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美国

证券交易委员会

华盛顿特区 20549

10-Q/A 表格

(第 1 号修订)

☒ 根据 1934 年证券交易法第 13 或 15(d) 条提交的季度报告

截至 2026 年 6 月 30 日的季度

或

☐ 根据 1934 年证券交易法第 13 或 15(d) 条提交的过渡报告

从 ___________ 至 ___________ 的过渡期

委员会文件编号: 001-38323

ADIAL PHARMACEUTICALS, INC.

(注册人章程中规定的准确名称)

\n\n\n\n\n\n\n\n\n\n

特拉华州		82-3074668
州或其他司法管辖区 \n成立或组织		美国国税局雇主 \n识别号码

4870 Sadler Road, Suite 300 Glen Allen, VA		23060
主要执行办公室地址		邮政编码

(804) 487-8196

注册人的电话号码，包括
\n地区代码

如果自上次报告以来名称、地址或财政年度有所更改，请提供以前的名称、以前的地址和以前的财政年度

根据法案第 12(b) 条注册的证券：

\n\n\n\n\n\n

每类证券的名称		交易符号		每种证券的注册交易所名称
普通股		ADIL		NASDAQ

通过勾选方框表明注册人（1）是否已提交了根据 1934 年证券交易法第 13 或 15(d) 条在前 12 个月（或注册人需要提交此类报告的较短期间）内应提交的所有报告，以及（2）是否在过去 90 天内受到此类提交要求的约束。是 ☒ 否 ☐

通过勾选方框表明注册人是否在前 12 个月（或注册人需要提交此类文件的较短期间）内提交了根据规则 405 的所有交互式数据文件（§ 232.405 本章）。是 ☒ 否 ☐

通过勾选方框表明注册人是大型加速提交者、加速提交者、非加速提交者、较小报告公司或新兴成长公司。请参见《交易法》第 12b-2 条中“大型加速提交者”、“加速提交者”、“较小报告公司”和“新兴成长公司”的定义。

\n\n\n\n\n

大型加速提交者	☐	加速提交者	☐
非加速提交者	☒	较小的报告公司	☒
	新兴成长公司	☐

如果是一家新兴成长公司，请通过勾选方框表明注册人是否已选择不使用根据《交易法》第 13(a) 条提供的任何新修订的财务会计标准的延长过渡期。 ☐

通过勾选方框表明注册人是否为壳公司（根据《法案》第 12b-2 条的定义）。是 ☐ 否 ☒

截至 2026 年 8 月 12 日的普通股股份数量为 2,625,890。

说明性注释

Adial Pharmaceuticals, Inc. (the “Company”) 正在提交其季度报告 10-Q 的第 1 号修正案（“第 1 号修正案”），该报告针对的是截至 2026 年 6 月 30 日的期间，该报告最初于 2026 年 8 月 14 日提交给美国证券交易委员会（the “SEC”）（“原始提交”）。第 1 号修正案的目的是根据 SEC 工作人员收到的评论，对原始提交中的某些部分进行修正和重述。

此外，根据 SEC 的规则，原始提交的第二部分第 6 项已修订，以包含最新日期的认证。

除上述内容外，第 1 号修正案不修正、修改或以其他方式更新原始提交中的任何其他信息，也不反映原始提交提交后发生的事件，除了（i）于 2026 年 9 月 16 日和 2026 年 9 月 30 日签订的购买协议和交换协议的修正案，（ii）截至 2026 年 9 月 30 日公司的现金及现金等价物以及其普通股在 2026 年 9 月 30 日的收盘价，这些信息被包含以量化 A 系列优先股潜在现金结算的金额，以及（iii）公司纳斯达克上市状态。因此，应将第 1 号修正案与原始提交以及公司向 SEC 提交的其他文件一起阅读。

ADIAL PHARMACEUTICALS, INC.

关于前瞻性声明的说明

本季度报告（表格10-Q）包含根据《1933年证券法》（经修订）第27A条（“证券法”）和《1934年证券交易法》（经修订）第21E条（“交易法”）定义的“前瞻性声明”。特别是，本季度报告中的声明，包括但不限于有关我们现金充足性、我们融资能力及业务计划和获取此类活动资金的能力；我们未来经营成果和财务状况、业务策略和计划前景、管理层未来收购的成本和目标，以及我们最近收购Azora Therapeutics, Inc.所涉及的业务、经营成果、管理团队和董事会的预期变化等，均为前瞻性声明。这些前瞻性声明涉及我们的未来计划、目标、期望和意图，可能通过诸如“可能”、“将”、“应该”、“预期”、“计划”、“预期”、“意图”、“目标”、“项目”、“考虑”、“相信”、“寻求”、“目标”、“估计”、“预测”、“潜力”和“继续”或类似词语来识别。我们提醒读者，这些前瞻性声明基于我们当前的信念、期望和假设，可能受到难以预测的风险、不确定性和假设的影响，包括下文第II部分第lA项“风险因素”及其他部分所述，以及我们在2025年10-K年度报告中第I部分第1A项所述的风险，该报告于2026年3月5日提交给证券交易委员会（“SEC”）（“2025年10-K”）。因此，实际结果可能与任何前瞻性声明中表达、预测或暗示的结果有重大且不利的差异。我们不承担因任何原因修订或更新任何前瞻性声明的义务。

关于公司引用的说明

在本季度报告（表格10-Q）中，“Adial”、“公司”、“我们”、“我们”和“我们的”指Adial Pharmaceuticals, Inc。

表格10-Q

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n

		页码
	第一部分 – 财务信息	1
项目l。	未经审计的合并财务报表	1
	截至2026年6月30日和2025年12月31日未经审计的合并资产负债表	1
	截至2026年6月30日和2025年期间的未经审计的合并损益表	2
	截至2026年6月30日和2025年期间的未经审计的合并临时权益和股东（赤字）权益变动表	3
	截至2026年6月30日和2025年期间的未经审计的合并现金流量表	4
	未经审计的合并财务报表附注	5
项目2。	管理层讨论与分析财务状况和经营成果	22
项目3。	关于市场风险的定量和定性披露	43
项目4。	控制和程序	43

	第二部分 – 其他信息	44
项目 1。	法律诉讼	44
项目 1A。	风险因素	44
项目 2。	未注册的股权证券销售及资金用途	51
项目 3。	高级证券违约	51
项目 4。	矿山安全披露	51
项目 5。	其他信息	51
项目 6。	附件	52
签名	54

PART I – 财务信息

项目 1。简要合并未经审计的财务报表

ADIAL PHARMACEUTICALS, INC.

简要合并资产负债表（未经审计）

（千美元，除非另有说明）

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n

	2026 年 6 月 30 日			2025 年 12 月 31 日
资产
流动资产：
现金及现金等价物	$	28,712			$	5,881
预付费用和其他流动资产		133				300
流动资产总额		28,845				6,181

无形资产，净额		3				3
权益法投资		241				490
总资产	$	29,089			$	6,674

负债、临时权益和股东（赤字）权益
流动负债：
应付账款	$	2,624			$	655
应计费用		2,497				742
流动负债总额		5,121				1,397
里程碑认股权证权利负债		23,812				—
总负债	$	28,933			$	1,397

承诺和或有事项 – 参见第 10 号注释

A 系列可转换优先股，面值 0.001 美元；截至 2026 年 6 月 30 日和 2025 年 12 月 31 日分别指定 13,000 和 0 股；截至 2026 年 6 月 30 日和 2025 年 12 月 31 日分别发行和流通 12,930.601 和 0 股		38,533				—

股东权益（赤字）
优先股，授权发行5,000,000股，面值为每股0.001美元，截至2026年6月30日和2025年12月31日		—				—
普通股，授权发行100,000,000股，面值为每股0.001美元，截至2026年6月30日和2025年12月31日分别发行并流通2,625,890股和1,111,010股		3				1
额外支付资本		105,604				95,248
累计赤字		(143,984	)			(89,972	)
股东权益（赤字）总额		(38,377	)			5,277
总负债、临时权益和股东权益（赤字）	$	29,089			$	6,674

附注是这些未经审计的合并财务报表不可分割的一部分。

ADIAL PHARMACEUTICALS, INC.

合并损益表（未经审计）

（除每股金额外，以千为单位）

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n

	截至三个月的期间			截至六个月的期间
	6月30日			6月30日
	2026			2025			2026		2025
运营费用：
研发费用	$	440			$	732		$	873		$	1,479
一般及行政费用		5,400				1,150			6,969			2,671
已获得的在研研发		46,185				—			46,185			—
总运营费用		52,025				1,882			54,027			4,150

运营亏损		(52,025	)			(1,882	)		(54,027	)		(4,150	)

其他收入（费用）
利息收入		58				24			105			59
里程碑期权权利负债公允价值变动		8,280				—			8,280			—
与里程碑期权权利负债相关的融资费用		(2,067	)						(2,067	)
注销Azora Therapeutics可转换本票的亏损		(6,054	)			—			(6,054	)		—
权益法投资的亏损		(181	)			(99	)		(249	)		(262	)
其他收入（费用）		—				(1	)		—			165
其他收入（费用）总额		36				(76	)		15			(38	)

净亏损	$	(51,989	)		$	(1,958	)	$	(54,012	)	$	(4,188	)

每股亏损，基本和稀释	$	(11.25	)		$	(4.61	)	$	(17.97	)	$	(12.19	)
加权平均股数，基本和稀释		4,621,735				424,908			3,004,904			343,700

附注是这些未经审计的合并财务报表不可分割的一部分。

ADIAL PHARMACEUTICALS, INC.

合并的临时权益

\n和股东权益（赤字）（未经审计）

（除股份数额外，以千为单位）

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n

	临时权益		股东权益 \n（赤字）
	A轮可转换 \n 优先股		普通股			额外投入资本	累计	总股东权益 \n （赤字）
	股数		金额			股数	金额	资本		赤字			权益
2026年1月1日余额		—			—		1,111,010	$	1		$	95,248		$	(89,972	)	$	5,277
股权激励 - 股票期权费用		—			—		—		—			86			—			86
股权激励 – 限制性股票		—			—		—		—			62			—			62
从休眠状态发行的股数		—			—		216,960		—			—			—			—
普通股出售的净收益		—			—		181,230					315			—			315
净损失		—			—		—		—			—			(2,023	)		(2,023	)
2026年3月31日余额		—			—		1,509,200		1			95,711			(91,995	)		3,717
股权激励费用–股票期权费用		—			—		—		—			134			—			134
股权激励 – 限制性股票		—			—		134,815		—			3			—			3
与私募交易相关的预先资助认股权证发行		—			—		—		—			5,938			—			5,938
与收购Azora Therapeutics相关的A系列可转换优先股发行		12,930.601			38,533		—		—			—			—			—
与收购Azora Therapeutics相关的普通股发行		—			—		437,421		1			1,305			—			1,306
与合并前服务期相关的假设期权公允价值		—			—		—		—			1,664			—			1,664
普通股出售的净收益		—			—		544,454		1			849			—			850
净损失		—			—		—		—			——			(51,989	)		(51,989	)
2026年6月30日余额		12,930.601		$	38,533		2,625,890	$	3		$	105,604		$	(143,984	)	$	(38,377	)

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n

	普通股		额外投入资本			累计		总股东权益
	股数		金额			资本		赤字	权益
2025年1月1日余额		258,826		$	—		$	86,063	$	(81,995	)	$	4,068
股权激励 - 股票期权费用		—			—			93		—			93
股权激励 - 向供应商发行的股票和员工归属		4,000			—			143		—			143
普通股出售的净收益		3,000			—			51		—			51
净损失		—			—			—		(2,229	)		(2,229	)
2025年3月31日余额		265,826			—			86,350		(84,224	)		2,126
股权激励 – 股票期权费用		—			—			75		—			75
股权激励 – 向供应商发行的股票和员工归属		—			—			49		—			49
普通股出售的净收益		216,314			—			3,076		—			3,076
行权认股权证，扣除费用		379,089			—			2,222		—			2,222
净损失		—			—			—		(1,958	)		(1,958	)
2025年6月30日余额		861,229		$	—		$	91,772	$	(86,182	)	$	5,590

附注是这些未经审计的合并财务报表的组成部分。

ADIAL PHARMACEUTICALS, INC.

合并现金流量表\n（未经审计）

（以千为单位）

	截至 6月30日的六个月
	2026			2025
经营活动产生的现金流量：
净损失	$	(54,012	)		$	(4,188	)
调整以将净损失调节为经营活动使用的净现金：
股权激励		285				361
里程碑认股权证权利负债的公允价值变动		(8,280	)
与里程碑认股权证权利负债相关的融资费用		2,067
Azora Therapeutics可转换票据注销损失		6,054
在研开发资产		46,185				—
权益法投资价值变动		249				262
或有对价公允价值变动		—				(150	)
经营性资产和负债变动：
预付费用和其他流动资产		176				145
应计费用		(2,354	)			(137	)
应付账款		1,655				420
关联方应付账款		—				(48	)
经营活动使用的净现金		(7,975	)			(3,335	)

投资活动产生的现金流量：
或有对价收到的现金		—				150
收购Azora Therapeutics所承担的净现金		5,282				—
投资活动提供的净现金		5,282				150

筹资活动产生的现金流量：
普通股出售的净收益		1,165				3,127
私募发行预先资助认股权证的收益		26,800				—
私募发行预先资助认股权证的发行成本		(2,441	)			—
扣除费用后的认股权证行权收益		—				2,222
筹资活动提供的净现金		25,524				5,349

现金及现金等价物净增加额		22,831				2,164

期初现金及现金等价物		5,881				3,751

期末现金及现金等价物	$	28,712			$	5,915

非现金筹资信息的补充披露：

收购Azora Therapeutics所发行的A系列可转换优先股的公允价值	$	38,533				—
收购Azora Therapeutics所获得的净负债	$	9,964				—
包含在应付账款中的私募发行预先资助认股权证的发行成本	$	35				—
可转换票据注销为Azora Therapeutics预付认股权证	$	5,585				—
收购Azora Therapeutics的交易费用计入应付账款和应计负债	$	2,412				—
与预付认股权证私募发行相关的购买里程碑认股权证的权利	$	32,092				—

附注是这些未经审计的合并资产负债表的不可分割组成部分。

ADIAL PHARMACEUTICALS, INC.

未经审计的合并资产负债表附注

1 — 业务描述

Adial Pharmaceuticals, Inc.（“Adial”或“公司”）于2010年11月23日在弗吉尼亚州成立，名为Adial Pharmaceuticals, LLC，后于2017年10月5日转换为公司并在特拉华州重新注册。2026年6月11日，公司根据2026年6月11日签署的《合并协议》（“合并协议”），完成了之前宣布的对Azora Therapeutics, Inc.（“Azora”）的收购，该协议由Adial、Adial Merger Sub, Inc.（“第一合并子公司”）、Adial Second Merger Sub, LLC（“第二合并子公司”）和Azora共同签署。根据合并协议，第一合并子公司与Azora合并，Azora作为Adial的全资子公司继续存在（“第一次合并”）。第一次合并完成后，Azora与第二合并子公司合并，第二合并子公司作为Adial的全资子公司继续存在，并将名称变更为“Azora Therapeutics, LLC”（“第二次合并”；与第一次合并合称为“合并”）。合并被核算为可变利益实体（“VIE”）的合并，因为公司被认定为一个非业务的VIE的主要受益人。

合并将Azora的领先研究药物AT177纳入了Adial的管线。Adial长期以来一直专注于开发用于治疗或预防成瘾及相关疾病的药物。合并后，公司的重点发生了转变，其主要项目现在是Azora的领先资产AT177，这是一种专有的、全合成的、口服的、结肠靶向的AhR激动剂，正在开发用于治疗溃疡性结肠炎。

2 — 持续经营及其他不确定性

这些未经审计的合并资产负债表是根据美国通用会计原则（“GAAP”）编制的，其假设公司作为持续经营实体继续存在。公司处于开发阶段，自成立以来每年都发生了亏损，并且根据AT177和AD04在美国及国际市场上的当前开发计划以及其他运营需求，预计将继续亏损。

该公司需要额外的融资以支持其持续运营并推进当前战略。在公司能够从产品销售中产生大量收入之前（如果有的话），它预计通过股权发行、债务融资、合作、战略联盟和许可协议的组合方式为其运营提供资金。公司可能无法在需要时以有利的条款或根本无法筹集到额外资金或达成其他协议。无法在需要时筹集资本将对公司的财务状况及其推进业务战略的能力产生负面影响。

根据并购协议条款发行的公司A类非投票可转换优先股（每股面值0.001美元（“A类优先股”））在公司获得股东批准后的第三个营业日自动转换为公司普通股。A类非投票可转换优先股的条款、权利和限制证书（“条款证书”）规定，自股东批准或2026年12月11日（以较早者为准）起，如果公司未能根据条款证书的规定及时向转换持有人交付普通股，该持有人可要求公司支付相当于未交付股票公允价值的现金。

公司满足这些潜在现金结算义务的能力并不完全在其控制之下，因为这取决于诸如公司获得A类优先股转换为普通股的股东批准以及根据条款证书规定的时间框架内交付普通股的能力等因素。如果公司无法及时获得股东批准，或无法及时交付普通股，那么在相关触发日期之后提交转换通知的持有人可能会要求公司进行大额现金支付，这可能会大幅减少公司的可用现金资源。在综合评估上述情况并假设A类优先股相关的现金结算义务被触发后，公司得出结论认为，其持续作为持续经营的能力存在重大不确定性。随附的未经审计的合并财务报表是基于公司将在这些未经审计的合并财务报表发布后十二个月内继续作为持续经营的假设编制的，这预示着公司将在可预见的未来正常业务过程中实现资产并结算负债和承诺。因此，随附的未经审计的合并财务报表未包含可能因这些不确定性结果而产生的任何调整。

其他不确定性

一般来说，公司所处行业会使其面临若干其他风险和不确定性，这些风险和不确定性可能会影响其经营成果和财务状况。这些因素包括但不限于：临床试验和其他开发活动的时间、成本和结果与预期的差异；获得监管机构批准其产品候选人的能力；成功制造产品的能力；其他公司销售或正在开发的产品所带来的竞争；产品获批后的价格、报销情况和需求；以及为其产品协商有利的许可或其他生产和营销协议的能力。

3 — 报告基础及重要会计政策摘要

会计估计

根据公认会计原则（GAAP）编制这些未经审计的合并中期财务报表，需要公司管理层做出估计和假设，这些估计和假设会影响这些财务报表日期的资产和负债金额以及报告期间的费用金额。实际结果可能与这些估计不同。

受此类估计和假设影响的重要项目包括与支持临床试验的第三方供应商相关的预提费用、里程碑认股权证负债和所得税资产实现。

报告基础

随附的未经审计的中期合并财务报表是根据财务会计准则委员会（“FASB”）会计准则汇编（“ASC”）对中期财务信息的规定以及Regulation S-X的10-Q表格说明编制的。因此，它们不包含GAAP要求的完整财务报表所需的所有信息和脚注。在管理层看来，这些未经审计的中期合并财务报表反映了所有调整，这些调整仅包括为公允列报所列期间的余额和经营成果所必需的正常经常性调整。中期经营结果不一定代表任何后续期间可能实现的结果。应将这些未经审计的合并财务报表与随附于2025年12月31日年度报告10-K表格中的经审计的合并财务报表一并阅读，该文件于2026年3月5日提交给证券交易委员会（“2025年10-K表格”）。

随附的未经审计的中期合并财务报表包含截至2026年6月30日公司及其全资子公司Azora Therapeutics, LLC的合并账户。所有重大的内部交易均已抵销。

反向股票分割

在2026年2月5日，该公司对流通的普通股进行了反向股票分割，按1比25的比例在纳斯达克交易所交易，股票代码为ADIL。根据公司章程授权发行的普通股数量保持在1亿股不变，根据公司章程授权发行的优先股数量保持在500万股不变。公司已对未经审计的合并财务报表中所有关于普通股、购买普通股的认股权证、购买普通股的股票期权、股份数据、每股数据及相关信息进行了追溯调整。

基本和稀释每股亏损

基本和稀释每股亏损是根据加权平均流通普通股计算的，预付认股权证在基本每股亏损中包括在内，因为行权价格为负数。稀释每股净亏损是根据所有比例的流通普通股计算的，包括股票期权、限制性股票、优先股和认股权证，只要这些具有稀释性。对于2026年6月30日止的三个月和六个月以及2025年6月30日止的三个月和六个月，基本净亏损每股与稀释净亏损每股相同，因为包括所有潜在流通普通股将产生反稀释效果。

截至2026年6月30日止三个月和2025年6月30日止三个月，被排除在外的潜在稀释性普通股总数如下：

	潜在稀释性普通股流通股 6月30日
	2026		2025
购买普通股的认股权证		1,240,076		1,064,339
行权后可发行的普通股		1,646,685		47,367
A系列优先股		12,930,601		—
未解锁的限制性股票		692,063		266
被排除的潜在稀释性普通股总数		16,509,425		1,111,972

现金及现金等价物

公司将所有原始到期日为三个月或更短的高流动性投资视为现金等价物。有时，公司的现金余额可能超过联邦存款保险公司（“FDIC”）当前的保险金额。截至2026年6月30日，公司在受保银行账户中的存款超过了FDIC保险限额约340万美元，并持有约2480万美元的非FDIC保险现金等价账户。现金等价物包括原始到期日购买时少于90天的货币市场投资，按公允价值计量。未实现的收益或损失计入利息收入，对合并财务报表影响不大。截至2025年12月31日，公司受保银行账户中的存款超过了FDIC保险限额约1.7万美元，并持有约560万美元的非FDIC保险现金等价账户。

权益法投资

当公司能够对被投资方的经营和财务决策施加重大影响但不控制时，公司采用权益法核算投资。公司唯一的权益法投资是Adovate LLC（“Adovate”）的权益。

权益法投资按成本减去减值（如有）加上或减去公司按比例享有的权益法被投资方的经营收入或损失，加上或减去公司按比例享有的新发行股权购买者的稀释。权益法投资的收入或损失按一个季度的滞后确认。

目前，公司对其权益法投资没有义务进行额外的资本投入，因此仅记录其总投资金额（包括对被投资方的其他投资和贷款）范围内的损失，这些投资和贷款未被作为权益法投资进行核算。

公允价值计量

FASB ASC 820，公允价值计量（“ASC 820”）将公允价值定义为在报告日，市场参与者之间在有序交易中出售资产所获得的价格或转让负债所支付的价格（退出价格）。该方法通过提供一个公允价值层级来建立一致性与可比性，该层级将估值技术的输入分为三个广泛级别，如下所述：

●

第一级输入是活跃市场中相同资产或负债的报价市场价（这些是可观察的市场输入）。

●

第二级输入是除第一级包含的报价以外的可观察输入，用于资产或负债（包括在交易较少的市场中类似资产或相同或类似资产的报价、非当前价格或价格差异较大的价格）。

●

第三级输入是反映实体在定价资产或负债时自身假设的不可观察输入（当几乎没有市场数据可用时使用）。

由于期限较短，现金及现金等价物和应付账款的公允价值近似于其账面价值。

研究与开发

研究与开发费用在发生时计入费用，包括供应品和其他直接试验费用，如应付给合同研究组织的费用、支持公司研究与开发工作的顾问，以及无其他用途的技术权利的获取，以及临床研究与开发人员的薪酬和福利。某些研究与开发费用，特别是应付给合同研究组织（“CRO”）的费用，是根据特定关键事件的发生情况设置里程碑付款的。当此类里程碑付款大于通过提供此类服务所获得的金额时，公司确认一项预付资产，并将其作为费用记录；当所获得的费用大于里程碑付款时，记录一项应计费用负债作为费用。在资产收购中为用于研究与开发活动且有其他未来用途的资产，作为进行中的研究与开发（“IPR&D”）进行资本化。在收购日没有其他未来用途的收购IPR&D在收购日确认为研究与开发费用。

以股票为基础的薪酬

公司根据奖励的授予日公允价值来衡量期权奖励的成本。该成本在奖励获得者为获得整个奖励而提供服务的期间内按直线法确认。期权的公允价值是根据关键假设计算的，例如公司普通股的预期波动率、无风险回报率和期权的预期期限。公司对这些假设的估计主要基于历史数据、同行公司数据、政府数据以及管理层对未来趋势的判断。

发行的普通股按公司普通股的公允价值计量，该公允价值根据承诺发行的日期公司普通股的市场收盘价确定。

分部信息

公司作为一个运营分部运营，专注于开发芳香烃受体激动剂以治疗自身免疫疾病，包括溃疡性结肠炎，以及用于治疗或预防成瘾及相关障碍的药物。公司的首席执行官作为其首席运营决策者（“CODM”），以合并方式管理并分配公司的运营资源。CODM根据公司的损益表以及公司运营的关键组成部分和流程来评估绩效并分配资源，这些组成部分和流程由公司集中管理。CODM不使用分部资产信息来分配资源。这使公司的首席执行官能够评估其整体可用资源水平，并确定如何最佳地将这些资源部署到符合公司长期公司整体战略目标的研究和开发项目中。

里程碑认股权证权利负债

公司根据其融资和Azora票据交换中发行的里程碑认股权证权利（如第4号注释中定义的）的特性和条款进行会计处理。已被确定为负债的里程碑认股权证权利在发行日按其公允价值记录为长期负债，并在每个报告期间重新计量为公允价值，公允价值的变化在未审计的合并损益表中确认为收益或损失。公司调整了这些里程碑认股权证权利的负债，以反映其公允价值的变化，直到这些权利被行权或到期，或直到这些里程碑认股权证权利不再被视为负债为止。

可变利益实体

对于根据ASC 810定义的可变利益实体（\"VIEs\"），如果公司是主要受益人，则公司会合并该实体。如果公司具有（i）对最显著影响VIE经济表现的活动的决策权，以及（ii）承担VIE可能对其产生重大影响的损失或获得VIE收益的权利，则公司是VIE的主要受益人。公司会持续重新评估其VIE认定和主要受益人结论，包括在发生重新考虑事件时。当公司合并一个不符合业务定义的VIE时，会根据（1）支付对价的公允价值、（2）任何非控制性权益的公允价值和（3）之前持有权益的报告金额与根据ASC 805确认和计量的VIE可辨认资产和负债的净额之间的差额确认收益或损失。

可转换优先股

由于公司无法控制的现金结算条款，公司将其可转换优先股在附带的资产负债表中归类为临时权益。只有在很可能发生此类控制权变更事件时，才会对账面价值进行调整以达到结算价值。由于结算取决于股东批准，而股东批准不在公司的控制范围内，因此公司未将可转换优先股的账面价值计提至结算价值。

近期会计准则

2024年11月，FASB发布了会计准则更新ASU 2024-03，利润表—报告综合收益—费用分解披露（子主题220-40）：利润表费用的分解。该更新要求上市公司披露有关库存采购、员工薪酬、折旧、无形资产摊销和开采费用的信息，这些费用包含在每个利润表项目中。本更新中的修正案适用于2026年12月15日之后开始的年度报告期间以及2027年12月15日之后开始的中期报告期间。允许对尚未发布的年度财务报表提前采用这些修正案。公司正在评估该新指引对其未经审计的合并财务报表的影响。

2025年12月，FASB发布了ASU 2025-11，中期报告（主题270）：窄范围改进。该更新旨在改进会计准则汇编（ASC）主题270中中期报告指南的组织和可导航性，将所有必要的中期披露集中列出，并建立一个总体披露原则，要求实体披露自最近一个年度报告期结束以来发生的、对实体有重大影响的任何事件或变化。该标准对于公司而言，适用于2027年12月15日之后开始的财年中的中期报告期间，允许在尚未发布财务报表的任何中期期间提前采用。该修订应按前瞻性方式应用。公司正在评估该新指南对其未经审计的合并财务报表的影响。

2025年5月，FASB发布了ASU 2025-03，企业合并（主题805）和合并（主题810）：在取得可变利益实体的收购中确定会计收购方。 该ASU要求参与主要通过交换权益利益进行的收购交易的实体，如果法律上的被收购方是一个符合业务定义的VIE，则应考虑ASC 805-10-55-12至55-15中的因素来确定会计收购方，而不是假定主要受益人是收购方。允许提前采用。该ASU适用于2026年12月15日之后开始的年度报告期间，包括这些年度内的中期期间，并且对初始采用日期之后发生的收购交易按前瞻性方式应用。ASU 2025-03必须对初始采用日期之后发生的任何企业合并按前瞻性方式应用，且允许在尚未发布财务报表的中期或年度期间提前采用。由于公司目前没有在ASU 2025-03范围内的任何交易计划，该标准的采用预计不会对其财务报表和相关披露产生重大影响。

4 — 收购Azora及管道发行

2026年6月11日，公司根据Adial、First Merger Sub、Adial Second Merger Sub和Azora之间的并购协议条款，通过并购协议收购了Azora。根据并购协议，First Merger Sub与Azora合并，Azora作为Adial的全资子公司继续存在（“第一次并购”）。

第一次合并之后，在第二次合并中，Azora与Second Merger Sub合并并将其吸收，Second Merger Sub作为Adial的全资子公司继续存在，并且Second Merger Sub将其名称变更为“Azora Therapeutics, LLC”。在合并完成时，Adial向原来的Azora股东发行了437,421股Adial的普通股和12,930.601股A系列优先股。每一份A系列优先股可转换为1,000股Adial的普通股（“转换比率”），受适用的章程文件及相关交易文件中规定的条款和限制的约束，包括但不限于获得Adial股东对转换的批准。Azora的未行权期权，用于购买Azora普通股，已转换为购买Adial普通股的期权，共计1,177,782股。合并于2026年6月11日完成。

2026年6月11日，作为合并完成的条件，Adial与协议中所列的购买方（“PIPE投资者”）签订了证券购买协议（“购买协议”），根据该协议，Adial在2026年6月12日的首次PIPE交割（“首次PIPE交割”）中，通过私募交易向PIPE投资者发行并销售了预付认股权证（“首次交割预付认股权证”），用于购买最多9,749,345股Adial的普通股，每份首次交割预付认股权证的价格为2.7489美元，总购买价格为2,680万美元。此外，Adial同意在一次或多次后续交割（每项称为“里程碑交割”）中向PIPE投资者发行并销售预付认股权证（“里程碑预付认股权证”），用于购买最多9,749,345股Adial的普通股，以及激励认股权证（“里程碑激励认股权证”，与里程碑预付认股权证合称为“里程碑认股权证”），每份的行权价为2.7489美元，用于购买最多9,749,345股Adial的普通股，每份里程碑认股权证的总购买价格为2.7489美元，总购买价格最高可达2,680万美元。根据购买协议发行和销售首次交割预付认股权证和里程碑认股权证，统称为“融资”。

根据合并协议的条款，在合并完成时，Adial同意担保支付Azora发行的某些修订和重述的可转换票据（“Azora票据”）的本金550万美元，这些票据是向某些个人（统称为“前Azora票据持有人”）发行的。Azora票据的本金和应计利息的公允价值560万美元在公司收购的净资产表中列为“可转换票据”，并包含在第4号注释中。2026年6月11日，Adial与前Azora票据持有人签订了交换协议（“交换协议”），以终止支付担保并赎回Azora票据，作为交换，向前Azora票据持有人发行初始交割前资助认股权证，以购买Adial普通股共计2,031,603股（“Azora票据交换”）。由于Azora票据交换，所有此类Azora票据均被视为全额偿还，所有未偿还的义务均已终止。根据交换协议，前Azora票据持有人还享有参与里程碑交割的权利，以购买里程碑前资助认股权证，购买最多共计2,031,603股Adial普通股，以及行权价为每股2.7489美元的里程碑激励认股权证，购买最多共计2,031,603股Adial普通股，总价格为2.7489美元，基本上与购买协议下的PIPE投资者条款相同，总购买价格最高为560万美元。公司将Azora票据交换作为债务终止处理，并根据重新收购价格1170万美元与Azora票据的净账面价值560万美元之间的差额确认了610万美元的终止损失，这反映了Azora票据本金和应计利息的公允价值。重新收购价格1170万美元等于初始交割前资助认股权证的公允价值610万美元，这些认股权证用于购买Adial普通股共计2,031,603股，以及具有总公允价值560万美元的负债分类权利，用于参与里程碑交割，购买里程碑前资助认股权证，购买最多共计2,031,603股Adial普通股，以及行权价为每股2.7489美元的里程碑激励认股权证，购买最多共计2,031,603股Adial普通股，这些权利是在Azora票据交换时发行的，净账面价值等于Azora票据的本金和应计利息金额。

在获得股东批准将合并中发行的A系列优先股转换为Adial普通股的前提下，每份A系列优先股将自动转换为1000股普通股，但需满足以下条件：(a) 每位持有人设立的某些受益所有权限制（最初为4.99%，在提前61天书面通知后可增加至19.99%）（“受益所有权限制”）以及(b) 公司章程中授权的普通股数量，如果数量不足，公司有义务尽合理最大努力增加（可能需要进一步的股东投票）。A系列优先股的每位持有人也可选择提前转换，但需满足相同的限制条件，或者，仅为实现下文所述的现金结算，自A系列优先股初始发行日起六个月后，如果尚未获得A系列优先股转换的股东批准，则可进行转换。如果在（i）股东批准A系列优先股转换或（ii）A系列优先股初始发行日起六个月后任何时间，公司未能及时向该持有人交付转换所得股份（非因持有人自身的受益所有权限制所致），受影响的持有人可要求根据未交付股份的公允价值对A系列优先股进行现金结算。

根据公司章程，A系列优先股以及转换后可发行的普通股（“锁定股份”）受转让限制，分三批解除：初始PIPE交割后180天；获得交易股东事项批准后180天；以及公司发布里程碑事件通知时，届时所有剩余限制将解除。某些公司高管和董事也签署了支持协议，某些前Azora的高管、董事和A系列优先股持有人签署了单独的180天锁定期协议。以下事项统称为需要股东批准的交易股东事项：(i) 将A系列优先股转换为普通股，(ii) 行使在合并中承担的购买Azora股票的期权，(iii) 持有人行使初始交割前资金认股权证，(iv) 持有人行使里程碑认股权证，(v) 修订公司章程，将授权发行的普通股数量增加至5亿股，(vi) 通过新的2026年股权激励计划，以及(vii) 通过新的2026年员工股票购买计划。

股票结算价格是系列A优先股持有人发出转换通知前最后一个交易日的收盘价；根据2026年9月30日的4.01美元收盘价，结算所有12,930,601股可转换为普通股的股份，公司将需要支付约5190万美元的结算金额。如果尚未获得系列A优先股转换的股东批准，现金结算权将在2026年12月11日（发行后六个月）首次可用，但该权利的行使仅在持有人选择时进行。截至2026年9月30日，公司的现金储备约为2200万美元，这不足以支付全额结算，公司将寻求通过其他债务或股权融资来实现。公司可能无法在需要时以有利条件或甚至无法筹集到额外资金。公司认为，公司普通股持有者了解公司的现金状况，如果公司被迫现金结算系列A优先股，预计会出现资金缺口，以及公司很可能无法筹集到足够的资金来支付系列A优先股的全额现金结算。公司认为，这些因素都会积极影响公司普通股持有者支持在公司重新召开的2026年股东年会上批准允许转换系列A优先股的提案的可能性。

由于合并、融资和阿佐拉票据交换（统称为“交易”），合并前阿迪尔的股东拥有阿迪尔普通股约7.7%的股份，收购前阿佐拉的股东拥有阿迪尔普通股约51.0%的股份，融资中的投资者（包括阿佐拉票据持有人）拥有阿迪尔普通股约41.3%的股份，所有计算均基于完全稀释、转换后基础（不考虑任何有益所有权限制），使用库存股法，并基于阿迪尔和阿佐拉的隐含股权价值。交易后，但在系列A优先股转换之前，以及在任何初始交割前资助认股权证行权之前，根据已发行的普通股，合并前阿迪尔的股东拥有阿迪尔普通股约83.3%的股份，收购前阿佐拉的股东拥有阿迪尔普通股约16.7%的股份，而融资中的投资者（包括前阿佐拉票据持有人）拥有阿迪尔普通股0%的股份。

在2026年6月11日交易完成时，公司根据ASC 810评估了与Azora的关系，并确定Azora是一家公司，该公司持有Azora的可变利益。这一确定以及公司基于ASC 810下的权力和经济状况得出的结论，即公司是Azora的主要受益人（如下所述），并不依赖于，也不会因所需股东投票的结果或时间，以及A系列优先股转换为有投票权普通股的结果而改变。由于Azora是被收购方，并且被确定为VIE，因此ASC 805下的其他定性因素不适用于该分析。Azora是一家处于开发阶段的公司，尚未产生收入，并且历史上依赖于外部融资，包括债务和股权投资，以资助其研发活动。由于Azora的股权投资风险不足，无法在没有额外的次级财务支持的情况下资助其活动，公司确定Azora根据ASC 810符合VIE的定义。因此，Azora根据VIE模型进行合并，而不是投票权益模型。根据VIE模型，合并Azora的主体是主要受益人，即拥有（i）对最显著影响其经济表现的Azora活动的决策权，以及（ii）承担损失的义务或获得可能对Azora具有重大影响的收益的权利的主体，无论该主体是否持有Azora大部分的已发行投票权益。因此，公司确定Adial拥有成为Azora主要受益人所需的权力和经济条件，并据此在根据ASC 810-10-25作为会计收购方自交易完成之日起的未经审计的合并财务报表中合并了Azora。

由于Azora不符合ASC 805中对“业务”的定义，公司根据ASC 810-10-30-4的要求，对初始合并时获得的资产和承担的负债进行了计量，该规定适用于非业务的VIE的初始合并。根据该指导原则，可识别的资产和负债按照ASC 805-20的确认和计量原则以公允价值确认和计量；未确认商誉，因为在合并非业务的VIE时禁止确认商誉。所获得的可识别净资产的公允价值，因此根据ASC 810-10-30-4未确认任何收益或损失。没有其他未来用途的已收购IPR&D在合并时立即费用化。

所转移对价的估计公允价值为4150万美元，如下所示（以千为单位）：

已承担期权	$	1,664
发行的普通股		1,306
发行的A系列优先股		38,533
所转移的总对价	$	41,503

所转移对价的公允价值是根据投资者在融资中支付的每份预付认股权证的价格进行衡量的。已承担期权反映了与合并前服务期相关的收购日公允价值基础衡量的一部分。

下表总结了所转移对价的估计公允价值分配至公司所获得的净资产的情况（以千为单位）：

获得的资产：
现金及现金等价物	$	5,282
预付费用		9
获得的总资产		5,291
承担的负债：
应付账款和应计负债		3,816
薪酬和员工福利负债		572
可转换本票		5,585
承担的总负债		9,973
获得的净负债	$	(4,682	)
进行中的研究与开发		46,185
总转移对价	$	41,503

5 — 公允价值计量

公司根据第4号注释中描述的融资和Azora票据交换发行了里程碑认股权证。里程碑指的是指定的临床开发里程碑，包括公司宣布第一例患者已接受AT177的I期临床试验（或根据21 C.F.R. 312.40(b)的规定AT177的IND生效）或特定的市场里程碑，即在任何三十个交易日的测量期内，连续十个交易日的加权平均股价等于或超过购买价格（每股10.9956美元）的400%。无论是否发生了里程碑事件，每位投资者都有权在初始交割日后且在里程碑事件通知日后30个日历日之前，随时完成里程碑交割并获得里程碑认股权证。

由于将要发行的里程碑认股权证所依据的股份数量取决于希望参与的投资者数量，因此该股份数量并不仅与公司自身股票挂钩，因此根据ASC 480，《负债与权益的区分》和ASC 815，《衍生工具和对冲》将里程碑认股权证归类为金融负债。该负债在发行时按公允价值记录，并在每个报告日按公允价值重新计量，公允价值变动在未审计的合并损益表中作为其他收入（支出）确认

里程碑认股权证负债的公允价值是通过蒙特卡洛模拟模型（属于第三级公允价值计量）估算的。选择蒙特卡洛模型是因为里程碑认股权证负债的发行和行权取决于路径依赖变量，包括：

●

预计实现临床开发里程碑的时间和概率。

●

在剩余合同期限内，在几何布朗运动框架下模拟的未来股价路径。

●

模拟经济路径中的股权波动率和无风险利率。

在每条模拟路径中，如果在到期前满足股价或临床触发条件，则使用反映基础里程碑执行和市场风险以及里程碑事件概率百分比的风险调整贴现率，计算平均现值并折现回计量日。与参与权的期权性质一致，模拟假设理性市场参与者会保留该权利直至合同决策日，并且只有在模拟价值超过该时间点的所需购买价格时才会选择购买一篮子工具。如果模拟的一篮子价值低于购买价格，该权利将被视为未行使而到期。

下表总结了在2026年6月11日、2026年6月30日和2025年12月31日估算里程碑认股权证负债公允价值所使用的关键定量输入：

估值输入	截至 2026年6月11日			截至 2026年6月30日			截至 2025年12月31日
基础股票价格（1）		3.31			$	2.84		—
行权价格		2.7489			$	2.7489		—
预期波动率		65	%			65	%	—
无风险利率		3.78	%			3.91	%	—
预期期限（年）		5				5		—
里程碑实现概率		90	%			90	%	—
预期股息收益率		0	%			0	%	—

(1)	该公司将观察到的截至2026年6月11日和2026年6月30日的每股2.98美元和2.56美元的收盘普通股价格，按预计的90%的里程碑实现概率进行上调，以估算在里程碑成功情况下的隐含每股价格。

●

预期波动率：根据可比公开交易同行公司的历史波动率，在与预期剩余期限一致的期间内得出。

●

Probability of Milestone Achievement: Reflects management’s best estimate based on clinical trial progress, regulatory interactions, and historical industry success rates. An increase in the probability of milestone achievement or underlying stock price significantly increases the fair value of the warrant liability. The likelihood of obtaining stockholder approval does not affect the assumed probability of milestone achievement. In estimating the probability of Milestone Achievement, the Company considered, among other factors, (1) that the clinical development milestone is satisfied upon an IND for AT177 going into effect per 21 C.F.R. 312.40(b) or the dosing of the first patient in a Phase 1 clinical trial, rather than upon any clinical result; (2) the status of the AT177 IND-enabling program as of the measurement dates, including completion of a GLP toxicology study in rats, and (3) receipt of pre-IND feedback from the FDA and the current status of the 28-day GLP minipig study.

The following table presents the changes in the fair value of the Level 3 Milestone warrant rights liability for the six months ended June 30, 2026 and 2025 (in thousands):

Milestone Warrant rights Liability Reconciliation	2026			2025
Balance at Beginning of Period	$	—			—
Initial fair value of Milestone warrant rights issued		32,092			—
Change in fair value recognized in other income (expenses)		(8,280	)		—
Warrants exercised / settled during the period		—			—
Balance at End of Period	$	23,812			—

As of December 31, 2025, there were no financial assets and liabilities measured at fair value. During the three and six months ended June 30, 2026 and 2025, there were no transfers between levels.

6 — EQUITY METHOD INVESTMENTS

The Company held a weighted average of 10.3% of Adovate’s equity during the six months ended March 31, 2026. At June 30, 2026, the Company held 10.3% of Adovate’s outstanding equity.

Activity recorded for the Company’s equity method investment in Adovate during the six months ended June 30, 2026 is summarized in the following table (in thousands):

Equity investment carrying amount at January 1, 2026	$	490
Portion of operating losses recognized		(139	)
Share of dilution to new investors		71
Equity investment carrying amount at March 31, 2026		422
Portion of operating losses recognized		(181	)
Equity investment carrying amount at June 30, 2026	$	241

At June 30, 2026, the Company’s maximum exposure to loss through its equity method investment is limited to the value of its equity.

Consideration for the sale of the assets of Purnovate, Inc. to Adovate also included contingent payments based on the occurrence of certain milestone events and a contingent royalty on future sales. The Company recognized $150,000 in other income for a milestone achieved and payment received during the three months ended March 31, 2025.

7 — ACCRUED EXPENSES

Accrued expenses consist of the following (in thousands):

	June 30, 2026		December 31, 2025
Employee compensation	$	1,457		$	660
Minimum license royalties		20			—
Pre-clinical and manufacturing expenses		129			4
Legal and consulting expense		830			—
Other		61			78
Total accrued expenses	$	2,497		$	742

As of June 30, 2026, included in employee compensation was an accrual of approximately $1.0 million, which was related to severance and benefits for certain positions of the Company that were being eliminated as part of the Merger with Azora.

8 — Convertible Preferred stock

In conjunction with the Merger Agreement, on June 11, 2026, the Board adopted the Certificate of Designation, which authorized the issuance of 13,000 shares of Series A Preferred Stock, par value of $0.001 per share, and the Company filed the Certificate of Designation with the Secretary of State of the State of Delaware.

Under the terms of the Merger Agreement, the Company issued to the former stockholders of Azora an aggregate of 12,930.601 shares of Series A Preferred Stock, representing 12,930,601 shares of Company common stock on an as-converted basis and without giving effect to any beneficial ownership limitations.

Following stockholder approval of the conversion of the shares of Series A Preferred Stock into shares of Company common stock, each share of Series A Preferred Stock will automatically convert into 1,000 shares of Company common stock, subject to certain beneficial ownership limitations established by each holder and the Certificate of Designation. As the Series A Preferred Stock contains a cash settlement provision that is outside the control of the Company, the Series A Preferred Stock is classified in temporary equity.

The holders of Series A Preferred Stock have the following rights, preferences and privileges:

Ranking

The Series A Preferred Stock ranks pari passu with the common stock with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.

Voting Rights

Except as otherwise required by the General Corporation Law of the State of Delaware, holders of the Series A Preferred Stock shall have no voting rights; provided, however, as long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the majority of outstanding shares of Series A Preferred Stock (i) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock, (ii) issue further shares of Series A Preferred Stock or increase or decrease the number of authorized shares of Series A Preferred Stock, (iii) prior to receipt of stockholder approval of the conversion of the shares of Series A Preferred Stock, consummate either a merger or consolidation or other business combination in which stockholders of the Company do not hold at least a majority of the voting power, (iv) prior to receipt of stockholder approval of the conversion of the shares of Series A Preferred Stock, authorize or issue any class or series of stock that has powers, preferences or rights that are senior to those of the Series A Preferred Stock, or (v) amend, waive or modify the Merger Agreement in any manner that would be reasonably likely to prevent, impede or materially delay the stockholder approval or conversion of Series A Preferred Stock.

Dividends

Holders of outstanding shares of Series A Preferred Stock are entitled to receive dividends on shares of Series A Preferred Stock, on an as-if-converted to common stock basis, equal to and in the same form and manner as dividends paid on shares of common stock.

Liquidation Preference

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation, the holders of shares of the Series A Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company the same amount that a holder of common stock would receive if the Series A Preferred Stock were fully converted to common stock and amounts shall be paid pari passu with all holders of Common Stock, plus an additional amount equal to any dividends declared on but unpaid to such shares.

Cash Settlement

The Series A Preferred Stock does not have redemption rights. However, if (i) the Company fails to obtain shareholder approval within six months of the initial issuance of Series A Preferred Stock or (ii) the Company fails to timely deliver to the holder shares of common stock upon conversion of shares of the Series A Preferred stock by such holder, shares of Series A Preferred Stock become eligible for cash settlement at the option of the holder for a fair value equal to the closing price of the Company’s common stock on the last trading day prior to the date that the notice for cash settlement is delivered from the holder to the Company.

Conversion

Each share of Series A Preferred Stock shall automatically convert at a conversion ratio of 1,000 shares of common stock for each share of Series A Preferred Stock on the third business day after stockholder approval of the conversion of the Series A Preferred Stock into shares of common stock, subject to certain beneficial ownership limitations. If any shares of Series A Preferred Stock continue to be outstanding following such automatic conversion due to a beneficial ownership limitation, such shares of Series A Preferred Stock will be convertible at the option of the holder, subject to such beneficial ownership limitations.

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:

	Total Options Outstanding			Weighted Average Remaining Term (Years)		Weighted Average Exercise Price
Outstanding January 1, 2026		47,220			8.58		$	151.15
Forfeited		—			—			—
Granted		—			—			—
Outstanding March 31, 2026		47,220			8.33		$	151.15
Forfeited		(170,416	)		—			12.66
Granted		1,769,881			—			1.43
Outstanding June 30, 2026		1,646,685			8.82			4.56
Outstanding June 30, 2026, vested and exercisable		643,156			7.19		$	10.23

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:

	June 30, 2026			June 30, 2025
Fair Value per Share	$	2.69			$	17.25
Expected Term		5.13 years				5.75 years
Expected Dividend	$	—			$	—
Expected Volatility		119.5	%			114.2	%
Risk free rate		4.22	%			4.05	%

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):

	Three months ended June 30,		Six months ended June 30,
	2026		2025			2026		2025
Research and development options expense	$	3		$	2		$	7	$	7
Total research and development expenses		3			2			7		7
General and administrative options expense		131			73			214		162
Restricted stock expense		3			49			65		192
Total general and administrative expenses		134			122			279		354
Total stock-based compensation expense	$	137		$	124		$	285	$	361

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:

	Restricted Stock		Weighted Average Grant Date Fair Value
Unvested at January 1, 2026		—			—
Vested		—			—
Forfeited		—			—
Granted		—			—
Unvested at March 31, 2026		—			—
Vested		—			—
Forfeited		—			—
Granted		557,248		$	2.98
Unvested at June 30, 2026		557,248		$	2.98

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:

	Total Warrants			Weighted Average Remaining Term (Years)		Weighted Average Exercise Price		Average Intrinsic Value
Outstanding January 1, 2026		1,240,480			3.1		$	19.25	$	0.00
Issued		—			—			—		—
Exercised		—			—			—		—
Outstanding March 31, 2026		1,240,480			2.8			19.25		0.00
Issued		—			—			—		—
Forfeited		(404	)					1,441.77
Exercised		—			—			—		—
Outstanding June 30, 2026		1,240,076			2.6		$	18.79	$	0.00

Pre-Funded Warrants

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

	Total Warrants		Weighted Average Exercise Price
Outstanding January 1, 2026		—		$	—
Issued		—			—
Exercised		—			—
Outstanding March 31, 2026		—			—
Issued		11,780,948			0.001
Forfeited		—			—
Exercised		—			—
Outstanding June 30, 2026		11,780,948		$	0.001

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.

10 — COMMITMENTS AND CONTINGENCIES

License with University of Virginia Patent Foundation

In January 2011, the Company entered into an exclusive, worldwide license agreement with the University of Virginia Patent Foundation, dba UVA Licensing and Ventures Group (“UVA LVG”) for rights to make, use or sell licensed products in the United States based upon the ten separate patents and patent applications made and held by UVA LVG.

As consideration for the rights granted in the UVA LVG License, the Company is obligated to pay UVA LVG yearly license fees and milestone payments, as well as a royalty based on net sales of products covered by the patent-related rights. More specifically, the Company paid UVA LVG a license issue fee and is obligated to pay UVA LVG (i) annual minimum royalties of $40,000 commencing in 2017; (ii) a $20,000 milestone payments upon dosing the first patient under a Phase 3 human clinical trial of a licensed product, $155,000 upon the earlier of the completion of a Phase 3 trial of a licensed product, partnering of a licensed product, or sale of the Company, $275,000 upon acceptance of a New Drug Application by the FDA, and $1,000,000 upon approval for sale of AD04 in the U.S., Europe or Japan; as well as (iii) royalties equal to a 2% and 1% of net sales of licensed products in countries in which a valid patent exists or does not exist, respectively, with royalties paid quarterly. In the event of a sublicense to a third party, the Company is obligated to pay royalties to UVA LVG equal to a percentage of what the Company would have been required to pay to UVA LVG had it sold the products under sublicense itself. In addition, the Company is required to pay to UVA LVG 15% of any sublicensing income. A certain percentage of these payments by the Company to UVA LVG may then be distributed to the Company’s former Chairman of the Board and former Chief Medical Officer in his capacity as inventor of the patents by the UVA LVG in accordance with their policies at the time.

The license agreement may be terminated by UVA LVG upon sixty (60) days written notice if the Company breaches its obligations thereunder, including failing to make any milestone, failure to make required payments, or the failure to exercise diligence to bring licensed products to market. In the event of a termination, the Company will be obligated to pay all amounts that accrued prior to such termination. The Company is required to use commercially reasonable efforts to achieve the goals of submitting a New Drug Application to the FDA for a licensed product by March 31, 2028 and commencing commercialization of an FDA approved product by March 31, 2029. If the Company were to fail to use commercially reasonable effort and fail to meet either goal, the licensor would have the right to terminate the license.

The term of the license continues until the expiration, abandonment or invalidation of all licensed patents and patent applications, and following any such expiration, abandonment or invalidation will continue in perpetuity on a royalty-free, fully paid basis.

During the three months ended June 30, 2026 and 2025, the Company recognized a $10,000 minimum license royalty expense under this agreement. During the six months ended June 30, 2026 and 2025, the Company recognized a $20,000 minimum license royalty expense under this agreement. At June 30, 2026 and December 31, 2025, total accrued royalties and fees due to UVA LVG were $60,000 and $40,000, respectively.

Litigation

The Company is subject, from time to time, to claims by third parties under various legal disputes. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition, and cash flows. As of June 30, 2026, the Company did not have any pending legal actions.

11 — SEGMENT REPORTING

The Company has one reportable operating segment relating to developing aryl hydrocarbon receptor agonists to treat autoimmune diseases, including ulcerative colitis, and drug development for addiction and related disorders. When evaluating the Company’s financial performance, the CODM reviews total operating expenses for the operating segment excluding equity method investments. The CODM makes decisions using this information on a company-wide basis.

Significant segment expenses, as provided to the CODM, are presented below:

	For the Three Months Ended			For the Six Months Ended
	June 30,			June 30,
	2026			2025			2026		2025
Operating Expenses:
Segment research and development expenses	$	440			$	732		$	873		$	1,479
Segment general and administrative expenses		5,400				1,150			6,969			2,671
Acquired in-process research and development		46,185				—			46,185			—
Total Operating Expenses		52,025				1,882			54,027			4,150

Loss From Operations		(52,025	)			(1,882	)		(54,027	)		(4,150	)

Other Income (Expense)
Interest income		58				24			105			59
Change in fair value of milestone warrant rights liability		8,280				—			8,280			—
Financing expense related to milestone warrant rights liability		(2,067	)						(2,067	)
Loss on extinguishment of Azora Therapeutics convertible promissory notes		(6,054	)			—			(6,054	)		—
Loss on equity method investment		(181	)			(99	)		(249	)		(262	)
Other income (expenses)		—				(1	)		—			165
Total other income (expense)		36				(76	)		15			(38	)

Net Loss	$	(51,989	)		$	(1,958	)	$	(54,012	)	$	(4,188	)

12 — SUBSEQUENT EVENTS

Purchase Agreement and Exchange Agreement Amendments

On September 16, 2026, the Company entered into an Amendment No. 2 to Securities Purchase Agreement (the “Purchase Agreement Amendment”) with certain PIPE Investors, constituting holders of the Majority of Interest (as defined in the Purchase Agreement), pursuant to which the Purchase Agreement was amended to (i) remove the provision reducing each PIPE Investors’ right to purchase Milestone Warrants by the percentage of its Initial Closing Pre-Funded Warrants that it exercised (the “Penalty Provision”) and to (ii) add a provision prohibiting the PIPE Investor from offering for sale, selling, assigning, transferring, pledging or otherwise disposing of certain of the shares of common stock issuable upon exercise of the Initial Closing Pre-Funded Warrants for the lock-up period specified in the Purchase Agreement Amendment, subject to certain exceptions.

On September 16, 2026 and September 30, 2026, the Company also entered into an Amendment No. 1 to Note Exchange Agreements (the “Note Agreement Amendment” and together with the Purchase Agreement Amendment, the “Amendments”) with the Former Azora Noteholders, pursuant to which the Note Exchange Agreements were amended to (i) remove the Penalty Provision and to (ii) add a provision prohibiting the Former Azora Noteholders from offering for sale, selling, assigning, transferring, pledging or otherwise disposing of certain of the shares of common stock issuable upon exercise of the Initial Closing Pre-Funded Warrants for the lock-up period specified in the Note Agreement Amendment, subject to certain exceptions.

As a result of the Amendments, the Milestone Warrant rights now meet the definition of equity classified under the accounting guidance, and as such the Milestone Warrant rights are no longer liability classified.

Item 2. Management’s Discussion and Analysis\nof Financial Condition and Results of Operations.

The following discussion\nand analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods\nindicated. The discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the notes\npresented herein included in this Amendment No. 1 to Form 10-Q and the audited consolidated financial statements and the other information\nset forth in the Annual Report on Form 10-K for the year ended December 31, 2025 that we filed with the SEC on March 5, 2026 (the “2025\nForm 10-K”). ln addition to historical information, the following Management’s Discussion and Analysis of Financial Condition\nand Results of Operations contains forward-looking statements that involve risks and uncertainties including, but not limited to, those\nset forth below under “Risk Factors” and elsewhere herein, and those identified under Part I, Item 1A of the 2025 Form 10-K.\nOur actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors\ndiscussed herein and any other periodic reports filed and to be filed with the Securities and Exchange Commission (“SEC”).

On February 5,\n2026, we effected a one-for-twenty-five reverse stock split (the “Reverse Stock Split”) of our authorized, issued and outstanding\ncommon stock. Unless otherwise noted, all references to share amounts in this Amendment No. 1 to Form 10-Q reflect the Reverse Stock\nSplit.

Overview

We are a clinical-stage\nbiopharmaceutical company focused on developing treatments for serious inflammatory diseases, and the development of therapeutics for\nthe treatment or prevention of addiction and related disorders. On June 11, 2026, we completed our previously announced acquisition of\nAzora Therapeutics, Inc. (“Azora”), a biopharmaceutical company developing treatments for serious inflammatory diseases, pursuant\nto an Agreement and Plan of Merger, dated June 11, 2026 (the “Merger Agreement”), by and among Adial, Adial Merger Sub, Inc.\n(“First Merger Sub”), Adial Second Merger Sub, LLC (“Second Merger Sub”) and Azora. Pursuant to the Merger Agreement,\nFirst Merger Sub merged with and into Azora, with Azora surviving as a wholly owned subsidiary of Adial (the “First Merger”).\nImmediately following the First Merger, Azora merged with and into Second Merger Sub, with Second Merger Sub surviving as a wholly owned\nsubsidiary of Adial and the Second Merger Sub changing its name to “Azora Therapeutics, LLC” (the “Second Merger”\nand, together with the First Merger, the “Merger”). On June 12, 2026 we received approximately $24.3 million in net proceeds\nfrom the initial closing of a private placement financing from a group of institutional investors, with potential additional closings,\nthe funding of which is at the option of the investors. The Merger brought Azora’s lead investigational candidate, AT177, into\nour pipeline. For additional information regarding the terms of the Merger and the concurrent financing, see Note 4 to the unaudited\ncondensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Azora has historically\nfocused on developing aryl hydrocarbon receptor (“AhR”) agonists to treat autoimmune diseases including ulcerative colitis.\nFollowing the Merger, our focus has shifted to the treatment of serious inflammatory diseases and our lead program is AT177, which is\nbeing studied for the treatment of ulcerative colitis (“UC”). AT177 is a fully synthetic, patented, oral AhR agonist designed\nto restore mucosal immune homeostasis at the site of disease with minimal systemic exposure. Its active ingredient is a prodrug of indirubin,\nwhich we believe is one of the most potent AhR agonists within indigo naturalis, a botanical extract that has been evaluated in clinical\nstudies in patients with UC but has not been approved by the U.S. Food and Drug Administration (the “FDA”) or any comparable\nforeign regulatory authority for the treatment of UC. AT177’s colon-targeted formulation is designed to deliver AhR engagement\nto the colonic mucosa while limiting systemic AhR exposure. In preclinical studies, AT177 demonstrated local colonic AhR activation with\nlimited systemic exposure. AT177 is currently in IND-enabling studies, with an investigational new drug (“IND”) submission\nplanned for the first half of 2027, initiation of a Phase 1a single- and multiple-ascending-dose (“SAD/MAD”) clinical trial\nplanned to commence in the first half of 2027, followed by a Phase 1b proof-of-concept study in UC patients, in each case subject to\nthe appropriate regulatory agency allowing the studies to proceed.

Prior to the Merger, we were\nprimarily focused on the development of AD04, a genetically targeted, serotonin-3 receptor antagonist, therapeutic agent for the treatment\nof Alcohol Use Disorder (“AUD”) in heavy drinking patients. Historically, we have devoted the vast majority of our resources\nto development efforts relating to AD04, including preparation for and conducting clinical trials, providing general and administrative\nsupport for these operations and protecting our intellectual property.

We currently do not have any\nproducts approved for sale and we have not generated any significant revenue since our inception. From our inception through the date\nof this Quarterly Report on Form 10-Q, we have funded our operations primarily through the private and public placements of debt, equity\nsecurities, and an equity line.

In the event the cash\nsettlement obligations related to the Series A Preferred Stock are triggered, our current cash and cash equivalents are not expected\nto be sufficient to fund operations for the twelve months from the date of filing this Quarterly Report on Form 10-Q, based on our current\ncommitments and development plans. We have incurred recurring losses and need to raise additional funds to sustain our operations. These\nfactors raise substantial doubt about our ability to continue as a going concern.

We have incurred net losses\nin each year since our inception, including net losses of approximately $54.0 million, inclusive of the one-time acquired in process research\nand development write off of $46.2 million, and $8.0 million for the six months ended June 30, 2026 and year ended December 31, 2025,\nrespectively. We had accumulated deficits of approximately $144.0 million and $90 million as of June 30, 2026 and December 31, 2025, respectively.\nAll of our operating losses in the six months ended June 30, 2026 resulted from costs incurred in operations, including costs in connection\nwith our continuing research and development programs and from general and administrative costs associated with our operations.

We will not generate revenue\nfrom product sales unless and until we successfully complete development and obtain marketing approval for AT177 or AD04, which we expect\nwill take a number of years and is subject to significant uncertainty.

Until such time, if ever,\nas we can generate substantial revenue from product sales, we expect to finance our operating activities through a combination of equity\nofferings, debt financings, government or other third-party funding, commercialization, marketing and distribution arrangements and other\ncollaborations, strategic alliances and licensing arrangements. However, we may be unable to raise additional funds or enter into such\nother arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and\nwhen needed would have a negative impact on our financial condition and our ability to develop AT 177 and AD04.

Recent Developments

Acquisition of Azora

On June 11, 2026, we acquired\nAzora in accordance with the terms of the Merger Agreement. Pursuant to the Merger Agreement, Azora became a wholly owned subsidiary\nof the Company.

At closing of the Merger,\nwe issued to former Azora stockholders 437,421 shares of our common stock and 12,930.601 shares of Series A Non-Voting Convertible Preferred\nStock, par value $0.001 per share (“Series A Preferred Stock”). Each share of Series A Preferred Stock is convertible into\n1,000 shares of our common stock, subject to the terms and limitations set forth in the applicable certificate of designation and related\ntransaction documents, including without limitation the receipt of approval of our stockholders of the conversion thereof. Azora outstanding\noptions to purchase Azora common stock were converted into options to purchase an aggregate of 1,177,782 shares of our common stock.

On June 11, 2026, in connection\nwith, and as a condition to closing of, the Merger, we entered into a Securities Purchase Agreement (the “Purchase Agreement”)\nwith the purchasers named therein (the “PIPE Investors”), pursuant to which we issued and sold to the PIPE Investors, in a\nprivate placement transaction, at the initial closing on June 12, 2026 (the “Initial PIPE Closing”), pre-funded warrants (the\n“Initial Closing Pre-Funded Warrants”) to purchase up to an aggregate of 9,749,345 shares of common stock, at a price of $2.7489\nper Initial Closing Pre-Funded Warrant, for an aggregate purchase price of $26.8 million. In addition, we agreed to issue and sell to\nthe PIPE Investors, at one or more subsequent closings at the option of each PIPE Investor (each, a “Milestone Closing”),\npre-funded warrants (“Milestone Pre-Funded Warrants”) to purchase up to an aggregate of 9,749,345 shares of common stock and\nincentive warrants (“Milestone Incentive Warrants” and, together with the Milestone Pre-Funded Warrants, the “Milestone\nWarrants”) to purchase up to an aggregate of 9,749,345 shares of common stock, at a combined purchase price equal to $2.7489 per\nMilestone Warrants, for an aggregate purchase price of up to $26.8 million; provided, however, that a PIPE Investor’s right to\npurchase Milestone Warrants would be decreased by the percentage of their Initial Closing Pre-Funded Warrants that they exercised (the\n“PIPE Warrant Penalty Provision”). The issuance and sale of Initial Closing Pre-Funded Warrants and Milestone Warrants pursuant\nto the Purchase Agreement are collectively referred to as the “Financing.”

Pursuant to the terms\nof the Merger Agreement, upon the closing of the Merger, we agreed to guarantee the payment of $5.5 million in principal amount of certain\namended and restated convertible promissory notes issued by Azora (the “Azora Notes”) to certain individuals (collectively,\nthe “Former Azora Noteholders”). The $5.6 million fair value of the principal and accrued interest of the Azora Notes is represented\nas “Convertible promissory notes” in the table of net assets acquired by the Company and included in Note 4. On June 11,\n2026, we entered into exchange agreements (the “Exchange Agreements”) with the Former Azora Noteholders to extinguish the\npayment guaranty and retire the Azora Notes in exchange for the issuance to the Former Azora Noteholders of Initial Closing Pre-Funded\nWarrants to purchase an aggregate of 2,031,603 shares of common stock (the “Azora Note Exchange”). As a result of the Azora\nNote Exchange, all such Azora Notes have been deemed to be repaid in full and all outstanding obligations thereunder have been extinguished.\nPursuant to the Exchange Agreements, the Former Azora Noteholders are also entitled to participate in Milestone Closings to purchase\nMilestone Pre-Funded Warrants to purchase up to an aggregate of 2,031,603 shares of common stock and Milestone Incentive Warrants to\npurchase up to an aggregate of 2,031,603 shares of common stock, at a combined price of $2.7489, on substantially the same terms as the\nPIPE Investors under the Purchase Agreement, for an aggregate purchase price of up to $5.6 million; provided, however, that a Former\nAzora Noteholder’s right to purchase Milestone Warrants would be decreased by the percentage of their Initial Closing Pre-Funded\nWarrants that they exercised (the “Noteholder Warrant Penalty Provision”, and together with the PIPE Warrant Penalty Provision,\nthe “Penalty Provision”). We accounted for the Azora Note Exchange as a debt extinguishment and an extinguishment\nloss of $6.1 million was recognized based upon the difference between the reacquisition price of $11.7 million and the net carrying amount\nof the Azora Notes of $5.6 million, which reflects the fair value of the principal and accrued interest of the Azora Notes. The reacquisition\nprice of $11.7 million is equal to the fair value of the Initial Closing Pre-Funded Warrants to purchase an aggregate of 2,031,603\nshares of Adial’s common stock of $6.1 million and the liability classified rights with an aggregate fair value of $5.6\nmillion to participate in Milestone Closings to purchase Milestone Pre-Funded Warrants to purchase up to an aggregate of 2,031,603 shares\nof Adial’s common stock and Milestone Incentive Warrants having an exercise price of $2.7489 per share to purchase up to an aggregate\nof 2,031,603 shares of Adial’s common stock issued upon the Azora Note Exchange and the net carrying amount is equal\nto the principal and accrued interest amount of the Azora Notes.

The Azora Note Exchange, together with the Merger\nand the Financing, are referred to as the “Transactions.”

Purchase Agreement and Exchange Agreement\nAmendments

On September 16, 2026,\nthe Company entered into an Amendment No. 2 to Securities Purchase Agreement (the “Purchase Agreement Amendment”) with certain\nPIPE Investors, constituting holders of the Majority of Interest (as defined in the Purchase Agreement), pursuant to which the Purchase\nAgreement was amended to (i) remove the PIPE Warrant Penalty Provision and to (ii) add a provision prohibiting the PIPE Investor from\noffering for sale, selling, assigning, transferring, pledging or otherwise disposing of certain of the shares of common stock issuable\nupon exercise of the Initial Closing Pre-Funded Warrants for the lock-up period specified in the Purchase Agreement Amendment, subject\nto certain exceptions.

On September 16, 2026\nand September 30, 2026, the Company also entered into an Amendment No. 1 to Note Exchange Agreements (the “Note Agreement Amendment”\nand together with the Purchase Agreement Amendment, the “Amendments”) with the Former Azora Noteholders, pursuant to which\nthe Note Exchange Agreements were amended to (i) remove the Noteholder Warrant Penalty Provision and to (ii) add a provision prohibiting\nthe Former Azora Noteholders from offering for sale, selling, assigning, transferring, pledging or otherwise disposing of certain of\nthe shares of common stock issuable upon exercise of the Initial Closing Pre-Funded Warrants for the lock-up period specified in the\nNote Agreement Amendment, subject to certain exceptions.

As a result of the Amendments,\nthe Milestone Warrant rights now meet the definition of equity classified under the accounting guidance.

Our Product Candidates

Azora is developing colon-targeted\nAhR agonists for the treatment of inflammatory bowel disease (“IBD”). Azora was originally incorporated as Meya Pharmaceuticals\nand later renamed and co-founded by Matthew Davidson, Ph.D., Julie Saiki, Ph.D., and Johan Andreasson Ph.D., and was spun out of Stanford\nUniversity’s translational medicine SPARK program. In connection with the Merger, Dr. Davidson, Azora’s co-founder and\nformer Chief Executive Officer, was appointed as our Chief Development Officer and as a member of our Board of Directors, Dr. Saiki\nwas appointed Executive Vice President of Strategy, and Wendy Young, Ph.D., formerly Senior Vice President of Small Molecule Drug Discovery\nat Genentech, was appointed to our Board of Directors as an independent director upon closing of the Merger.

AhR is a ligand-activated\ntranscription factor involved in regulating immune responses and epithelial barrier function, and we believe it represents an attractive\ntherapeutic target across a range of inflammatory diseases. In the gastrointestinal tract, AhR signaling helps regulate mucosal immunity\nand intestinal barrier integrity, and reduced AhR expression has been reported in the inflamed intestinal mucosa of patients with inflammatory\nbowel disease. In clinical studies, including a randomized, placebo-controlled trial conducted in Japan, indigo naturalis, a traditional\nherbal preparation containing the AhR ligands indigo and indirubin, was associated with clinical responses in patients with UC. However,\nindigo naturalis use has also been associated with serious adverse events, including pulmonary arterial hypertension. In addition, as\na botanical extract, indigo naturalis is subject to limitations such as variability in composition and potency.

Our core scientific thesis\nis that delivering potent AhR agonism locally to the colon, while minimizing systemic exposure, may enable us to achieve the clinical\nactivity of AhR activation observed in these clinical studies while reducing the risk of the systemic adverse effects observed with prior\nAhR agonists.

AT177, our lead product\ncandidate, is a fully synthetic, orally administered prodrug designed to release indirubin, which we believe to be one of the most potent\nAhR agonists in indigo naturalis, in the colon. We believe AT177 has the potential to be a differentiated treatment for UC. We have completed\na GLP toxicology study in rats, received pre-IND feedback from the FDA, and are conducting IND-enabling studies. Subject to the appropriate\nregulatory agencies allowing our studies to proceed, we intend to advance AT177 into a Phase 1a SAD/MAD study followed by a Phase 1b\nproof-of-concept (“PoC”) study in patients with UC, with an initial proof-of-concept readout anticipated in first half of\n2028.

In addition to AT177, our\npipeline includes AD04, our legacy investigational product candidate for the treatment of AUD, which is described under “Legacy\nProgram — AD04,” below.

Our Pipeline

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Figure: Our pipeline — AT177\nin UC (lead) and AT177 in Crohn’s disease. Source: Company materials.

Corporate Strategy

Our mission is to improve\nthe lives of patients suffering from serious inflammatory diseases by developing differentiated therapies that restore immune balance\nat the site of disease. Our strategy to achieve this goal centers on the following development priorities:

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Advance AT177\n through IND-enabling studies and into the clinic. We intend to complete our ongoing IND-enabling\n program and initiate a Phase 1a SAD/MAD study, with an IND submission and Phase 1a\n initiation targeted for the first half of 2027, subject to the appropriate regulatory agencies\n allowing our studies to proceed.

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Establish\n clinical proof of concept in UC. We plan to conduct a Phase 1b proof-of-concept\n study of AT177 in patients with UC, subject to the appropriate regulatory agencies allowing\n our studies to proceed, with an initial readout anticipated in the first half of 2028.

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Expand AT177 into additional indications or combinations. We\nbelieve a successful proof of concept in UC may support expansion of AT177 into Crohn’s disease and other immune-mediated\nconditions, and that AT177’s mechanism is orthogonal to and potentially combinable with existing UC therapies.

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Evaluate options for our legacy AD04 program. We\ncontinue to evaluate strategic and development options for AD04 for the treatment of alcohol use disorder in genetically defined patient\npopulations.

Ulcerative Colitis and the Case for Colon-Targeted\nAhR Agonism

Disease Overview and Unmet Need

UC is a chronic inflammatory\nbowel disease characterized by inflammation and ulceration of the colonic mucosa. Symptoms include rectal bleeding, urgency, diarrhea\nand abdominal pain and can severely impact quality of life. Ulcerative colitis arises from a dysregulated immune response, with immunologic,\nepithelial barrier and environmental factors all contributing to disease initiation and progression. It is estimated that UC and Crohn’s\ndisease impacts more than 5.0 million patients worldwide and growing.

In the United States,\napproximately 1.25 million patients were treated for UC in 2020, representing an estimated U.S. total addressable market of\napproximately $8.4 billion in 2023 and growing. Despite meaningful therapeutic advances over the last decade, including more than\n15 approved therapies across multiple classes, UC continues to impose a substantial burden of illness, with clinical remission at induction\nrates generally below 30% and durable mucosal healing remaining a central unmet clinical priority.

Despite the availability of multiple classes of\napproved therapies, UC remains an area of substantial unmet need. Existing therapies are limited by:

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A therapeutic ceiling that generally does not exceed approximately\n30% clinical remission at induction or approximately 40% at maintenance;

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Secondary loss of response, with approximately 50% of patients\nwho achieve an initial benefit losing response over time;

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Approximately 10% of patients failing all available therapies\nand ultimately requiring colectomy; and

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Systemic immunosuppression associated with many approved agents,\nwhich can increase the risk of serious infection and malignancy.

As a result, there remains\na significant need for an oral therapy that achieves high, durable rates of remission with a favorable safety profile. We designed AT177\nwith the goal of addressing these limitations.

The Aryl Hydrocarbon Receptor (AhR) Is a Master\nRegulator of Gut Health

The AhR is a ligand-activated\ntranscription factor expressed in immune cells and intestinal epithelial cells that regulates both immune function and epithelial barrier\nintegrity. Polymorphisms in AhR have been associated with increased risk of UC. AhR agonism has been shown to reduce pro-inflammatory\ncytokines, including IL-17a, IL-6 and TNFα, to increase the anti-inflammatory and tissue-protective cytokines IL-10 and IL-22 and\nregulatory T cells (Tregs), and to increase expression of tight junction proteins. AT177 is currently being researched for its ability\nto restore barrier function locally, which may help end the cycle whereby additional bacteria, antigens and inflammatory triggers can\nenter the body via a disrupted mucosal barrier and further exacerbate the ongoing immune response. Although further research is needed,\nwe believe that AT177 may have the potential to be used in combination with existing targeted drugs for UC, given its orthogonal mechanism.

Systemically available\nAhR agonists have been evaluated in clinical studies in UC and other inflammatory diseases, and we believe the results of those studies\nsupport AhR as a target for further investigation in UC. Although the approved AhR agonist tapinarof is approved for the treatment of\npsoriasis and atopic dermatitis, no AhR agonist has been approved by the FDA for the treatment of UC. Systemic AhR signaling has been\nassociated with potential safety risks, including headaches, cardiovascular adverse events, and systemic immunosuppression that may increase\nrisk of malignancy. These observations informed our strategy of delivering potent AhR agonism locally in the colon while minimizing systemic\nexposure.

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Figure: The AhR gut immune and epithelial barrier function.\nSource: Company materials.

Clinical Studies of Indigo Naturalis in\nUlcerative Colitis

Indigo naturalis, a\nbotanical extract used historically in traditional medicine practices in East Asia, has been evaluated in several clinical studies\nin patients with UC, which are described below. Indigo naturalis has not been approved by the FDA or any comparable foreign\nregulatory authority for the treatment of UC. Our co-founder, Dr. Julie Saiki, conducted an open-label Phase 1b study of\nindigo naturalis in refractory UC patients at Stanford University (Saiki et al., BMJ Open Gastroenterology, 2021; n=11), of whom 9\nof 11 had failed anti-TNF therapy and 5 of 11 had been recommended for colectomy. Eligible patients were 13 to 75 years old with\nbiopsy-confirmed UC and a total Mayo score of 3 to 12, a Mayo endoscopic subscore of at least 1 and a Physician’s Global\nAssessment subscore of at least 1, and were refractory or intolerant to 5-aminosalicylic acid; patients 17 years or younger were\nalso required to be refractory or intolerant to corticosteroids, small-molecule immunomodulators and biologics, or to be\ncorticosteroid-dependent. Patients with Crohn’s disease or indeterminate colitis, a change in therapy within two weeks before\nbaseline, or use of immunomodulators or tobacco, were excluded. In this study, indigo naturalis was associated with increased\ncolonic AhR target engagement (~12,000-fold mean increase in colonic AhR activity). This study was not powered for statistical\nsignificance. No patient discontinued treatment due to an adverse event although one patient had two serious adverse events judged\nto be unrelated to study drug. Clinical response was defined as a decrease in the total Mayo score of at least 30% and 3 points with\nan accompanying decrease in the rectal bleeding subscore, clinical remission as a Mayo score below 3 with no individual subscore\nabove 1, and mucosal healing as a Mayo endoscopic subscore of 0 or 1. We believe the results of this study support further\ninvestigation of the AhR mechanism in UC.

Indigo naturalis has been\nevaluated in additional clinical studies in UC. In a randomized, double-blind, placebo-controlled trial (Naganuma et al., Gastroenterology,\n2018; n=86) which included UC patients with a Mayo score of 6 or more and sigmoidoscopy subscore of at least 2, indigo naturalis demonstrated\nup to approximately 50% placebo-adjusted clinical remission (defined as a Mayo score of ≤2 and no subscores >1) at Week 8, with\nbenefit observed in both biologic-experienced and biologic-naïve patients (Naganuma et al., J Gastroenterol, 2019). The study was\ndesigned with 80% power to detect a difference in clinical response (defined as a 3-point decrease in Mayo score and a decrease of at\nleast 30% from baseline, with a decrease of at least 1 point on rectal bleeding subscore or absolute rectal bleeding score of 0-1) between\nthe highest-dose (2.0 g/d) and placebo, using a two-sided alpha of 0.05. There was a significant dose-dependent linear trend for the\nprimary endpoint, proportion of patients in clinical response at week 8 (Cochran-Armitage trend test P<.0001 compared with placebo).\nNo serious adverse events were observed, although mild liver dysfunction was observed in 10 patients who received indigo naturalis. This\nstudy was stopped early due to a report of a patient using indigo naturalis outside of clinical study developing pulmonary arterial hypertension.\nIn a longer-term open label maintenance study (Matsuno et al., 2022; n=33) in patients with moderate to severe active UC with a clinical\nactivity index (CAI) ≥8 and Mayo endoscopic subscore (MES) ≥2, clinical remission (defined as a clinical activity index or CAI\nscore of ≤4) was reported in approximately 73% of patients at one year. Seven severe adverse events were reported in 4 patients, which\nincluded acute colitis (3), infectious colitis (1), intussusception (1), appendicitis (1), and portal vein thrombosis (1). This open\nlabel study was not powered for statistical significance. Indigo naturalis is an uncontrolled botanical mixture that is not FDA-approved\nand carries potential systemic safety liabilities, limiting its utility as a therapy.

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Figure:\nSummary of results from clinical studies of indigo naturalis in ulcerative colitis. Source: Company materials

We Believe AhR Activity in UC Is Driven\nLocally

Preclinical and\nclinical evidence supports our thesis that the activity of AhR agonism in UC is driven by local activation in the colonic\nepithelium, rather than by systemic exposure. In a chronic murine colitis model, selective deletion of AhR in intestinal epithelial\ncells eliminated most of the benefit of AhR agonism, supporting that colonic epithelial AhR signaling is critical to efficacy. In\naddition, tapinarof (Vtama®), a topically-applied AhR agonist approved for psoriasis and atopic dermatitis, achieves its\ntherapeutic effect with minimal systemic exposure. Consistent with these findings, Azora’s fully-owned, topical indirubin\nprogram, AT193, was evaluated in psoriasis patients with no quantifiable systemic exposure in a Phase 1b study\nconducted in Australia and sponsored by Azora Therapeutics Australia Pty Ltd. Although the program is not in active development, we believe the clinical data support the hypothesis that\nlocal activation alone may be sufficient for clinical activity in another autoimmune disease. Together, these data support our\nbelief that local AhR activation may be sufficient to drive clinical benefit.

AT177 — Our Lead Product Candidate

Composition and Mechanism of Action

AT177 is a fully-synthetic,\ncolon-targeted, small-molecule prodrug designed to recapitulate the clinical activity observed with indigo naturalis while minimizing\nsystemic exposure. AT177 converts in the colonic lumen to indirubin, which we believe to be one of the most potent AhR agonists in indigo\nnaturalis, in the colon. Conversion to indirubin occurs via hydrolysis across a range of physiological pHs expected in healthy and UC\ncolons and does not rely on microbial activity or expression of enzymes which may be disrupted in UC patients. By liberating indirubin\ndirectly at the site of disease, AT177 is designed with the intention to maximize local AhR activation in the colonic epithelium while\nlimiting systemic exposure.

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Figure: AT177 converts into indirubin, the\nactive moiety in indigo naturalis. Source: Company materials.

Differentiated Product Profile

We believe that AT177 has a differentiated clinical\nprofile compared with approved therapies and other AhR candidates in development:

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Active moiety\n with prior clinical experience. AT177’s active moiety, indirubin, is the AhR agonist\n that we believe is primarily responsible for the clinical activity observed with indigo naturalis\n in UC. Obefazimod, which we believe acts at least in part as a medium-potency AhR agonist,\n has been evaluated in Phase 3 trials in UC.

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Designed\n for ulcerative colitis. AT177 is an oral, colon-targeted agent designed to maximize local\n AhR activation at the site of disease while minimizing systemic exposure, with the goal of\n improving efficacy and limiting systemic toxicities.

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Endogenous\n active moiety. Indirubin is an endogenous molecule produced by colonic bacteria in healthy\n individuals.

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Non-immunosuppressive, combinable mechanism. AT177\nis designed to restore mucosal immune homeostasis and epithelial barrier function locally rather than broadly suppressing the immune\nsystem, which we believe may make it combinable with existing mechanisms for UC while potentially avoiding certain risks associated with\nsystemic immunosuppression.

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Greater colonic\n AhR activation than indirubin in a head-to-head preclinical study. While preclinical\n studies have limited value in predicting the safety and effectiveness of a drug, in a head-to-head\n preclinical study in the DSS murine colitis model, oral AT177 achieved approximately 8-fold\n greater colonic AhR signaling than a molar-equivalent amount of indirubin, as measured by\n induction of the AhR regulated gene CYP1A1 (n = 5 per group; p = 0.0156).

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Long-dated intellectual property. AT177\nis protected by granted composition-of-matter patents extending to 2042, with additional pending applications for colon-targeted AhR\nagonist formulations and methods of use.

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Market-expansion\n optionality. AT177 is designed to be combinable with other UC mechanisms, and a successful\n proof of concept in UC may support development in Crohn’s disease.

Preclinical Evidence

While preclinical studies\nhave limited value in predicting the safety and effectiveness of a drug, in a dextran sodium sulfate (“DSS”) murine colitis\nmodel, in a head-to-head comparison, oral AT177 produced greater in vivo colonic AhR activity than indirubin, achieving approximately\n8-fold greater local colonic AhR signaling than a molar-equivalent amount of indirubin. In a trinitrobenzene sulfonic acid (“TNBS”)\nmurine colitis model, animals treated with oral AT177 had lower disease activity scores than vehicle-treated animals (p< 0.0001 at\nday 5 and day 6), and histology showed greater preservation of colonic crypt architecture and epithelial integrity and less inflammatory\ninfiltrate in the lamina propria than in vehicle-treated animals. Results in animal models may not be predictive of results in humans.

In mini pig animal studies,\noral AT177 resulted in indirubin concentrations above the AhR EC50 across the colon and into the rectum, with low plasma exposure (below\nthe quantification limit).

We believe these preclinical\ndata, together with the clinical evidence supporting the AhR mechanism from indigo naturalis studies and the shared active moiety, reduce\ncertain development risks for AT177. However, substantial development risks remain, including risks related to safety, efficacy, manufacturing,\nand regulatory approval.

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Competitive Positioning Among AhR Agonists

We believe that AT177’s\nprofile is differentiated from other AhR agonists in development because it is designed to deliver a highly potent AhR agonist locally\nto the colon, is rapidly metabolized and potentially has a pharmacokinetic/pharmacodynamic (“PK/PD”) profile we believe to\nbe appropriate for UC with limited systemic exposure in preclinical studies. Its active moiety, indirubin, has been evaluated in patients\nas a component of indigo naturalis and is an endogenously produced molecule.

We are aware of several other\nparties developing drugs with AhR activity in inflammatory bowel disease, including Abivax, Equillium and Dr. Falk Pharma (in partnership\nwith AllianThera Biopharma).

Abivax is developing obefazimod,\nan orally administered, medium-potency systemic AhR agonist that induces upregulation of MiR-124. Obefazimod has reported approximately\n16.4% placebo-adjusted clinical remission at Week 8 at a 50 mg dose in its Phase 3 ABTECT program. Based on published data,\nwe believe obefazimod’s PK/PD profile may not achieve optimal colonic AhR activation, with near-undetectable levels of obefazimod\nand its metabolite reported in rectal biopsies in a Phase 1 study (data from https://clinicaltrials.gov/study/NCT02990325 accessed\non June 3, 2026).

Equillium is developing\nEQ504, a preclinical-stage AhR modulator that it acquired through its 2024 acquisition of Ariagen, Inc. We believe a key distinction\nbetween AT177 and EQ504 is that AT177’s active moiety, indirubin, has been evaluated in patients with UC as a component of indigo\nnaturalis, whereas EQ504’s active moiety has not, to our knowledge, been evaluated in patients. Further the systemic exposure due\nto EQ504 administration is unknown.

Dr. Falk is developing\nATB102, an early clinical-stage orally administered AhR/Nrf2 agonist which appears to be based on the tapinarof scaffold. ATB102 appears\nto be a medium potency AhR agonist with reduced systemic exposure relative to tapinarof.

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Figure: AT177 was rationally designed to\nhave the right profile for ulcerative colitis. Source: Company materials.

Clinical Development Plan

Our near-term development\npriorities are focused on advancing AT177 efficiently through IND-enabling studies into Phase 1a safety and pharmacology studies,\nfollowed by a Phase 1b proof-of-concept trial in patients with UC. As of the date of this Quarterly Report on Form 10-Q, we\nhave scaled drug substance, demonstrated in vivo activity in animal models, achieved target PK/PD in large animals, and completed GLP\ntoxicology studies in rats. We have received pre-IND feedback from the FDA and are conducting IND-enabling studies in line with FDA guidance.\nOur proposed IND enabling package will include phase-appropriate toxicology studies in a rodent and non-rodent species, genotoxicity\nstudies, safety pharmacology studies, adsorption, distribution, metabolism and excretion (“ADME”) studies, transporter studies,\nphototoxicity studies, pharmacology studies, and AhR binding studies. We plan to file an IND for AT177 in the first half of 2027 and,\nsubject to the appropriate regulatory agencies allowing us to proceed, to initiate a Phase 1a SAD/MAD study followed by a Phase 1b\nproof-of-concept study in UC patients, with an initial proof-of-concept readout anticipated in the first half of 2028.

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Figure: Financing positions AT177 through\nIND-enabling studies and into clinical proof of concept in UC. Timelines shown are estimates, are not guaranteed and are subject to change\nbased on numerous factors, including the successful and timely completion of preclinical studies and clinical trials, the appropriate\nregulatory agencies allowing studies to proceed, regulatory feedback, manufacturing and the availability of funding. Source: Company\nmaterials.

Chemistry, Manufacturing and Controls

AT177 is manufactured\nfrom commercially available, fully-synthetic starting materials using a proprietary, highly scalable synthetic route. We have completed\nkilogram-scale feasibility batches and have observed drug-substance stability of greater than 18 months at room temperature. We\nhave initiated the development of U.S.-based current Good Manufacturing Practice (“cGMP”) manufacturing with a long-term development\npartner. The drug product is a colon-targeted oral formulation that uses only excipients found in FDA-approved drugs and is designed\nto provide a highly targeted colonic release profile, which has been supported by large-animal studies. We believe AT177’s CMC\npackage is well-positioned to support clinical advancement.

Potential Future Indications

We believe our colon-targeted\nAhR agonist holds promise across a broader range of immune-mediated conditions, including other inflammatory bowel diseases. A proof\nof concept in ulcerative colitis may, if successful, support development of AT177 in Crohn’s disease, and we are researching whether\nAT177’s mechanism is orthogonal to, and potentially combinable with, approved UC therapies. We also intend to explore additional,\nundisclosed platform opportunities as the AT177 program advances.

Legacy Program — AD04

Prior to the Merger, we were\na clinical-stage pharmaceutical company focused on the treatment and prevention of addiction and related disorders. Our legacy investigational\nproduct candidate, AD04, was being developed as a potential therapy for alcohol use disorder, or AUD. AD04 was previously evaluated\nin the Phase 3 ONWARD trial for the treatment of AUD in patients with specific target genotypes identified through a companion genetic\ndiagnostic test. See Part I, Item 1. Business of our Annual Report on Form 10-K for the year ended December 31, 2025,\nfor additional information regarding our legacy AD04 program and additional information about our business prior to the Merger.

Competition

The biotechnology and pharmaceutical\nindustries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on intellectual property. While\nwe believe our differentiated, colon-targeted AhR agonist approach provides a competitive advantage, we face competition from many sources,\nincluding pharmaceutical and biotechnology companies, academic institutions, governmental agencies and public and private research institutions.

The UC market in particular\nhas become an increasingly competitive space. There are now multiple classes of approved therapies — including anti-TNF\nagents, anti-integrin antibodies, IL-12/23 and IL-23 inhibitors, JAK inhibitors and S1P receptor modulators — as well\nas numerous product candidates in clinical development. There are also several competitive AhR-directed approaches including obefazimod\n(Abivax), EQ504 (Equillium), ATB102 (Dr. Falk Pharma in partnership with AllianThera).

Intellectual Property

We seek to protect proprietary\ntechnology, inventions and improvements that are commercially important to the development of our business by seeking, maintaining and\ndefending patent rights, and leveraging trade secrets, know-how and regulatory exclusivities where available.

We solely own\nintellectual property rights covering AT177 on a worldwide, royalty-free basis. Azora was spun out of Stanford University’s\nSPARK translational research program after a clinical study of indigo naturalis was conducted at Stanford, Stanford granted Azora\nexclusive rights to use clinical data with indigo naturalis for regulatory, development and intellectual property\npurposes. This data has been published in Saiki et al., 2021. Stanford has not granted any license relating to indirubin or AT177,\nand we do not believe that any such license is required. No Stanford resources were used in the development of the inventions\nclaimed in Azora’s patents, and No inventors of Azora’s patents were affiliated with Stanford at the time such patents\nwere filed. Our granted composition-of-matter patent directed to AT177 extends to 2042. We are also pursuing patent protection for\nour colon-targeted AhR agonist formulations and methods of preventing or mitigating side effects (headaches, GI, PAH) and enhancing\nthe efficacy of AhR agonists. The following table summarizes our key issued patents directed to AT177:

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Patent No.	Type	Status	Expires
US Patent No. 11,834,412 \nJP 7660263	Composition-of-Matter	Granted (U.S., JP)	2042
US Patent No. 12,516,022	Methods	Granted (U.S.)	2042

GI = gastrointestinal; PAH = pulmonary arterial\nhypertension. Patent expiration dates shown do not include any patent term extension or adjustment that may be available.

As of July 27, 2026, our patent estate related\nto AT177 and our broader patent families (four) are described below:

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Composition-of-matter — indirubin prodrugs.\nThis patent family includes claims directed to indirubin prodrugs, including AT177, and is issued in the United States and Japan\n(U.S. Patent No. 11,834,412 and Japanese Patent No. 7660263), with claims estimated to expire in 2042, absent any patent\nterm adjustment or extension. Applications in this patent family are also pending in Australia, Canada, China, Europe, Mexico, Hong Kong\nand the United States.

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Methods of use in inflammatory disease. This same patent\nfamily also includes claims directed to the use of our active pharmaceutical compounds to treat inflammatory diseases, including ulcerative\ncolitis, pouchitis and Crohn’s disease, and is issued in the United States (U.S. Patent No. 12,516,022), with\nclaims estimated to expire in 2042.

\n\n

●

Colon-targeted formulations. Our second patent family\nincludes pending claims directed to colon-targeted formulations of AhR agonists (US-2025-0255820-A1), which, if granted, are expected\nto expire in 2040. We believe this family has the potential to provide broad intellectual property covering colon-targeted AhR agonists.

\n\n

●

Methods to improve the therapeutic profile of AhR agonists.\nOur third patent family includes pending claims directed to methods of reducing possible side effects of AhR agonists, including\nheadaches, gastrointestinal effects and pulmonary arterial hypertension (US-2025-0195469), which, if granted, are expected to\nexpire in 2042.

AT177 is not a botanical\nsubstance. AT177 is a fully synthetic novel prodrug of indirubin that does not occur in nature. The composition-of-matter claims\ncovering AT177 have already been granted by the USPTO. We do not intend to patent any botanical substances.

We hold these rights outright\nand are not subject to any third-party license, royalty or milestone obligations with respect to AT177. In addition to patent protection,\nwe rely on trade secrets, know-how and continuing technological innovation to protect our technology. We intend to seek patent term extension\nunder the Hatch-Waxman Act for one or more patents covering AT177 following any marketing approval, where available.

Manufacturing

We do not own or operate,\nand currently have no plans to establish, manufacturing facilities for the production of AT177. We rely, and expect to continue to rely,\non third-party contract manufacturing organizations (“CMOs”) for our raw materials, drug substance and drug product needs\nfor preclinical research and clinical supply, and expect to do so for any future commercial supply. AT177 is manufactured from commercially\navailable, fully-synthetic starting materials using a proprietary, highly scalable synthetic route.

Sales and Marketing

Given our current stage\nof development, we have not yet established commercial organization or distribution capabilities. If AT177 or any other product candidate\nreceives marketing approval from the FDA, we expect to manage sales, marketing, patient access and distribution through internal resources,\nthird-party relationships, or collaboration with one or more pharmaceutical companies to enhance our commercial capabilities.

Key Factors Impacting\nthe Comparability of Results

The\nhistorical results of operations for the periods presented may not be comparable, either to each other or to our future results of operations,\nfor the reasons described below:

Acquisition of\nAzora

On\nJune 11, 2026, we completed the acquisition of Azora. As a result of this transaction, Azora became a wholly owned subsidiary of ours,\nand our business shifted from the development of AD04 for the treatment of AUD in heavy drinking patients to being primarily focused on\nthe development of AT177 for the treatment of UC.

We\nhave been determined to be the accounting acquirer, and accordingly, the financial statements for periods prior to the Merger reflect\nonly the historical results of our legacy AUD focused business. The results of operations of Azora have been included in our consolidated\nfinancial statements beginning on the date of the Merger, June 11, 2026.

As\na result, the results of operations for the three and six months ended June 30, 2026 include (i) our legacy AUD focused operations for\nthe full period and (ii) the results of Azora for the period from June 11, 2026 through June 30, 2026. Accordingly, the results for the\ncurrent period are not directly comparable to prior periods.

In\naddition, the Merger resulted in significant changes to our financial position, including the recognition of substantial in process research\nand development expense. We also incurred transaction-related costs and integration-related expenses in connection with the Merger, which\nimpacted operating results for the current period.

Following\nthe Merger, we operate with a different product candidate, cost structure, capital requirements, and personnel. As a result of these changes,\nperiod-to-period comparisons of our historical results may not be indicative of future performance.

Results of operations for the three months\nended June 30, 2026 and 2025

The following table sets forth the components\nof our statements of operations in dollars for the periods presented (in thousands):

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n

	For the Three Months Ended June 30,
	2026			2025			Change
Research and development expenses	$	440			$	732		$	(292	)
General and administrative expenses		5,400				1,150			4,250
Acquired in-process research and development		46,185				—			46,185
Total Operating Expenses		52,025				1,882			50,143

Loss From Operations		(52,025	)			(1,882	)		(50,143	)

Change in fair value of milestone warrant rights liability		8,280				—			8,280
Financing expense related to milestone warrant rights liability		(2,067	)			—			(2,067	)
Loss on extinguishment of Azora Therapeutics convertible promissory notes		(6,054	)			—			(6,054	)
Change in value of equity method investment		(181	)			(99	)		(82	)
Other income (expense)		—				(1	)		1
Interest income		58				24			34
Total other income (expenses)		36				(76	)		112

Net loss	$	(51,989	)		$	(1,958	)	$	50,031

Research and development (“R&D”)\nexpenses

The\nfollowing table sets forth our research and development expenses in dollars for the periods presented (in thousands):

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n

	Three Months Ended
	June 30,
	2026		2025			Change
Research and development expenses
AD04	$	38		$	322		$	(284	)
AT177		103			–			103
CMC (1)		69			326			(257	)
Other personnel and unallocated (2)		230			84			146
Total research and development expense	$	440		$	732		$	(292	)

\n\n\n\n\n

(1)	Costs\n related to production and testing for CMC activities are not allocated on a program-by-program\n basis and mainly related to our AD04 product candidate.
(2)	Costs\n (primarily personnel) are related to all research and development programs and are not allocated\n on a program-by-program basis.

Research and development expenses\ndecreased by approximately $292,000 (40%) to $440,000 during the three months ended June 30, 2026 compared to $732,000 for the three months\nended June 30, 2025. The decrease was mainly due to decreased CMC and decreased research and development activity as the Company was engaged\nin merger discussions in the three months ended June 30, 2026 as compared to the same period in 2025.

General and administrative expenses (“G&A”)\nexpenses

General and administrative expenses increased by approximately $4,250,000\n(370%) to $5,400,000 during the three months ended June 30, 2026 compared to $1,150,000 for the three months ended June 30, 2025. The\nincrease was mainly due to merger related cost associated with the acquisition of Azora and bonus and severance expenses incurred in the\nthree months ended June 30, 2026 as compared to the same period in 2025.

Acquired In-Process Research and Development\nExpense

Acquired in-process research\nand development expense was $46.2 million for the three months ended June 30, 2026, with no comparable expense in the prior year period.\nThe charge was recognized in connection with the acquisition of Azora in June 2026 and represents the fair value of acquired IPR&D\nassets that had no alternative future use as of the acquisition date. See Note 4 to our unaudited condensed consolidated financial statement\nincluded elsewhere in this Quarterly Report on Form 10-Q for additional information regarding the Merger.

Change in Value of Equity Method Investment

The expense recognized to\nthe change in the value of our equity method investment in Adovate, LLC (“Adovate”) increased by approximately $82,000 in\nthe three months ended June 30, 2026 compared to the three months ended June 30, 2025. This increase is due to variations in the loss\nrecognized related to our equity investment which includes a lower equity share, with changes to the value of our Adovate equity recognized\non a three month lag.

Total Other income (expenses)

Total other income (expense),\nwas $36,000 for the three months ended June 30, 2026, compared to ($76,000) for the same period in 2025. The change was primarily driven\nby a ($6.1) million non-cash loss on extinguishment of promissory notes, recognized in connection with the acquisition with Azora when\nwe exchanged outstanding promissory notes for pre-funded warrants to purchase our common stock, ($2.1) million financing costs, offset\nby $8.3 million change in the fair value of our milestone warrant rights.

Results of operations for the six months ended\nJune 30, 2026 and 2025

The following table sets\nforth the components of our statements of operations in dollars for the periods presented (in thousands):

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n

	For the Six Months Ended June 30,			Change
	2026			2025			(Decrease)
Research and development expenses	$	873			$	1,479		$	(606	)
General and administrative expenses		6,969				2,671			4,298
Acquired in-process research and development		46,185				—			46,185
Total Operating Expenses		54,027				4,150			49,877

Loss From Operations		(54,027	)			(4,150	)		(49,877	)

Change in fair value of milestone warrant rights liability		8,280				—			8,280
Financing expense related to milestone warrant rights liability		(2,067	)			—			(2,067	)
Loss on extinguishment of Azora Therapeutics convertible promissory notes		(6,054	)			—			(6,054	)
Change in value of equity method investment		(249	)			(262	)		13
Other income (expenses)		—				165			(165	)
Interest income		105				59			46
Total other income (expenses)		15				(38	)		53

Net loss	$	(54,012	)		$	(4,188	)	$	(49,824	)

Research and development (“R&D”) expenses

The\nfollowing table sets forth our research and development expenses in dollars for the periods presented (in thousands):

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n

	Six Months Ended
	June 30,
	2026		2025			Change
Research and development expenses
AD04	$	215		$	695		$	(480	)
AT177		103			–			103
CMC (1)		240			615			(375	)
Other personnel and unallocated (2)		315			169			146
Total research and development expense	$	873		$	1,479		$	(606	)

\n\n

(1)	Costs\n related to production and testing for CMC activities are not allocated on a program-by-program\n basis and mainly related to our AD04 product candidate.

\n\n

(2)	Costs\n (primarily personnel) are related to all research and development programs and are not allocated\n on a program-by-program basis.

Research and development expenses decreased by approximately $606,000\n(41%) to $873,000 during the six months ended June 30, 2026 compared to $1,479,000 for the six months ended June 30, 2025. The decrease\nwas mainly due to decreased CMC and decreased research and development activity as the Company was engaged in merger discussions in the\nsix months ended June 30, 2026 as compared to the same period in 2025.

General and administrative expenses (“G&A”)\nexpenses

General and administrative expenses increased by approximately $4,298,000\n(161%) to $6,969,000 during the six months ended June 30, 2026 compared to $2,671,000 for the six months ended June 30, 2025. The increase\nwas mainly due to merger related cost associated with the acquisition of Azora, private placement costs that were expensed and bonus and\nseverance expenses incurred in the six months ended June 30, 2026 as compared to the same period in 2025.

Acquired In-Process Research and Development\nExpense

Acquired in-process research\nand development expense was $46.2 million for the six months ended June 30, 2026, with no comparable expense in the prior year period.\nThe charge was recognized in connection with the acquisition of Azora in June 2026 and represents the fair value of acquired IPR&D\nassets that had no alternative future use as of the acquisition date. See Note 4 to our unaudited condensed consolidated financial statement\nincluded elsewhere in this Quarterly Report on Form 10-Q for additional information regarding the Merger.

Change in Value of Equity Method Investment

The expense recognized to\nthe change in the value of our equity method investment in Adovate, LLC (“Adovate”) decreased by approximately $13,000 in\nthe six months ended June 30, 2026 compared to the six months ended June 30, 2025. This decrease is due to variations in the loss recognized\nrelated to our equity investment which includes a lower equity share, with changes to the value of our Adovate equity recognized on a\nthree month lag.

Total Other income (expenses)

Total other income (expense),\nwas $15,000 for the three months ended June 30, 2026, compared to ($38,000) for the same period in 2025. The change was primarily driven\nby a ($6.1) million non-cash loss on extinguishment of promissory notes, recognized in connection with the acquisition with Azora when\nwe exchanged outstanding promissory notes for pre-funded warrants to purchase our common stock, ($2.1) million financing costs, offset\nby $8.3 million change in the fair value of our milestone warrant rights liability.

Total other income, excluding losses from the equity method investment,\nchange in fair value of milestone warrant rights liability and financing costs, loss on extinguishment of promissory notes, decreased\nby approximately $119,000 in the six months ended June 30, 2026 compared to the six months ended June 30, 2025. This decrease was mainly\ndue to a milestone gain of approximately $150,000 that was recognized in the six months ended June 30, 2025 which did not occur during\nthe six months ended June 30, 2026.

Liquidity and Capital Resources at June 30,\n2026

On\nJune 11, 2026, we completed the acquisition of Azora and determined that the Company is the accounting acquirer. Accordingly, periods\nprior to the acquisition reflect the historical financial statements of the Company, and the results of Azora are included beginning on\nthe acquisition date. As a result, the liquidity and capital resources information for the six months ended June 30, 2026 is not directly\ncomparable to the prior-year period.

We\nhave incurred significant operating losses and negative cash flows from operations since inception and had an accumulated deficit of approximately\n$144.0 million as of June 30, 2026. We expect to continue to incur net losses for the foreseeable future as we continue to invest in the\ndevelopment of AT177 for the treatment of UC and maintain our legacy operations in a reduced capacity. We currently do not have enough\nfunding to complete our planned clinical trials for AT177 and accordingly, will not continue development of AD04 unless we receive additional\ncapital from a partner or collaboration earmarked for the development of AD04.

As\nof June 30, 2026, we had cash and cash equivalents of approximately $28.7 million. The Certificate of Designation of Preferences, Rights\nand Limitations of the Series A Non-Voting Convertible Preferred Stock (the “Certificate of Designation”) provides that if,\nat any time following the earlier of (i) stockholder approval of the conversion of the Series A Preferred Stock into shares of our common\nstock or (ii) December 11, 2026, we fail to timely deliver shares of common stock to a converting holder in accordance with the terms\nof the Certificate of Designation, such holder may require us to pay cash in an amount equal to the fair value of the undelivered shares.\nThe cash settlement price is the closing price on the last trading day before the Company’s receipt of a stockholder’s conversion\nnotice; based on the $4.01 closing price on September 30, 2026, settling all 12,930,601 shares of common stock issuable upon conversion\nof the Series A Preferred Stock would cost approximately $51.9 million. If stockholder approval of the conversion of the Series A Preferred\nStock has not yet been obtained, the cash settlement right will first become available on December 11, 2026 (six months after issuance),\nprovided that the exercise of such right will be only at a holder’s election. The Company’s cash reserves as of September\n30, 2026 were approximately $22.0 million, which would not be sufficient to fund a full settlement, and we expect that we would seek\nto raise alternative debt or equity financing to do so. The Company may be unable to raise additional funds when needed on favorable\nterms or at all. The Company believes holders of the Company’s common stock are aware of the Company’s cash position, the\nexpected shortfall should the Company be forced to cash settle the Series A Preferred Stock and the unlikelihood that the Company would\nbe able to raise sufficient capital to finance full cash settlement of the Series A Preferred Stock. The Company believes each of these\nfactors positively influence the likelihood that holders of the Company’s common stock will support approval of the proposal to\nallow for the conversion of the Series A Preferred Stock at the Company’s reconvened 2026 Annual Meeting of Stockholders, when\nheld.

Our ability to execute our longer-term business plan will depend on\na number of factors, including the pace and cost of our IND-enabling and clinical development activities, the timing of regulatory interactions,\nand our ability to manage operating costs. We may seek to raise additional capital through public or private equity offerings, debt financings,\nor strategic partnerships to support future growth initiatives. However, there can be no assurance that such financing will be available\non acceptable terms, or at all.

Our principal liquidity needs\nhave historically been working capital, R&D costs including clinical trials, patent costs and personnel costs. We expect these needs\nto continue to increase in the near term as we engage in clinical trials and develop and eventually commercialize our compounds, if approved\nby regulatory authorities. Over the next several years, we expect to increase our R&D expenses as we undergo clinical trials to demonstrate\nthe safety and efficacy of our lead product candidate. To date, we have funded our operations primarily with the proceeds from our initial\nand secondary public offerings, sales pursuant to the sales agreement (the “ATM”) that we entered into with A.G.P./Alliance\nGlobal Partners ( “AGP”) on August 1, 2025 providing for the sale by us of our shares of common stock, from time to time,\nthrough the ATM, with certain limitations on the amount of common stock that may be offered and sold by us, private placements, use of\nour equity line, as well as other equity financings and warrant exercises.

For the six months ended June\n30, 2026, we sold 725,684 shares of common stock through the AGP ATM, for net proceeds of approximately $1.2 million after expenses. Additionally,\nwe sold Initial Closing Pre-Funded Warrants to purchase an aggregate of 9,749,345 shares of common stock to the PIPE Investors, for net\nproceeds of approximately $24.3 million, after deducting placement agent fees and the payment of other offering expenses associated with\nthe Financing that were payable by us.

We will require additional\nfinancing as we continue to execute our overall business strategy which is to complete IND-enabling studies, with an IND submission planned\nfor the first half of 2027. We intend to advance AT177 into a Phase 1a SAD/MAD study followed by a Phase 1b PoC study in patients\nwith UC, in each case subject to the appropriate regulatory authorities allowing our planned studies to proceed, with an initial proof-of-concept\nreadout anticipated in first half of 2028. We do not believe our current cash will be sufficient to allow us to commence the planned\nPhase 1b study or any additional studies for AD04. However, we do believe that the additional $32.4 million that we could receive upon\npurchase of the Milestone Warrants by the PIPE Investors and Former Azora Noteholders, if such persons exercise their right to purchase\nthe Milestone Warrants, would be sufficient to allow us to complete the planned Phase 1b study of AT177. We have no right to compel the\npurchase of any Milestone Warrants, and we are not relying on any commitment to do so. The PIPE Investors and Former Azora Noteholders\nare not obligated to purchase any Milestone Warrants, and no assurances can be provided that they will exercise their right to do so.

Our liquidity may be negatively\nimpacted as a result of research and development cost increases in addition to general economic and industry factors. Our continued operations\nwill depend on our ability to raise additional capital through various potential sources, such as through the sale of the Milestone Warrants,\nequity and/or debt financings, grant funding, strategic collaborations and strategic relationships in order to complete our subsequent\nclinical trial requirements for AT177. At this time, we have no committed sources of funding. The sale and issuance of the Milestone\nWarrants and the receipt of cash proceeds from such issuance is not guaranteed and is in the discretion of the PIPE Investors and Former\nAzora Noteholders. Our ability to sell shares under the AGP ATM is restricted by certain SEC rules, and our ability to sell shares under\nthe purchase agreement, dated December 13, 2024, that we entered into with Alumni Capital LP (“Alumni”) is restricted by the\nterms of such agreement and certain Nasdaq rules. Without additional funding or securing a strategic collaboration, we will be required\nto delay, scale back or eliminate some or all of our research and development programs including our planned Phase 1b trial, which would\nlikely have a material adverse effect on us and our consolidated financial statements. We expect that any further development of AD04\nwill only be commenced if we receive grant funding, or enter into strategic collaborations and strategic relationships.

There can be no assurance\nthat we will be successful in pursuing any strategic alternative or that, if pursued, we will be able to consummate a strategic alternative\non attractive terms or at all or that it would lead to increased stockholder value.

If we raise additional\nfunds by issuing equity securities or convertible debt, our stockholders will experience dilution. Debt financing, if available, would\nresult in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to\ntake specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional\nfunds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our products,\nfuture revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. We cannot be certain that\nadditional funding will be available on acceptable terms, or at all. Any failure to raise capital in the future could have a negative\nimpact on our financial condition and our ability to pursue our business strategies. These factors raise substantial doubt about our\nability to continue as a going concern in the event the cash settlement obligations related to the Series A Preferred Stock are triggered.

Cash flows

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n

	For the Six Months Ended June 30,
(in thousands)	2026			2025
Provided by (used in)
Operating activities	$	(7,975	)		$	(3,335	)
Investing activities		5,282				150
Financing activities		25,524				5,349
Net increase in cash and cash equivalents	$	22,831			$	2,164

Net cash used in operating activities

Net cash used in operating activities increased by approximately $4.6\nmillion in the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The primary driver was merger related cost\nassociated with the acquisition of Azora, private placement costs that were expensed and bonus and severance expenses, which mainly attributed\nto this increase for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.

Net cash provided by investing activities

Net cash provided by investing\nactivities increased by approximately $5.1 million in the six months ended June 30, 2026 compared to the six months ended June 30, 2025.\nThis primary driver was due to the net cash received in the acquisition of Azora partially offset by recognition of a milestone payment\nreceived from Adovate of $150,000 in 2025 which did not occur in 2026 in the same period.

Net cash provided by financing activities

Net cash provided by financing\nactivities increased by approximately $20.2 million in the six months ended June 30, 2026 compared to the six months ended June 30, 2025.\nDuring the six months ended June 30, 2026, the primary driver was our Financing in conjunction with the acquisition of Azora as compared\nto a Warrant Inducement transaction and sales of our common stock under a best efforts offering completed during the six months ended\nJune 30, 2025.

Off-balance sheet arrangements

We do not have any off-balance sheet arrangements.

Recent Accounting Pronouncements

See Note 3 to the unaudited condensed consolidated\nfinancial statements for a discussion of recent accounting pronouncements.

Critical Accounting Estimates

We consider an accounting\nestimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the\ntime the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use\nof different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition\nor results of operations.

Management has discussed the development and selection of these critical\naccounting estimates with the Audit Committee of our Board of Directors. In addition, there are other items within our financial statements\nthat require estimation, but are not deemed critical as defined above. Changes in estimates used in these and other items could have a\nmaterial impact on our financial statements.

During the three and six\nmonths ended June 30, 2026, we acquired in-process research and development, which was expensed, and we recorded a milestone warrant\nrights liability in connection with the Merger. For the milestone warrant rights liability, our best estimate is based on clinical trial\nprogress, regulatory interactions, and historical industry success rates. An increase in the probability of milestone achievement or\nunderlying stock price significantly increases the fair value of the milestone warrant rights liability.

Item 3. Quantitative and Qualitative Disclosures\nabout Market Risk.

We are a smaller reporting\ncompany as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures\nthat are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is\nrecorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls\nand procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us\nin the reports we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer\nand principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls\nand procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable\nassurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit\nrelationship of possible controls and procedures. As required by Rule 13a-15(b) or Rule 15d-15(b) promulgated by the SEC under the Exchange\nAct, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive\nofficer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as\nof the end of the period covered by this Quarterly Report on Form 10-Q.

During the preparation of\nour financial statements for the second quarter of 2026, management identified a material weakness in internal control over financial\nreporting related to the accounting and financial reporting of the non-routine, complex transactions associated with the Merger, Financing,\nand Azora Note Exchange (collectively, the “Transaction”). This material weakness did not affect any previously issued financial\nstatements. The June 30, 2026 unaudited condensed consolidated financial statements included in this Form 10-Q appropriately reflect the\naccounting for the Transaction, and no prior-period financial statements were impacted.

Due to the material weakness\nin internal control over financial reporting as described above, our Chief Executive Officer and our Chief Financial Officer concluded\nthat based on their evaluation of our disclosure controls and procedures, as of the end of the period covered by this report, our disclosure\ncontrols and procedures were not effective.

Notwithstanding the material\nweakness described above, our management, including the Chief Executive Officer and Chief Financial Officer, has concluded that unaudited\ncondensed consolidated financial statements, and other financial information included in this quarterly report, fairly present in all\nmaterial respects our financial condition, results of operations, and cash flows as of and for the periods presented in this Quarterly\nReport on Form 10-Q.

Remediation Plan for Existing Material Weakness

Management will take steps\nto remediate the weakness described above. Management will engage third-party accounting consulting firms to assist us in the review of\nour application and accounting for complex financial instruments.

Changes in Internal Control

On June 11, 2026, we completed our acquisition of Azora, as further\ndescribed in Note 4 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.\nIn connection with the acquisition, we have begun the process of integrating Azora’s financial processes, systems, and personnel\ninto our system of internal control over financial reporting. We expect this integration to continue through the remainder of 2026 and\nto result in changes to our internal control over financial reporting. Other than as described above, there has been no change in our\ninternal control over financial reporting during the three months ended June 30, 2026 that has materially affected, or is reasonably likely\nto materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may\nbecome involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party\nto any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our\nbusiness, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us\nbecause of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors.

Investing in our securities\ninvolves a high degree of risk. You should consider carefully the following risks, together with all the other information in this Quarterly\nReport on Form 10-Q, including our unaudited condensed consolidated financial statements and notes thereto. If any of the following risks\nactually materializes, our operating results, financial condition and liquidity could be materially adversely affected. As a result, the\ntrading price of our common stock could decline and you could lose part or all of your investment. The following information updates,\nand should be read in conjunction with, the information disclosed in Part I, Item 1A, “Risk Factors,” contained\nin our 2025 Form 10-K. Except as disclosed below, there have been no material changes from the risk factors disclosed in our 2025 Form\n10-K.

We have incurred losses from our operations\nevery year and quarter since our inception and anticipate that we will continue to incur losses from our operations in the future.

We are a clinical stage biotechnology\npharmaceutical company that is focused on developing treatments for serious inflammatory diseases, and the development of therapeutics\nfor the treatment or prevention of addiction related disorders. We have a limited operating history. Investment in biopharmaceutical product\ndevelopment is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential\nproduct candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval and become commercially\nviable. We have no products approved for commercial sale and have not generated any revenue from product sales to date, and we continue\nto incur significant research and development and other expenses related to our ongoing operations. To date, we have not generated positive\ncash flow from operations, revenues, or profitable operations, nor do we expect to in the foreseeable future. As of June 30, 2026, we\nhad an accumulated deficit of approximately $144.0 million and during the three months ended June 30, 2026, we incurred a net loss of\n$52.0 million.

Our current cash and cash\nequivalents are not expected to be sufficient to fund operations for the twelve months from the date of filing this Quarterly Report\non Form 10-Q and are only anticipated to be sufficient to fund our needs into the second half of 2027, based our current projections\nand current commitments. Implementation of our full development plans would exhaust our cash on hand more quickly. Therefore, despite\nthe funding we have recently received, we will need to engage in additional fundraising in the near term as we carry out our development\nplans. We do not have any fixed commitments of financing and there can be no assurance that we will be able to meet the conditions for\ncontinued sales pursuant to the AGP ATM. In addition, there is no assurance that funds could be raised before we have expended our current\ncash on hand on acceptable terms to continue our operations and AT177 or AD04 development projects. We are actively pursuing financing,\nbut can provide no assurances that such financing will be available on acceptable terms, or at all.

We expect our research and\ndevelopment expenses to increase as we continue our clinical development program in the US. Even if we succeed in commercializing our\nproduct candidate or any future product candidates, we expect that the commercialization of our product will not begin until 2028 or later,\nwe will continue to incur substantial research and development and other expenditures, including potentially developing additional product\ncandidates and will continue to incur substantial losses and negative operating cash flow. We may encounter unforeseen expenses, difficulties,\ncomplications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend,\nin part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses\nhave had and will continue to have an adverse effect on our stockholders’ equity and working capital.

Our independent registered public accounting\nfirm has expressed doubt about our ability to continue as a going concern on Form 10-K as do our notes to condensed consolidated financial\nstatements included in this Quarterly Report on Form 10-Q.

Our consolidated unaudited\nfinancial statements as of June 30, 2026 have been prepared assuming we will continue as a going concern. During the three months ended\nJune 30, 2026, we incurred a net loss of $52.0 million and used $8.0 million of cash in operations. During the year ended December 31,\n2025, we incurred a net loss of $8.0 million and used cash in operations of $6.5 million. Losses have principally occurred as a result\nof the research and development efforts coupled with no operating revenue. The notes to the unaudited condensed consolidated financial\nstatements included in this Quarterly Report on Form 10-Q state that, in the event the cash settlement obligations related to the Series\nA Preferred Stock are triggered, we do not believe that the existing cash and cash equivalents are sufficient to fund operations for\nthe next twelve months following the filing of this Quarterly Report on Form 10-Q and our significant accumulated deficit, recurring\nlosses, and needs to raise additional funds to sustain its operations raise substantial doubt about our ability to continue as a going\nconcern. In addition, the report of our independent registered public accounting firm included in the 2025 Form 10-K contains an explanatory\nparagraph that our accumulated deficit, incurred recurring losses and need to raise additional funds to sustain our operations has raised\nsubstantial doubt about our ability to continue as a going concern. During 2026, the Company received net proceeds of approximately $27.6\nmillion from equity issuances. However, the Company will require additional capital to continue operations and development of AT177 and\nAD04.

Even if we succeed in commercializing\nour product candidate or any future product candidates, we expect that the commercialization of our product will not begin until 2028\nor later, we will continue to incur substantial research and development and other expenditures to develop and market additional product\ncandidates and will continue to incur substantial losses and negative operating cash flow.

We could lose our listing on the Nasdaq\nCapital Market if our stockholders’ equity does not meet Nasdaq requirements or if we do not comply with other Nasdaq\nrequirements, including if we do not receive conditional approval from Nasdaq of our Initial Listing Application prior to our receipt\nof stockholder approval of the conversion of shares of our Series A Preferred Stock. The loss of our Nasdaq listing would likely have\nan adverse effect on the liquidity and market price of our common stock.

Pursuant to the Nasdaq\ncontinued listing rules, we are currently required to maintain stockholders’ equity in excess of $2.5 million. Our stockholders’\nequity as of June 30, 2026, as reported in this Quarterly Report on Form 10-Q, does not meet Nasdaq rules for continued listing of our\nstock on the Nasdaq Capital Market, LLC (“Nasdaq”). On August 18, 2026, we received a deficiency notice to this effect from\nNasdaq, and on October 2, 2026, we submitted a plan to Nasdaq for regaining compliance.. Additionally, Nasdaq Listing Rule 5110 requires\nthat the Company submit, and Nasdaq approve, a Nasdaq Listing Application prior to the approval by our stockholders of a change of control\npursuant to Nasdaq Listing Rule 5635(b). We currently expect that the receipt of stockholder approval of the conversion of our shares\nof Series A Preferred Stock, together with certain other expected changes to our management team and board of directors and other factors,\nwill result in a change of control under Nasdaq rules.

We currently believe that\nwe will exceed the $2.5 million stockholder’s equity continued listing requirement at such time that we receive stockholder approval\nof the conversion of our Series A Preferred Stock and that we will be able to take the necessary actions to obtain conditional approval\nof our Initial Listing Application from Nasdaq prior to our reconvened 2026 Annual Meeting of Stockholders; however, no assurances can\nbe provided that we will satisfy such requirements or be able to obtain the conditional approval of our Initial Listing Application from\nNasdaq prior to our reconvened 2026 Annual Meeting of Stockholders.

A delisting of our Common\nStock would have an adverse effect on the liquidity and market price of our Common Stock and on our ability to raise additional capital\nin the public markets. In the event of a delisting from the Nasdaq Capital Market, our common stock would likely be traded in the over-the-counter\ninter-dealer quotation system, more commonly known as the OTC. OTC transactions involve risks in addition to those associated with transactions\nin securities traded on the securities exchanges, such as the Nasdaq Capital Market, or exchange-listed stocks. Many OTC stocks trade\nless frequently and in smaller volumes than exchange-listed stocks. Accordingly, our common stock would likely be less liquid than it\nwould be otherwise. Also, the prices of OTC stocks are often more volatile than exchange-listed stocks. Additionally, many institutional\ninvestors are prohibited from investing in OTC stocks, and it might be more challenging to raise capital when needed.

We have identified a material weakness in\nour internal controls, and we cannot provide assurances that this weakness will be effectively remediated or that additional material\nweaknesses will not occur in the future

If our internal control over financial reporting or our disclosure\ncontrols and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud, or file our periodic\nreports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline\nin our stock price. Our management is responsible for establishing and maintaining adequate internal control over our financial reporting,\nas defined in Rule 13a- 15(f) under the Exchange Act. During the preparation of our financial statements for the second quarter of 2026,\nmanagement identified a material weakness in internal control over financial reporting related to the accounting and financial reporting\nof the non-routine, complex transactions associated with the Transaction. While we plan to take remedial action to address the material\nweakness, we cannot provide any assurance that such remedial measures, or any other remedial measures we take, will be effective. If we\nfail to maintain effective internal control over financial reporting, we may not be able to accurately report our financial results, detect\nor prevent fraud, or file our periodic reports in a timely manner, which may, among other adverse consequences, cause investors to lose\nconfidence in our reported financial information and lead to a decline in our stock price. In addition, a material weakness will not be\nconsidered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing,\nthat these controls are designed and operating effectively. Although management believes that the material weakness will be remediated\nin the near future there can be no assurance that the deficiencies will be remediated at such time or that the internal control over financial\nreporting, as modified, will enable us to identify or avoid material weaknesses in the future.

Future sales and issuances of our common\nstock or rights to purchase common stock, including pursuant to our equity incentive plans and outstanding warrants, or conversions of\nshares of our Series A Preferred Stock could result in additional dilution of the percentage ownership of our stockholders and could cause\nour stock price to fall.

We expect that significant\nadditional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization\nefforts, expanded research and development activities and costs associated with operating a public company. To raise capital, we may\nsell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine\nfrom time to time. If we sell common stock, convertible securities or other equity securities, investors may be materially diluted by\nsubsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights,\npreferences and privileges senior to the holders of our common stock. Additionally, in connection with the Merger, we issued 12,930.601\nshares of Series A Preferred stock to the former stockholders of Azora, which are convertible into an aggregate of 12,930,601 shares\nof our common stock. Subject to certain beneficial ownership limitations, the outstanding shares of our Series A Preferred Stock will\nautomatically convert into shares of our common stock upon stockholder approval of such conversions, which we intend to seek at our reconvened\n2026 Annual Meeting of Stockholders. Pursuant to our 2017 equity incentive plan, which became effective on the business day prior to\nthe public trading date of our common stock, our management is authorized to grant equity awards to our employees, officers, directors\nand consultants.

At June 30, 2026, we had\noutstanding (i) warrants to purchase 1,240,076 shares of common stock outstanding with a weighted average exercise price of $18.79, (ii)\noptions to purchase 1,646,685 shares of common stock at a weighted average exercise price of $4.56 per share, (iii) 557,248 restricted\nstock units, and (iv) shares of Series A Preferred Stock convertible into an aggregate of 12,930,601 shares of our common stock. The\nissuance of the shares of common stock underlying the options. warrants and Series A Convertible Preferred Stock will have a dilutive\neffect on the percentage ownership held by holders of our common stock.

Pursuant to the terms of the Merger Agreement,\nthe Purchase Agreement and the Exchange Agreements, we are required to recommend that our stockholders approve the conversion of all outstanding\nshares of our Series A Preferred Stock into shares of our common stock, the exercise of all of the Assumed Options, the exercise\nof all of the Initial Closing Pre-Funded Warrants and the exercise of all of the Milestone Warrants. We cannot guarantee that our stockholders\nwill approve these matters, and if they fail to do so we may be required to settle certain shares of our Series A Preferred Stock\nin cash and continue to solicit our stockholders, which could be time-consuming and costly and adversely affect our financial condition.

Under the terms of the\nMerger Agreement, the Purchase Agreement and the Exchange Agreements, as promptly as practicable following the date of the Merger Agreement,\nwe are required to call and hold a meeting of our stockholders to obtain the requisite approval from our stockholders, in accordance\nwith Nasdaq Stock Market Rules, for, among other things: (i) the conversion of the shares of our Series A Preferred Stock into shares\nof common stock, (ii) the exercise of the Assumed Options by the holders thereof, (iii) the exercise of the Initial Closing\nPre-Funded Warrants by the holders thereof, (iv) the exercise of the Milestone Warrants by the holders thereof, (v) the amendment\nof our certificate of incorporation to increase the number of shares of common stock authorized for issuance thereunder to 500,000,000\nshares, (vi) the adoption of a new 2026 Equity Incentive Plan and (vii) the adoption of a new 2026 Employee Stock Purchase\nPlan (collectively, the “Transaction Stockholder Matters”). If we fail to have enough shares present in person or by proxy\nto constitute a quorum, fail to obtain the required vote on the Transaction Stockholder Matters and/or the Nasdaq Listing Application\nis not approved, we will be required to further adjourn the 2026 Annual Meeting of Stockholders one or more times for up to 30 days\nper adjournment. If stockholder approval of the Transaction Stockholder Matters or approval of the Nasdaq Listing Application are still\nnot obtained following such adjournment(s), we will be obligated to continue soliciting stockholder approval at subsequent annual or\nspecial meetings of our stockholders, held at intervals of no more than six months, until such approvals are obtained, which would\nbe time consuming and costly.

There can be no assurance\nthat our stockholders will approve the Transaction Stockholder Matters.

Additionally, if the conversion\nof the shares of our Series A Preferred Stock into shares of our common stock is not approved by the date that is six months following\nthe initial issuance date of the Series A Preferred Stock, the holders of the Series A Preferred Stock would be entitled to\nrequire us to settle the shares of our common stock underlying the Series A Preferred Stock for cash at a price per share equal to\nthe fair value of our common stock at such time as described in the Certificate of Designation. If we are forced to cash settle a significant\namount of the shares of our common stock underlying the Series A Preferred Stock, it could materially affect our results of operations,\nbusiness and financial condition.

Failure to obtain approval of the Nasdaq\nListing Application could materially affect our results of operations, business and financial condition.

Pursuant to the Merger Agreement,\nin order to permit the waiver of the beneficial ownership limitations applicable to the Series A Preferred Stock and take other actions\nfollowing the consummation of the Merger, which would constitute a “change of control” under Nasdaq Listing Rule 5110(a),\nwe are required to use our reasonable best efforts to file the Nasdaq Listing Application. The Nasdaq Listing Application must be conditionally\napproved prior to the date of our stockholder meeting to approve the Transaction Stockholder Matters. If we fail to meet the Nasdaq listing\nrequirements and Nasdaq does not approve the Nasdaq Listing Application, we will be required to adjourn our stockholder meeting to approve\nthe Transaction Stockholder Matters one or more times for up to 30 days per adjournment, continue to use our reasonable best efforts\nto obtain approval of the Nasdaq Listing Application and to continue soliciting stockholder approval of the Transaction Stockholder Matters\nat subsequent annual or special meetings of our stockholders, held at intervals of no more than six months, until such approval and\nthe approval of the Transaction Stockholder Matters are obtained, which would be time consuming and costly. Additionally, if the conversion\nof the shares of our Series A Preferred Stock into shares of common stock is not approved by the date that is six months following\nthe initial issuance date of the Series A Preferred Stock, the holders of the Series A Preferred Stock would be entitled to\nrequire us to settle their shares of Series A Preferred Stock for cash at a price per share equal to the fair value of the Series A\nPreferred Stock at such time as described in the Certificate of Designation. If we are forced to cash settle a significant amount of the\nshares of our common stock underlying the Series A Preferred Stock, it could materially affect our results of operations, business\nand financial condition. We cannot assure you that we will be able to meet Nasdaq’s initial listing standards. Furthermore, if we\nfail to obtain approval of the Nasdaq Listing Application, we may be unable to execute on our plans for the Company following the Merger,\nwhich could materially affect our results of operations, business and financial condition.

If certain proposals are not approved\nby stockholders at the reconvened 2026 Annual Meeting of Stockholders, certain securities will remain outstanding and unconverted, which\ncould adversely affect the Company and our stockholders.

Under the terms of the\nMerger Agreement, we are obligated to obtain stockholder approval for the conversion of all outstanding shares of Series A Preferred\nStock issued in the Merger into shares of our common stock, as required by the Nasdaq Listing Rules. Under the terms of the Purchase\nAgreement and Exchange Agreements, we are obligated to obtain stockholder approval for the exercise of all outstanding issued or issuable\nInitial Closing Pre-Funded Warrants and the Milestone Warrants as required by the Nasdaq Listing Rules. We are seeking such approval\nat the reconvened 2026 Annual Meeting of Stockholders. If our stockholders do not approve the conversion of the Series A Preferred Stock,\nthe Series A Preferred Stock will remain outstanding and unconvertable, and we are obligated to seek such approval at one or more subsequent\nstockholders meetings until such approval is obtained, which would result in additional cost and delay. If our stockholders do not approve\nthe exercise of the Initial Closing Pre-Funded Warrants, the Initial Closing Pre-Funded Warrants will remain outstanding and not exercisable,\nand we are obligated to seek such approval at one or more subsequent stockholders meetings until such approval is obtained. If our stockholders\ndo not approve the exercise of the Milestone Warrants, any Milestone Pre-Funded Warrants and/or Milestone Incentive Warrants issued,\nif any, will not be exercisable and we will be obligated to seek such approval at subsequent stockholders meetings, resulting in additional\ncost and delay and we do not believe the PIPE Investors or Azora Noteholders will seek to acquire any Milestone Warrants until stockholder\napproval of their exercise is obtained. If the conversion of the Series A Preferred Stock is approved, the conversion of all such Series\nA Preferred Stock will result in the issuance of a maximum of 12,930,601 shares of our common stock, causing dilution to existing holders\nof our common stock and an increase in the number of shares eligible for resale in the public market. If the exercise of the Initial\nClosing Pre-Funded Warrant Proposal is approved, the exercise of all such Initial Closing Pre-Funded Warrants issuable will result in\nthe issuance of a maximum of 11,780,948 shares of our common stock, causing dilution to existing holders of our common stock and an increase\nin the number of shares eligible for resale in the public market. If the issuance and exercise of the Milestone Warrants is approved,\nthe exercise of all such Milestone Pre-Funded Warrants and Milestone Incentive Warrants will result in the issuance of a maximum of 23,561,896\nshares of our common stock, causing dilution to existing holders of our common stock and an increase in the number of shares eligible\nfor resale in the public market. We also have a contractual obligation under the Merger Agreement and RRA to register all shares of common\nstock issuable upon exercise of the Initial Closing Pre-Funded Warrants for resale within 80 days of the closing of the Financing and\nto file, within 30 days after a Milestone Registration Trigger Date a registration statement registering for resale the common stock\nissuable upon exercise of the Milestone Warrants that have not yet been registered.

The market price of our common stock after\nthe Merger may be affected by factors different from those that historically affected the market price of our common stock.

The business of Azora differs\nfrom that of our legacy ADO4 business in important respects, and, accordingly, our results of operations after the Merger, as well as\nthe market price of our common stock, may be affected by factors different from those that historically affected the results of operations\nof the Company. Additionally, the market price of our common stock may fluctuate significantly following the Merger. Moreover, general\nfluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, our common stock, regardless of\nour actual operating performance.

We may fail to realize the anticipated benefits\nof the Merger.

The Company believes that\nthere are significant benefits that may be realized by the Merger. However, the efforts to realize these benefits will be a complex process\nand may disrupt our existing operations if not implemented in a timely and efficient manner. The full benefits of the Merger may not be\nrealized as expected or may not be achieved within the anticipated time frame, or at all. Failure to achieve the anticipated benefits\nof the Merger could adversely affect our business, operating results or financial condition and cause the combined business to not perform\nas expected.

Specifically, the following\nissues, among others, must be addressed to realize the anticipated benefits of the Merger:

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combining certain of the companies’ financial, reporting\nand corporate functions;

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expanding our number of employees primarily those involved\nin research and development;

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consolidating the companies’ administrative and information\ntechnology infrastructure;

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implementing and maintaining requisite internal controls over\nfinancial reporting and disclosure controls and procedures; and

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maintaining continued compliance with the Nasdaq Listing Rules,\nincluding compliance with Nasdaq corporate governance requirements.

Potential litigation against us could result\nin substantial costs and divert management’s attention.

Securities class action lawsuits\nand derivative lawsuits are often brought against public companies in connection with merger transactions. Even if such lawsuits are unsuccessful,\ndefending against them can result in substantial costs and divert management’s attention.

Stockholders of the Company\nmay file lawsuits against the Company and/or directors and officers of the Company in connection with the Merger. Potential lawsuits could\nresult in significant costs to the Company, including any costs associated with the indemnification of directors and officers. There can\nbe no assurance that any of the defendants will be successful in the outcome of any potential lawsuits.

The expected dilution caused by the issuance\nof our securities in connection with the Transactions may adversely affect the market price of our common stock.

The expected dilution caused\nby the issuance of new shares of our common stock in connection with the conversion of the Series A Preferred Stock issued to former\nAzora stockholders, and the issuance of common stock upon the exercise of the Assumed Options, the Initial Closing Pre-Funded Warrants,\nthe Milestone Warrants either alone or in combination with any negative impact on the market price of our common stock following the release\nof lock-up restrictions entered by the respective directors, officers and certain stockholders of Azora and the Company in connection\nwith the Merger, may result in fluctuations in the market price of our common stock, including a stock price decrease.

If we are unable to obtain stockholder\napproval of the conversion of the Series A Preferred Stock into shares of common stock, we may be required to make a significant cash\nsettlement that exceeds our cash reserves.

Subject to the receipt\nof stockholder approval of the conversion of the Series A Preferred Stock, each share of Series A Preferred Stock will automatically\nconvert into 1,000 shares of common stock, subject to certain beneficial ownership limitations and the number of shares of common stock\nauthorized under our certificate of incorporation, as amended (“Certificate of Incorporation”), which we would be obligated\nto use reasonable best efforts to increase if insufficient (potentially requiring a further stockholder vote). Each holder of Series\nA Preferred Stock may also elect to convert earlier, subject to the same limitations, solely to effect the cash settlement described\nbelow, beginning six months after the Series A Preferred Stock’s initial issuance date if stockholder approval of the conversion\nof the Series A Preferred Stock has not yet been obtained. If at any time after the earlier of (i) stockholder approval of the conversion\nof the shares of Series A Preferred Stock or (ii) six (6) months after the issuance of the Series A Preferred Stock, we fail to timely\ndeliver shares issuable upon a conversion of the Series A Preferred Stock to a holder thereof (other than as a result of a stockholder’s\nown beneficial ownership limitation), the affected stockholder may require cash settlement of the shares of Series A Preferred Stock\nsubject to such conversion at the fair value of the undelivered shares.

The cash settlement price\nis the closing price on the last trading day before the Company’s receipt of a holder’s conversion notice; based on the $4.01\nclosing price on September 30, 2026, settling all 12,930,601 shares of common stock issuable upon conversion of the Series A Preferred\nStock would cost approximately $51.9 million. If stockholder approval of the conversion of the Series A Preferred Stock has not yet been\nobtained, the cash settlement right will first become available on December 11, 2026 (six months after issuance), provided that the exercise\nof such right will only be at the election of a holder of Series A Preferred Stock. Our cash reserves as of September 30, 2026 were approximately\n$22.0 million, which would not be sufficient to fund a full settlement, and we expect that we would seek to raise alternative debt or\nequity financing to do so. We may be unable to raise additional funds when needed on favorable terms or at all.

Risks Related to the Business of Azora

Azora is a pre-clinical stage company with\na limited operating history and its lead product candidate, AT177, has not yet been tested in human clinical trials. There is no assurance\nthat AT177 will successfully advance through clinical development or receive regulatory approval.

Azora was founded in 2019\nand is a pre-clinical stage biopharmaceutical company. Azora’s lead product candidate, AT177, a colon-targeted AhR agonist being\ndeveloped for the treatment of ulcerative colitis, has not yet been tested in human clinical trials. We expect to file an IND for AT177\nand initiate a Phase 1a SAD/MAD study in the first half of 2027, with a proof-of-concept readout in UC patients expected in the first\nhalf of 2028. There can be no assurance that the IND will be accepted by the FDA or that AT177 will demonstrate safety or efficacy in\nclinical trials. Drug development is inherently uncertain, and pre-clinical results may not be predictive of clinical outcomes. Even if\nclinical trials are initiated, there is a significant risk that AT177 could fail at any stage due to safety concerns, lack of efficacy,\nmanufacturing difficulties or other factors, which would have a material adverse effect on our business, financial condition and results\nof operations.

Substantially all of the value of the assets\nacquired in the Merger is concentrated in Azora’s colon-targeted AhR program. If this program fails, we may not be able to recover\nthe value attributed to Azora in the Merger.

We have determined that\nsubstantially all (greater than 90%) of the fair value of the assets acquired in the Merger is concentrated in a single asset — Azora’s\ncolon-targeted AhR program. Accordingly, the Merger was treated as an asset acquisition for accounting purposes. Because the acquired\nvalue is concentrated in a single program, any failure or material setback in the development of AT177 or other product candidates arising\nfrom the AhR program would disproportionately impact the combined company and could result in a significant loss of the value attributed\nto Azora in the Merger. Unlike a diversified pharmaceutical company with multiple product candidates across various stages of development,\nour post-Acquisition business is substantially dependent on the success of this single program.

We will require substantial additional capital\nto fund the clinical development of AT177, and our failure to obtain sufficient funding on acceptable terms could force us to delay, reduce\nor eliminate our development programs.

The clinical development of\nAT177 through Phase 1 studies, proof-of-concept studies, and any subsequent pivotal trials required for regulatory approval will\nrequire substantial capital. While the Financing provides initial capital for our operations, including aggregate gross proceeds of approximately\n$26.8 million from the Initial Closing Pre-Funded Warrants, the receipt of additional proceeds from the Milestone Pre-Funded Warrants\nand Milestone Incentive Warrants is contingent upon the achievement of specified milestone events and the election of the PIPE Investors\nand Azora Noteholders to participate in Milestone Closings, which is at their option. There is no assurance that such milestone events\nwill be achieved or that the PIPE Investors or Azora Noteholders will elect to purchase Milestone Warrants. We may need to raise additional\ncapital through equity or debt financings, collaborations, licensing arrangements or other sources, which may not be available on favorable\nterms, or at all. If we are unable to raise additional capital when needed, we may be required to delay, reduce or eliminate our clinical\ndevelopment programs.

The market for the treatment of UC is highly\ncompetitive, and AT177 may not be able to compete effectively with existing and future therapies.

The UC therapeutic market,\nwhich management has estimated to be approximately $7.5 billion to $10.8 billion, is highly competitive and includes a number\nof approved therapies, including anti-TNF biologics, anti-integrin therapies, JAK inhibitors, sphingosine 1-phosphate receptor modulators,\nand IL-23 inhibitors, as well as numerous product candidates in clinical development by companies with greater financial and development\nresources than ours. AT177’s novel mechanism of action targeting the AhR in the colon is unproven in clinical settings, and there\ncan be no assurance that this approach will prove superior to, or even comparable with, existing or future therapies. Many of our potential\ncompetitors have substantially greater financial, technical, human and other resources than we do, more extensive experience in conducting\nclinical trials, obtaining regulatory approvals and manufacturing and marketing pharmaceutical products, and established relationships\nwith physicians and patient communities. If we are unable to differentiate AT177 from existing and future competitive therapies, our business\nand prospects would be materially adversely affected.

Our intellectual property protection for\nthe AhR program may be insufficient to protect our competitive position, and we may be unable to prevent third parties from using our\ntechnology or developing competing products.

We rely on patent protection,\ntrade secrets and other intellectual property rights to protect the AhR program, including composition-of-matter patent protection through\n2042. However, patents provide only limited protection and may not adequately cover our product candidates or prevent competitors from\ndesigning around our patents. Patent applications may not result in issued patents, and issued patents may be challenged, narrowed, invalidated\nor circumvented. Moreover, the patent landscape in the pharmaceutical industry is highly complex, and third parties may hold patent rights\nthat could prevent us from developing or commercializing AT177. There can be no assurance that our intellectual property position will\nbe sufficient to provide meaningful commercial protection for AT177 or any other product candidate arising from the AhR program, and any\ninability to adequately protect our intellectual property could materially adversely affect our competitive position, business and financial\ncondition.

We are dependent on the continued services\nof key personnel, including Dr. Matthew Davidson, who is critical to the advancement of the Azora AhR program, and the loss of such\npersonnel could materially harm our business.

The successful development\nof the Azora AhR program is substantially dependent on the expertise and continued contributions of key scientific and management personnel,\nincluding Matthew Davidson, Ph.D., our Chief Development Officer and a co-founder of Azora, who invented and developed the first FDA-approved\ndrug for the skin disease molluscum contagiosum during his prior role as CEO and founder of Verrica Pharmaceuticals, Inc. Dr. Davidson’s\nscientific expertise and institutional knowledge of the AhR program are critical to advancing AT177 through clinical development. The\nloss of Dr. Davidson or other key personnel could significantly delay or impair our ability to advance the AhR program. Competition\nfor qualified personnel in the biopharmaceutical industry is intense, and we may not be able to attract or retain qualified scientists\nand other key personnel on acceptable terms, which could materially adversely affect our business and prospects.

We may encounter difficulties in managing\nthe integration of Azora’s research and development operations and in scaling our organization to support clinical-stage development\nactivities.

Following the Merger, we must\nintegrate the research and development operations of Azora and significantly expand its organizational capabilities to support clinical-stage\ndevelopment activities, including, among other things, combining financial, reporting and corporate functions, expanding the number of\nemployees primarily involved in research and development, consolidating administrative and information technology infrastructure, and\nimplementing and maintaining requisite internal controls over financial reporting and disclosure controls and procedures. Prior to the\nMerger our development activities were focused on its legacy AD04 program, which is at a different stage and involves a different therapeutic\narea than Azora’s AhR program. The need to pivot our operational focus, combined with the challenges inherent in integrating a newly\nacquired pre-clinical program, may divert management attention from clinical development activities and increase operating costs. Any\nfailure to successfully manage this transition could delay the development timeline for AT177 and adversely affect our business, financial\ncondition and results of operations.

Item 2. Unregistered Sales of Equity Securities\nand Use of Proceeds.

(a) Unregistered Sales of Equity Securities

We did not sell any equity\nsecurities during the three months ended June 30, 2026 in transactions that were not registered under the Securities Act other than as\ndisclosed in our filings with the SEC.

(b) Use of Proceeds

Not applicable.

(c) Issuer Purchases of Equity Securities

Not applicable.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Rule 10b5-1 Trading Arrangements

During the three months ended June 30, 2026, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Termination of Chief Operating Officer

In accordance with disclosures included in that Current Report on Form\n8-K filed by the Company with the SEC on June 11, 2026 (the “Prior 8-K”), the employment of Tony Goodman, our Chief Operating\nOfficer, was terminated effective August 11, 2026. In connection therewith, on August 11, 2026, the Company and Mr. Goodman entered into\na release (the “Goodman Release”), pursuant to which the Company agreed to pay Mr. Goodman the severance benefits owed to\nhim under his amended and restated employment agreement in exchange for a general release and waiver of claims by Mr. Goodman. Severance\namounts that will be paid to Mr. Goodman includes: (i) the annual bonus earned by the Mr. Goodman for the immediately prior fiscal year\nto the extent unpaid, as if no such termination had occurred; (ii) Mr. Goodman’s annual bonus target for the 2026 fiscal year, prorated\nbased on the number of days elapsed in the fiscal year through the termination date, payable in a cash lump sum on the first payroll date\nafter the effective date of the Goodman Release (with all revocation periods having expired unexercised); and (iii) a lump sum payment\nequal to Mr. Goodman’s annual base salary ($312,000), plus the higher of his target annual bonus opportunity and the annual bonus\npaid to him with respect to the 2025 fiscal year, to be paid in cash on the first payroll date after the effective date of the Goodman\nRelease (with all revocation periods having expired unexercised) and in all events no later than 70 days after such termination, (iv)\na payment equal to 12 times the monthly COBRA premium for him and his eligible dependents, payable in either a lump sum or in installments\nover 12 months, at Mr. Goodman’s election; and (v) immediate and full accelerated vesting of all outstanding equity awards received\nby Mr. Goodman from the Company, with any performance-based awards deemed earned at not less than target performance and any outstanding\nstock options or stock appreciation rights remaining exercisable until the expiration date of the grant award.

The foregoing description\nof the Goodman Release does not purport to be complete and is qualified by reference to the full text of the Goodman Release, a copy of\nwhich is attached to this Quarterly Report on Form 10-Q as Exhibit 10.12 and incorporated herein by reference.

Amendment of Purchase Agreement

As previously disclosed in\nthe Prior 8-K, subject to certain exceptions, the Purchase Agreement prohibits the Company from issuing, without prior consent from the\nholders of the majority of the then outstanding Initial Closing Pre-Funded Warrants, shares of common stock or common stock equivalents\nduring the period commencing as of the Initial Closing Date until the date that is ten business days following the later of (i) the Milestone\nFunding Period Expiration (as defined in the Pre-Funded Warrant) (or, if earlier, the date on which all PIPE Investors have (x) closed\ntheir Milestone Closing or (y) have lost their right to participate in a Milestone Closing) and (ii) provided that a resale registration\nstatement covering the shares of common stock underlying the Initial Closing Pre-funded Warrants is effective, the Shareholder Approval\nDate (as defined in the Form of Pre-funded Warrant), at a price per share of common stock that is less than $4.25 (the “Minimum\nIssuance Price”), On August 12, 2026, the Company and certain of the PIPE Investors, constituting holders of a majority of the\noutstanding Initial Closing Pre-Funded Warrants, entered into an Amendment No. 1 to Securities Purchase Agreement (the “Purchase\nAgreement Amendment”), pursuant to which the Purchase Agreement was amended to decrease the Minimum Issuance Price from $4.25 to\n$4.00.

The foregoing description\nof the Purchase Agreement Amendment does not purport to be complete and is qualified by reference to the full text of the Purchase Agreement\nAmendment, a copy of which is attached to this Quarterly Report on Form 10-Q as Exhibit 10.13 and incorporated herein by reference.

Item 6. Exhibits

The exhibit index set forth below is incorporated\nby reference in response to this Item 6.

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n

2.1		Agreement\n and Plan of Merger, dated June 11, 2026 by and among Adial Pharmaceuticals, Inc., Adial First Merger Sub, Inc., Adial Second Merger\n Sub, LLC and Azora Therapeutics, Inc. (Incorporated\n by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, File No. 001-38323, filed with the Securities and\n Exchange Commission on June 11, 2026).
3.1		Certificate of Incorporation of Adial Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on October 25, 2017).
3.2		Amended and Restated Bylaws of Adial Pharmaceuticals, Inc., dated February 22, 2022 (Incorporated by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K, File No. 001-38323, filed with the Securities and Exchange Commission on March 28, 2022).
3.3		Certificate of Amendment to Certificate of Incorporation of Adial Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on August 4, 2023).
3.4		Certificate of Amendment to Certificate of Incorporation of Adial Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on August 1, 2025).
3.5		Certificate of Amendment to Certificate of Incorporation of Adial Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on February 4, 2026).
3.6		Certificate of Designation of Series A Non-Voting Convertible Preferred Stock, dated June 11, 2026. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on June 11, 2026).
4.1		Form of Pre-Funded Warrant (Financing) (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on June 11, 2026).
4.2		Form of Warrant (Financing) (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on June 11, 2026).
4.3		Form of Pre-Funded Warrant (Note Exchange) (Incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on June 11, 2026).
4.4		Form of Warrant (Note Exchange) (Incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on June 11, 2026).
10.1#		Form of Restricted Stock Award Agreement under 2017 Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on April 9, 2026)

10.2+		Form of Securities Purchase Agreement, dated as of June 11, 2026, by and among Adial Pharmaceuticals, Inc. and each investor listed on Exhibit A thereto (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on June 11, 2026).
10.3+		Form of Exchange Agreement, dated as of June 11, 2026, by and among Adial Pharmaceuticals, Inc. and each note holder listed on Exhibit A thereto (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on June 11, 2026).
10.4		Form of Registration Rights Agreement, by and among Adial Pharmaceuticals, Inc. and the investors signatory thereto (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on June 11, 2026).
10.5		Amendment to Amended and Restated Employment Agreement between Adial Pharmaceuticals, Inc. and Cary J. Claiborne, effective June 11, 2026 (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on June 11, 2026).
10.6		Amendment to Employment Agreement between Adial Pharmaceuticals, Inc. and Tony Goodman, effective June 11, 2026 (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on June 11, 2026).
10.7		Amendment to Employment Agreement between Adial Pharmaceuticals, Inc. and Vinay Shah, effective June 11, 2026 (Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on June 11, 2026).
10.8		Amended and Restated Employment Agreement, dated June 11, 2026, by and between Adial Pharmaceuticals, Inc. and Matthew Davidson (Incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2026).
10.9#		Form of Stock Option Inducement Award Grant Notice and Agreement (Incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2026).
10.10#		Form of Restricted Stock Unit Inducement Award Grant Notice and Agreement (Incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2026).
10.11#		Notice of Termination and Release and Waiver, dated August 11, 2026, by and between Adial Pharmaceuticals, Inc. and Tony Goodman (Incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2026).
10.12		Amendment No. 1 to Securities Purchase Agreement, dated August 12, 2026, by and between Adial Pharmaceuticals, Inc. and the investor signatories thereto (Incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2026).
31.1		Certification by principal executive officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (incorporated by reference to Exhibit 31.1 of the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2026).
31.2		Certification by principal financial officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (incorporated by reference to Exhibit 31.2 of the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2026).
31.3*		Certification by principal executive officer pursuant to Rule 13a-14(a) or\n 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.4*		Certification by principal financial officer pursuant to Rule 13a-14(a) or\n 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification by principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (incorporated by reference to Exhibit 32.1 of the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2026).
32.2		Certification by principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (incorporated by reference to Exhibit 32.2 of the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2026).
32.3*		Certification by principal executive officer pursuant to 18 U.S.C.\n Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.4*		Certification by principal financial officer pursuant to 18 U.S.C.\n Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (the cover page XBRL tags are embedded within the inline XBRL document)

\n\n\n\n\n\n\n\n\n\n

*	Filed herewith
#	Management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this report.
+	Certain schedules and attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to provide, on a supplemental basis, a copy of any omitted schedules and attachments to the Securities and Exchange Commission or its staff upon request.

SIGNATURES

Pursuant to the requirements of the Securities\nExchange Act of 1934, the registrant has duly caused this Amendment No.1 to the report to be signed on its behalf by the undersigned\nthereunto duly authorized.

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n

	ADIAL PHARMACEUTICALS, INC.

	By:	/s/ Cary J. Claiborne
	Name:	Cary J. Claiborne
	Title:	President and Chief Executive Officer \n(Principal Executive Officer)

Dated:\nOctober 20, 2026

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