# Azora Therapeutics, Inc. (DE): Form 10-Q for the period ended Mar 31, 2025

- Company: [Azora Therapeutics, Inc. (DE)](/companies/adil.md) (CIK 1513525)
- Form: 10-Q
- Filed: 2025-05-14
- Accepted by EDGAR: May 14, 2025, 16:02 ET
- Period: 2025-03-31
- Accession: 0001213900-25-043281
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1513525/000121390025043281/ea0240351-10q_adial.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1513525/000121390025043281/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2025-01-01 to 2025-03-31 | $746.9k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | −$2.3m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | −$2.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.34 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.34 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 6,539,760 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | −$1.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2025-03-31 | $2.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-03-31 | $2.6m | us-gaap:AssetsCurrent |
| Total assets | at 2025-03-31 | $3.5m | us-gaap:Assets |
| Current liabilities | at 2025-03-31 | $1.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-03-31 | $1.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2025-03-31 | $2.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 21,437 characters.

*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 consolidated 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, 2024 that we filed with the SEC on March 4, 2025 (the “2024 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 2024 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”).*

### Overview

We are a clinical-stage biopharmaceutical company focused on the development of therapeutics for the treatment or prevention of addiction and related disorders. Our investigational new drug candidate, AD04, is being developed as a therapeutic agent for the treatment of alcohol use disorder (“AUD”). AD04 was recently investigated in a Phase 3 clinical trial, designated the ONWARD trial, for the potential treatment of AUD in subjects with certain target genotypes, which were identified using our companion diagnostic genetic test. Based on our analysis of the subgroup data from the ONWARD trial, we are now focused on completing the clinical development program for AD04 in the specified genetic subgroups to meet regulatory requirements primarily in the US and secondarily in Europe/UK.

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.

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 this 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.

Our current cash and cash equivalents, including the cash received from the warrant inducement that closed on May 5, 2025, 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. We have incurred recurring losses and need to raise additional funds to sustain our operations. These factors raise substantial doubt about our ability to continue as a going concern.

We have incurred net losses in each year since our inception, including net losses of approximately $2.2 million and $13.2 million for the three months ended March 31, 2025 and year ended December 31, 2024, respectively. We had accumulated deficits of approximately $84.2 million and $82 million as of March 31, 2025 and December 31, 2024, respectively. All of our operating losses in the three months ended March 31, 2025 resulted from costs incurred in continuing operations, including costs in connection with our continuing research and development programs and from general and administrative costs associated with our operations.

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.

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.

### Recent Developments

On Feb 4, 2025, we received a positive response from the U.S. Food and Drug Administration (“FDA”) on it’s proposed in-vitro bridging strategy for AD04. At the April 2023 Type C meeting with the FDA, they reaffirmed the acceptance of the heavy-drinking-day based endpoints as a basis for approval for the treatment of Alcohol Use Disorder rather than the previously required abstinence-based endpoints. As a result, we are preparing for the next FDA interaction to confirm the Phase 3 clinical plan in the United States. In January of 2025, the FDA also released a Qualification Statement accepting another surrogate endpoint for Alcohol Use Disorder (AUD). The newly released Qualification Statement by Center for Drug Evaluation and Research (CDER), states the acceptance of the 2-level reduction of the World Health Organization (WHO) risk drinking levels of alcohol consumption as an efficacy endpoint in pivotal clinical trials with adults diagnosed with (AUD). We have also been issued key patents in the United States, the European Union, and other jurisdictions for which we have exclusive license rights. The active ingredient in AD04 is ondansetron, a serotonin-3 antagonist. Due to its mechanism of action, AD04 has the potential to be used for the treatment of other addictive disorders, such as Opioid Use Disorder, obesity, smoking, and other drug addictions.

On May 1, 2025, we announced patent number 12,274,692 was issued on April 15, 2025 by the United States Patent and Trademark Office covering the administration of AD04, our investigational drug, as a precision medicine approach for patients with specific genetic markers. The patent claims a method of treating addiction by administering a therapeutically effective amount of AD04 to patients with serotonin-related gene variations, including specific genotypes of HTR3A, HTR3B, and SLC6A4, such as the LL genotype of 5-HTTLPR in combination with variations in rs1150226, rs17614942, and rs1176713.

On May 2, 2025, we entered into a warrant inducement agreement (the “Inducement Agreement”) with an existing healthcare-focused institutional investor of ours for the immediate exercise of existing Series B Warrants to purchase 1,418,440 shares of our common stock and Series C Warrants, and together with the Series B Warrants (the "Existing Warrants") to purchase 2,300,000 shares of our common stock at a reduced exercise price of $0.74 for net proceeds of approximately $2.35 million, before deducting legal fees and other transaction expenses. In consideration for the immediate exercise in full of the Existing Warrants, the investor received, in a private placement, new unregistered (i) Series B-1 warrants to purchase up to 2,482,270 shares of common stock(the "Series B-1 Warrants"), and (ii) Series C-1 Warrants to purchase up to 4,025,000 shares of common stock (the "Series C-1 Warrants"), and together with the Series B-1 Warrants the "New Warrants"). The New Warrants have an exercise price of $0.74 and will be exercisable upon stockholder approval. The Series B-1 Warrants expire five years from the date of such approval and the Series C-1 Warrants will expire eighteen months from the date of such approval. The warrant inducement transaction closed on May 5, 2025. We expect to use the net proceeds from these transactions for working capital and other general corporate purposes.

The exercise price and the number of shares of common stock issuable upon exercise of each New Warrant are subject to appropriate adjustments in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock. In addition, in certain circumstances, upon a fundamental transaction (as defined in the New Warrants), a holder of New Warrants will be entitled to receive, upon exercise of the New Warrants, the kind and amount of securities, cash or other property that such holder would have received had they exercised the New Warrants immediately prior to the fundamental transaction.

We may not effect the exercise of certain New Warrants, and the applicable holder will not be entitled to exercise any portion of any such New Warrant, which, upon giving effect to such exercise, would cause the aggregate number of shares of common stock beneficially owned by the holder of such New Warrant (together with its affiliates) to exceed 4.99% (or, at the election of the holder, 9.99%) of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of such New Warrants.

### Results of operations for the three months ended March 31, 2025 and 2024 (rounded to nearest thousand)

The following table sets forth the components of our statements of operations in dollars for the periods presented:

|  | For the Three Months Ended March 31, 2025 | 2024 | Increase (Decrease) |
| --- | ---: | ---: | ---: |
| Research and development expenses | $747,000 | $454,000 | $293,000 |
| General and administrative expenses | 1,520,000 | 1,391,000 | 129,000 |
| Total Operating Expenses | 2,267,000 | 1,845,000 | 422,000 |
| Loss From Operations | (2,267,000) | (1,845,000) | (422,000) |
| Inducement expense | — | (4,465,000) | (4,465,000) |
| Other income (expense) | 166,000 |  | 166,000 |
| Change in value of equity method investment | (163,000) | (190,000) | (27,000) |
| Interest income | 36,000 | 23,000 | 13,000 |
| Total other income (expenses) | 39,000 | (4,632,000) | (4,671,000) |
| Net loss | (2,228,000) | (6,477,000) | (4,249,000) |

### Research and development (“R&D”) expenses

Research and development expenses increased by approximately $293,000 (65%) during the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The key drivers of the increase were increased chemistry, manufacturing, and controls (CMC) expenses to develop clinical supplies for the upcoming program and consulting expenses as we continue to progress and advance AD04 to a Phase 3 trial.

### General and administrative expenses (“G&A”) expenses

General and administrative expenses increased by approximately $129,000 (9%) during the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This modest increase was mainly due to higher compensation and consulting.

### Change in Value of Equity Method Investment

The expense recognized to the change in the value of our equity method investment in Adovate, LLC decreased by approximately $27,000 in the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This slight decrease is due to variations in the loss recognized related to our equity investment, with changes to the value of our Adovate equity recognized on a three month lag.

### Total Other income (expenses)

Total other income, excluding losses from the equity method investment and inducement expense from the March 2024 warrant inducement transaction, increased by approximately $179,000 in the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This increase was mainly due to the recognition of a milestone payment received from Adovate of $150,000 along with an increase in interest income that resulted from a higher cash balance held in the period.

### Liquidity and Capital Resources at March 31, 2025

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 At the Market Offering Agreement, dated April 18, 2024, that we entered into with H.C. Wainwright & Co., LLC (the “ ATM Agreement”), private placements, use of our equity line, as well as other equity financings, warrant exercises, and the issuance of debt securities.

During the year ended December 31, 2024, our primary sources of funding were the exercise of previously issued warrants and the use of our ATM Agreement and the March 2024 warrant inducement described below.

On March 1, 2024, warrants to purchase 268,440 shares of common stock at an exercise price of $2.82 per share were exercised for gross proceeds of approximately $757 thousand.

On March 1, 2024, we entered into the Inducement Agreement pursuant to which the Holder of the Existing Warrants exercised for cash the Existing Warrants to purchase up to approximately 1,150,000 shares of common stock, at an exercise price of $2.82 per share. The transactions contemplated by the Inducement Agreement closed on March 6, 2024 and we received aggregate gross proceeds of approximately $3.5 million, before deducting placement agent fees and other expenses payable by us. Net proceeds of this transaction were approximately $3.1 million.

In the year ended December 31, 2024, we sold 2,348,520 shares of common stock through our ATM Agreement, for net proceeds of approximately $4 million after placement fees and expenses.

On May 2, 2025, we entered into the Inducement Agreement with an existing healthcare-focused institutional investor of ours for the immediate exercise of existing the Series B Warrants to purchase 1,418,440 shares of our common stock and the Series C Warrants, and together with the Series B Warrants to purchase 2,300,000 shares of our common stock at a reduced exercise price of $0.74 for net proceeds of approximately $2.35 million, before deducting legal fees and other transaction expenses.

At March 31, 2025, we had cash and cash equivalents of $2.4 million. As of May 12, 2025, we had cash and cash equivalents of approximately $3.9 million. We have completed a Phase 1 pharmacokinetic study of AD04 with a total cost of approximately $1.4 million, which has been fully paid. In addition, we plan to begin a Phase III study of AD04 in the second half of 2025, to complete production of sufficient drug product to carry out the study, and to begin the process of revalidation for our companion diagnostic to be included in our Phase III study. We have signed a contract with a vendor for approximately $2.3 million, 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 and cash equivalents, including the cash proceeds of the warrant inducement that closed on May 5, 2025 is sufficient to fund our operations and meet our existing commitments into the fourth quarter of 2025, based on our current commitments. We have incurred recurring losses and need to raise additional funds to sustain our operations. These factors raise substantial doubt about our ability to continue as a going concern.

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. At this time, we have no committed sources of funding and our ability to use our ATM Agreement is restricted by certain SEC rules and our ability to use our equity line is restricted by certain Nasdaq rules. 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.

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

### Cash flows

| (rounded to nearest thousand) Provided by (used in) | For the Three months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Operating activities | $(1,585,000) | (1,626,000) |
| Investing activities | 150,000 | — |
| Financing activities | 51,000 | 3,824,000 |
| Net increase (decrease) in cash and cash equivalents | $(1,384,000) | 2,198,000 |

#### Net cash used in operating activities – continuing operations

Net cash used in operating activities decreased by approximately $41,000 in the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The primary drivers of the decrease were higher accounts payable and accrued expenses as compared to the prior period.

#### Net cash provided by investing activities

Net cash provided by investing activities increased by approximately $150,000 in the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This increase was due to the recognition of a milestone payment received from Adovate of $150,000.

#### Net cash provided by financing activities

Net cash provided by financing activities decreased by approximately $3,774,000 in the three months ended March 31, 2025 compared to the three months ended March 31, 2024. In the three months ended March 31, 2024, we realized additional funds from the induced and uninduced exercise of warrants for net proceeds of approximately $3,824,000, whereas in the three months ended March 31, 2025, we sold 75,000 shares of common stock through our purchase agreement with Alumni Capital for net proceeds of approximately $51,000.

#### Off-balance sheet arrangements

We do not have any off-balance sheet arrangements.

#### Recent Accounting Pronouncements

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

#### Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements. These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these unaudited condensed consolidated 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 consolidated financial statements included with this report.

## Market risk

As filed, 153 characters.

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

## Controls and procedures

As filed, 3,350 characters.

#### Disclosure Controls and Procedures

We have adopted and maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the SEC. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure.

As previously reported, we have identified material weaknesses in our internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. The material weaknesses identified and as yet unremediated include (i) lack of finalized assessment under COSO framework, (ii) policies and procedures which are not adequately documented, (iii) lack of proper approval processes, review processes and documentation for such reviews, (iv) insufficient GAAP experience regarding complex transactions and ineffective review processes over period end financial disclosure and reporting (v) deficiencies in the risk assessment, design and policies and procedures over information technology (“IT”) general controls. and (vi) insufficient segregation of duties.

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

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

#### Remediation Plan for Existing Material Weakness

Management continues to take steps to remediate the weaknesses described above. Management has engaged consulting services to ameliorate those material weaknesses stemming from its small number of personnel, in particular consultants with significant GAAP experience and IT security experts. The Company recently completed a risk assessment of its controls, and management is committed to additional remediation steps, improved documentation the Company’s controls, and redesign of inadequate approval processes, as resources permit.

#### Changes in Internal Control

There has been no change in our internal control procedures over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our fiscal quarter ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 13,906 characters.

*Investing in our securities involves a high degree of risk. You should consider carefully the following risks, together with all the other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and notes thereto. If any of the following risks actually materializes, our operating results, financial condition and liquidity could be materially adversely affected. As a result, the trading price of our common stock could decline and you could lose part or all of your investment. The following information updates, and should be read in conjunction with, the information disclosed in Part I, Item 1A, “Risk Factors,” contained in our 2024 Form 10-K. Except as disclosed below, there have been no material changes from the risk factors disclosed in our 2024 Form 10-K.*

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

We are a clinical stage biotechnology pharmaceutical company that is focused on the discovery and development of medications for the treatment of addictions and related disorders of AUD in patients with certain targeted genotypes. We have a limited operating history. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval and become commercially viable. We have no products approved for commercial sale and have not generated any revenue from product sales to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. To date, we have not generated positive cash flow from operations, revenues, or profitable operations, nor do we expect to in the foreseeable future. As of March 31, 2025, we had an accumulated deficit of approximately $84.2 million and as of December 31, 2024, we had an accumulated deficit of approximately $82 million. Our current cash and cash equivalents, including the cash proceeds of the warrant inducement that closed on May 5, 2025 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 fourth quarter of 2025, based our current projections and current commitments. Implementation of our full development plans would exhaust our cash on hand more quickly. 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. 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 before we have expended our current cash on hand on acceptable terms to continue our operations and AD04 development projects.

Even if we succeed in commercializing our product candidate or any future product candidates, we expect that the commercialization of our product will not begin until 2027 or later, we will continue to incur substantial research and development and other expenditures to develop and market additional product candidates and will continue to incur substantial losses and negative operating cash flow. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

***Our independent registered public accounting firm has expressed doubt about our ability to continue as a going concern as do our notes to financial statements included in this Quarterly Report on Form 10-Q.***

The report of our independent registered public accounting firm included in the 10-K filing contains a note stating that the accompanying financial statements have been prepared assuming we will continue as a going concern. During the three months ended March 31, 2025, we incurred a net loss of $2.2 million and used $1.4 million of cash in operations. During the year ended December 31, 2024, we incurred a net loss of $13.2 million and used cash in operations of $6.9 million. Losses have principally occurred as a result of the research and development efforts coupled with no operating revenue. The notes to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q state that we do not believe that the existing cash and cash equivalents are sufficient to fund operations for the next twelve months following the filing of this Quarterly Report on Form 10-Q and our significant accumulated deficit, recurring losses, and needs to raise additional funds to sustain its operations raise substantial doubt about our ability to continue as a going concern. In May 2025, the Company received net proceeds of approximately $2.35 million from the exercise of warrants. However, the Company will require additional capital to continue operations and development of AD04.

Even if we succeed in commercializing our product candidate or any future product candidates, we expect that the commercialization of our product will not begin until 2027 or later, we will continue to incur substantial research and development and other expenditures to develop and market additional product candidates and will continue to incur substantial losses and negative operating cash flow.

***Our failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a de-listing of our common stock.***

Our shares of common stock are listed for trading on The Nasdaq Capital Market (“Nasdaq”) under the symbol “ADIL.” If we fail to satisfy the continued listing requirements of The Nasdaq Capital Market such as the corporate governance requirements, the stockholder’s equity requirement or the minimum closing bid price requirement, The Nasdaq Capital Market may take steps to de-list our common stock or warrants.

On August 31, 2022, we received written notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC (the “Staff”) notifying us that for the preceding 30 consecutive business days (July 20, 2022 through August 30, 2022), our common stock did not maintain a minimum closing bid price of $1.00 per share (“Minimum Bid Price Requirement”) as required by Nasdaq Listing Rule 5550(a)(2). On August 4, 2023, we effected a reverse stock split for the purpose of regaining compliance with Nasdaq’s listing requirements. On August 21, 2023, we, received a notice from the Staff notifying us that the Staff has determined that for 10 consecutive business days, from August 7, 2023 to August 18, 2023, the closing bid price of our common stock has been at $1.00 per share or greater. Accordingly, the Staff determined that we had regained compliance with Nasdaq Listing Rule 5550(a)(2) and that the matter was closed.

On May 19, 2023, we received a letter from the Staff stating that we were not in compliance with Nasdaq Listing Rule 5550(b)(1) because our stockholders’ equity of $1,439,848 as of March 31, 2023, as reported in our Quarterly Report on Form 10-Q filed with the SEC on May 12, 2023, was below the minimum requirement of $2,500,000. On August 22, 2023, we also received a notice from the Staff that we now complied with Nasdaq Listing Rule 5550(b)(1), and that the matter was closed.

On November 21, 2023, we received a letter from Nasdaq stating that we were not in compliance with Nasdaq Listing Rule 5550(b)(1) because our stockholders’ equity of $2,339,258 as of September 30, 2023, as reported in our Quarterly Report on Form 10-Q filed with the SEC on November 14, 2023, was below the minimum requirement of $2,500,000. On November 29, 2023, we received a letter from Nasdaq stating that based on the Current Report on Form 8-K that we filed with the Securities and Exchange Commission on November 28, 2023 it determined that we were in compliance with Nasdaq Listing Rule 5550(b)(1). The letter further stated that if we failed to evidence compliance with Nasdaq Listing Rule 5550(b)(1) upon filing of our next periodic report we might be subject to delisting. At such time, Nasdaq staff would provide written notification to us and we might then appeal the Staff’s determination to a Nasdaq Hearings Panel. Our subsequent annual report on form 10-K, filed on April 1, 2024, disclosed stockholders’ equity at a level which was in compliance with Nasdaq Listing Rule 5550(b)(1) and the matter was closed.

On March 5, 2025, we received written notice from Nasdaq notifying us that for the preceding 30 consecutive business days (January 17, 2025 through March 4, 2025), our common stock did not maintain the Minimum Bid Price Requirement as required by Nasdaq Listing Rule 5550(a)(2). The notice has no immediate effect on the listing or trading of the our common stock and the common stock will continue to trade on The Nasdaq Capital Market under the symbol “ADIL.” In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a compliance period of 180 calendar days, or until September 1, 2025, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Compliance may be achieved without further action if the closing bid price of our common stock is at or above $1.00 for a minimum of ten consecutive business days at any time during the 180-day compliance period, in which case Nasdaq will notify us if it determines it is in compliance and the matter will be closed; however Nasdaq may require the closing bid price to equal or to exceed the Minimum Bid Price Requirement for more than 10 consecutive business days before determining that a company complies. If, however, we do not achieve compliance with the Minimum Bid Price Requirement by September 1, 2025, we may be eligible for additional time to comply. We intend to actively monitor the bid price of our common stock and will consider available options to regain compliance with the Nasdaq listing requirements, including such actions as effecting a reverse stock split to maintain our Nasdaq listing.

As reported in this Quarterly Report on Form 10-Q, at March 31, 2025, our stockholders’ equity of $2.1 million is below the Nasdaq minimum requirement of $2.5 million.

In the event of a de-listing, we would take actions to restore our compliance with The Nasdaq Capital Market’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below The Nasdaq Capital Market, minimum bid price requirement or prevent future non-compliance with The Nasdaq Capital Market’s listing requirements.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our common stock is listed on The Nasdaq Capital Market, our common stock is covered securities. Although the states are preempted from regulating the sale of covered securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were to be delisted from The Nasdaq Capital Market, our common stock would cease to be recognized as covered securities and we would be subject to regulation in each state in which we offer our securities.

***Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans and outstanding warrants, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.***

We expect that significant additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating a public company. To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to the holders of our common stock. Pursuant to our 2017 equity incentive plan, which became effective on the business day prior to the public trading date of our common stock, our management is authorized to grant equity awards to our employees, officers, directors and consultants.

At March 31, 2025, we had outstanding (i) warrants to purchase 4,201,568 shares of common stock outstanding with a weighted average exercise price of $8.45, and (ii) options to purchase 739,999 shares of common stock at a weighted average exercise price of $9.64 per share. The issuance of the shares of common stock underlying the options and warrants will have a dilutive effect on the percentage ownership held by holders of our common stock.

Filed May 14, 2025.
Source: SEC EDGAR, the filing index for accession 0001213900-25-043281. Last ingested by Listed: Nov 10, 2026, 17:05 ET. No prices; not investment advice.