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, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION

13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file number: 001-38323

ADIAL PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

4870 Sadler Road, Suite 300

Glen Allen, Virginia23060

(Address of principal executive offices) (Zip Code)

(804)487-8196

(Registrant’s telephone number, including

area code)

Securities registered pursuant to Section 12(b)

of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered

Common Stock, par value $0.001 per share ADIL The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a

well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not

required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the issuer: (1)

has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months

(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements

for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant

has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405

of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes

☒ No ☐

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 pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant

has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial

reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared

or issued its audit report. ☐

If securities are registered pursuant to Section

12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction

of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error

corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant’s

executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant

is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting

common equity held by non-affiliates of the registrant, based on the closing price of a share of the registrant’s common stock on

June 30, 2023 (the last business day of the registrant’s mostly recently completed second fiscal quarter) as reported by the Nasdaq

Capital Market on such date was $5,385,155. This calculation does not reflect a determination that certain persons are affiliates of the

registrant for any other purpose.

As of March 29, 2024, the issuer had 4,054,861 shares of common stock

outstanding.

Documents incorporated by reference: None

FORM 10-K

TABLE OF CONTENTS

Page

PART I

Item 1. Business 1

Item 1A. Risk Factors 24

Item 1B. Unresolved Staff Comments 59

Item 1C. Cybersecurity 59

Item 2. Properties 60

Item 3. Legal Proceedings 60

Item 4. Mine Safety Disclosures 60

PART II

Item 6. [Reserved] 63

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 72

Item 8. Financial Statements and Supplementary Data F-1

Item 9A. Controls and Procedures 73

Item 9B. Other Information 74

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 74

PART III

Item 10. Directors, Executive Officers and Corporate Governance 75

Item 11. Executive Compensation 81

Item 14. Principal Accountant Fees and Services 93

PART IV

Item 15. Exhibit and Financial Statement Schedules 94

SIGNATURES 99

PART I

ADIAL PHARMACEUTICALS, INC.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking

statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and

Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In particular, statements contained in

this Annual Report on Form 10-K, including but not limited to, statements regarding the sufficiency of our cash, our ability to finance

our operations and business initiatives and obtain funding for such activities; our future results of operations and financial position,

business strategy and plan prospects, or costs and objectives of management for future initiatives, are forward-looking statements. These

forward-looking statements relate to our future plans, objectives, expectations and intentions and may be identified by words such as

“may,” “will,” “should,” “expects,” “plans,” “anticipates,” “intends,”

“targets,” “projects,” “contemplates,” “believes,” “seeks,” “goals,”

“estimates,” “predicts,” “potential” and “continue” or similar words. Readers are cautioned

that these forward-looking statements are based on our current beliefs, expectations and assumptions and are subject to risks, uncertainties,

and assumptions that are difficult to predict, including those identified below, under Part I, Item lA. “Risk Factors” and

elsewhere in this Annual Report on Form 10-K. Therefore, actual results may differ materially and adversely from those expressed, projected

or implied in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.

NOTE REGARDING COMPANY REFERENCES

Throughout this Annual Report on Form 10-K, “Adial,”

the “Company,” “we,” “us” and “our” refer to Adial Pharmaceuticals, Inc.

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 the Company. A more detailed description of our

risk factors set forth under the caption “Risk Factors” in Item 1A in Part I of this Annual Report on Form 10-K.

Risks Relating to Our Company

● There is substantial doubt about our ability to continue as a going concern.

● We have identified weaknesses in our internal controls.

● Our business is dependent upon the success of our product candidate, AD04.

● We have limited experience as a company conducting clinical trials.

● Our product candidate will require extensive clinical and other testing.

● Our success will be dependent upon adoption of our products by physicians.

iii

Risks Relating to Our Business and Industry

● AD04 and any future product candidates may cause undesirable side effects.

● We have limited protection for our intellectual property.

● Certain of our officers may have a conflict of interest.

● We may acquire other businesses that could harm our operating results.

Risks Related to Our Securities and Investing

in Our Securities

● Future sales of securities could result in additional dilution.

● If we implement a reverse stock split, it may not result in intended benefits.

● The warrants that we have issued are speculative in nature.

● There is no established market for the warrants.

PART I

Item 1. Business.

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 investigational new drug candidate, AD04, is being developed as a therapeutic agent for the treatment of alcohol use disorder (“AUD”).

AD04 was recently investigated in a Phase 3 clinical trial, designated the ONWARD trial, for the potential treatment of AUD in subjects

with certain target genotypes, which were identified using our companion diagnostic genetic test. Based on our analysis of the subgroup

data from the ONWARD trial, we are now focused on completing the clinical development program for AD04 in the specified genetic subgroups

to meet regulatory requirements primarily in the U.S. and secondarily in Europe/UK.

In January 2021, we expanded our portfolio in

the field of addiction with the acquisition of Purnovate, LLC via a merger into our wholly owned subsidiary, Purnovate, Inc. (“Purnovate”)

and in January 2023, we entered into an option agreement with Adovate LLC (“Adovate”), pursuant to which we granted to Adovate

an exclusive option for Adovate or its designated affiliate to acquire all of the assets of Purnovate and to assume related liabilities

and expenses. (Our then-CEO was a significant equity holder in Adovate, LLC, so this was considered a related party transaction.) On May

8, 2023, Adovate sent a letter exercising its option effective May 16, 2023 and made payment of the $450,000 in fees due on exercise.

Effective June 30, 2023, Adovate issued to us the equity stake in Adovate due on exercise of the option agreement. On August 17, 2023,

a Bill of Sale, Assignment and Assumption Agreement (“Bill of Sale”) was executed between Purnovate and Adovate, transferring

the Purnovate assets to Adovate, effective as of June 30, 2023. On August 17, 2023, Purnovate and Adovate also entered into a letter agreement

acknowledging that Adovate acquired the assets of Purnovate effective as of June 30, 2023, pursuant to the Bill of Sale.

We have devoted the vast

majority of our resources to development efforts relating to AD04, including preparation for and conducting clinical trials, providing

general and administrative support for these operations and protecting our intellectual property.

Recent Developments

Securities Purchase Agreement

On October 19, 2023,

we entered into a securities purchase agreement (the “Purchase Agreement”) with an institutional investor (the “Purchaser”)

for the issuance and sale in a private placement (the “Private Placement”) of (i) pre-funded warrants (the “Pre-Funded

Warrants”) to purchase up to 1,418,440 shares of our common stock, par value $0.001 (the “Common Stock”), at an exercise

price of $0.001 per share, (ii) series A warrants (the “Series A Warrants”) to purchase up to 1,418,440 shares of the Company’s

Common Stock at an exercise price of $2.82 per share, and (iii) series B warrants (the “Series B Warrants” and together with

the Series A Warrants, the “Warrants”) to purchase up to 1,418,440 shares of the Company’s Common Stock at an exercise

price of $2.82 per share. The Series A Warrants are exercisable at any time on or after the earlier of (i) if permitted by the rules and

regulations of the Nasdaq Stock Market, upon the payment by the Purchaser of $0.125 per share in addition to the exercise price of $2.82

per share, and (ii) the Stockholder Approval Date (as defined in the Purchase Agreement) (the “Initial Exercise Date”),

and have a term of exercise equal to five and one-half years from the date of issuance. The Series B Warrants are exercisable at any time

on or after the Initial Exercise Date and have a term of exercise equal to eighteen months from the date of issuance. The combined purchase

price for one Pre-Funded Warrant and the accompanying Warrants was $2.819. The net proceeds to us from the Private Placement were approximately

$3.4 million, after deducting placement agent fees and expenses and estimated offering expenses payable by us.

In connection with the

Private Placement, we entered into a registration rights agreement (the “Registration Rights Agreement”), dated as of October

19, 2023, with the Purchaser, pursuant to which we agreed to prepare and file a registration statement with the Securities and Exchange

Commission (the “SEC”) registering the resale of the shares of Common Stock underlying the Pre-Funded Warrants and the Warrants

(the “Shares”) no later than 20 days after the date of the Registration Rights Agreement, to use our commercially reasonable

efforts to have the registration statement declared effective as promptly as practical thereafter, and in any event not more than 45 days

following the date of the Registration Rights Agreement (or 75 days following the date of the Registration Rights Agreement in the event

of a “full review” by the SEC), and to keep such registration statement effective at all times until (i) the Purchaser does

not own any Warrants or shares issuable upon exercise thereof or (ii) the Shares may be sold without volume or manner-of-sale restrictions

pursuant to Rule 144 and without the requirement for us to be in compliance with the current public information requirement under Rule

144.

On January 11, 2024,

we held a Special Meeting of Stockholders (the “Special Meeting”) at which our stockholders approved the issuance of up to

an aggregate of 3,007,092 shares of our Common Stock upon the exercise of Pre-Funded Warrants and the Warrants issued in the Private Placement,

that may be equal to or exceed 20% of our Common Stock outstanding before such offering.

At the date of this report,

all the Pre-Funded Warrants we issued pursuant to the Purchase agreement had been exercised for total proceeds of $1,418.

Warrant Exercise

On March 1, 2024, warrants to purchase 268,440

warrants to purchase shares for common stock for an exercise price of $2.82 per share were exercised for gross proceeds of approximately

$757 thousand.

Warrant Exercise Inducement Agreement

On March 1, 2024, we entered into a warrant inducement

agreement (the “Inducement Agreement”) with a certain holder (the “Holder”) of the Company’s warrants to

purchase shares of our common stock, par value $0.001 per share (the “common stock”), issued in a private placement offering

that closed on October 24, 2023 (the “Existing Warrants”). Pursuant to the Inducement Agreement, the Holder of the Existing

Warrants agreed to exercise for cash the Existing Warrants to purchase approximately 1,150,000 shares of common stock, at an exercise

price of $2.82 per share. The transactions contemplated by the Inducement Agreement closed on March 6, 2024. The Company received aggregate

gross proceeds of approximately $3.5 million, before deducting placement agent fees and other expenses payable by the Company. Net proceeds

of this transaction were estimated to be approximately $3.1 million.

In consideration of the Holder’s immediate

exercise of the Existing Warrants and the payment of $0.125 per New Warrant (as such term is defined below) in accordance with the Inducement

Agreement, we issued unregistered Series C Warrants (the “New Warrants”) to purchase 2,300,000 shares of common stock (200%

of the number of shares of common stock issued upon exercise of the Existing Warrants) (the “New Warrant Shares”) to the Holder

of Existing Warrants, at an exercise price of $2.82 per share.

AD04 Clinical Development Program

Adial’s AD04 clinical development program began with initiation

of a Phase 3 trial, otherwise known as the ONWARDTM trial. Adial believed that the ONWARD trial design provided the flexibility to

meet global regulatory requirements. The trial started in February 2020 in Scandinavia and Central and Eastern Europe. The ONWARD trial

was a 24-week, multicenter, randomized, double-blind, placebo-controlled, parallel group, Phase 3 clinical study to evaluate the efficacy,

safety and tolerability of AD04 in patients with AUD and selected polymorphisms in the serotonin transporter and receptor genes. Patients

were genetically screened prior to enrollment in the ONWARD trial so that only genetically positive patients were enrolled. ONWARD enrolled

302 patients (a total of 303 patients were recruited and then randomized in the trial, however, one subject never initiated treatment

and has been excluded from enrollment numbers and was not included in the full analysis data set or efficacy analysis for the trial);

and was conducted in 25 clinical sites in six countries in Scandinavia and Central and Eastern Europe (Sweden, Finland, Poland, Latvia,

Bulgaria and Croatia). Approximately one-third of the total screened patients tested positive for the targeted genotypes.

A Phase 2b study (N = 283), conducted by the University of Virginia

for which we have acquired rights to the data, showed that a prospectively identified subgroup of alcohol-dependent individuals with specific

polymorphisms of the serotonin transporter protein responded therapeutically to ondansetron administration (Johnson, BA et al., 2011).

Further analysis of this same data set against 18 additional polymorphisms located on the genes for the A and B subunits of the serotonin

5-HT3 receptor revealed polymorphisms that were also associated with a therapeutic response to ondansetron. It was this hypothesis that

collectively led Adial to focus the ONWARD trial on genotypes LL/TT, GG, AG, and AC.

The primary efficacy endpoint of the ONWARD trial was the average percentage

change from baseline in the monthly heavy drinking days (PHDD) experienced by each patient in months 5 and 6 combined. Key secondary endpoints

included reduction in total alcohol consumed (TAC), and improvement as measured by the Patient Health Questionnaire-9, a widely accepted

tool for assessment of depression. The definition of a heavy drinking day was greater than 40 grams or 60 grams of ethyl alcohol in a

day for a woman or a man, respectively.

ONWARD Phase 3 Clinical Trial Results – Topline Data Analysis

Topline Data Analysis

On July 20, 2022, we announced the following results

from the ONWARDTM Phase 3 trial. Although the trial missed the primary endpoint, it did show statistical significance in a pre-defined

patient group.

Heavy drinkers are defined by NIAAA (National

Institute on Alcohol Abuse and Alcoholism) as men who drink 5 or more drinks on any day or 15 or more per week and women who drink 4 or

more drinks on any day or 8 or more per week. AD04 patients, compared with placebo patients, achieved a statistically significant reduction

from baseline at month six in percentage of heavy drinking days (PHDD) for the pre-specified patient group of heavy drinkers. across all

genotypes combined (avg. <10 drinks per drinking day at baseline; p=0.03), which accounted for approximately two-thirds of the trial

population. A similar trend was seen in the combined month five and six analysis in the reduction from baseline (p =0.07). Notably, in

the last month of the trial, AD04 heavy drinking patients had a mean reduction of approximately 79% in heavy drinking compared with baseline.

Compared with placebo patients, AD04 patients

in the heavy drinking group had an overall significant difference in the severity of their AUD diagnosis (p=0.04) under the Diagnostic

and Statistical Manual of Mental Disorders, Fifth Edition (DSM-5). For the group of those who no longer meet AUD criteria (<2 symptoms),

the comparisons were 27.4% vs. 14.9% (i.e., an 84% decrease), of AD04 and placebo patients, respectively. These data underscore the clinical

relevance of the findings that heavy drinking AUD patients that receive AD04 appear more likely to recover from the disease by the end

of the treatment regimen.

Additionally, and consistent with the Phase 2b

trial, AD04 had a safety and tolerability profile that was similar to placebo. No side effects or severe adverse events (SAEs) were determined

to be related to AD04 treatment. In fact, more SAEs were reported in the placebo group compared with the AD04 group (7 on placebo vs.

3 on AD04). There were two cardiac events in placebo group and none in the AD04 group. Comparing overall Adverse Events (AEs), the profiles

between AD04 and placebo were similar. AEs reported with a frequency of 5% or more of patients in either group were: headache (11% on

placebo, 12% on AD04), insomnia (3% on placebo, 7% on AD04), blood magnesium decreased (5% on placebo, 6% on AD04), and fatigue (3% on

placebo, 6% on AD04). All of the AE’s were reported as mild to moderate. Importantly, in the overall category of cardiac disorders,

patients on placebo showed a greater number of adverse events compared to AD04 (7% on placebo, 4% on AD04), in addition to greater number

of cardiac SAEs in the placebo group as reported above.

US Clinical Development and Regulatory Actions

Completed

Utilizing both the Phase 2 and ONWARD <10 DDD

(Drinks per Drinking Day) Responder Analysis datasets, additional post-hoc analysis was conducted using the FDA specified endpoint of

reduction of heavy drinking days (PNHDD), defined as the percentage of patients that have zero heavy drinking days during the efficacy

observation period of months 5 and 6, for AD04 vs placebo compared to baseline at study entry. (FDA Feb. 2015 Draft Guidance Alcoholism:

Developing Drugs for Treatment Guidance for Industry) and which the FDA in prior meetings has indicated will be acceptable. When applying

a PNHDD endpoint during the post hoc Phase 2 data analysis, the genotype polymorphism AG+ showed a statistically significant difference

at month 3 compared to placebo (p=0.031). Equally, the post hoc analysis of the PNHDD endpoint of the ONWARD data set the AG+ polymorphism

also demonstrated a statistically significant difference at month’s 5&6 compared to placebo (p= 0.021). This important post

hoc analysis brings a new clinical development focus for future trials of AD04 in the heavy drinking AUD population. Additionally, while

the GG+ polymorphism did not achieve statistical significance in this analysis, the GG+ polymorphism showed promising trends toward achieving

the PNHDD endpoint and we believe that the GG+ polymorphism may be important for future trials. There was a substantial difference between

the treatment and placebo arms in the percentage of patients that achieved zero heavy drinking days within the AG and GG polymorphism

groups. In the same post hoc analysis comparing genotype polymorphisms in both the Phase 2 and Phase 3 against PNHDD for LL/TT no statistically

significant difference was seen.

When analyzing the Phase 3 Study ONWARD, DDD <10,

Responder Analysis Results at Months 5 and 6, we also examined the important measure of treatment effect. Treatment effect is a measure

of clinical meaningfulness. Treatment effect is defined in both absolute reduction of heavy drinking days as well as percentage change

of no heavy drinking days in AD04 vs placebo. In the AG+ group the AD04 treatment group achieved 48% of days with no heavy drinking vs

22% with placebo, or a 1.23 times better reduction of heavy drinking days vs placebo. The GG+ group achieved a 25% change in no heavy

drinking days vs 7% in the placebo group, or a 2.53 times better reduction of heavy drinking days vs placebo. When the same analysis was

conducted with the LL/TT genotypes no difference was found, further supporting the future direction and focus on the AG+ and GG+ genotypes.

These analyses are the basis of our future direction

of clinical, regulatory and commercial strategy in the United States.

Our regulatory strategy for the US has been clearly

defined as a result of both ongoing discussions with key advisors in US regulatory affairs as well as face to face meetings with the FDA.

In April 2023, we met with the FDA Division of Anesthesiology, Addiction and Pain Medicine (DAAP), the division responsible for reviewing

the NDA submission for AD04 if submitted in the future. The primary objective of this meeting with the FDA was to seek clarity on the

path forward based on the Phase 2 results, Phase 3 results, and post-hoc analysis of the Phase 2 and Phase 3 data.

In July 2023, we announced a summary of feedback

received during the meeting. The FDA acknowledged and confirmed the importance of ongoing research in the AUD therapeutic area as a persistent

high unmet need. We received (1) confirmation of the primary US endpoint based on Percentage of No Heavy Drinking Days (“PNHDD”),

which utilized a responder analysis of patients who reduced their alcohol consumption to zero heavy drinking days in the last 2 months

of a 6-month study, (2) acknowledgment of results from the Phase 2 and Phase 3 post hoc analysis against PNHDD, which demonstrated statistical

significance of responder analysis of specific genotypes as useful information for planning future studies of AD04, (3) acknowledgement

that the safety data from the ONWARD trial did not raise any concerns, (4) confirmation of the importance of identifying a patient subgroup

where a relevant treatment effect and compelling evidence of a favorable risk-benefit profile can be assessed (5) acknowledgment that

the post hoc analysis showing a statistical and clinically meaningful effect in specific genetic subtypes was positive and promising,

and (6) a request for additional data to support an NDA and approval for AD04.

Based on this positive feedback received from

the FDA, we have made the strategic decision to focus our efforts on the US, with the understanding that the US standards may translate

to acceptance in other international markets.

US Clinical Development and Regulatory Actions

Planned

We have assessed the impact of the regulatory

guidance on the future business and operating plan requirements to meet the needs of the FDA for submission and approval of AD04 to treat

genetic subtypes of AUD. While we are in the process of confirming the impact on the clinical development plans and timing with our external

advisors and ongoing partnership discussions, the following provides a working summary of the planned strategy, which is subject to final

discussions with the regulatory agencies.

Regulatory feedback indicates that even though

a single additional Phase 3 trial with convincing data may suffice for approval, it would be a review issue for the agencies following

trial completion to determine if the data was sufficient for approval. Therefore, while possible to file for registration with one additional

trial, current planning assumptions are that we will need to conduct two Phase 3 trials with AD04, ideally in parallel. The second trial

will likely include a biomarker negative patient arm to satisfy any ongoing questions from the regulators regarding efficacy parameters.

This is expected to support potential approval in the shortest time frame and removes future regulatory filing and review risk that would

be associated with conducting a single additional trial. Confirmation of the clinical development plan and pathway is currently being

conducted by our clinical development and regulatory advisors. In addition to the Phase 3 studies described above, several smaller additional

studies required by the FDA may be conducted including bioavailability studies and longer-term safety data on at least 100 AD04 treated

patients from the Phase 3 (per ICH E1A guidance).

Based on the new expectations regarding the targeted

genotypes, the two additional Phase 3 trials are currently expected to require $8-12 million each in direct expenses, and up to $5 million

in additional other development expenses. These estimates may change based on upcoming discussions with regulatory authorities and final

trial designs.

EX US Clinical Development and Regulatory

Actions Completed

As previously referenced, the primary efficacy

endpoint of the ONWARD trial was the average percentage change from baseline in the monthly heavy drinking days (PHDD) experienced by

each patient in months 5 and 6 combined. Key secondary endpoints included reduction in total alcohol consumed (TAC) and improvement as

measured by the Patient Health Questionnaire-9, a widely accepted tool for assessment of depression. The definition of a heavy drinking

day was greater than 40 grams or 60 grams of ethyl alcohol in a day for a woman or a man, respectively.

In the major EU4 countries, the primary regulatory

authority is the EMA (European Medicines Agency). Current draft guidelines released by the EMA, CHMP (Committee for Medicinal Products

for Human Use), 2010, are the basis of clinical development planning in the EU4 and, the MHRA (Medicines and Healthcare Products Regulatory

Agency), in the UK. These agencies differ from the FDA in their views of clinical endpoints, and therefore future clinical development

and regulatory strategies should account for these differences. The primary differences are that EU and UK regulators consider the change

in HDD (heavy drinking days) and TAC (total alcohol consumed in grams) at month 6, the efficacy observation period vs the FDA which considers

the PNHDD (percentage of no heavy drinking days) at months 5 and 6 as the efficacy observation period. There are also differences in the

total grams of alcohol which constitute a drink in the EMA vs US (10 to 12 grams in Europe versus 14 grams in the United States), and

therefore the definitions of the number of drinks which constitute a heavy drinking day are also slightly different.

According to the EMA CHMP guidance, any study

drug for alcohol dependence that is not focused to achieve abstinence should be addressing the intermediate goal of clinically significant

moderation. Efficacy should be expressed by change to baseline in total consumption of alcohol (TAC, presented as amount of pure alcohol

in grams per day) as well as by reduction in number of Heavy Drinking Days (HDD defined as more than 60 grams of pure alcohol in men and

40 grams in women). Both are considered primary variables, since HDD are associated with specific risks such as acute cardiovascular outcomes

or accidents. A clinically relevant difference compared to placebo should be demonstrated. Further, efficacy on these two variables should

be reflected in a clearly expectable improved health outcome on an individual patient level. Therefore, efficacy should also be evaluated

in terms of responders. This could be done by evaluating the proportion of subjects with a 50%, 70% and 90% reduction in alcohol consumption

as well as the proportion of patients achieving maintained abstinence. Another option would be evaluating the proportion of subjects with

a significant categorical shift in WHO (World Health Organization) risk levels of drinking (i.e. proportion of patients with change of

consumption to baseline from very high risk to at least medium risk level and change from high risk to at least low risk level, as well

as the proportion of patients with full abstinence. In general, the harm reduction of populations through the reduction of alcohol consumption

is recognized by EMA and MHRA and has been used for prior drug product approvals in the EU with a focus on reducing HDD as well as TAC.

Examining the endpoints outlined in guidance from

EMA/CHMP, we completed a post hoc analysis of the ONWARD trial. AD04 patients, compared with placebo patients, showed a trend in the reduction

from baseline at month six in heavy drinking days for the combined trial population of heavy and very heavy drinkers (p=NS). A similar,

non-statistically significant trend was seen in the combined months five and six analysis in the average percentage change of heavy drinking

days (PHDD) from baseline, which was the pre-specified primary efficacy analysis.

Also in July, 2023, we announced results from

meetings held with key country-level regulatory agencies in Europe. The results of these meetings as previously reported are being used

for the development of our future clinical and regulatory strategy.

EX US Clinical Development and Regulatory

Actions Planned

As previously stated, based on positive feedback

received from the relevant global regulatory bodies and overlapping clinical requirements, we made the strategic decision to focus our

efforts on the US. We believe that these clinical endpoints should translate to acceptance in other international markets. We will continue

to look for synergies where they exist in the primary efficacy data variables when planning for study designs to meet global regulatory

requirements. We have a high level of confidence in the US clinical program based on our post hoc analysis and regulatory feedback and

we believe these data results to be useful for Ex US regulators.

However, if these synergies cannot be found, it

is possible that new analysis and/or additional data generation may be required to meet the requirements of global regulators, including

the EU and UK. This is also vital for our ongoing partnering efforts based on discussions with companies active in the EU and UK.

Disease Overview - Alcohol Use Disorder

AUD is characterized by an urge to consume alcohol

and an inability to control the levels of consumption.

The 2022 National Survey on Drug Use and Health

(NSDUH), commissioned by The Substance Abuse and Mental Health Services Administration (SAMHSA), reported the percentage of heavy alcohol

use highest among young adults age 18-25 (7.6% or 2.6 M people) followed by adults age 26 and over (6% or 13.4M people). In the United

States, 29.5 million people age 12 and older had AUD, according to the 2022 National Survey on Drug Use and Health (NSDUH). AUD results

in significant health, social, and financial costs, with excessive alcohol use being the third leading cause of preventable death and

responsible for 31% of driving fatalities (NIAAA Alcohol Facts & Statistics). AUD contributes to over 200 different diseases and 10%

of children live with a person that has an alcohol problem. According to the American Society of Clinical Oncologists, 5-6% of new cancers

and cancer deaths globally are directly attributable to alcohol. And, The Lancet published that alcohol is the leading cause of death

in people ages 15-49 globally. The Centers for Disease Control (the “CDC”) has reported that AUD costs the U.S. economy about

$250 billion annually, with heavy drinking accounting for greater than 75% of the social and health related costs.

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.

Limitations of Current AUD Therapies

Today the most common treatments for AUD are directed

at achieving abstinence and typical treatments include psychological and social interventions. Most therapies actually require abstinence

prior to initiating therapy. Abstinence requires dramatic lifestyle changes often with serious work and social consequences. Frequently,

patients cannot attend family and social events in order to ensure compliance with abstinence, and patients often must suffer from the

stigma of having been labelled an alcoholic. Significant side effects of current pharmacologic therapies include mental side effects such

as psychiatric disorders and depressive symptoms and physical side effects such as nausea, dizziness, vomiting, abdominal pain, and hepatoxicity.

In fact, according to peer reviewed studies referenced in The Sober Truth: Debunking the Bad Science Behind 12-Step Programs and the

Rehab Industry, L. Dodes and Z. Dodes, 2014 by Dr. Lance Dodes, the former Director of the substance abuse treatment unit of Harvard’s

McLean Hospital, 90% or more of patients that use current therapy solutions, such as Alcoholics Anonymous, do not achieve long-term abstinence.

There are four drugs approved by the FDA and marketed

in the United States for the treatment of alcohol addiction, Antabuse® (disulfram) Vivitrol® (naltrexone),

Revia® (naltrexone) and Campral® (acomprosate) and one drug, Selincro® (nalmefene) is marketed

outside of the United States. All of the approved drugs, other than Selincro®, require abstinence prior to commencing treatment

with the drug, and all five drugs are known to have significant side effects.

Antabuse® was approved for the

treatment of alcohol dependence more than 50 years ago, making it the oldest such drug on the market. It works by interfering with the

body’s ability to process alcohol. Its method of action and purpose is to cause patients that drink alcohol while taking Antabuse®

to experience numerous and extremely unpleasant adverse effects, including, among others, flushing, nausea, and palpitations, with the

goal that patients will continue the medication but refrain from drinking in order to avoid these effects.

Naltrexone, which can be taken as a once-daily

pill (Revia®) or in an approved once-monthly injectable form (Vivitrol® ) that requires a doctor to administer

is often associated with gastrointestinal complaints and has been reported to cause liver damage when given at certain high doses. As

a result, it carries an FDA boxed warning, a special emphasized warning, for this side effect. Vivitrol is currently being marketed by

Alkermes to physicians for the treatment of AUD.

Campral®, taken by mouth three

times daily, acts on chemical messenger systems in the brain.

Selincro® has not been approved

for sale in the United States.

Our Proposed Solution is AD04 and a PGx Companion

Diagnostic

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. Under current US FDA regulations, the approval of the specific dosage of 0.33mg ondansetron in

AD04 for the new indication of AUD in patients with genetic subtypes and data exclusivity will result in a minimum of 3 years of regulatory

and, therefore, commercial exclusivity for AD04 in the US.

Our goal with AD04 is to develop an effective

and safe product to treat AUD that does not require abstinence as part of the treatment and does not have the negative side effects of

the current drugs on the market. Our product candidate, AD04, is designed for genotype positive patients who desire to control their drinking

but cannot or do not want to completely abstain from drinking. By removing the difficulties associated with abstinence and the side effects

associated with the other current products on the market, we believe that we may be able to remove barriers to patient adoption that inhibit

adoption of current therapies and can attract a greater portion of the many millions of patients with AUD that remain untreated. Unlike

other therapies, our investigational product, AD04, uses a novel mode of action for treating AUD that involves genetic screening with

a companion diagnostic genetic test prior to treatment and is designed to reduce cravings for alcohol to effectively curb alcohol intake,

without the requirement of abstinence prior to or during treatment. Our product candidate is intended to be easy to use since it is administered

orally, currently on a twice daily basis and with a once-a-day tablet planned as part of the product’s life cycle management. To

date, clinical testing of AD04 has shown it to have a positive safety and tolerability profile with side effects similar to placebo.

The companion diagnostic genetic test to be used

to identify patients that are most likely to benefit from treatment with AD04 may potentially enhance the likelihood of a successful outcome

for those undergoing treatment. Additionally, it may provide doctors with the opportunity to have a non-threatening conversation about

alcohol with their patients and may provide the patient an acceptable path to help them determine if they might be a candidate for help

with their alcohol use. If the test results are positive, they would have a science-based rationale for their treatment, which reduces

some of the stigma patients might otherwise endure, and potentially allows them to be treated in the confidence of their doctor with an

oral tablet.

Strengths and Competitive Advantages

Large Market Opportunity for an Effective

Solution

In the United States

alone, the 2021 National Survey on Drug Use and Health (NSDUH) reported approximately 30 million people age 12 and older had AUD. Of those,

only 2.6 million people received treatment at any healthcare location, and of those who received treatment at any healthcare location,

only 0.9% (265,000) received medication assisted treatment (MAT). Based on data from the ONWARD trial and Phase 2b trial of AD04 and our

analysis of publicly available genetic databases, we preliminarily estimate that about one in three patients with AUD in the U.S. and

Europe will have the genetic markers to indicate possible treatment with AD04. Our initial focus, based on the subgroup analysis will

include genotypes, AG and possibly GG, that we estimate represent about 14% and 6% of AUD patients in the U.S, and Europe, respectively

and 20% collectively. At this time, we are not aware of any oral pharmaceutical treatment approved in the U.S. that addresses the needs

of patients who desire to control their drinking but cannot or do not want to abstain from drinking. The current abstinence-based treatments

have limitations, as outlined in the previous section “Limitations of Current AUD Therapies”. The limited side effects expected

for our investigational new drug, based on clinical data so far, are also believed to be an important factor in the expected rapid uptake

of AD04 in the market. Our approach, if approved by FDA, may allow for social drinking to continue and is aimed at reducing the dangerous,

heavy drinking. This would allow patients to live the life they want without the stigma associated with complete abstention and currently

endured by those seeking help for their excessive drinking.

According to the WHO (World Health Organization,

2022), the harmful use of alcohol is a causal factor in more than 200 disease and injury conditions. Worldwide, 3 million deaths every

year result from harmful use of alcohol. This represents 5.3% of all deaths. Overall, 5.1% of the global burden of disease and injury

is attributable to alcohol, as measured in disability-adjusted life years (DALY’s). Alcohol consumption causes death and disability

relatively early in life. In people aged 20-39 years, approximately 13.5% of total deaths are attributable to alcohol.

Companion Genetic Bio-Marker Test Aimed

at Identifying Patients Most Likely to Respond To Treatment, Potentially Results in Increased Use of AD04

We believe our AD04 and its companion diagnostic

is unique in that it is designed to reduce heavy drinking in individuals with certain genotypes. We are pursuing a strategy that aims

to integrate pre-treatment screening with the companion diagnostic genetic test into the drug label, essentially combining the test and

treatment into one integrated therapeutic. This companion diagnostic testing approach may be a useful genetic screening tool to predict

those most likely to respond to the drug and to have minimal side effects. Based on the clinical experience to date and publicly available

databases, we believe the genetic prevalence of genotype positive people is about 33% of the population in the United States and Europe.

We believe that the companion diagnostic genetic

test enables physicians to more easily have an initial conversation with their patients about alcohol use and, for the patient, provides

a less threatening and obtrusive first step toward treatment because the conversation will include the topic of genetic testing and not

be solely about behavior. Patients that then test positive against the AD04 genetic panel would be expected to be more likely to then

receive a prescription for AD04 (based on an external quantitative market study of 156 primary care physicians and psychiatrists that

was conducted by Ipsos-Insight LLC, who we commissioned, and that concluded a majority of genetically targeted patients currently receiving

pharmacologic treatment would be switched to a drug with the characteristics expected for AD04).

Our Substantial Proprietary Estate and Protection from Competition

We currently hold a worldwide, exclusive license

to three (3) patent families that provide us with the ability to exclude potential competitors from practicing the claimed inventions,

such as the use of ondansetron to treat any of the four (4) specified genotypes for AUD. Our licensed patent estate is expected to provide

us patent protection through 2031. Ondansetron, the active ingredient in AD04, has never been approved in a low dosage near the AD04 dose

of 0.33mg per tablet, and we believe our licensed patents will protect AD04 from any competitor that attempts to bring to market an ondansetron

dose at or near the AD04 dose for treatment of patients having one or more of the four target genotypes.

We believe use of the currently marketed doses

“off-label” will not be significant due to (i) the lack of demonstrated efficacy at currently marketed doses, (ii) potential

safety concerns if the currently marketed doses are used chronically as is expected to be necessary for treating AUD, and (iii) cutting

the smallest currently marketed dose into the 12 pieces that would be necessary to achieve the AD04 dose is deemed by us to be impractical

and likely to result in inaccurate dosing.

Experienced Leadership

Our management, advisors and board of directors

have extensive experience in pharmaceutical development, the clinical trial and regulatory approval processes, drug commercialization,

financing capital-intensive projects, and developing new markets for pharmaceutical agents. Members of our team have previously worked

in senior management and senior officer positions, or led significant research initiatives at Indivior, Shire, Viagene, Collateral Therapeutics,

Krystal Biotech, Sucampo Pharmaceuticals, SmithKline Beecham, Osiris Therapeutics, Adenosine Therapeutics, and the University of Virginia

and University of Maryland in a broad range of therapeutic areas. Our management and board members have particular expertise in the science

and development of addiction related drugs and bringing new drugs to the market.

Our Strategy for AD04 and Addiction Related

Diseases and Disorders

We are developing pharmaceutical treatments for

addictions, addictive disorders, and related diseases and disorders. Our business strategy is to advance AD04, our lead investigational

drug candidate, toward regulatory approval for alcohol use disorder in the United States, the European Union, and then eventually other

territories. We subsequently plan to develop label expansions into other indications (e.g., opioid use disorder, other drug addictions,

obesity, smoking cessation, eating disorders and anxiety).

Our goals in executing this strategy are to keep

capital requirements to a minimum, expedite product development, gain access to clinical research and manufacturing expertise that will

advance product development, approval and eventual market uptake of our product, and rely on a well-defined and carefully executed intellectual

property strategy in order to position our products with long-term, defensible, competitive advantages. Execution of this strategy may

include seeking grant funding and funding from partners and collaborators when available on terms we believe to be favorable to us.

Near Term

● Advancing the AD04 Clinical Development Program in the US.

Longer Term

Evidence from the primary qualitative market research

suggests the product profile for AD04 will be received well by physician and payors. We will continue to develop plans to support future

communications with physicians and payors as well as pre market commercialization planning for AD04

License with University of Virginia Patent

Foundation

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 90 issued patents in over 40 jurisdictions, including

eight 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 support our landmark ONWARD pivotal Phase 3 clinical

trial. Our licensed therapeutic agent was the product candidate used in the ONWARD pivotal Phase 3 clinical trial of 302 patients as well

as a University of Virginia investigator sponsored Phase 2b clinical trial of 283 patients.

In January 2011, we entered into an exclusive,

worldwide license agreement with UVA LVG for rights to make, use or sell licensed products in the United States based upon the patents

and patent applications made and held by UVA LVG (the “UVA LVG License”). Three patent and patent application families are

included in the UVA LVG License, with patents issued in over 40 countries, including, without limitation, in the U.S., Europe and Eurasia.

The licensed patents and patent applications currently include the below listed U.S. patents and patent application and any divisional

patents, continuation patents and foreign equivalents.

“Serotonin Transporter Gene and Treatment of Alcoholism”