6 — STOCKHOLDERS’ EQUITY

Standby Equity Purchase Agreement

On December 13, 2024, the existing Equity Purchase Agreement that we entered into with Alumni Capital, LLC (“Alumni”) on May 31, 2023 was cancelled by mutual agreement. Simultaneously, the Company and Alumni Capital entered into a new Equity Purchase Agreement (the “New SEPA”) on substantially the same terms, but with an initial right to sell Alumni up to $5,000,000 in newly issued shares and an end date of the commitment period of December 31, 2026. Upon the Company’s entry into and subject to the terms and conditions set forth in the New SEPA, 68,807 shares of common stock were issued to Alumni as consideration for its irrevocable commitment to purchase shares of common stock, pursuant to the New SEPA. During the three months ended June 30, 2025, 66,667 shares were sold under the terms of the New SEPA for proceeds of $42,396. During the six months ended June 30, 2025, 141,667 shares had been sold under the terms of the New SEPA for total proceeds of $93,044 leaving a remaining $4.9 million to be sold under the New SEPA.

Other Common Stock Issuances

On January 27, 2025, the Company issued 100,000 shares of common stock to a vendor and cash of $4,970 in consideration for services rendered valued at $100,000.  

2017 Equity Incentive Plan

On October 9, 2017, the Company adopted the Adial Pharmaceuticals, Inc. 2017 Equity Incentive Plan (the “2017 Equity Incentive Plan”); which became effective on July 31, 2018. Under the 2017 Equity Incentive Plan, the Company may grant equity-based awards to individuals who are employees, officers, directors, or consultants of the Company. Options issued under the Plan will generally expire ten years from the date of grant and vest over a three-year period. At June 30, 2025, the Company had 677,954 shares issuable under the 2017 Equity Incentive Plan.

On August 1, 2025, the Company’s stockholders approved an amendment to the Company’s 2017 Equity Incentive Plan to increase the number of shares of Common Stock authorized for grant under the plan from 2,000,000 to 5,000,000.

Stock Options

The following table provides the stock option activity for the three and six months ended June 30, 2025:

At June 30, 2025, the total intrinsic value of the outstanding options was zero dollars.

The Company used the Black Scholes valuation model to determine the fair value of the options issued, using the following key assumptions for the six months ended June 30, 2025 and 2024:

The weighted-average grant-date fair value of stock options granted during the six months ended June 30, 2025 and 2024 was $0.59 and $1.14, respectively. As of June 30, 2025, there was $751,983 of total time-based unrecognized compensation costs related to unvested stock options. These costs are expected to be recognized over a weighted average period of 1.4 years.

The components of stock-based compensation expense included in the Company’s Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2025 and 2024 are as follows:

Stock Warrants

The following table provides the activity in warrants for the three and six months ended June 30, 2025.

On May 2, 2025, the Company entered into a warrant inducement agreement (the “Inducement Agreement”) with an existing healthcare-focused institutional investor of the Company for the immediate exercise of existing Series B Warrants to purchase 1,418,440 shares of the Company’s common stock and Series C Warrants, and together with the Series B Warrants (the "Existing Warrants") to purchase 2,300,000 shares of the Company’s common stock at a reduced exercise price of $0.74 in exchange for   (i) Series B-1 warrants to purchase up to 2,482,270 shares of common stock (the "Series B-1 Warrants"), and (ii) Series C-1 Warrants to purchase up to 4,025,000 shares of common stock (the "Series C-1 Warrants"), and together with the Series B-1 Warrants (the "New Warrants"). The New Warrants have an exercise price of $0.74 and will be exercisable upon stockholder approval. The Series B-1 Warrants expire five years from the date of such approval and the Series C-1 Warrants will expire eighteen months from the date of such approval. The Company’s stockholders have approved the Series B-1 and C-1 warrants as of August 1, 2025.

In addition, the Company issued to other investors as tail fee warrants, consisting of Placement Agent Series B-1 Common Stock Purchase Warrants and Placement Agent Series C-1 Common Stock Purchase Warrants, to purchase up to an aggregate of 223,106 shares of Common Stock, which tail fee warrants have the same terms as the New Warrants, except that they have an exercise price of $0.925 per share.

The Inducement Agreement, which resulted in the lowering of the exercise price of the Existing Warrants and the issuance of the New Warrants, is considered a modification of the Existing Warrants under the guidance ASC 815-40. The modification is consistent with the equity issuance classification under that guidance as the reason for the modification was to induce the holders of the Existing Warrants to cash exercise their warrants, which raised equity capital and generated net proceeds of approximately $2.2 million. The Company incurred approximately $0.5 million as equity issuance costs associated with the inducement agreement. As the Existing Warrants and the New Warrants were classified as equity instruments before and after the exchange, and as the exchange is directly attributable to an equity offering, the Company recognized the effect of the modification of approximately $3.0 million as additional equity issuance cost.

On June 17, 2025, the Company entered into an amendment agreement (the “Warrant Amendment”) with the holder of certain existing warrants to purchase Common Stock (the “Holder”), consisting of (i) Series B-1 warrants to purchase up to 2,482,270 shares of Common Stock and (ii) Series C-1 warrants to purchase up to 4,025,000 shares of Common Stock and, together with the Series B-1 Warrants, the “Prior Warrants”). Pursuant to the Warrant Amendment, the Company agreed (i) to amend the Prior Warrants to reduce the exercise price of the Prior Warrants to $0.35 per share, (ii) to amend the Prior Warrants to modify the termination date thereof to (x) June 17, 2030 for the Series B-1 Warrants and (y) December 17, 2026 for the Series C-1 Warrants, and (iii) to amend that certain warrant inducement agreement (the “Inducement Agreement”), dated May 2, 2025, by and between the Company and the Holder, to provide that the Company would hold a special meeting of stockholders at the earliest practicable date, but in no event later than one hundred twenty (120) days after the Closing Date, for the purpose of obtaining Stockholder Approval (as defined in the Inducement Agreement). As the Warrant Amendment was classified as equity instruments before and after the Warrant Amendment, and as the Warrant Amendment is directly attributable to an equity offering, the Company recognized the effect of the Warrant Amendment of approximately $197,000 as additional equity issuance cost.

On June 18, 2025, the Company consummated a best efforts offering (the “Offering”) of (i) 5,341,200 shares of the Company’s common stock, (ii)  pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to an aggregate of 5,758,800 shares of Common Stock (the “Pre-Funded Warrant Shares”), (iii) Series D warrants (the “Series D Warrants”) to purchase up to an aggregate of 11,100,000 shares of Common Stock (the “Series D Warrant Shares”), (iv) Series E warrants (the “Series E Warrants” and, together with the Series D Warrants, the “Common Warrants”) to purchase up to an aggregate of 8,325,000 shares of Common Stock (the “Series E Warrant Shares” and, together with the Series D Warrant Shares, the “Common Warrant Shares”). Each Share or Pre-Funded Warrant was sold together with one Series D Warrant and one Series E Warrant. The combined public offering price for each Share and accompanying Common Warrants was $0.3251. The combined public offering price for each Pre-Funded Warrant and accompanying Common Warrants was $0.3241. The aggregate net proceeds from the Offering was approximately $3.0 million. The Company incurred approximately $0.6 million as equity issuance costs associated with the Offering.

In addition, the Company issued to other investors as tail fee warrants, consisting of Series D Warrants, to purchase up to an aggregate of 106,110 shares of Common Stock, which tail fee warrants have the same terms as the Series D Warrants, except that they have an exercise price of $0.4375 per share. 

The Common Warrants have an exercise price of $0.35 per Common Warrant Share and will be exercisable beginning on the effective date of shareholder approval of the issuance of the Common Warrant Shares. The Series D Warrants will expire on the 5-year anniversary of the shareholder approval and the Series E Warrants will expire on the 18-month anniversary of the shareholder approval. The Company’s stockholders have approved the Series D and E warrants as of August 1, 2025. The Company evaluated the pre-funded warrants and the common warrant shares under ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, and determined the warrants meet the requirements to be classified in permanent equity. The fair value of the Common Warrants approximated $3.3 million and was recognized as additional-paid-in capital during the three months ended June 30, 2025. As of June 30, 2025 all of the pre-funded warrants have been exercised.