ADIAL PHARMACEUTICALS INC
For the period ended Jun 30, 2024. Filed Aug 13, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 13, 2024
ADIL$5.05+36.1%Stored close · as of Oct 28, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-14.
0001213900-24-043023
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-13.
0001213900-24-068262
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 52 previous paragraphs and 70 current paragraphs.
32 unchanged; 11 reworded; 21 added; 8 removed; 1 previous and 6 current paragraphs rearranged.
Tables are not compared: 2 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
Research and development expense increased by $583,000 (136%) in the three months ended June 30, 2024, compared to the three months ended June 30, 2023. This increase was almost entirely due to two factors: an increase of approximately $526,000 in clinical trial expenses with the initiation of a new Phase I trial during the three months ended June 30, 2024, and an increase of approximately $80,000 in chemistry, manufacturing, and controls (“CMC”) expenses for provision of drug product used in the Phase I trial.
Current report
General and administrative expenses increased by approximately $228,000 (22%) in the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This increase was largely explained by an increase in G&A employee cash and equity compensation of approximately $216,000 in the three months ended June 30, 2024, which itself was due to the one time gains recognized in the prior year period against previously accrued but ultimately unpaid bonus and vacation employee compensation expense for employees transferred to Adovate on June 30, 2023 or terminated in the period.
Current report
Total other income, excluding losses from the equity method investment, increased by $85,000 (258%) in the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This increase was due to two factors: first, the increase of approximately $33,000 in interest income that came with a higher working cash balance held in the period, and, second, a one time expense in the prior year period of approximately $52,000 related to issuing commitment shares on establishment of our standby equity purchase agreement.
Current report
Gain from discontinued operations, net of tax
Current report
Research and development expenses increased by approximately $671,000 (84%) in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This increase was driven by an increase of approximately $502,000 in clinical trial expenses with the initiation of a new Phase I trial during the six months ended June 30, 2024, an increase of approximately $118,000 in chemistry, manufacturing, and controls (“CMC”) expenses for provision of drug product used in the Phase I trial, and an increase of approximately $166,000 in the use of strategic drug development consultants. These increases we partially offset by a decrease in the use of regulatory consultants, for decreased expense of approximately $109,000.
Current report
General and administrative expenses decreased by approximately $286,000 (10%) in the six months ended June 30, 2024, compared to the six months ended June 30, 2023. This change was driven by decreases in the following areas which were approximately $112,000 in combined cash and equity compensation to G&A employees, $74,000 in business development expense, a $39,000 in direct patent prosecution expenses, $40,000 in corporate legal expenses, and $26,000 in insurance premiums.
Current report
Losses from Equity Method Investment
Current report
Inducement Expense
Current report
The inducement expense of approximately $4,464,000 which was a one time, noncash expense associated with the issuance of new warrants to induce the exercise of outstanding warrants which occurred in the six months ended June 30, 2024.
Current report
Total Other income (expenses)
Current report
Total other income, excluding losses from the equity method investment and inducement expense, increased by $77,000 (2567%) in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This increase was due to two factors: the increase of approximately $26,000 in interest income that came with a higher cash balance held in the period, and a one time expense in the prior year period of approximately $52,000 related to issuing commitment shares on establishment of our standby equity purchase agreement.
Current report
Income from discontinued operations, net of tax
Current report
In the six months ended June 30, 2024, we sold 238,820 shares of common stock through our ATM agreement, for net proceeds of $411,091 after placement fees and expenses.
Current report
On July 24, 204, we sold 2,109,700 shares common stock through our ATM agreement for net proceeds of $3,658,230 after placement fees and expenses.
Current report
We have been using and will continue to use the additional $7.5 million in funding received from warrant exercises and sales of our common stock pursuant to the ATM Agreement to accelerate the development of AD04.
Current report
We have initiated a Phase 1 pharmacokinetic study of AD04 with an estimated total cost of approximately $1.4 million, of which approximately half has been paid, with the remaining half expected to be paid by the end of October, 2024. In addition, we plan to begin a Phase III study of AD04 in the first half of 2025, to complete production of sufficient drug product to carry out the study, and to begin the process of registering our companion diagnostic. Were we to proceed with all these additional accelerated development plans without raising any additional funds, we would potentially expend our cash on hand by the end of 2024. However, management retains the ability to delay implementation of these plans and will not proceed without having first secured sufficient funding either through a financing or a partnership agreement. If these additional accelerated development plans are not implemented, our cash on hand would be sufficient to fund our operations and meet our existing commitments into the second half of 2025.
Current report
Net cash used in operating activities increased by approximately $567,000 in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. Excluding non-cash expenses such as depreciation, inducement expense, change in the value of the equity method investment, and equity-based compensation, our net loss in the six months ended June 30, 2024 was approximately $1,127,000 greater, when compared to the six months ended June 30, 2023. Approximately $560,000 less in cash was used to increase operating assets and reduce operating liabilities in the six months ended June 30, 2024 than in the six months ended June 30, 2023, leaving approximately $567,000 in increased cash expenses.
Current report
Net cash used in discontinued operations decreased by approximately $986,000 in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This was entirely due to the completion of the sale of the discontinued operations in June of 2023, after which these operations ceased requiring the use of cash.
Current report
Net cash provided by investing activities
Current report
Net cash provided by investing activities decreased by approximately $800,000 in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The decrease was driven by payments received in the prior year period related to the sale of Purnovate.
Current report
Net cash provided by financing activities increased by approximately $3,625,000 in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. In the six months ended June 30, 2023, we engaged in a single limited sale of common stock to a single individual investor, whereas in the six months ended June 30, 2024, we sold 238,820 shares of common stock through our ATM agreement for net proceeds of approximately $411,000 and realized additional funds from the induced and uninduced exercise of additional warrants for net proceeds of approximately $3,824,000.
Removed paragraphs (8)
Previous report
Research and development expenses increased by approximately $88,000 (24%) in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This change was due to increased use of drug development planning consultants by approximately $140,000, chemistry and manufacturing expenses by approximately $39,000, and for R&D directed personnel salaries by approximately $40,000. These increases were partially offset by decreased expense of regulatory consultants of approximately $77,000 and direct clinical trial expenses of approximately $24,000. These changes were the result of the completion of data analysis and other follow up activity associated with our recent ONWARD trial and the ramp up of planning for the next steps in the development of our drug candidate, AD04. The non-cash expense of equity compensation for R&D directed personnel also decreased by approximately $32,000, due to completion of vesting of options grants from previous periods and decreased use of equity compensation by our Board.
Previous report
General and administrative expenses decreased by approximately $512,000 (27%) in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The three months ended March 31, 2024 saw substantial decreases in expense in several areas, including the salaries of G&A directed personnel and cash director compensation of approximately $134,000, corporate legal expenses of approximately $49,000, direct patent expenses of approximately $41,000, travel expenses of approximately $37,000, as well as other, more modest decreases in G&A expense. These reductions were primarily the reassignment of executives from away from management of the Company to management of Purnovate, as well as completion of negotiations for the sale of Purnovate in 2023, which entailed considerable legal and executive effort. The non-cash expense of equity compensation for R&D directed personnel also decreased by approximately $125,000, due to completion of vesting of options grants from previous periods and decreased use of equity compensation by our Board.
Previous report
Total other income (expenses), excluding the losses from the equity method investment, decreased by approximately $4,471,000. This was almost entirely due to the one-time, non-cash inducement expense of issuing warrants to the holder of existing warrants to induce the existing warrants exercise during the three months ended March 31, 2024.
Previous report
On April 22, 2024, we sold 178,447 shares of common stock through our ATM agreement at an average price of $2.2129 per share, for net proceeds of $382,250 after placement fees and expenses.
Previous report
We intend to use the additional $4.2 million in funding received from warrant exercises and ATM sales to accelerate the development of AD04. Our current cash and cash equivalents are not expected to be sufficient to fund operations for the twelve months from the date of filing this Quarterly Report on Form 10-Q and are only anticipated to be sufficient to fund our needs into the first quarter of 2025, based on our current projections. Therefore, despite the funding we have recently received, we will need to engage in additional fundraising in the near term as we carry out our development plans.
Previous report
Cash used in operating activities during the three months ended March 31, 2024 increased by approximately $88,000 when compared to the three months ended March 31, 2023. This increase differed by approximately $512,000 from the decrease in loss from operations of approximately $424,000 when comparing the same two periods, and was due to two factors: use of approximately $272,000 more cash to pay existing operating liabilities and accrued expenses, and approximately $234,000 of the decrease in operating expense being non-cash reduction in equity compensation expense.
Previous report
Cash used in discontinued operations ceased entirely by the three months ended March 31, 2024, as the business of Purnovate, the operations of which are classified as discontinued, was sold in 2023.
Previous report
Cash provided by financing activities increased by approximately $3,214,000 in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. During the three months ended March 31, 2024, we completed a large induced exercise of previously registered warrants, whereas, in the three months ended March 31, 2023, our fundraising activity was limited to a small, shelf offering.
Reworded paragraphs (11)
Previous wording
We currently do not have any products approved for sale and we have not generated any significant revenue since our inception. From our inception through the date of our 2023 Annual Report on Form 10-K, we have funded our operations primarily through the private and public placements of debt, equity securities, and an equity line.
Current wording
We currently do not have any products approved for sale and we have not generated any significant revenue since our inception. From our inception through the date of our 2023 Quarterly Report on Form 10-Q, we have funded our operations primarily through the private and public placements of debt, equity securities, and an equity line.
Previous wording
Our current cash and cash equivalents are not expected to be sufficient to fund operations for the twelve months from the date of filing our 2023 Annual report on Form 10-K, based our current projections.
Current wording
Our current cash and cash equivalents are not expected to 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 commitments and development plans.
Previous wording
We have incurred net losses in each year since our inception, including net losses of approximately $6.5 million and $5.1 million for the three months ended March 31, 2024 and year ended December 31, 2023, respectively. We had accumulated deficits of approximately $75 million and $68.8 million as of March 31, 2024 and December 31, 2023, respectively. All of our operating losses in the three months ended March 31, 2024 resulted from costs incurred in continuing operations, including costs in connection with our continuing research and development programs, from general and administrative costs associated with our operations, and from financing costs.
Current wording
We have incurred net losses in each year since our inception, including net losses of approximately $8.9 million and $5.1 million for the six months ended June 30, 2024 and year ended December 31, 2023, respectively. We had accumulated deficits of approximately $77.7 million and $68.8 million as of June 30, 2024 and December 31, 2023, respectively. All of our operating losses in the six months ended June 30, 2024 resulted from costs incurred in continuing operations, including costs in connection with our continuing research and development programs, from general and administrative costs associated with our operations, and from financing costs.
Previous wording
On March 1, 2024, warrants to purchase 268,440 warrants to purchase shares for common stock for an exercise price of $2.82 per share were exercised for gross proceeds of approximately $757 thousand.
Current wording
On March 1, 2024, warrants to purchase 268,440 warrants to purchase shares of our common stock at an exercise price of $2.82 per share were exercised for gross proceeds of approximately $757 thousand.
Previous wording
On April 18, 2024, we entered into an At the Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (the “Sales Agent” or “Wainwright”) providing for sale of our shares of common stock, from time to time, through the Sales Agent, with certain limitations on the number of shares of common stock that may be offered and sold by us as set forth in the ATM Agreement. The aggregate market value of the shares of Common Stock eligible for sale under the ATM Prospectus Supplement was $4,283,650 which is based on the limitations of such offerings under SEC regulations. The ATM Agreement provides that we will pay the Sales Agent commissions for its services in acting as agent in the sale of shares of common stock pursuant to the ATM Agreement. The Sales Agent 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 Agreement. The Offering of shares of common stock pursuant to the ATM Agreement will terminate upon the earlier of (i) the sale of all shares of Common Stock subject to the ATM Agreement; or (ii) termination of the ATM Agreement by us as permitted therein.
Current wording
On April 18, 2024, we entered into an At the Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (the “Sales Agent” or “Wainwright”) providing for sale of our shares of common stock, from time to time, through the Sales Agent, with certain limitations on the number of shares of common stock that may be offered and sold by us as set forth in the ATM Agreement. The aggregate market value of the shares of Common Stock eligible for sale under the ATM prospectus supplement filed in connection with the ATM Agreement was $4,283,650 which is based on the limitations of such offerings under SEC regulations. The ATM Agreement provides that we will pay the Sales Agent commissions for its services in acting as agent in the sale of shares of common stock pursuant to the ATM Agreement. The Sales Agent 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 Agreement. The offering of shares of common stock pursuant to the ATM Agreement will terminate upon the earlier of (i) the sale of all shares of common stock subject to the ATM Agreement; or (ii) termination of the ATM Agreement by us as permitted therein. During the six months ended June 30, 2024, we used this ATM Agreement to sell 238,820 shares of common stock for net proceeds of $411,091, after fees and expenses. On July 24, 2024, we sold 2,109,700 shares common stock through our ATM agreement net proceeds of $3,658,230 after placement fees and expenses.
Previous wording
The expense recognized to the change in the value of our equity method investment in Adovate, LLC increased by approximately $190,000 in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This increase is entirely due to the fact that this investment was only acquired in June of 2023.
Current wording
The expense recognized to the change in the value of our equity method investment in Adovate, LLC increased by approximately $222,000 in the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This increase is entirely due to the fact that this investment was only acquired on June 30 of 2023.
Previous wording
The loss from discontinued operations, net of tax, decreased by approximately $666,000 (100%) in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This decrease is wholly due to the fact that the business of Purnovate, Inc., the activities of which are now classified as discontinued, was sold in 2023 and all activity ceased.
Current wording
The gain from discontinued operations, net of tax, decreased by approximately $2,598,000 (100%) in the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This decrease is wholly due to the fact that the business of Purnovate, Inc., the activities of which are now classified as discontinued, was sold in June of 2023 and all activity ceased.
Previous wording
Our principal liquidity needs have historically been working capital, R&D, patent costs and personnel costs. We expect these needs to continue to increase in the near term as we engage in clinical trials and develop and eventually commercialize our compound, if approved by regulatory authorities. Over the next several years, we expect to increase our R&D expenses as we undergo clinical trials to demonstrate the safety and efficacy of our lead product candidate. To date, we have funded our operations primarily with the proceeds from our initial and secondary public offerings, and, to a lesser extent, private placements and our equity line, as well as other equity financings, warrant exercises, and the issuance of debt securities prior to that. On July 31, 2018, we closed our initial public offering.
Current wording
Our principal liquidity needs have historically been working capital, R&D costs including clinical trials, patent costs and personnel costs. We expect these needs to continue to increase in the near term as we engage in clinical trials and develop and eventually commercialize our compound, if approved by regulatory authorities. Over the next several years, we expect to increase our R&D expenses as we undergo clinical trials to demonstrate the safety and efficacy of our lead product candidate. To date, we have funded our operations primarily with the proceeds from our initial and secondary public offerings, and, to a lesser extent, private placements and our equity line, as well as other equity financings, warrant exercises, and the issuance of debt securities prior to that.
Previous wording
During the three months ended March 31, 2024, our primary sources of funding was the exercise of previously issued warrants.
Current wording
During the six months ended June 30, 2024, our primary sources of funding was the exercise of previously issued warrants and, to a lesser extent, the use of our ATM agreement.
Previous wording
If we are successful in raising additional funds, under our accelerated development plans, we expect to use approximately $4.9 million in cash during the twelve months ended March 31, 2025 for both AD04 development costs and general corporate expenses. Since we expect to have entirely expended our current cash on hand after the beginning of 2025, we will not be able to fully implement our accelerated development plans without additional financing. 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 continued sales pursuant to the ATM Agreement. In addition, there is no assurance that funds could be raised on acceptable terms to continue our operations and AD04 development projects before we have expended our current cash on hand.
Current wording
If we are successful in raising sufficient additional funds, under our accelerated development plans, we expect to use approximately $10-15 million in cash during the twelve months ended June 30, 2025 for both AD04 development costs and general corporate expenses, of which approximately $5-10 million are contingent on our implementation of our accelerated development plans. Since implementation of our accelerated development plans would require the expenditure of our current cash on hand by the end of 2024, we will not be able to fully implement our accelerated development plans without additional financing. We do not have any fixed commitments of financing and there can be no assurance that we will be able secure financing on acceptable terms, if at all. In addition, there is no assurance that funds could be raised on acceptable terms to continue our operations and AD04 development projects before we have expended our current cash on hand, even if we delay our accelerated development plans.
Previous wording
We will require additional financing as we continue to execute our overall business strategy, including two additional Phase 3 trials for AD04 that are currently expected to require $8-12 million each in direct expenses, and up to $5 million in additional other development expenses. These estimates may change based on upcoming discussions with regulatory authorities and final trial designs. Our liquidity may be negatively impacted as a result of research and development cost increases in addition to general economic and industry factors. Our continued operations will depend on our ability to raise additional capital through various potential sources, such as equity and/or debt financings, grant funding, strategic relationships, or out-licensing in order to complete its subsequent clinical trial requirements for AD04. Management is actively pursuing financing and other strategic plans but can provide no assurances that such financing or other strategic plans will be available on acceptable terms, or at all. Without additional funding, we will be required to delay, scale back or eliminate some or all of its research and development programs, which would likely have a material adverse effect on us and our financial statements.
Current wording
We will require additional financing as we continue to execute our overall business strategy, including two additional Phase 3 trials for AD04 that are currently expected to require $8-12 million each in direct expenses, and up to $5 million in additional other development expenses. These estimates may change based on upcoming discussions with regulatory authorities and final trial designs. Our liquidity may be negatively impacted as a result of research and development cost increases in addition to general economic and industry factors. Our continued operations will depend on our ability to raise additional capital through various potential sources, such as equity and/or debt financings, grant funding, strategic relationships, or out-licensing in order to complete its subsequent clinical trial requirements for AD04. Management is actively pursuing financing and other strategic plans but can provide no assurances that such financing or other strategic plans will be available on acceptable terms, or at all. Without additional funding, we will be required to delay, scale back or eliminate some or all of our research and development programs, which would likely have a material adverse effect on us and our financial statements.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
Results of operations for the six months ended June 30, 2024 and 2023(rounded to nearest thousand)
Current report — wording carried from elsewhere
The following table sets forth the components of our statements of operations in dollars for the periods presented:
Current report — wording carried from elsewhere
Research and development (“R&D”) expenses
Current report — wording carried from elsewhere
General and administrative expenses (“G&A”) expenses
Current report — wording carried from elsewhere
The expense recognized to the change in the value of our equity method investment in Adovate, LLC increased by approximately $412,000 in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This increase is entirely due to the fact that this investment was only acquired on June 30 of 2023.
Current report — wording carried from elsewhere
The loss from discontinued operations, net of tax, decreased by approximately $1,932,000 (100%) in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This decrease is wholly due to the fact that the business of Purnovate, Inc., the activities of which are now classified as discontinued, was sold in June of 2023 and all activity ceased.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Loss from discontinued operations, net of tax