Financial Reporting and Compliance - The company has identified material weaknesses in its internal control over financial reporting, which may lead to material misstatements in financial statements [240]. - The company is subject to increasing legal, accounting, and financial compliance costs due to the reporting requirements of the Sarbanes-Oxley Act [238]. - The company anticipates incurring significant legal, accounting, and compliance costs as a public entity, which were not present as a private company [399]. - The company is classified as an "emerging growth company" and will remain so until total annual gross revenue exceeds $1.07 billion or other specified conditions are met [397]. Clinical Trials and Product Development - The company is currently conducting the ONWARD Phase 3 clinical trial for its lead product candidate, AD04, with approximately 290 patients in Scandinavia and Central and Eastern Europe [248]. - The company anticipates completing patient enrollment in the ONWARD pivotal Phase 3 clinical trial in Q2 or Q3 of 2021, but patient enrollment challenges may lead to significant delays [286]. - The company plans to test AD04 in adolescent patients (ages 12-17) as part of the next Phase 3 trial [272]. - The company has limited experience in conducting clinical trials, which may impact the timely completion of planned trials [279]. - The company cannot guarantee that the clinical trial material produced will be approved for use in trials, which could delay the clinical program [274]. - Success in preclinical testing and early clinical trials does not ensure later clinical trials will be successful, which could delay commercialization [281]. - The company must demonstrate safety and efficacy through lengthy and expensive preclinical testing and clinical trials before obtaining regulatory approvals for AD04 and future product candidates [283]. - The FDA may require additional clinical trials for patients negative for the targeted genotypes, potentially delaying approval [270]. - The approval of AD04 is contingent upon the successful development and approval of a companion diagnostic genetic test [275]. - The Phase 3 trials are expected to last 24 weeks, compared to the 12 weeks of the Phase 2b trial [268]. - The FDA has indicated that a satisfactory endpoint for the Phase 3 trial will be the percentage of patients with no heavy drinking days in the last two months of a six-month treatment regimen [269]. Market and Competitive Landscape - The pharmaceutical industry is characterized by rapid technological change and substantial competition, which may impair the company's business [289]. - The company will compete against larger pharmaceutical companies and smaller firms with greater resources and experience in drug development and commercialization [291]. - The success of the product candidates will depend on acceptance by physicians, healthcare payers, and patients, particularly as the products are intended to be used in conjunction with genetic testing [288]. - Market acceptance of AD04 and future product candidates is uncertain, and failure to gain acceptance could significantly harm revenue generation [319]. Financial Risks and Funding - The company currently generates no revenues from its product candidate and may never be able to develop or commercialize a marketable drug [251]. - The company may need to raise additional financing through equity sales, which could have a dilutive effect on existing shareholders [237]. - The company may require additional financing in the future, which could lead to dilution of existing shareholders' equity [408]. - If the common stock is de-listed and trades as a "penny stock," it may face additional regulatory requirements that could limit trading activity and increase transaction costs [410]. - The company may incur substantial costs if its products infringe on the proprietary rights of other parties, which could include obtaining licenses, redesigning products, or paying damages [349]. Intellectual Property and Legal Risks - There is a risk of third parties asserting claims related to their intellectual property rights, which could lead to costly litigation and diversion of resources [348]. - The company has limited protection for its intellectual property, and unauthorized use of technology may occur despite licensing efforts [340]. - The company cannot assure that pending patent applications will be approved or that issued patents will provide significant commercial protection [343]. - Non-compliance with patent application requirements could lead to abandonment or loss of patent rights, allowing competitors to enter the market [356]. - The company may face lawsuits to protect or enforce patents, which could be expensive and time-consuming, with adverse outcomes risking the validity of licensed patents [351]. Strategic Partnerships and Acquisitions - The company may pursue acquisitions and joint ventures, but lacks experience in integrating such transactions successfully [377]. - The company relies on collaboration agreements for the commercialization of investigational product candidates, which may involve greater uncertainty and less control [335]. - If strategic partnerships are not established or maintained, the development of current and future product candidates may be delayed or terminated [332]. - The acquisition of Purnovate is expected to provide strategic benefits, but there is no assurance that these benefits will materialize or enhance stockholder value [292]. Stockholder and Governance Issues - The company has outstanding warrants to purchase 7,957,225 shares at a weighted average exercise price of $4.83, which could dilute common stock ownership [389]. - The company’s board is authorized to issue 50,000,000 shares of common stock and 5,000,000 shares of preferred stock, potentially diluting existing shareholders [390]. - The company has never paid dividends and does not plan to do so in the future, intending to retain future earnings for operations [392]. - Provisions in the corporate charter and Delaware law may complicate potential acquisitions, potentially hindering stockholder interests [411]. - The company's board of directors is divided into three classes, with each class serving a three-year term, which may limit stockholder influence on management [412].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File Number: 001-38323 ADIAL PHARMACEUTICALS, INC. (Exact Name of Registrant as Specified in its Charter) | --- | --- | |------ ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File Number: 001-38323 ADIAL PHARMACEUTICALS, INC. (Exact Name of Registrant as Specified in its Charter) | --- | --- | |----------- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File Number: 001-38323 ADIAL PHARMACEUTICALS, INC. (Exact Name of Registrant as Specified in its Charter) | --- | --- | |---------- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-3823 ADIAL PHARMACEUTICALS, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware (State or Other Jurisdiction of Incorporation or ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Delaware 82-3074668 State or Other Jurisdiction of Incorporation or Organization I.R.S. Employer Identification No. Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock ADIL NASDAQ Warrants ADILW NASDAQ FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 O ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock ADIL NASDAQ Warrants ADILW NASDAQ FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File ...

[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I-FINANCIAL%20INFORMATION) This section covers the company's unaudited financial statements, management's analysis, market risk, and internal controls [Item 1. Condensed Unaudited Financial Statements](index=5&type=section&id=Item%201.%20Condensed%20Unaudited%20Financial%20Statements) The company reported a net loss of **$2.7 million** for Q1 2019, with balance sheet strength significantly improved by a **$9.2 million** equity offering [Balance Sheets](index=5&type=section&id=Balance%20Sheets) Condensed Balance Sheet Data (Unaudited) | Account | March 31, 2019 ($) | December 31, 2018 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | $11,394,244 | $3,869,043 | | Total Current Assets | $12,053,336 | $4,692,550 | | Total Assets | $12,059,929 | $4,699,285 | | Total Current Liabilities | $329,192 | $257,974 | | Total Stockholders' Equity | $11,730,737 | $4,441,311 | [Statements of Operations](index=6&type=section&id=Statements%20of%20Operations) Condensed Statements of Operations (Unaudited) | Account | Three Months Ended March 31, 2019 ($) | Three Months Ended March 31, 2018 ($) | | :--- | :--- | :--- | | Research and development expenses | $686,914 | $55,508 | | General and administrative expenses | $1,562,352 | $284,005 | | Loss From Operations | ($2,249,266) | ($339,513) | | Net Loss | ($2,682,651) | ($378,950) | | Net loss per share, basic and diluted | ($0.33) | ($0.12) | [Statements of Stockholders' Equity (Deficit)](index=7&type=section&id=Statements%20of%20Stockholders'%20Equity%20(Deficit)) - Stockholders' equity increased from **$4.4 million** at the end of 2018 to **$11.7 million** at March 31, 2019[15](index=15&type=chunk) - The increase was primarily driven by the sale of Common Stock & Warrants, which raised **$9.25 million**, and the exercise of warrants, which added another **$1.05 million**[15](index=15&type=chunk) - These inflows were partially offset by a net loss of **$2.68 million** and offering issuance costs of **$1.05 million**[15](index=15&type=chunk) [Statements of Cash Flows](index=8&type=section&id=Statements%20of%20Cash%20Flows) Condensed Statements of Cash Flows (Unaudited) | Activity | Three Months Ended March 31, 2019 ($) | Three Months Ended March 31, 2018 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,721,109) | ($214,282) | | Net cash provided by financing activities | $9,246,310 | $250,001 | | Net increase in cash and cash equivalents | $7,525,201 | $35,719 | | Cash and cash equivalents - End of period | $11,394,244 | $53,967 | [Notes to the Unaudited Condensed Financial Statements](index=9&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Financial%20Statements) - The company is a clinical-stage biopharmaceutical firm developing AD04 for alcohol use disorder and plans to start a Phase 3 trial[19](index=19&type=chunk)[20](index=20&type=chunk) - In February 2019, the company raised net proceeds of **$8.2 million** in a follow-on public offering of common stock and warrants, following a **$6.3 million** IPO in July 2018[21](index=21&type=chunk) - Management believes existing cash of **$11.4 million** as of March 31, 2019, is sufficient to fund operations for at least the next twelve months, but longer-term operations depend on raising additional capital[22](index=22&type=chunk)[23](index=23&type=chunk) - The company has a master services agreement with Crown CRO Oy for its Phase 3 clinical study, with an estimated fee of approximately **$3.3 million** plus pass-through costs, with **$505,960** prepaid as of March 31, 2019[90](index=90&type=chunk)[93](index=93&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses increased Q1 2019 expenses and strengthened liquidity from an **$8.2 million** offering, sufficient for 12 months of operations [Overview](index=23&type=section&id=Overview) - Adial is a clinical-stage biopharmaceutical company developing AD04, a selective serotonin-3 antagonist, for the treatment of alcohol use disorder (AUD) in patients with specific genotypes[110](index=110&type=chunk) - The company has incurred net losses each year since inception, with a net loss of **$2.7 million** for Q1 2019 and an accumulated deficit of **$14.7 million** as of March 31, 2019[116](index=116&type=chunk) - Operations have been funded primarily through private placements and public offerings, and the company does not expect to generate revenue until AD04 is successfully developed and approved[115](index=115&type=chunk)[117](index=117&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Comparison of Operations for the Three Months Ended March 31 | Expense Category | 2019 ($) | 2018 ($) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $687,000 | $56,000 | $631,000 | 1127% | | General and administrative | $1,562,000 | $284,000 | $1,278,000 | 450% | | **Net Loss** | **($2,683,000)** | **($379,000)** | **($2,304,000)** | **608%** | - The increase in R&D expenses was driven by higher compensation costs from increased headcount (including a CMO signing bonus) and the initiation of clinical trial activities[124](index=124&type=chunk) - The increase in G&A expenses was primarily due to higher employee headcount and compensation post-IPO, including one-time cash bonuses and increased use of financial consultants[125](index=125&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) - As of March 31, 2019, the company had approximately **$11.4 million** in cash and cash equivalents and **$11.7 million** in working capital[129](index=129&type=chunk) - In February 2019, a follow-on offering generated net proceeds of **$8.2 million**[128](index=128&type=chunk) - Current cash is expected to be sufficient for at least the next twelve months, with an estimated cash use of **$7.9 million**, though additional financing will be required for subsequent clinical trials and to execute the full business strategy[131](index=131&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company has indicated that this item is not applicable for the reporting period - Not applicable[136](index=136&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of March 31, 2019, due to identified material weaknesses in policies and staffing - Management concluded that as of March 31, 2019, the company's disclosure controls and procedures were not effective[137](index=137&type=chunk) - Identified material weaknesses include inadequately documented policies, lack of proper approval/review processes, insufficient GAAP experience, and insufficient staff for segregation of duties[136](index=136&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[141](index=141&type=chunk) [PART II - OTHER INFORMATION](index=30&type=section&id=PART%20II-OTHER%20INFORMATION) This section includes legal proceedings, risk factors, equity sales, and other required disclosures [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings that would have a material adverse effect on its business, financial condition, or cash flows - As of the report date, the company is not involved in any material legal proceedings[142](index=142&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) Key risks include continued net losses, the critical need for additional financing, significant shareholder concentration, and potential future dilution - The company has a history of net losses since inception and anticipates continued losses, with an accumulated deficit of approximately **$14.7 million** as of March 31, 2019[144](index=144&type=chunk)[145](index=145&type=chunk) - Additional financing is required to support operations and fund clinical trials, including the completion of a second Phase 3 trial for AD04, as failure to raise capital could force delays or discontinuation of product development[147](index=147&type=chunk)[149](index=149&type=chunk)[151](index=151&type=chunk) - Officers and directors beneficially own approximately **41%** of outstanding common stock, giving them significant influence over management and corporate transactions[157](index=157&type=chunk) - Future sales of common stock to raise capital, or the exercise of outstanding warrants and options, could result in significant dilution to existing stockholders and cause the stock price to fall[158](index=158&type=chunk)[161](index=161&type=chunk)[163](index=163&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued unregistered shares to consultants and through warrant exercises, with no material change in IPO proceeds use - In Q1 2019, the company issued unregistered shares of common stock on multiple occasions to consultants and through warrant exercises[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk) - There has been no material change in the planned use of proceeds from the July 2018 IPO, with funds primarily used for the Phase 3 clinical trial of AD04, personnel, and working capital[172](index=172&type=chunk) [Item 3. Defaults Upon Senior Securities](index=34&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None[173](index=173&type=chunk) [Item 4. Mine Safety Disclosures](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[173](index=173&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item - Not applicable[173](index=173&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Underwriting Agreement for the February 2019 offering and various officer certifications

Part I [Business](index=4&type=section&id=Item%201.%20Business) Adial Pharmaceuticals is a clinical-stage biopharmaceutical company developing AD04, a genetically targeted therapeutic for Alcohol Use Disorder [Overview and Strategy](index=4&type=section&id=Overview%20and%20Strategy) - Adial is a clinical-stage biopharmaceutical company focused on developing AD04, a therapeutic agent using ondansetron for Alcohol Use Disorder (AUD), targeted at patients with specific genotypes[6](index=6&type=chunk) - The company holds an exclusive worldwide license from the University of Virginia Patent Foundation (UVA LVG) for AD04, supported by patents in over 40 jurisdictions[7](index=7&type=chunk) - The business strategy involves a two-stage clinical development plan, starting with a Phase 3 trial in Europe, followed by further trials for US and EU approval. The commercialization plan is also two-staged, beginning with a specialty sales force targeting psychiatrists, followed by a potential partnership with a larger pharmaceutical company[44](index=44&type=chunk)[45](index=45&type=chunk) - The total potential market for AD04 is estimated at approximately **$36 billion** in the United States alone, assuming one-third of the 35 million AUD patients are genotype positive[22](index=22&type=chunk) [Clinical Development and Results](index=14&type=section&id=Clinical%20Development%20and%20Results) - The lead product, AD04, is based on ondansetron, a 5-HT3 receptor antagonist. The scientific rationale is that blocking these receptors influences the dopamine reward system activated by alcohol, thereby reducing cravings[46](index=46&type=chunk)[50](index=50&type=chunk) Phase 2b Clinical Trial Efficacy Results for Target Genotypes | Endpoint | Result | Placebo Comparison | Statistical Significance (p-value) | | :--- | :--- | :--- | :--- | | **Primary:** Reduction in Severity of Drinking | 1.71 fewer drinks/drinking day | vs. P3-Genotype on Placebo | p=0.0042 | | **Secondary:** Reduction in Frequency of Drinking | 11.56% increase in days abstinent | vs. P3-Genotype on Placebo | p=0.0352 | | **Post Hoc:** Reduction in Heavy Drinking Days | 11.08% reduction | vs. P3-Genotype on Placebo | p=0.0445 | - The planned Phase 3 program will enroll only genotype-positive patients. The initial trial is planned for 294 patients in Scandinavia and Central/Eastern Europe. The FDA has indicated this trial design is acceptable but would result in labeling restricted to genotype-positive patients[90](index=90&type=chunk) - The company has met with the FDA's CDER and CDRH divisions, which have agreed on the evaluation pathway for the drug and its companion diagnostic test, respectively[92](index=92&type=chunk) [Intellectual Property and Competition](index=26&type=section&id=Intellectual%20Property%20and%20Competition) - The company has an exclusive license from UVA LVG for three patent families covering the use of ondansetron to treat AUD in patients with specified genotypes, with protection expected through **2032**[31](index=31&type=chunk)[94](index=94&type=chunk) - Adial believes the threat of "off-label" use of generic ondansetron (Zofran) is low due to the impracticality of dividing existing high-dose tablets, lack of efficacy data for high doses in AUD, and potential safety concerns with chronic high-dose use[100](index=100&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk) - Any competitor attempting to market ondansetron at AD04's dosage for AUD would likely be seen as inducing infringement on Adial's licensed patents, as there is no other approved use for such a low dose[111](index=111&type=chunk)[112](index=112&type=chunk) [Government Regulation](index=29&type=section&id=Government%20Regulation) - The company is subject to extensive regulation by the FDA, governing research, development, testing, manufacturing, and marketing of pharmaceutical products[120](index=120&type=chunk) - Adial intends to submit a 505(b)(2) New Drug Application (NDA), which allows the FDA to rely on data not developed by the applicant, such as existing safety data for the approved drug Zofran (ondansetron)[30](index=30&type=chunk)[142](index=142&type=chunk) - The development of AD04 is dependent on the contemporaneous approval of a companion diagnostic test, which is regulated as a medical device by the FDA's Center for Devices and Radiological Health (CDRH)[139](index=139&type=chunk) - The company is also subject to various healthcare laws, including the Anti-Kickback Statute, False Claims Act, and the Physician Payments Sunshine Act, which regulate interactions with healthcare providers and programs[145](index=145&type=chunk)[146](index=146&type=chunk)[148](index=148&type=chunk) [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including net losses, a going concern opinion, and dependence on financing for its sole product AD04's clinical trials - The company has a history of net losses, an accumulated deficit of approximately **$12.0 million** as of December 31, 2018, and does not expect to generate revenue or be profitable in the foreseeable future[179](index=179&type=chunk) - The independent registered public accounting firm has expressed substantial doubt about the company's ability to continue as a going concern due to recurring losses and the need for additional capital[184](index=184&type=chunk)[185](index=185&type=chunk) - The business is entirely dependent on the success of its single product candidate, AD04, and its licensed intellectual property from UVA LVG. Failure of AD04 or termination of the license would have a material adverse effect[191](index=191&type=chunk)[192](index=192&type=chunk) - Significant risks exist regarding clinical development, including the potential for Phase 3 trials to fail, regulatory agencies not accepting planned endpoints, and challenges in getting the companion diagnostic test approved[210](index=210&type=chunk)[215](index=215&type=chunk)[225](index=225&type=chunk) - Material weaknesses in internal control over financial reporting have been identified, including inadequate documentation, lack of proper review processes, insufficient GAAP experience, and poor segregation of duties[327](index=327&type=chunk) [Unresolved Staff Comments](index=84&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - Not applicable[370](index=370&type=chunk) [Properties](index=84&type=section&id=Item%202.%20Properties) The company does not own any real estate, operating from leased office and coworking spaces in Virginia and Hawaii - As of January 2, 2019, the company occupies approximately **250 square feet** of furnished workspace in Charlottesville, Virginia, under an office service agreement with a monthly rent of **$1,150**[371](index=371&type=chunk) [Legal Proceedings](index=84&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently subject to any material legal claims or actions expected to adversely affect its financial position - The company is not currently subject to any material legal proceedings[375](index=375&type=chunk) [Mine Safety Disclosures](index=85&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's business - Not applicable[376](index=376&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=85&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock and warrants began trading on NASDAQ in July 2018 following its IPO, raising **$6.3 million** in net proceeds - The company's common stock and warrants began trading on The NASDAQ Capital Market on **July 27, 2018**, under the symbols "ADIL" and "ADILW," respectively[376](index=376&type=chunk) - On **July 31, 2018**, the company closed its IPO, selling **1,464,000 units** at **$5.00 per unit**, raising aggregate net proceeds of **$6.3 million**[381](index=381&type=chunk) - The company has never paid dividends and does not intend to in the foreseeable future, planning to retain any earnings for business growth[377](index=377&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2018) | Plan Category | Securities to be Issued upon Exercise of Outstanding Options | Weighted-Average Exercise Price | Securities Remaining Available for Future Issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 68,900 | $2.80 | 1,681,100 | [Selected Financial Data](index=89&type=section&id=Item%206.%20Selected%20Financial%20Data) This section is not applicable as the company qualifies as a smaller reporting company - The Company is a smaller reporting company and is not required to provide this information[403](index=403&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=89&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) For 2018, the company's net loss significantly increased to **$11.6 million** from **$1.1 million** in 2017, driven by higher G&A expenses and debt extinguishment losses Results of Operations Comparison (2018 vs. 2017) | Line Item | 2018 | 2017 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development expenses | $368,000 | $182,000 | $186,000 | 102% | | General and administrative expenses | $6,619,000 | $813,000 | $5,806,000 | 714% | | Loss From Operations | ($6,987,000) | ($995,000) | ($5,992,000) | 602% | | Loss on debt extinguishments | ($3,485,000) | $0 | ($3,485,000) | N/A | | **Net Loss** | **($11,632,000)** | **($1,139,000)** | **($10,493,000)** | **921%** | - The increase in G&A expenses was primarily due to **$5.1 million** in equity compensation expense, including stock issued to cancel a performance bonus plan and stock/warrants issued to consultants[425](index=425&type=chunk) - As of **December 31, 2018**, the company had **$3.9 million** in cash and cash equivalents. Management states this is not sufficient to fund operations for the next **12 months**, with existing cash expected to be exhausted by the end of **Q3 2019**[428](index=428&type=chunk)[435](index=435&type=chunk) - The company estimates it will require an additional **$4.5 million** to complete its initial Phase 3 clinical trial, which has a total estimated direct cost of **$7.5 million**[435](index=435&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=103&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable as the company qualifies as a smaller reporting company - The Company is a smaller reporting company and is not required to provide this information[473](index=473&type=chunk) [Financial Statements and Supplementary Data](index=104&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Audited financial statements for 2018 and 2017 are presented, with the auditor's report highlighting a "Going Concern" due to accumulated deficit and recurring losses - The independent auditor's report contains a "Going Concern" paragraph, citing the company's accumulated deficit of **$12.0 million** as of **December 31, 2018**, recurring losses, and net working capital deficiency[479](index=479&type=chunk) Key Balance Sheet Data (as of Dec 31) | Metric | 2018 | 2017 | | :--- | :--- | :--- | | Cash and cash equivalents | $3,869,043 | $18,248 | | Total Current Assets | $4,692,550 | $27,248 | | Total Current Liabilities | $257,974 | $1,032,099 | | Total Stockholders' Equity (Deficit) | $4,441,311 | ($997,553) | Key Statement of Operations Data (Year Ended Dec 31) | Metric | 2018 | 2017 | | :--- | :--- | :--- | | Total Operating Expenses | $6,987,222 | $995,286 | | Net Loss | ($11,631,378) | ($1,139,456) | | Net loss per share, basic and diluted | ($2.44) | ($0.35) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=128&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[609](index=609&type=chunk) [Controls and Procedures](index=128&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were ineffective as of December 31, 2018, due to identified material weaknesses in internal control - Management concluded that the company's disclosure controls and procedures were ineffective as of the end of the period[610](index=610&type=chunk) - Material weaknesses in internal control over financial reporting were identified, including: (i) inadequately documented policies, (ii) lack of proper approval/review processes, (iii) insufficient GAAP experience, and (iv) insufficient staff for segregation of duties[612](index=612&type=chunk) [Other Information](index=128&type=section&id=Item%209B.%20Other%20Information) There is no other information to report in this section - None[615](index=615&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=129&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company's board consists of seven directors, five independent, with staggered terms, and has established key governance committees - The board of directors consists of **seven members**, with a classified structure where directors serve staggered **three-year terms**[616](index=616&type=chunk) - The key executive officers are William B. Stilley, III (CEO & President) and Joseph Truluck (COO & CFO). Dr. Bankole A. Johnson serves as Chairman of the Board[618](index=618&type=chunk) - The board has determined that **five of its seven directors** are independent under NASDAQ and SEC rules. It has established an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee[640](index=640&type=chunk)[642](index=642&type=chunk) [Executive Compensation](index=138&type=section&id=Item%2011.%20Executive%20Compensation) Total compensation for CEO William B. Stilley in 2018 was approximately **$1.2 million**, with a significant portion in stock awards, and the report details employment agreements Summary Compensation Table (2018) | Name and Principal Position | Salary | Stock & Option Awards | All Other Compensation | Total | | :--- | :--- | :--- | :--- | :--- | | William B. Stilley (CEO) | $180,833 | $988,365 | $42,458 | $1,211,656 | | Joseph A. M. Truluck (COO/CFO) | $85,183 | $223,180 | - | $308,363 | - The company has employment agreements with its CEO and COO/CFO, effective upon the IPO closing, with base salaries of **$350,000** and **$143,000** (for 50% time commitment), respectively[661](index=661&type=chunk)[662](index=662&type=chunk) - Non-employee directors receive annual cash compensation, with retainers for board membership (**$20,000**), committee membership (**$3,000-$6,000**), and committee chairmanship (**$7,000-$15,000**)[687](index=687&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=146&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of February 13, 2019, the company's directors and executive officers as a group beneficially owned approximately **52.94%** of the outstanding common stock, indicating significant insider control Beneficial Ownership (as of Feb 13, 2019) | Name / Group | Percentage Ownership | | :--- | :--- | | All current executive officers and directors as a group | 52.94% | | Bankole Johnson, DSc, MD (Chairman) | 20.32% | | Kevin Schuyler, CFA (Director) | 17.61% | | William B. Stilley, III (CEO) | 12.47% | | James W. Newman, Jr. (Director) | 8.92% | | Becker Specialty Corporation (>5% Shareholder) | 7.04% | [Certain Relationships and Related Transactions, and Director Independence](index=150&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company discloses several related-party transactions, primarily involving its directors and executive officers, including pre-IPO financing and stock grants for a bonus plan retirement - The company engaged in multiple financing transactions with directors and officers prior to the IPO, including the issuance of Subordinated Notes and Senior Notes[709](index=709&type=chunk)[710](index=710&type=chunk) - On **January 29, 2018**, the company entered into a Medical Translation Services Agreement with a firm controlled by Chairman Dr. Bankole Johnson, involving cash payments of **$68,540** and the issuance of **40,463 shares** of common stock[711](index=711&type=chunk) - On **April 1, 2018**, the company retired its Performance Bonus Plan by issuing restricted common stock to CEO William Stilley (**197,673 shares**), Chairman Bankole Johnson (**50,000 shares**), and COO/CFO Joseph Truluck (**44,636 shares**)[714](index=714&type=chunk) - Several directors, officers, and their affiliates participated significantly in the company's Initial Public Offering[715](index=715&type=chunk)[716](index=716&type=chunk) [Principal Accountant Fees and Services](index=154&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Friedman LLP served as the independent auditor, with total fees of **$146,500** for 2018 and **$118,418** for 2017, consisting entirely of audit fees Auditor Fees | Fee Category | 2018 | 2017 | | :--- | :--- | :--- | | Audit fees and expenses | $146,500 | $118,418 | | All other fees | $0 | $0 | | **Total** | **$146,500** | **$118,418** | Part IV [Exhibits and Financial Statement Schedules](index=156&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements included in Item 8 and provides a comprehensive list of all exhibits filed with the Form 10-K - This section contains a list of all financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K[724](index=724&type=chunk)[725](index=725&type=chunk) [Form 10-K Summary](index=162&type=section&id=Item%2016.%20Form%2010-K%20Summary) This section is not applicable to the company - Not applicable[732](index=732&type=chunk)