ADIAL PHARMACEUTICALS, INC.
For the period ended Jun 30, 2026. Filed Aug 14, 2026.
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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, 2026 · Filed Aug 14, 2026
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 2026-03-31; filed 2026-05-08.
0001213900-26-053907
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-14.
0001213900-26-090051
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 50 previous paragraphs and 142 current paragraphs.
19 unchanged; 18 reworded; 99 added; 13 removed; 0 previous and 6 current paragraphs rearranged.
Tables are not compared: 2 previous and 23 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 (99)
Current report
We are a clinical-stage biopharmaceutical company focused on developing treatments for serious inflammatory diseases, and the development of therapeutics for the treatment or prevention of addiction and related disorders. On June 11, 2026, we completed our previously announced acquisition of Azora Therapeutics, Inc. (“Azora”), a biopharmaceutical company developing treatments for serious inflammatory diseases, pursuant to an Agreement and Plan of Merger, dated June 11, 2026 (the “Merger Agreement”), by and among Adial, Adial Merger Sub, Inc. (“First Merger Sub”), Adial Second Merger Sub, LLC (“Second Merger Sub”) and Azora. Pursuant to the Merger Agreement, First Merger Sub merged with and into Azora, with Azora surviving as a wholly owned subsidiary of Adial (the “First Merger”). Immediately following the First Merger, Azora merged with and into Second Merger Sub, with Second Merger Sub surviving as a wholly owned subsidiary of Adial and the Second Merger Sub changing its name to “Azora Therapeutics, LLC” (the “Second Merger” and, together with the First Merger, the “Merger”). . On June 12, 2026 we received approximately $24.3 million in net proceeds from the initial closing of a private placement financing from a group of institutional investors, with potential additional closings. The Merger brought Azora’s lead investigational candidate, AT177, into our pipeline. For additional information regarding the terms of the Merger and the concurrent financing, see Note 4 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Current report
Azora has historically focused on developing aryl hydrocarbon (“AhR”) receptor agonists to treat autoimmune diseases including ulcerative colitis. Following the Merger, our focus has shifted to the treatment of serious inflammatory diseases and our lead program is AT177 being studied for the treatment of ulcerative colitis (“UC”). AT177 is a fully synthetic, patented, oral AhR agonist designed to restore mucosal immune homeostasis at the site of disease with minimal systemic exposure. Its active ingredient is a prodrug of indirubin, the most potent AhR agonist within indigo naturalis, a botanical extract with best-in-category clinical efficacy in ulcerative colitis. AT177’s colon-targeted formulation delivers therapeutic AhR engagement directly to the colonic mucosa with exquisite gut restriction, minimizing the systemic AhR exposure associated with adverse effects. In preclinical studies, AT177 demonstrated robust local colonic AhR activation with markedly limited systemic exposure and superior colon-to-systemic selectivity compared to other AhR agonists in development. AT177 is currently in IND-enabling studies, with an investigational new drug (“IND”) filing planned for the second quarter of 2027, initiation of a Phase 1a single- and multiple-ascending-dose (“SAD/MAD”) clinical trial planned to commence in the second half of 2027, followed by a Phase 1b proof-of-concept study in UC patients.
Current report
Acquisition of Azora
Current report
On June 11, 2026, we acquired Azora in accordance with the terms of the Merger Agreement. Pursuant to the Merger Agreement, Azora became a wholly owned subsidiary of the Company.
Current report
At closing of the Merger, we issued to former Azora stockholders 437,421 shares of our common stock and 12,930.617 shares of Series A Non-Voting Convertible Preferred Stock, par value $0.001 per share (“Series A Preferred Stock”). Each share of Series A Preferred Stock is convertible into 1,000 shares of our common stock, subject to the terms and limitations set forth in the applicable certificate of designation and related transaction documents, including without limitation the receipt of approval of our stockholders of the conversion thereof. Azora outstanding options to purchase Azora common stock were converted into options to purchase an aggregate of 1,177,782 shares of our common stock.
Current report
On June 11, 2026, in connection with, and as a condition to closing of, the Merger, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the purchasers named therein (the “PIPE Investors”), pursuant to which we issued and sold to the PIPE Investors, in a private placement transaction, at the initial closing on June 12, 2026 (the “Initial PIPE Closing”), pre-funded warrants (the “Initial Closing Pre-Funded Warrants”) to purchase up to an aggregate of 9,749,345 shares of common stock, at a price of $2.7489 per Initial Closing Pre-Funded Warrant), for an aggregate purchase price of $26.8 million. In addition, we agreed to issue and sell to the PIPE Investors, at one or more subsequent closings (each, a “Milestone Closing”), pre-funded warrants (“Milestone Pre-Funded Warrants”) to purchase up to an aggregate of 9,749,345 shares of common stock and incentive warrants (“Milestone Incentive Warrants” and, together with the Milestone Pre-Funded Warrants, the “Milestone Warrants”) to purchase up to an aggregate of 9,749,345 shares of common stock, at a combined purchase price equal to $2.7489 per Milestone Warrants, for an aggregate purchase price of up to $26.8 million. The issuance and sale of Initial Closing Pre-Funded Warrants and Milestone Warrants pursuant to the Purchase Agreement are collectively referred to as the “Financing.”
Current report
Pursuant to the terms of the Merger Agreement, upon the closing of the Merger, we agreed to guarantee the payment of $5.5 million in principal amount of certain amended and restated convertible promissory notes issued by Azora (the “Azora Notes”) to certain individuals (collectively, the “Former Azora Noteholders”). On June 11, 2026, we entered into exchange agreements (the “Exchange Agreements”) with the Former Azora Noteholders to extinguish the payment guaranty and retire the Azora Notes in exchange for the issuance to the Former Azora Noteholders of Initial Closing Pre-Funded Warrants to purchase an aggregate of 2,031,603 shares of common stock (the “Azora Note Exchange”). As a result of the Azora Note Exchange, all such Azora Notes have been deemed to be repaid in full and all outstanding obligations thereunder have been extinguished. Pursuant to the Exchange Agreements, the Former Azora Noteholders are also entitled to participate in Milestone Closings to purchase Milestone Pre-Funded Warrants to purchase up to an aggregate of 2,031,603 shares of common stock and Milestone Incentive Warrants to purchase 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 PIPE Investors under the Purchase Agreement, for an aggregate purchase price of up to $5.6 million. We accounted for the Azora Note Exchange as a debt extinguishment and an extinguishment loss of $6.1 million was recognized based upon the difference between the reacquisition price and the net carrying amount of the Azora Notes. The reacquisition price is equal to the fair value of the Initial Closing Pre-Funded Warrants to purchase an aggregate of 2,031,603 shares of Adial’s common stock and the liability classified rights to participate in Milestone Closings to purchase Milestone Pre-Funded Warrants to purchase up to an aggregate of 2,031,603 shares of Adial’s common stock and Milestone Incentive Warrants having an exercise price of $2.7489 per share to purchase up to an aggregate of 2,031,603 shares of Adial’s common stock issued upon the Azora Note Exchange and the net carrying amount is equal to the principal and accrued interest amount of the Azora Notes.
Current report
The Azora Note Exchange, together with the Merger and the Financing, are referred to as the “Transactions.”
Current report
Our Product Candidates
Current report
Azora is developing colon-targeted AhR agonists for the treatment of inflammatory bowel disease (“IBD”). Azora was originally incorporated as Meya Pharmaceuticals and 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 University’s translational medicine SPARK program. In connection with the Merger, Dr. Davidson, Azora’s co-founder and former Chief Executive Officer, was appointed as our Chief Development Officer and as a member of our Board of Directors, Dr. Saiki was appointed Executive Vice President of Strategy. and Wendy Young, Ph.D., formerly Senior Vice President of Small Molecule Drug Discovery at Genentech, was appointed to our Board of Directors as an independent director upon closing of the Merger.
Current report
AhR is a master regulator of gut immune and epithelial barrier function and restoring AhR signaling at the intestinal mucosa has been clinically validated as a mechanism for treating UC. Our core scientific thesis is that delivering potent, localized AhR agonism directly to the colon, while minimizing systemic exposure, can capture the efficacy of AhR activation demonstrated in patients while mitigating the systemic safety liabilities observed with previous generations of AhR agonists.
Current report
AT177 was inspired by indigo naturalis, a botanical extract with demonstrated clinical benefit in UC but with certain limitations inherent to an uncontrolled botanical. AT177 is a rationally designed prodrug that liberates indirubin, the most potent AhR agonist in indigo naturalis, directly in the colon in a controlled, fully-synthetic, patented oral dosage form. We believe AT177 has the potential to be a differentiated treatment for UC. As of the date of this Quarterly Report on Form10-Q, we have completed a GLP toxicology in rats evaluating AT177, received pre-IND feedback from the U.S. Food and Drug Administration (the “FDA”), and are advancing AT177 through IND-enabling studies, with an IND planned for the second quarter of 2027. We intend to advance AT177 into a Phase 1a SAD/MAD study followed by a Phase 1b proof-of-concept (“PoC”) study in patients with UC, with an initial proof-of-concept readout anticipated in first half of 2028.
Current report
In addition to AT177, our pipeline includes AD04, our legacy investigational product candidate for the treatment of AUD, which is described under “Legacy Program — AD04,” below.
Current report
Our Pipeline
Current report
Figure: Our pipeline — AT177 in UC (lead), AT177 in Crohn’s disease, and an undisclosed platform program. Source: Company materials.
Current report
Corporate Strategy
Current report
Our mission is to improve the lives of patients suffering from serious inflammatory diseases by developing differentiated therapies that restore immune balance at the site of disease. Our strategy to achieve this goal centers on the following development priorities:
Current report
Ulcerative Colitis and the Case for Colon-Targeted AhR Agonism
Current report
Disease Overview and Unmet Need
Current report
UC is a chronic inflammatory bowel disease characterized by inflammation and ulceration of the colonic mucosa. Symptoms include rectal bleeding, urgency, diarrhea and abdominal pain and can severely impact quality of life. Ulcerative colitis arises from a dysregulated immune response, with immunologic, epithelial barrier and environmental factors all contributing to disease initiation and progression. It is estimated that UC and Crohn’s disease impacts more than 5.0 million patients worldwide and growing.
Current report
In the United States, approximately 1.25 million patients were treated for UC in 2020, representing an estimated U.S. total addressable market of approximately $8.4 billion in 2023 and growing. Despite meaningful therapeutic advances over the last decade, including more than 15 approved therapies across multiple classes, UC continues to impose a substantial burden of illness, with clinical remission at induction rates generally below 30% and durable mucosal healing remaining a central unmet clinical priority.
Current report
Despite the availability of multiple classes of approved therapies, UC remains an area of substantial unmet need. Existing therapies are limited by:
Current report
As a result, there remains a significant need for an oral therapy that achieves high, durable rates of remission with a favorable safety profile. We designed AT177 with the goal of addressing these limitations.
Current report
The Aryl Hydrocarbon Receptor (AhR) Is a Master Regulator of Gut Health
Current report
The AhR is a ligand-activated transcription factor expressed in immune cells and intestinal epithelial cells that regulates both immune function and epithelial barrier integrity. Polymorphisms in AhR have been associated with increased risk of UC. AhR agonism has been shown to reduce pro-inflammatory cytokines, including IL-17a, IL-6 and TNFα, to increase the anti-inflammatory and tissue-protective cytokines IL-10 and IL-22 and regulatory T cells (Tregs), and to increase expression of tight junction proteins. By restoring barrier function locally, AT177 may help end the cycle whereby additional bacteria, antigens and inflammatory triggers can enter the body via a disrupted mucosal barrier and further exacerbate the ongoing immune response. We believe that AT177 can be used in combination with existing targeted drugs for UC, given its orthogonal mechanism.
Current report
Systemic AhR agonists have demonstrated efficacy in UC and other inflammatory diseases, providing clinical validation of the target. However, systemic AhR signaling has been associated with potential safety risks, including headaches, cardiovascular adverse events, and systemic immunosuppression that may increase risk of malignancy. These observations informed our strategy of delivering potent AhR agonism locally in the colon while minimizing systemic exposure.
Current report
Figure: The AhR is a master regulator of gut immune and epithelial barrier function. Source: Company materials.
Current report
Indigo Naturalis Supports Validation of the AhR Mechanism in Ulcerative Colitis
Current report
Indigo naturalis, a botanical extract used historically in traditional medicine practices in East Asia, has demonstrated profound and durable efficacy in UC, providing clinical validation of the AhR mechanism. Our co-founder, Dr. Julie Saiki, conducted a Phase 1b study of indigo naturalis in refractory UC patients at Stanford University (Saiki et al., BMJ Open Gastroenterology, 2021; n=11), of whom 9 of 11 had failed anti-TNF therapy and 5 of 11 had been recommended for colectomy. In this study, indigo naturalis drove robust colonic AhR target engagement (~12,000-fold mean increase in colonic AhR activity). This study supports validation of the AhR mechanism in UC.
Current report
The clinical benefit of indigo naturalis in UC has been demonstrated in additional studies. In a randomized, double-blind, placebo-controlled trial (Naganuma et al., Gastroenterology, 2018; n=86), indigo naturalis demonstrated up to approximately 50% placebo-adjusted clinical remission at Week 8, with benefit observed in both biologic-experienced and biologic-naïve patients. In a longer-term maintenance study (Matsuno et al., 2022; n=33), clinical remission was reported in approximately 73% of patients at one year. Despite this efficacy, indigo naturalis is an uncontrolled botanical mixture that is not FDA-approved and carries potential systemic safety liabilities, limiting its utility as a therapy.
Current report
Figure: Indigo naturalis has demonstrated profound, durable efficacy in ulcerative colitis, validating the AhR mechanism. Source: Company materials.
Current report
Efficacy Is Driven Locally, Not Systemically
Current report
Preclinical and clinical evidence supports our thesis that the therapeutic benefit of AhR agonism in UC is driven by local activation in the colonic epithelium, rather than by systemic exposure. In a chronic murine colitis model, selective deletion of AhR in intestinal epithelial cells eliminated most of the benefit of AhR agonism, supporting that colonic epithelial AhR signaling is critical to efficacy. In addition, tapinarof (Vtama®), a topically-applied AhR agonist approved for psoriasis and atopic dermatitis, achieves its therapeutic effect with minimal systemic exposure. Consistent with these findings, Azora’s fully-owned, topical indirubin program, AT193, has demonstrated activity in psoriasis with no quantifiable systemic exposure in a Phase 1b study conducted in Australia. Although the program is not in active development, the clinical data supports the hypothesis that only local activation alone is sufficient for efficacy in another autoimmune disease. Together, these data support our belief that local AhR activation is sufficient to drive clinical benefit.
Current report
AT177 — Our Lead Product Candidate
Current report
Composition and Mechanism of Action
Current report
AT177 is a fully-synthetic, gut-restricted, small-molecule prodrug designed to recapitulate the benefit of indigo naturalis while minimizing systemic exposure. AT177 converts in the colonic lumen to indirubin,, the most potent AhR agonist in indigo naturalis, in the colon. Conversion to indirubin occurs via hydrolysis across a range of physiological pHs expected in healthy and UC colons and does not rely on microbial activity or expression of enzymes which may be disrupted in UC patients. By liberating indirubin directly at the site of disease, AT177 is designed with the intention to maximize local AhR activation in the colonic epithelium while limiting systemic exposure.
Current report
Figure: AT177 converts into indirubin, the active moiety in indigo naturalis. Source: Company materials.
Current report
Differentiated Product Profile
Current report
We believe that AT177 has a differentiated clinical profile compared with approved therapies and other AhR candidates in development:
Current report
Preclinical Evidence
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Removed paragraphs (13)
Previous report
We are a clinical-stage biopharmaceutical company focused on the development of therapeutics for the treatment or prevention of addiction and related disorders. Our investigational new drug candidate, AD04, is being developed as a therapeutic agent for the treatment of alcohol use disorder (“AUD”). AD04 was investigated in a Phase 3 clinical trial, designated the ONWARD trial, for the potential treatment of AUD in subjects with certain target genotypes, which were identified using our companion diagnostic genetic test. Based on our analysis of the subgroup data from the ONWARD trial, we are now focused on completing the clinical development program for AD04 in the specified genetic subgroups to meet regulatory requirements primarily in the US and secondarily in Europe/UK.
Previous report
Collaboration Framework
Previous report
On March 3, 2026, we entered into a collaboration framework agreement with a strategic partner, Molteni Farmaceutici (“Molteni”), for a proposed exclusive partnership covering the commercialization of AD04 in Europe. The collaboration framework, which is subject to execution of a final definitive agreement, sets forth the strategic and financial parameters of the proposed partnership, covering clinical, regulatory, manufacturing, and commercial terms. Under the framework, the strategic partner has been granted a period of exclusivity to evaluate the feasibility of the project, conduct planning, due diligence, and a comprehensive assessment of the requirements for the successful commercial launch of AD04 across Europe.
Previous report
The definitive agreement is expected to include an upfront payment, milestone payments tied to development and commercial progress, and tiered royalties on European AD04 net sales, payable to us. We believe the total potential aggregate value from royalties and milestones over time will be significant, estimated at nearly $60 million, assuming AD04 progresses through clinical development and is successfully introduced in the European market. However, there can be no assurance given that a definitive agreement to implement the terms set forth in the collaboration framework agreement will be executed to establish the proposed partnership (and Molteni has no obligation to enter into such definitive agreement), that ADO4 will successfully progress through clinical development and commercialization in Europe or that we will receive any royalties or milestone payments as a result of the proposed partnership.
Previous report
AD04 — Clinical Development Strategy
Previous report
The clinical development plan for AD04 is based on the regulatory feedback received in the meetings that took place in the third quarter of 2025. Our current planning assumption is to conduct one Phase 3 trial with an adaptive enrichment trial design, one subsequent confirmatory Phase 3 trial and one open label extension safety study. These assumptions may change based on the recent shift in the FDA’s evidentiary posture to potentially provide approval based on one adequate and well-controlled clinical trial plus confirmatory evidence, rather than the historic expectation of two independent clinical trials ongoing discussions with regulatory authorities, and final trial designs and results. It is possible that we may conduct only one additional Phase 3 clinical trial of AD04.
Previous report
At the Market Offering
Previous report
On August 1, 2025, we, entered into a sales agreement (the “ATM”) with A.G.P./Alliance Global Partners ( “AGP”) providing for the sale by us of our 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 us. 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 we will pay AGP commissions for its services in acting as agent in the sale of shares of common stock pursuant to the ATM. AGP is 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 three months ended March 31, 2026, we sold 181,230 shares of common stock under the ATM and received net proceeds of approximately $315,000.
Previous report
Results of operations for the three months ended March 31, 2026 and 2025 (rounded to nearest thousand)
Previous report
From April 1, 2026 through May 6, 2026, we sold 499,606 shares of common stock through the AGP ATM and received net proceeds of approximately $782,000.
Previous report
At March 31, 2026, we had cash and cash equivalents of $4.6 million. We plan to begin a Phase 3 study of AD04 in 2026, pending availability of adequate funds, to complete production of sufficient drug product to carry out the study, and to begin the process of clinical validation of our new cheek swab diagnostic genetic test, which will be conducted with the Phase 3 study. We have signed a contract with a vendor for approximately $2.3 million with approximately $1.7 million remaining under this contract, which is cancellable by either party, to produce sufficient drug product to carry out the study, validate the manufacturing process, and manufacture registration batches for commercial usage. Our cash on hand is sufficient to fund our operations and meet our existing commitments into the second half of 2026, based on our current commitments. We have incurred recurring losses and need to raise additional funds to sustain our operations.
Previous report
We will require additional financing as we continue to execute our overall business strategy which is to conduct one Phase 3 trial with adaptive trial design, one subsequent confirmatory Phase 3 trial and one open label extension study. These assumptions may change based on ongoing discussions with regulatory authorities and final trial designs. We are actively pursuing additional equity or debt financing opportunities, in the form of either a private placement or a public offering and have been engaged in ongoing discussions with strategic institutional investors and investment banks with respect to such possible offerings as well as other strategic alternatives. Potential sources of financing that we are pursuing include strategic relationships, licensing arrangements, public or private sales of our equity or debt and other sources. Such additional financing opportunities might not be available to us when and if needed, on acceptable terms or at all.
Previous report
Our discussion and analysis of our financial condition and results of operations is based on our financial statements. These unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these unaudited condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results and experiences may differ materially from these estimates. We did not identify any critical accounting estimates. Our significant accounting policies are more fully described in Note 3 to our unaudited condensed financial statements included with this report.
Reworded paragraphs (18)
Previous wording
The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our unaudited condensed financial statements and the notes presented herein included in this Form 10-Q and the audited financial statements and the other information set 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 Form 10-K”). ln addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties including, but not limited to, those set forth below under “Risk Factors” and elsewhere herein, and those identified under Part I, Item 1A of the 2025 Form 10-K. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the Securities and Exchange Commission (“SEC”).
Current wording
The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the notes presented herein included in this Form 10-Q and the audited consolidated financial statements and the other information set 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 Form 10-K”). ln addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties including, but not limited to, those set forth below under “Risk Factors” and elsewhere herein, and those identified under Part I, Item 1A of the 2025 Form 10-K. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the Securities and Exchange Commission (“SEC”).
Previous wording
We have devoted the vast majority of our resources to development efforts relating to AD04, including preparation for and conducting clinical trials, providing general and administrative support for these operations and protecting our intellectual property. We expect these activities to continue to demand most of our resources for the foreseeable future.
Current wording
Prior to the Merger, we were primarily focused on the development of AD04, a genetically targeted, serotonin-3 receptor antagonist, therapeutic agent for the treatment of Alcohol Use Disorder (“AUD”) in heavy drinking patients. Historically, we have devoted the vast majority of our resources to development efforts relating to AD04, including preparation for and conducting clinical trials, providing general and administrative support for these operations and protecting our intellectual property.
Previous wording
We have incurred net losses in each year since our inception, including net losses of approximately $2.0 million and $8.0 million for the three months ended March 31, 2026 and year ended December 31, 2025, respectively. We had accumulated deficits of approximately $92 million and $90 million as of March 31, 2026 and December 31, 2025, respectively. All of our operating losses in the three months ended March 31, 2026 resulted from costs incurred in operations, including costs in connection with our continuing research and development programs and from general and administrative costs associated with our operations.
Current wording
We have incurred net losses in each year since our inception, including net losses of approximately $54.0 million, inclusive of the one-time acquired in process research and 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, respectively. We had accumulated deficits of approximately $144.0 million and $90 million as of June 30, 2026 and December 31, 2025, respectively. All of our operating losses in the six months ended June 30, 2026 resulted from costs incurred in operations, including costs in connection with our continuing research and development programs and from general and administrative costs associated with our operations.
Previous wording
We will not generate revenue from product sales unless and until we successfully complete development and obtain marketing approval for AD04, which we expect will take a number of years and is subject to significant uncertainty.
Current wording
We will not generate revenue from product sales unless and until we successfully complete development and obtain marketing approval for AT177 or AD04, which we expect will take a number of years and is subject to significant uncertainty.
Previous wording
Until such time, if ever, as we can generate substantial revenue from product sales, we expect to finance our operating activities through a combination of equity offerings, debt financings, government or other third-party funding, commercialization, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop AD04.
Current wording
Until such time, if ever, as we can generate substantial revenue from product sales, we expect to finance our operating activities through a combination of equity offerings, debt financings, government or other third-party funding, commercialization, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop AT 177 and AD04.
Previous wording
The following table sets forth the components of our statements of operations in dollars for the periods presented:
Current wording
The following table sets forth the components of our statements of operations in dollars for the periods presented (in thousands):
Previous wording
Research and development expenses decreased by approximately $314,000 (42%) to $433,000 during the three months ended March 31, 2026 compared to $747,000 for the three months ended March 31, 2025. The decrease was mainly due to decreased CMC and no new data analytics activity in the three months ended March 31, 2026 as compared to the same period in 2025.
Current wording
Research and development expenses decreased by approximately $292,000 (40%) to $440,000 during the three months ended June 30, 2026 compared to $732,000 for the three months ended June 30, 2025. The decrease was mainly due to decreased CMC and decreased research and development activity as the Company was engaged in merger discussions in the three months ended June 30, 2026 as compared to the same period in 2025.
Previous wording
General and administrative expenses increased by approximately $49,000 (3%) to $1,569,000 during the three months ended March 31, 2026 compared to $1,520,000 for the three months ended March 31, 2025. The increase was mainly due to an increase in business development costs incurred in the three months ended March 31, 2026 as compared to the same period in 2025.
Current wording
General and administrative expenses increased by approximately $4,250,000 (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 increase was mainly due to merger related cost associated with the acquisition of Azora and bonus and severance expenses incurred in the three months ended June 30, 2026 as compared to the same period in 2025.
Previous wording
The expense recognized to the change in the value of our equity method investment in Adovate, LLC (“Adovate”) decreased by approximately $95,000 in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This decrease is due to variations in the loss recognized related to our equity investment which includes a lower equity share, with changes to the value of our Adovate equity recognized on a three month lag.
Current wording
The expense recognized to the change in the value of our equity method investment in Adovate, LLC (“Adovate”) increased by approximately $82,000 in the three months ended June 30, 2026 compared to the three months ended June 30, 2025. This increase is due to variations in the loss recognized related to our equity investment which includes a lower equity share, with changes to the value of our Adovate equity recognized on a three month lag.
Previous wording
Total other income, excluding losses from the equity method investment, decreased by approximately $154,000 in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This decrease was mainly due to a milestone gain of approximately $150,000 that was recognized in the three months ended March 31, 2025 which did not occur during the three months ended March 31, 2026.
Current wording
Total other income, excluding losses from the equity method investment, change in fair value of milestone warrant rights liability and financing costs, loss on extinguishment of promissory notes, decreased by approximately $119,000 in the six months ended June 30, 2026 compared to the six months ended June 30, 2025. This decrease was mainly due to a milestone gain of approximately $150,000 that was recognized in the six months ended June 30, 2025 which did not occur during the six months ended June 30, 2026.
Previous 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, sales pursuant to the AGP ATM, private placements, use of our equity line, as well as other equity financings and warrant exercises.
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 compounds, 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, sales pursuant to the sales agreement (the “ATM”) that we entered into with A.G.P./Alliance Global Partners ( “AGP”) on August 1, 2025 providing for the sale by us of our 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 us, private placements, use of our equity line, as well as other equity financings and warrant exercises.
Previous wording
For the three months ended March 31, 2026, we sold 181,230 shares of common stock through the AGP ATM, for net proceeds of approximately $315,000 after expenses.
Current wording
For the six months ended June 30, 2026, we sold 725,684 shares of common stock through the AGP ATM, for net proceeds of approximately $1.2 million after expenses. Additionally, we sold Initial Closing Pre-Funded Warrants to purchase an aggregate of 9,749,345 shares of common stock to the PIPE Investors, for net proceeds of approximately $24.3 million, after deducting placement agent fees and the payment of other offering expenses associated with the Financing that were payable by us.
Previous wording
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 collaborations and strategic relationships in order to complete our subsequent clinical trial requirements for AD04. At this time, we have no committed sources of funding, our ability to sell shares under the AGP ATM is restricted by certain SEC rules, and our ability to sell shares under the purchase agreement, dated December 13, 2024, that we entered into with Alumni Capital LP (“Alumni”) is restricted by the terms of such agreement and certain Nasdaq rules. Management is actively pursuing financing and other strategic plans and strategic alternatives, that may include a business combination, merger or reverse merger, but can provide no assurances that such financing or other strategic plans or strategic alternatives will be available on acceptable terms, or at all. Without additional funding or securing a strategic collaboration, we will be required to delay, scale back or eliminate some or all of our research and development programs including our planned Phase 3 trial, which would likely have a material adverse effect on us and our financial statements.
Current wording
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 through the sale of the Milestone Warrants, equity and/or debt financings, grant funding, strategic collaborations and strategic relationships in order to complete our subsequent clinical trial requirements for AT177. At this time, we have no committed sources of funding. The sale and issuance of the Milestone Warrants and the receipt of cash proceeds from such issuance is not guaranteed and is in the discretion of the PIPE Investors and Azora Noteholders. Our ability to sell shares under the AGP ATM is restricted by certain SEC rules, and our ability to sell shares under the purchase agreement, dated December 13, 2024, that we entered into with Alumni Capital LP (“Alumni”) is restricted by the terms of such agreement and certain Nasdaq rules. Without additional funding or securing a strategic collaboration, we will be required to delay, scale back or eliminate some or all of our research and development programs including our planned Phase 1b trial, which would likely have a material adverse effect on us and our consolidated financial statements. We expect that any further development of AD04 will only be commenced if we receive grant funding, or enter into strategic collaborations and strategic relationships.
Previous wording
We are devoting substantial time and resources to evaluating strategic alternatives. However, there can be no assurance that we will be successful in pursuing any strategic alternative or that, if pursued, we will be able to consummate a strategic alternative on attractive terms or at all or that it would lead to increased stockholder value.
Current wording
There can be no assurance that we will be successful in pursuing any strategic alternative or that, if pursued, we will be able to consummate a strategic alternative on attractive terms or at all or that it would lead to increased stockholder value.
Previous wording
Net cash used in operating activities increased by approximately $27,000 in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The primary driver was an increase in changes in operating assets and liabilities for the months ended March 31, 2026 as compared to the three months ended March 31, 2025.
Current wording
Net cash used in operating activities increased by approximately $4.6 million in the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The primary driver was merger related cost associated with the acquisition of Azora, private placement costs that were expensed and bonus and severance expenses, which mainly attributed to this increase for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.
Previous wording
Net cash provided by investing activities decreased by approximately $150,000 in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This decrease was due to the recognition of a milestone payment received from Adovate of $150,000 in 2025 which did not occur in 2026 in the same period.
Current wording
Net cash provided by investing activities increased by approximately $5.1 million in the six months ended June 30, 2026 compared to the six months ended June 30, 2025. This primary driver was due to the net cash received in the acquisition of Azora partially offset by recognition of a milestone payment received from Adovate of $150,000 in 2025 which did not occur in 2026 in the same period.
Previous wording
Net cash provided by financing activities increased by approximately $264,000 in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. During the three months ended March 31, 2026, we had increased sales under the AGP ATM as compared sales of our common stock under the purchase agreement with Alumni during the three months ended March 31, 2025.
Current wording
Net cash provided by financing activities increased by approximately $20.2 million in the six months ended June 30, 2026 compared to the six months ended June 30, 2025. During the six months ended June 30, 2026, the primary driver was our Financing in conjunction with the acquisition of Azora as compared to a Warrant Inducement transaction and sales of our common stock under a best efforts offering completed during the six months ended June 30, 2025.
Previous wording
See Note 3 to the unaudited condensed financial statements for a discussion of recent accounting pronouncements.
Current wording
See Note 3 to the unaudited condensed consolidated financial statements for a discussion of recent accounting pronouncements.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
Results of operations for the three months ended June 30, 2026 and 2025
Current report — wording carried from elsewhere
The following table sets forth the components of our statements of operations in dollars for the periods presented(in thousands):
Current report — wording carried from elsewhere
Research and development (“R&D”) expenses
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General and administrative expenses (“G&A”) expenses
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Change in Value of Equity Method Investment
Current report — wording carried from elsewhere
The expense recognized to the change in the value of our equity method investment in Adovate, LLC (“Adovate”) decreased by approximately $13,000 in the 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 related to our equity investment which includes a lower equity share, with changes to the value of our Adovate equity recognized on a three month lag.