4 — ACQUISITION OF AZORA AND PIPE ISSUANCE

On June 11, 2026, the Company acquired Azora, in accordance with the terms of the Merger Agreement, by and among Adial, First Merger Sub, Adial Second Merger Sub and Azora. Pursuant to the Merger Agreement, First Merger Sub merged with and into Azora, with Azora surviving as a wholly owned subsidiary of Adial (the “First Merger”).

Immediately following the First Merger, in the Second Merger, Azora merged with and into Second Merger Sub, with Second Merger Sub surviving as a wholly owned subsidiary of Adial and the Second Merger Sub changing its name to “Azora Therapeutics, LLC”. At closing of the Merger, Adial issued to former Azora stockholders 437,421 shares of Adial’s common stock and 12,930.617 shares of Series A Preferred Stock. Each share of Series A Preferred Stock is convertible into 1,000 shares of Adial’s common stock, subject to the terms and limitations set forth in the applicable certificate of designation and related transaction documents, including without limitation the receipt of approval of Adial’s stockholders of the conversion thereof. Azora outstanding options to purchase Azora common stock were converted into options to purchase 1,177,782 shares of Adial’s common stock. The Merger was completed on June 11, 2026.

On June 11, 2026, in connection with and as a condition to closing of the Merger, Adial entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the purchasers named therein (the “PIPE Investors”), pursuant to which Adial issued and sold to the PIPE Investors, in a private placement transaction, at the initial closing on June 12, 2026 (the “Initial PIPE Closing”) pre-funded warrants (the “Initial Closing Pre-Funded Warrants”) to purchase up to an aggregate of 9,749,345 shares of Adial’s common stock, at a price of $2.7489 per Initial Closing Pre-Funded Warrant, for an aggregate purchase price of $26.8 million. In addition, Adial agreed to issue and sell to the PIPE Investors at one or more subsequent closings (each, a “Milestone Closing”), pre-funded warrants (“Milestone Pre-Funded Warrants”) to purchase up to an aggregate of 9,749,345 shares of Adial’s common stock and incentive warrants (“Milestone Incentive Warrants” and together with the Milestone Pre-Funded Warrants, the “Milestone Warrants”) having an exercise price of $2.7489 per share to purchase up to an aggregate of 9,749,345 shares of Adial’s common stock, at a combined purchase price equal to $2.7489 per Milestone Warrants, for an aggregate purchase price of up to $26.8 million. The issuance and sale of Initial Closing Pre-Funded Warrants and Milestone Warrants pursuant to the Purchase Agreement are collectively referred to as the “Financing.”

Pursuant to the terms of the Merger Agreement, upon the closing of the Merger, Adial agreed to guarantee the payment of $5.5 million in principal amount of certain outstanding amended and restated convertible promissory notes issued by Azora (the “Azora Notes”) to certain individuals (collectively, the “Former Azora Noteholders”). On June 11, 2026, Adial entered into exchange agreements (the “Exchange Agreements”) with the Former Azora Noteholders to extinguish the payment guaranty and retire the Azora Notes in exchange for the issuance to the Former Azora Noteholders of Initial Closing Pre-Funded Warrants to purchase an aggregate of 2,031,603 shares of Adial’s common stock (the “Azora Note Exchange”). As a result of the Azora Note Exchange, all such Azora Notes have been deemed to be repaid in full and all outstanding obligations thereunder have been extinguished. Pursuant to the Exchange Agreements, the Former Azora Noteholders are also entitled to participate in Milestone Closings to purchase Milestone Pre-Funded Warrants to purchase up to an aggregate of 2,031,603 shares of Adial’s common stock and Milestone Incentive Warrants having an exercise price of $2.7489 per share to purchase up to an aggregate of 2,031,603 shares of Adial’s common stock, at a combined price of $2.7489, on substantially the same terms as the PIPE Investors under the Purchase Agreement, for an aggregate purchase price of up to $5.6 million. The Company accounted for the Azora Note Exchange as a debt extinguishment and an extinguishment loss of $6.1 million was recognized based upon the difference between the reacquisition price and the net carrying amount of the Azora Notes. The reacquisition price is equal to the fair value of the Initial Closing Pre-Funded Warrants to purchase an aggregate of 2,031,603 shares of Adial’s common stock and the liability classified rights to participate in Milestone Closings to purchase Milestone Pre-Funded Warrants to purchase up to an aggregate of 2,031,603 shares of Adial’s common stock and Milestone Incentive Warrants having an exercise price of $2.7489 per share to purchase up to an aggregate of 2,031,603 shares of Adial’s common stock issued upon the Azora Note Exchange and the net carrying amount is equal to the principal and accrued interest amount of the Azora Notes.

Subject to the receipt of stockholder approval of the conversion of the shares of Series A Preferred issued in the Merger into shares of Adial’s common stock, each share of Series A Preferred Stock will automatically convert into 1,000 shares of common stock, subject to certain beneficial ownership limitations established by each holder. As a result of the Merger, Financing and Azora Note Exchange (collectively, the “Transactions”), equityholders of Adial immediately prior to the Merger owned approximately 7.7% of Adial’s common stock, equityholders of Azora immediately prior to the acquisition owned approximately 51.0% of Adial’s common stock and the investors in the Financing, including the Azora Noteholders, owned approximately 41.3% of Adial’s common stock, in each case calculated on a fully-diluted, as-converted-basis (and without giving effect to any beneficial ownership limitations) using the treasury stock method and based on the implied equity values of Adial and Azora.

Upon the closing of the Merger on June 11, 2026, the Company evaluated its relationship with Azora under ASC 810, and determined that Azora is a VIE in which the Company holds a variable interest. The Company concluded it is the primary beneficiary of Azora because it has (i) the power to direct the activities of Azora that most significantly affect Azora’s economic performance and (ii) the obligation to absorb losses of, or the right to receive benefits from, Azora that could potentially be significant to Azora. Accordingly, the Company consolidates Azora in its unaudited condensed consolidated financial statements in accordance with ASC 810-10-25 as the accounting acquirer.

Because Azora does not meet the definition of a business under ASC 805, the Company measured the assets acquired and liabilities assumed upon initial consolidation as required by ASC 810-10-30-4 for the initial consolidation of a VIE that is not a business. Under this guidance, the identifiable assets acquired and liabilities assumed were recognized and measured at fair value in accordance with the recognition and measurement principles of ASC 805-20; no goodwill was recognized, as goodwill recognition is prohibited when consolidating a VIE that is not a business. Fair value of the identifiable net assets acquired, and accordingly no gain or loss was recognized under ASC 810-10-30-4. Acquired IPR&D that has no alternative future use was expensed immediately upon consolidation.

The estimated fair value of the consideration transferred of $41.5 million is summarized as follows (in thousands):

The fair value of the consideration transferred was measured using the price per pre-funded warrant the investors paid as part of the Financing. The Assumed Options reflects the portion of the acquisition date fair-value based measure that relates to the pre-combination service period.

The following table summarizes the allocation of the estimated fair value of the consideration transferred to the net assets acquired by the Company (in thousands):