reports on Form 8-K filed with the SEC on February 1, 2021, February 26, 2021 (other than as indicated therein), March 15, 2021 and April 9, 2021 (File No. 001-38323); and |
| ● | The description of our common stock set forth in (i) our registration statements on Form 8-A12B, filed with the SEC on December 11, 2017 and Form 8-A12B/A filed with the SEC on July 23, 2018 (File No. 001-38323) and (ii) Exhibit 4.19—Description of Securities to our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. |
Any statement contained in this prospectus or any prospectus supplement, or in a document incorporated or deemed to be incorporated by reference herein or therein, shall be deemed to be modified or superseded to the extent that a statement contained herein, or in any subsequent prospectus supplement or in any subsequently filed document that also is incorporated or deemed to be incorporated by reference herein or therein, modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus or any prospectus supplement.
You may obtain, free of charge, a copy of any of these documents (other than exhibits to these documents unless the exhibits are specifically incorporated by reference into these documents or referred to in this prospectus) from our website (www.adiapharma.com) or by writing or calling us at the following address and telephone number:
1180 Seminole Trail, Suite 495
Charlottesville VA 22901
Telephone (434) 422-9800
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses, other than the underwriting discounts and commissions, payable by the registrant in connection with the sale of the common stock being registered. All the amounts shown are estimates except the SEC registration fee.
| SEC registration fee | $ | 171 | ||
| Accounting fees and expenses | $ | 10,000 | ||
| Legal fees and expenses | $ | 25,000 | ||
| Printing and engraving expenses | $ | 5,000 | ||
| Miscellaneous | $ | 829 | ||
| Total | $ | 41,000 |
Item 15. Indemnification of Directors and Officers.
The Registrant is incorporated under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law provides that a Delaware corporation may indemnify any persons who were, are, or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent of such corporation, or is or was serving at the request of such corporation as an officer, director, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may indemnify any persons who were, are, or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person is or was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’\ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses (including attorneys’ fees) actually and reasonably incurred.
The Registrant’s certificate of incorporation and amended and restated bylaws, each of which will become effective immediately prior to the closing of this offering, provide for the indemnification of its directors and officers to the fullest extent permitted under the Delaware General Corporation Law.
Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director, except for liability for any:
| ● | transaction from which the director derives an improper personal benefit; |
| ● | act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
| ● | unlawful payment of dividends or redemption of shares; or |
| ● | breach of a director’s duty of loyalty to the corporation or its stockholders. |
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The Registrant’s certificate of incorporation includes such a provision. Expenses incurred by any officer or director in defending any such action, suit or proceeding in advance of its final disposition shall be paid by the Registrant upon delivery to it of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Registrant.
Section 174 of the Delaware General Corporation Law provides, among other things, that a director who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock purchase or redemption, may be held liable for such actions. A director who was either absent when the unlawful actions were approved or dissented at the time may avoid liability by causing his or her dissent to such actions to be entered in the books containing minutes of the meetings of the board of directors at the time such action occurred or immediately after such absent director receives notice of the unlawful acts.
As permitted by the Delaware General Corporation Law, the Registrant has entered into indemnity agreements with each of its directors and executive officers, that require the Registrant to indemnify such persons against any and all costs and expenses (including attorneys’, witness or other professional fees) actually and reasonably incurred by such persons in connection with any action, suit or proceeding (including derivative actions), whether actual or threatened, to which any such person may be made a party by reason of the fact that such person is or was a director or officer or is or was acting or serving as an officer, director, employee or agent of the Registrant or any of its affiliated enterprises. Under these agreements, the Registrant is not required to provide indemnification for certain matters, including:
| ● | indemnification beyond that permitted by the Delaware General Corporation Law; |
| ● | indemnification for any proceeding with respect to the unlawful payment of remuneration to the director or officer; |
| ● | indemnification for certain proceedings involving a final judgment that the director or officer is required to disgorge profits from the purchase or sale of the Registrant’s stock; |
| ● | indemnification for proceedings involving a final judgment that the director’s or officer’s conduct was in bad faith, knowingly fraudulent or deliberately dishonest or constituted willful misconduct or a breach of his or her duty of loyalty, but only to the extent of such specific determination; |
| ● | indemnification for proceedings or claims brought by an officer or director against us or any of the Registrant’s directors, officers, employees or agents, except for claims to establish a right of indemnification or proceedings or claims approved by the Registrant’s board of directors or required by law; |
| ● | indemnification for settlements the director or officer enters into without the Registrant’s consent; or |
| ● | indemnification in violation of any undertaking required by the Securities Act or in any registration statement filed by the Registrant. |
The indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder.
Except as otherwise disclosed under the heading “Legal Proceedings” in the “Business” section of this registration statement, there is at present no pending litigation or proceeding involving any of the Registrant’s directors or executive officers as to which indemnification is required or permitted, and the Registrant is not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
The Registrant has an insurance policy in place that covers its officers and directors with respect to certain liabilities, including liabilities arising under the Securities Act or otherwise.
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Item 16. Exhibits.
EXHIBIT INDEX
| * | Filed herewith |
| + | Management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this report. |
| # |
To be filed, if necessary, by amendment to this Registration Statement or incorporated by reference from documents filed with the SEC under the Exchange Act in connection with the offering of securities. |
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Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: |
| (a) | to include any prospectus required by Section 10(a)(3) of the Securities Act; |
| (b) | to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
| (c) | to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
provided, however, that paragraphs (1)(a), (1)(b) and (1)(c) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
| (2) | That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
| (4) | That, for the purpose of determining liability under the Securities Act to any purchaser: |
| (a) | Each prospectus filed by a Registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and |
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| (b) | Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date. |
| (c) | That, for purposes of determining any liability under the Securities Act, each filing of Registrant’s annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (d) | Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has 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 a Registrant of expenses incurred or paid by a director, officer or controlling person of a Registrant 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, that Registrant will, unless in the opinion of its 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. |
| (5) | That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the registrant undertakes that in a primary offering of securities of the registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| (a) |
Any preliminary prospectus or prospectus of the registrant relating to the offering required to be filed pursuant to Rule 424; | |
| (b) |
Any free writing prospectus relating to the offering prepared by or on behalf of the registrant or used or referred to by the registrant; | |
| (c) | The portion of any other free writing prospectus relating to the offering containing material information about registrant or its securities provided by or on behalf of the registrant; and | |
| (d) | Any other communication that is an offer in the offering made by a registrant to the purchaser. |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Charlottesville, State of Virginia, on the 19th day of April 2021.
| ADIAL PHARMACEUTICALS, INC. | ||
| By: | /s/ William B. Stilley | |
| Name: | William B. Stilley | |
|
Title: |
President and Chief Executive Officer | |
Each of the undersigned, whose signature appears below, hereby constitutes and appoints William B. Stilley and Joseph M. Truluck, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement, whether pre-effective or post-effective, and any and all additional registration statements pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, or his or their substitute or substitutes, full power and authority to do and perform each and every act and thing necessary or appropriate to be done with respect to this Registration Statement or any amendments hereto in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitute or substitutes, or any of them, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ William B. Stilley | Chief Executive Officer and President | |||
| William B. Stilley | (Principal Executive Officer) | April 19, 2021 | ||
| /s/ Joseph M. Truluck | Chief Operating Officer and Chief Financial Officer | |||
| Joseph M. Truluck | (Principal Financial and Accounting Officer) | April 19, 2021 | ||
| /s/ J. Kermit Anderson | ||||
| J. Kermit Anderson | Member of the Board of Directors | April 19, 2021 | ||
| /s/ Robertson H. Gilliland | ||||
| Robertson H. Gilliland | Member of the Board of Directors | April 19, 2021 | ||
| /s/ Tony Goodman | ||||
| Tony Goodman | Member of the Board of Directors | April 19, 2021 | ||
| /s/ James W. Newman, Jr. | ||||
| James W. Newman, Jr. | Member of the Board of Directors | April 19, 2021 | ||
| /s/ Kevin Schuyler, CFA | ||||
| Kevin Schuyler, CFA | Member of the Board of Directors | April 19, 2021 |
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Exhibit 5.1
The Chrysler Building
405 Lexington Avenue, 26th Floor
New York, New York 10174
Telephone (212) 907-6457
Facsimile: (212) 208-4657
April 19, 2021
The Board of Directors
Adial Pharmaceuticals, Inc.
1180 Seminole Trail, Suite 495
Charlottesville, Virginia 22901
| Re: | Registration Statement on Form S-3 |
Ladies and Gentlemen:
We have acted as counsel to Adial Pharmaceutical, Inc., a Delaware corporation (the “Company”), in connection with the filing with the Securities and Exchange Commission (the “Commission”) of a Registration Statement on Form S-3 (the “Registration Statement”) for the purpose of registering under the Securities Act of 1933, as amended (the “Securities Act”), the resale by the selling stockholders named therein (the “Selling Stockholders”) of 700,001 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share. The Selling Stockholders agreed to acquire the Shares from the Company pursuant to securities purchase agreements, dated March 11, 2021 (the “Securities Purchase Agreement”).
As counsel to the Company, we have examined the Registration Statement, the Securities Purchase Agreements and the originals or copies, certified or otherwise identified to our satisfaction, of such other documents, corporate records, certificates of public officials and other instruments as we have deemed necessary for the purposes of rendering this opinion and we are familiar with the proceedings taken and proposed to be taken by the Company in connection with the filing of the Registration Statement as it relates to the Shares. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies.
Based upon and subject to the foregoing, we are of the opinion that when the Shares have been issued in accordance with the terms of the Securities Purchase Agreements, the Shares will be duly authorized, validly issued, fully paid and non-assessable.
We express no opinion as to matters governed by any laws other than the General Corporation Law of the State of Delaware (including all related provisions of the Delaware Constitution and all reported judicial decisions interpreting the General Corporation Law of the State of Delaware and the Delaware Constitution) and the federal laws of the United States of America, as in effect on the date hereof.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to our firm under the caption “Legal Matters” in the Registration Statement. In giving our consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder.
| Very truly yours, | |
| /s/ Gracin & Marlow, LLP | |
| Gracin & Marlow, LLP |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated March 22, 2021, which includes an explanatory paragraph as to the Company’s ability to continue as going concern, with respect to our audits of the financial statements of the Company as of December 31, 2020 and 2019 and for each of the years in the two year period ended December 31, 2020. We also consent to the reference to our firm under the heading “Experts” in this Registration Statement.
/s/ Friedman LLP
Marlton, New Jersey
April 19, 2021