9 — STOCKHOLDERS’ EQUITY

On August 1, 2025, the Company’s stockholders approved, and the Company filed with the Secretary of State of the State of Delaware, an amendment to the Company’s Certificate of Incorporation to increase the authorized number of shares of the Company’s common stock, from 50,000,000 to 100,000,000.

During the six months ended June 30, 2026, the Company issued 216,960 shares of common stock from shares held in abeyance related to the exercise of warrants in November 2025.

During the six months ended June 30, 2026, the Company issued 437,421 shares of common stock to the former Azora stockholders, see Note 4.

Standby Equity Purchase Agreement

On December 13, 2024, the existing Equity Purchase Agreement that the Company entered into with Alumni Capital, LP (“Alumni”), dated May 31, 2023, was cancelled by mutual agreement. Simultaneously, the Company and Alumni 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, 2,752 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, 2026, no shares were sold under the terms of the New SEPA, leaving a remaining $4.9 million to be sold under the New SEPA.

At-the-market Offering Agreement

On August 1, 2025, the Company, entered into a sales agreement (the “ATM”) with A.G.P./Alliance Global Partners (“AGP”) providing for the sale by the Company of its shares of common stock, from time to time, through the ATM, with certain limitations on the amount of common stock that may be offered and sold by the Company. The aggregate market value of the shares of common stock eligible for sale under the ATM prospectus supplement filed in connection with the ATM was $4,983,000 which is based on the limitations of such offerings under SEC regulations. The ATM provides that the Company will pay AGP commissions for its services in acting as agent in the sale of shares of common stock pursuant to the ATM. AGP will be entitled to compensation at a fixed commission rate of 3.0% of the gross proceeds from the sale of shares of common stock pursuant to the ATM. During the six months ended June 30, 2026, the Company sold 725,684 shares of common stock under the ATM for net proceeds of approximately $1.2 million.

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.

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 80,000 to 200,000. At June 30, 2026, the Company had 3,330 shares issuable under the 2017 Equity Incentive Plan.

Assumed Options from Acquisition of Azora

On June 11, 2026, in connection with the Acquisition of Azora, the Company assumed all outstanding and unexercised stock options to purchase Azora stock, resulting in the option holders having the right to purchase an aggregate of 1,177,782 shares of Company common stock. The Assumed Options were converted into options to purchase shares of the Company’s common stock using an exchange ratio of approximately 0.319, with exercise prices ranging from $0.53 to $1.57 per share on an as-converted basis. The Company recognized $1.7 million representing the fair value of the Assumed Options attributable to the pre-combination service period as part of the consideration transferred. The remaining unrecognized compensation expense associated with the unvested Assumed Options will be recognized over their remaining service periods, which range from approximately 0.75 to 3.9 years, provided that no portion of the Options will vest prior to the date the Company receives stockholder approval of the transaction related matters, and the Options will be subject to catch up vesting for any awards that would have otherwise vested prior to receipt of stockholder approval. These stock options were granted outside of the 2017 Plan as an inducement material to each employee’s acceptance of employment with the Company. See Note 4 for additional information regarding the Merger.

Inducement Grants

The Company granted inducement non-statutory stock options to purchase an aggregate of 557,249 shares of common stock to, the Company’s newly appointed chief development officer and executive vice president of strategy respectively, on June 12, 2026, at an exercise price of $2.98 per share, as a material inducement to entering employment with the Company. These options will vest as follows: (i) with respect to 305,136, pro rata on a monthly basis over three years commencing on the one month anniversary of the effective grant date thereof and (ii) with respect to 252,113 options, on a pro rata portion of such options will be subject to the same vesting included in (i) upon the sale and issuance by the Company of the Milestone Warrants, subject to catch up vesting for any awards that would have otherwise vested prior to issuance of such Milestone Warrants; provided that no portion of the Options will vest prior to the date the Company receives stockholder approval of the transaction related matters, and the Options will be subject to catch up vesting for any awards that would have otherwise vested prior to receipt of stockholder approval. These stock options were granted outside of the 2017 Plan as an inducement to each employee’s acceptance of employment with the Company.

Stock Options

The following table provides the stock option activity for the three and six months ended June 30, 2026:

At June 30, 2026, the total intrinsic value of the outstanding options was $1,925,371.

The Company used the Black Scholes valuation model to determine the fair value of the options issued and assumed in the acquisition of Azora, using the following key assumptions for the six months ended June 30, 2026 and 2025:

As of June 30, 2026, there was $2,980,300 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 3.1 years. 

The components of stock-based compensation expense included in the Company’s Unaudited Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2026 and 2025 are as follows (in thousands):

Restricted Stock

The Company has granted restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) with service-based and performance vesting conditions.

The following is a summary of the RSUs which were granted outside of the 2017 Equity Incentive Plan as inducement grants, during the three and six months ended June 30, 2026:

On June 11, 2026, the Company granted 557,248 RSUs which are included in the table above to newly appointed executives of the Company. These RSUs will vest as follows: (i) with respect to 305,136 RSUs, pro rata on a monthly basis over three years commencing on the one month anniversary of the effective grant date thereof and (ii) with respect to 252,112 RSUs, on a pro rata portion of such awards will be subject to the same vesting included in (i) upon the sale and issuance by the Company of the Milestone Warrants, subject to catch up vesting for any awards that would have otherwise vested prior to issuance of such Milestone Warrants; provided that no portion of the RSUs will vest prior to the date the Company receives stockholder approval of the transaction related matters, and the RSUs will be subject to catch up vesting for any awards that would have otherwise vested prior to receipt of stockholder approval.

On April 7, 2026, the Company issued an aggregate of 134,815 RSAs to the Company’s named executive officers, employees and directors, with a weighted average grant date fair value of $1.64. The RSAs vest in full on the earlier of (i) the one-year anniversary of the grant date and (ii) upon the occurrence of a Change of Control (as defined in the 2017 Plan).

As of June 30, 2026, unrecognized stock-based compensation expense associated with the RSUs and RSAs was $1,803,600 and is expected to be recognized over a weighted-average period of 2.6 years.

Common Stock Warrants

The following table provides the activity for common stock warrants for the three and six months ended June 30, 2026:

Pre-Funded Warrants

The Following table provides the activity for pre-funded warrants for the three and six months ended June 30, 2026: 

The pre-funded warrants were issued in accordance with the private placement transaction and conversion of Azora’s convertible notes, and have no expiration date, see Note 4 for further information.