UNITED STATES SECURITIES AND EXCHANGE COMMISSION

 WASHINGTON, DC 20549

 FORM 10-K

 ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended December 31, 2024

 or

 TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from
to

 Commission file number: 001-38323

 ADIAL PHARMACEUTICALS, INC.

 (Exact name of registrant as specified in its charter)

 Delaware

 82-3074668

 (State or Other Jurisdiction of

Incorporation or Organization)

 (I.R.S. Employer

Identification No.)

 4870 Sadler Road, Suite 300

 Glen Allen, Virginia 23060

 (Address of principal executive offices) (Zip Code)

 (804) 487-8196

 (Registrant's telephone number, including
area code)

 Securities registered pursuant to Section 12(b)
of the Act:

 Title of each class

 Trading Symbol(s)

 Name of each exchange on which registered

 Common Stock, par value $0.001 per share

 ADIL

 The Nasdaq Stock Market LLC

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

 Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

 Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

 Indicate by check mark whether the issuer: (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes No

 Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
 No

 Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of "large accelerated filer, "accelerated filer" "smaller reporting company" and "emerging
growth company" in Rule 12b-2 of the Exchange Act.

 Large accelerated filer

 Accelerated filer

 Non-accelerated filer

 Smaller reporting company

 Emerging growth company

 If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.

 Indicate by check mark whether the registrant
has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report.

 If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.

 Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant's
executive officers during the relevant recovery period pursuant to §240.10D-1(b).

 Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 The aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant, based on the closing price of a share of the registrant's common stock on
June 30, 2024 (the last business day of the registrant's mostly recently completed second fiscal quarter) as reported by the Nasdaq
Capital Market on such date was $ 4,832,073. This calculation does not reflect a determination that certain persons are affiliates of the
registrant for any other purpose.

 As of February 28, 2025, the issuer had 6,574,588 shares of common
stock outstanding.

 Documents incorporated by reference: None

 FORM 10-K

 Page

 Item 1.

 Business

 Item 1A.

 Risk Factors

 Item 1B.

 Unresolved Staff Comments

 Item 1C.

 Cybersecurity

 Item 2.

 Properties

 Item 3.

 Legal Proceedings

 Item 4.

 Mine Safety Disclosures

 Item 5.

 Market for Registrant's Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities

 Item 6.

 [Reserved]

 Item 7.

 Management's Discussion and Analysis of Financial Condition and Results of Operations

 Item 7A.

 Quantitative and Qualitative Disclosures About Market Risk

 Item 8.

 Financial Statements and Supplementary Data

 Item 9.

 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item 9A.

 Controls and Procedures

 Item 9B.

 Other Information

 Item 9C.

 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 Item 10.

 Directors, Executive Officers and Corporate Governance

 Item 11.

 Executive Compensation

 Item 12.

 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Item 13.

 Certain Relationships and Related Transactions, and Director Independence

 Item 14.

 Principal Accountant Fees and Services

 Item 15.

 Exhibit and Financial Statement Schedules

 Item 16.

 Form 10-K Summary

 SIGNATURES

 i

 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 This Annual Report on Form 10-K contains "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In particular, statements contained in
this Annual Report on Form 10-K, including but not limited to, statements regarding the sufficiency of our cash, our ability to finance
our operations and business initiatives and obtain funding for such activities; our future results of operations and financial position,
business strategy and plan prospects, or costs and objectives of management for future initiatives, are forward-looking statements. These
forward-looking statements relate to our future plans, objectives, expectations and intentions and may be identified by words such as
"may," "will," "should," "expects," "plans," "anticipates," "intends,"
"targets," "projects," "contemplates," "believes," "seeks," "goals,"
"estimates," "predicts," "potential" and "continue" or similar words. Readers are cautioned
that these forward-looking statements are based on our current beliefs, expectations and assumptions and are subject to risks, uncertainties,
and assumptions that are difficult to predict, including those identified below, under Part I, Item lA. "Risk Factors" and
elsewhere in this Annual Report on Form 10-K. Therefore, actual results may differ materially and adversely from those expressed, projected
or implied in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.

 NOTE REGARDING COMPANY REFERENCES

 Throughout this Annual Report on Form 10-K, "Adial,"
the "Company," "we," "us" and "our" refer to Adial Pharmaceuticals, Inc.

 Summary Risk Factors

 Our business
faces significant risks and uncertainties of which investors should be aware before making a decision to invest in our common stock. If
any of the following risks are realized, our business, financial condition and results of operations could be materially and adversely
affected. The following is a summary of the more significant risks relating to the Company. A more detailed description of our
risk factors set forth under the caption "Risk Factors" in Item 1A in Part I of this Annual Report on Form 10-K.

 Risks Relating to Our Company

 We have a limited operating history and have incurred significant losses since our inception.

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

 We currently have no product revenues and may not generate revenue at any time in the near future, if at all.

 There can be no assurance that we will be able to execute on our business strategy.

 We will need to secure additional financing, which may not be available to us on favorable terms, if at all.

 We have identified weaknesses in our internal controls.

 We rely on a license to use various technologies that are material to our business.

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

 The active ingredient of our product candidate, ondansetron, is currently available in generic form.

 Changes in general economic conditions and geopolitical and other conditions may adversely impact us.

 For ondansetron, under short-term use, there are currently no long-term use clinical safety data available.

 All of our current data for our product candidate does not necessarily provide sufficient evidence that our product is viable as a potential pharmaceutical product.

 The FDA and/or EMA may not accept our planned Phase 3 endpoints for final approval of AD04.

 We will incur additional costs if the FDA or EMA requires additional clinical trials.

 AD04 is dependent on a successful development, approval, and commercialization of a genetic test.

 We have limited experience as a company conducting clinical trials.

 Our product candidate will require extensive clinical and other testing.

 Our clinical trials may fail to demonstrate adequately the safety and efficacy of AD04.

 Delays in the enrollment of patients in our clinical trials could impact our regulatory approvals.

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

 Rapid technological change and substantial competition may impair the business.

 ii

 Risks Relating to Our Business and Industry

 We must obtain regulatory approvals in every jurisdiction in which we intend to sell our product candidate.

 Clinical trials are very expensive, time-consuming and difficult to design and implement.

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

 We may incur substantial liabilities and may be subject to product liability lawsuits.

 There is uncertainty as to market acceptance of our technology and product candidates.

 We will continue to be subject to ongoing and extensive regulatory requirements even after regulatory approval, and compliance with such regulatory requirements cannot be assured.

 Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper activities.

 We have no experience selling, marketing or distributing products and have no internal capability to do so.

 We may not be successful in establishing and maintaining strategic partnerships.

 Our internal computer systems, or those used by our CROs or other contractors or consultants, may fail or suffer security breaches and we may face particular data protection, data security and privacy risks.

 We have limited protection for our intellectual property.

 We may be involved in lawsuits to protect or enforce the patents of our licensors.

 Obtaining and maintaining patent protection depends on compliance with requirements imposed by governmental patent agencies and the courts.

 Our ability to generate product revenues will be diminished if our products sell for inadequate prices or patients are unable to obtain adequate levels of reimbursement.

 We rely on key executive officers and scientific, regulatory and medical advisors.

 Certain of our officers may have a conflict of interest.

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

 Declining general economic or business conditions may have a negative impact on our business.

 Health care policy changes, including legislation reforming the U.S. health care system and other legislative initiatives, may have a material adverse effect on our financial condition, results of operations and cash flows.

 Risks Related to Our Securities and Investing
in Our Securities

 Certain of our shareholders have sufficient voting power to make corporate governance decisions.

 Future sales of securities could result in additional dilution.

 Issuance of additional securities could adversely affect the rights of the holders of our common stock.

 If we issue preferred stock with superior rights than our common stock, it could result in a decrease in the value of our common stock and delay or prevent a change in control of us.

 We have never paid dividends and have no plans to pay dividends in the foreseeable future.

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

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

 As a result of being a public company, we are subject to additional reporting and corporate governance requirements that will require additional management time, resources and expense.

 Our common stock has often been thinly traded, so you may be unable to sell at or near ask prices or at all.

 Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future.

 Our need for future financing may result in the issuance of additional securities and dilution.

 Fluctuations in the international currency markets may significantly impact the cost of our planned trial.

 The application of the "penny stock" rules to our common stock could limit the trading and liquidity.

 Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company more difficult and may prevent attempts to replace or remove our current management.

 Our Certificate of Incorporation and our bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain types of state actions.

 If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

 The warrants that we have issued are speculative in nature.

 There is no established market for the warrants.

 iii

 Item 1. Business.

 Overview

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

 In January 2021, we expanded
our portfolio in the field of addiction with the acquisition of Purnovate, LLC via a merger into our wholly owned subsidiary, Purnovate,
Inc. ("Purnovate") and in January 2023, we entered into an option agreement with Adovate LLC ("Adovate"), pursuant
to which we granted to Adovate an exclusive option for Adovate or its designated affiliate to acquire all of the assets of Purnovate and
to assume related liabilities and expenses. (Our then-CEO was a significant equity holder in Purnovate, LLC, so this was considered a
related party transaction.) On May 8, 2023, Adovate sent a letter exercising its option effective May 16, 2023 and made payment of the
$450,000 in fees due on exercise. Effective June 30, 2023, Adovate issued to us the equity stake in Adovate due on exercise of the option
agreement. On August 17, 2023, a Bill of Sale, Assignment and Assumption Agreement ("Bill of Sale") was executed between Purnovate
and Adovate, transferring the Purnovate assets to Adovate, effective as of June 30, 2023. On August 17, 2023, Purnovate and Adovate also
entered into a letter agreement acknowledging that Adovate acquired the assets of Purnovate effective as of June 30, 2023, pursuant to
the Bill of Sale.

 We have devoted the vast
majority of our resources to development efforts relating to AD04, including preparation for and conducting clinical trials, providing
general and administrative support for these operations and protecting our intellectual property. 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 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.

 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 Annual Report
on Form 10-K, based on our current commitments and development plans.

 We have incurred net
losses in each year since our inception, including net losses of approximately $13.2 million and $5.1 million for the years ended December
31, 2024 and 2023, respectively. We had accumulated deficits of approximately $82.0 million and $68.8 million as of December 31, 2024
and 2023, respectively. All of our operating losses in the year ended December 31, 2024 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. Our net loss for the year ended December 31, 2024 also includes uncapitalized financing costs, such as the cost of
issuing new warrants to induce a holder to exercise existing warrants and the cost of inducement shares.

 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. We do not believe our current cash and equivalents will be sufficient
to fund our operations for the next twelve months from the date of the accompanying financial statements.

 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

 Purchase Agreement

 On December 13,
2024, we entered into a Purchase Agreement (the "Purchase Agreement") with Alumni Capital LP ("Alumni Capital").
Pursuant to the Purchase Agreement, we have the right to sell to Alumni Capital up to the lesser of (i) $5,000,000 of newly issued shares,
subject to increase to $10,000,000 at our option (the "Investment Amount"), of the shares (the "Shares") of the
Company's common stock, par value $0.001 per share (the "Common Stock"), and (ii) the Exchange Cap (as defined below)
(subject to certain conditions and limitations), from time to time during the term of the Purchase Agreement. Sales of Common Stock pursuant
to the Purchase Agreement, and the timing of any sales, are solely at our option and we are under no obligation to sell securities pursuant
to this arrangement. Shares of Common Stock may be sold by us pursuant to this arrangement over a period ending on the earlier of December
31, 2026 or the date on which Alumni Capital shall have purchased Shares pursuant to the Purchase Agreement for an aggregate purchase
price of the Investment Amount; provided, however that we can terminate the Agreement at any time upon ten days prior written notice, subject
to the satisfaction of the conditions in the Purchase Agreement.

 Upon the satisfaction
of the conditions in the Purchase Agreement, including that a registration statement that we agreed to file with the Securities and Exchange
Commission (the "SEC") pursuant to the Purchase Agreement is declared effective by the SEC and a final prospectus in connection
therewith is filed with the SEC, we will have the right, but not the obligation, from time to time at our sole discretion over the period
described above, to direct Alumni Capital to purchase up to a fixed maximum amount of shares of Common Stock as set forth in the Purchase
Agreement; provided, that Alumni Capital's maximum commitment under any single fixed purchase will not exceed the greater of (i) $500,000
and (ii) 150% of the average daily trading volume of the Common Stock during the five (5) days immediately prior to the date that
we deliver a Purchase Notice, without mutual agreement of Alumni Capital; further provided, however, that the maximum commitment under
any single fixed purchase will in no case exceed $1,250,000 or, with mutual agreement of Alumni Capital, $2,500,000.

 The purchase price per
Share that may be sold to Alumni Capital under the Purchase Agreement in such fixed purchases equals ninety-seven percent (97%) of the
lowest daily dollar volume-weighted average price for the Common Stock during the period ending on the earlier of (i) three (3) consecutive
trading days period following the date we deliver a purchase notice and (ii) the date on which Alumni Capital notifies us that it is prepared
to proceed with the closing, subject to a Minimum Acceptable Price (as defined in the Purchase Agreement). There is no upper limit on
the price per share that Alumni Capital might be obligated to pay for the Common Stock under the Purchase Agreement; provided, however,
that at no time can the purchase price be below $0.55 per share (subject to adjustment as provided in the Purchase Agreement for any reorganization,
recapitalization, non-cash dividend, stock split, or other similar transaction occurring after the date of the Purchase Agreement).

 We will control the timing
and amount of any sales of Shares to Alumni Capital. Actual sales of Shares to Alumni Capital under the Purchase Agreement will depend
on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price
of the Common Stock and determinations by us as to the appropriate sources of funding for us and our operations.

 Under the applicable
rules of the Nasdaq Stock Market LLC ("Nasdaq"), in no event may we issue more than 1,280,515 Shares (including the Commitment
Shares, as defined below), representing 19.99% of the shares of the Common Stock outstanding immediately prior to the execution of the
Purchase Agreement (the "Exchange Cap"), to Alumni Capital under the Purchase Agreement, unless we obtain stockholder approval
to issue shares of Common Stock in excess of the Exchange Cap, provided further that the Exchange Cap does not apply to the extent the
purchase price is equal to or exceeds the Minimum Price, which is $1.09. If stockholder approval to exceed the Exchange Cap were obtained
and all $5,000,000 were to be sold at $0.55 per share, we would issue a total of 9,090,909 shares of Common Stock (not including the Commitment
Shares).

 In all instances, we
may not sell shares of our Common Stock to Alumni Capital under the Purchase Agreement if it would result in Alumni Capital beneficially
owning more than 4.99% of the Common Stock.

 As consideration for
Alumni Capital's irrevocable commitment to purchase Shares upon the terms of and subject to satisfaction of the conditions set forth
in the Purchase Agreement, concurrently with the execution and delivery of the Purchase Agreement, we issued to Alumni Capital 68,807 shares
of Common Stock (the "Commitment Shares"). If we were to elect to increase the number of the shares of Common Stock available
for purchase under the Purchase Agreement from $5,000,000 up to a limit of $10,000,000, we would be obligated to issue to Alumni Capital
additional shares of Common Stock as a commitment fee equal to 1.5% of the increased amount divided by the closing price of the Common
Stock on the date of issuance and delivery by us of the notice to increase such amount.

 Pursuant to the Purchase
Agreement, we have agreed to file a registration statement with the SEC to register for resale under the Securities Act of 1933, as amended
(the "Securities Act") the shares of our Common Stock that may be issued to Alumni Capital under the Purchase Agreement, including
the Commitment Shares. The registration statement was declared effective on December 30, 2024. The Purchase Agreement contains customary
representations, warranties, conditions and indemnification obligations of the parties. The representations, warranties and covenants
contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the
parties to such agreements and may be subject to limitations agreed upon by the contracting parties.

 Pharmacokinetics Study

 On November 14, 2024,
we issued a press release announcing that we completed a pharmacokinetics (PK) study of AD04. The study, a single-center, relative bioavailability,
open label study, enrolled a total of 30 healthy adult volunteers in two cohorts. Cohort 1 (n=6) was a randomized, open-label, 2-sequence,
2-period crossover study to evaluate the PK variability of ondansetron from AD04 0.33 and 0.99mg. Cohort 2 (n=24) was a randomized, open-label,
6-sequence, 4-period crossover study to evaluate the relative bioavailability of the AD04 0.33mg tablet to a marketed ondansetron 4mg
tablet, dose proportionality of ondansetron PK between AD04 0.33 and 0.99mg, and the effect of food on the bioavailability of ondansetron
administered as the AD04 0.33mg tablet. The results of this study showed that, as a result of the lower dose, AD04 0.33mg delivered lower
ondansetron PK exposure than the marketed reference standard ondansetron 4mg tablet; ondansetron pharmacokinetic exposure increased in
proportion to dose across a 3-fold AD04 dose range; and AD04 can be taken in fed or fasted states. This data is expected to help us optimize
study design elements needed for the upcoming Phase 3 clinical trial of AD04. Completion of this study also satisfied an FDA requirement
for the upcoming Phase 3 clinical trials of AD04.

 Chief Financial Officer

 On November 1, 2024,
we entered into a Separation Agreement and Release, dated November 1, 2024 (the "Separation Agreement"), with Joseph Truluck,
our former Chief Financial Officer. Pursuant to the Separation Agreement, Mr. Truluck will receive: (i) from November 1, 2024 through
December 31, 2024, 100% of his current base salary during which period he would serve until November 15, 2024 as our Chief Financial Officer
and thereafter as a consultant to us, (ii) from January 1, 2025 through March 31, 2025, 50% of his current base salary as a consultant
to us, and (iii) from and after March 31, 2025, $350 an hour as a consultant to us on an as needed basis.

 On November 1, 2024, our board of directors
appointed Vinay Shah as our Chief Financial Officer, effective November 16, 2024. In connection with his appointment, we entered into
an employment agreement with Mr. Shah (the "Shah Employment Agreement") to employ Mr. Shah as our Chief Financial Officer
for a three-year term effective November 16, 2024 at an annual base salary of $315,000, with a discretionary bonus of up to 30% of his
base salary upon achievement of objectives as may be determined by our board of directors. The Shah Employment Agreement provides for
six (6) months' severance for a without cause termination of employment and twelve (12) months' severance for a without cause
termination of employment following a change of control of the Company. Pursuant to the Shah Employment Agreement, we issued a Mr. Shah
a stock option to purchase up to 40,000 shares of common stock pursuant to our 2017 Equity Incentive Plan (the "Plan"), which
vests pro rata on a monthly basis over 36 months, at an exercise price of $1.06.

 At-the-market Offering Agreement

 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 year ended
December 31, 2024, we sold 2,348,520 shares of common stock under the ATM Agreement for net proceeds of approximately $4.0 million.

 AD04 Clinical Development Program

 Adial's AD04 clinical development program
began with initiation of a Phase 3 trial, otherwise known as the ONWARD trial. Adial believed that the ONWARD trial design provided
the flexibility to meet global regulatory requirements. The trial started in February 2020 in Scandinavia and Central and Eastern Europe.
The ONWARD trial was a 24-week, multicenter, randomized, double-blind, placebo-controlled, parallel group, Phase 3 clinical study to evaluate
the efficacy, safety and tolerability of AD04 in patients with AUD and selected polymorphisms in the serotonin transporter and receptor
genes. Patients were genetically screened prior to enrollment in the ONWARD trial so that only genetically positive patients were enrolled.
ONWARD enrolled 302 patients (a total of 303 patients were recruited and then randomized in the trial, however, one subject never initiated
treatment and has been excluded from enrollment numbers and was not included in the full analysis data set or efficacy analysis for the
trial); and was conducted in 25 clinical sites in six countries in Scandinavia and Central and Eastern Europe (Sweden, Finland, Poland,
Latvia, Bulgaria and Croatia). Approximately one-third of the total screened patients tested positive for the targeted genotypes.

 A Phase 2b study (N = 283), conducted by the University
of Virginia for which we have acquired rights to the data, showed that a prospectively identified subgroup of alcohol-dependent individuals
with specific polymorphisms of the serotonin transporter protein responded therapeutically to ondansetron administration (Johnson, BA
et al., 2011). Further analysis of this same data set against 18 additional polymorphisms located on the genes for the A and B subunits
of the serotonin 5-HT3 receptor revealed polymorphisms that were also associated with a therapeutic response to ondansetron. It was this
hypothesis that collectively led Adial to focus the ONWARD trial on genotypes LL/TT, GG, AG, and AC.

 The primary efficacy endpoint of the ONWARD trial
was the average percentage change from baseline in the monthly heavy drinking days (PHDD) experienced by each patient in months 5 and
6 combined. Key secondary endpoints included reduction in total alcohol consumed (TAC), and improvement as measured by the Patient Health
Questionnaire-9, a widely accepted tool for assessment of depression. The definition of a heavy drinking day was greater than 40 grams
or 60 grams of ethyl alcohol in a day for a woman or a man, respectively.

 ONWARD Phase 3 Clinical Trial Results – Topline Data Analysis

 Topline Data Analysis

 On July 20, 2022, we announced the following results
from the ONWARD Phase 3 trial. Although the trial missed the primary endpoint, it did show statistical significance in a pre-defined
patient group.

 Heavy drinkers are defined by NIAAA (National
Institute on Alcohol Abuse and Alcoholism) as men who drink 5 or more drinks on any day or 15 or more per week and women who drink 4 or
more drinks on any day or 8 or more per week. AD04 patients, compared with placebo patients, achieved a statistically significant reduction
from baseline at month six in percentage of heavy drinking days (PHDD) for the pre-specified patient group of heavy drinkers, across all
genotypes combined (avg. <10 drinks per drinking day at baseline; p=0.03), which accounted for approximately two-thirds of the trial
population. A similar trend was seen in the combined month five and six analysis in the reduction from baseline (p =0.07). Notably, in
the last month of the trial, AD04 heavy drinking patients had a mean reduction of approximately 79% in heavy drinking compared with baseline.

 Compared with placebo patients, AD04 patients
in the heavy drinking group had an overall significant difference in the severity of their AUD diagnosis (p=0.04) under the Diagnostic
and Statistical Manual of Mental Disorders, Fifth Edition (DSM-5). For the group of those who no longer meet AUD criteria (<2 symptoms),
the comparisons were 27.4% vs. 14.9% (i.e., an 84% decrease), of AD04 and placebo patients, respectively. These data underscore the clinical
relevance of the findings that heavy drinking AUD patients that receive AD04 appear more likely to recover from the disease by the end
of the treatment regimen.

 Additionally, and consistent with the Phase 2b
trial, AD04 had a safety and tolerability profile that was similar to placebo. No side effects or severe adverse events (SAEs) were determined
to be related to AD04 treatment. In fact, more SAEs were reported in the placebo group compared with the AD04 group (7 on placebo vs.
3 on AD04). There were two cardiac events in placebo group and none in the AD04 group. Comparing overall Adverse Events (AEs), the profiles
between AD04 and placebo were similar. AEs reported with a frequency of 5% or more of patients in either group were: headache (11% on
placebo, 12% on AD04), insomnia (3% on placebo, 7% on AD04), blood magnesium decreased (5% on placebo, 6% on AD04), and fatigue (3% on
placebo, 6% on AD04). All of the AE's were reported as mild to moderate. Importantly, in the overall category of cardiac disorders,
patients on placebo showed a greater number of adverse events compared to AD04 (7% on placebo, 4% on AD04), in addition to greater number
of cardiac SAEs in the placebo group as reported above.

 US Clinical Development and Regulatory Actions
Completed

 Utilizing both the Phase 2 and ONWARD <10 DDD
(Drinks per Drinking Day) Responder Analysis datasets, additional post-hoc analysis was conducted using the FDA specified endpoint of
reduction of heavy drinking days (PNHDD), defined as the percentage of patients that have zero heavy drinking days during the efficacy
observation period of months 5 and 6, for AD04 vs placebo compared to baseline at study entry. (FDA Feb. 2015 Draft Guidance Alcoholism:
Developing Drugs for Treatment Guidance for Industry) and which the FDA in prior meetings has indicated will be acceptable. When applying
a PNHDD endpoint during the post hoc Phase 2 data analysis, the genotype polymorphism AG+ showed a statistically significant difference
at month 3 compared to placebo (p=0.031). Equally, the post hoc analysis of the PNHDD endpoint of the ONWARD data set the AG+ polymorphism
also demonstrated a statistically significant difference at month's 5&6 compared to placebo (p= 0.021). This important post
hoc analysis brings a new clinical development focus for future trials of AD04 in the heavy drinking AUD population. Additionally, while
the GG+ polymorphism did not achieve statistical significance in this analysis, the GG+ polymorphism showed promising trends toward achieving
the PNHDD endpoint and we believe that the GG+ polymorphism may be important for future trials. There was a substantial difference between
the treatment and placebo arms in the percentage of patients that achieved zero heavy drinking days within the AG and GG polymorphism
groups. In the same post hoc analysis comparing genotype polymorphisms in both the Phase 2 and Phase 3 against PNHDD for LL/TT no statistically
significant difference was seen.

 When analyzing the Phase 3 Study ONWARD, DDD <10,
Responder Analysis Results at Months 5 and 6, we also examined the important measure of treatment effect. Treatment effect is a measure
of clinical meaningfulness. Treatment effect is defined in both absolute reduction of heavy drinking days as well as percentage change
of no heavy drinking days in AD04 vs placebo. In the AG+ group the AD04 treatment group achieved 49% of days with no heavy drinking vs
22% with placebo, or a 1.23 times better reduction of heavy drinking days vs placebo. The GG+ group achieved a 25% change in no heavy
drinking days vs 7% in the placebo group, or a 2.53 times better reduction of heavy drinking days vs placebo. When the same analysis was
conducted with the LL/TT genotypes no difference was found, further supporting the future direction and focus on the AG+ and GG+ genotypes.

 These analyses are the basis of our future direction
of clinical, regulatory and commercial strategy in the United States.

 Our regulatory strategy for the US has been clearly
defined as a result of both ongoing discussions with key advisors in US regulatory affairs as well as face to face meetings with the FDA.
In April 2023, we met with the FDA Division of Anesthesiology, Addiction and Pain Medicine (DAAP), the division responsible for reviewing
the NDA submission for AD04 if submitted in the future. The primary objective of this meeting with the FDA was to seek clarity on the
path forward based on the Phase 2 results, Phase 3 results, and post-hoc analysis of the Phase 2 and Phase 3 data.

 In July 2023, we announced a summary of feedback
received during the meeting. The FDA acknowledged and confirmed the importance of ongoing research in the AUD therapeutic area as a persistent
high unmet need. We received (1) confirmation of the primary US endpoint based on Percentage of No Heavy Drinking Days ("PNHDD"),
which utilized a responder analysis of patients who reduced their alcohol consumption to zero heavy drinking days in the last 2 months
of a 6-month study, (2) acknowledgment of results from the Phase 2 and Phase 3 post hoc analysis against PNHDD, which demonstrated statistical
significance of responder analysis of specific genotypes as useful information for planning future studies of AD04, (3) acknowledgement
that the safety data from the ONWARD trial did not raise any concerns, (4) confirmation of the importance of identifying a patient subgroup
where a relevant treatment effect and compelling evidence of a favorable risk-benefit profile can be assessed (5) acknowledgment that
the post hoc analysis shows positive progress and potentially promising clinically meaningful effect in specific genetic subtypes, and
(6) a request for additional data to support an NDA and approval for AD04.

 Based on this positive feedback received from
the FDA, we have made the strategic decision to focus our efforts on the US, with the understanding that the US standards may translate
to acceptance in other international markets.

 US Clinical Development and Regulatory Actions
Planned

 We have assessed the impact of the regulatory
guidance on the future business and operating plan requirements to meet the needs of the FDA for submission and approval of AD04 to treat
genetic subtypes of AUD. While we are in the process of confirming the impact on the clinical development plans and timing with our external
advisors and ongoing partnership discussions, the following provides a working summary of the planned strategy, which is subject to final
discussions with the regulatory agencies.

 Regulatory feedback indicates that even though
a single additional Phase 3 trial with convincing data may suffice for approval, it would be a review issue for the agencies following
trial completion to determine if the data was sufficient for approval. Therefore, while possible to file for registration with one additional
trial, current planning assumptions are that we will need to conduct two Phase 3 trials with AD04, ideally in parallel. The second trial
will likely include a biomarker negative patient arm to satisfy any ongoing questions from the regulators regarding efficacy parameters.
This is expected to support potential approval in the shortest time frame and removes future regulatory filing and review risk that would
be associated with conducting a single additional trial. Confirmation of the clinical development plan and pathway is currently being
conducted by our clinical development and regulatory advisors. In addition to the Phase 3 studies described above, several smaller additional
studies required by the FDA may be conducted including bioavailability studies and longer-term safety data on at least 100 AD04 treated
patients from the Phase 3 (per ICH E1A guidance).

 Based on the new expectations regarding the targeted
genotypes, the two additional Phase 3 trials are currently expected to require $8-12 million each in direct expenses, and up to $5 million
in additional other development expenses. These estimates may change based on upcoming discussions with regulatory authorities and final
trial designs.

 EX US Clinical Development and Regulatory
Actions Completed

 As previously referenced, the primary efficacy
endpoint of the ONWARD trial was the average percentage change from baseline in the monthly heavy drinking days (PHDD) experienced by
each patient in months 5 and 6 combined. Key secondary endpoints included reduction in total alcohol consumed (TAC) and improvement as
measured by the Patient Health Questionnaire-9, a widely accepted tool for assessment of depression. The definition of a heavy drinking
day was greater than 40 grams or 60 grams of ethyl alcohol in a day for a woman or a man, respectively.

 In the major EU4 countries, the primary regulatory
authority is the EMA (European Medicines Agency). Current draft guidelines released by the EMA, CHMP (Committee for Medicinal Products
for Human Use), 2010, are the basis of clinical development planning in the EU4 and, the MHRA (Medicines and Healthcare Products Regulatory
Agency), in the UK. These agencies differ from the FDA in their views of clinical endpoints, and therefore future clinical development
and regulatory strategies should account for these differences. The primary differences are that EU and UK regulators consider the change
in HDD (heavy drinking days) and TAC (total alcohol consumed in grams) at month 6, the efficacy observation period vs the FDA which considers
the PNHDD (percentage of no heavy drinking days) at months 5 and 6 as the efficacy observation period. There are also differences in the
total grams of alcohol which constitute a standard drink in the EMA vs US (10 to 14 grams in Europe versus 14 grams in the United States),
and therefore the definitions of the number of drinks which constitute a heavy drinking day are also slightly different.

 According to the EMA CHMP guidance, any study
drug for alcohol dependence that is not focused to achieve abstinence should be addressing the intermediate goal of clinically significant
moderation. Efficacy should be expressed by change to baseline in total consumption of alcohol (TAC, presented as amount of pure alcohol
in grams per day) as well as by reduction in number of Heavy Drinking Days (HDD defined as more than 60 grams of pure alcohol in men and
40 grams in women). Both are considered primary variables, since HDD are associated with specific risks such as acute cardiovascular outcomes
or accidents. A clinically relevant difference compared to placebo should be demonstrated. Further, efficacy on these two variables should
be reflected in a clearly expectable improved health outcome on an individual patient level. Therefore, efficacy should also be evaluated
in terms of responders. This could be done by evaluating the proportion of subjects with a 50%, 70% and 90% reduction in alcohol consumption
as well as the proportion of patients achieving maintained abstinence. Another option would be evaluating the proportion of subjects with
a significant categorical shift in WHO (World Health Organization) risk levels of drinking (i.e. proportion of patients with change of
consumption to baseline from very high risk to at least medium risk level and change from high risk to at least low risk level, as well
as the proportion of patients with full abstinence. In general, the harm reduction of populations through the reduction of alcohol consumption
is recognized by EMA and MHRA and has been used for prior drug product approvals in the EU with a focus on reducing HDD as well as TAC.

 Examining the endpoints outlined in guidance from
EMA/CHMP, we completed a post hoc analysis of the ONWARD trial. AD04 patients, compared with placebo patients, showed a trend in the reduction
from baseline at month six in heavy drinking days for the combined trial population of heavy and very heavy drinkers (p=NS). A similar,
non-statistically significant trend was seen in the combined months five and six analysis in the average percentage change of heavy drinking
days (PHDD) from baseline, which was the pre-specified primary efficacy analysis.

 Also, in July 2023, we announced results from
meetings held with key country-level regulatory agencies in Europe. The results of these meetings as previously reported are being used
for the development of our future clinical and regulatory strategy.

 EX US Clinical Development and Regulatory
Actions Planned

 As previously stated, based on positive feedback
received from the relevant global regulatory bodies and overlapping clinical requirements, we made the strategic decision to focus our
efforts on the US. We believe that these clinical endpoints should translate to acceptance in other international markets. We will continue
to look for synergies where they exist in the primary efficacy data variables when planning for study designs to meet global regulatory
requirements. We have a high level of confidence in the US clinical program based on our post hoc analysis and regulatory feedback and
we believe these data results to be useful for Ex US regulators.

 However, if these synergies cannot be found, it
is possible that new analysis and/or additional data generation may be required to meet the requirements of global regulators, including
the EU and UK. This is also vital for our ongoing partnering efforts based on discussions with companies active in the EU and UK.

 Disease Overview - Alcohol Use Disorder

 AUD is characterized by an urge to consume alcohol
and an inability to control the levels of consumption.

 The 2022 National Survey on Drug Use and Health
(NSDUH), commissioned by The Substance Abuse and Mental Health Services Administration (SAMHSA), reported the percentage of heavy alcohol
use highest among young adults age 18-25 (7.6% or 2.6 M people) followed by adults age 26 and over (6% or 13.4M people). In the United
States, 29.5 million people age 12 and older had AUD, according to the 2022 National Survey on Drug Use and Health (NSDUH). AUD results
in significant health, social, and financial costs, with excessive alcohol use being the third leading cause of preventable death and
responsible for 31% of driving fatalities (NIAAA Alcohol Facts & Statistics). AUD contributes to over 200 different diseases and 10%
of children live with a person that has an alcohol problem. According to the American Society of Clinical Oncologists, 5-6% of new cancers
and cancer deaths globally are directly attributable to alcohol. And, The Lancet published an article that alcohol is the leading
risk factor for death and disability in people ages 15-49 globally. The Centers for Disease Control (the "CDC") has reported
that AUD costs the U.S. economy about $250 billion annually, with heavy drinking accounting for greater than 75% of the social and health
related costs.

 AUD is characterized by an urge to consume alcohol
and an inability to control the levels of consumption. Until the publication of the fifth revision of the Diagnostic and Statistical Manual
of Mental Disorders in 2013 (the "DSM-5"), AUD was broken into "alcohol dependence" and "alcohol abuse".
More broadly, overdrinking due to the inability to moderate drinking is called alcohol addiction and is often called "alcoholism",
sometimes pejoratively.

 Limitations of Current AUD Therapies

 Today the most common treatments for AUD are directed
at achieving abstinence and typical treatments include psychological and social interventions. Most therapies actually require abstinence
prior to initiating therapy. Abstinence requires dramatic lifestyle changes often with serious work and social consequences. Frequently,
patients cannot attend family and social events in order to ensure compliance with abstinence, and patients often must suffer from the
stigma of having been labelled an alcoholic. Significant side effects of current pharmacologic therapies include mental side effects such
as psychiatric disorders and depressive symptoms and physical side effects such as nausea, dizziness, vomiting, abdominal pain, and hepatoxicity.
In fact, according to peer reviewed studies referenced in The Sober Truth: Debunking the Bad Science Behind 12-Step Programs and the
Rehab Industry, L. Dodes and Z. Dodes, 2014 by Dr. Lance Dodes, the former Director of the substance abuse treatment unit of Harvard's
McLean Hospital, 90% or more of patients that use current therapy solutions, such as Alcoholics Anonymous, do not achieve long-term abstinence.

 There are four drugs approved by the FDA and marketed
in the United States for the treatment of alcohol addiction, Antabuse (disulfram) Vivitrol (naltrexone),
Revia (naltrexone) and Campral (acomprosate) and one drug, Selincro (nalmefene) is marketed
outside of the United States. All of the approved drugs, other than Selincro, require abstinence prior to commencing treatment
with the drug, and all five drugs are known to have significant side effects.

 Antabuse was approved for the
treatment of alcohol dependence more than 50 years ago, making it the oldest such drug on the market. It works by interfering with the
body's ability to process alcohol. Its method of action and purpose is to cause patients that drink alcohol while taking Antabuse
to experience numerous and extremely unpleasant adverse effects, including, among others, flushing, nausea, and palpitations, with the
goal that patients will continue the medication but refrain from drinking in order to avoid these effects.

 Naltrexone, which can be taken as a once-daily
pill (Revia) or in an approved once-monthly injectable form (Vivitrol) that requires a doctor to administer
is often associated with gastrointestinal complaints and has been reported to cause liver damage when given at certain high doses. As
a result, it carries an FDA boxed warning, a special emphasized warning, for this side effect. Vivitrol is currently being marketed by
Alkermes to physicians for the treatment of AUD.

 Campral, taken by mouth three
times daily, acts on chemical messenger systems in the brain.

 Selincro has not been approved
for sale in the United States.

 Our Proposed Solution is AD04 and a PGx Companion
Diagnostic

 The active pharmaceutical agent in AD04, our lead
investigational new drug product, is ondansetron, which is also the active ingredient in Zofran, which was granted FDA
approval in 1991 for nausea and vomiting post-operatively and after chemotherapy or radiation treatment and is now commercially available
in generic form. In studies of Zofran, conducted as part of its FDA review process, ondansetron was given acutely at dosages
up to almost 100 times the dosage expected to be formulated in AD04 with the highest doses of Zofran given intravenously
("i.v."), which results in approximately 160% of the exposure level as oral dosing. Even at high doses given i.v. the studies
found that ondansetron is well-tolerated and results in few adverse side effects at the currently marketed doses, which reach more than
80 times the AD04 dose and are given i.v. The formulation dosage of ondansetron used in our drug candidate (and expected to be used by
us in our Phase 3 clinical trials) has the potential advantage that it contains a much lower concentration of ondansetron than the generic
formulation/dosage that has been used in prior clinical trials, is dosed orally, and is available with use of a companion diagnostic genetic
biomarker. Our development plan for AD04 is designed to demonstrate both the efficacy of AD04 in the genetically targeted population and
the safety of ondansetron when administered chronically at the AD04 dosage. However, to the best of our knowledge, no comprehensive clinical
study has been performed to date that has evaluated the safety profile of ondansetron at any dosage for long-term use as anticipated in
our ongoing and planned clinical trials. Under current US FDA regulations, the approval of the specific dosage of 0.33mg ondansetron in
AD04 for the new indication of AUD in patients with genetic subtypes and data exclusivity will result in a minimum of 3 years of regulatory
and, therefore, commercial exclusivity for AD04 in the US.

 Our goal with AD04 is to develop an effective
and safe product to treat AUD that does not require abstinence as part of the treatment and does not have the negative side effects of
the current drugs on the market. Our product candidate, AD04, is designed for genotype positive patients who desire to control their drinking
but cannot or do not want to completely abstain from drinking. By removing the difficulties associated with abstinence and the side effects
associated with the other current products on the market, we believe that we may be able to remove barriers to patient adoption that inhibit
adoption of current therapies and can attract a greater portion of the many millions of patients with AUD that remain untreated. Unlike
other therapies, our investigational product, AD04, uses a novel mode of action for treating AUD that involves genetic screening with
a companion diagnostic genetic test prior to treatment and is designed to reduce cravings for alcohol to effectively curb alcohol intake,
without the requirement of abstinence prior to or during treatment. Our product candidate is intended to be easy to use since it is administered
orally, currently on a twice daily basis and with a once-a-day tablet planned as part of the product's life cycle management. To
date, clinical testing of AD04 has shown it to have a positive safety and tolerability profile with side effects similar to placebo.

 The companion diagnostic genetic test to be used
to identify patients that are most likely to benefit from treatment with AD04 may potentially enhance the likelihood of a successful outcome
for those undergoing treatment. Additionally, it may provide doctors with the opportunity to have a non-threatening conversation about
alcohol with their patients and may provide the patient an acceptable path to help them determine if they might be a candidate for help
with their alcohol use. If the test results are positive, they would have a science-based rationale for their treatment, which reduces
some of the stigma patients might otherwise endure, and potentially allows them to be treated in the confidence of their doctor with an
oral tablet.

 Strengths and Competitive Advantages

 Large Market Opportunity for an Effective
Solution

 In the United States
alone, the 2021 National Survey on Drug Use and Health (NSDUH) reported approximately 30 million people age 12 and older had AUD. Of those,
only 2.6 million people received treatment at any healthcare location, and of those who received treatment at any healthcare location,
only 0.9% (265,000) received medication assisted treatment (MAT). Based on data from the ONWARD trial and Phase 2b trial of AD04 and our
analysis of publicly available genetic databases, we preliminarily estimate that about one in three patients with AUD in the U.S. and
Europe will have the genetic markers to indicate possible treatment with AD04. Our initial focus, based on the subgroup analysis will
include genotypes, AG and possibly GG, that we estimate represent about 14% and 6% of AUD patients in the U.S, and Europe, respectively
and 20% collectively. At this time, we are not aware of any oral pharmaceutical treatment approved in the U.S. that addresses the needs
of patients who desire to control their drinking but cannot or do not want to abstain from drinking. The current abstinence-based treatments
have limitations, as outlined in the previous section "Limitations of Current AUD Therapies". The limited side effects expected
for our investigational new drug, based on clinical data so far, are also believed to be an important factor in the expected rapid uptake
of AD04 in the market. Our approach, if approved by FDA, may allow for social drinking to continue and is aimed at reducing the dangerous,
heavy drinking. This would allow patients to live the life they want without the stigma associated with complete abstention and currently
endured by those seeking help for their excessive drinking.

 According to the WHO (World Health Organization,
2022), the harmful use of alcohol is a causal factor in more than 200 disease and injury conditions. Worldwide, 3 million deaths every
year result from harmful use of alcohol. This represents 5.3% of all deaths. Overall, 5.1% of the global burden of disease and injury
is attributable to alcohol, as measured in disability-adjusted life years (DALY's). Alcohol consumption causes death and disability
relatively early in life. In people aged 20-39 years, approximately 13.5% of total deaths are attributable to alcohol.

 Companion Genetic Bio-Marker Test Aimed
at Identifying Patients Most Likely to Respond To Treatment, Potentially Results in Increased Use of AD04

 We believe our AD04 and its companion diagnostic
is unique in that it is designed to reduce heavy drinking in individuals with certain genotypes. We are pursuing a strategy that aims
to integrate pre-treatment screening with the companion diagnostic genetic test into the drug label, essentially combining the test and
treatment into one integrated therapeutic. This companion diagnostic testing approach may be a useful genetic screening tool to predict
those most likely to respond to the drug and to have minimal side effects. Based on the clinical experience to date and publicly available
databases, we believe the genetic prevalence of genotype positive people is about 33% of the population in the United States and Europe.

 We believe that the companion diagnostic genetic
test enables physicians to more easily have an initial conversation with their patients about alcohol use and, for the patient, provides
a less threatening and obtrusive first step toward treatment because the conversation will include the topic of genetic testing and not
be solely about behavior. Patients that then test positive against the AD04 genetic panel would be expected to be more likely to then
receive a prescription for AD04 (based on an external quantitative market study of 156 primary care physicians and psychiatrists that
was conducted by Ipsos-Insight LLC, who we commissioned, and that concluded a majority of genetically targeted patients currently receiving
pharmacologic treatment would be switched to a drug with the characteristics expected for AD04).

 Our Substantial Proprietary Estate and Protection from Competition

 We currently hold a worldwide, exclusive license
to three (3) patent families that provide us with the ability to exclude potential competitors from practicing the claimed inventions,
such as the use of ondansetron to treat any of the four (4) specified genotypes for AUD. Our licensed patent estate is expected to provide
us patent protection through 2031. Ondansetron, the active ingredient in AD04, has never been approved in a low dosage near the AD04 dose
of 0.33mg per tablet, and we believe our licensed patents will protect AD04 from any competitor that attempts to bring to market an ondansetron
dose at or near the AD04 dose for treatment of patients having one or more of the four target genotypes.

 We believe use of the currently marketed doses
"off-label" will not be significant due to (i) the lack of demonstrated efficacy at currently marketed doses, (ii) potential
safety concerns if the currently marketed doses are used chronically as is expected to be necessary for treating AUD, and (iii) cutting
the smallest currently marketed dose into the 12 pieces that would be necessary to achieve the AD04 dose is deemed by us to be impractical
and likely to result in inaccurate dosing.

 Experienced Leadership

 Our management, advisors and board of directors
have extensive experience in pharmaceutical development, the clinical trial and regulatory approval processes, drug commercialization,
financing capital-intensive projects, and developing new markets for pharmaceutical agents. Members of our team have previously worked
in senior management and senior officer positions, or led significant research initiatives at Indivior, Shire, Viagene, Collateral Therapeutics,
Krystal Biotech, Sucampo Pharmaceuticals, GlaxoSmithKline, Osiris Therapeutics, Yumanity Therapeutics, Delix Therapeutics, and Aravive
in a broad range of therapeutic areas. Our management and board members have particular expertise in the science and development of addiction
related drugs and bringing new drugs to the market.

 Our Strategy for AD04 and Addiction Related
Diseases and Disorders

 We are developing pharmaceutical treatments for
addictions, addictive disorders, and related diseases and disorders. Our business strategy is to advance AD04, our lead investigational
drug candidate, toward regulatory approval for alcohol use disorder in the United States, the European Union, and then eventually other
territories. We subsequently plan to develop label expansions into other indications (e.g., opioid use disorder, other drug addictions,
obesity, smoking cessation, eating disorders and anxiety).

 Our goals in executing this strategy are to keep
capital requirements to a minimum, expedite product development, gain access to clinical research and manufacturing expertise that will
advance product development, approval and eventual market uptake of our product, and rely on a well-defined and carefully executed intellectual
property strategy in order to position our products with long-term, defensible, competitive advantages. Execution of this strategy may
include seeking grant funding and funding from partners and collaborators when available on terms we believe to be favorable to us.

 Near Term

 Advancing the AD04 Clinical Development Program in the US.

 After the completion of the ONWARD trial, an updated product profile for AD04 was developed to be used to guide future clinical development planning as well as to be used in primary market research.

 Summarizing the findings, addiction specialists will order the genetic test for 50% to 100% of their AUD patients. If the genetic test is positive, addiction specialists will prescribe AD-04. Addiction specialists are particularly interested in the Mechanism of Action (MOA) and how AD04 complements current products being used to treat AUD. The HDD endpoint validates the hypothesis about AD-04 modulating cravings and impulsiveness. For heavy drinking AUD patients seen by addiction specialists, AD-04 is likely to be used in conjunction with existing approved products as a first- line medication assisted treatment (MAT) to treat AUD. Because of its high tolerability and excellent safety profile, we believe AD-04 is uniquely positioned to reduce alcohol consumption without requiring abstinence among the broader population including mild- and moderate- AUD, and patients that do not have an AUD diagnosis.

 Based on the ONWARD trial results, and after discussions with our regulatory advisors and key opinion leaders (KOLs), we believe there is a clear, cost-effective path toward FDA approval that we plan to aggressively pursue. This decision was based on a detailed analysis of both the prior Phase 2 clinical trial and the recently completed ONWARD Phase 3 clinical trial. These results were reviewed with regulatory and statistical experts to confirm their validity. Additionally, after these results were analyzed and confirmed, we engaged commercial experts to confirm the value of this data as tested through market research with physicians and payers.

 The detailed analysis of the Phase 2 and Phase 3 data identified two specific genotypes that we believe can meet the FDA's prespecified, confirmed and recommended primary endpoint, which is to measure the proportion of patients who attain and sustain zero heavy drinking days in a pre-specified efficacy observation period, which was months five and six of the six-month study period in ONWARD. The prevalence of patients with these genotypes, which performed best during the trials, is estimated to exist in about 20% of the AUD population.

 Based on the information collected and the feedback received from meetings held in Q2 2023 with the FDA and European regulatory agencies and overlapping clinical requirements, we made the strategic decision to focus our efforts on the US as the US standards should translate to acceptance in other international markets. We believe that AD04 will achieve success in clinical development based on our post hoc analysis and the US FDA regulatory feedback on the pre-specified primary endpoint that the FDA has now confirmed (PNHDD). This is also vital for our ongoing partnering efforts based on discussions with companies active in the US and Europe. Importantly, the regulators acknowledged the valuable insights of the post hoc analysis, which demonstrated that patients with a specific genetic subtype (AG+), achieved a statistical significance of p=0.031 and p=0.021 respectively in both the Phase 2 and Phase 3 trials. Additionally, these patients averaged over 17 (17.23) heavy drinking days per month at the study start and achieved under 3 (2.37) heavy drinking days per month at study completion.

 These clinically meaningful results are important as evidenced by the US healthcare provider research completed after the ONWARD trial, which suggests AD04 would play an important role as a medication for physicians currently treating patients with AUD.

 Market research conducted subsequent to completion of the ONWARD trial suggests unit pricing for AD04 could be significantly higher than previous assumptions which we believe confirms AD04 as an attractive commercial opportunity.

 We currently intend to engage a U.S. partner to assist with funding the anticipated required clinical trials and, assuming a successful outcome with FDA, to advance commercialization efforts. We are exploring partnerships with companies that have an established commercial presence and existing relationships with psychiatrists and addiction specialists. With an experienced partner, assuming we obtain FDA approval, we believe that we can rapidly penetrate the U.S. market given the expectation of AD04 being widely accessible, reasonably priced, and reimbursable.

 Prosecuting and expanding our intellectual property and product portfolio. We have acquired rights to a promising drug candidate and made a significant investment in the development of our licensed patent portfolio to protect our technologies and programs, and we intend to continue to do so. We have obtained exclusive rights to three different patent families directed to therapeutic methods related to our AD04 platform. These families include 3 issued U.S. patents, and at least one foreign equivalent patent covering AD04 issued in over 40 national jurisdictions, including most of Europe and Eurasia. Divisional and continuation applications to expand the coverage have also been filed in certain jurisdictions.

 Maximizing commercial opportunity for our technology. AD04 targets large markets with significant unmet medical need. We intend to develop an extended release, once-a-day, or other modified formulation of AD04 to enhance compliance and market appeal.

 Managing our business with efficiency and discipline. We believe we have efficiently utilized our capital and human resources to develop and acquire our product candidate and programs and create a broad intellectual property portfolio. We operate cross-functionally and are led by an experienced management team with backgrounds in developing product candidates. We use project management techniques to assist us in making disciplined strategic program decisions and to attempt to limit the risk profile of our product pipeline.

 Longer Term

 Evidence from the primary qualitative market research
suggests the product profile for AD04 will be received well by physician and payors. We will continue to develop plans to support future
communications with physicians and payors as well as pre market commercialization planning for AD04

 License with University of Virginia Patent
Foundation

 We have a worldwide, exclusive license from the
University of Virginia Patent Foundation (d/b/a the Licensing & Venture Group) ("UVA LVG"), which is the licensing arm
of the University of Virginia, to commercialize our investigational drug candidate, AD04, subject to Food and Drug Administration ("FDA")
approval of the product, based upon three separate patent application families, with 90 issued patents in over 40 jurisdictions, including
eight issued patents in the U.S. Our investigational agent has been used in several investigator-sponsored trials and we possess or have
rights to use toxicology, pharmacokinetic and other preclinical and clinical data that support our landmark ONWARD pivotal Phase 3 clinical
trial. Our licensed therapeutic agent was the product candidate used in the ONWARD pivotal Phase 3 clinical trial of 302 patients as well
as a University of Virginia investigator sponsored Phase 2b clinical trial of 283 patients.

 In January 2011, we entered into an exclusive,
worldwide license agreement with UVA LVG for rights to make, use or sell licensed products in the United States based upon the patents
and patent applications made and held by UVA LVG (the "UVA LVG License"). Three patent and patent application families are
included in the UVA LVG License, with patents issued in over 40 countries, including, without limitation, in the U.S., Europe and Eurasia.
The licensed patents and patent applications currently include the below listed U.S. patents and patent application and any divisional
patents, continuation patents and foreign equivalents.

 1.

 U.S. Patent Number 8,697,361, issued 4/2017

 "Serotonin Transporter Gene and Treatment of Alcoholism"

 2.

 U.S. Patent Number 10,533,226, filed issued 1/2020

 "Serotonin Transporter Gene and Treatment of Alcoholism"

 3.

 U.S. Patent Number 8,753,815, issued 6/2014

 4.

 U.S. Patent Number 9,539,242, issued 1/2017

 5.

 U.S. Patent Number 10,603,307, issued 3/2020

 6.

 U.S. Patent Number 11,, issued 9/2021

 7.

 US Patent Number 11,324,723, issued 5/2022

 8.

 U.S. Patent Number 11,351,154, issued 7/2020

 9.

 U.S. Patent Number 11,905,562 issued 2/2024

 "Serotonin Transporter Gene and Treatment of Substance Use Disorder
including Opioid Use Disorder"

 10.

 U.S. Patent Number 12,150,931 issued 11/2024

 11.

 US Patent Number 11,957,664 issued 4/2024

 12.

 U.S. Patent Number 12,226,401 issued 2/2025

 13.

 U.S. Patent Number 12,221,654 issued 2/2025

 "Serotonin transporter gene and treatment of opioid-related disorders"

 Additionally, the UVA LVG License grants rights
to data and know-how developed by the University of Virginia related to AD04, including, without limitation, to the data from the Phase
2b study described above.

 As consideration for the rights granted in the
license agreement, we are obligated to pay UVA LVG yearly license fees and milestone payments, and a royalty based on net sales of products
covered by the patent-related rights set forth above. More specifically, upon commencement of the license we issued to UVA LVG Class A
Units (which was equal to four percent (4%) of our equity on the date of issuance) as a license issue. We are obligated to pay UVA LVG
(i) annual minimum royalties of $40,000 commencing in 2017; (ii)a $20,000 milestone payments that was originally due upon dosing the first
patient under a Phase 3 human clinical trial of a licensed product but has been paid in full, $155,000 upon the earlier of the completion
of a Phase 3 trial of a licensed product or the partnering of the licensed or sale of our company, which was paid in 2022 with completion
of the ONWARD trial, $275,000 upon acceptance of an NDA by the FDA, and $1,000,000 upon approval for sale of AD04 in the U.S., Europe
or Japan; and (iii) royalties equal to a 2% and 1% of net sales of licensed products in countries in which a valid patent exists or does
not exist, respectively, with royalties paid quarterly. In the event of a sublicense to a third party, we are obligated to pay royalties
to UVA LVG equal to a percentage of what we would have been required to pay to UVA LVG had we sold the products under sublicense ourselves.
In addition, we are required to pay to UVA LVG 15% of any sublicensing income. The license agreement, as amended on May 18, 2016 and further
amended on August 15, 2017, December 14, 2017, and October 21, 2024 sets forth specific milestones completion deadlines including using
commercially reasonable efforts to submit an NDA by March 31, 2028 and commence commercialization of an FDA approved product by March
31, 2029. The license agreement may be terminated by UVA LVG upon sixty (60) days written notice if we breach our obligations thereunder,
including failing to make any milestone, or failing to use commercially reasonable efforts to submit an NDA or commence commercialization
within the date specified above, failing to make other required payments, or the failure to exercise diligence to bring licensed products
to market. In the event of a termination, we will be obligated to pay all amounts that accrued prior to such termination. The license
agreement also contains other customary clauses and terms as are common in similar agreements between industry and academia, including
agreements to indemnify UVA LVG for any liabilities arising out of or related to the licensee's exercise of its rights under the
license agreement, making the license grant subject to the Bayh-Dole Act (35 U.S.C. 200 et seq.), the reservation of the licensor of the
right to use the licensed intellectual property rights for its internal, non-commercial purposes, limitations/disclaimers of various warranties
and representations, reporting and record-keeping requirements, and licensee liability insurance requirements.

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

 The UVA LVG currently has a policy under which
up to 35% of the payments made to the UVA LVG under a license may be distributed to inventor of the licensed technology, therefor our
Chief Medical Officer in his capacity as inventor of the patents licensed by us from the UVA LVG may be eligible to receive such payments
from the UVA LVG.

 Protection from Generic Competition

 Since our inception, we have focused on taking
action primarily through the filing of patents geared toward ensuring AD04 will have market exclusivity for several years after it is
launched with particular focus on the U.S. and Europe. Ondansetron, the active pharmaceutical ingredient ("API") of AD04 was
granted FDA approval as Zofran for the treatment of post-operative and post-chemotherapy nausea and emesis in January
1991 and is now commercially available in generic form at doses from more than 12 times the AD04 dose to over 70 times the AD04 dose with
the highest doses being administered intravenously ("i.v."), which provides almost twice the drug exposure levels as oral
dosing. With generic ondansetron available, the following threats have been addressed: (i) the potential use of currently available ondansetron
products (i.e., Zofran) "off-label", and (ii) the potential manufacturing and launching of a generic version
AD04 by a competitor.

 Limited Threat of "Off-label" Use
of Zofran

 The lowest doses of Zofran tablets
(and its generic equivalents) on the market are a 4 mg and 8 mg tablet as compared to AD04, which is currently formulated as a 0.33 mg
tablet (12.2 times less than the 4 mg tablet). Thus, in order for a patient to use tablets already on the market and get the AD04 dose,
a patient would have to cut the 4 mg tablet into 12 parts (or the 8 mg tablet into 24 parts), which we do not believe is reasonably possible;
and, even with precise sectioning into 12 pieces, the dose may still not be accurate because tablets at the Zofran dose
have not been manufactured to ensure uniformity of distribution of the active ingredient across the tablet. Therefore, we believe that
the risk of a large number of patients attempting to cut the currently marketed tablet to achieve the AD04 dose to be extremely low.

 Since we do not believe that Zofran
tablets can be used as a substitute for AD04, the main question related to the potential for off-label use of the current products for
treating addictions then becomes whether doctors and patients will believe it is possible to use the currently available, higher doses
of ondansetron to treat addictions, including AUD. We believe doctors are extremely unlikely to prescribe currently available high dose
versions of ondansetron and that any such prescribing that dose will likely be limited and immaterial to the sales of AD04 for two reasons
— (1) we believe the high doses are unlikely to be efficacious as a treatment for AUD, and (2) we believe the high doses would likely
raise significant safety concerns.

 1.

 Lack of Efficacy. The high doses of ondansetron found in Zofran have been tested in clinical trials for treating AUD and have not shown efficacy against AUD (Sellers, et. al. 1994). At best, existing trial results do not suggest that the high Zofran -level doses of ondansetron currently on the market and approved for nausea and emesis will be effective.

 2.

 Safety Concerns. While high-dose ondansetron is safe and tolerable at the doses on the market if administered acutely (i.e., dosed for a few hours i.v. or a few days orally) as is done for post-operative and post-chemotherapy nausea and emesis, the drug is known to have cardiovascular side effects at higher doses, and results from clinical studies suggest that high doses of ondansetron may affect the electrical activity of the heart. In fact, the FDA withdrew approval of the 32 mg i.v. Zofran product that was previously on the market. As part of the FDA's on-going safety review of currently available ondansetron doses, the FDA has stated that: "Ondansetron at currently marketed levels may increase the risk of developing prolongation of the QT interval of the electrocardiogram, which can lead to an abnormal or potentially fatal heart rhythm." There are also several recent lawsuits claiming that Zofran used for off label for morning sickness causes birth defects. Thus, if the currently available high-dose ondansetron was used chronically as would be needed for treating addiction there could potentially be significant safety concerns without additional clinical studies related to the chronic dosing of currently available ondansetron. At the lower dose of ondansetron in AD04, our product is almost as low as one one-hundredth of the dose of i.v. ondansetron that was removed from the market. The FDA has stated that we can commence chronic dosing of patients with AD04 without any further safety or non-clinical studies.

 Therefore, we do not expect physicians to prescribe
current ondansetron doses for currently unapproved use for treating AUD because there is no evidence those doses would work for treating
AUD and there may be safety concerns associated with the chronic administration of currently available doses.

 There is also a liquid, pediatric formulation
of Zofran on the market. It is offered in a 50 mL bottle that is available for a little over $100 online and would provide
a 2-month supply of AD04 if dosed at the 0.4 mL required to achieve the 0.33 mg AD04 dose. Our risk assessment is that, though it would
be possible to use the liquid formulation for administering a dose of ondansetron equivalent to AD04, it is not expected to be a practice
that would materially impact the sales of AD04, and the risk from the liquid formulation is low for the following reasons:

 1.

 Compliance concerns. In the field of addiction, patient compliance is one of the biggest concerns for both the physicians and the patients themselves. A treatment not appropriately administered is a treatment that will not work. Oral tablets have been shown to have one of the highest compliance rates over other dosage forms. It is likely that both physicians and patients will demand the tablet in order to improve compliance and, thus, treatment success rates.

 2.

 Inconvenient, complicated delivery. A major driver of compliance is the convenience of appropriately administering the drug. Appropriate delivery of the liquid formulation would require patients to measure each dose into a graduated dropper or syringe (administration of such a small amount (0.4 mL) by graduated cup would not be practical). Cleanup of the sticky product would be inconvenient as would transportation and storage, and an opened bottle would need to be used within 4 weeks (per UKPAR). Therefore, we expect that AD04's convenient tablet would increase patient compliance relative to the liquid formulation. Bottle breakage and spillage will also be a concern.

 3.

 Dosing Accuracy. Dosing accuracy is particularly important when using ondansetron to treat alcoholism due to the limitations of the therapeutic window and the cardiovascular side effects at high doses. With the liquid formulation, measuring the small (0.4 mL) dose will be difficult with great opportunity for misdosing even if a graduated syringe is used. In real-world practice, many patients would use other methods such as estimated pouring into cups and drinking directly from the bottle. Misdosing could significantly affect the safety and/or efficacy of the treatment.

 4.

 Lack of physician motivation to prescribe the liquid formulation. Given the known compliance advantages of oral tablets vs. liquid formulations, the heightened need for compliance in this particular patient population, and the concerns around dosing accuracy with a liquid formulation, we believe it is likely physicians would recognize the risk of prescribing the liquid formulation off-label and so be unwilling to prescribe it. For insured patients, any differential in co-payments would create little incentive to use the liquid formulation relative to the compliance and inconvenience problems.

 5.

 Lack of competitive marketing. Manufacturers of liquid ondansetron are not allowed to market for reduction in alcohol use disorder because reduction in alcohol use disorder is not an approved indication for their product. Furthermore, most generic companies do not have marketing efforts of any kind.

 6.

 Litigation risk to large prescribers. If a large clinic (such as a rehabilitation clinic) prescribes or provides the liquid formulation off-label, the institution could be liable for inducing infringement of our licensed patents.

 In summary, we do not expect off-label use of
currently available ondansetron to meaningfully impact the sales of AD04.

 Protection from a Competitor Launching a Generic
Version of AD04.

 We believe that we have licensed the patent protection
necessary to protect us against the launch by a competitor of a generic version of AD04. The label being sought for AD04 will be:

 The use of AD04 (i.e., ondansetron) for the treatment
of patients that are positive for the specified genetic markers.

 The only use for the AD04 dose of ondansetron
will be under this label.

 Our licensed patents cover the following:

 The use of AD04 (i.e., ondansetron) for the treatment
of patients that are positive for the specified genetic markers.

 We believe that any attempt by competitors to
reformulate and market ondansetron at our intended dosage levels, while technically feasible, can be interpreted under current case law
as inducement to infringe on our intellectual property rights, which should, accordingly, be actionable. Additionally, there will be no
unpatented use for the AD04 dose of ondansetron. So, a competitor that sells a product containing the AD04 dose of ondansetron will indirectly
infringe our licensed patents, which should, accordingly, be actionable.

 A competitor could sell a dose equal to that of
AD04 and avoid our licensed patents were they to conduct a Phase 3 program using the AD04 dose to treat a different label indication and
achieved successful results and approval. We do not know of any clinical development programs of ondansetron underway at this time and
so consider this risk to be negligible.

 Governmental Regulation

 Our business is subject to extensive laws and
regulations, the most significant of which are summarized below.

 FDA Approval Process

 In the United States, pharmaceutical products
are subject to extensive regulation by the FDA. The Federal Food, Drug, and Cosmetic Act (the "FDC Act"), and other federal
and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping,
approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of
pharmaceutical products. In the United States, pharmaceutical products used for the prevention, treatment, or cure of a disease or condition
of a human being are subject to extensive regulation under the FDC Act. Failure to comply with applicable U.S. requirements may subject
a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending NDAs, warning or untitled letters,
product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and
criminal prosecution.

 Pharmaceutical product development for a new product
or certain changes to an approved product in the United States typically involves preclinical laboratory and animal tests, the submission
to the FDA of an investigational new drug application ("IND"), which must become effective before clinical testing may commence,
and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA
approval is sought. Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary
substantially based upon the type, complexity, and novelty of the product or disease.

 Preclinical tests include laboratory evaluation
of product chemistry, formulation, and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy
of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including good laboratory
practices. The results of preclinical testing are submitted to the FDA as part of an IND along with other information, including information
about product chemistry, manufacturing and controls, and a proposed clinical trial protocol. Long-term preclinical tests, such as animal
tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted.

 A 30-day waiting period after the submission of
each IND is required prior to the commencement of clinical testing in humans. If the FDA has neither commented on nor questioned the IND
within this 30-day period, the clinical trial proposed in the IND may begin. However, the FDA can impose a clinical hold after 30 days
if it has safety or compliance-related concerns.

 Clinical trials involve the administration of
the investigational new drug or biologic to healthy volunteers or patients under the supervision of a qualified investigator. Clinical
trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with good clinical practice ("GCP"),
an international standard meant to protect the rights and health of subjects and to define the roles of clinical trial sponsors, administrators,
and monitors; as well as (iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety,
and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. subjects and subsequent protocol amendments must
be submitted to the FDA as part of the IND.

 As noted, the FDA may order the temporary, or
permanent, discontinuation of a clinical trial at any time, or impose other sanctions, if it believes that the clinical trial either is
not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. The study protocol
and informed consent information for subjects in clinical trials must also be submitted to an institutional review board ("IRB"),
for approval. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply
with the IRB's requirements, for safety or other concerns, or may impose other conditions.

 Clinical trials to support NDAs for marketing
approval are typically conducted in three sequential phases, but the phases may overlap. In Phase 1, the initial introduction of the drug
or biologic into healthy human subjects or patients, the product is tested to assess metabolism, pharmacokinetics, pharmacological actions,
side effects associated with increasing doses, and, if possible, early evidence of effectiveness. Phase 2 usually involves trials in a
limited patient population to determine the effectiveness of the drug or biologic for a particular indication, dosage tolerance, and optimum
dosage, and to identify common adverse effects and safety risks. If preliminary evidence of effectiveness and an acceptable safety profile
in Phase 2 evaluations, Phase 3 trials are undertaken to obtain the additional information about clinical efficacy and safety in a larger
number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk
relationship of the drug or biologic and to provide adequate information for the labeling of the product. In most cases, the FDA requires
two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the drug or biologic.

 After completion of the required clinical testing,
an NDA is prepared and submitted to the FDA. FDA approval of the NDA is required before marketing of the product may begin in the United
States. The NDA must include the results of all preclinical, clinical, and other testing and a compilation of data relating to the product's
pharmacology, chemistry, manufacture, and control. The cost of preparing and submitting an NDA is substantial. The submission of most
NDAs is additionally subject to a substantial application user fee, currently exceeding $3.2 million for fiscal year 2023 (although a
waiver is possible in certain cases), and the manufacturer and/or sponsor under an approved new drug application are also subject to a
program fee set at more than $339,000 for fiscal year 2023. These fees are typically increased annually.

 The FDA has 60 days from its receipt of an NDA
to determine whether the application will be accepted for filing based on the agency's threshold determination that it is sufficiently
complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review. The FDA has agreed
to certain performance goals in the review of NDAs. Most such applications for standard review drug or biologic products are reviewed
within ten to twelve months; most applications for priority review drugs or biologics are reviewed in six to eight months. The FDA can
extend these reviews by three months. The review process for both standard and priority review may be extended by the FDA for three additional
months to consider certain late-submitted information, or information intended to clarify information already provided in the submission.

 The FDA may also refer applications for novel
drug or biologic products, or drug or biologic products that present difficult questions of safety or efficacy, to an advisory committee
— typically a panel that includes clinicians and other experts — for review, evaluation, and a recommendation on questions
raised by an application, including whether the application should be approved. The FDA is not bound by the recommendation of an advisory
committee, but it generally follows such recommendations. Before approving an NDA, the FDA will typically inspect one or more clinical
sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured.
The FDA will not approve the product unless compliance with current good manufacturing practice ("cGMP") is satisfactory and
the NDA contains data that provide substantial evidence that the drug or biologic is safe and effective in the indication studied.

 After the FDA evaluates the NDA and the manufacturing
facilities, it issues either an approval letter or a Complete Response Letter ("CRL"). In some cases, FDA may choose to extend
the review time, in consultation with the sponsor. A CRL generally outlines the deficiencies in the submission and may require substantial
additional testing, or information, in order for the FDA to reconsider the application. If, or when, those deficiencies have been addressed
to the FDA's satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing
such resubmissions in two or six months depending on the type of information included.

 An approval letter authorizes commercial marketing
of the drug or biologic with specific prescribing information for specific indications. As a condition of NDA approval, the FDA may require
a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the drug outweigh the potential risks. REMS can
include medication guides, communication plans for healthcare professionals, and elements to assure safe use ("ETASU"). ETASU
can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances,
special monitoring, and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability
of the product. Moreover, product approval may require substantial post-approval testing and surveillance to monitor the product's
safety or efficacy. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems
are identified following initial marketing. The FDA could also impose a boxed warning (sometimes referred to as a Black Box Warning) in
the product label if it identifies a specific risk that requires particular attention. This imposition of a Black Box Warning limits certain
types of promotions.

 Changes to some of the conditions established
in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and
FDA approval of a new NDA or NDA supplement before the change can be implemented.

 Enacted in 2016, the 21 st Century Cures
Act (the "Cures Act"), in part, revises the drug and device review and approval processes at the FDA. The Cures Act, which
was signed into law on December 13, 2016, among other things, requires the manufacturer of an investigational drug for a serious disease
or condition to make available, such as by posting on its website, its policy on evaluating and responding to requests for individual
patient access to such investigational drug. This requirement applies on the later of 60 calendar days after the date of enactment of
the Cures Act or the first initiation of a Phase 2 or Phase 3 trial of the investigational drug.

 The FDA has various programs, including fast track
designation, accelerated approval, priority review, and breakthrough therapy designation, which are intended to expedite or simplify the
process for the development and FDA review of drugs that are intended for the treatment of serious or life-threatening diseases or conditions
and demonstrate the potential to address unmet medical needs. We believe AD04 may qualify for one or more of these programs and intend
to purse one or more of them as part of our strategy to expedite the approval of AD04 for marketing.

 Post-Approval Requirements

 Once an NDA is approved, a product will be subject
to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of drugs and
biologics, including standards and regulations for direct-to-consumer advertising, industry-sponsored scientific and educational activities
and promotional activities involving the internet. Drugs and biologics may be marketed only for the approved indications and in accordance
with the provisions of the approved labeling.

 Adverse event reporting and submission of periodic
reports is required following FDA approval of an NDA. The FDA also may require post-marketing testing, known as Phase 4 testing, REMS,
and special surveillance to monitor the effects of an approved product, or the FDA may place other conditions on an approval that could
restrict the distribution or use of the product. In addition, quality control, drug manufacture, packaging, and labeling procedures must
continue to conform to cGMPs after approval. Drug and biologic manufacturers must list the product with the FDA, and they and certain
of their subcontractors are required to register their establishments with the FDA and certain state agencies. Registration with the FDA
subjects entities to periodic unannounced inspections by the FDA, during which the agency inspects manufacturing and other facilities
to assess compliance with cGMPs and other requirements. Accordingly, manufacturers must continue to expend time, money, and effort in
the areas of production and quality-control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals,
issue warning or other letters, suspend production activities, or request product recalls if a company fails to comply with regulatory
standards, or take other regulatory or enforcement action if it encounters problems following initial marketing, or if previously unrecognized
problems are subsequently discovered. Significant expenses are required to correct deficiencies.

 Companion diagnostics and complementary
diagnostics

 We believe that the success of our product candidates
may depend, in part, on the development and commercialization of either a companion diagnostic or complementary diagnostic. Companion
diagnostics and complementary diagnostics can identify patients who are most likely to benefit from a particular therapeutic product;
identify patients likely to be at increased risk for serious side effects as a result of treatment with a particular therapeutic product;
or monitor response to treatment with a particular therapeutic product for the purpose of adjusting treatment to achieve improved safety
or effectiveness. Companion diagnostics and complementary diagnostics are regulated as medical devices by the FDA and, as such, require
either clearance or approval prior to commercialization. The level of risk combined with available controls to mitigate risk determines
whether a companion diagnostic device requires Premarket Approval Application, or PMA, approval or is cleared through the 510(k) premarket
notification process. For a novel therapeutic product for which a companion diagnostic device is essential for the safe and effective
use of the product, the companion diagnostic device should be developed and approved or 510(k)-cleared contemporaneously with the therapeutic.
The use of the companion diagnostic device will be stipulated in the labeling of the therapeutic product. This is also true for a complementary
diagnostic, although it is not a prerequisite for receiving the therapeutic. Currently, we intend to submit a 505(b)(2) new drug application
to the FDA for AD04. We have interacted primarily with the FDA's Center for Drug Evaluation and Research, in consultation
with the agency's Center for Devices and Radiological Health ("CDRH"). We expect to need approval of a PMA or a 510(k)
from CDRH for the companion diagnostics to be used with the drug product. If the FDA requires a separate application for the diagnostic,
this could potentially delay the approval of the new drug application for AD04, complicate the review process, or even lead to the rejection
of the new drug application. The necessary information required for the completion of the companion diagnostic PMA submission to CDRH
will be part of the clinical development program for AD04 and will also require a MDUFA (Medical Device User Fee Amendments) fee. As of
2025 the estimated fee for submission of the PMA is $540,783. These fees are typically increased annually.

 Hatch-Waxman Amendments to the Federal Food,
Drug and Cosmetic Act

 Under certain circumstances, an approved application
may be eligible for three years of non-patent market exclusivity provided by the Hatch-Waxman Amendments to the Federal Food, Drug, and
Cosmetic Act. The FDA might grant such exclusivity, (which would be separate from any patent protection to which an approved drug might
be entitled) if the applicant conducted new clinical investigations (other than bioavailability studies) that are new and essential to
the application's approval. Among the types of exclusivity are those for a "new chemical entity" and those for a new
formulation or indication for a previously-approved drug. If granted, marketing exclusivity for the types of products that include only
drugs with innovative changes to previously-approved products using the same active ingredient, might prohibit the FDA from approving
an application for a competitor product, such as an abbreviated new drug application or a 505(b)(2) NDA relying on the finding of safety
and efficacy for three years. This three-year exclusivity, however, covers only the innovation associated with the original NDA. It does
not prohibit the FDA from approving applications for drugs with the same active ingredient but without the new innovative change. These
marketing exclusivity protections do not prohibit the FDA from approving a full NDA, even if it contains the innovative change. There
is no guarantee that the FDA will grant such exclusivity and competitors can try to seek approval of competitive products, notwithstanding
the exclusivity. However, if three years of exclusivity is afforded, it offers us one more barrier to competitor entry for a few years.

 505(b)(2) NDA

 For AD04, we intend to submit a 505(b)(2) NDA.
A 505(b)(2) NDA provided by Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, allows the FDA to rely, for approval of an
NDA, on data not developed by the applicant. Such an NDA, referred to as a 505(b)(2) application contains full reports of investigations
of safety and effectiveness, but where at least some of the information required for approval comes from studies not conducted by or for
the applicant and for which the applicant has not obtained a right of reference. Such applications permit approval of applications other
than those for duplicate products and permit reliance for such approvals on scientific literature or an FDA finding of safety and/or effectiveness
for a previously approved drug product. While each application is different, these types of applications will typically require bridging
studies (to support the change or modification from the listed drug) and could require clinical data to support the modification of the
already-approved drug product.

 In addition, a 505(b)(2) NDA requires the applicant
to certify as to any patents that claim the drug for which a claim of patent infringement could be made. In certain cases, the applicant
of the NDA with a patent certification must provide notice to the patent holder, which can lead to a patent infringement lawsuit, thereby
delaying the FDA approval of the competitor product for up to 30 months, separate from any traditional patent infringement litigation
delay. Similarly, if the competitor has its own market exclusivity, this can delay approval of the product. However, if a product obtains
exclusivity or patent protection, it can delay entry of competitors for several years.

 Pediatric Information

 Under the Pediatric Research Equity Act ("PREA"),
NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant
pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective.
The FDA may grant full or partial waivers, or deferrals, for submission of data.

 Fraud and Abuse and Other Healthcare Regulation

 We are subject to various federal and state healthcare
laws, including, but not limited to, anti-kickback laws. Penalties for violations of these healthcare laws include, but are not limited
to, criminal, civil and/or administrative penalties, damages, fines, disgorgement, individual imprisonment, possible exclusion from Medicare,
Medicaid and other federal and state healthcare programs, and the curtailment or restructuring of operations.

 Anti-Kickback Statute

 The federal Anti-Kickback Statute prohibits persons
or entities from knowingly and willfully soliciting, offering, receiving or paying any remuneration, directly or indirectly, overtly or
covertly, in cash or in kind, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for or recommending
a good or service, or for the purchasing, leasing, ordering, or arranging for or recommending, any good, facility, service or item for
which payment may be made in whole or in part under federal healthcare programs, such as the Medicare and Medicaid programs. The federal
Anti-Kickback Statute is broad and prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry.
The term "remuneration" expressly includes kickbacks, bribes, or rebates and also has been broadly interpreted to include
anything of value, including for example, gifts, discounts, meals, entertainment, the furnishing of supplies or equipment, credit arrangements,
payments of cash, waivers of payments, ownership interests and providing anything at less than its fair market value.

 There are a number of statutory exceptions and
regulatory safe harbors protecting certain business arrangements from prosecution under the federal Anti-Kickback Statute. These statutory
exceptions and safe harbors set forth provisions that, if all their applicable requirements are met, will assure healthcare providers
and other parties that they may not be prosecuted under the federal Anti-Kickback Statute. The failure of a transaction or arrangement
to fit precisely within one or more applicable statutory exceptions or safe harbors does not necessarily mean that it is per se
illegal or that prosecution will be pursued. However, conduct and business arrangements that do not fully satisfy all requirements of
an applicable safe harbor may result in increased scrutiny by government enforcement authorities and will be evaluated on a case-by-case
basis based on a cumulative review of all of its facts and circumstances. Additionally, the intent standard under the federal Anti-Kickback
Statute was amended under the Affordable Care Act, to a stricter standard such that a person or entity no longer needs to have actual
knowledge of the statute or specific intent to violate it in order to have committed a violation. The Affordable Care Act provides that
the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes
a false or fraudulent claim for purposes of the federal civil False Claims Act, which is discussed below.

 Federal Civil False Claims Act

 The federal civil False Claims Act prohibits,
among other things, persons or entities from knowingly presenting or causing to be presented a false or fraudulent claim to, or the knowing
use of false statements to obtain payment from or approval by, the federal government. Suits filed under the federal civil False Claims
Act, known as "qui tam" actions, can be brought by any individual on behalf of the government. These individuals, sometimes
known as "relators" or, more commonly, as "whistleblowers", may share in any amounts paid by the entity to the
government in fines or settlement. The number of filings of qui tam actions has increased significantly in recent years, causing more
healthcare companies to have to defend a case brought under the federal civil False Claim Act. If an entity is determined to have violated
the federal civil False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil
penalties for each separate false claim. Many comparable state laws are broader in scope and apply to all payors, and therefore, are not
limited to only those claims submitted to the federal government.

 Federal Physician Self-Referral Prohibition

 We may also be subject to the federal physician
self-referral prohibitions, commonly known as the Stark Law, which prohibits, among other things, physicians who have a financial relationship,
including an investment, ownership or compensation relationship with an entity, from referring Medicare and Medicaid patients for designated
health services (which include clinical laboratory services) to such entity, unless an exception applies. Similarly, entities may not
bill Medicare, Medicaid or any other party for services furnished pursuant to a prohibited referral. Many states have their own self-referral
laws as well, which in some cases apply to all third-party payors, not just Medicare and Medicaid.

 Federal Civil Monetary Penalties Statute

 The federal Civil Monetary Penalties Statute,
among other things, imposes fines against any person or entity who is determined to have presented, or caused to be presented, claims
to a federal healthcare program that the person knows, or should know, is for an item or service that was not provided as claimed or is
false or fraudulent.

 Health Insurance Portability and Accountability
Act of 1996

 The federal Health Insurance Portability and Accountability
Act ("HIPAA") created several new federal crimes, including healthcare fraud and false statements relating to healthcare matters.
The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including
private third-party payors. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material
fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits,
items or services.

 In addition, HIPAA, as amended by the Health Information
Technology for Economic and Clinical Health Act ("HITECH"), and their implementing regulations established uniform standards
for certain covered entities, which are healthcare providers, health plans and healthcare clearinghouses, as well as their business associates,
governing the conduct of specified electronic healthcare transactions and protecting the security and privacy of protected health information.
Among other things, HITECH also created four new tiers of civil monetary penalties and gave state attorneys general new authority to file
civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs
associated with pursuing federal civil actions.

 The Federal Physician Payments Sunshine
Act

 The federal Physician Payment Sunshine Act requires
certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the
Children's Health Insurance Program, with certain exceptions, to report annually to CMS, information related to "payments
or other transfers of value" provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors)
and teaching hospitals, and to report annually to CMS ownership and investment interests held by physicians, as defined above, and their
immediate family members. Failure to submit timely, accurately and completely the required information for all payments, transfers of
value and ownership or investment interests may result in civil monetary penalties of up to an aggregate of $150,000 per year and up to
an aggregate of $1.0 million per year for "knowing failures."

 State Law Equivalents

 Many states have also adopted laws similar to
each of the above federal laws, such as anti-kickback and false claims laws, which may be broader in scope and apply to items or services
reimbursed by any third-party payor, including commercial insurers, as well as laws that restrict our marketing activities with health
care professionals and entities, and require us to track and report payments and other transfers of value, including consulting fees,
provided to certain healthcare professionals and entities. Some states mandate implementation of compliance programs to ensure compliance
with these laws. We also are subject to foreign fraud and abuse laws, which vary by country.

 Healthcare Reform

 In March 2010, President Obama signed into law
the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the "ACA"),
which has the potential to substantially change healthcare financing and delivery by both governmental and private insurers, and significantly
impact the drug and medical device industries. The ACA will impact existing government healthcare programs and will result in the development
of new programs.

 In addition, the ACA and its implementing regulations,
among other things, revised the methodology for calculation of rebates owed by manufacturers to the state and federal government for covered
outpatient drugs and certain biologics, including AD04 or any future product candidates, under the Medicaid Drug Rebate Program, increased
the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate program
to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual
fees and taxes for certain branded prescription drugs, and provided incentives to programs that increase the federal government's
comparative effectiveness research.

 Other legislative changes have been proposed and
adopted in the United States since the Affordable Care Act was enacted. In August 2011, the Budget Control Act of 2011, among other things,
created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted
deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the
legislation's automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers
up to 2% per fiscal year. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012 (the "ATRA")
which delayed for another two months the budget cuts mandated by these sequestration provisions of the Budget Control Act of 2011. In
March 2013, the President signed an executive order implementing sequestration, and in April 2013, the 2% Medicare payment reductions
went into effect. The ATRA also, among other things, reduced Medicare payments to several providers, including hospitals, imaging centers
and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers
from three to five years. Most recently, on August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the
"IR Act"). Among other things, the IR Act requires manufacturers of certain drugs to engage in price negotiations with Medicare
(beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to
penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new
discounting program (beginning in 2025).

 In addition, Congress often uses the Medicare
program for pay for legislation. For example, on April 16, 2015, President Obama signed into law the "Medicare Access and CHIP Reauthorization
Act of 2015" ("MACRA"). MACRA repealed the Medicare sustainable growth rate formula that had been used to determine
payment levels under the Medicare physician fee schedule ("PFS"), and established a new method to update payments for physicians
and other providers paid under the PFS. Congress reduced Medicare payments for several categories of providers and made changes to Medicare
policies to offset the cost of the bill. It is possible that future legislation and regulations may include Medicare payment reductions
or policy changes that result in reduced payments, increased burdens or increased operating costs.

 The full impact of the ACA, as well as other laws
and reform measures that may be proposed and adopted in the future, remains uncertain, but may continue the downward pressure on medical
device pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs, which could have
a material adverse effect on our business operations. Efforts to significantly amend or repeal the ACA continue and if passed could have
a significant impact on important aspects of our business including medical device and drug pricing, Medicare payment reductions or policy
changes that result in reduced payments, or increased burdens or operating costs.

 The Foreign Corrupt Practices Act

 The Foreign Corrupt Practices Act ("FCPA"),
prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or
indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of such foreign
official in her or her official capacity or to secure any other improper advantage in order to obtain or retain business. In addition
to the antibribery provisions, the FCPA also obligates "issuers," companies whose securities are registered pursuant to Section
12 of the Exchange Act or is required to file periodic and other reports with SEC under Section 15(d) of the Exchange Act to comply with
the FCPA's record keeping and internal controls provisions; the accounting provisions require a listed company to maintain books
and records that, in reasonable detail, accurately and fairly reflect all transactions of the corporation, including international affiliates,
and to devise and maintain an adequate system of internal accounting controls to assure management's control authority, and responsibility
over the company's assets.

 Export Controls and Economic Sanctions

 Several U.S. statutes and regulations regulate
the export from the United States of pharmaceutical products. Pursuant to the Export Administration Regulations, ("EAR") the
export (including re-exports and "deemed exports") of commercial and "dual-use" products may require a license
or be prohibited. A listing of the types of goods and services controlled for export by the EAR is on the Commerce Control List ("CCL"),
which includes essentially all civilian science, technology, and engineering dual use items. For products listed on the CCL, a license
will be required as a condition to export, unless an exclusion or license exception applies. Those items not explicitly included on the
CCL are included in a broad category known as "EAR99." Although a license may not generally be required for EAR99 designated
items, a license will be required if the item will be shipped or otherwise transferred to a comprehensively embargoed country or for a
potentially prohibited purpose.

 The Commerce Department's Office of Antiboycott
Compliance and the Treasury Department's Internal Revenue Service enforce anti-boycott compliance regulations that prohibit U.S.
persons such as the Company from participating directly or indirectly with an economic boycott that is not recognized by the United States.
The regulations include reporting requirements, prohibitions, and tax liabilities that may be incurred if the Company supports, even inadvertently,
an economic boycott in which the U.S. does not participate.

 Pursuant to the Trading With the Enemy Act, the
International Emergency Economic Powers Act, and other related statutes, regulations, and Executive Orders, the Treasury Department's
Office of Foreign Assets Control ("OFAC"), administers and enforces economic and trade sanctions that prohibit or restrict
certain activities with embargoed countries, sanctioned entities, and sanctioned individuals for particular foreign policy and national
security reasons. The scope of the sanctions varies significantly, but may include comprehensive restrictions on imports, exports, investment,
and facilitation of foreign transactions involving a sanctioned jurisdiction, entity or person, as well as non-sanctioned persons and
entities acting on behalf of sanctioned jurisdictions, entities or people. OFAC's programs also prohibit U.S. persons, such as the
Company, from transacting with any person or entity that is deemed to be a Foreign Sanctions Evader (foreign individuals and entities
determined to have violated, attempted to violate, conspired to violate, or caused a violation of U.S. sanctions).

 Other U.S. government agencies, including the
U.S. Department of State, may maintain regulations that impact the Company's ability to export pharmaceutical products from the
United States. These broad range of U.S. export control laws and regulations obligate U.S. businesses to develop, maintain, and enforce
an adequate system of internal controls to ensure compliance with such laws and regulations.

 Implications of Being an Emerging Growth Company
and Smaller Reporting Company

 In 2023, we were an "emerging growth company,"
as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), and therefore were able to take advantage
of certain exemptions from various public company reporting requirements, including not being required to have our internal controls over
financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of
2002 (the "Sarbanes-Oxley Act"), reduced disclosure obligations regarding executive compensation in our periodic reports and
proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute
payments. We elected to use the extended transition period for complying with new or revised accounting standards under the JOBS Act.
This election allowed us to delay the adoption of new or revised accounting standards that have different effective dates for public and
private companies until those standards apply to private companies. As a result of this election, our financial statements for 2023 and
prior years may not be comparable to companies that comply with public company effective dates. At December 31, 2023, the last day of
the fiscal year following the fifth anniversary of our initial public offering, we ceased to be an emerging growth company as defined
in the JOBS Act. References herein to "emerging growth company" have the meaning associated with that term in the JOBS Act.

 We are a "smaller reporting company",
as defined in Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among
other things, providing only two years of audited financial statements. We will cease to be a smaller reporting company if we have (i)
more than $250 million in market value of our shares held by non-affiliates as of the last business day of our most recently completed
second fiscal quarter or (ii) more than $100 million of annual revenues in our most recent fiscal year completed before the last business
day of our second fiscal quarter and a market value of our shares held by non-affiliates more than $700 million as of the last business
day of our second fiscal quarter.

 Corporate Information

 ADial Pharmaceuticals, L.L.C. was formed as a
Virginia limited liability company in November 2010. ADial Pharmaceuticals, L.L.C. converted from a Virginia limited liability company
into a Virginia corporation on October 3, 2017, and then reincorporated in Delaware on October 11, 2017 by merging the Virginia corporation
with and into Adial Pharmaceuticals, Inc., a Delaware corporation that was incorporated on October 5, 2017 as a wholly owned subsidiary
of the Virginia corporation. We refer to this as the corporate conversion/reincorporation. In connection with the corporate conversion/reincorporation,
each unit of ADial Pharmaceuticals, L.L.C. was converted into shares of common stock of the Virginia corporation and then into shares
of common stock of Adial Pharmaceuticals, Inc., the members of ADial Pharmaceuticals, L.L.C. became stockholders of Adial Pharmaceuticals,
Inc. and Adial Pharmaceuticals, Inc. succeeded to the business of ADial Pharmaceuticals, L.L.C.

 Purnovate, LLC, our wholly owned subsidiary, was
formed as a Virginia limited liability company in April 2019. Purnovate, LLC converted from a Virginia limited liability company into
a Virginia corporation on January 18, 2021, and reincorporated in Delaware on January 26, 2021 by merging the Virginia corporation with
and into Purnovate, Inc., a Delaware corporation that was incorporated on January 20, 2021 and as a wholly owned subsidiary of Adial Pharmaceuticals,
Inc. ("Adial"). The assets and business of Purnovate were sold in 2023. While we continue to own the entirety of Purnovate,
Inc. shares, the Company is no longer an active entity.

 Our principal executive offices are located at
4870 Sadler Rd, Suite 300, Glen Allen VA 23060, and our telephone number is (804) 487-8196. Our website address is www.adial.com.
Information contained in our website does not form part of this Annual Report on Form 10-K and is intended for informational purposes
only. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers
that file electronically with the SEC. The address of that website is www.sec.gov.

 This Annual Report on Form 10-K contains references
to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this
Annual Report on Form 10-K, including logos, artwork and other visual displays, may appear without the or TM symbols,
but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our
rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies'
trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 Human Capital/Employees

 As of the date of this Annual Report on Form 10-K,
we have seven employees, of which five are full-time employees, and two are consultants serving under Company titles. Our Chief Operating
Officer is a consultant that devotes 75% of his working time to providing services to us and our Chief Medical Officer is a consultant
that devotes approximately 50% her working time to providing services to us. None of our employees is represented by a labor union, and
we consider our relationship with our employees to be good.

 We anticipate that we will need to identify, attract,
train and retain other highly skilled personnel to pursue our development program. Hiring for such personnel is competitive, and there
can be no assurance that we will be able to retain our key employees or attract, assimilate or retain the qualified personnel necessary
for the development of our business.

 We have no collective bargaining agreements with
our employees and have not experienced any work stoppages. We consider our relations with our employees to be good. Although, management
continually seeks to add additional talent to its work force, management believes that it has sufficient human capital to operate its
business successfully.

 Competitive Pay and Benefits. Our compensation
programs are designed to align the compensation of our employees with our performance and to provide the proper incentives to attract,
retain and motivate employees to achieve superior results. The structure of our compensation programs balances incentive earnings for
both short-term and long-term performance. Specifically:

 We provide employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location.

 Annual increases and incentive compensation are based on merit, which is communicated to employees at the time of hiring and documented through our talent management process as part of our annual review procedures and upon internal transfer and/or promotion.

 All full-time employees are eligible for health insurance, paid and unpaid leaves, a 401K retirement plan with employer matching contributions (maximum of 4% match), and life insurance coverage. We also offer a variety of voluntary benefits that allow employees to select the options that meet their needs, including flexible time-off, telemedicine, and paid parental leave.

 Description of Property

 On January 6, 2020, our then-subsidiary Purnovate
entered a lease for the Facility with a term of three (3) years for office and laboratory space. On January 19, 2021, Purnovate entered
an amendment to this lease extending the lease until January 31, 2026, committing us to total lease payments in the period from January
1, 2022 and the end of the lease of $302,492. In May, 2023, this lease was assumed by the buyer of Purnovate. The Company concluded a
sublease agreement with the buyer of Purnovate for use of limited office space $1765 per month. This sublease was terminated effective
February 29, 2024.

 Other company personnel work remotely.

 Legal Proceedings

 We are subject to claims and legal actions that
arise in the ordinary course of business from time to time. However, we are not currently subject to any claims or actions that we believe
would have a material adverse effect on our financial position or results of operations.

 Item 1A. Risk Factors.

 Investing in our securities involves a high
degree of risk. In addition to the risks related to our business set forth in this Annual Report on Form 10-K and the other information
included and incorporated by reference in this Annual Report on Form 10-K, you should carefully consider the risks described below before
purchasing our securities. Additional risks, uncertainties and other factors not presently known to us or that we currently deem immaterial
may also impair our business operations.

 Risks Relating to Our Company

 We have incurred net losses every year and
quarter since our inception and anticipate that we will continue to incur net losses 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 December 31, 2024, we had
an accumulated deficit of approximately $82.0 million.

 We expect our research and development expenses
to increase when we commence our clinical development program in the US. 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 2025 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 shareholders' equity and working capital.

 Our independent registered public accounting
firm has expressed doubt about our ability to continue as a going concern.

 The report of our independent registered public
accounting firm contains a note stating that the accompanying financial statements have been prepared assuming we will continue as a going
concern. During the year ended December 31, 2024, we incurred a net loss of approximately $13.2 million and used cash in operations of
approximately $6.9 million. Losses have principally occurred as a result of the research and development efforts coupled with no operating
revenue. Until we begin generating revenue, there is substantial doubt about our ability to continue as a going concern.

 We currently have no product revenues and
may not generate revenue at any time in the near future, if at all. Currently, we have no products approved for commercial sale.

 We currently have no products for sale and we
cannot guarantee that we will ever have any drug products approved for sale. We and our product candidate are subject to extensive regulation
by the FDA, and comparable regulatory authorities in other countries governing, among other things, research, testing, clinical trials,
manufacturing, labeling, promotion, marketing, adverse event reporting and recordkeeping of our product candidates. Until, and unless,
we receive approval from the FDA or other regulatory authorities for our product candidates, we cannot commercialize product candidates
and will not have product revenues. Even if we successfully develop products, achieve regulatory approval, and then commercialize our
products, we may be unable to generate revenue for many years, if at all. If we are unable to generate revenue, we will not become profitable,
and we may be unable to continue our operations. For the foreseeable future, we will have to fund all of our operations from equity and
debt offerings, cash on hand and grants. In addition, changes may occur that would consume our available capital at a faster pace than
expected, including changes in and progress of our development activities, acquisitions of additional candidates and changes in regulation.
Moreover, preclinical and clinical testing may not start or be completed as we forecast and may not achieve the desired results. Therefore,
we expect to seek additional sources of funding, such as additional financing, grant funding or partner or collaborator funding, which
additional sources of funding may not be available on favorable terms, if at all.

 We have had limited operations to date and
there can be no assurance that we will be able to execute on our business strategy.

 We are a clinical stage company, as such, have
had limited operations to date and need to rely on paid consultants to help us achieve our clinical, regulatory and overall business goals.
We have yet to demonstrate our ability to overcome the risks frequently encountered in our industry and are still subject to many of the
risks common to such enterprises, including our ability to implement our business plan, market acceptance of our proposed business and
lead product, under-capitalization, cash shortages, limitations with respect to personnel, financing and other resources, competition
from better funded and experienced companies, and uncertainty of our ability to generate revenues. In fact, though individual team members
have experience running clinical trials, as a company we have yet to prove that we can successfully run a clinical trial to the point
of releasing data. There is no assurance that our activities will be successful or will result in any revenues or profit, and the likelihood
of our success must be considered in light of the stage of our development. In addition, no assurance can be given that we will be able
to consummate our business strategy and plans, or that financial, technological, market, or other limitations may force us to modify,
alter, significantly delay, or significantly impede the implementation of such plans. We have insufficient results for investors to use
to identify historical trends. Investors should consider our prospects in light of the risk, expenses and difficulties we will encounter
as an early stage company. Our revenue and income potential is unproven and our business model is continually evolving. We are subject
to the risks inherent to the operation of a new business enterprise, and cannot assure you that we will be able to successfully address
these risks.

 We will need to secure additional financing
in order to support our operations and fund our current and future clinical trials. We can provide no assurances that any additional sources
of financing will be available to us on favorable terms, if at all. Our forecast of the period of time through which our current financial
resources will be adequate to support our operations and the costs to support our general and administrative, selling and marketing and
research and development activities are forward-looking statements and involve risks and uncertainties.

 If we do not succeed in raising additional funds
on acceptable terms, we may be unable to complete planned product development activities or obtain approval of our product candidate from
the FDA and other regulatory authorities. We do not have any committed sources of capital. Moreover, if our future trial activities are
significantly delayed due to pandemics or unrest, our project cost and operating overhead costs may significantly increase. In such case,
we would need to obtain additional funding, either through other grants or through potentially dilutive means. In any case, we will need
to raise additional capital to complete our development program and to meet our long-term business objectives.

 Our cash and cash equivalents at the date of this
Annual Report filing on Form 10-K are not expected to be sufficient to fund our operations for the next twelve months. Given current expectations,
we will require additional financing as we continue to execute our business strategy. Though we have recently received total net proceeds
of approximately $7.8 million from equity sales and warrant exercise fees, we have determined to use these additional funds to accelerate
our development of AD04. Moreover, we will require additional funds in order to continue operations and for additional clinical trials
of AD04, if needed, as well as any additional clinical trials or other development of any products we may acquire or license. Our liquidity
may be negatively impacted as a result of a research and development cost increases in addition to general economic and industry factors.
We anticipate that, to the extent that we require additional liquidity, it will be funded through the incurrence of other indebtedness,
additional equity financings or a combination of these potential sources of liquidity. In addition, we may raise additional funds to finance
future cash needs through grant funding and/or corporate collaboration and licensing arrangements. There can be no assurance that the
new administration will devote significant funds to grants or that any grant money will be available to us. 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. We are in discussions with potential partners
that could fund a Phase 3 clinical program and/or commercialization of AD04, assuming a successful regulatory outcome; however, there
can be no assurance that we will be successful in attracting such a partner. 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. The covenants under future credit facilities may limit our ability
to obtain additional debt financing. 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.

 Additional financing, which is not in place at
this time, may be from the sale of equity or convertible or other debt securities in a public or private offering, from a credit facility
or strategic partnership coupled with an investment in us or a combination of both. Our ability to raise capital through the sale of equity
may be limited by the various rules of the SEC and The Nasdaq Capital Market (the "Nasdaq"), which place limits on the number
of shares of stock that may be sold. Equity issuances would have a dilutive effect on our stockholders. We may be unable to raise sufficient
additional financing on terms that are acceptable to us, if at all. Our failure to raise additional capital and in sufficient amounts
may significantly impact our ability to expand our business. For further discussion of our liquidity requirements as they relate to our
long-term plans, see the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity
and Capital Resources."

 We have identified material weaknesses in
our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated or that additional material
weaknesses will not occur in the future.

 As a public company, we are subject to the reporting
requirements of the Exchange Act, and the Sarbanes-Oxley Act. We expect that the requirements of these rules and regulations will continue
to increase our legal, accounting and financial compliance costs, make some activities more difficult, time consuming and costly, and
place significant strain on our personnel, systems and resources.

 The Sarbanes-Oxley Act requires, among other things,
that we maintain effective disclosure controls and procedures, and internal controls over financial reporting.

 We do not yet have effective disclosure controls
and procedures, or internal controls over all aspects of our financial reporting. We are continuing to develop and refine our internal
controls over financial reporting. Our management is responsible for establishing and maintaining adequate internal control over our financial
reporting, as defined in Rule 13a-15(f) under the Exchange Act. We will be required to expend time and resources to further improve our
internal controls over financial reporting, including by expanding our staff. However, we cannot assure you that our internal control
over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.

 We have identified material weaknesses in our
internal control 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 to date include (i) lack of formal risk 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.

 We will be required to expend time and resources
to further improve our internal controls over financial reporting, including by expanding our staff. However, we cannot assure you that
our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.

 Our current controls and any new controls that
we develop may become inadequate because of changes in conditions in our business, including increased complexity resulting from our international
expansion. Further, weaknesses in our disclosure controls or our internal control over financial reporting may be discovered in the future.
Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm
our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements
for prior periods. Any failure to implement and maintain effective internal control over financial reporting could also adversely affect
the results of management reports and independent registered public accounting firm audits of our internal control over financial reporting
that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls
and procedures, and internal control over financial reporting could also cause investors to lose confidence in our reported financial
and other information, which would likely have a negative effect on the market price of our common stock.

 Our independent registered public accounting firm
has not been required to audit the effectiveness of our internal control over financial reporting since we were, until December 31, 2023,
an "emerging growth company" as defined in the JOBS Act. Because we are no longer an emerging growth company, and if we meet
other requirements, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied
with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to maintain effective
disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating
results, and cause a decline in the market price of our common stock.

 We rely on a license to use various technologies
that are material to our business and if the agreement were to be terminated or if other rights that may be necessary or we deem advisable
for commercializing our intended products cannot be obtained, it would halt our ability to market our products and technology, as well
as have an immediate material adverse effect on our business, operating results and financial condition.

 Our prospects are significantly dependent upon
the UVA LVG License. The UVA LVG License grants us exclusive, worldwide rights to certain existing patents and related intellectual property
that covers AD04, currently our only product candidate. If we breach the terms of the UVA LVG License, including any failure to make minimum
royalty payments required thereunder or failure to reach certain developmental milestones and completion of deadlines, including, submitting
an NDA by March 31, 2028 and commencing commercialization of an FDA approved product by March 31, 2029, or other factors, including but
not limited to, the failure to comply with material terms of the Agreement, the licensor has the right to terminate the license. If we
were to lose or otherwise be unable to maintain this license on acceptable terms, or find that it is necessary or appropriate to secure
new licenses from other third parties, we would not be able to market our products and technology, which would likely require us to cease
our current operations which would have an immediate material adverse effect on our business, operating results and financial condition.
As a result of our ongoing business and clinical development planning for AD04, we are approaching UVA LVG to extend the milestones referenced
in our license agreement with UVA.

 Our business is dependent upon the success
of our lead product candidate, AD04, which requires significant additional clinical testing before we can seek regulatory approval and
potentially launch commercial sales.

 Our business and future success depends upon our
ability to obtain regulatory approval of and then successfully commercialize our lead investigational product candidate, AD04 and other
product candidates. AD04 is in clinical stage development. To date, our main focus and the investment of a significant portion of our
efforts and financial resources has been in the development of our lead investigational product candidate, AD04, for which we recently
completed the ONWARD Phase 3 clinical trial with 302 patients in Scandinavia and Central and Eastern Europe, which targets the reduction
of risk drinking (heavy drinking of alcohol) in subjects that possess selected genetics of the serotonin transporter and/or 5-HT3 receptor
gene. We currently plan to conduct two additional Phase 3 clinical trials, as well as one or more supportive clinical studies. Even though
we are pursuing a registration pathway based on specific FDA input and guidance and the EMA precedents and guidance, there are many uncertainties
known and unknown that may affect the outcome of the trial. These include adequate patient enrollment, adequate supply of our product
candidate, potential changes in the regulatory landscape, and the results of the trial being successful.

 AD04 currently, as well as any potential future
product candidates, will require additional clinical and non-clinical development, regulatory review and approval in multiple jurisdictions,
substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate
any revenue from product sales. We expect AD04 will need at least two additional Phase 3 trials (including the ONWARD Phase 3 trial we
recently completed in Scandinavia and Central and Eastern Europe) and one or more supportive clinical studies to gain approval in either
the U.S. or outside the US for AUD and additional development activity, including, without limitation, clinical trials, in order to seek
approval for the use of AD04 to treat any other indications (e.g., such as opioid use disorder, gambling addiction, smoking cessation,
and other drug addictions). In addition, because AD04 is our most advanced product candidate and there is limited history information
on long-term effects of our proposed dosage, there is always a chance of developmental delays or regulatory issues or other problems arising,
with our development plans and depending on their magnitude, our business could be significantly harmed. In any case, the costs associated
with completion of our two additional Phase 3 trials, commercialization of AD04, and the costs of developing AD04 for use in other indications
are significant and will require obtaining funding, possibly through equity sales, before AD04 generates revenue.

 Our future success depends heavily on our ability
to successfully manufacture, develop, obtain regulatory approval, and commercialize AD04, which may never occur. We currently generate
no revenues from our product candidate, and we may never be able to develop or commercialize a marketable drug.

 The active ingredient of our product candidate,
ondansetron, is currently available in generic form.

 Ondansetron, the active pharmaceutical ingredient
("API") of AD04, was granted FDA approval as Zofran in January 1991 and is approved in many foreign markets.
Ondansetron is commercially available in generic form, but not available: (i) at the formulation/dosage levels expected to be marketed
by us, or (ii) with a requirement to use a diagnostic biomarker, as we expect to be the case with AD04. Although ondansetron has been
approved to treat nausea and emesis it has not been approved to treat AUD and it has not been approved for daily long-term use as planned
by us. Clinical testing to date of ondansetron at the higher doses used to treat nausea/emesis have not shown effectiveness in treating
AUD or any other addictive disorder; however, if a third party conducted a Phase 3 clinical program and showed success treating AUD at
those doses, we could not prevent such third party from marketing ondansetron for AUD at those doses.

 Results from clinical studies suggest that high
intravenous doses of ondansetron may affect the electrical activity of the heart. In a Drug Safety Communication dated June 29, 2012,
the FDA stated that: "A 32 mg single intravenous dose of ondansetron (Zofran, ondansetron hydrochloride, and generics) may affect
the electrical activity of the heart (QT interval prolongation), which could pre-dispose patients to develop an abnormal and potentially
fatal heart rhythm known as Torsades de Pointes." In addition: "No single intravenous dose should exceed 16 mg." There
are also several recent lawsuits claiming that Zofran used for the unapproved use of morning sickness causes birth defects.
Although we do not believe that our dosage will cause such adverse event there can be no assurance that the negative side effects of the
generic drug that have been found in higher dosages will not occur in our dosage or otherwise deter potential users of our product candidate
and adversely impact sales of our product candidate. If we were to be required to have such a warning on our drug label, patients may
be deterred from using our product candidates.

 In addition, we also face the risk, that doctors
will prescribe off label, the generic form of ondansetron to treat AUD despite the different dosage of ondansetron in the generic form
from that in AD04, the lack of demonstrated clinical efficacy against AUD at the currently available doses (i.e., the Zofran
and approved generics), and the potential safety concerns if the currently available/higher doses are taken chronically as would be needed
for AUD or other addictions. Physicians, or their patients, could divide the lowest dose existing oral tablet into more than ten parts
to approximate the necessary AD04 dosage.

 Although we believe that any attempt by competitors
to reformulate and market ondansetron at our intended dosage levels, while technically feasible, infringes on our intellectual property
rights, and should, accordingly, be actionable, we cannot give assurances that we would be successful in defending our rights or that
we will have access to sufficient funds necessary to successfully prosecute any such violations of, or infringements on, our intellectual
property rights. Additionally, we cannot ensure investors that other companies will not discover and seek to commercialize low doses of
ondansetron, not currently available, for other indications.

 Changes in general economic conditions,
geopolitical conditions, domestic and foreign trade policies, monetary policies and other factors beyond our control may adversely impact
our business and operating results.

 Our operations and performance depend on global,
regional and U.S. economic and geopolitical conditions. General worldwide economic conditions have experienced significant instability
in recent years including the recent global economic uncertainty and financial market conditions.

 The uncertain financial markets, disruptions in
supply chains, mobility restraints, and changing priorities as well as volatile asset values could impact our business in the future.
The COVID-19 outbreak and government measures taken in response to the pandemic have also had a significant impact, both direct and indirect,
on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been
suspended; and demand for certain goods and services, such as medical services and supplies, have spiked, while demand for other goods
and services, such as travel, have fallen. We expect the same will be true for any other pandemic. The future progression of the pandemic
and its effects on our business and operations are uncertain. In addition, the outbreak of a pandemic could disrupt our operations
due to absenteeism by infected or ill members of management or other employees, or absenteeism by members of management and other employees
who elect not to come to work due to the illness affecting others in our office or laboratory facilities, or due to quarantines. Pandemics
could also impact members of our Board of Directors resulting in absenteeism from meetings of the directors or committees of directors,
and making it more difficult to convene the quorums of the full Board of Directors or its committees needed to conduct meetings for the
management of our affairs.

 Further, due to increasing inflation, operating
costs for many businesses including ours have increased and, in the future, could impact demand or pricing manufacturing of our drug candidates
or services providers, foreign exchange rates or employee wages. Inflation rates, particularly in the United States, have increased
recently to levels not seen in years, and increased inflation may result in increases in our operating costs (including our labor costs),
reduced liquidity and limits on our ability to access credit or otherwise raise capital. In addition, the Federal Reserve has raised,
and may again raise, interest rates in response to concerns about inflation, which coupled with reduced government spending and volatility
in financial markets may have the effect of further increasing economic uncertainty and heightening these risks.

 Actual events involving reduced or limited liquidity,
defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services
industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may
in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank, was closed by the California
Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver. Although
we did not have any cash or cash equivalent balances on deposit with Silicon Valley Bank, uncertainty and liquidity concerns in the broader
financial services industry remain and the failure of Silicon Valley Bank and its potential near- and long-term effects on the biotechnology
industry and its participants such as our vendors, suppliers, and investors, may also adversely affect our operations and stock price.

 We are actively monitoring the effects these disruptions
and increasing inflation could have on our operations.

 These conditions make it extremely difficult for
us to accurately forecast and plan future business activities.

 While there exists a large body of evidence
supporting the safety of our primary API, ondansetron, under short-term use, there are currently no long-term use clinical safety data
available.

 We intend to market our products, particularly
AD04, for long-term use by patients seeking to reduce their number of days of heavy drinking, and we assume future sales volumes reflecting
such extended use.

 Studies of Zofran conducted as
part of its FDA and other regulatory agencies review process found that the drug is well-tolerated and results in few adverse side effects
at dosages almost 100 times the dosage expected to be formulated in AD04. However, to the best of our knowledge, no comprehensive clinical
study has been performed to date that has evaluated the safety profile of ondansetron for long-term use. We expect the FDA will require
us to provide safety data in at least 100 patients for 12 months and can offer no assurances that safety results of these long term use
studies will lead to any subsequent approval for long-term use. There can be no assurance that long-term usage of ondansetron, at dosages
anticipated by us, will be safe. Though the FDA has stated it will not require additional non-clinical testing nor will it require a QT
interval prolongation clinical study, such statements by the FDA are not legally binding on the agency.

 The current data for our lead product candidate,
AD04 are the result of Phase 2 clinical trials conducted by third parties as well as data generated from the ONWARD trial we conducted
and do not currently provide sufficient evidence that our products are viable as potential pharmaceutical products.

 Through our proprietary access to relevant laboratory
and clinical trial results of the University of Virginia's research program, and through our reliance on publicly available third-party
research, we possess toxicology, pharmacokinetic, and other preclinical data and clinical data on AD04. As of now, AD04 has completed
only Phase 2 clinical trials and one Phase 3 trial. There is no guarantee that Phase 2 results can or will be replicated by additional
pivotal Phase 3 studies.

 To date, long-term safety and efficacy have not
yet been demonstrated in clinical trials for our investigational product candidate. Favorable results in early studies or trials may not
be repeated in later studies or trials. Even if our clinical trials are initiated and completed as planned, we cannot be certain that
the results will support our product candidate claims. Success in preclinical testing and early clinical trials does not ensure that later
clinical trials will be successful. We cannot be sure that the results of later clinical trials would replicate the results of prior clinical
trials and preclinical testing, nor that they would satisfy the requirements of the FDA or other regulatory agencies. Clinical trials
may fail to demonstrate that our product candidate is safe for humans and effective for indicated uses. Preclinical and clinical results
are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals or commercialization. Any
delay in, or termination of, our clinical trials would delay our obtaining FDA or other global regulatory approval for the affected product
candidate and, ultimately, our ability to commercialize that product candidate.

 On July 20, 2022, we announced the results from
the ONWARD Phase 3 trial. Although the trial missed the primary endpoint, it did show statistical significance in a pre-defined
patient group. AD04 patients, compared with placebo patients, achieved a statistically significant reduction from baseline at month six
in percentage of heavy drinking days (PHDD) for the pre-specified patient group of heavy drinkers. across all genotypes combined (avg.
<10 drinks per drinking day at baseline; p=0.03), which accounted for approximately two-thirds of the trial population. A similar trend
was seen in the combined month five and six analysis in the reduction from baseline (p =0.07). Notably, in the last month of the trial,
AD04 heavy drinking patients had a mean reduction of approximately 79% in heavy drinking compared with baseline.

 Compared with placebo patients, AD04 patients
in the heavy drinking group had an overall significant difference in the severity of their AUD diagnosis (p=0.04) under the Diagnostic
and Statistical Manual of Mental Disorders, Fifth Edition (DSM-5). For the group of those who no longer meet AUD criteria (<2 symptoms),
the comparisons were 27.4% vs. 14.9% (i.e., an 84% decrease), of AD04 and placebo patients, respectively. These data underscore the clinical
relevance of the findings that heavy drinking AUD patients that receive AD04 appear more likely to recover from the disease by the end
of the treatment regimen.

 Additionally, and consistent with the Phase 2b
trial, AD04 had a safety and tolerability profile that was similar to placebo. No side effects or severe adverse events (SAEs) were determined
to be related to AD04 treatment. In fact, more SAEs were reported in the placebo group compared with the AD04 group (7 on placebo vs.
3 on AD04). There were two cardiac events in placebo group and none in the AD04 group. Comparing overall Adverse Events (AEs), the profiles
between AD04 and placebo were similar. AEs reported with a frequency of 5% or more of patients in either group were: headache (11% on
placebo, 12% on AD04), insomnia (3% on placebo, 7% on AD04), blood magnesium decreased (5% on placebo, 6% on AD04), and fatigue (3% on
placebo, 6% on AD04). All of the AE's were reported as mild to moderate. Importantly, in the overall category of cardiac disorders,
patients on placebo showed a greater number of adverse events compared to AD04 (7% on placebo, 4% on AD04), in addition to greater number
of cardiac SAEs in the placebo group as reported above.

 As a result of the above clinical trials, Adial
will have to conduct additional clinical trials to meet US and global regulatory requirements for approval.

 The FDA and/or other global regulators may
not accept our planned Phase 3 endpoints for final approval of AD04 and may determine additional clinical trials are required for approval
of AD04.

 The FDA has indicated to us that a comparison
of the percent of patients with no heavy drinking days in the last two months of a six month clinical trial between the drug and placebo
groups will be a satisfactory endpoint for determination of a successful Phase 3 trial of AD04 and has published the draft guidance Alcoholism:
Developing Drugs for Treatment Guidance for Industry dated February 2015 indicating this endpoint for the development of drugs for
AUD. Similarly, the EMA has in the past accepted the co-primary endpoints of reduction from baseline in days of heavy drinking and reduction
total grams of alcohol consumed per month and has published the Guideline on the development of medicinal products for the treatment
of alcohol dependence on February 18, 2010 stating these endpoints as approvable endpoints for alcohol addiction treatment. Despite
these indications, neither the FDA nor the EMA is bound to accept the stated endpoint if a new drug application for AD04 is submitted
and their definitions of a heavy drinking day may change. We, however, can offer no assurance that the FDA or EMA will approve our primary
endpoints, that we can achieve success at the any endpoints they do approve, or that these potential benefits will subsequently be realized.

 We will incur additional costs and our approvals
could be delayed if the FDA or other global regulators requires additional clinical trials in patients that are negative for the genotypes
targeted by AD04. In addition, clinical trials conducted with only genotype positive subjects will likely result in labeling restricted
to treating patients that are genotype positive.

 Although the FDA has indicated that it sees little
evidence of positive effects for the use of AD04 in subjects that are negative for the genotypes targeted by AD04 and has stated that
it would not object to the AD04 Phase 3 clinical trials going forward without including these additional subjects, the FDA has indicated
that some research in this area may be required prior to approval of AD04 for AUD within the marker negative population. We believe data
in genotype negative patients will be needed to satisfy FDA requirements, and necessary for approval of the genetic test with CDRH. We
intend to conduct two additional Phase 3 trials that will not include the additional subjects and therefore we expect the label for AD04
to be restricted. If the results of such studies are not positive for AD04, it may result in AD04 not being approved.

 Under the Pediatric Research Equity Act ("PREA"),
NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant
pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective.
We plan to test AD04 in adolescent patients (ages 12-17) as part of our next Phase 3 trial. If successful, we intend to request labeling
for treating adolescent patients. Under PREA, an applicant may request and be granted a waiver based on meeting specific criteria as outlined
in guidance published in February 2023.

 Our use of the currently manufactured clinical
trial material in the planned Phase 3 trial is dependent upon the review and approval of the relevant regulatory agencies and authorities.

 The Company has manufactured additional clinical
trial material for use in the other studies that may be required by the FDA or EMA. No assurance can be given that the CMC plan developed
by us will be satisfactory to the regulatory agencies or that the clinical trial material produced for use in clinical trials of AD04
will be approved for use in the trials, either of which could result in delay of the clinical trial program and a requirement for increased
investment prior to commencement of clinical trials.

 Our investigational product, AD04, is dependent
on a successful development, approval, and commercialization of a genetic test, which is expected to be classified as a companion diagnostic.

 Treatment with AD04 will be dependent on identification
of patients with a genetic test (i.e., a companion diagnostic). Companion diagnostics and complementary diagnostics are regulated as medical
devices by the FDA and, as such, require either clearance or approval prior to commercialization. While the technology for the test we
plan to use is well established, it cannot be certain the testing laboratory we set up will be able to conduct the test with the selectivity
and sensitivity that will be required or that the genetic test will be approved by FDA for such use, which could increase the time and
cost to develop AD04 and possibly prevent marketing approval. While we have been party to a joint meeting with the Center for Drug Evaluation
and Research ("CDER", the FDA division responsible for drug approvals) and the CDRH, the FDA division responsible for device
approvals, including genetic tests) at which agreement was reached as to the development path for the genetic test, neither CDER nor CDRH
is bound to accept our planned submission package even if the data is positive. We expect to need approval of a PMA or a 510(k) from CDRH
for the companion diagnostics to be used with the drug product. We have collected and are storing additional blood samples from all patients
enrolled in the ONWARD Phase 3 trial, and plan to do so for any future trials that may be conducted, in the event of any difficulties,
however, we cannot be certain we can overcome all of the technological, logistical or regulatory hurdles related to the genetic testing,
which include, without limitation, technical validation of the test (e.g. specificity, sensitivity, reproducibility, robustness of methods),
clinical validation acceptable to CDER and CDRH, all of which are needed for approval of AD04 and its companion diagnostic genetic test.
Failure in any of these areas could delay approval of AD04, increase the cost necessary to achieve approval of AD04 or prevent approval
of AD04.

 If we obtain approval of AD04 and its genetic
test, we currently plan to distribute the genetic test through an approved third party clinical testing lab partner in order to achieve
wider availability of the genetic test to drive market uptake of AD04. However, we cannot be sure that third party testing companies will
be willing to provide the test, that reimbursement for the test will be available to make such business profitable, or that taking a genetic
test will be acceptable to patients or physicians.

 Our product candidate will require extensive
clinical and other testing.

 Our product candidate will require extensive clinical
and other testing. Although our product candidate has completed a 283-patient Phase 2 clinical trial and has also completed an initial
302-patient Phase 3 clinical trial, we anticipate completing two additional Phase 3 clinical trials in order to obtain regulatory approval
and therefore cannot predict with any certainty if or when we might submit an application for regulatory approval for any of our product
candidates or whether any such application will be accepted for review by the FDA or other global regulators, or whether any application
will be approved upon review.

 Even if our clinical trials are completed as planned,
we cannot be certain that their results will support our proposed indications. Success in preclinical testing and early clinical trials
does not ensure that later clinical trials will be successful, and we cannot be sure that the results of later clinical trials will replicate
the results of prior clinical trials and preclinical testing. Results from earlier clinical trials may not be repeated in later clinical
trials. The clinical trial process may fail to demonstrate that our product candidate is safe and effective for their proposed uses. This
failure could cause us to abandon our product candidate and may delay development of other product candidates. Any delay in, or termination
of, our clinical trials will delay and possibly preclude the filing of any NDAs with the FDA or other global regulators and, ultimately,
our ability to commercialize our product candidate and generate product revenues.

 Our clinical trials may fail to demonstrate
adequately the safety and efficacy of AD04 or any future product candidates, which would likely prevent or delay regulatory approval and
commercialization.

 Before obtaining regulatory approvals for the
commercial sale of AD04 or any future product candidates, including AD04, we must demonstrate through lengthy, complex and expensive preclinical
testing and clinical trials that product candidates are both safe and effective for use in each target indication. Clinical testing is
expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical
trial process. The results of preclinical studies and early and even later stage clinical trials of product candidates may not be predictive
of the results of later-stage clinical trials. Results from subsequent clinical trials may not be the same as the results from the Phase
2b clinical trial that was conducted by the University of Virginia or the results of our Phase 3 trial. There is typically an extremely
high rate of attrition from the failure of product candidates proceeding through clinical trials. Product candidates in later stages of
clinical trials may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial
clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials
due to lack of efficacy or unacceptable safety issues, notwithstanding promising results in earlier trials. We can make no assurances
that, should our future Phase 3 studies provide statistically significant and clinical meaningful results evidencing that treatment with
AD04 results in reduced days of heavy drinking or abstinence, these same results will also provide evidence of greater patient efficacy
rates and or patient benefit ratios vis- -vis currently marketed drug treatments. Most product candidates that commence clinical
trials are never approved as products.

 In addition, even if the trials are successfully
completed, we cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as we do, and more trials could
be required before we submit product candidates for approval. To the extent that the results of the trials are not satisfactory to the
FDA or foreign regulatory authorities for support of a marketing application, approval of product candidates may be significantly delayed,
or we may be required to expend significant additional resources, which may not be available to us, to conduct additional trials in support
of potential approval of product candidates.

 If we experience delays in the enrollment
of patients in our clinical trials our receipt of necessary regulatory approvals could be delayed or prevented.

 We plan to conduct two additional Phase 3 clinical
trials in order to obtain regulatory approval and therefore our inability to locate and continue to enroll a sufficient number of eligible
patients in any future clinical trials would result in significant delays or may require us to abandon one or more clinical trials. Retention
of subjects in clinical trials related to AUD can be challenging relative to trials in some other indications due to the nature of the
target population. Our ability to enroll patients in trials is affected by many factors out of our control including the size and nature
of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical
trial, the prevalence and successful recruiting of patients that are genotype positive, competing clinical trials, and clinicians'
and patients' perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including
any new drugs that may be approved for the indications we are investigating. Due to the use of a biomarker to determine enrollment in
our current and planned Phase 3 clinical trials, we will have a limited population of patients to draw from for our Phase 3 clinical trials.

 Our success will be dependent upon adoption
by physicians and others.

 Even if the FDA and/or EMA approves our product
candidate or any future product candidates we may develop or acquire, the product will require acceptance among physicians, healthcare
payers, patients, and the medical community. Our product is to be used in combination with a genetic test targeted at patients with certain
specified genotypes. It is anticipated that physicians will recommend patients for screening prior to administration of AD04 or future
product candidates. Therefore, our business will be substantially dependent upon our ability to communicate with and obtain support from
physicians regarding the benefits of our products relative to alternative treatments available at that time.

 Rapid technological change and substantial
competition may impair the business.

 The pharmaceutical industry is subject to rapid
and substantial technological change. Technological competition in the industry from pharmaceutical and biotechnology companies, universities,
governmental entities, and others diversifying into the field is intense and is expected to increase. Many of these entities have significantly
greater research and development capabilities, as well as substantially more marketing, financial, and managerial resources than we do,
and represent significant competition. Acquisitions of, or investments in, competing biotechnology companies by large pharmaceutical companies
could increase these competitors' financial, marketing, and other resources. We cannot assure you that developments by others will
not render our products or technologies noncompetitive or that we will be able to keep pace with technological developments. Competitors
have developed, or are in the process of developing, technologies that are, or in the future may be, the basis for competitive products.
Some of these products may have an entirely different approach or means of accomplishing similar therapeutic endpoints than products we
are currently developing. These competing products may be more effective and less costly than the products that we are developing. In
addition, conventional behavioral therapies and other treatment approaches currently in use today may continue to be used instead of,
rather than in conjunction with, our products.

 Any product that we successfully develop, and
for which we gain regulatory approval, must compete for market acceptance and market share. Accordingly, important competitive factors,
in addition to completion of clinical testing and the receipt of regulatory approval, will include product efficacy, safety, timing, and
scope of regulatory approvals, availability of supply, marketing and sales capability, reimbursement coverage, pricing, and patent protection.
Existing or future competing products may provide greater therapeutic convenience or clinical or other benefits for a specific indication
than our products, or may offer comparable performance at a lower cost. If our products fail to capture and maintain market share, we
may not achieve sufficient product revenues and our business will suffer.

 We will compete against fully integrated pharmaceutical
companies such as Alkermes and Indivior and smaller companies that are collaborating with larger pharmaceutical companies, academic institutions,
government agencies and other public and private research organizations. Many of these competitors have drugs already approved or in development.
In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development
programs or have substantially greater financial resources than we do, as well as significantly greater experience in:

 developing drugs, and other therapies;

 undertaking preclinical testing and clinical trials;

 obtaining
FDA and other regulatory approvals of drugs, biologics and other therapies;

 formulating
and manufacturing drugs, biologics and other therapies; and

 launching,
marketing and selling drugs, and other therapies.

 Risks Relating to Our Business and Industry

 If we do not obtain the necessary regulatory
approvals in the United States and/or other countries, we will not be able to sell our product candidates.

 We cannot assure you that we will receive the
approvals necessary to commercialize AD04 or any future product candidates we acquire or develop in the future. We will need FDA approval
to commercialize our product candidates in the United States and approvals from the FDA-equivalent regulatory authorities in foreign jurisdictions
to commercialize our product candidates in those jurisdictions. In order to obtain FDA approval of any product candidate, we must submit
to the FDA an NDA, demonstrating that the product candidate is safe, pure and potent, and effective for its intended use. This demonstration
requires significant research including preclinical studies, as well as clinical trials. We plan to conduct two additional Phase 3 clinical
trials of AD04 for the treatment of AUD. Satisfaction of the FDA's regulatory requirements typically takes many years, depends upon
the type, complexity and novelty of the product candidate and requires substantial resources for research, development and testing. We
cannot predict whether our clinical trials will demonstrate the safety and efficacy of our product candidates or if the results of any
clinical trials will be sufficient to advance to the next phase of development or for approval from the FDA. We also cannot predict whether
our research and clinical approaches will result in drugs or therapeutics that the FDA considers safe and effective for the proposed indications.
The FDA has substantial discretion in the approval process.

 The approval process may be delayed by changes
in government regulation, future legislation or administrative action, or changes in FDA policy that occur prior to or during our regulatory
review. Factors that might lead to a suspension or termination of a clinical trial include, but are not limited to:

 failure
to conduct the clinical trial in accordance with U.S., international and or local regulatory requirements;

 failure
of medical investigators to follow clinical trial protocols;

 unforeseen
safety issues; and/or

 lack
of adequate funding to continue any clinical trial.

 Further, delays in obtaining regulatory approvals
may:

 prevent
or delay commercialization of, and our ability to derive product revenues from, product candidates; and

 diminish
any competitive advantages that we may otherwise believe that we hold.

 Even if we comply with all FDA requests, the FDA
may ultimately reject one or more of our applications. We may never obtain regulatory clearance for any product candidates. Failure to
obtain FDA approval of any of product candidates will severely undermine our business by leaving us without a saleable product, and therefore
without any source of revenues, until another product candidate can be developed. There is no guarantee that we will ever be able to develop
or acquire another product candidate.

 In addition, the FDA may require us to conduct
additional preclinical and clinical testing or to perform post-marketing studies, as a condition to granting marketing approval of a product.
Initial acceptance by the FDA of clinical trial protocols is subject to constant review and any process control failures could result
in additional required testing. Regulatory approval of products often requires that subjects in clinical trials be followed for long periods
to assess their overall survival. The results generated after approval could result in loss of marketing approval, changes in product
labeling, and/or new or increased concerns about the side effects or efficacy of a product. The FDA has significant post-market authority,
including the explicit authority to require post-market studies and clinical trials, labeling changes based on new safety information,
and compliance with FDA-approved risk evaluation and mitigation strategies. The FDA's exercise of its authority has in some cases
resulted, and in the future could result, in delays or increased costs during product development, clinical trials and regulatory review,
increased costs to comply with additional post-approval regulatory requirements and potential restrictions on sales of approved products
based on labeling or other requirements.

 In foreign jurisdictions, we must also receive
approval from the appropriate regulatory authorities, and pricing authorities, before we can commercialize any candidate products. Foreign
regulatory approval processes generally include all of the risks associated with the FDA approval procedures described above. There can
be no assurance that we will receive the approvals necessary to commercialize our product candidate for sale outside the United States.

 Changes in regulatory requirements and guidance
may occur, and we may need to amend clinical trial protocols or our development plan to reflect these changes. Amendments may require
resubmitting clinical trial protocols to FDA and institutional review boards for reexamination, which may impact the costs, timing or
successful completion of a clinical trial. If we experience delays in completion of, or if we terminate any clinical trials, the commercial
prospects for product candidates may be harmed, and the ability to generate product revenues will be delayed. In addition, many of the
factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of
regulatory approval of product candidates.

 Obtaining and maintaining regulatory approval
of product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of product candidates
in other jurisdictions.

 Obtaining and maintaining regulatory approval
of product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other
jurisdiction, and a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory
approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities
in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those countries. Approval
procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those
in the United States, including additional preclinical studies or clinical trials, as clinical studies conducted in one jurisdiction may
not be accepted by or sufficient for regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a
product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price
that we intend to charge for our candidate products is also subject to approval. Additionally, some foreign jurisdictions require participation
of subjects from their country in the Phase 3 trials in order to gain approval in their country.

 We intend to also submit marketing applications
in other jurisdictions, including European countries. Regulatory authorities in jurisdictions outside of the United States have requirements
for approval of product candidates with which we must comply prior to marketing in those jurisdictions. Obtaining foreign regulatory approvals
and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay
or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international
markets and/or fail to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market
potential of AD04 or any future product candidates will be harmed.

 Even if we receive regulatory approval of AD04
or any future product candidates, we will be subject to ongoing regulatory obligations, such as post market surveillance and current good
manufacturing practice ("GMP") requirements, and continued regulatory review, which may result in significant additional expense.
We may also be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with product
candidates. In addition, third parties on whom we rely must comply with regulatory requirements, and any non-compliance on their part
may negatively impact our business, assuming we obtain regulatory authorization at all.

 Any regulatory approvals that we receive for product
candidates will require surveillance to monitor the safety and efficacy of the product candidate. The FDA may also require a Risk Evaluation
and Mitigation Strategy ("REMS") program in order to approve product candidates, which could entail requirements for a medication
guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries
and other risk minimization tools. The FDA could also require a boxed warning, sometimes referred to as a Black Box Warning on the product
label to identify a particular safety risk, which could affect commercial efforts to promote and sell the product. In addition, if the
FDA or a comparable foreign regulatory authority approves product candidates, the manufacturing processes, labeling, packaging, distribution,
adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for product candidates will be subject to extensive
and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports,
registration, as well as continued compliance with current GMPs and current good clinical practices ("GCPs") for any clinical
trials that we conduct post-approval. We are also subject to certain user fees imposed by the regulatory agencies. Later discovery of
previously unknown problems with product candidates, including adverse events of unanticipated severity or frequency, or with our third-party
manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

 restrictions
on the marketing or manufacturing of product candidates, withdrawal of the product from the market, or product recalls;

 fines,
warning letters or holds on clinical trials;

 refusal
by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of approvals;

 product
seizure or detention, or refusal to permit the import or export of product candidates; and

 injunctions
or the imposition of civil or criminal penalties.

 The FDA's and other regulatory authorities'
policies may change, such as those required by the 21 st Century Cures Act, and additional government regulations may be enacted
that could prevent, limit or delay regulatory approval of AD04 or any future product candidates. In addition, it is unclear what changes,
if any, the new presidential administration may bring. We cannot predict the likelihood, nature or extent of government regulation that
may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to
changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance,
we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

 Clinical trials are very expensive, time-consuming
and difficult to design and implement.

 As part of the regulatory process, we must conduct
clinical trials for each product candidate to demonstrate safety and efficacy to the satisfaction of the FDA and other regulatory authorities.
As we advance AD04 or any future product candidates we expect that our expenses will increase when we commence the two planned Phase 3
clinical trials of AD04 for the treatment of AUD. The number and design of the clinical trials that will be required varies depending
upon product candidate, the condition being evaluated, current medical strategies and the trial results themselves. Therefore, it is difficult
to accurately estimate the cost of the clinical trials. Clinical trials are very expensive and difficult to design and implement, in part
because they are subject to rigorous regulatory requirements. The clinical trial process is also time consuming. We estimate that clinical
trials of product candidates including AD04, will take at least several years to complete. Furthermore, failure can occur at any stage
of the trials, and we could encounter problems that cause us to abandon or repeat clinical trials. The commencement and completion of
clinical trials may be delayed or prevented by several factors, including:

 unforeseen
safety issues;

 failure
to determine appropriate dosing;

 greater
than anticipated cost of our clinical trials;

 failure
to demonstrate effectiveness during clinical trials;

 slower
than expected rates of subject recruitment or difficulty obtaining investigators;

 subject
drop-out or discontinuation;

 inability
to monitor subjects adequately during or after treatment;

 third
party contractors, including, without limitation, CRO's and manufacturers, failing to comply with regulatory requirements or meet
their contractual obligations to us in a timely manner;

 reaching
agreements with prospective CROs, and trial sites, both of which can be subject to extensive negotiation and may vary significantly among
different CROs and trial sites;

 insufficient
or inadequate supply or quality of product candidates or other necessary materials to conduct our trials;

 potential
additional safety monitoring, or other conditions required by FDA or comparable foreign regulatory authorities regarding the scope or
design of our clinical trials, or other studies requested by regulatory agencies;

 problems
engaging Institutional Review Boards ("IRBs"), to oversee trials or in obtaining and maintaining IRB approval of studies;

 imposition
of clinical hold or suspension of our clinical trials by regulatory authorities; and

 inability
or unwillingness of medical investigators to follow our clinical protocols.

 In addition, we or the FDA may suspend or terminate
our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks or if the FDA finds deficiencies
in our Investigational New Drug, or IND, submissions or the conduct of these trials. Therefore, we cannot predict with any certainty when,
if ever, future clinical trials will commence or be completed.

 AD04 and any future product candidates may
cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval,
limit their commercial potential or result in significant negative consequences.

 Undesirable side effects caused by AD04 or any
future product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more
restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authorities. Results
of our trials could reveal a high and unacceptable severity and prevalence of side effects or other unexpected characteristics.

 If unacceptable safety concerns or other adverse
events arise in the development of a product candidate, our clinical trials could be suspended or terminated or the FDA or comparable
foreign regulatory authorities could order us to cease clinical trials or deny approval of such product candidate for any or all targeted
indications. Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete the
trial or result in potential product liability claims. Inadequate training in recognizing or managing the potential side effects of a
product candidate could result in patient deaths. Any of these occurrences may harm our business, financial condition and prospects significantly.

 We may incur substantial liabilities and
may be required to limit commercialization of our products in response to product liability lawsuits.

 The testing and marketing of drug product candidates
entail an inherent risk of product liability. Product liability claims might be brought against us by consumers, health care providers
or others selling or otherwise coming into contact with our products. Clinical trial liability claims may be filed against us for damages
suffered by clinical trial subjects or their families. If we cannot successfully defend ourselves against product liability claims, we
may incur substantial liabilities or be required to limit commercialization of our products which could impact our ability to continue
as a going concern. Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential
product liability claims could prevent or inhibit the commercialization of pharmaceutical products we develop, alone or with collaborators.
In addition, regardless of merit or eventual outcome, product liability claims may result in:

 decreased
demand for any approved product candidates;

 impairment
of our business reputation;

 withdrawal
of clinical trial participants;

 costs
of related litigation;

 distraction
of management's attention;

 substantial
monetary awards to patients or other claimants;

 loss
of revenues; and

 the
inability to successfully commercialize any approved drug candidates.

 There is uncertainty as to market acceptance
of our technology and product candidates.

 Even if the FDA approves our current product candidate,
or any future product candidates we may develop or acquire, the products may not gain broad market acceptance among physicians, healthcare
payers, patients, and the medical community. We have conducted our own research into the markets for our product candidates; however,
we cannot guarantee market acceptance of our product candidates, if approved, and have somewhat limited information on which to estimate
our anticipated level of sales. Product candidates, if approved, will require payers, healthcare providers and doctors to adopt our technology.
Our industry is susceptible to rapid technological developments and there can be no assurance that we will be able to match any new technological
advances. If we are unable to match the technological changes in the needs of our customers, the demand for our products will be reduced.
Acceptance and use of any products we market, assuming market authorization approval at all, will depend upon a number of factors including:

 perceptions
by members of the health care community, including physicians, about the safety and effectiveness of our products;

 limitation
on use or warnings required by FDA in our product labeling;

 cost-effectiveness
of our products relative to competing products;

 convenience
and ease of administration;

 potential
advantages of alternative treatment methods;

 availability
of reimbursement for our products from government or other healthcare payers; and

 effectiveness
of marketing and distribution efforts by us and our licensees and distributors, if any.

 Because we expect virtually all of our product
revenues for the foreseeable future to be generated from sales of AD04, if approved, the failure of this product to find market acceptance
would substantially harm our business and would adversely affect our revenue.

 Even if we are able to obtain regulatory
approval for our product candidate or any product candidates we develop or acquire, we will continue to be subject to ongoing and extensive
regulatory requirements, and our failure, or the failure of our contract manufacturers, to comply with these requirements could substantially
harm our business.

 If the FDA approves our product candidate or any
product candidates we develop or acquire, the labeling, manufacturing, packaging, adverse events reporting, storage, advertising, promotion
and record-keeping for our products will be subject to ongoing FDA requirements and continued regulatory oversight and review. We may
also be subject to additional FDA post-marketing obligations. If we are not able to maintain regulatory compliance, we may not be permitted
to market product candidates and/or may be subject to product recalls or seizures. The subsequent discovery of previously unknown problems
with any marketed product, including adverse events of unanticipated severity or frequency, may result in restrictions on the marketing
of the product, and could include withdrawal of the product from the market.

 Our employees, independent contractors,
consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory
standards and requirements.

 We are exposed to the risk of employee fraud or
other illegal activity by our employees, independent contractors, consultants, commercial partners and vendors. Misconduct by these parties
could include intentional, reckless and/or negligent conduct that fails to: (i) comply with the laws of the FDA and other similar foreign
regulatory bodies; (ii) provide true, complete and accurate information to the FDA and other similar foreign regulatory bodies; (iii)
comply with manufacturing standards we have established; (iv) comply with healthcare fraud and abuse laws in the United States and similar
foreign fraudulent misconduct laws; or (v) report financial information or data accurately or to disclose unauthorized activities to us.
Any such misconduct or noncompliance could negatively affect the FDA's review of our regulatory submission, including delaying approval
or disallowance of certain information to support the submission, and/or delay a federal or state healthcare program's or a commercial
insurer's determination regarding the availability of future reimbursement for product candidates. If we obtain FDA approval of
any product candidates and begin commercializing those products in the United States, our potential exposure under such laws will increase
significantly, and our costs associated with compliance with such laws are also likely to increase. These laws may impact, among other
things, our current activities with principal investigators and research patients, as well as proposed and future sales, marketing and
education programs. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements
in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s),
certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper
use of information obtained in the course of patient recruitment for clinical trials. The laws that may affect our ability to operate
or may require us to modify certain programs include, but are not limited to:

 the
federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying
any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce,
or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or
service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs;

 federal
civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from
knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other third-party payors
(both governmental and private) that are false or fraudulent or knowingly making a false statement to improperly avoid, decrease or conceal
an obligation to pay money to a federal or state healthcare program or private payor;

 the
federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), which, among other things, created new federal
criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit
program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or
under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and
willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection
with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters;

 HIPAA,
as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 ("HITECH"), and their respective
implementing regulations, which, among other things, impose requirements on certain covered healthcare providers, health plans, and healthcare
clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of,
individually identifiable health information, relating to the privacy, security and transmission of such individually identifiable health
information;

 the
federal Physician Payment Sunshine Act, created under the Healthcare Reform Act (as defined herein), and its implementing regulations,
which require certain manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare,
Medicaid or the Children's Health Insurance Program (with certain exceptions) to report annually to the United States Department
of Health and Human Services ("HHS"), information related to payments or other transfers of value made to physicians (defined
to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment
interests held by physicians and their immediate family members;

 federal
consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;
and

 the
Foreign Corrupt Practices Act (the "FCPA") and similar antibribery and anticorruption laws in other countries that, for example,
prevent improper payments or transfers of anything of value to foreign officials for the purpose of gaining commercial advantage, obtaining
or retaining business, or to enhancing clinical trials.

 Additionally, we are subject to state and foreign
equivalents of each of the healthcare laws described above, among others, some of which may be broader in scope and may apply regardless
of the payor.

 It is not always possible to identify and deter
employee misconduct, and the precautions we take to detect and prevent inappropriate conduct may not be effective in controlling unknown
or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure
to be in compliance with such laws or regulations. Efforts to ensure that our business arrangements will comply with applicable healthcare
laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices
may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws
and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights,
those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties,
damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs,
contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could
adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of
any product candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above,
among other foreign laws.

 We have no experience selling, marketing
or distributing products and have no internal capability to do so.

 We currently have no sales, marketing or distribution
capabilities, including, without limitation, capabilities to market AD04 or its companion genetic test. We do not anticipate having the
resources in the foreseeable future to allocate to the sales and marketing of our proposed products, if approved. Our future success depends,
in part, on our ability to enter into and maintain collaborative relationships for such capabilities, the collaborator's strategic
interest in the products under development and such collaborator's ability to successfully market and sell any such products. We
intend to pursue collaborative arrangements regarding the sales and marketing of our products, however, there can be no assurance that
we will be able to establish or maintain such collaborative arrangements, or if able to do so, that our collaborators will have effective
sales forces. To the extent that we decide not to, or are unable to, enter into collaborative arrangements with respect to the sales and
marketing of our proposed products, significant capital expenditures, management resources and time will be required to establish and
develop an in-house marketing and sales force with technical expertise. There can also be no assurance that we will be able to establish
or maintain relationships with third party collaborators or develop in-house sales and distribution capabilities. To the extent that we
depend on third parties for marketing and distribution, any revenues we receive will depend upon the efforts of such third parties over
whom we have no control, and there can be no assurance that such efforts will be successful. In addition, there can also be no assurance
that we will be able to successfully market and sell our products in the United States or overseas on our own.

 We may not be successful in establishing
and maintaining strategic partnerships, which could adversely affect our ability to develop and commercialize products.

 We may seek to enter into strategic partnerships
in the future, including alliances with other biotechnology or pharmaceutical companies, to enhance and accelerate the development and
commercialization of our products, such as a third party drug development company. We face significant competition in seeking appropriate
strategic partners and the negotiation process is time-consuming and complex and can be costly. Moreover, we may not be successful in
our efforts to establish a strategic partnership or other alternative arrangements for any future product candidates and programs because
our research and development pipeline may be insufficient, our product candidates and programs may be deemed to be at too early of a stage
of development for collaborative effort and/or third parties may not view our product candidates and programs as having the requisite
potential to demonstrate safety and efficacy or return on investment. Even if we are successful in our efforts to establish strategic
partnerships, the terms that we agree upon may not be favorable to us and we may not be able to maintain such strategic partnerships if,
for example, development or approval of a product candidate is delayed or sales of an approved product are disappointing.

 If we ultimately determine that entering into
strategic partnerships is in our best interest but either fail to enter into, are delayed in entering into or fail to maintain such strategic
partnerships:

 the
development of our current product candidate or certain future product candidates may be terminated or delayed;

 our
planned clinical trials may be restructured or terminated;

 our
cash expenditures related to development of our current product candidate or certain future product candidates may increase significantly
and we may need to seek additional financing;

 we
may be required to hire additional employees or otherwise develop expertise, such as sales and marketing expertise, for which we have
not budgeted;

 we
will bear all of the risk related to the development of any such product candidates; and

 the
competitiveness of any product candidate that is commercialized could be reduced.

 To the extent we elect to enter into licensing
or collaboration agreements to partner AD04 or any future product candidates, our dependence on such relationships may adversely affect
our business.

 Our commercialization strategy for certain product
candidates may depend on our ability to enter into agreements with collaborators to obtain assistance and funding for the development
and potential commercialization of these investigational product candidates. Supporting diligence activities conducted by potential collaborators
and negotiating the financial and other terms of a collaboration agreement are long and complex processes with uncertain results. Even
if we are successful in entering into one or more collaboration agreements, collaborations may involve greater uncertainty for us, as
we have less control over certain aspects of our collaborative programs than we do over our proprietary development and commercialization
programs. Our collaborators could delay or terminate their agreements, and our product candidates subject to collaborative arrangements
may never be successfully developed or commercialized.

 Further, our future collaborators may develop
alternative products or pursue alternative technologies either on their own or in collaboration with others, including our competitors,
and the priorities or focus of our collaborators may shift such that our programs receive less attention or fewer resources than we would
like, or they may be terminated altogether. Any such actions by our collaborators may adversely affect our business prospects and ability
to earn revenues. In addition, we could have disputes with our future collaborators, such as the interpretation of terms in our agreements.
Any such disagreements could lead to delays in the development or commercialization of any potential products or could result in time-consuming
and expensive litigation or arbitration, which may not be resolved in our favor.

 We may face particular data protection,
data security and privacy risks in connection with the European Union's Global Data Protection Regulation and other privacy regulations.

 Outside of the United States, the laws, regulations
and standards in many jurisdictions apply broadly to the collection, use, and other processing of personal information. For example, in
the European Union, the collection and use of personal data are governed by the provisions of the General Data Protection Regulation (the
"GDPR"). The GDPR, together with national legislation, regulations and guidelines of the European Union. member states governing
the processing of personal data, impose strict obligations on entities subject to the GDPR, including but not limited to: (i) accountability
and transparency requirements, and enhanced requirements for obtaining valid consent from data subjects; (ii) obligations to consider
data protection as any new products or services are developed and to limit the amount of personal data processed; (iii) obligations to
comply with the data protection rights of data subjects; and (iv) obligations to report certain personal data breaches to governmental
authorities and individuals. Data protection authorities from the different E.U. member states and other European countries may enforce
the GDPR and national data protection laws differently, and introduce additional national regulations and guidelines, which adds to the
complexity of processing European personal data. Failure to comply with the requirements of the GDPR and the related national data protection
laws may result in significant monetary fines and other administrative penalties (the GDPR authorizes fines for certain violations of
up to 4% of global annual revenue or 20 million, whichever is greater) as well as civil liability claims from individuals whose
personal data was processed. Additionally, expenses associated with compliance could reduce our operating margins.

 The GDPR also prohibits the transfer of personal
data from the E.U. to countries outside of the E.U. unless made to a country deemed by the European Commission to provide adequate protection
for personal data or accomplished by means of an approved data transfer mechanism (e.g., standard contractual clauses). Data protection
authority guidance and enforcement actions that restrict companies' ability to transfer data may increase risk relating to data
transfers or make it more difficult or impossible to transfer E.U. personal data to the U.S.

 Any failure to maintain the security of
information relating to our patients, customers, employees and suppliers, whether as a result of cybersecurity attacks or otherwise, could
expose us to litigation, government enforcement actions and costly response measures, and could disrupt our operations and harm our reputation.

 Significant disruptions to our information technology
systems or breaches of information security could adversely affect our business. In connection with the pre-clinical and clinical development,
sales and marketing of our products and services, we may from time to time transmit confidential information. We also have access to,
collect or maintain private or confidential information regarding our clinical trials and the patients enrolled therein, employees, and
suppliers, as well as our business. Although we have instituted security measures, there can be no assurance that these security measures
will be able to protect against cyberattacks. Cyberattacks are rapidly evolving and becoming increasingly sophisticated. It is possible
that computer hackers and others might compromise our security measures, or security measures of those parties that we do business with
now or in the future, and obtain the personal information of patients in our clinical trials, vendors, employees and suppliers or our
business information. A security breach of any kind, including physical or electronic break-ins, computer viruses and attacks by hackers,
employees or others, could expose us to risks of data loss, litigation, government enforcement actions, regulatory penalties and costly
response measures, and could seriously disrupt our operations. Any resulting negative publicity could significantly harm our reputation,
which could cause us to lose market share and have an adverse effect on our results of operations.

 We rely extensively on our information technology
systems, and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks.

 We rely on our information technology systems
and infrastructure to process transactions, summarize results and manage our business, including maintaining client and supplier information.
In the ordinary course of business, we collect, store and transmit large amounts of confidential information, and it is critical that
we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. Additionally, we utilize third
parties, including cloud providers, to store, transfer and process data. Our information technology systems, as well as the systems of
our suppliers and other partners, whose systems we do not control, are vulnerable to outages and an increasing risk of continually evolving
deliberate intrusions to gain access to company sensitive information. The size and complexity of our information technology systems,
and those of our third-party vendors with whom we contract, make such systems potentially vulnerable to service interruptions and security
breaches from inadvertent or intentional actions by our employees, partners or vendors, from attacks by malicious third parties, or from
intentional or accidental physical damage to our systems infrastructure maintained by us or by third parties. Data security incidents
and breaches by employees and others with or without permitted access to our systems pose a risk that sensitive data may be exposed to
unauthorized persons or to the public. Maintaining the secrecy of this confidential, proprietary, or trade secret information is important
to our competitive business position. While we have taken steps to protect such information and invested in information technology, there
can be no assurance that our efforts will prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent
wrongful use or disclosure of confidential information that could adversely affect our business operations or result in the loss, dissemination,
or misuse of critical or sensitive information. A cyber-attack or other significant disruption involving our information technology systems,
or those of our vendors, suppliers and other partners, could also result in disruptions in critical systems, corruption or loss of data
and theft of data, funds or intellectual property. A breach of our security measures or the accidental loss, inadvertent disclosure, unapproved
dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result
of theft, hacking, fraud, trickery or other forms of deception, or for any other reason, could enable others to produce competing products,
use our proprietary technology or information, or adversely affect our business or financial condition. We may be unable to prevent outages
or security breaches in our systems. We remain potentially vulnerable to additional known or yet unknown threats as, in some instances,
we, our suppliers and our other partners may be unaware of an incident or its magnitude and effects. We also face the risk that we expose
our vendors or partners to cybersecurity attacks. Any or all of the foregoing could adversely affect our results of operations and our
business reputation.

 Our internal computer systems, or those
used by our CROs or other contractors or consultants, may fail or suffer security breaches.

 Despite the implementation of security measures,
our internal computer systems and those of our future CROs and other contractors and consultants are vulnerable to damage from computer
viruses and unauthorized access. While we have not experienced any such material system failure or security breach to date, if such an
event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and
our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays
in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Since we rely on third parties
for research and development of AD04 and expect do so for future product candidates and for the manufacture of product candidates and
to conduct clinical trials, similar events relating to their computer systems could also have a material adverse effect on our business.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate
disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of product
candidates could be delayed.

 We have limited protection for our intellectual
property. Our licensed patents and proprietary rights may not prevent us from infringing on the rights of others or prohibit potential
competitors from commercializing products.

 We intend to rely on a combination of common law
copyright, patent, trademark, and trade secret laws and measures to protect our proprietary information. We have licensed patents to protect
certain of our proprietary intellectual property and have obtained exclusive rights to license certain of the technology for which patent
protection has been obtained; however, such protection does not prevent unauthorized use of such technology. Trademark and copyright protections
may be limited, and enforcement could be too costly to be effective. It may also be possible for unauthorized third parties to copy aspects
of, or otherwise obtain and use, our proprietary information without authorization, including, but not limited to, product design, software,
customer and prospective customer lists, trade secrets, copyrights, patents and other proprietary rights and materials. Other parties
can use and register confusingly similar business, product and service names, as well as domain names, which could divert customers, resulting
in a material adverse effect on our business, operating results and financial condition.

 We have not conducted an exhaustive patent search
and cannot assure you that patents do not exist or could not be filed that would negatively affect our ability to market our products
or maintain our competitive position with respect to our products. Additionally, our licensed patents may not prevent others from developing
competitive products using related technology. Furthermore, other companies that obtain patents claiming products or processes useful
to us may bring infringement actions against us. As a result, we may be required to obtain licenses from others to develop, manufacture
or market our products. We cannot assure you that we will be able to obtain any such licenses on commercially reasonable terms, if at
all.

 We also rely on trade secrets and proprietary
know-how that we seek to protect, in part, by confidentiality agreements with our employees, consultants, suppliers, and licensees. We
cannot give any assurance that these third parties will not breach these agreements, that we would have adequate remedies for any breach,
or that our trade secrets will not otherwise become known or be independently developed by competitors.

 We cannot assure you that the U.S. Patent and
Trademark Office ("USPTO") will approve pending patent applications for intellectual property for which we are currently the
exclusive worldwide licensee, or that any patent issued to, or licensed by, us will provide protection that has commercial significance.
In this regard, the patent position of pharmaceutical compounds and compositions is particularly uncertain. Even issued patents may later
be modified or revoked by the USPTO in proceedings instituted by others or by us. In addition, we cannot assure you that our licensed
patents will afford protection against competitors with similar compounds or technologies, that others will not obtain patents with claims
similar to those covered by our licensed patents or applications, or that the patents of others will not adversely affect our ability
to conduct our business.

 Despite licensing patents issued in more than
40 jurisdictions around the world, continuing to achieve additional foreign patent issuances and maintaining and defending foreign patents
may be more difficult than defending domestic patents because of differences in patent laws, and our licensed patent position therefore
may be stronger in the United States than abroad. In addition, the protection provided by foreign patents, once they are obtained, may
be weaker than that provided in the United States.

 If we fail to successfully enforce our intellectual
property rights, our competitive position could suffer, which could harm our operating results. Competitors may challenge the validity
or scope of our licensed patents or future patents we may obtain or license. In addition, our licensed patents may not provide us with
a meaningful competitive advantage. We may be required to spend significant resources to monitor and police our licensed intellectual
property rights. We may not be able to detect infringement and our competitive position may be harmed. In addition, competitors may design
around our technology or develop competing technologies. Intellectual property rights may also be unavailable or limited in some foreign
countries, which could make it easier for competitors to capture market share.

 The technology we license, our products
or our development efforts may be found to infringe upon third-party intellectual property rights.

 Our commercial success depends in part on us avoiding
infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation involving patents and
other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging
patents, including interference and reexamination proceedings before the USPTO, or oppositions and other comparable proceedings in other
jurisdictions. Recently, under the American Invents Act ("AIA"), new procedures including inter parties review and
post grant review have been implemented. These procedures are relatively new and the manner in which they are being implemented continues
to evolve, which brings additional uncertainty to our licensed patents and pending applications. Numerous U.S. and foreign issued patents
and pending patent applications, which are owned by third parties, exist in the fields in which we are developing product candidates.
As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates
may give rise to claims of infringement of the patent rights of others.

 Third parties may, in the future, assert claims
or initiate litigation related to their patent, copyright, trademark and other intellectual property rights in technology that is important
to us. The asserted claims and/or litigation could include claims against us, our licensors or our suppliers alleging infringement of
intellectual property rights with respect to our products or components of those products. Regardless of the merit of the claims, they
could be time consuming, result in costly litigation and diversion of technical and management personnel, or require us to develop a non-infringing
technology or enter into license agreements. We have not undertaken an exhaustive search to discover any third party intellectual patent
rights which might be infringed by commercialization of the product candidates described herein. Although we are not currently aware of
any such third party intellectual patent rights, it is possible that such rights currently exist or might be obtained in the future. In
the event that a third party controls such rights and we are unable to obtain a license to such rights on commercially reasonable terms,
we may not be able to sell or continue to develop our products, and may be liable for damages for such infringement. We cannot assure
you that licenses will be available on acceptable terms, if at all. Furthermore, because of the potential for significant damage awards,
which are not necessarily predictable, it is not unusual to find even arguably unmeritorious claims resulting in large settlements. If
any infringement or other intellectual property claim made against us by any third party is successful, or if we fail to develop non-infringing
technology or license the proprietary rights on commercially reasonable terms and conditions, our business, operating results and financial
condition could be materially adversely affected.

 If our products, methods, processes and other
technologies infringe the proprietary rights of other parties, we could incur substantial costs and we may have to:

 obtain licenses, which may not be available on commercially reasonable terms, if at all;

 abandon an infringing drug or therapy candidate;

 redesign our products or processes to avoid infringement;

 stop using the subject matter claimed in the patents held by others;

 pay damages; or

 defend litigation or administrative proceedings which may be costly whether we win or lose, and which could result in a substantial diversion of our financial and management resources.

 Parties making claims against us may seek and
obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize product candidates.
Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion
of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial
damages, including treble damages and attorneys' fees for willful infringement, obtain one or more licenses from third parties,
pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. We cannot
predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore,
even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization
of product candidates. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event,
we would be unable to further develop and commercialize product candidates, which could harm our business significantly.

 We may be involved in lawsuits to protect
or enforce the patents of our licensors, which could be expensive, time-consuming and unsuccessful.

 Competitors may infringe the patents of our licensors.
To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming.
In addition, in an infringement proceeding, a court may decide that one or more of our licensed patents is not valid or is unenforceable,
or may refuse to stop the other party from using the technology at issue on the grounds that our licensed patents do not cover the technology
in question. An adverse result in any litigation or defense proceedings could put one or more of our licensed patents at risk of being
invalidated, held unenforceable, or interpreted narrowly and could put our licensed patent applications at risk of not issuing. Defense
of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee
resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including
treble damages and attorneys' fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign
our infringing products, which may be impossible or require substantial time and monetary expenditure.

 Interference proceedings provoked by third parties
or brought by the USPTO may be necessary to determine the priority of inventions with respect to some of our licensed patents or patent
applications subject to pre-AIA or those of our licensors. An unfavorable outcome could result in a loss of our current licensed patent
rights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our
business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation or interference
proceedings may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and distract
our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our trade secrets
or confidential information, particularly in countries where the laws may not protect those rights as fully as in the United States.

 A derivation proceeding is a trial proceeding
conducted at the Patent Trial and Appeal Board to determine whether (i) an inventor named in an earlier application derived the claimed
invention from an inventor named in the petitioner's application; and (ii) the earlier application claiming such invention was
filed without authorization. An applicant subject to the first-inventor-to-file provisions may file a petition to institute a derivation
proceeding only within one year of the first publication of a claim to an invention that is the same or substantially the same as the
earlier application's claim to the invention. The petition must be supported by substantial evidence that the claimed invention
was derived from an inventor named in the petitioner's application. Derivation proceedings may result in a decision adverse to
our interests and, even if we are successful, may result in substantial costs and distract our management and other employees.

 Furthermore, because of the substantial amount
of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could
be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings,
motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could
have a substantial adverse effect on the price of our shares of common stock.

 Obtaining and maintaining patent protection
depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent
agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

 Periodic maintenance fees on any issued patent
are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign
governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during
the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance
with the applicable rules, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application,
resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment
or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time
limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able
to enter the market, which would have a material adverse effect on our business.

 Patents are subject to changing legal interpretation
by the USPTO and the Courts.

 If the U.S. Supreme Court, other federal courts,
or the USPTO were to change the standards of patentability such changes could have a negative impact on our business. Recent court cases
have made it more difficult to protect certain types of inventions. For instance, on October 30, 2008, the Court of Appeals for the Federal
Circuit issued a decision that methods or processes cannot be patented unless they are tied to a machine or involve a physical transformation.
On March 20, 2012, in the case Mayo v. Prometheus, the U.S. Supreme Court invalidated a patent focused on a diagnostic process
because the patent claim embodied a law of nature. On July 3, 2012, the USPTO issued its Interim Guidelines for Subject Matter Eligibility
Analysis of Process Claims Involving Laws of Nature in view of the Prometheus decision. It remains to be seen how these guidelines
will play out in the actual prosecution of diagnostic claims. Similarly, it remains to be seen how lower courts will interpret the Prometheus
decision. Some aspects of our technology involve processes that may be subject to this evolving standard and we cannot guarantee that
any of our pending process claims will be patentable as a result of such evolving standards.

 We may be subject to claims that our employees,
consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.

 We have received confidential and proprietary
information from third parties. In addition, we employ individuals who were previously employed at other biotechnology or pharmaceutical
companies. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise
used or disclosed confidential information of these third parties or our employees' former employers. Litigation may be necessary
to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial cost
and be a distraction to our management and employees.

 Our ability to generate product revenues
will be diminished if our products sell for inadequate prices or patients are unable to obtain adequate levels of reimbursement.

 Our ability to commercialize our products, alone
or with collaborators, will depend in part on the extent to which reimbursement will be available from:

 government and health administration authorities;

 private health maintenance organizations and health insurers; and

 other healthcare payers.

 Patients generally expect that products such as
ours are covered and reimbursed by third-party payors for all or part of the costs and fees associated with their use. If such products
are not covered and reimbursed then patients may be responsible for the entire cost of the product, which can be substantial. Therefore,
health care providers generally do not prescribe products that are not covered and reimbursed by third-party payors in order to avoid
subjecting their patients to such financial liability. The existence of adequate coverage and reimbursement for the products by government
and private insurance plans is central to the acceptance of AD04 and any future products we provide.

 During the past several years, third-party payors
have undertaken cost-containment initiatives including different payment methods, monitoring health care expenditures, and anti-fraud
initiatives. For some governmental programs, such as Medicaid, coverage and reimbursement differ from state to state, and some state Medicaid
programs may not pay an adequate amount for AD04 or any of our other products or may make no payment at all. Furthermore, the health care
industry in the United States has experienced a trend toward cost containment as government and private insurers seek to control health
care costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Therefore, we cannot be certain
that our services will be reimbursed at a level that is sufficient to meet our costs.

 Obtaining coverage and reimbursement approval
of a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide to the
payor supporting scientific, clinical and cost-effectiveness data for the use of our products. Even if we obtain coverage for a given
product, the resulting reimbursement payment rates might not be adequate for us to achieve or sustain profitability or may require co-payments
that patients find unacceptably high. Patients are unlikely to use AD04 or any future product candidates unless coverage is provided and
reimbursement is adequate to cover a significant portion of the cost of AD04 or any future product candidates.

 We intend to seek approval to market AD04 and
future product candidates in both the United States and in selected foreign jurisdictions. If we obtain approval in one or more foreign
jurisdictions for AD04 or any future product candidates, we will be subject to rules and regulations in those jurisdictions. In some foreign
countries, particularly those in the European Union, the pricing of drugs is subject to governmental control. In these countries, pricing
negotiations with governmental authorities can take considerable time after obtaining marketing approval of a product candidate. In addition,
market acceptance and sales of product candidates will depend significantly on the availability of adequate coverage and reimbursement
from third-party payors for product candidates and may be affected by existing and future health care reform measures.

 Third-party payors, whether domestic or foreign,
or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In both the United States
and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could
impact our ability to sell our products profitably. In particular, in 2010, the Patient Protection and Affordable Care Act, as amended
by the Health Care and Education Affordability Reconciliation Act (collectively, the "Healthcare Reform Act"), was enacted.
The Healthcare Reform Act and its implementing regulations, among other things, revised the methodology by which rebates owed by manufacturers
to the state and federal government for covered outpatient drugs, including product candidates, under the Medicaid Drug Rebate Program
are calculated, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended the
Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected
manufacturers to new annual fees and taxes for certain branded prescription drugs, and provided incentives to programs that increase the
federal government's comparative effectiveness research.

 Other legislative changes have been proposed and
adopted in the United States since the Healthcare Reform Act was enacted. In August 2011, the Budget Control Act of 2011, among other
things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending
a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering
the legislation's automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to
providers up to 2% per fiscal year. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012 (the "ATRA")
which delayed for another two months the budget cuts mandated by these sequestration provisions of the Budget Control Act of 2011. In
March 2013, the President signed an executive order implementing sequestration, and in April 2013, the 2% Medicare payment reductions
went into effect. The ATRA also, among other things, reduced Medicare payments to several providers, including hospitals, imaging centers
and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers
from three to five years.

 There have been, and likely will continue to be,
legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and
containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future, particularly in light
of the new presidential administration in the United States, and any proposed changes to healthcare laws that could potentially affect
our clinical development or regulatory strategy. The continuing efforts of the government, insurance companies, managed care organizations
and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:

 the demand for AD04, or future product candidates, if we obtain regulatory approval;

 our ability to set a price that we believe is fair for our products;

 our ability to generate revenue and achieve or maintain profitability;

 the level of taxes that we are required to pay; and

 the availability of capital.

 Any reduction in reimbursement from Medicare,
Medicaid or other government programs may result in a similar reduction in payments from private payors, which may adversely affect our
future profitability.

 If we are unable to obtain adequate coverage
and reimbursement for our tests, it is unlikely that our tests will gain widespread acceptance.

 Use of our product candidate will require pre-treatment
screening. Our strategy for AD04 aims to integrate pre-treatment screening into the drug label, effectively creating a patient-specific
or "precision" treatment into one integrated therapeutic offering. Our ability to generate revenue will depend upon the availability
of adequate coverage and reimbursement for our tests from third-party payors, including government programs such as Medicare and Medicaid,
private insurance plans and managed care programs. Health care providers that order diagnostic services generally expect that those diagnostic
services are covered and reimbursed by third-party payors for all or part of the costs and fees associated with the diagnostic tests they
order. If such diagnostic tests are not covered and reimbursed then their patients may be responsible for the entire cost of the test,
which can be substantial. Therefore, health care providers generally do not order tests that are not covered and reimbursed by third-party
payors in order to avoid subjecting their patients to such financial liability. The existence of adequate coverage and reimbursement for
the procedures performed by us by government and private insurance plans is central to the acceptance of our product candidate. During
the past several years, third-party payors have undertaken cost-containment initiatives including different payment methods, monitoring
health care expenditures, and anti-fraud initiatives. In addition, the Centers for Medicare & Medicaid Services, or CMS, which administers
the Medicare program, has taken the position that the algorithm portion of multi-analyst algorithmic assays, or MAAAs, is not a clinical
laboratory test and is therefore not reimbursable under the Medicare program. Although this position is only applicable to tests with
a CMS determined national payment amount, it is possible that the local MACs, who make coverage and payment determinations for tests such
as ours may adopt this policy and reduce payment for such test. If that were to happen, reimbursement for our pre-screening tests would
be uncertain. We may not be able to achieve or maintain profitability if third-party payors deny coverage or reduce their current levels
of payment, or if our costs of production increase faster than increases in reimbursement levels. Further, many private payors use coverage
decisions and payment amounts determined by CMS as guidelines in setting their coverage and reimbursement policies. Future action by CMS
or other government agencies may diminish payments to clinical laboratories, physicians, outpatient centers and/or hospitals. Those private
payors that do not follow the Medicare guidelines may adopt different coverage and reimbursement policies for us and coverage and the
amount of reimbursement under those polices is uncertain. For some governmental programs, such as Medicaid, coverage and reimbursement
differ from state to state, and some state Medicaid programs may not pay an adequate amount for MyPRS or may make no payment
at all. As the portion of the U.S. population over the age of 65 and eligible for Medicare continues to grow, we may be more vulnerable
to coverage and reimbursement limitations imposed by CMS. Furthermore, the health care industry in the United States has experienced a
general trend toward cost containment as government and private insurers seek to control health care costs through various mechanisms,
including imposing limitations on payment rates and negotiating reduced contract rates with service providers, among other things. Therefore,
we cannot be certain that our services will be reimbursed at a level that is sufficient to meet our costs.

 A variety of risks associated with marketing
AD04 or any future product candidates internationally could materially adversely affect our business.

 We plan to seek regulatory approval of AD04 and
any future product candidates outside of the United States, in particular in European markets, and, accordingly, we expect that we will
be subject to additional risks related to operating in foreign countries if we obtain the necessary approvals, including:

 differing regulatory and reimbursement requirements in foreign countries;

 unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;

 economic weakness, including inflation, or political instability in particular foreign economies and markets;

 compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

 foreign taxes, including withholding of payroll taxes;

 foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;

 compliance with U.S. and foreign export control regulations, including economic sanctions and embargo programs, each of which may be subject to unexpected changes;

 difficulties staffing and managing foreign operations;

 workforce uncertainty in countries where labor unrest is more common than in the United States;

 potential liability under the FCPA or comparable foreign regulations;

 challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;

 production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;

 business interruptions resulting from geo-political actions, including war and terrorism; and

 potential difficulties that may arise with pharmaceutical company partners under license or other agreement to jointly develop, seek regulatory approval, and commercialize our products.

 These and other risks associated with our international
operations may materially adversely affect our ability to attain or maintain profitable operations.

 We may not successfully effect our intended
expansion.

 Our success will depend upon the expansion of
our operations and the effective management of our growth, which will place a significant strain on our management and on our administrative,
operational and financial resources. To manage this growth, we must expand our facilities, augment our operational, financial and management
systems and hire additional qualified personnel. As our clinical, regulatory, and business planning is finalized, we may need to hire
additional qualified personnel with expertise in preclinical and clinical research, government regulation, formulation and manufacturing,
sales and marketing and accounting and financing. We compete for qualified individuals with numerous biopharmaceutical companies, universities
and other research institutions. Competition for such individuals is intense, and we cannot be certain that our search for such personnel
will be successful. Attracting and retaining qualified personnel will be critical to our success. If we are unable to manage our growth
effectively, our business would be harmed.

 We rely on key executive officers and scientific,
regulatory and medical advisors, and their knowledge of our business and technical expertise would be difficult to replace.

 Because of the specialized nature of our business,
our ability to maintain a competitive position depends on our ability to attract and retain qualified management and other personnel.
We cannot assure you that we will be able to continue to attract or retain such persons.

 We are highly dependent on our principal scientific,
regulatory and medical advisors and our chief executive officer. We do not have an insurance policy on the life of our chief executive
officer, Cary J. Claiborne; and we do not have "key person" life insurance policies for any of our other officers or advisors.
The loss of the technical knowledge and management and industry expertise of any of our key personnel could result in delays in product
development, loss of customers and sales and diversion of management resources, which could adversely affect our operating results.

 Declining general economic or business conditions
and changes to trade policy, including tariff and customs regulations, may have a negative impact on our business.

 Continuing concerns over U.S. health care reform
legislation and energy costs, geopolitical issues, including those in Eastern Europe, the availability and cost of credit and government
stimulus programs in the United States and other countries have contributed to increased volatility and diminished expectations for the
global economy. These factors, combined with low business and consumer confidence and high unemployment, precipitated an economic slowdown
and recession and stagnant economy for more than a decade. Additionally, political changes in the U.S. and elsewhere in the world have
created a level of uncertainty in the markets. If the economic climate does not improve or deteriorate, our business, as well as the financial
condition of our suppliers and our third-party payors, could be adversely affected, resulting in a negative impact on our business, financial
condition and results of operations.

 Changes in U.S. or international social, political,
regulatory and economic conditions or in laws and policies governing trade, manufacturing, development and investment in the countries
where we currently conduct our business could adversely affect our business, reputation, financial condition and results of operations.
Changes or proposed changes in U.S. or other countries' trade policies may result in restrictions and economic disincentives on
international trade. The U.S. government has recently imposed, or is currently considering imposing, tariffs on certain trade partners.
Tariffs, economic sanctions and other changes in U.S. trade policy have in the past and could in the future trigger retaliatory actions
by affected countries, and certain foreign governments have instituted or are considering imposing retaliatory measures on certain U.S.
goods. Further, any emerging protectionist or nationalist trends (whether regulatory- or consumer-driven) either in the United States
or in other countries could affect the trade environment. Our business, like many other corporations, would be impacted by changes to
the trade policies of the United States and foreign countries (including governmental action related to tariffs, international trade agreements,
or economic sanctions). Such changes have the potential to adversely impact the U.S. economy or certain sectors thereof, the global economy,
and our industry, and as a result, could have a material adverse effect on our business, financial condition and results of operations.

 In addition, the global macroeconomic environment
could be negatively affected by, among other things, COVID-19 or other pandemics or epidemics, instability in global economic markets,
instability in the global credit markets, supply chain weaknesses, instability in the geopolitical environment as a result of the withdrawal
of the United Kingdom from the European Union, the Russian invasion of Ukraine, the war in the Middle East and other political tensions,
and foreign governmental debt concerns. Such challenges have caused, and may continue to cause, uncertainty and instability in local economies
and in global financial markets.

 Health care policy changes, including legislation
reforming the U.S. health care system and other legislative initiatives, may have a material adverse effect on our financial condition,
results of operations and cash flows.

 Government payors, such as Medicare and Medicaid,
have taken steps and can be expected to continue to take steps to control the cost, utilization and delivery of health care services,
including clinical laboratory test services.

 In March 2010, U.S. President Barack Obama signed
the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA,
which made a number of substantial changes in the way health care is financed by both governmental and private insurers. It is unclear
what, if any, changes the new administration will make to the health care system. We cannot predict whether future health care initiatives
will be implemented at the federal or state level, or how any future legislation or regulation may affect us.

 Risks Related to Our Securities and Investing
in 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.

 Initially, the aggregate number of shares of our
common stock that might be issued pursuant to stock awards under our 2017 equity incentive plan was 70,000 shares, which has been since
increased to 2,000,000 at our 2024 Annual Stockholders Meeting, and of which 1,098,165 remain available for grant as of the date hereof.
Increases in the number of shares available for future grant or purchase may result in additional dilution, which could cause our stock
price to decline.

 At December 31, 2024, we had outstanding (i) warrants
to purchase 4,201,568 shares of common stock outstanding at exercise prices ranging from $0.13 to $190.86 (with a weighted average exercise
price of $8.45), and (ii) options to purchase 733,971 shares of common stock at a weighted average exercise price of $9.76 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.

 At the date of this filing, we had outstanding
(i) warrants to purchase 4,201,568 shares of common stock outstanding at exercise prices ranging from $0.13 to $190.86 (with a weighted
average exercise price of $8.45), and (ii) options to purchase 763,971 shares of common stock at a weighted average exercise price of
$9.40 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.

 We have additional securities available
for issuance, which, if issued, could adversely affect the rights of the holders of our common stock.

 Our Certificate of Incorporation authorizes the
issuance of 50,000,000 shares of common stock and 5,000,000 shares of preferred stock. The common stock and preferred stock, as well as
the awards available for issuance under our 2017 equity incentive plan, can be issued by our board of directors, without stockholder approval.
Any future issuances of such stock would further dilute the percentage ownership in us held by holders of our common stock and may be
issued at prices below the initial price offering. In addition, the issuance of preferred stock may be used as an "anti-takeover"
device without further action on the part of our stockholders, and may adversely affect the holders of the common stock.

 If we issue preferred stock with superior
rights than our common stock, it could result in a decrease in the value of our common stock and delay or prevent a change in control
of us.

 Our board of directors is authorized to issue
5,000,000 shares of preferred stock in series. The issuance of any preferred stock having rights superior to those of the common stock
may result in a decrease in the value or market price of our common stock. Holders of preferred stock may have the right to receive dividends,
certain preferences in liquidation and conversion rights and rights to elect directors. The issuance of preferred stock could, under certain
circumstances, have the effect of delaying, deferring or preventing a change in control of us without further vote or action by the stockholders
and may adversely affect the voting and other rights of the holders of our common stock.

 We have never paid dividends and have no
plans to pay dividends in the future.

 Holders of our common stock are entitled to receive
such dividends as may be declared by our board of directors. To date, we have paid no cash dividends on our preferred or common stock
and we do not expect to pay cash dividends in the foreseeable future. We intend to retain future earnings, if any, to provide funds for
operations of our business. Therefore, any return investors in our preferred or common stock may have will be in the form of appreciation,
if any, in the market value of their common stock.

 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
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 the Company's 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 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 stating that it had determined that for 10 consecutive business days, from August 7, 2023 to August 18, 2023, the closing bid
price of our common stock was at $1.00 per share or greater. Accordingly, the Staff determined that we regained compliance with Nasdaq
Listing Rule 5550(a)(2) and that the matter is now 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 the Company's 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 the Company 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.

 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 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.

 We are a "smaller reporting company,"
and we cannot be certain if the reduced SEC reporting requirements applicable to smaller reporting companies will make our common stock
less attractive to investors.

 We are a "smaller reporting company",
as defined in Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among
other things, providing only two years of audited financial statements. We will cease to be a smaller reporting company if we have (i)
more than $700 million in market value of our shares held by non-affiliates as of the last business day of our most recently completed
second fiscal quarter or (ii) more than $100 million of annual revenues in our most recent fiscal year completed before the last business
day of our second fiscal quarter and a market value of our shares held by non-affiliates more than $250 million as of the last business
day of our second fiscal quarter.

 We intend to take advantage of exemptions from
various reporting requirements that are applicable to most other public companies, whether or not they are classified as "emerging
growth companies," including, but not limited to, an exemption from the provisions of Section 404(b) of Sarbanes-Oxley requiring
that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over
financial reporting. An attestation report by our auditor would require additional procedures by them that could detect problems with
our internal control over financial reporting that are not detected by management. If our system of internal control over financial reporting
is not determined to be appropriately designed or operating effectively, it could require us to restate financial statements, cause us
to fail to meet reporting obligations, and cause investors to lose confidence in our reported financial information. The JOBS Act also
provides that an "emerging growth company" can take advantage of the extended transition period provided in the Securities
Act, for complying with new or revised accounting standards. However, we have chosen to "opt out" of this extended transition
period and, as a result, we will comply with new or revised accounting standards on or prior to the relevant dates on which adoption of
such standards is required for all public companies that are not emerging growth companies. Our decision to opt out of the extended transition
period for complying with new or revised accounting standards is irrevocable. We cannot predict if investors will find our common stock
less attractive because we have relied, and intend to rely on, certain of these exemptions and benefits.

 As a result of being a public company, we
are subject to additional reporting and corporate governance requirements that will require additional management time, resources and
expense.

 As a public company, and particularly since we
are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private
company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The Nasdaq
Capital Market and other applicable securities rules and regulations impose various requirements on public companies, including the obligation
to file with the SEC annual and quarterly information and other reports that are specified in the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and to establish and maintain effective disclosure and financial controls and corporate governance
practices. Our management and other personnel need to devote a substantial amount of time to these compliance initiatives. Moreover, these
rules and regulations increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

 We cannot predict or estimate the amount of additional
costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases
due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by
regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated
by ongoing revisions to disclosure and governance practices.

 Our common stock has often been thinly traded,
so you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate
your shares.

 To date, there have been many days on which limited
trading of our common stock took place. We cannot predict the extent to which investors' interests will lead to an active trading
market for our common stock or whether the market price of our common stock will be volatile. If an active trading market does not develop,
investors may have difficulty selling any of our common stock that they buy. We are likely to be too small to attract the interest of
many brokerage firms and analysts. We cannot give you any assurance that an active public trading market for our common stock will develop
or be sustained. The market price of our common stock could be subject to wide fluctuations in response to quarterly variations in our
revenues and operating expenses, announcements of new products or services by us, significant sales of our common stock, including "short"
sales, the operating and stock price performance of other companies that investors may deem comparable to us, and news reports relating
to trends in our markets or general economic conditions.

 Our stock price has fluctuated in the past,
has recently been volatile and may be volatile in the future, and as a result, investors in our common stock could incur substantial losses.

 The trading price of our common stock has been
and is expected to continue to be volatile and has been and may continue to be subject to wide fluctuations in response to various factors,
some of which are beyond our control, including limited trading volume. On February 28, 2025, the reported low sale price of our common
stock was $0.75, the reported high sale price was $0.80 and closing price of our common stock was $0.79 while on December 31,2024 the
closing price of our common stock was $0.78. We may incur rapid and substantial decreases in our stock price in the foreseeable future
that are unrelated to our operating performance for prospects. In addition to the factors discussed in this "Risk Factors"
section and elsewhere in this Annual Report, these factors include:

 the commencement, enrollment or any future clinical trials we may conduct, or changes in the development status of AD04 or any product candidates;

 any delay in our regulatory filings for our product candidate and any adverse development or perceived adverse development with respect to the applicable regulatory authority's review of such filings, including without limitation the FDA's issuance of a "refusal to file" letter or a request for additional information;

 adverse results or delays in clinical trials;

 our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;

 adverse regulatory decisions, including failure to receive regulatory approval of our product candidate;

 changes in laws or regulations applicable to our products, including but not limited to clinical trial requirements for approvals;

 adverse developments concerning our manufacturers;

 our inability to obtain adequate product supply for any approved product or inability to do so at acceptable prices;

 our inability to establish collaborations if needed;

 our failure to commercialize AD04;

 additions or departures of key scientific or management personnel;

 unanticipated serious safety concerns related to the use of AD04;

 introduction of new products or services offered by us or our competitors;

 announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;

 our ability to effectively manage our growth;

 the size and growth of our initial target markets;

 our ability to successfully treat additional types of indications or at different stages;

 actual or anticipated variations in quarterly operating results;

 our cash position;

 our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;

 publication of research reports about us or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts;

 changes in the market valuations of similar companies;

 overall performance of the equity markets;

 sales of our common stock by us or our stockholders in the future;

 trading volume of our common stock and declines in the market prices of stocks generally;

 changes in accounting practices;

 ineffectiveness of our internal controls;

 disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our or our licensee's technologies;

 significant lawsuits, including patent or stockholder litigation;

 general political and economic conditions; and

 other events or factors, many of which are beyond our control, including those resulting from such events, or the prospect of such events, including war, terrorism and other international conflicts, including the conflict in Eastern Europe, public health issues including health epidemics or pandemics, such as the recent outbreak of the novel coronavirus (COVID-19), and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our suppliers or result in political or economic instability.

 In addition, the stock market in general, and
The Nasdaq Capital Market and biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively
affect the market price of our common stock, regardless of our actual operating performance. Since the stock price of our common stock
has fluctuated in the past, has recently been volatile and may be volatile in the future, investors in our common stock could incur substantial
losses. In the past, securities class action litigation has often been instituted against companies following periods of volatility in
the market price of a company's securities. This type of litigation, if instituted, could result in substantial costs and a diversion
of management's attention and resources, which would harm our business, operating results or financial condition.

 Our need for future financing may result
in the issuance of additional securities which will cause investors to experience dilution.

 Our cash requirements may vary from those now
planned depending upon numerous factors, including the result of future research and development activities. We will require additional
funds in the future to complete our clinical trials of AD04. There are no other commitments by any person for future financing. In addition,
the issuance of securities in any future financing using our securities may dilute an investor's equity ownership. Moreover, we
may issue derivative securities, including options and/or warrants, from time to time, to procure qualified personnel or for other business
reasons. The issuance of any such derivative securities, which is at the discretion of our board of directors, may further dilute the
equity ownership of our stockholders. No assurance can be given as to our ability to procure additional financing, if required, and on
terms deemed favorable to us. To the extent additional capital is required and cannot be raised successfully, we may then have to limit
our then current operations and/or may have to curtail certain, if not all, of our business objectives and plans.

 The application of the "penny stock"
rules to our common stock could limit the trading and liquidity of the common stock, adversely affect the market price of our common stock
and increase your transaction costs to sell those shares.

 If our common stock is no longer listed on The
Nasdaq Capital Market and becomes traded on a securities market or exchange which is not registered as a national securities exchange
with the SEC under Section 6 of the Exchange Act, as long as the trading price of our common stock is below $5 per share, the open-market
trading of our common stock will be subject to the "penny stock" rules, unless we otherwise qualify for an exemption from
the "penny stock" definition. The "penny stock" rules impose additional sales practice requirements on certain
broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with assets in
excess of $1.0 million or annual income exceeding $200,000 or $300,000 together with their spouse). These regulations, if they apply,
require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and
the associated risks. Under these regulations, certain brokers who recommend such securities to persons other than established customers
or certain accredited investors must make a special written suitability determination regarding such a purchaser and receive such purchaser's
written agreement to a transaction prior to sale. These regulations may have the effect of limiting the trading activity of our common
stock, reducing the liquidity of an investment in our common stock and increasing the transaction costs for sales and purchases of our
common stock as compared to other securities. The stock market in general and the market prices for penny stock companies in particular,
have experienced volatility that often has been unrelated to the operating performance of such companies. These broad market and industry
fluctuations may adversely affect the price of our stock, regardless of our operating performance. Stockholders should be aware that,
according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include: (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or
issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii)
boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive
and undisclosed bid-ask differential and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters
and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices
and with consequent investor losses. The occurrence of these patterns or practices could increase the volatility of our share price.

 Provisions in our corporate charter documents
and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent
attempts by our stockholders to replace or remove our current management.

 Provisions in our corporate charter and our bylaws
may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable,
including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that
investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock.
In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate
or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to
replace members of our board of directors. Among other things, these provisions:

 our board of directors is divided into three classes, one class of which is elected each year by our stockholders with the directors in each class to serve for a three-year term;

 the authorized number of directors can be changed only by resolution of our board of directors;

 directors may be removed only by the affirmative vote of the holders of at least sixty percent (60%) of our voting stock, whether for cause or without cause;

 our bylaws may be amended or repealed by our board of directors or by the affirmative vote of sixty-six and two-thirds percent (66 2/3%) of our stockholders;

 stockholders may not call special meetings of the stockholders or fill vacancies on the board of directors;

 our board of directors will be authorized to issue, without stockholder approval, preferred stock, the rights of which will be determined at the discretion of the board of directors and that, if issued, could operate as a "poison pill" to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that our board of directors does not approve;

 our stockholders do not have cumulative voting rights, and therefore our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors; and

 our stockholders must comply with advance notice provisions to bring business before or nominate directors for election at a stockholder meeting.

 Moreover, because we are incorporated in Delaware,
we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess
of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction
in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed
manner.

 Our Certificate of Incorporation and our
bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain types of state actions that
may be initiated by our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes
with us or our directors, officers, or employees.

 Our Certificate of Incorporation and our bylaws
provide that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the exclusive
forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary
duty owed by any of our directors, officers, or other employees to us or our stockholders, (iii) any action arising pursuant to any provision
of the DGCL or our certificate of incorporation or bylaws (as either may be amended from time to time), or (iv) any action asserting a
claim governed by the internal affairs doctrine. The exclusive forum provision does not apply to suits brought to enforce any liability
or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction
over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Furthermore,
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty
or liability created by the Securities Act or the rules and regulations thereunder.

 These exclusive-forum provisions may limit a stockholder's
ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, employees, control persons,
underwriters, or agents, which may discourage lawsuits against us and our directors, employees, control persons, underwriters, or agents.
Additionally, a court could determine that the exclusive forum provision is unenforceable, and our stockholders will not be deemed to
have waived our compliance with the federal securities laws and the rules and regulations thereunder. If a court were to find these provisions
of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur
additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition,
or results of operations.

 If securities or industry analysts do not
publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

 The trading market for our common stock will depend
in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts
do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company,
the trading price for our stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if
one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our
stock price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly,
demand for our stock could decrease, which might cause our stock price and trading volume to decline.

 The warrants that we have issued are speculative
in nature.

 The warrants that we have issued do not confer
any rights of common stock ownership on their holders except as otherwise provided in the warrants. Specifically, commencing on the date
of issuance, holders of the warrants may exercise their right to acquire the common stock and pay the exercise price to acquire the warrants.
There can be no assurance that the market value of the warrants will equal or exceed their public offering price. In the event our common
stock price does not exceed the exercise price of the warrants during the period when the warrants are exercisable, the warrants may not
have any value.

 Holders of the warrants will have no rights
as a common stockholder except as otherwise provided in the warrants until they acquire our common stock.

 Until holders of warrants acquire shares of our
common stock upon exercise of their warrants, they will have no rights with respect to shares of our common stock issuable upon exercise
of their warrant except as otherwise provided in the warrant. Upon exercise of a warrant, a holder will be entitled to exercise the rights
of a common stockholder as to the security exercised only as to matters for which the record date occurs after the exercise.

 There is no established market for the warrants.

 There is no established trading market for the
warrants. We have not applied for the listing of such warrants on any national securities exchange or other trading market. Without an
active trading market, the liquidity of the warrants will be limited.

 Item 1B. Unresolved Staff Comments.

 Not applicable.

 Item 1C. Cybersecurity

 We maintain a cyber risk management program designed
to identify, assess, manage, mitigate, and respond to cybersecurity threats.

 The underlying processes and controls of our cyber
risk management program incorporate recognized best practices and standards for cybersecurity and information technology, including the
National Institute of Standards and Technology ("NIST") Cybersecurity Framework ("CSF"). We have an annual assessment
performed by a third-party specialist of the Company's cyber risk management program against the NIST CSF. The annual risk assessment
identifies, quantifies, and categorizes material cyber risks. In addition, the Company, in conjunction with the third-party cyber risk
management specialists develop a risk mitigation plan to address such risks, and where necessary, remediate potential vulnerabilities
identified through the annual assessment process.

 In addition, we maintain policies over areas such
as information security, access on/offboarding, and access and account management, to help govern the processes put in place by management
designed to protect our IT assets, data, and services from threats and vulnerabilities. We partner with industry recognized cybersecurity
providers leveraging third-party technology and expertise. These cybersecurity partners, including consultants and other third-party service
providers, are a key part of Adial's cybersecurity risk management strategy and infrastructure and provide services including, maintenance
of an IT assets inventory, periodic vulnerability scanning, identity access management controls including restricted access of privileged
accounts, network integrity safeguarded by employing web-based software, including endpoint protection, endpoint detection and response,
and remote monitoring management on all devices, industry-standard encryption protocols, critical data backups, infrastructure maintenance,
incident response, cybersecurity strategy, and cyber risk advisory, assessment and remediation.

 Our management team, in conjunction with third-party
information technology ("IT") and cybersecurity service providers, is responsible for oversight and administration of our
cyber risk management program, and for informing senior management and other relevant stakeholders regarding the prevention, detection,
mitigation, and remediation of cybersecurity incidents. Adial's management team has prior experience selecting, deploying, and overseeing
cybersecurity technologies, initiatives, and processes directly or via selection of strategic third-party partners, and relies on threat
intelligence as well as other information obtained from governmental, public, or private sources, including external consultants engaged
by us for strategic cyber risk management, advisory and decision making. Our management team and key staff participate in regular cybersecurity
training created by industry recognized cybersecurity providers. Our Audit Committee also provides oversight of risks from cybersecurity
threats.

 As part of its review of the adequacy of our system
of internal controls over financial reporting and disclosure controls and procedures, the Audit Committee is specifically responsible
for reviewing the adequacy of our computerized information system controls and security related thereof. The cybersecurity stakeholders,
including member(s) of management assigned with cybersecurity oversight responsibility and/or third-party consultants providing cyber
risk services brief the Audit Committee on cyber vulnerabilities identified through the risk management process, the effectiveness of
our cyber risk management program, and the emerging threat landscape and new cyber risks on at least an annual basis. This includes updates
on our processes to prevent, detect, and mitigate cybersecurity incidents. In addition, cybersecurity risks are reviewed by our Board
of Directors at least annually, as part of the Company's corporate risk oversight processes.

 We face risks from cybersecurity threats that
could have a material adverse effect on our business, financial condition, results of operations, cash flows or reputation. Adial acknowledges
that the risk of cyber incident is prevalent in the current threat landscape and that a future cyber incident may occur in the normal
course of its business. However, prior cybersecurity incidents have not had a material adverse effect on our business, financial condition,
results of operations, or cash flows. We proactively seek to detect and investigate unauthorized attempts and attacks against our IT assets,
data, and services, and to prevent their occurrence and recurrence where practicable through changes or updates to internal processes
and tools and changes or updates to service delivery; however, potential vulnerabilities to known or unknown threats will remain. Further,
there is increasing regulation regarding responses to cybersecurity incidents, including reporting to regulators, investors, and additional
stakeholders, which could subject us to additional liability and reputational harm. In response to such risks, we have implemented initiatives
such as implementation of the cybersecurity risk assessment process and development of an incident response plan. See Item 1A. "Risk
Factors" for more information on cybersecurity risks.

 Item 2. Properties.

 On January 6, 2020, our then-subsidiary Purnovate
entered a lease for the Facility with a term of three (3) years for office and laboratory space. On January 19, 2021, Purnovate entered
an amendment to this lease extending the lease until January 31, 2026, committing us to total lease payments in the period from January
1, 2022 and the end of the lease of $302,492. In May 2023, this lease was assumed by the buyer of Purnovate. The Company concluded a sublease
agreement with the buyer of Purnovate for use of limited office space $1765 per month. This sublease was terminated effective February
29, 2024.

 We believe that we have adequate space for our
anticipated needs and that suitable additional space will be available at commercially reasonable prices as needed.

 Item 3. Legal Proceedings.

 We are subject to claims and legal actions that
arise in the ordinary course of business from time to time. However, we are not currently subject to any claims or actions that we believe
would have a material adverse effect on our financial position or results of operations.

 Item 4. Mine Safety Disclosures.

 Not applicable.

 PART
II

 Item
5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities.

 Market
Information

 On July 27, 2018, our common stock began trading
on The Nasdaq Capital Market under the symbol "ADIL". Prior to our initial public offering, no public trades occurred in our
common stock. The closing price of our common stock on the Nasdaq Capital Market on February 28, 2024 was $0.79.

 Dividend
Policy

 We
have not paid dividends on our common stock to date and do not anticipate paying dividends on our common stock. We currently intend to
retain all of our future earnings, if any, to finance the growth and development of our business. We are not subject to any legal restrictions
respecting the payment of dividends, except that we may not pay dividends if the payment would render us insolvent. Any future determination
as to the payment of cash dividends on our common stock will be at our board of directors' discretion and will depend on our financial
condition, operating results, capital requirements and other factors that our board of directors considers to be relevant.

 Transfer
Agent, Warrant Agent and Registrar

 The
transfer agent and registrar for our common stock and warrant agent for our warrants offered in our initial public offering is VStock
Transfer, LLC.

 Holders
of Common Stock

 As
of February 25, 2025, there were an estimated 98 holders of record of our common stock. A certain amount of the shares of common stock
are held in street name and may, therefore, be held by additional beneficial owners. This number does not include beneficial owners from
whom shares are held by nominees in street name.

 Performance
Graph and Purchases of Equity Securities

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

 Recent
Sale of Unregistered Securities

 We
did not sell any equity securities during the year ended December 31, 2024 in transactions that were not registered under the Securities
Act other than as disclosed in our filings with the SEC.

 Issuer
Purchases of Equity Securities

 There
were no issuer purchases of equity securities during the year ended December 31, 2024.

Compensation Plan Information

 On
October 9, 2017, we adopted the Adial Pharmaceuticals, Inc. 2017 Equity Incentive Plan (the "2017 equity incentive plan");
which became effective on July 31, 2018. The following table provides information, as of December 31, 2024 with respect to options outstanding
under our 2017 equity incentive plan.

 Plan Category

 Number
 of
 Securities
 to be Issued
 upon
 Exercise of
 Outstanding
 Compensation Plan Options*

 Weighted-

 Exercise
 Price of
 Outstanding
 Equity Compensation Plan Options

 Number
 of
 Securities
 Remaining
 Available for
 Future Issuance
 Under Equity
 Plans (excluding

 securities
 reflected in
 the first
 column)

 Equity compensation
 plans approved by security holders

 730,908

 $
 9.76

 1,128,165

 compensation plans not approved by security holders

 –

 NA

 NA

 Total

 730,908

 $
 9.76

 1,128,165

 *

 Excludes
 3,063 options issued prior to adoption of the Equity Compensation Plan and 140,927 shares of common stock issued under the Equity
 Compensation Plan.

 2017
Equity Incentive Plan

 As
stated above, on October 9, 2017, we adopted the 2017 equity incentive plan, which became effective on July 31, 2018. Initially, the
aggregate number of shares of our common stock that may be issued pursuant to stock awards under the 2017 equity incentive plan was 70,000
shares, which has since been increased to 2,000,000 at our 2024 Annual Stockholders Meeting. As of the date of this filing, we have issued
options to purchase an aggregate 760,908 shares of our common stock and have issued 140,927 shares of common stock under the 2017 equity
incentive plan, leaving up to 1,098,165 shares issuable under the 2017 equity incentive plan.

 The
principal provisions of the 2017 equity incentive plan are summarized below.

 Administration

 The
2017 equity incentive plan generally is administered by our Compensation Committee, which has been appointed by the board of directors
to administer the 2017 equity incentive plan. The Compensation Committee will have full authority to establish rules and regulations
for the proper administration of the 2017 equity incentive plan, to select the employees, directors and consultants to whom awards are
granted, and to set the date of grant, the type of award and the other terms and conditions of the awards, consistent with the terms
of the 2017 equity incentive plan.

 Eligibility

 Persons
eligible to participate in the 2017 equity incentive plan include all of our officers, employees, directors and consultants.

 Awards

 The
2017 equity incentive plan provides for the grant of: (i) incentive stock options; (ii) nonstatutory stock options; (iii) stock appreciation
rights; (iv) restricted stock; and (v) other stock-based and cash-based awards to eligible individuals. The terms of the awards will
be set forth in an award agreement, consistent with the terms of the 2017 equity incentive plan. No stock option will be exercisable
later than ten years after the date it is granted.

 The
2017 equity incentive plan permits the grant of awards intended to qualify as "performance-based compensation" under Section
162(m) of the Internal Revenue Code of 1986, as amended.

 Stock

 The
Compensation Committee may grant incentive stock options as defined in Section 422 of the Code, and nonstatutory stock options. Options
shall be exercisable for such prices, shall expire at such times, and shall have such other terms and conditions as the Compensation
Committee may determine at the time of grant and as set forth in the award agreement; however, the exercise price must be at least equal
to 100% of the fair market value at the date of grant. The option price is payable in cash or other consideration acceptable to us.

 Stock
Appreciation Rights

 The
Compensation Committee may grant stock appreciation rights with such terms and conditions as the Compensation Committee may determine
at the time of grant and as set forth in the award agreement. The grant price of a stock appreciation right shall be determined by the
Compensation Committee and shall be specified in the award agreement; however, the grant price must be at least equal to 100% of the
fair market value of a share on the date of grant. Stock appreciation rights may be exercised upon such terms and conditions as are imposed
by the Compensation Committee and as set forth in the stock appreciation right award agreement.

 Restricted
Stock

 Restricted
stock may be granted in such amounts and subject to the terms and conditions as determined by the Compensation Committee at the time
of grant and as set forth in the award agreement. The Compensation Committee may impose performance goals for restricted stock. The Compensation
Committee may authorize the payment of dividends on the restricted stock during the restricted period.

 Other
Awards

 The
Compensation Committee may grant other types of equity-based or equity-related awards not otherwise described by the terms of the 2017
equity incentive plan, in such amounts and subject to such terms and conditions, as the Compensation Committee shall determine. Such
awards may be based upon attainment of performance goals established by the Compensation Committee and may involve the transfer of actual
shares to participants, or payment in cash or otherwise of amounts based on the value of shares.

 Amendment
and Termination

 Our
board of directors may amend the 2017 equity incentive plan at any time, subject to stockholder approval to the extent required by applicable
law or regulation or the listing standards of the Nasdaq or any other market or stock exchange on which the common stock is at the time
primarily traded or the provisions of the Code.

 Our
board of directors may terminate the 2017 equity incentive plan at any time provided all shareholder approval has been received to the
extent required by the Code, applicable law or the listing standards of Nasdaq or any other market or stock exchange which the common
stock is at the time primarily traded. Unless sooner terminated by the Board, the 2017 equity incentive plan will terminate on the close
of business on August 30, 2027.

 Miscellaneous

 The
2017 equity incentive plan also contains provisions with respect to payment of exercise prices, vesting and expiration of awards, treatment
of awards upon the sale of our company, transferability of awards, and tax withholding requirements. Various other terms, conditions,
and limitations apply, as further described in the 2017 equity incentive plan.

 Item
6. [Reserved]

 Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations.

 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 consolidated financial statements and the notes presented
herein. In 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. See "Risk Factors" and "Cautionary
Note Regarding Forward-Looking Statements" included elsewhere in the 2024 Annual Report on Form 10-K. Our actual results could
differ significantly from those expressed, implied or anticipated in these forward-looking statements as a result of certain factors
discussed herein and any other periodic reports filed and to be filed by us with the Securities and Exchange Commission.

 On
August 4, 2023, we effected a reverse stock split of our outstanding shares of common stock, trading on Nasdaq under the symbol ADIL,
at a ratio of 1-for-25. As a result of the reverse split, we had 1,197,630 shares of common stock outstanding immediately after effecting
the reverse split. The shares authorized for issue under our charter remained 50,000,000 common stock. We have retrospectively adjusted
all references to common stock, stock warrants to purchase common stock, stock options to purchase common stock, share data, per share
data and related information contained in the following discussion to reflect the effect of the reverse stock split.

 Effective
June 30, 2023, we sold the business of our wholly owned subsidiary, Purnovate, Inc., to a third party. As a result, the assets, liabilities,
and results of Purnovate were classified as discontinued operations. We have retrospectively reclassified all assets, liabilities, and
results of Purnovate as discontinued operations in the following discussion and have adjusted all references to Purnovate assets, liabilities,
and results accordingly.

 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 lead investigational new drug product, AD04, is a genetically targeted therapeutic agent being developed 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 commercializing AD04
in the U.S. and Europe.

 We
continue to explore opportunities to expand our portfolio in the field of addiction and related disorders, both through internal development
and through acquisitions. Our vision is to create the world's leading addiction focused pharmaceutical company.

 In
January 2021, we expanded our portfolio in the field of addiction with the acquisition of Purnovate, LLC via a merger into our wholly
owned subsidiary, Purnovate, Inc. ("Purnovate") and in January 2023, we entered into an option agreement with Adovate LLC
("Adovate"), pursuant to which we granted to Adovate an exclusive option for a period of one hundred twenty (120) days from
the effective date of the Option Agreement for Adovate or its designated affiliate to acquire all of the assets of Purnovate and to assume
related liabilities and expenses. On May 8, 2023, Adovate sent a letter exercising its option effective May 16, 2023 and made payment
of the $450,000 in fees due on exercise. Effective June 30, 2023, Adovate issued to us the equity stake in Adovate due on exercise of
the option agreement. On August 17, 2023, a Bill of Sale, Assignment and Assumption Agreement ("Bill of Sale") was executed
between Purnovate and Adovate, transferring the Purnovate assets to Adovate, effective as of June 30, 2023. On August 17, 2023, Purnovate
and Adovate also entered into a Letter Agreement which stated that Adovate acquired the assets of Purnovate effective as of June 30,
2023, pursuant to the Bill of Sale.

 We
have devoted the vast majority of our resources to development efforts relating to AD04, including preparation for conducting clinical
trials, providing general and administrative support for these operations and protecting our intellectual property.

 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 2024 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.

 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 2024 Annual report on Form 10-K, based our current projections.

 We
have incurred net losses in each year since our inception, including net losses of approximately $13.2 million and $5.1 million for the
years ended December 31, 2024 and 2023. We had accumulated deficits of approximately $82.0 and $68.8 million as of December 31, 2024
and 2023, respectively. Our operating losses 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.

 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. We do not believe our current cash and equivalents
will be sufficient to fund our operations for the next twelve months from the filing of these financial statements.

 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.

 Clinical
Trials — Research and Development Schedule

 AD04
— Clinical Development Strategy — Conduct two additional Phase 3 clinical trials in parallel

 The
clinical development plan for AD04 is based on the regulatory feedback received in the meetings that took place in Q2 2023 which indicated
that even though a single additional Phase 3 trial with convincing data may suffice for approval, it would be a review issue for the
agencies following the trial completion to determine if the data was sufficient for approval. Therefore, while possible to file for registration
with one additional trial, our current planning assumptions are that we will need to conduct two additional Phase 3 trials with AD04,
where the active arm of patients will be compared to placebo and the second trial may include a biomarker negative patient arm to satisfy
any ongoing questions from the regulators regarding efficacy parameters. This is expected to support potential approval in the shortest
time frame possible and removes future regulatory filing and review risk that would be associated with conducting a single additional
trial, as we would plan to run the studies in parallel. We believe that conducting two trials in parallel is the best strategy to minimize
risk, optimize timing and costs, as well as improve the probability of regulatory authority acceptance and approval in the US and Europe.
The new clinical development plan includes both the US and EU endpoints and will be designed to satisfy both US and EU AD04 submission
requirements. Confirmation of the clinical development plan and pathway is currently being conducted by Adial's clinical development
and regulatory advisors.

 Based
on the new expectations regarding the patient population and targeted genotypes and subject to upcoming discussions with regulatory authorities,
the two additional Phase 3 trials are expected to cost a total of between $21-$29 million and each expected to require $8-12 million
in direct expenses pending final trial design, and up to $5 million in additional other development expenses is expected to be required.

 2024
and 2023 Financing Developments

 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 year ended December 31, 2024, we used this ATM Agreement to sell
2,348,520 shares of common stock for net proceeds of approximately $4 million, after fees and expenses.

 On
March 1, 2024, we entered into a warrant inducement agreement (the "Inducement Agreement") with a certain holder (the "Holder")
of the Company's warrants to purchase shares of our common stock, par value $0.001 per share (the "common stock"),
issued in a private placement offering that closed on October 24, 2023 (the "Existing Warrants"). Pursuant to the Inducement
Agreement, the Holder of the Existing Warrants agreed to exercise for cash the Existing Warrants to purchase 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. The Company received aggregate gross proceeds of approximately $3.5 million, before deducting placement agent fees and
other expenses payable by the Company. Net proceeds of this transaction were estimated to be approximately $3.1 million.

 In
consideration of the Holder's immediate exercise of the Existing Warrants and the payment of $0.125 per New Warrant (as such term
is defined below) in accordance with the Inducement Agreement, we issued unregistered Series C Warrants (the "New Warrants")
to purchase 2,300,000 shares of common stock (200% of the number of shares of common stock issued upon exercise of the Existing Warrants)
(the "New Warrant Shares") to the Holder of Existing Warrants, recognizing a non-cash inducement expense of approximately
$4.5 million.

 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.

 On
October 19, 2023, we entered into a securities purchase agreement (the "Purchase Agreement") with an institutional investor
(the "Purchaser") for the issuance and sale in a private placement (the "Private Placement") of (i) pre-funded
warrants (the "Pre-Funded Warrants") to purchase up to 1,418,440 shares of our common stock, par value $0.001 (the "Common
Stock"), at an exercise price of $0.001 per share, (ii) series A warrants (the "Series A Warrants") to purchase up
to 1,418,440 shares of our Common Stock at an exercise price of $2.82 per share, and (iii) series B warrants (the "Series B Warrants"
and together with the Series A Warrants, the "Warrants") to purchase up to 1,418,440 shares of our Common Stock at an exercise
price of $2.82 per share. The Series A Warrants are exercisable at any time on or after the earlier of (i) if permitted by the rules
and regulations of the Nasdaq Stock Market, upon the payment by the Purchaser of $0.125 per share in addition to the exercise price of
$2.82 per share, and (ii) the Stockholder Approval Date (as defined in the Purchase Agreement) (the "Initial Exercise Date"),
and have a term of exercise equal to five and one-half years from the date of issuance. The Series B Warrants are exercisable at any
time on or after the Initial Exercise Date and have a term of exercise equal to eighteen months from the date of issuance. The combined
purchase price for one Pre-Funded Warrant and the accompanying Warrants was $2.819. In addition, 85,106 warrants with an exercise price
of $3.52 per share of common stock were issued to the placement agent.

 The
net proceeds to us from the Private Placement were approximately $3.4 million, after deducting placement agent fees and expenses and
estimated offering expenses payable by us.

 Pursuant
to the terms of the Purchase Agreement, we are prohibited from entering into any agreement to issue or announcing the issuance or proposed
issuance of any shares of Common Stock or securities convertible or exercisable into Common Stock for a period commencing on October
19, 2023 and expiring 60 days from the Effective Date (as defined in the Purchase Agreement). Furthermore, the Company is also prohibited
from entering into any agreement to issue Common Stock or Common Stock Equivalents (as defined in the Purchase Agreement) involving a
Variable Rate Transaction (as defined in the Purchase Agreement), subject to certain exceptions, for a period commencing on October 19,
2023 and expiring one year from such Effective Date. The Effective Date is defined in the Purchase Agreement as the earliest of the date
that (a) the initial registration statement contemplated by the Registration Rights Agreement has been declared effective by the SEC,
(b) all of the Shares have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement for us to be in
compliance with the current public information required under Rule 144 and without volume or manner-of-sale restrictions, (c) following
the one year anniversary of the closing of the Private Placement provided that the holder of the Shares is not an affiliate of the Company,
or (d) all of the Shares may be sold pursuant to an exemption from registration under Section 4(a)(1) of the Securities Act without volume
or manner-of-sale restrictions and the holders of such Shares shall have received an opinion from Company legal counsel reasonably acceptable
to them. The registration statement was declared effective on November 16, 2023.

 At
the date of this report the 1,418,440 shares of common stock had been issued on exercise of pre-funded warrants for proceeds of $1,418,
leaving no pre-funded warrants unexercised.

 On
May 31, 2023, we entered into an Equity Purchase Agreement with Alumni Capital, LLC ("Alumni"). This agreement constituted
a standby equity purchase agreement (a "SEPA"). Pursuant to the SEPA, we have the right, but not the obligation, to sell
to Alumni up to $3,000,000 of newly issued shares, subject to increase to $10,000,000 at our option, at our request at any time during
the commitment period, which commenced on May 31, 2023 and will end on the earlier of (i) December 31, 2024, or (ii) the date on which
Alumni shall have made payment of advances requested by the Company totaling up to the commitment amount of $3,000,000. Each sale we
request under the SEPA (a "Purchase Notice") may be for a number of shares of common stock with an aggregate value of up
to $500,000, and up to $2,000,000 provided certain conditions concerning the average daily trading value are met. The SEPA provides for
shares to be sold to Alumni at 95% of the lowest daily volume weighted average price during the three days after a Purchase Notice is
issued to Alumni. Upon our entry into and subject to the terms and conditions set forth in the SEPA, we issued 7,983 shares of common
stock to Alumni as consideration for its irrevocable commitment to purchase shares of common stock, pursuant to the SEPA. On August 3,
2023, 20,550 shares of common stock were sold under the terms of the SEPA for cash proceeds $140,330. On December 13, 2024, this SEPA
was terminated by mutual agreement in favor of a new equity purchase agreement (see Recent Developments above).

 On
February 23, 2023, we entered into a securities purchase agreement (the "2023 Purchase Agreement") with an accredited institutional
investor (the "Investor") providing for the issuance of 73,144 shares of our common stock. Pursuant to the 2023 Purchase
Agreement, the Investor purchased the shares of our common stock for an aggregate purchase price of $750,000 with net proceeds of $609,613,
after placement agent fees and expenses. Pursuant to the Purchase Agreement, an aggregate of 73,144 shares were issued to the Investor.

 We
issued to the Placement Agent a warrant (the "Placement Agent Warrants") to purchase up to an aggregate of 7,317 shares of
common stock, representing 10% of the aggregate number of shares of Common Stock sold pursuant to the Purchase Agreement. The Placement
Agent Warrants have an exercise price equal to $10.25 and are exercisable two months after the closing date and expire five years after
the date of issuance. The total estimated fair value of the Placement agent warrant was $58,540.

 Clinical
and Research Developments

 In
July 2023, we announced a summary of feedback received following meetings held with both US and EU regulators, as well as an update on
the Company's current clinical development plan based on guidance received.

 Feedback
from the FDA as well as key country-level regulatory agencies in Europe included:

 Acknowledgment
 and confirmation of the importance of ongoing research in the AUD therapeutic area as a persistent high unmet need.

 Confirmation
 of the primary US endpoint based on Percentage of No Heavy Drinking Days ("PNHDD"), which utilized a responder analysis
 of patients who reduced their alcohol consumption to zero heavy drinking days in the last 2 months of a 6-month study.

 Acknowledgment
 of results from the Phase 2 and Phase 3 post hoc analysis against the US endpoint of PNHDD, which demonstrated statistical significance
 of responder analysis of specific genotypes as useful information for planning future studies of AD04.

 Reviewed
 the safety data from the ONWARD trial and did not express any concerns with the data.

 Confirmation
 of the importance of identifying a patient subgroup where a relevant treatment effect and compelling evidence of a favorable risk-benefit
 profile can be assessed.

 Acknowledgment
 that the post hoc analysis showing a statistical and clinically meaningful effect in specific genetic subtypes was positive and promising.
 They requested additional data to support an NDA or MA submission and approval for AD04.

 Based
on positive feedback received from the relevant global regulatory bodies and overlapping clinical requirements, we made the strategic
decision to focus its efforts on the US as the US standards should translate to acceptance in other international markets. We have a
high level of confidence that AD04 will achieve success in clinical development based on our post hoc analysis and the regulatory feedback
on the pre-specified primary endpoint that the FDA has now confirmed, specifically, a reduction of heavy drinking days to zero at months
5 and 6. This is also vital for our ongoing partnering efforts based on discussions with companies active in the US and Europe. Importantly,
the regulators acknowledged the valuable insights of the post hoc analysis, which demonstrated that patients with a specific genetic
subtype (AG+), achieved a statistical significance of p=0.031 and p=0.021 respectively in both the Phase 2 and Phase 3 trials. Additionally,
these patients averaged over 17 (17.23) heavy drinking days per month at the study start and achieved under 3 (2.37) heavy drinking days
per month at study completion.

 These
clinically meaningful results are important as evidenced by the US healthcare provider research completed after the ONWARD trial, which
suggests AD04 would play an important role as a medication for physicians currently treating patients with AUD.

 Market
research conducted subsequent to completion of the ONWARD trial suggests unit pricing for AD04 could be significantly higher than previous
assumptions which we believe confirms AD04 as an attractive commercial opportunity.

 We
have assessed the impact of the regulatory guidance on the future business and operating plan requirements to meet the needs of the FDA
and EU regulators for submission and approval of AD04 to treat genetic subtypes of AUD. While the Company is in the process of confirming
the impact on the clinical development plans and timing with its external advisors and ongoing partnership discussions, the following
provides a working summary subject to final discussions with the regulatory agencies.

 Efficacy
Requirements:

 Regulatory
 feedback indicates that even though a single additional Phase 3 trial with convincing data may suffice for approval, it would be
 a review issue for the agencies following trial completion to determine if the data was sufficient for approval.

 Therefore,
 while possible to file for registration with one additional trial, current planning assumptions are that we will need to conduct
 two additional Phase 3 trials with AD04, where the active arm of patients will be compared to placebo and the second trial may include
 a biomarker negative patient arm to satisfy any ongoing questions from the regulators regarding efficacy parameters. This is expected
 to support potential approval in the shortest time frame possible and removes future regulatory filing and review risk that would
 be associated with conducting a single additional trial, as we would plan to run the studies in parallel. We believe that conducting
 two trials in parallel is the best strategy to minimize risk, optimize timing and costs, as well as improve the probability of regulatory
 authority acceptance and approval in the US and Europe.

 The new
 clinical development plan includes both the US and EU endpoints and will be designed to satisfy both US and EU AD04 submission requirements.
 Confirmation of the clinical development plan and pathway is currently being conducted by Adial's clinical development and
 regulatory advisors.

 Safety
Requirements:

 FDA agreed
 to our plan to comply with ICH E1A by adding a long-term safety follow-up to the planned Phase 3 trial, thereby exposing at least
 100 patients to AD04 for one year.

 A thorough
 QT study will not be required.

 FDA noted
 it may potentially reduce certain safety requirements such as food effect, ECG monitoring and bioequivalence pending review of additional
 manufacturing data establishing that AD04 has an identical formulation to Zofran.

 In
parallel with the Phase 3 trials, we expect to conduct any standard Phase 1 studies required by the regulatory agencies. Studies that
have been discussed with the FDA as potentially being required might assess potentiation of the central nervous system effects of alcohol
and pharmacodynamic impact of certain cytochrome P450 enzyme variants.

 Results
of operations for the years ended December 31, 2024 and 2023 (rounded to nearest thousand)

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

 For
 the Year Ended

 Change

 2024

 2023

 (Decrease)

 Research and
 development expenses

 $
 3,229,000

 1,267,000

 1,962,000

 General
 and administrative expenses

 5,130,000

 5,621,000

 (491,000
)

 Total
 Operating Expenses

 8,359,000

 6,888,000

 1,471,000

 Loss
 From Operations

 (8,359,000
)

 (6,888,000
)

 (1,471,000
)

 Interest income

 179,000

 70,000

 109,000

 Inducement expense

 (4,464,000
)

 –

 (4,464,000
)

 Change in value of equity
 method investment

 (552,000
)

 (194,000
)

 (358,000
)

 Other

 (1,000
)

 10,000

 (11,000
)

 Total
 other income (expenses)

 (4,838,000
)

 (114,000

 (4,724,000
)

 Net Loss before provision
 for income taxes

 (13,197,000
)

 (7,002,000
)

 (6,195,000
)

 Provision
 for income tax

 –

 –

 –

 Loss from continuing operations

 (13,197,000
)

 (7,002,000
)

 (6,195,000
)

 Gain
 (loss) from discontinued operations, net of tax

 –

 1,879,000

 (1,879,000
)

 Net
 loss

 (13,197,000
)

 (5,123,000
)

 (8,074,000
)

and development ("R&D") expenses

and development expenses increased by approximately $1,962,000 (155%) during the year ended December 31, 2024 compared to the year ended
December 31, 2023. The key drivers of this increase were an increase of approximately $1,397,000 of direct clinical trial expenses associated
with the Phase 1b trial initiated in 2024 and an increase of approximately $813,000 of chemistry, manufacturing, and controls (CMC) expenses,
which increased by approximately $813,000, as stability testing took place to support the Phase 1b trial in 2024 and drug product manufacturing
were initiated to support the upcoming Phase 3 trials. These increases were offset by an approximately $182,000 decrease in compensation,
including equity-based compensation of R&D personnel.

 General
and administrative expenses ("G&A") expenses

 General
and administrative expenses decreased by approximately $491,000 (9%) during the year ended December 31, 2024 compared to the year ended
December 31, 2023. This decrease was the result of lower corporate legal expense of approximately $269,000 and a decrease in compensation
of approximately $215,000, including equity based compensation of G&A personnel.

 Change
in Value of Equity Method Investment

 The
expense recognized to the change in the value of our equity method investment in Adovate, LLC increased by approximately $358,000 in
the year ended December 31, 2024 compared to the year ended December 31, 2023. This increase is due to the timing of investment. This
investment was made on June 30 of 2023, with changes to the value of our Adovate equity being recognized on a three-month lag. Therefore,
the loss recognized for the year ended December 31, 2023 reflects only 3 months of Adovate's operations while the loss recognized
for the year ended December 31, 2024 reflects a full year of Adovate's operations.

 Inducement
Expense

 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 during the year ended December 31, 2024.

 Total
Other income (expenses)

 Total
other income, excluding losses from the equity method investment and inducement expense, increased by approximately $98,000 (123%) in
the year ended December 31, 2024 compared to year ended December 31, 2023. This increase was due to the increase of approximately $109,000
in interest income that resulted from a higher cash balance held in the period.

 Gain
(loss) from discontinued operations, net of tax

 The
gain from discontinued operations, net of tax, decreased by approximately $1,894,000 (100%) in the year ended December 31, 2024 compared
to the year ended December 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 June of 2023 and all associated activities ceased.

 Liquidity
and Capital Resources

 Overview

 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 out ATM Agreement, private placements, use of our
equity line, as well as other equity financings, warrant exercises, and the issuance of debt securities.

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.

 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.

 At December 31, 2024, we had cash and cash equivalents
of $3,750,525. 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 is sufficient to fund our operations and meet our existing commitments into the second half of 2025, based on our current
commitments.

 We
will require additional financing as we continue to execute our overall business strategy, including two additional Phase 3 trials for
AD04 (one of which is included in our accelerated plans) that are currently expected to require an average of $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 are 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 shareholders 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. There can
be no assurance that grant funding will be available. 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.

 Cash
flows

 For
 the Year Ended

 (rounded
 to nearest thousand)

 2024

 2023

 Provided by (used in)

 Operating
 activities – continuing operations

 $
 (6,922,000
)

 $
 (5,803,000
)

 Discontinued operations

 –

 (1,003,000
)

 Investing activities

 –

 1,500,000

 Financing
 activities

 7,846,000

 4,132,000

 Net
 increase (decrease) in cash and cash equivalents

 $
 924,000

 $
 (1,174,000
)

 Net
cash used in operating activities – continuing operations

 Net
cash used in operating activities increased by approximately $1,119,000 during the year ended December 31, 2024 compared to the year
ended December 31, 2023. The increase was primarily due to higher research and development expenses, partially offset by the favorable
increase in the net change in operating assets and liabilities when comparing the same two periods.

 Net
cash used in discontinued operations

 Net
cash used in discontinued operations decreased by approximately $1,003,000 during the year ended December 31, 2024 compared to the year
ended December 31, 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.

 Net
cash provided by investing activities

 Net
cash provided by investing activities decreased by approximately $1,500,000 in the year ended December 31, 2024 compared to the year
ended December 31, 2023. The decrease was driven by payments received in the prior year period related to the sale of Purnovate.

 Net
cash provided by financing activities

 Net
cash provided by financing activities increased by approximately $3,714,000 in the year ended December 31, 2024 compared to the year
ended December 31, 2023. In the year ended December 31, 2023, we engaged in two financings: a limited sale of common stock to a single
individual investor for net proceeds of approximately $750,000 and a sale of pre-funded warrants to an institutional investor for net
proceeds of approximately $3,383,000. In the year ended December 31, 2024, we sold 2,348,520 shares of common stock through an ATM agreement
for net proceeds of approximately $4,021,000 and realized additional funds from the induced and uninduced exercise of additional warrants
for net proceeds of approximately $3,824,000.

 Off-balance
sheet arrangements

 We
do not have any off-balance sheet arrangements.

 Recent
Accounting Pronouncements

 See
Note 3 to the 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
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States,
or GAAP. The preparation of these 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 consider an accounting estimate
to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the
accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different
estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results
of operations. There are items within our financial statements that require estimation but are not deemed critical, as defined above.
Our significant accounting policies are more fully described in Note 3 to our financial statements included with this report.

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

 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.

 Item 8.
Financial Statements and Supplemental Data.

 ADIAL

 FINANCIAL
STATEMENTS

 Contents

 Page

 Report of Independent Registered Public Accounting Firm (PCAOB Firm ID: 688)

 Consolidated Balance Sheets as of December 31, 2024 and 2023

 Consolidated Statements of Operations for the years ended December 31, 2024 and 2023

 Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2024 and 2023

 Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023

 Notes to Consolidated Financial Statements

 F- 1

 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 To
the Stockholders and Board of Directors of

 Adial
Pharmaceuticals, Inc.

 Opinion
on the Financial Statements

 We
have audited the accompanying consolidated balance sheets of Adial Pharmaceuticals, Inc. (the "Company") as of December 31,
2024 and 2023, the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the
two years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements").
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024,
in conformity with accounting principles generally accepted in the United States of America.

 Explanatory
Paragraph – Going Concern

 The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more
fully described in Note 2, the Company has a significant accumulated deficit, incurred recurring losses and needs to raise additional
funds to sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

 Basis
for Opinion

 These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.

 Critical
Audit Matters

 Critical
audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be
communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and
(2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

 /s/ Marcum
 llp

 We have served
as the Company's auditor since 2017.

 Marlton,
New Jersey

 March 4,
2025

 F- 2

 ADIAL

 CONSOLIDATED
BALANCE SHEETS

 2024

 2023

 ASSETS

 Current Assets:

 Cash
 and cash equivalents

 $
 3,750,525

 $
 2,827,082

 Prepaid
 expenses and other current assets

 308,239

 371,597

 Total
 Current Assets

 4,058,764

 3,198,679

 Intangible
 assets, net

 3,348

 3,913

 method investment

 981,830

 1,534,013

 Total
 Assets

 $
 5,043,942

 $
 4,736,605

 LIABILITIES
 AND STOCKHOLDERS' EQUITY

 Current
 Liabilities:

 Accounts
 payable

 $
 250,130

 $
 103,325

 Accounts
 payable, related party

 48,272

 24,062

 expenses

 677,456

 477,747

 expenses, related party

 —

 47,942

 Total
 Current Liabilities

 975,858

 653,076

 Total
 Liabilities

 $
 975,858

 $
 653,076

 Commitments
 and contingencies – see Note 9

 Stockholders'

 Preferred Stock, 5,000,000 shares authorized with a par value of $ 0.001 per share, 0 shares outstanding at December 31, 2024 and 2023

 —

 —

 Common Stock, 50,000,000 shares authorized with a par value of $ 0.001 per share, 6,474,588 and 1,663,421 shares issued and outstanding at December 31, 2024 and 2023, respectively

 6,473

 1,663

 Additional
 paid in capital

 86,056,934

 72,879,738

 Accumulated
 deficit

 ( 81,995,323
)

 ( 68,797,872
)

 Total
 Stockholders' Equity

 4,068,084

 4,083,529

 Total
 Liabilities and Stockholders' Equity

 $
 5,043,942

 $
 4,736,605

 The
accompanying notes are an integral part of these consolidated financial statements.

 F- 3

 ADIAL

 CONSOLIDATED
STATEMENTS OF OPERATIONS

 For the Years Ended

 2024

 2023

 Operating Expenses:

 Research and development

 $
 3,229,226

 $
 1,267,077

 General and administrative

 5,055,231

 5,620,870

 Total Operating Expenses

 8,284,457

 6,887,947

 Loss From Operations

 ( 8,284,457
)

 ( 6,887,947
)

 Other Income (Expense)

 Interest income

 178,659

 69,779

 Inducement expense

 ( 4,464,427
)

 —

 Loss on equity method investment

 ( 552,183
)

 ( 193,884
)

 Other income (expense)

 ( 75,043
)

 10,162

 Total other expense

 ( 4,912,994
)

 ( 113,943
)

 Loss Before Provision For Income Taxes

)

 ( 7,001,890
)

 Income tax benefit

 —

 —

 Loss from Continuing Operations

)

 ( 7,001,890
)

 Income from discontinued operations, net of taxes, including gain on disposal of $ 2,624,798

 —

 1,878,549

 Net Loss

 $
)

 $
 ( 5,123,341
)

 Loss per share from continuing operations, basic and diluted

 $
 ( 2.72
)

 $
 ( 4.91
)

 Loss per share from discontinued operations, basic and diluted

 $
 —

 $
 ( 1.32
)

 Net loss per share, basic and diluted

 $
 ( 2.72
)

 $
 ( 3.60
)

 Weighted average shares, basic and diluted

 4,851,487

 1,424,661

 The
accompanying notes are an integral part of these consolidated financial statements.

 F- 4

 ADIAL

 CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

 FOR
THE YEARS ENDED DECEMBER 31, 2024 AND 2023

 Common
 Stock

 Additional

 Paid In

 Accumulated

 Total Stockholders'

 Shares

 Amount

 Capital

 Deficit

 Balance,
 January 1, 2023

 1,067,491

 $
 1,067

 $
 66,949,958

 $
 ( 63,674,531
)

 $
 3,276,494

 compensation

 —

 —

 1,232,691

 —

 1,232,691

 compensation, common stock issued for services

 48,580

 513,638

 —

 513,687

 Issuance of commitment
 shares

 7,983

 51,893

 —

 51,901

 Redemption of fractional
 shares

 ( 199
)

 ( 1
)

 ( 1,660
)

 —

 ( 1,661
)

 Sale
 of common stock

 93,694

 749,849

 —

 749,943

 Sale of warrants

 —

 —

 3,383,312

 —

 3,383,312

 Warrant
 exercises

 445,872

 —

 Net
 loss

 —

 —

 —

 ( 5,123,341
)

 ( 5,123,341
)

 Balance,
 December 31, 2023

 1,663,421

 $
 1,663

 $
 72,879,738

 $
 ( 68,797,872
)

 $
 4,083,529

 compensation

 —

 —

 597,453

 —

 597,453

 compensation, common stock issued for services

 2,400

 199,376

 —

 199,378

 Issuance
 of inducement warrants, net of payment

 4,464,427

 4,464,427

 Issuance of commitment
 shares

 68,807

 74,930

 —

 74,999

 Sale
 of common stock

 2,348,520

 2,348

 4,019,137

 —

 4,021,485

 Warrant
 exercises

 2,391,440

 2,391

 3,821,873

 —

 3,824,264

 Net
 loss

 —

 —

 —

)

)

 Balance,
 December 31, 2024

 6,474,588

 $
 6,473

 $
 86,056,934

 $
 ( 81,995,323
)

 $
 4,068,084

 The
accompanying notes are an integral part of these consolidated financial statements.

 F- 5

 ADIAL

 CONSOLIDATED
STATEMENTS OF CASH FLOWS

 For
 the Years Ended

 2024

 2023

 CASH FLOWS FROM OPERATING ACTIVITIES:

 Loss
 from operations

 $
)

 $
 ( 7,001,890
)

 Adjustments
 to reconcile net loss to net cash used in operating activities:

 compensation

 796,831

 1,746,378

 Amortization
 of intangible assets

 Inducement
 expense

 4,464,427

 —

 Cost of commitment shares
 issued

 74,999

 51,901

 Loss
 on equity method investment

 552,183

 193,884

 Changes
 in operating assets and liabilities:

 Prepaid
 expenses and other current assets

 63,358

 ( 22,156
)

 expenses

 199,709

 ( 485,580
)

 expenses, related party

 ( 47,942
)

 ( 127,058
)

 Accounts
 payable and other current liabilities

 146,805

 ( 183,473
)

 Accounts
 payable, related party

 24,210

 24,062

 Net cash
 used in operating activities – continuing operations

 ( 6,922,306
)

 ( 5,803,368
)

 Net
 cash used in discontinued operations

 ( 1,003,441
)

 Net cash
 used in operating activities

 ( 6,922,306
)

 ( 6,806,809
)

 CASH
 FLOWS FROM INVESTING ACTIVITIES:

 Purchase consideration
 received for sale of assets

 —

 1,500,000

 Net
 cash provided by investing activities

 —

 1,500,000

 CASH
 FLOWS FROM FINANCING ACTIVITIES:

 Net
 proceeds from equity offerings

 4,021,485

 749,943

 Net
 proceeds from warrant offerings

 —

 3,383,312

 Proceeds
 from warrant exercises

 3,824,264

 Redemption
 of fractional shares

 —

 ( 1,661
)

 Net cash
 provided by financing activities

 7,845,749

 4,132,097

 NET
 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 923,443

 ( 1,174,712
)

 CASH
 AND CASH EQUIVALENTS-BEGINNING OF YEAR

 2,827,082

 4,001,794

 CASH
 AND CASH EQUIVALENTS-END OF YEAR

 $
 3,750,525

 $
 2,827,082

 SUPPLEMENTAL
 DISCLOSURE OF CASH FLOW INFORMATION:

 Interest
 paid

 $
 —

 $
 —

 taxes paid

 $
 —

 $
 —

 consideration received for sale of Purnovate

 $
 —

 1,727,897

 The
accompanying notes are an integral part of these consolidated financial statements.

 F- 6

 ADIAL

 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

 1 —
DESCRIPTION OF BUSINESS

 Adial
Pharmaceuticals, Inc. ("Adial") was converted from a limited liability company formed on November 23, 2010 in the Commonwealth
of Virginia under the name ADial Pharmaceuticals, LLC, to a corporation and reincorporated in Delaware on October 1, 2017. Adial is presently
engaged in the development of medications for the treatment or prevention of addictions and related disorders.

 Adial's
wholly owned subsidiary, Purnovate, Inc. ("Purnovate"), was formed on January 26, 2021 to acquire Purnovate, LLC, an entity
formed in December of 2019. Purnovate was a drug development company with a platform focused on developing drug candidates for non-opioid
pain reduction and other diseases and disorders potentially targeted with adenosine analogs that are selective, potent, stable, and soluble.
On January 27, 2023, the Company entered into an option agreement for the acquisition of Purnovate's assets and business with Adovate,
LLC ("Adovate"), a Virginia limited liability company that was formed and majority owned by a then director of the Company
and then CEO of Purnovate and that was therefore a related party. On May 8, 2023, Adovate sent a letter to the Company exercising its
option effective May 16, 2023 for the purchase of the assets and business of the Company's wholly owned subsidiary, Purnovate and
made payment of the $ 450,000 in fees due on exercise. Effective June 30, 2023, Adovate issued to the Company the equity stake in Adovate
due on exercise of the option agreement. On August 17, 2023, a Bill of Sale, Assignment and Assumption Agreement ("Bill of Sale")
was executed between Purnovate and Adovate, transferring the Purnovate assets to Adovate, effective as of June 30, 2023. On August 17,
2023, Purnovate and Adovate also entered into a Letter Agreement which stated that Adovate acquired the assets of Purnovate effective
as of June 30, 2023, pursuant to the Bill of Sale. On September 18, 2023, the parties executed a final acquisition agreement which memorialized
the terms of the sale of the Purnovate assets to Adovate pursuant to the Option Agreement and Bill of Sale. See Note 4 for additional
information.

 In
July of 2022, the Company released data from its ONWARD Phase 3 pivotal trial of its compound AD04 ("AD04") for the
treatment of Alcohol Use Disorder. Although the trial missed the primary endpoint, it did show statistical significance in a pre-defined
patient group. The U.S. Food and Drug Administration ("FDA") has indicated they will accept 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. Key
patents have been issued in the United States, the European Union, and other jurisdictions for which the Company has 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.

 2 —
GOING CONCERN AND OTHER UNCERTAINTIES

 The
consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States
of America ("GAAP"), which contemplate continuation of the Company as a going concern. The Company is in a development stage
and has incurred losses each year since inception. Based on the current development plans for AD04 in both the U.S. and international
markets and other operating requirements, the Company does not believe that the existing cash and cash equivalents are sufficient to
fund operations for the next twelve months following the filing of these consolidated financial statements. The Company has incurred
recurring losses and needs to raise additional funds to sustain its operations. These factors raise substantial doubt about the Company's
ability to continue as a going concern.

 Based
on the announced results of its ONWARD Phase 3 trial, the Company has completed and publicly reported meetings with the FDA and various
European national authorities to discuss the appropriate next steps towards the future development of AD04. The Company has sold its
Purnovate programs to a company formed for that purpose, reducing the Company's operating expenses. In March of 2024, the Company
received net proceeds of approximately $ 3.8 million from the exercise of warrants, and during the year ended December 31, 2024, the Company
received an additional $ 4 million in net proceeds from sale of common stock through an ATM agreement. The Company will nonetheless require
additional capital to continue operating and development of AD04. There is no certainty that the Company will be able to access additional
capital on acceptable terms, if at all, to continue operations after whatever funds are received from the buyer are expended. If unable
to access sufficient capital, the Company would be required to delay, scale back or eliminate some or all of its research and development
programs or delay its approach to commercialization of AD04, which would likely have a material adverse effect on the Company and its
financial statements.

 F- 7

 The
Company's continued operations will depend on its 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, if at all. Without additional funding, the Company would 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 the Company and its financial statements.

 Other
Uncertainties

 Generally,
the industry in which the Company operates subjects the Company to a number of other risks and uncertainties that can affect its operating
results and financial condition. Such factors include, but are not limited to: the timing, costs and results of clinical trials and other
development activities versus expectations; the ability to obtain regulatory approval to market product candidates; the ability to manufacture
products successfully; competition from products sold or being developed by other companies; the price of, and demand for, Company products
once approved; the ability to negotiate favorable licensing or other manufacturing and marketing agreements for its products.

 3 —
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Use of
Estimates

 The
preparation of these consolidated financial statements in conformity with GAAP requires Company management to make estimates and assumptions
the affect the amounts of assets and liabilities at the date of these consolidated financial statements and the reported amounts of expenses
during the reporting period. Actual results might differ from these estimates.

 Significant
items subject to such estimates and assumptions include accruals associated with third party providers supporting clinical trials, income
tax asset realization, and the valuation of equity method investments.

 Basis
of Presentation and Principals of Consolidation

 The
accompanying consolidated financial statements have been prepared in accordance with GAAP. The financial statements represent the consolidation
of the Company and its subsidiary in conformity with GAAP. All intercompany transactions have been eliminated in consolidation.

 Reverse
Stock Split

 On
August 4, 2023, the Company effected a reverse stock split of its outstanding shares of common stock, trading on Nasdaq under the symbol
ADIL, at a ratio of 1-for-25. The shares authorized for issue under the Company's charter remained 50,000,000 common stock. All
references to common stock, stock warrants to purchase common stock, stock options to purchase common stock, share data, per share data
and related information contained in these financial statements have been retrospectively adjusted to reflect the effect of the Reverse
Stock Split for all periods presented.

 Basic
and Diluted Loss per Share

 Basic
and diluted loss per share are computed based on the weighted-average outstanding shares of common stock, which are all voting shares. Diluted
net loss per share is computed giving effect to all proportional shares of common stock, including stock options, restricted stock, and
warrants to the extent dilutive. Basic net loss per share was the same as diluted net loss per share for the years ended December 31,
2024 and 2023 as the inclusion of all potential common shares outstanding would have an anti-dilutive effect.

 F- 8

 The
total potentially dilutive common shares that were excluded for the years ended December 31, 2024 and 2023 were as follows:

 Potentially

 Dilutive Common
 Shares Outstanding

 2024

 2023

 Warrants to
 purchase common shares

 4,201,568

 3,251,008

 Common Shares issuable
 on exercise of options

 733,971

 152,194

 Unvested
 restricted stock awards

 13,328

 26,664

 Total
 potentially dilutive Common Shares excluded

 4,948,867

 3,429,866

 Cash
and Cash Equivalents

 The
Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. At times, the
Company's cash balances may exceed the current insured amounts under the Federal Deposit Insurance Corporation. At December 31,
2024, the Company did not exceed FDIC insurance limits in its insured bank accounts but held approximately $ 3.6 million in non-FDIC insured
cash equivalent accounts. Included in cash equivalents are money market investments with maturity dates less than ninety days and are
carried at fair value. Unrealized gain or loss are included in the interest income and are immaterial to the financial statements. At
December 31, 2023, the Company did exceed FDIC insurance limits by approximately $ 927,000 and held approximately $ 1.6 million in non-FDIC
insured cash equivalent investments.

Method Investments

 The
Company utilizes the equity method to account for investments when it possesses the ability to exercise significant influence, but not
control, over the operating and financial decisions of the investee.

method investments are measured at cost minus impairment, if any, plus or minus the Company's proportionate share of the equity
method investee's income or loss. The proportionate share of the income or loss from equity method investments is recognized on
a lag.

 Currently,
the Company is not obligated to make additional capital contributions for its equity method investments, and therefore only records losses
up to the amount of its total investment, inclusive of other investments in and loans to the investee, which are not accounted for as
equity method investments.

 Fair
Value Measurements

 FASB
ASC 820, Fair Value Measurement, ("ASC 820") defines fair value as the price that would be received to sell an asset or paid
to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The methodology
establishes consistency and comparability by providing a fair value hierarchy that prioritizes the inputs to valuation techniques into
three broad levels, which are described below:

 Level 1 inputs are quoted
 market prices in active markets for identical assets or liabilities (these are observable market inputs).

 Level 2 inputs are inputs
 other than quoted prices included within Level 1 that are observable for the asset or liability (includes quoted market prices for
 similar assets or identical or similar assets in markets in which there are few transactions, prices that are not current or prices
 that vary substantially).

 Level 3 inputs are unobservable
 inputs that reflect the entity's own assumptions in pricing the asset or liability (used when little or no market data is available).

 The
fair value of cash and cash equivalents and accounts payable approximate their carrying value due to their short-term maturities.

 F- 9

and Development

and development costs are charged to expense as incurred and include supplies and other direct trial expenses such as fees due to contract
research organizations, consultants which support the Company's research and development endeavors, the acquisition of technology
rights without an alternative use, and compensation and benefits of clinical research and development personnel. Certain research and
development costs, in particular fees to contract research organizations ("CROs"), are structured with milestone payments
due on the occurrence of certain key events. Where such milestone payments are greater than those earned through the provision of such
services, the Company recognizes a prepaid asset which is recorded as expense; where fees earned are greater than milestone payments,
an accrued expense liability is recorded as expense.

 Stock-Based

 The
Company measures the cost of option awards based on the grant date fair value of the awards. That cost is recognized on a straight-line
basis over the period during which the awardee was required to provide service in exchange for the entire award. The fair value of options
is calculated using the Black-Scholes option pricing model, based on key assumptions such as the expected volatility of the Company's
common stock, the risk-free rate of return, and expected term of the options. The Company's estimates of these assumptions are
primarily based on historical data, peer company data, government data, and the judgment of management regarding future trends.

 Common
shares issued are valued based on the fair value of the Company's common shares as determined by the market closing price of a
share of our common stock on the date of the commitment to make the issuance.

Taxes

 The
Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax basis and tax carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 A
valuation allowance is established to reduce net deferred tax assets to the amount expected to be realized. The Company recognizes the
effect of income tax positions only if those positions are more likely than not of being sustained. Changes in recognition and measurement
are reflected in the period in which the change in judgment occurs. Interest and penalties related to unrecognized tax benefits are included
in income tax expense. The Company has generally recorded a full valuation allowance for its tax carryforwards, reflecting the judgment
of Company management that they are more likely than not to expire unused.

 Segment
Information

 The Company operates as one
operating segment with a focus on drug development for addiction and related disorders. The Company's Chief Executive Officer, as
its chief operating decision maker (CODM), manages and allocates resources to the operations of the Company's on a consolidated
basis. The CODM assesses performance and allocates resources based on the Company's consolidated statements of operations and key
components and processes of the Company's operations are managed centrally. Segment asset information is not used by the CODM to
allocate resources. This enables our Chief Executive Officer to assess our overall level of available resources and determine how best
to deploy these resources across research and development projects in line with our long-term company-wide strategic goals.

 F- 10

 Recent
Accounting Pronouncements

 In November 2023, the FASB
issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. This update improves reportable
segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update
are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15,
2024. The Company adopted this update effective December 31, 2024, on a retrospective basis. Refer to Note 12 for the disclosures related
to our single operating segment.

 In December 2023, the FASB
issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. This update enhances the transparency and
usefulness of income tax disclosures, particularly in the rate reconciliation table and disclosures about income taxes paid. The guidance
also eliminates certain existing requirements related to uncertain tax positions and unrecognized deferred tax liabilities. The amendments
in this update are effective for annual periods beginning after December 15, 2024. Early adoption of the amendments is permitted for annual
financial statements that have not yet been issued. The Company is in the process of evaluating the impact of this new guidance on its
consolidated financial statements.

 In November 2024, FASB issued
ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation
of Income Statement Expenses. This update would require a public entity to disclose information about purchases of inventory, employee
compensation, depreciation, intangible asset amortization, and depletion for each income statement line item that contains those expenses.
The amendments in this update are effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods
beginning after December 15, 2027. Early adoption of the amendments is permitted for annual financial statements that have not yet been
issued. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements.

— SALE OF PURNOVATE

 On
January 27, 2023, the Company entered into an option agreement for the acquisition of Purnovate's assets and business with Adovate,
LLC ("Adovate"). On May 8, 2023, Adovate sent a letter to the Company exercising its option effective May 16, 2023 for the
purchase of the assets and business of the Company's wholly owned subsidiary, Purnovate, Inc. and made payment of the $ 450,000
in fees due on exercise. Effective June 30, 2023, Adovate issued to the Company the equity stake in Adovate due on exercise of the option
agreement. On August 17, 2023, a Bill of Sale, Assignment and Assumption Agreement ("Bill of Sale") was executed between
Purnovate and Adovate, transferring the Purnovate assets to Adovate, effective as of June 30, 2023. On August 17, 2023, Purnovate and
Adovate also entered into a Letter Agreement which stated that Adovate acquired the assets of Purnovate effective as of June 30, 2023,
pursuant to the Bill of Sale. On September 18, 2023, the parties executed a final acquisition agreement which memorialized the terms
of the sale of the Purnovate assets to Adovate pursuant to the Option Agreement and Bill of Sale. The CEO, founder, and a major equity
holder of Adovate is a former director and the former CEO of the Company, but ceased to be a related party on resigning as a director
on September 18, 2023.

 Under
the terms of the option agreement, upon the exercise of the option Adovate became liable for reimbursement of all Purnovate operating
expenses incurred and paid after December 1, 2022, such reimbursement to be paid within thirty days of execution of the final acquisition
agreement with the Company holding a security interest in the assets of Adovate until the expense reimbursement is paid in full. On June
30, 2023, September 20, 2023, and December 8, 2023, payments totaling of $ 1,050,000 for the reimbursement of previously incurred Purnovate
project costs were paid to the Company by the buyer of Purnovate. On June 30, 2023, Adovate issued to the Company a 19.9 % equity stake
in Adovate as part of consideration owed, which the Company valued at $ 1,727,897 (see Note 6). Consideration paid by Adovate also included
contingent payments based on the occurrence of certain milestone events and a contingent royalty on future sales. No value has been imputed
to these contingent payments on the Company's balance sheet, since it is at present less likely than not that such payments will
ever be made. On execution of the final asset purchase agreement, the Company recognized a charge of $ 37,276 on adjustment of the final
expense reimbursement due from its previous estimate, which was recognized as an expense of discontinued operations. Total consideration
paid or receivable is $ 3,227,897. The gain on the sale of Purnovate has been classified as income from discontinued operations.

 F- 11

 The
assets, liabilities, and results of operations of Purnovate, Inc. have been classified as discontinued for purposes of these financial
statements and have been retroactively reclassified for past periods.

 The
table below summarizes the sale:

 Consideration:

 Cash, including
 upfronts exercise payments and expense reimbursements prepaid

 $
 800,000

 Fair value of shares received

 1,727,897

 Expense
 reimbursements receivable

 700,000

 Total
 consideration

 3,227,897

 Assets sold:

 Fixed assets, net of depreciation

 48,492

 In process R&D

 455,000

 Goodwill

 248,971

 Operating lease right-of-use
 asset

 180,229

 Deposits
 and prepaid expenses on assumed contracts

 428,700

 Total
 assets sold

 1,361,392

 Liabilities transferred:

 Contingent liability

 506,000

 Lease liability

 193,796

 Payables
 and accrued liabilities

 58,497

 Liabilities
 transferred

 758,293

 Net
 assets sold

 603,099

 Gain
 on sale

 2,624,798

 5 —
DISCONTINUED OPERATIONS

 The
business of the Company's wholly owned subsidiary, Purnovate, Inc., was sold during the year ended December 31, 2023 (see Note
4). As a result, all the assets and liabilities and the operating results of Purnovate, Inc. have been classified as discontinued operations.

from discontinued operations, net of tax for the years ended December 31, 2024 and 2023 are as follows:

 For the Year
 Ended

 December
 31,

 2024

 2023

 Operating Expenses:

 Research and development expenses

 $
 —

 $
 260,748

 General and administrative
 expenses

 —

 471,326

 Total
 Operating Expenses

 —

 732,074

 Loss
 From Operations

 —

 ( 732,074
)

 Other Income (Expense)

 Interest expense

 —

 ( 175
)

 Change in value of contingent
 liability

 —

 ( 14,000
)

 Total
 other income (expense)

 —

 ( 14,175
)

 Loss before provision for
 income taxes

 —

 ( 746,249
)

 Income tax benefit (expense)

 —

 —

 Loss from discontinued operations,
 net of tax

 —

 ( 746,249
)

 Gain on sale

 —

 2,624,798

 Gain
 (loss) from discontinued operations, net of gain on sale

 $
 —

 $
 1,878,549

 F- 12

— EQUITY METHOD INVESTMENTS

 On
June 30, 2023, Adovate issued to the Company a 19.9 % equity stake in Adovate as part of consideration owed upon the exercise of Adovate's
option to purchase the business and assets of the Company's wholly owned subsidiary, Purnovate, Inc. (See Note 4.) Under the terms
of the final asset purchase agreement, Adovate was obligated to protect the Company against dilution by issuing additional equity to
the Company in Adovate as Adovate equity was sold to maintain the Company's 15 % equity stake until such time as Adovate had raised
$ 4 million through equity sales, at which time the Company's equity stake would be adjusted to equal to 15 %. The Company determined
the fair value of this equity to be $ 1,727,897 at time of issue, based on the price of cash sales by Adovate of the same class of equity
to third parties around the same time as the date of issue.

 On
January 30, 2024, the Company acknowledged that Adovate had raised $ 4 million and the Company's equity in Adovate was reduced to
equal 15 % of Adovate's equity then outstanding. As a result, the Company recorded a reduction on the value of its equity stake
of $ 283,268.

 In
accordance with ASC 810, the Company determined that Adovate does not qualify as a variable interest entity, nor does the Company have
a controlling financial interest in Adovate. The Company has influence over, but does not control, Adovate through its equity interest
in Adovate. The Company has determined that the equity it owns is in-substance common stock. The Company is not the primary beneficiary
as it does not have the power to direct the activities of Adovate that most significantly impact Adovate's economic performance.
Accordingly, the Company does not consolidate the financial statements of Adovate with those of the Company.

 The
Company recorded the initial investment in Adovate of $ 1,727,897 in "Equity method investments" on its consolidated balance
sheet. Due to the timing and availability of Adovate's financial information, the Company is recording its proportionate share
of losses from Adovate on a one quarter lag basis. Adovate's summary balance sheet information as of September 30, 2024 is below:

 Current Assets

 $
 1,676,591

 Non-current assets

 $
 3,506,713

 Current liabilities

 $
 537,303

 Non-current liabilities

 $
 929,156

 Results
for Adovate's operations in the twelve months ended September 30, 2024 are summarized below:

 Revenues

 $
 —

 Costs and expenses

 3,248,659

 Loss from operations

 ( 3,248,659
)

 Other loss

 119,886

 Net loss

 $
 ( 3,128,773
)

 The Company held a weighted
average of 15.33 % of Adovate's equity in the year ended September 30, 2024. The Company recognized an expense of $ 552,183, classified
as other income (expense), against the carrying amount of the equity method investment, representing the Company's portion of Adovate
operating loss for the period from October 1, 2023 to September 30, 2024 and a reduction in the amount of equity owned by the company,
net of an increase in the value of Adovate equity owned based on the Company's share of dilution to new cash investors in Adovate
during the period from October 1, 2023 to September 30, 2024. At December 31, 2024, the Company held 11.3 % of Adovate's outstanding
equity.

 F- 13

 Activity
recorded for the Company's equity method investment in Adovate in the year ended December 31, 2024 is summarized in the following
table:

 Equity investment carrying amount
 at January 1, 2024

 $
 1,534,013

 Portion of operating losses recognized

 ( 479,636
)

 Reduction in equity

 ( 283,268
)

 Share of dilution to
 new investors

 210,721

 Equity investment carrying
 amount at December 31, 2024

 $
 981,830

 At
December 31, 2024, the Company's maximum exposure to loss through its equity method investment is limited to the value of its equity.

— ACCRUED EXPENSES

expenses consist of the following:

 2024

 2023

 Employee compensation

 $
 405,246

 $
 421,365

 Pre-clinical and manufacturing
 expenses

 81,607

 50,566

 Legal
 and consulting services

 190,603

 5,816

 Total
 accrued expenses

 $
 677,456

 $
 477,747

 8 —
RELATED PARTY TRANSACTIONS

 In
January 2011, the Company entered into an exclusive, worldwide license agreement with The University of Virginia Patent Foundation d/b/a
the University of Virginia Licensing and Ventures Group (the "UVA LVG") for rights to make, use or sell licensed products
in the United States based upon patents and patent applications made and held by UVA LVG (the "UVA LVG License"). The Company
is required to pay compensation to the UVA LVG, as described in Note 11. A certain percentage of these payments by the Company to the
UVA LVG may then be distributed to the Company's former Chairman of the Board and former Chief Medical Officer in his capacity
as inventor of the patents by the UVA LVG in accordance with their policies at the time.

 On
July 1, 2023, the Company executed a shared services agreement with Adovate, Inc., in which the Company holds a significant equity stake
(see Note 6), for sharing of the efforts of certain Adovate employee time and use of Adovate office space and equipment. At December
31, 2024, the Company had $ 28,272 in outstanding accounts payable associated with this agreement. In the years ended December 31, 2024
and 2023, the Company recognized $ 55,667 and $ 32,005, respectively, in expenses associated with this agreement.

 See
Note 11 for related party vendor, consulting, and lease agreements. See Note 4 for a related party sale of business.

 F- 14

— STOCKHOLDERS' EQUITY

 At
the Market Offering Agreement

 On
April 18, 2024, the Company entered into an At the Market Offering Agreement (the "ATM Agreement") with H.C. Wainwright &
Co., LLC (the "Sales Agent" or "Wainwright") providing for the sale by the Company of its shares of common stock,
from time to time, through the Sales Agent, with certain limitations on the amount of Common Stock that may be offered and sold by the
Company 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 Company recognized $ 77,600 in
expenses associated with the conclusion the ATM Agreement, which expenses were classified as cost of capital.

 The
ATM Agreement provides that the Company 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 the Company as permitted therein.

the year ended December 31, 2024, the Company sold 2,348,520 shares of common stock through the ATM Agreement, for net proceeds of $ 4,021,485
after placement fees and expenses.

 Standby
Equity Purchase Agreements

 On
May 31, 2023, the Company entered into an Equity Purchase Agreement with Alumni Capital, LLC ("Alumni"). This agreement constituted
a standby equity purchase agreement (a "SEPA"). Pursuant to the SEPA, the Company has the right, but not the obligation,
to sell to Alumni up to $ 3,000,000 of newly issued shares, subject to increase to $ 10,000,000 at the option of the Company, at the Company's
request at any time during the commitment period, which commenced on May 31, 2023 and will end on the earlier of (i) December 31, 2024,
or (ii) the date on which Alumni shall have made payment of advances requested by the Company totaling up to the commitment amount of
$ 3,000,000. Each sale the Company requests under the SEPA (a "Purchase Notice") may be for a number of shares of common stock
with an aggregate value of up to $ 500,000, and up to $ 2,000,000 provided certain conditions concerning the average daily trading value
are met. The SEPA provides for shares to be sold to Alumni at 95 % of the lowest daily volume weighted average price during the three
days after a Purchase Notice is issued to Alumni. The Company determined that the SEPA contains put option elements and forward share
issuance elements that fail to meet equity classification under ASC 815-40, Contracts in an Entity's Own Equity; the put
option is recorded at fair value at inception and each reporting date thereafter. Forward contracts to issue shares created on the occurrence
of a Purchase Notice will be measured at fair value, with changes in fair value recognized in net loss upon closing of the Purchase Notice
and sale of the Company's stock.

 Upon
the Company's entry into and subject to the terms and conditions set forth in the SEPA, 7,983 shares of common stock were issued
to Alumni as consideration for its irrevocable commitment to purchase shares of common stock, pursuant to the SEPA, as shown in the consolidated
statement of shareholders' equity. The fair value of these shares of $ 51,901 was recorded under other expenses.

 On
August 3, 2023, 20,550 shares of common stock were sold under the terms of the SEPA for cash proceeds $ 140,330.

 On
December 13, 2024, the existing SEPA was cancelled by mutual agreement. Simultaneously, the Company and Alumni Capital entered into a
new Equity Purchase Agreement (the "New SEPA") on substantially the same terms, but with an initial right to sell Alumni
up to $ 5,000,000 in newly issued shares and an end date of the commitment period of December 31, 2026. Upon the Company's entry
into and subject to the terms and conditions set forth in the New SEPA, 68,807 shares of common stock were issued to Alumni as consideration
for its irrevocable commitment to purchase shares of common stock, pursuant to the New SEPA, as shown in the consolidated statement of
shareholders' equity. The fair value of these shares of $ 74,999 was recorded under other expenses. At December 31, 2024, no shares
had been sold under the terms of the New SEPA.

 F- 15

 Other
Common Stock Issuances

 On
February 23, 2023, the Company entered into a securities purchase agreement (the "2023 Purchase Agreement") with an accredited
institutional investor (the "Investor") providing for the issuance of 73,144 shares of the Company's common stock.
Pursuant to the 2023 Purchase Agreement, the Investor purchased the shares of the Company's common stock for an aggregate purchase
price of $ 750,000 with net proceeds of $ 609,613, after placement agent fees and expenses. Pursuant to the Purchase Agreement, an aggregate
of 73,144 shares were issued to the Investor.

 The
Company issued to the placement Agent a warrant (the "Placement Agent Warrants") to purchase up to an aggregate of 7,317
shares of common stock, representing 10 % of the aggregate number of shares of Common Stock sold pursuant to the Purchase Agreement. The
Placement Agent Warrants have an exercise price equal to $ 10.25 and are exercisable two months after the closing date and expire five
years after the date of issuance. The total estimated fair value of the Placement agent warrant was $ 58,540.

 On
June 20, 2023, warrants to purchase 432 shares at an exercise price of $ 0.13 per share were exercised for total proceeds of $ 58.

 On
October 19, 2023, the Company entered into a securities purchase agreement with an institutional investor for the issuance and sale in
a private placement of (i) pre-funded warrants to purchase up to 1,418,440 shares of the Company's common stock, par value $ 0.001
at an exercise price of $ 0.001 per share, (ii) series A warrants to purchase up to 1,418,440 shares of the Company's Common Stock
at an exercise price of $ 2.82 per share, and (iii) series B warrants to purchase up to 1,418,440 shares of the Company's Common
Stock at an exercise price of $ 2.82 per share. The combined purchase price for one Pre-Funded Warrant and the accompanying Warrants was
$ 2.819, for gross proceeds of $ 3,998,582, which was recognized as additional paid-in capital. The net proceeds to the Company from the
Private Placement were approximately $ 3.4 million, after deducting placement agent fees and expenses and offering expenses payable by
the Company. In addition, 85,106 warrants with an exercise price of $ 3.52 per share of common stock were issued to the placement agent.
 Pursuant to the terms of the purchase agreement, the Company was prohibited from entering into
any agreement to issue or announcing the issuance or proposed issuance of any shares of common stock or securities convertible or exercisable
into common stock for a period commencing on October 19, 2023 and expiring January 15, 2024. At December 31, 2024, the Purchaser
had exercised Pre-Funded Warrants to purchase 1,418,440 shares of common stock for total proceeds of $ 1.418, by which time no pre-funded
warrants remained outstanding.

 On
March 1, 2024, warrants for the purchase of 268,440 shares of common stock with an exercise price of $ 2.82 per share were exercised for
total gross proceeds of $ 756,732.

 On
March 1, 2024, the Company entered into a warrant inducement agreement with a certain holder of the Company's warrants to purchase
shares of the Company's common stock (the "Existing Warrants") issued in a private placement offering that closed on
October 24, 2023. Pursuant to the inducement agreement, the holder of the Existing Warrants agreed to exercise 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. The Company received aggregate gross proceeds of approximately $ 3.5
million, before deducting placement agent fees and other expenses payable by the Company. Net proceeds of this transaction were estimated
to be approximately $ 3.1 million.

 In
consideration of the holder's immediate exercise of the Existing Warrants and the payment of $ 0.125 per warrant in accordance with
the inducement agreement, the Company issued unregistered Series C warrants (the "Series C Warrants") to purchase 2,300,000
shares of common stock ( 200 % of the number of shares of common stock issued upon exercise of the Existing Warrants) to the holder of
Existing Warrants. The shares underlying the Series C Warrants were registered for sale on April 12, 2024 and the registrations statement
registering the shares underlying the Series C Warrants was declared effective on April 19, 2024. The fair value per warrant was determined
to be $ 2.066 per warrant, resulting in an expense of issuance of $ 1.94 per warrant as excess fair value over the $ 0.125 paid, or $ 4,464,427
in total inducement expense, classified under other income (expenses).

 On
August 19, 2024, the Company issued 2,400 shares of common stock under the 2017 Equity Incentive Plan to Bankole Johnson, the former
CMO and a continuing consultant.

 F- 16

 2017
Equity Incentive Plan

 On
October 9, 2017, the Company adopted the Adial Pharmaceuticals, Inc. 2017 Equity Incentive Plan (the "2017 Equity Incentive Plan");
which became effective on July 31, 2018. Initially, the aggregate number of shares of our common stock that may be issued pursuant to
stock awards under the 2017 Equity Incentive Plan was 70,000 shares. On November 13, 2024, by a vote of the shareholders, the number
of shares issuable under the 2017 Equity Incentive Plan was increased to 2,000,000. At December 31, 2024 the Company had issued and outstanding
 140,927 shares and 730,908 options to purchase shares of our common stock under the 2017 Equity Incentive Plan, as well as 3,063 options
to purchase shares of common stock that were issued before the 2017 Equity Incentive Plan was adopted, leaving 1,128,165 available for
issue.

 Stock

 The
following table provides the stock option activity for the years ended December, 2024 and 2023:

 Total
 Outstanding

 Weighted
 Remaining
 Term
 (Years)

 Weighted
 Exercise
 Price

 Weighted
 Fair Value
 at Issue

 Outstanding December 31, 2022

 172,676

 7.21

 $
 62.00

 $
 47.75

 Issued

 39,800

 6.11

 Cancelled

 ( 60,282
)

 60.43

 47.39

 Outstanding December 31, 2023

 152,194

 7.02

 $
 48.00

 $
 36.72

 Issued

 595,000

 1.21

 1.04

 Cancelled

 ( 13,223
)

 65.51

 53.37

 Outstanding December 31, 2024

 733,971

 9.01

 $
 9.76

 $
 7.54

 Outstanding December 31, 2024, vested and exercisable

 191,242

 7.08

 $
 33.60

 $
 25.65

 At
December 31, 2024, the total intrinsic value of the outstanding options was zero dollars.

 The
Company used the Black Scholes valuation model to determine the fair value of the options issued, using the following key assumptions
for the years ended December 31, 2024 and 2023:

 2024

 2023

 Fair Value per Share

 $
 1.35 - 1.06

 $
 7.50

 Expected Term

 5.75 years

 5.75 years

 Expected Dividend

 $
 —

 $
 —

 Expected Volatility

 111.89 - 118.39
 %

 107.88
 %

 Risk free rate

 4.09 - 4.29
 %

 1.89
 %

the year ended December 31, 2024, 595,000 options to purchase shares of common stock were granted at a fair value of $ 616,263, an approximate
weighted average fair value of $ 1.04 per option, to be amortized over a service a weighted average period of 3 years. As of December
31, 2024, $ 688,463 in unrecognized compensation expense will be recognized over a dollar weighted remaining service period of 2.36 years.

 The
components of stock-based compensation expense included in the Company's Statements of Operations for the years ended December
31, 2024 and 2023 are as follows:

 Year
 ended December 31,

 2024

 2023

 and development options expense

 $
 54,303

 206,042

 Total
 research and development expenses

 54,303

 206,042

 General
 and administrative options expense

 543,150

 1,026,649

 Stock
 issued to consultants and employees

 199,378

 588,504

 Cancellation of unvested
 stock issued to consultants and employees

 —

 ( 74,817
)

 Total
 general and administrative expenses

 742,528

 1,540,336

 Total
 stock-based compensation expense

 $
 796,831

 $
 1,746,378

 F- 17

 Stock
Warrants

 The
following table provides the activity in warrants for the respective periods.

 Total Warrants

 Weighted
 Remaining
 Term
 (Years)

 Weighted Average Exercise Price

 Intrinsic
 Value

 Outstanding December 31, 2022

 486,726

 3.04

 $
 100.75

 $
 0.25

 Issued

 4,347,743

 1.93

 Expired

 ( 164,589
)

 149.32

 Exercised

 ( 445,872
)

 $
 0.001

 Outstanding December 31, 2023

 4,224,008

 3.31
 *

 $
 7.76

 $
 0.43

 Issued

 2,369,000

 2.84

 Exercised

 ( 2,391,440
)

 $
 1.67

 Outstanding December 31, 2024

 4,201,568

 2.07

 $
 8.45

 $
 0.01

 *
 As the 973,000 pre-funded warrants outstanding on December 31, 2023 did not expire, they have been excluded from this calculation.

the years ended December 31, 2024 and 2023, 2,391,440 and 445,872 warrants to purchase shares of common stock were exercised for total
gross proceeds of $ 4,000,974 and $ 502, respectively.

 10 —
INCOME TAXES

 A
reconciliation of the statutory Federal income tax rate and effective rate of the provision for income taxes is as follows:

 Year
 ended

 2024

 2023

 Federal statutory rate

 21.00
 %

 21.00
 %

 Stock options

 ( 0.93
)%

 ( 3.69
)%

 Change in fair value of investment

 ( 0.00
)%

 ( 0.58
)%

 Transaction expenses

 ( 0.56
)%

 ( 1.67
)%

 Other permanent items

 0.03
 %

 1.25
 %

 State taxes

 2.94
 %

 7.08
 %

 Increase in VA

 ( 15.37
)%

 ( 23.19
)%

 Warrant inducement

 ( 7.10
)%

 0.00
 %

 Other

 0.00
 %

 ( 0.20
)%

 Effective tax rate

 0.00
 %

 0.00
 %

 Tax
expense (benefit) for the year ended December 31, 2024 is shown on the table below:

 Current

 Total

 Federal

 —

 —

 —

 State and Local

 —

 —

 —

 Total

 —

 —

 —

 F- 18

income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities recognized for
financial reporting, and the amounts recognized for income tax purposes. The significant components of deferred tax assets and liabilities
as of December 31, 2023 and 2022, respectively, are as follows:

Tax Assets & Liabilities (rounded)

 Tax Asset

 2024

 2023

 Net operating loss carry-forward

 13,963,767

 12,297,198

 Accrued Expenses

 107,221

 101,758

 Restricted stock

 16,184

 15,854

 Section 174 R&D

 1,510,506

 1,116,665

 Less: valuation allowance

 ( 15,559,357
)

 ( 13,531,039
)

 Total
 tax assets

 $
 38,321

 $

 Fixed Asset

 —

 —

 Intangible assets

 ( 495
)

 ( 437
)

 Joint Venture

 ( 37,826
)

 —

 Total
 deferred tax labilities

 $
 ( 38,321
)

 $
 ( 437
)

 Net
 deferred tax asset (liability)

 $
 —

 $
 —

 The
Company has a net operating loss carry-forward of $ 53.9 million for Federal and of $ 56.4 million state tax purposes at December 31, 2024,
that is potentially available to offset future taxable income. NOLS generated prior to 2018, $340 thousand of Federal NOLS and $655 thousand
of state NOLs, will begin to expire in 2037. For Federal and most states, the NOL carryover limitation was eliminated for losses generated
after January 1, 2018, giving the taxpayer the ability to carry forward losses indefinitely. However, NOL carry forward arising after
January 1, 2018, will now be limited to 80 percent of Taxable income.

 In
assessing the realizability of the deferred tax assets, management considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, net operating loss carryback potential and tax planning strategies in making these assessments.

 Based
upon the above criteria, the Company believes that it is more likely than not that the remaining net deferred tax assets will not be
realized. Accordingly, the Company has recorded a valuation allowance of $ 15.6 million against the net deferred tax asset that is not
realizable as of December 31, 2024.

 Section
382 of the Internal Revenue Code ("Section 382") imposes limitations on a corporation's ability to utilize net operating
losses if it experiences an "ownership change." In general terms, an ownership change may result from transactions increasing
the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. Any unused
annual limitation may be carried over to later years, and the amount of the limitation may under certain circumstances be increased by
the built-in gains in assets held by us at the time of the change that are recognized in the five-year period after the change.

 The
company has not performed a study to assess whether an ownership change for purposes of Section 382 has occurred, or whether there have
been multiple ownership change since the Company's inception, due to the significant costs and complexities associated with such
study. If the company has experienced a change in control, as defined by Section 382, at any time since its public offering, utilization
of net operating loss carryforwards would be subject to an annual limitation under Section 382. Any limitation may result in expiration
of a portion of the net operating losses before utilization.

 The
Company files tax returns as prescribed by the tax laws of the jurisdiction in which they operate. In the normal course of business,
the Company is subject to examination of Federal and state jurisdiction where applicable based on the statute of limitations that apply
in each jurisdiction. As of December 31, 2024, open years related to the federal and state Jurisdictions are 2023, 2022, and 2021. Since
the Company was not a taxable entity prior to reincorporation, examination of returns for years prior to 2017 will not result in changes
to tax liability or benefit. The company has no open tax audits with any taxing authority as of December 31, 2024.

 The
Company had no uncertain tax positions at December 31, 2024.

 F- 19

 11 —
COMMITMENTS AND CONTINGENCIES

 License
with University of Virginia Patent Foundation

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

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

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

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

both the years ended December 31, 2024 and 2023, the Company recognized $ 40,000 minimum license royalty expenses under this agreement,
however, on July 1, 2024, UVA LVG issued a credit of $ 40,000 to the Company against overpayments of royalties in previous periods, resulting
in a net royalty expense for the year ended December 31, 2024 of zero dollars. At December 31, 2024 and 2023, total accrued royalties
and fees due to UVA LVG were zero dollars and $ 40,000, respectively, shown on balance sheet as accrued expenses, related party. At December
31, 2024, the Company had recognized a payable of $ 20,000 for 2024 minimum royalties due, net of the previously issued credit.

 Grant
Incentive Plan – Related Party

 On
April 1, 2018, the board of directors approved and then revised, respectively, a grant incentive plan to provide incentive for Bankole
A. Johnson, the Company's former Chief Medical Officer and a related party, to secure grant funding for the Company. Under the
Grant Incentive Plan, the Company was required to make a cash payment to the Dr. Johnson each year based on the grant funding received
by the Company in the preceding year in an amount equal to 10 % of the first $ 1 million of grant funding received and 5 % of grant funding
received in the preceding year above $ 1 million. Amounts to be paid to the Dr. Johnson be paid as follows: 50 % in cash and 50 % in stock.
As of December 31, 2024, no grant funding that would result in a payment to the Dr. Johnson had been obtained.

 Consulting
Agreement – Related Party

 On
March 24, 2019, the Company entered into a consulting agreement (the "Consulting Agreement") with Dr. Bankole A. Johnson,
who at the time of the agreement was serving as the Chairman of the Board of Directors, for his service as Chief Medical Officer of the
Company. The Consulting Agreement had a term of three years, unless terminated by mutual consent or by the Company for cause. Dr. Johnson
resigned as Chairman of the Board of Directors at the time of execution of the consulting agreement. Under the terms of the Consulting
Agreement, Dr. Johnson's annual fee of $ 375,000 per year was paid twice per month. On September 8, 2022, Dr. Johnson's consulting
agreement was amended to increase his annual compensation to $ 430,000 annually and to pay him series of bonuses in cash and shares on
the occurrence of certain milestones. The Company recognized $ 108,750 and $ 435,000 in compensation expense in the years ended December
31, 2024 and 2023, respectively.

 F- 20

 On
April 10, 2024, the Company provided Dr. Johnson with notice of the termination of the Company's consulting agreement with him.
As a result of the termination of the Consulting Agreement, effective as of May 17, 2024, Dr. Johnson ceased serving as the Company's
Chief Medical Officer. On April 24, 2024, the Company and Dr. Johnson executed a separation agreement providing for Dr. Johnson's
continued service as a consultant on an hourly basis as needed, a separation payment of $ 56,792, and for certain payments on the occurrence
of milestones. In June of 2024, the Company determined that Dr. Johnson had achieved milestones making due to him payments of $ 40,000,
which payment was made on August 20, 2024. On August 18, 2024, the Company issued 2,400 shares of common stock to Dr. Johnson on achievement
of certain milestones as agreed under the separation agreement at a cost of $ 0.98 cents per share, for a total cost of $ 2,352. At December
31, 2024, no milestone payments remained possible under the terms of the separation agreement.

 Consulting
Agreement – Related Party

 On
October 24, 2022, the Company entered into a Master Services Agreement (the "MSA") with Abuwala & Company, LLC, dba as
Orbytel, for provision of strategic consulting services. Orbytel made it known that it intended to utilize the services of the Keswick
Group, LLC as a subcontractor in the provision of these services. Tony Goodman, a director of Company, is the founder and principal of
Keswick Group, LLC, therefore Orbytel was considered a related party. Statement of work #1 ("SOW #1"), executed with the
MSA, committed the Company to $ 209,250 in payments. During the years ended December 31, 2024 and 2023, the Company recognized zero dollars
and $ 57,750 in expenses, respectively, under SOW #1.

 Consulting
Agreement – Related Party

 On
March 15, 2023, the Company entered into a Master Services Agreement (the "Keswick MSA") with the Keswick Group, LLC for
provision of consulting services. Tony Goodman, a director, is the founder and principal of Keswick Group. Under the terms of the Keswick
MSA, the Keswick Group is to be paid $ 22,000 per month for its services for a period of one year from execution of the MSA. On January
17, 2024, the Company entered into a statement of work #2 ("SOW #2") with Tony Goodman and Keswick Group, pursuant to which
Mr. Goodman was appointed as Chief Operating Officer of Adial for compensation of $ 25,000 per month for the role of Chief Operating Officer
including carry over duties from a previous statement of work #1. In the years ended December 31, 2024 and 2023, the Company recognized
$ 298,000 and $ 216,713 in expenses, respectively, associated with this agreement.

 Separation
Agreement – Related Party

 On
November 1, 2024, the Company entered into a Separation Agreement and Release, dated November 1, 2024 (the "Separation Agreement"),
with Joseph Truluck, the Company's former Chief Financial Officer. Mr. Truluck resigned as CFO effective November 15, 2024. Pursuant
to the Separation Agreement, Mr. Truluck receives, as a consultant: (i) from November 16, 2024 through December 31, 2024, an amount equal
to 100% of his most recent base salary, (ii) from January 1, 2025 through March 31, 2025, 50% of his most recent base, and (iii) from
and after March 31, 2025, $350 an hour on an as needed basis. The Separation Agreement contains a general release of all claims against
the Company and its current and former officers, directors, employees and agents, and a non-disparagement clause relating to the Company
or any released party.

 In
the year ended December 31, 2024, the Company recognized $ 35,050 in expenses associated with the Separation Agreement.

 Litigation

 The
Company is subject, from time to time, to claims by third parties under various legal disputes. The defense of such claims, or any adverse
outcome relating to any such claims, could have a material adverse effect on the Company's liquidity, financial condition and cash
flows. As of December 31, 2024, the Company did not have any pending legal actions.

 12 — SEGMENT REPORTING

 The
Company has one reportable operating segment relating to drug development for addiction and related disorders. When evaluating the Company's
financial performance, the CODM reviews total operating expenses for the operating segment excluding discontinued operations and equity
method investments. The CODM makes decisions using this information on a company-wide basis.

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

 For the Year
 Ended

 December
 31,

 2024

 2023

 Operating Expenses:

 Segment research
 and development expenses

 $
 3,229,226

 $
 1,267,077

 Segment
 general and administrative expenses

 5,055,231

 5,620,870

 Total
 Operating Expenses

 8,284,457

 6,887,947

 Total
 Operating Loss

 ( 8,284,457
)

 ( 6,887,947
)

 Interest
 income

 178,659

 69,779

 Inducement
 expense

 ( 4,464,427
)

 —

 Loss
 on equity method investment

 ( 552,183
)

 ( 193,884
)

 Other
 income (expense)

 ( 75,043
)

 10,162

 Total
 other expense

 ( 4,912,994
)

 ( 113,943
)

 from discontinued operations

 —

 1,878,549

 Net
 Loss

)

 ( 5,123,341
)

 13 — SUBSEQUENT EVENTS

 On
January 27, 2025, the Company issued 100,000 shares of common stock to a vendor in compensation for services at a cost of $ 95,030.

 F- 21

 Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.

 Not
applicable.

 Item 9A.
Controls and Procedures.

 Evaluation
of 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 Annual Report on Form 10-K, 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 required under Exchange Act Rule 13a-15, our management, including the Chief Executive Officer and the Chief Financial Officer, after
evaluating the effectiveness of disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the
end of the period covered by this Annual Report on Form 10-K have concluded that our disclosure controls and procedures are ineffective
to ensure that information required to be disclosed us in the reports that we file or submit under the Exchange Act, is recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.

 Management's
Report on Internal Control over Financial Reporting

 Management
is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15.
Internal control over financial reporting is defined in Rule 13a-15(f) and 15(d)-15(f) under the Exchange Act as a process designed to
provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial
statements. Management conducted an assessment of our internal control over financial reporting as of December 31, 2024 based on the
framework and criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated
Framework (2013) (COSO). Based on the assessment, management concluded that, as of December 31, 2024 our internal controls over financial
reporting were not effective.

 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.

 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.

 Limitations
on the Effectiveness of Controls

 We
have not yet retained sufficient staff with appropriate experience in U.S. GAAP, especially of complex instruments and transactions,
to devise and implement effective disclosure controls and procedures, or appropriate internal controls over financial reporting. We will
be required to expend time and resources hiring and engaging additional staff with the appropriate experience to remedy these weaknesses.
We cannot assure you that management will be successful in locating and retaining appropriate candidates; that newly engaged staff will
be successful in remedying material weaknesses thus far identified or identifying material weaknesses in the future; or that appropriate
candidates will be located and retained prior to these deficiencies resulting in material and adverse effects on our business. However,
we have engaged outside consultants with appropriate experience in GAAP presentation, especially of complex instruments, to support our
efforts towards maintaining effective disclosure controls and procedures, and internal controls.

 Our
management, including our Chief Executive Officer and our Chief Financial Officer, do not expect that our disclosure controls and procedures
and our internal control processes will prevent all error and all fraud. A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control
issues and instances of error or fraud, if any, have been detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that the breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any
system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent
limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. However, these
inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards
to reduce, though not eliminate, this risk.

 Changes
in Internal Control Over Financial Reporting

 There
has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act)
that occurred during the three months ended December 31, 2024 that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.

 Item
9B. Other Information.

the three months ended December 31, 2024, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement"
or "non Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

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

 Not
applicable.

 Item 10. Directors, Executive Officers and Corporate Governance.

 Information About our Executive Officers and Directors

 Our business and affairs are organized under the
direction of our board of directors, which currently consists of six members.

 In accordance with the terms of our certificate
of incorporation, our board of directors is divided into three classes, as follows:

 Class
I, which consists of Kevin Schuyler and Tony Goodman, whose term will expire at our annual meeting of stockholders to be held in 2025;

 Class
II, which consists of Robertson H. Gilliland and Cary Claiborne, whose terms will expire at our annual meeting of stockholders to be
held in 2026; and

 Class
III, which consists of J. Kermit Anderson and James W. Newman, Jr., whose terms will expire at our annual meeting of stockholders to
be held in 2027.

 At each annual meeting of stockholders, the successors
to directors whose terms then expire will serve until the third annual meeting following their election and until their successors are
duly elected and qualified. The authorized number of directors may be changed only by resolution of the board of directors. Any additional
directorships resulting from an increase in the number of directors will be distributed between the three classes so that, as nearly as
possible, each class will consist of one-third of the directors.

 Set forth below are our directors and executive
officers and their respective ages and positions as of the date of this Annual Report on Form 10-K:

 Executive Officers and Directors

 Age

 Position(s) Held

 Cary J. Claiborne, MBA

 Chief Executive Officer, President and Director

 Tony Goodman

 Chief Operating Officer and Director

 Vinay Shah, MBA, CPA

 Chief Financial Officer

 Robertson H. Gilliland, MBA

 Director

 J. Kermit Anderson

 Director

 James W. Newman, Jr.

 Director

 Kevin Schuyler, MBA, CFA

 Director, Chairman of the Board, Lead Independent Director

 There are no family relationships among any of
our directors or executive officers. The executive officers and directors named above may act as authorized officers of the Company when
so deemed by resolutions of the Company. Set forth below is a summary of the business experience of each of our directors and executive
officers identified above and our key employee:

 Cary J. Claiborne, Chief Executive Officer, President, and Director

 Cary J. Claiborne has served as our Chief Executive
Officer since August 18, 2022, our Chief Operating Officer from December 2021 to August 18, 2022 and a director since November 2021. In
December 2021, Mr. Claiborne was appointed to the board of directors of NeuroSense Therapeutics, a Nasdaq-listed clinical-stage biopharmaceutical
company, focusing on the discovery and development of targeted innovative therapeutics for neurodegenerative diseases, where he also serves
as Chairman of the audit committee. In July 2022, Mr. Claiborne was appointed to the board of directors of LadRX Corporation (fka CytRx
Corporation), a biopharmaceutical company focused on discovering and developing new cancer therapeutics, where he also serves as Chairman
of the compensation committee. In November 2022, Mr. Claiborne was appointed to the board of directors of VirginiaBio.

 Prior to joining Adial, Mr. Claiborne served as
CEO of Prosperity Capital Management, LLC, a Private Investment and Advisory firm that he founded. Prosperity Capital is focused on private
Investment Management and providing Advisory Services to clients in multiple industries with an emphasis in the Pharma/Biotech and Finance
sectors. From November 2014 until February 2017, he served as the Chief Financial Officer and member of the Board of Directors at Indivior
PLC, a FTSE 500 listed specialty pharmaceutical company. Mr. Claiborne led the company's spin off from its then parent company,
Reckitt Benckiser, to become an independent, listed company. While at Indivior, he established and oversaw corporate reporting, internal
audit, tax, treasury, external audit and information technology. Prior to joining Indivior, Mr. Claiborne served as the CFO of Sucampo
Pharmaceuticals, Inc., a Nasdaq-listed global biopharmaceutical company, which was later sold to Mallinckrodt. Before joining Sucampo,
Mr. Claiborne served as CFO and Corporate Secretary of Osiris Therapeutics, Inc., and oversaw corporate finance during the company's
initial public offering.

 Mr. Claiborne graduated from Rutgers University
with a B.A. in Business Administration and from Villanova University with an M.B.A., and was a National Association of Corporate Directors
(NACD) Governance Fellow.

 We selected Mr. Claiborne to serve on our board
of directors because he brings extensive public company experience and his broad understanding of the financial markets and the financing
opportunities available to us.

 Vinay Shah, Chief Financial Officer and Treasurer

 Vinay Shah became our Chief Financial Officer
in November 2024. Previously, Mr. Shah served as the Chief Financial Officer of Virpax Pharmaceuticals, Inc. from June 2023 until October
2024 and Aravive, Inc. from October 2018 until June 2022. Mr. Shah also served as the Chief Financial Officer of Aravive Biologics, Inc.
from 2010 until October 2018, initially as a consultant and from 2017 as an employee. Mr. Shah brings more than 20 years of financial
management experience in the medical device and biopharmaceutical industries to our company. From 2008 until 2016, he served in various
positions at Pacira Pharmaceuticals Inc., a specialty pharmaceutical company, including Executive Director of Finance and Executive Director
of Strategy Analytics, initially as a consultant and since 2010 as an employee. Before Pacira Pharmaceuticals Inc., Mr. Shah worked for
Cardinal Health's medical device group in various finance management positions. His prior work experience includes positions at
Pricewaterhouse Coopers LLP and KPMG in India and the Middle East. Mr. Shah received a Bachelor of Commerce degree from Ranchi University
in India. He is a Chartered Accountant from the Institute of Chartered Accountants in India and has an MBA from W.P. Carey School of Business
at Arizona State University.

 Tony Goodman, Chief Operating Officer and
Director

 Tony Goodman has served as a director since July
2017 and began providing consulting services to us in March 2023. He was appointed as our Chief Operating Officer on January 18, 2024.
Mr. Goodman's career spans over 23 years in Pharma and Biotech. Mr. Goodman is the Founder/Managing Director of Keswick Group, LLC,
a Biotech Strategic Commercial and Business Development Advisory Firm. On January 17, 2024, Mr. Goodman began serving as the Chief Operating
Officer of Adial Pharmaceuticals, Inc. From October 2014 until February 2017, he served as the Chief Business Development Officer of Indivior
PLC, a FTSE 500 listed company and a member of the executive team which brought Indivior public as a demerger from Reckitt Benckiser Pharmaceuticals,
Inc. Mr. Goodman held many leadership positions at Reckitt Benckiser Pharmaceuticals from October 2009 until October 2014 that include:
Global Director, Strategy and Commercial Development; Global Head, Category Development; and Director of US Commercial Managed Care. Mr.
Goodman has also served as the Director of Strategic Marketing and Business Development at PRA International and Group Product Manager,
Marketing and Director of the Managed Health Strategies Group at Purdue Pharmaceuticals L.P. Mr. Goodman graduated from Marshall University,
with a degree in Business Administration and completed the requirements of a Full Board Executive with the National Association of Corporate
Directors ("NACD").

 We selected Mr. Goodman to serve on our board
of directors because he brings extensive knowledge of the addiction and pharmaceuticals industry and his significant strategic development
experience. Mr. Goodman's experience with the NACD provides him with a broad understanding of the role of directors and corporate
governance issues facing public companies.

 Robertson H. Gilliland, MBA, Director

 Mr. Gilliland has served as a director since
September 2014. Since May 2020, Mr. Gilliland has served as an independent consultant to family offices, with specific
focus on investment strategy formulation and governance. From July 2013 until April 2020, he was Principal and Chief Financial
Officer at Keller Enterprises, LLC, a family office that invests and manages private capital. In addition to his duties as CFO, as a principal,
Mr. Gilliland sourced, vetted and managed a variety of private direct investments and spearheaded internal strategic initiatives.
Prior to joining Keller Enterprises, Mr. Gilliland attended business school beginning in 2011 and was previously a Director at the
Brunswick Group, where he specialized in strategic communications and investor relations around mergers and acquisitions, including being
an advisor on the Pfizer-Wyeth, Celgene-Pharmion, and Mylan-Merck KGaA Generic transactions. During his tenure at Brunswick, Mr. Gilliland
worked on over 35 multi-billion dollar M&A transactions. He has his MBA from the University of Michigan's Ross School of Business,
where he graduated with honors.

 We selected Mr. Gilliland to serve on our
board of directors because he brings extensive knowledge of the financial markets. Mr. Gilliland's business background provides
him with a broad understanding of the financial markets and the financing opportunities available to us.

 J. Kermit Anderson, Director

 J. Kermit Anderson has served as a director since
February 2015. He has served as the VP and Chief Financial Officer at Cumberland Development Co. since 2007. Cumberland is a privately
held company which evaluates and oversees investments in minerals exploration, life sciences, and real estate for a family office. Mr. Anderson
has over forty years of experience in financial and development roles for a number of companies. He holds widely diversified experience
in financial planning and reporting, accounting, forecasting, pricing, GAAP reporting and contract negotiations including benefits and
compensation. His career is split almost equally between public and private companies including major sales and acquisitions. He has held
various positions in energy businesses including Massey Energy, AMVEST and Cumberland Resources Corporation working on the sale of the
companies for the last two roles. Mr. Anderson has worked extensively on startups for Massey and AMVEST including the move to a new
business area with AMVEST. He received his BS -BA from West Virginia University in 1972.

 We selected Mr. Anderson to serve on our
board of directors because he brings extensive industry experience in corporate development and finance. His prior service with other
public companies provides experience related to good corporate governance practices.

 James W. Newman, Jr., Director

 James W. Newman, Jr. has served as a director
since September 2014. Since April 2013, he served as the Founder, Chairman, and President of Medical Predictive Science Corporation
("MPSC"), a medical device company that translates ICU research discoveries to the patient's bedside and develops predictive
technology that detects imminent, catastrophic illness. MPSC's HeRO sold in over 20 countries and is a pioneering monitoring system
for premature infants which detects early signs of distress commonly caused by infection and other potentially life -threatening illnesses.
He has also served as part of the management team of Newman Company, a real estate company, since 1980, for which he still works and is
the sole owner. In the mid — 1990s he began making capital investments in several "start-up" companies, including Charlottesville-based Medical
Automation Systems, a major provider of information management systems for point-of-care testing, which was acquired by Massachusetts-based Alere
Inc. in 2011. His investments have covered a wide range of fields, encompassing everything from biotechnology, bio-informatics, education,
and telecommunications, as well as mechanical inventions. He is particularly interested in investments in the medical field that improve
healthcare, but do so at a reduced cost to consumers. Mr. Newman received a B.A. degree from Upsala College in 1968.

 We selected Mr. Newman to serve on our board
of directors because he brings a strong business background to our company and adds significant strategic, business and financial experience.
Mr. Newman's business and finance background provides him with a broad understanding of the issues faced by companies similar
to us.

 Kevin Schuyler, CFA, Chairman of the Board
of Directors, Lead Independent Director

 Kevin Schuyler has served as our non-executive Chairman of the Board
since August 2022, our director since April 2016 and is our Lead Independent Director. From April 2016 to August 2022, he served as our
Vice Chairman of the board of directors. Kevin is a Managing Director for CornerStone Partners, an institutional investment adviser.
Before joining CornerStone Partners in 2006, he was the chief investment officer at The Nature Conservancy, the world's largest not-for-profit
conservation organization. Kevin began his professional career working at the Chicago Board of Trade with Louis Dreyfus Corporation and
later was a management consultant with McKinsey & Company. Kevin serves on the board of Wildrock, Inc., a local not-for-profit, and
is a director and Chairman of the Board of Twin Vee Powercats, a NASDAQ-listed company (VEEE). A member of the Chartered Financial Analyst
Society of Virginia, Kevin graduated with honors from Harvard College and earned an MBA from the Darden Graduate School of Business at
the University of Virginia.

 We selected Mr. Schuyler to serve on our
board of directors because he brings extensive knowledge of the financial markets. Mr. Schuyler's business background provides
him with a broad understanding of the financial markets and the financing opportunities available to us.

 Board Composition and Election of Directors

 Our board of directors consists of six members:
Messrs. Kermit Anderson, Robertson Gilliland, Tony Goodman, James Newman, Kevin Schuyler, and Cary Claiborne. Our board of directors has
undertaken a review of its composition and its committees and the independence of each director. Based upon information requested from
and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board
of directors has determined that each of Messrs. Kermit Anderson, Robertson Gilliland, James Newman, and Kevin Schuyler is "independent"
under the applicable rules of the SEC and Nasdaq and that each of Mr. Claiborne and Mr. Goodman are not "independent" as defined
under such rules. In making such determination, our board of directors considered the relationship that each such non-employee director
has with our company and all other facts and circumstances that our board of directors deemed relevant in determining his independence,
including the beneficial ownership of our capital stock by each non-employee director. Messrs. Claiborne and Goodman are not independent
directors under these rules because Mr. Claiborne is our Chief Executive Officer and President and Mr. Goodman is our Chief Operating
Officer, who previously served as a consultant prior to his appointment pursuant to the consulting arrangement that we entered into with
him in March 2023.

 Corporate Governance

 Board Committees

 Our board of directors has established an Audit
Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, each of which and operates pursuant to a written
charter, the full text of which are available on our website at www.adial.com. From time to time, the Board of Directors may also
establish ad hoc committees to address particular matters.

 Audit Committee

 The members of our Audit Committee are Messrs.
Schuyler, Newman, and Anderson each of whom has been determined by our board of directors to be independent under applicable Nasdaq and
SEC rules and regulations. Mr. Schuyler is the chair of the Audit Committee. Our Audit Committee's responsibilities include, among
others:

 appointing,
approving the compensation of, and assessing the independence of our registered public accounting firm;

 overseeing
the work of our independent registered public accounting firm, including through the receipt and consideration of reports from that firm;

and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements and
related disclosures;

 monitoring
our internal control over financial reporting, disclosure controls and procedures;

 overseeing
our internal audit function;

 discussing
our risk management policies;

 establishing
policies regarding hiring employees from our independent registered public accounting firm and procedures for the receipt and retention
of accounting related complaints and concerns;

 meeting
independently with our internal auditing staff, if any, our independent registered public accounting firm and management;

and approving or ratifying any related person transactions; and

 preparing
the Audit Committee report required by Securities and Exchange Commission, or SEC, rules.

 All audit and non-audit services, other than de
minimis non-audit services, to be provided to us by our independent registered public accounting firm must be approved in advance
by our Audit Committee.

 Our board of directors has determined that Mr.
Schuyler is an "audit committee financial expert" as defined in applicable SEC rules.

 Compensation Committee

 The members of our Compensation Committee are
Messrs. Anderson, Gilliland, and Newman, each of whom has been determined by our board of directors to be independent under current Nasdaq
rules and regulations. Mr. Anderson is the chair of the Compensation Committee. Our Compensation Committee's responsibilities include,
among others:

and approving annually the corporate goals and objectives applicable to the compensation of the Chief Executive Officer, evaluating at
least annually the Chief Executive Officer's performance in light of those goals and objectives, and determining and approving
the Chief Executive Officer's compensation level based on this evaluation;

and approving the compensation of all other executive officers;

and approving and, when appropriate, recommending to the board of directors for approval, incentive compensation plans and equity-based
plans, and where appropriate or required, recommending for approval by the stockholders of the Company, the adoption, amendment or termination
of such plans; and administering such plans;

and approving the executive compensation information included in our annual report on Form 10-K and proxy statement;

and approving or providing recommendations with respect to any employment agreements or severance arrangements or plans; and

director compensation and recommending any changes to the board of directors.

 Nominating and Corporate Governance Committee

 The members of our Nominating and Corporate Governance
Committee are Messrs. Gilliland, and Schuyler, each of whom has been determined by our board of directors to be independent under current
Nasdaq rules. Mr. Gilliland is the chair of the Nominating and Corporate Governance Committee. Our Nominating and Corporate Governance
Committee's responsibilities include, among others:

 identifying
and recommending candidates to fill vacancies on the board of directors and for election by the stockholders;

 recommending
committee and chairperson assignments for directors to the board of directors;

 developing,
subject to the board of directors' approval, a process for an annual evaluation of the board of directors and its committees and
to oversee the conduct of this annual evaluation;

 overseeing
the Company's corporate governance practices, including reviewing and recommending to the board of directors for approval any changes
to the documents and policies in the Company's corporate governance framework, including its certificate of incorporation and bylaws;
and

 monitoring
compliance with the Company's Code of Business Conduct and Ethics, investigating alleged breaches or violations thereof and enforcing
its provisions.

 Board of Directors Leadership Structure

 We currently have a separate lead independent
director. Our lead independent director is Kevin Schuyler. In that role, he presides over the executive sessions of the board of directors,
during which our independent directors meet without management, and he serves as the principal liaison between management and the independent
directors of the board of directors. We do not have a formal policy regarding having a separate lead independent director. Our board of
directors has determined its leadership structure is appropriate and effective for us, given our stage of development.

 Risk Oversight

 Our board of directors monitors our exposure to
a variety of risks through our Audit Committee. Our Audit Committee charter gives the Audit Committee responsibilities and duties that
include discussing with management, the internal audit department and the independent auditors our major financial risk exposures and
the steps management has taken to monitor and control such exposures, including our risk assessment and risk management policies.

 Code of Conduct and Ethics

 We have adopted a code of business conduct and
ethics that applies to all of our employees, officers, and directors, including those officers responsible for financial reporting. These
standards are designed to deter wrongdoing and to promote honest and ethical conduct. The code of conduct and ethics is available on our
website at www.adial.com. The information that appears on our website is not part of, and is not incorporated into, this Annual
Report on Form 10-K.

 None of our directors or executive officers, nor
any associate of such individual, is involved in a legal proceeding adverse to us.

 If we make any substantive amendments to the code
of business conduct and ethics or grant any waiver from a provision of the code to any executive officer or director, we will promptly
disclose the nature of the amendment or waiver on our website. We will promptly disclose on our website (i) the nature of any amendment
to the policy that applies to our principal executive officer, principal financial officer, principal accounting officer or controller,
or persons performing similar functions and (ii) the nature of any waiver, including an implicit waiver, from a provision of the policy
that is granted to one of these specified individuals, the name of such person who is granted the waiver and the date of the waiver.

 Insider Trading Policy

 We have adopted an insider trading policy (the
"Trading Policy") and related procedures governing the purchase, sale, and/or other dispositions of our securities by us,
directors, officers and employees, that are reasonably designed to promote compliance with insider trading laws, rules and regulations,
and the listing standards of Nasdaq. The Trading Policy also sets forth the policies and procedures covering the handling of our confidential
information. The Trading Policy, which applies to all officers, employees, directors, consultants and independent contractors of the Company
and its subsidiaries (each a "Covered Person"), prohibits the purchase or sale of our securities by a Covered Person, including
their family members and others living in their household, who is in possession of material non-public information. The Trading Policy
also prohibits, among other things short-term trading, short sales, hedging and pledging. Consequently, no employee, executive officer
or director may enter into a hedge or pledge of our common stock, including short sales, derivatives, put options, swaps and collars.
A copy of the Trading Policy is filed as an exhibit to this Annual Report on Form 10-K.

 Delinquent Section 16(a) Reports

 We had one delinquent Form 4 filing made by Bankole Johnson on June
2, 2023.

 Item 11. Executive Compensation.

 Summary Compensation Table

 The following table sets forth the information
as to compensation paid to or earned by our executive officers during the years ended December 31, 2024 and 2023 whose total compensation
did exceed $100,000. The persons listed in the following table are referred to herein as the "named executive officers."

 Name and Principal Position

 Fiscal
 Year

 Salary

 Bonuses

 Option & Stock
 Award(s)

 All Other

 Total

 2024

 $
 485,688

 $
 –
 (1)

 $
 415,008
 (2)

 $
 75,643
 (3)

 $
 976,339

 Chief Executive Officer and Member of the Board of Directors

 2023

 $
 465,625

 $
 190,000
 (4)

 $
 73,314
 (5)

 $
 72,682
 (6)

 $
 801,621

 Joseph A. M. Truluck

 2024

 $
 250,250

 $
 –
 (7)

 $
 28,392
 (8)

 $
 49,773
 (9)

 $
 328,415

 Former Chief Financial Officer

 2023

 $
 276,250

 $
 70,000
 (10)

 $
 30,547
 (11)

 $
 12,236
 (12)

 $
 389,033

 Tony Goodman

 2024

 $
 298,500
 (13)

 $
 –

 $
 47,698
 (14)

 $
 30,000
 (15)

 $
 376,198

 Chief Operating Officer

 2023

 $
 –

 $
 –

 $
 12,219
 (16)

 $
 246,713
 (17)

 $
 258,932

 (1)

 The Company has accrued an expense of $196,236 for a bonus deemed earned in 2024. However, at the date of this report, Mr. Claiborne's bonus has not been paid and remains at the Board of Directors' discretion.

 (2)

 The total fair value of 60,000 options to purchase shares of common stock at an exercise price of $1.35 per share issued on March 23, 2024 at a fair value of $1.14 per option and 350,000 options to purchase shares of common stock at an exercise price of $1.15 per share issued on December 5, 2024 at a fair value of $0.99 per option. Options vest over a three year period from grant date. Fair value computed in accordance with FASB ASC Topic 718.

 (3)

 Includes (i) the payment of $31,530 of medical, dental, life, and disability insurance premiums, (ii) $13,800 of matched 401(k) contributions, (iii) $30,000 cash fee for services as a Director, and (iv) $313 of reimbursed telephone expenses.

 (4)

 Comprised of a $190,000 cash bonus payment earned in 2023 and paid in 2024.

 (5)

 The fair value of 12,000 options to purchase shares of common stock at an exercise price of $7.50 per share issued on May 23, 2023 at a fair value of $6.11 per option. Options vest over a three year period from grant date. Fair value computed in accordance with FASB ASC Topic 718.

 (6)

 Includes (i) the payment of $28,721 of medical, dental, life, and disability insurance premiums, (ii) $13,200 of matched 401(k) contributions, (iii) $30,000 cash fee for services as a Director, and (iv) $761 of reimbursed telephone expenses.

 (7)

 The Company has accrued an expense of $72,298 for a bonus deemed earned in 2024. However, at the date of this report, Mr. Truluck's bonus has not been paid and remains at the Board of Directors' discretion.

 (8)

 The fair value of 25,000 options to purchase shares of common stock at an exercise price of $1.35 per share issued on March 23, 2024 at a fair value of $1.14 per option.

 (9)

 Comprised of (i) $12,810 in matched 401(k) contributions, (ii) $913 in life and disability insurance premiums, and (iii) $36,050 in transition consulting fees.

 (10)

 Comprised of a $70,000 cash bonus payment earned in 2023 and paid in 2024.

 (11)

 The fair value of 5,000 options to purchase shares of common stock at an exercise price of $7.50 per share issued on May 23, 2023 at a fair value of $6.11 per option. Options vest over a three year period from grant date. Fair value computed in accordance with FASB ASC Topic 718.

 (12)

 Comprised of (i) $11,163 in matched 401(k) contributions and (ii) $1,073 in life and disability insurance premiums.

 (13)

 Mr. Goodman's salary is paid to the Keswick Group, LLC, of which he is principal.

 (14)

 The total fair value of 42,000 options to purchase shares of common stock at an exercise price of $1.35 per share issued on March 23, 2024 at a fair value of $1.14 per option. Options vest over a three year period from grant date. Fair value computed in accordance with FASB ASC Topic 718.

 (15)

 Comprised of a $30,000 cash fee for services as a Director.

 (16)

 The fair value of 2,000 options to purchase shares of common stock at an exercise price of $7.50 per share issued on May 23, 2023 at a fair value of $6.11 per option. Options vest over a three year period from grant date. Fair value computed in accordance with FASB ASC Topic 718.

 (17)

 Includes (i) the payment of $216,713 in consulting fees made to Keswick Group, of which Mr. Goodman in principal, and (ii) $30,000 cash fee for services as a Director.

 Outstanding Equity Awards at Fiscal Year-End (December 31, 2024)

 The following table provides information about
the number of outstanding equity awards held by each of our named executive officers as of December 31, 2024:

 Option Awards

 Stock Awards

 Name

 Number of

 Securities

 Underlying

 Unexercised

 (Exercisable)

 Number of

 Securities

 Underlying

 Unexercised

 (Unexercisable)

 Option

 Exercise

 Price

 Option

 Expiration

Date

 Incentive

 Plan

Awards:

 Number of

 Unearned

 Shares

 That

Have Not

 Vested

 Incentive

Plan

Awards:

 Market or

 Payout

Value of

 Unearned

 Shares

That

Have Not

 Vested

 9,995

 $
 10,095

 Chief Executive Officer and

 2,400

 —
 (1)

 $
 77.75

 10/25/31

 5,200

 —
 (2)

 $
 66.00

 12/7/31

 (3)

 $
 50.00

 2/23/32

 6,667

 5,333
 (4)

 $
 7.50

 5/22/33

 16,667

 43,333
 (5)

 1.35

 3/25/34

 9,722

 340,278
 (6)

 1.15

 12/5/34

 Joseph Truluck

 1,205

 —
 (7)

 $
 142.47

 6/30/27

 Former Chief Financial Officer

 7,200

 —
 (8)

 $
 84.75

 3/9/29

 8,000

 —
 (9)

 $
 36.00

 3/3/30

 5,000

 —
 (10)

 $
 77.75

 2/8/31

 3,889

 (3)

 $
 50.00

 2/23/32

 2,778

 2,222
 (4)

 $
 7.50

 5/22/33

 6,944

 18,056
 (5)

 1.35

 3/25/34

 Tony Goodman

 —
 (7)

 $
 142.47

 6/30/27

 Chief Operating Officer

 2,400

 —
 (9)

 $
 36.00

 3/3/27

 1,600

 —
 (1)

 $
 77.75

 2/8/31

 1,556

 (3)

 $
 50.00

 2/23/32

 (11)

 $
 30.75

 6/27/32

 1,111

 (4)

 $
 7.50

 5/23/33

 11,667

 30,333
 (5)

 $
 1.35

 3/25/34

 (1)

 One thirty-sixth (1/36) of these options vested on the date of grant, October 25, 2021, with an additional one thirty-sixth vesting on the first day of each subsequent month. At the date of this filing, these grants are fully vested.

 (2)

 One thirty-sixth (1/36) of these options vested on the date of grant, December 7, 2021, with an additional one thirty-sixth vesting on the first day of each subsequent month. At the date of this filing, these grants are fully vested.

 (3)

 One thirty-sixth (1/36) of these options vested on the date of grant, February 23, 2022, with an additional one thirty-sixth vesting on the first day of each subsequent month.

 (4)

 One thirty-sixth (1/36) of these options vested on the date of grant, May 23, 2023, with an additional one thirty-sixth vesting on the first day of each subsequent month.

 (5)

 One thirty-sixth (1/36) of these options vested on the date of grant, March 25, 2024, with an additional one thirty-sixth vesting on the first day of each subsequent month.

 (6)

 One thirty-sixth (1/36) of these options vested on the date of grant, December 5, 2024, with an additional one thirty-sixth vesting on the first day of each subsequent month.

 (7)

 One thirty-sixth (1/36) of these options vested on the date of grant, July 1, 2017, with an additional one thirty-sixth vesting on the first day of each subsequent month.

 (8)

 One thirty-sixth (1/36) of these options vested on the date of grant, March 10, 2019, with an additional one thirty-sixth vesting on the first day of each subsequent month.

 (9)

 One thirty-sixth (1/36) of these options vested on the date of grant, March 3, 2020, with an additional one thirty-sixth vesting on the first day of each subsequent month.

 (10)

 One thirty-sixth (1/36) of these options vested on the date of grant, February 8, 2021, with an additional one thirty-sixth vesting on the first day of each subsequent month.

 (11)

 One thirty-sixth (1/36) of these options vested on the date of grant, June 27, 2022, with an additional one thirty-sixth vesting on the first day of each subsequent month.

 Clawback Policy

 The Board has adopted a clawback policy which
allows us to recover performance-based compensation, whether cash or equity, from a current or former executive officer in the event of
an Accounting Restatement. The clawback policy defines an Accounting Restatement as an accounting restatement of our financial statements
due to our material noncompliance with any financial reporting requirement under the securities laws. Under such policy, we may recoup
incentive-based compensation previously received by an executive officer that exceeds the amount of incentive-based compensation that
otherwise would have been received had it been determined based on the restated amounts in the Accounting Restatement.

 The Board has the sole discretion to determine
the form and timing of the recovery, which may include repayment, forfeiture and/or an adjustment to future performance-based compensation
payouts or awards. The remedies under the clawback policy are in addition to, and not in lieu of, any legal and equitable claims available
to the Company. The clawback policy is incorporated by reference to this Annual Report on Form 10-K as an exhibit.

 Equity Compensation Policy

 While we do not have a formal written policy in
place with regard to the timing of awards of options in relation to the disclosure of material nonpublic information, the Compensation
Committee does not seek to time equity grants to take advantage of information, either positive or negative, about our company that has
not been publicly disclosed. It has been our practice to grant equity awards to our officers and directors upon their appointment. We
intend to issue equity grants to our officers and/or directors at the same time each year, typically in connection with our first meeting
of the Board of Directors each fiscal year. Option grants are effective on the date the award determination is made by the Compensation
Committee, and the exercise price of options is the closing market price of our common stock on the business day of the grant or, if the
grant is made on a weekend or holiday, on the prior business day.

 During the fiscal year ended December 31, 2024,
we did not award any options to a named executive officer in the period beginning four business days before the filing of a periodic report
on Form 10-Q or Form 10-K, or the filing or furnishing of a current report on Form 8-K that discloses material nonpublic information,
and ending one business day after the filing or furnishing of such report other than as set forth in the table below:

 Name

 Grant date

 Number of securities
 underlying the award

 Exercise
 price of the award per share

 Grant date fair value of the award

 Percentage change in the closing market price of the securities underlying the award between the trading day ending immediately prior to the disclosure of material nonpublic information and the trading day beginning immediately following the disclosure of material nonpublic information

 12/05/24

 350,000

 $
 1.15

 $
 346,868

 6.96
 %

 Employment Agreements and Consulting Agreement

 Employment Agreements

 We are currently a party to employment agreements
with each of Messrs. Claiborne and Shah.

 In connection with the
appointment of Mr. Claiborne as Chief Operating Officer of the Company, we and Mr. Claiborne entered into a three-year employment agreement
(the "Claiborne Employment Agreement"). Pursuant to the terms of the Claiborne Employment Agreement, Mr. Claiborne received
an annual base salary of $304,000, had a target bonus opportunity equal to 40% of his base salary and devoted no less than 80% of his
business time to the affairs of the Company. On August 22, 2022, Mr. Claiborne was appointed Chief Executive Officer by the Board of Directors,
at which time his employment agreement was amended to increase his annual base salary to $450,000 and Mr. Claiborne agreed to devote substantially
all his business time to the affairs of the Company. On execution of this agreement, Mr. Claiborne was also granted one million shares
of common stock, said shares vesting over a three year period. Effective December 5, 2024, we entered into an Amended and Restated Employment
Agreement (the "Claiborne EA") with Mr. Claiborne to employ him as our Chief Executive Officer for a three-year term commencing
on December 5, 2024. The Claiborne EA replaces and supersedes the Claiborne Employment Agreement, as amended August 22, 2022. Pursuant
to the Claiborne EA, Mr. Claiborne receives an annual base salary of $489,250 and his bonus target was increased to 50% of his base salary
upon achievement of objectives as may be determined by our board of directors. Mr. Claiborne also received a grant of stock options to
purchase 350,000 shares of our common stock under the 2017 Equity Incentive Plan, vesting monthly on a pro rata basis over 36 months.
Mr. Claiborne's annual salary is subject to increase at the discretion of the Board. The Board may, in its discretion, pay a portion
of Mr. Claiborne's annual bonus in the form of cash or equity or equity-based awards (or any combination thereof). Mr. Claiborne
is also subject to certain restrictive covenants, including a non-competition (applicable during employment and for 24 months thereafter),
customer non-solicitation and employee and independent contractor non-solicitation (each applicable during employment and for 12 months
thereafter), as well as confidentiality (applicable during employment and 7 years thereafter) and non-disparagement restrictions (applicable
during employment and at all times thereafter).

 In connection with the appointment of Mr. Shah
as Chief Financial Officer of the Company on, we and Mr. Shah entered into an employment agreement (the "Shah EA") for a three-year
term effective November 16, 2024. Pursuant to the Shah EA, Mr. Shah receives an annual base salary of $315,000, with a discretionary bonus
of up to 30% of his base salary upon achievement of objectives as may be determined by our board of directors. Pursuant to the Shah EA,
we also issued to Mr. Shah a stock option to purchase up to 40,000 shares of common stock pursuant to our 2017 Equity Incentive Plan (the
"Plan"), which vests pro rata on a monthly basis over 36 months, at an exercise price of $1.06. Mr. Shah is also subject to
certain restrictive covenants, including a non-competition (applicable during employment and for 24 months thereafter), customer non-solicitation
and employee and independent contractor non-solicitation (each applicable during employment and for 12 months thereafter), as well as
confidentiality (applicable during employment and 7 years thereafter) and non-disparagement restrictions (applicable during employment
and at all times thereafter).

 In the event that Mr. Claiborne's or Mr.
Shah's (each an "Executive") employment is terminated by us other than for Cause, or upon his resignation for Good Reason
(as such terms are defined in the Claiborne EA and Shah EA), the Executive will be entitled to any unpaid bonus earned in the year prior
to the termination, a pro -rata portion of the bonus earned during the year of termination, continuation of base salary for 12 months
in the case of Mr. Claiborne, or 6 months in the case of Mr. Shah. In the event Mr. Claiborne's employment is terminated without
Cause following a Change of Control, he will be entitled to any unpaid bonus earned in the year prior to the termination, and a lump sum
payment equal to two times the sum of: (i) his annual base salary and (ii) the higher of his target cash bonus and the annual bonus paid
to him with respect to the fiscal year prior to the fiscal year in which termination occurred. In the event Mr. Shah's employment
is terminated without Cause following a Change of Control, he will be entitled to any unpaid bonus earned in the year prior to the termination,
and a lump sum payment equal to twelve times his monthly base salary and the higher of his target cash bonus and the annual bonus paid
to him with respect to the fiscal year prior to the fiscal year in which termination occurred.

 In the event that the Executive's employment
is terminated due to his death or Disability, the Executive (or his estate) will be entitled to any unpaid bonus earned in the year prior
to the termination, a pro-rata portion of the bonus earned during the year of termination, 12 months of COBRA premium reimbursement and
accelerated vesting of (a) all equity awards received in payment of base salary or an annual bonus and (b) with respect to any other equity
award, the greater of the portion of the unvested equity award that would have become vested within 12 months after the termination date
had no termination occurred and the portion of the unvested equity award that is subject to accelerated vesting (if any) upon such termination
under the applicable equity plan or award agreement (with performance goals deemed earned at not less than target performance, and with
any equity award that is in the form of a stock option or stock appreciation right to remain outstanding and exercisable for 12 months
following the termination date or, if longer, such period as provided under the applicable equity plan or award agreement (but in no event
beyond the expiration date of the applicable option or stock appreciation right).

 All severance payments to the Executives will
be subject to the execution and non-revocation of a release of claims by the Executive or his estate, as applicable.

 Effective upon the closing of the initial public
offering, we entered into a three -year employment agreement with Joseph Truluck to serve as our Chief Operating Officer and Chief Financial
Officer (the "Truluck EA"), which agreement was amended on February 12, 2021 to extend the term of the agreement to March
31, 2026. Under the Truluck EA, Mr. Truluck devoted no less than 50% of his business time to the affairs of our company, which was increased
to 75% on February 12, 2021. Pursuant to the terms of the Truluck EA, as amended on March 10, 2019 to increase his salary to $150,000
per annum and further amended on March 3, 2020 to increase his salary to $170,000 per annum and further amended on February 23, 2022,
he received an annual salary of $270,000 and had a target bonus opportunity equal 25% of his salary. Mr. Truluck's annual salary
was subject to increase at the discretion of our board of directors. Our board of directors could have, in its discretion, paid a portion
of Mr. Truluck's annual bonus in the form of equity or equity -based compensation. Mr. Truluck is also subject to certain restrictive
covenants, including a non -competition (applicable during employment and for 24 months thereafter), customer non -solicitation and employee
and independent contractor non -solicitation (each applicable during employment and for 12 months thereafter), as well as confidentiality
(applicable during employment and 7 years thereafter) and non-disparagement restrictions (applicable during employment and at all times
thereafter).

 In the event that Mr. Truluck's employment
was terminated by us other than for Cause, or upon his resignation for Good Reason (as such terms are defined in the Truluck EA), he would
have been entitled to any unpaid bonus earned in the year prior to the termination, a pro -rata portion of the bonus earned during the
year of termination, and continuation of base salary for 6 months. In the event that Mr. Truluck's employment was terminated due
to his death or Disability, he (or his estate) would have been entitled to any unpaid bonus earned in the year prior to the termination,
a pro-rata portion of the bonus earned during the year of termination, 12 months of COBRA premium reimbursement and accelerated vesting
of (a) all equity awards received in payment of base salary or an annual bonus and (b) with respect to any other equity award, the greater
of the portion of the unvested equity award that would have become vested within 12 months after the termination date had no termination
occurred and the portion of the unvested equity award that is subject to accelerated vesting (if any) upon such termination under the
applicable equity plan or award agreement (with performance goals deemed earned at not less than target performance, and with any equity
award that is in the form of a stock option or stock appreciation right to remain outstanding and exercisable for 12 months following
the termination date or, if longer, such period as provided under the applicable equity plan or award

 For purpose of each of the Claiborne EA, Shah
EA, and Truluck EA, "Good Reason" is defined as the occurrence of any of the following events without the respective Executive's
consent: (i) a material reduction in the Executive's duties, responsibilities or authority; (ii) a reduction of the Executive's
base salary; (iii) failure or refusal of a successor to us to either materially assume our obligations under the employment agreement
or enter into a new employment agreement with the Executive on terms that are materially similar to those provided under this Agreement,
in any case, in the event of a Change of Control; (iv) relocation of the Executive's primary work location that results in an increase
in the Executive's one -way driving distance by more than twenty -five (25) miles from the Executive's then -current principal
residence; or (v) a material breach of the employment agreement by us.

 For purposes of the Claiborne EA, Shah EA, and
Truluck EA, "Cause" is defined as that the Executive shall have engaged in any of the following acts or that any of the following
events shall have occurred, all as determined by the board of directors in its sole and absolute discretion: (i) conviction for, or entering
of a plea of guilty or nolo contendere (or its equivalent under any applicable legal system) with respect to (A) a felony or (B) any crime
involving moral turpitude; (ii) commission of fraud, misrepresentation, embezzlement or theft against any person; (iii) engaging in any
intentional activity that injures or would reasonably be expected to injure (monetarily or otherwise), in any material respect, the reputation,
the business or a business relationship of the Company or any of its affiliates; (iv) gross negligence or willful misconduct in the performance
of the Executive's duties to us or its affiliates under this Agreement, or willful refusal or failure to carry out the lawful instructions
of the board of directors that are consistent with the Executive's title and position; (v) violation of any fiduciary duty owed
to us or any of its affiliates; or (vi) breach of any restrictive covenant (as defined) or material breach or violation of any other provision
of the employment agreement, of a written policy or code of conduct of our company or any of our affiliates (as in effect from time to
time) or any other agreement between the Executive and we or any of our affiliates. Except when such acts constituting Cause which, by
their nature, cannot reasonably be expected to be cured, the Executive will have twenty (20) days following the delivery of written notice
by the Company of its intention to terminate the Executive's employment for Cause within which to cure any acts constituting Cause.
Following such twenty (20) day cure period, and if the reason stated in the notice is not cured, the Executive shall be given five (5)
business days prior written notice to appear (with or without counsel) before the full Board for the opportunity to present information
regarding his views on the alleged Cause event. After we provide the original notice of our intent to terminate Executive's employment
for Cause, we may suspend the Executive, with pay, from all his duties and responsibilities and prevent him from accessing our or our
affiliates premises or contacting any of our personal or any of our affiliates until a final determination on the hearing is made. The
Executive will not be terminated for Cause until a majority of the independent directors approve such termination following the hearing.

 For the purposes of each of the Claiborne EA,
Shah EA, and Truluck EA, "Change of Control" is defined as: (i) the accumulation over a twelve (12) month period, whether
directly or indirectly, by any individual, entity or group of our securities representing over fifty (50%) percent of the total voting
power of all our then outstanding voting securities; (ii) a merger or consolidation of us in which our voting securities immediately prior
to the merger or consolidation do not represent, or are not converted into securities that represent, a majority of the voting power of
all voting securities of the surviving entity immediately after the merger or consolidation; (iii) a sale of substantially all of our
assets; or (iv) during any period of twelve (12) consecutive months, our current directors, together with any new director whose election
by the board of directors or nomination for election by the Company's stockholders was approved by a vote of at least a majority
of the directors then still in office, cease for any reason to constitute at least a majority of the board of directors.

 Effective upon the closing of our initial public
offering, we entered into a five-year employment agreement with William B. Stilley to serve as our Chief Executive Officer, which agreement
was amended on February 12, 2021 to extend the term of the agreement to March 31, 2026 (the "Stilley EA"). Under the Stilley
EA, as amended on March 10, 2019 to increase his salary to $400,000 and further amended on February 12, 2021 and March 17, 2021, Mr. Stilley
received an annual salary of $410,000 and had a target bonus opportunity equal to 40% of his salary. Mr. Stilley's annual salary
was subject to increase at the discretion of our board of directors. On August 22, 2022, Mr. Stilley was appointed by the Board to be
Chief Executive Officer of the Company's wholly owned subsidiary, Purnovate, Inc. At this time, his employment agreement was amended
to make his annual salary equal to $260,000, which was to be increased to $430,000 at such time as Purnovate's cash on hand is equal
to three million dollars or more. Our board of directors could, in its discretion, pay a portion of Mr. Stilley's annual bonus in
the form of equity or equity-based compensation, provided that commencing with the year following the year in which a Change of Control
(as defined in the Stilley EA) occurs, Mr. Stilley's annual bonus was paid in cash. Mr. Stilley is also subject to certain restrictive
covenants, including a non-competition (applicable during employment and for 24 months thereafter), customer non-solicitation and employee
and independent contractor non -solicitation (each applicable during employment and for 12 months thereafter), as well as confidentiality
(applicable during employment and 7 years thereafter) and non-disparagement restrictions (applicable during employment and at all times
thereafter). On January 27, 2023, we entered into an amendment to the Stilley EA, as amended, that (i) deleted the provision of the employment
agreement that provided that the termination by Mr. Stilley of his employment on or before February 22, 2023 shall be deemed to be a termination
by him for good reason and (ii) added a provision to the employment agreement providing that Mr. Stilley will not serve on a full time
basis for us and may provide services to other businesses including Adovate. Effective May16, 2023, the Stilley EA was assumed by Adovate,
LLC on exercise of Adovate's option to purchase the business of Purnovate, Inc., leaving the Company with no obligations under the
agreement. Mr. Stilley remained a member of the Board. On September 18, 2023, Mr. Stilley notified us of his decision to resign, effective
at such date, from his position as a member of the Board and any other executive positions with us and our subsidiaries.

 Separation Agreement

 On November 1, 2024,
we entered into a Separation Agreement and Release, dated November 1, 2024 (the "Separation Agreement"), with Mr. Truluck.
Pursuant to the Separation Agreement, Mr. Truluck is entitled to: (i) from November 1, 2024 through December 31, 2024, 100% of his current
base salary during which period he served until November 15, 2024 as our Chief Financial Officer and thereafter as a consultant to us,
(ii) from January 1, 2025 through March 31, 2025, 50% of his current base salary as a consultant to us; and (iii) from and after March
31, 2025, $350 an hour as a consultant to us on an as needed basis.

 Consulting Agreement

 On March 15, 2023, we entered into a nine month
consulting agreement with Tony Goodman (the "Goodman Consulting Agreement"), one of our directors. Pursuant to the terms of
the Goodman Consulting Agreement, Mr. Goodman is to receive a cash payment of $22,000 per month and will receive a grant of 100,000 shares
of Common Stock upon consummation of a partnering transaction if such transaction is consummated prior to December 31, 2024. On January
18, 2024, Mr. Goodman was appointed as our Chief Operating Officer. In such capacity, he will be paid compensation of $25,000 per month
and will devote no less than 75% of his business time to performing this role.

 Effective March 15, 2023, we entered in a
master services agreement (the "Services Agreement") with The Keswick Group, LLC, of which Tony Goodman is the founder and
principal, pursuant to which The Keswick Group, LLC has agreed to serve as a business consultant to lead our partnering efforts for AD04
for nine months at a monthly fee of $22,000, with a performance bonus of 4,000 shares of our restricted common stock issuable
upon our completion of a partnering agreement for AD04 through its efforts. The opportunity to earn the restricted stock performance bonus
expires if a partnering agreement has not been completed before December 31, 2024. The Services Agreement may be terminated by either
party upon thirty (30) days' notice.

 On January 18, 2024, Mr. Goodman was appointed
as our Chief Operating Officer. Pursuant to a Statement of Work #2 ("SOW#2") to the Services Agreement, that we entered into
with The Keswick Group, LLC on January 17, 2024, Mr. Goodman agreed to serve in the capacity as our Chief Operating Officer and,
in such capacity, he is paid compensation of $25,000 per month and devotes no less than 75% of his business time to performing this role.

 Indemnification Agreements

 We entered into agreements with each Executive
and each director under which we will be required to indemnify them against expenses, judgments, damages, liabilities, losses, penalties,
excise taxes, fines and amounts paid in settlement and other amounts actually and reasonably incurred in connection with an actual or
threatened proceeding if any of them may be made a party because the Executive or director is or was one of our Executives. We will be
obligated to pay these amounts only if the executive or director acted in good faith and in a manner that he or she reasonably believed
to be in or not opposed to our best interests. With respect to any criminal proceeding, we will be obligated to pay these amounts only
if the Executive or director had no reasonable cause to believe his/her conduct was unlawful. The indemnification agreements also set
forth procedures that will apply in the event of a claim for indemnification.

 Director Compensation

 Director Compensation Table

 The following table sets forth information regarding
the compensation earned for service on our board of directors by our non-employee directors during the year ended December 31, 2024. Mr.
Claiborne also served on our board of directors and received compensation as a result. The compensation for Mr. Claiborne as an executive
officer and Director is set forth above under "—Summary Compensation Table."

 (a) Name

 (b)
 Fees Earned or Paid
 in Cash
 ($)

 (c)
 Stock
 Awards
 ($)

 (d)
 Option
 Awards (1)
 ($)

 (e)
 Non-Equity
 Incentive
 Plan
 ($)

 (f)
 Change in
 Pension Value
 and
 Nonqualified
 Earnings
 ($)

 (g)
 All Other
 ($)

 (h)
 Total
 ($)

 J. Kermit Anderson

 $
 50,000

 —

 $
 13,628

 $
 —

 —

 —

 $
 63,628

 Robertson H. Gilliland, MBA

 $
 44,000

 —

 $
 13,628

 $
 —

 —

 —

 $
 57,628

 James W. Newman, Jr.

 $
 44,000

 —

 $
 13,628

 $
 —

 —

 —

 $
 57,628

 Kevin Schuyler, MBA, CFA

 $
 50,000

 —

 $
 13,628

 $
 —

 —

 —

 $
 63,628

 (1)

 As of December 31, 2024, the following are the total outstanding number of option awards held by each of our non-employee directors, all awards having been made prior to January 1, 2025:

 Name

 Option
 Award
 (#)

 J. Kermit Anderson

 19,823

 Robertson H. Gilliland, MBA

 19,823

 James W. Newman, Jr.

 19,823

 Kevin Schuyler, MBA, CFA

 19,823

 Directors receive cash compensation for their
service as directors, including service as members of each committee on which they serve.

 On June 30, 2017, the board of directors approved
a plan for the annual cash compensation of directors, which plan was amended on February 12, 2021 with respect to directors' compensation,
which plan remained in effect in 2024:

 Board

 Audit

Committee

Committee

 Nominating &

Governance

Committee

 Chair

 $

 31,200

 $

 16,000

 $

 11,000

 $

 8,000

 Member

 $

 30,000

 $

 8,000

 $

 6,000

 $

 4,000

 Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters.

 The following table sets forth certain information,
as of February 28, 2025, with respect to the beneficial ownership of our common stock by each of the following:

 each
person who is known by us to be the beneficial owner of more than 5% of our outstanding common stock;

 each
of our directors;

 each
of our named executive officers; and

 all
of our directors and executive officers as a group.

 As of February 28, 2025, we had 6,574,588 shares
of common stock outstanding.

 We have determined beneficial ownership in accordance
with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting
power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to
the exercise of profits interest units, warrants or other rights that are either immediately exercisable or exercisable on or before April
29, 2025, which is approximately 60 days after the date of this Annual Report on Form 10-K. These shares are deemed to be outstanding
and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person,
but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated,
the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially
owned by them, subject to applicable community property laws.

 Except as otherwise noted below, the address for
each of the individuals and entities listed in this table is c/o Adial Pharmaceuticals, Inc., 4870 Sadler Rd, Suite 300, Glen Allen, VA
23060.

 Name and address of beneficial owner

 Number of
 Shares of
 Common Stock
 Beneficially
 Owned

 Percentage of
 Common Stock
 Beneficially
 Owned

 Directors and named executive officers

 Cary J. Claiborne ( Chief Executive Officer, President, and Director) (1)

 148,609

 2.23
 %

 Joseph Truluck (former Chief Financial Officer) (2)

 49,066

 *

 J. Kermit Anderson ( Director) (3)

 11,823

 *

 Robertson H. Gilliland, MBA ( Director) (4)

 11,823

 *

 James W. Newman, Jr. ( Director) (5)

 26,049

 *

 Kevin Schuyler, CFA ( Director) (6)

 18,921

 *

 Tony Goodman ( Chief Operating Officer and Director) (7)

 25,035

 *

 All current executive officers and directors as a group (7 persons) (8)

 248,927

 3.69
 %

 *

 less than 1%

 (1)

 Comprised of 60,799 shares of common stock and an option to purchase 87,810 shares of common stock which will vest within 60 days of February 28, 2025, which shares were part of total option grants to purchase 429,866 shares of our common stock.

 (2)

 Comprised of 10,605 shares of our common stock. Includes option to purchase 38,461 shares of common stock, which will vest within 60 days February 28, 2025, which shares were part of a total option grant to purchase 55,405 shares of our common stock.

 (3)

 Includes option to purchase 11,823 shares of common stock which will vest within 60 days of February 28, 2025, which shares were part of total option grants to purchase 19,823 shares of our common stock.

 (4)

 Includes option to purchase 11,823 shares of common stock which will vest within 60 days of February 28, 2025, which shares were part of total option grants to purchase 19,823 shares of our common stock.

 (5)

 Includes (i) 6,117 shares of common stock, a warrant to purchase 216 shares of our common stock having an exercise price of $0.13 per share, and a warrant to purchase 198 shares of our common stock having an exercise price of $190.86 per share, all owned by Virga Ventures, LLC; (ii) 1,646 shares of our common stock and a warrant to acquire 94 shares of our common stock having an exercise price of $190.86 per share, all owned by Newman GST Trust FBO James W. Newman Jr; (iii) 2,008 shares of our common stock and a warrant to acquire 47 shares of our common stock having an exercise price of $190.86 per share, both owned by Ivy Cottage Group, LLC.; (iv) 1,379 shares of our common stock, a warrant to acquire 108 shares of our common stock having an exercise price of $0.13 per share, and a warrant to acquire 28 shares of our common stock having an exercise price of $190.86 per share, all owned by Rountop Limited Partnership, LLP; (v) 1,385 shares of common stock held in a Roth IRA for the benefit of Mr. Newman; (vi) 800 shares of common stock owned directly by Mr. Newman, and (vii) 200 shares of common stock owned by Courtney Newman, daughter of Mr. Newman. Mr. Newman is the sole member of Virga Ventures, LLC, the general partner of Ivy Cottage Group, LLC and Rountop Limited Partnership, LLP, and Trustee of the Newman GST Trust. Includes option to purchase 11,823 shares of common stock which will vest within 60 days of February 28, 2025, which shares were part of total option grants to purchase 19,823 shares of our common stock.

 (6)

 Includes (i) 700 shares common stock owned by Mr. Schuyler, (ii) 121 shares of our common stock, a warrant to acquire 78 shares of our common stock at an exercise price of $0.13 per share, and a warrant to acquire 46 shares of common stock at exercise price of $190.86, owned by Carolyn M. Schuyler, Mr. Schuyler's wife, (iii) warrant to acquire 40 shares common stock at exercise price of $0.13 per share and warrant to acquire 345 shares common stock at exercise price of $190.86 per share, all owned by the Kevin William Schuyler 2020 Irrevocable Perpetuities Trust, for which Mr. Schuyler's wife Carolyn M. Schuyler, is trustee, and (iv) 5,768 shares of common stock, all owned directly by MVA 151 Investors, LLC. MVA 151 Investors, LLC is an entity under Mr. Schuyler's control. Includes option to purchase 11,823 shares of common stock which will vest within 60 days of February 28, 2025, which shares were part of total option grants to purchase 19,823 shares of our common stock.

 (7)

 Includes 350 shares of our common stock. Mr. Goodman has also been granted an option to purchase 51,046 shares of our common stock, of which 24,685 are vested and exercisable within 60 days of February 28, 2025.

 (8)

 Includes all of the current directors and all of the current executive officers. This total excludes Joseph Truluck, our former CFO, and includes Vinay Shah, our current CFO who is not a named executive officer for 2024.

 Changes In Control

 None.

 Equity Compensation Plan Information

 See Part I, Item 5— Equity Compensation
Plan Information for certain information regarding our equity compensation plans.

 Item 13. Certain Relationships and Related
Transactions, and Director Independence.

 Review, Approval and Ratification of Transactions
with Related Persons

 The general policy of Adial Pharmaceuticals, Inc.
and our audit committee is that all material transactions with a related-party and agreements with related parties, as well as all material
transactions in which there is an actual, or in some cases, perceived, conflict of interest, will be subject to prior review and approval
by our audit committee and its independent members, which will determine whether such transactions or proposals are fair and reasonable
to our company and our stockholders. In general, potential related-party transactions will be identified by our management and discussed
with our audit committee at our audit committee's meetings. Detailed proposals, including, where applicable, financial and legal
analyses, alternatives and management recommendations, will be provided to our audit committee with respect to each issue under consideration
and decisions will be made by our audit committee with respect to the foregoing related-party transactions after opportunity for discussion
and review of materials. When applicable, our audit committee will request further information and, from time to time, will request guidance
or confirmation from internal or external counsel or auditors. Our policies and procedures regarding related-party transactions are set
forth in our Audit Committee Charter and Code of Business Conduct and Ethics, both of which are publicly available on our website at www.adial.com
under the heading "Investors—Corporate Governance."

 Related-Party Transactions

 Except as disclosed below or under Executive Compensation
and Director Compensation, there were no related party transactions during the two years ended December 31, 2024 or the current year as
of the filing of this Annual Report on Form 10-K.

 License with University of Virginia Patent
Foundation

 In January 2011, we entered into an exclusive,
worldwide license agreement with the University of Virginia Patent Foundation, dba UVA Licensing and Ventures Group ("UVA LVG")
for rights to make, use or sell licensed products in the United States based upon the ten separate patents and patent applications made
and held by UVA LVG. As consideration for the rights granted in the UVA LVG License, the we are obligated to pay UVA LVG yearly license
fees and milestone payments, as well as a royalty based on net sales of products covered by the patent-related rights. More specifically,
we paid UVA LVG a license issue fee and is obligated to pay UVA LVG (i) annual minimum royalties of $40,000 commencing in 2017; (ii) a
$20,000 milestone payments upon dosing the first patient under a Phase 3 human clinical trial of a licensed product, $155,000 upon the
earlier of the completion of a Phase 3 trial of a licensed product, partnering of a licensed product, or our sale, $275,000 upon acceptance
of an NDA by the FDA, and $1,000,000 upon approval for sale of AD04 in the U.S., Europe or Japan; as well as (iii) royalties equal to
a 2% and 1% of net sales of licensed products in countries in which a valid patent exists or does not exist, respectively, with royalties
paid quarterly. In the event of a sublicense to a third party, we are obligated to pay royalties to UVA LVG equal to a percentage of what
we would have been required to pay to UVA LVG had it sold the products under sublicense ourselves. In addition, we are required to pay
to UVA LVG 15% of any sublicensing income. A certain percentage of these payments by us to the UVA LVG may then be distributed to our
former Chairman of the Board and former Chief Medical Officer in his capacity as inventor of the patents by the UVA LVG in accordance
with their policies at the time. During both the years ended December 31, 2024 and 2023, we recognized $40,000 minimum license royalty
expenses under this agreement. At December 31, 2023 and 2022, total accrued royalties and fees due to UVA LVG were zero dollars and $40,000,
respectively, shown on our balance sheet as accrued expenses, related party.

 Incentive Plan

 On April 1, 2018, the board of directors approved
and then revised, respectively, a Grant Incentive Plan to provide incentive for Bankole A. Johnson, the Chief Medical Officer (the "Plan
Participant"), to secure grant funding for us. Under the Grant Incentive Plan, we will make a cash payment to the Plan Participant
each year based on the grant funding received by us in the preceding year in an amount equal to 10% of the first $1 million of grant funding
received and 5% of grant funding received in the preceding year above $1 million. Amounts to be paid to the Plan Participants will be
paid to each as follows: 50% in cash and 50% in stock. As of December 31, 2024, no grant funding that would result in a payment to the
Plan Participant had been obtained.

 Consulting Agreement

 On March 24, 2019, we entered
into a consulting agreement (the "Consulting Agreement") with Dr. Bankole A. Johnson, who at the time of the agreement
was serving as the Chairman of the Board of Directors, for his service as our Chief Medical Officer. The Consulting Agreement had a term
of three years, unless terminated by mutual consent or by the Company for cause. Dr. Johnson resigned as Chairman of the Board of Directors
at the time of execution of the consulting agreement. Under the terms of the Consulting Agreement, Dr. Johnson's annual fee of $375,000
per year was paid twice per month. On September 8, 2022, Dr. Johnson's Consulting Agreement was amended to increase his annual compensation
to $430,000 annually and to pay him series of bonuses in cash and shares on the occurrence of certain milestones, the agreement to continue
until terminated on 30 days notice by either party. We recognized $108,750 and $435,000 in compensation expense in the years ended December
31, 2024 and 2023, respectively, due to this agreement.

 On April 10, 2024, we provided
Dr. Johnson with notice of the termination of our consulting agreement with him. As a result of the termination of the Consulting Agreement,
effective as of May 17, 2024, Dr. Johnson ceased serving as our Chief Medical Officer. On April 24, 2024, Dr. Johnson executed a separation
agreement with us providing for Dr. Johnson's continued service as a consultant on an hourly basis as needed, a separation payment
of $56,792, and for certain payments on the occurrence of milestones. In June of 2024, we determined that Dr. Johnson had achieved milestones
making due to him payments of $40,000, which payment was made on August 20, 2024. On August 18, 2024, we issued 2,400 shares of common
stock to Dr. Johnson on achievement of certain milestones as agreed under the separation agreement at a cost of $0.98 cents per share,
for a total cost of $2,352.

 Orbytel Consulting Agreement

 On October 24, 2022, we entered into a Master
Services Agreement (the "MSA") with Abuwala & Company, LLC, dba as Orbytel, for provision of strategic consulting services.
Orbytel made it known that it intended to utilize the services of the Keswick Group, LLC as a subcontractor in the provision of these
services. Tony Goodman, a director, is the founder and principal of Keswick Group, LLC, therefore Orbytel was considered a related party.
During the years ended December 31, 2024 and 2023, we recognized zero dollars and $57,750, respectively, in expenses under this agreement.

 Purnovate Option Agreement

 On January 27, 2023, the Company and Adovate,
LLC ("Buyer") entered into an Option Agreement (the "Option Agreement") pursuant to which the Company granted
to the Buyer an exclusive option for a period of one hundred twenty (120) days from the effective date of the Agreement (the "Option
Term") for Buyer or its designated affiliate to acquire all of the assets of Purnovate, a wholly owned subsidiary of the Company.
William Stilley, who at the time was a director and Executive Vice President of the Company and Chief Executive Officer of Purnovate,
served as the President of Buyer and is the principal stockholder of Buyer. As consideration for the Option Agreement, the Company and
Mr. Stilley entered into an amendment to Mr. Stilley's employment agreement, as amended (the "Stilley Amendment"), that
(i) deleted the provision of the employment agreement that provided that the termination by Mr. Stilley of his employment on or before
February 22, 2023 shall be deemed to be a termination by him for good reason and (ii) added a provision to the employment agreement providing
that Mr. Stilley will not serve on a full time basis for the Company and may provide services to other businesses including Buyer. The
Option Agreement also provides that the Buyer may elect to acquire all of the equity of Purnovate from the Company instead of purchase
all of the assets of Purnovate.

 The Buyer had the right to extend the Option Term
for an additional thirty (30) consecutive day period by the payment of One Hundred Thousand Dollars ($100,000) to the Company prior to
the end of the original Option Term, and Buyer could also extend the Option Term for another thirty (30) consecutive day period by the
payment of Fifty Thousand Dollars ($50,000) to the Company prior to the end of the extended Option Term.

 The Buyer has the right to exercise the Option
by paying a cash exercise price of $150,000. Upon exercise of the Option, the Company will transfer to and Buyer was obligated to assume
liabilities of Purnovate, including: (i) trade payables incurred for services or purchases by Purnovate exclusively for its research operations;
(ii) any unpaid salaries of personnel on Purnovate's payroll; and (iii) the lease for 1180 Seminole Trail, Suite 495, Charlottesville,
VA 22901 (as modified). All other Purnovate liabilities, shall be retained by, or transferred to, the Company and any amounts owed by
Purnovate to Company will be extinguished. The Company will be reimbursed by Buyer for any Purnovate expenditures incurred and paid commencing
December 2022, to be paid within thirty (30) days of execution of the final acquisition agreement, and will hold a security interest in
the assets of Buyer until the expense reimbursement is paid in full and the equity in Buyer described below is issued to Company.

 The Option Agreement sets forth the terms of the
definitive acquisition agreement to be negotiated in good faith by the parties after exercise of the Option which include: (i) a cash
payment of $300,000 upon the completion of the definitive acquisition agreement (in additional to the option exercise fee); (ii) the issuance
by Buyer to Company of 19.99% of the equity of Buyer within thirty (30) days of execution of the final acquisition agreement (such 19.99%
to be subject to anti-dilution protection until the Buyer has raised $4,000,000); (iii) the assumption by Buyer of the obligations of
Company under that certain Equity Purchase Agreement by and among Company, Purnovate, the members of Purnovate, and Robert D. Thompson
as the member's representative, dated December 7, 2020 and amended January 25, 2021 (the "PNV EPA"); (iv) the assumption
by Buyer of the obligations of Company under that certain Employment Agreement, dated July 31, 2018, as amended, by and between Company
and William Stilley; (v) a low, single digit royalty payments on net sales; (vi) cash payments of up to approximately $11 million in development
and approval milestones for each compound after payments to the prior members of Purnovate pursuant to the PNV EPA; and (vii) cash payments
of up to an aggregate of $50,000,000 upon the achievement of certain commercial milestones.

 The Option Agreement was approved by the Company's
Board of Directors and by a committee of the Company's Board of Directors consisting solely of independent directors.

 On May 8, 2023, Adovate
gave irrevocable notice of its exercise of the option (the "Option") to acquire all of the assets and business of Purnovate
under the Option Agreement. In connection with exercise of the Option, we received from Adovate a non-refundable option exercise fee and
upfront payment of $450,000 and entered into an option exercise agreement with Adovate (the "Option Exercise Agreement") providing
that the exercise of the Option will be effective as of May 16, 2023 and that any Purnovate expenses incurred on or subsequent to May
16, 2023 will be the sole responsibility of Adovate.

 On September 18, 2023,
we entered into a final acquisition agreement (the "FAA") with Adovate to memorialize the sale effective on June 30, 2023
(the "Sale") to Adovate of the assets and business of Purnovate pursuant to the Option Agreement and Option Exercise Agreement.
The FAA provides that the reimbursable expenses shall be set at $1,050,000, of which $350,000 was previously paid on June 30, 2023 to
the Company by Adovate, $350,000 was to be paid within 48 hours following the execution of the FAA, which was paid and received on September
20, 2023, and $350,000 is to be paid in increments of 25% of each equity raise by Adovate within 72 hours following the receipt of such
proceeds and in full by December 2, 2023. The FAA also provided for anti-dilution protection from future Adovate equity raises in order
to maintain at least 15% ownership in Adovate. The anti-dilution protection expired upon Adovate receiving $4,000,000 in cumulative funding
on January 29, 2024, after which our equity share in Adovate was subject to dilution on the same basis as other equity holders.

 Master Services Agreement with The Keswick
Group, LLC

 Effective March 15, 2023, we entered in a master
services agreement (the "Services Agreement") with The Keswick Group, LLC, of which Tony Goodman is the founder and principal,
pursuant to which The Keswick Group, LLC has agreed to serve as a business consultant to lead our partnering efforts for AD04 for nine
months at a monthly fee of $22,000, with a performance bonus of 4,000 shares of our restricted common stock issuable upon our completion
of a partnering agreement for AD04 through its efforts. The opportunity to earn the restricted stock performance bonus expires if a partnering
agreement has not been completed before December 31, 2024. The Services Agreement may be terminated by either party upon thirty (30) days'
notice. In the years ended December 31, 2024 and 2023, the Company recognized $298,000 and $216,713, respectively, in expenses associated
with this agreement.

 On January 17, 2024, we entered into a Statement
of Work #2 ("SOW#2") to the Services Agreement, with The Keswick Group, LLC, pursuant to which Mr. Goodman has agreed to serve
in the capacity as our Chief Operating Officer at a compensation of $25,000 per month and devote no less than 75% of his business time
to performing this role.

 Adovate Shared Services Agreement

 On July 1, 2023, we entered into a shared services
agreement with Adovate, Inc., in which the Company holds a significant equity stake, for sharing of the efforts of certain Adovate employee
time and use of Adovate office space and equipment, and for the sharing of efforts of certain of our employees. In the years ended December
31, 2024 and 2023, the Company recognized $55,667 and $32,005, respectively, in expenses associated with this agreement.

 Director Independence

 The information included under the heading "Board
Composition and Election of Directors" in Part III, Item 10 is hereby incorporated by reference into this Item 13.

 Item 14. Principal Accountant Fees and Services.

 Marcum LLP serves as our independent registered
public accounting firm. Marcum was preceded by Friedman LLP, which merged with Marcum LLP.

 Independent Registered Public Accounting Firm Fees and Services

 The following table sets forth the aggregate fees
including expenses billed to us for the years ended December 31, 2024 and 2023 by our auditors:

 Year ended

 Year ended

 2024

 2023

 Audit Fees (1)

 $

 237,562

 $

 300,825

 Tax Fees

 —

 —

 Audit-Related Fees

 —

 —

 Other Fees

 —

 —

 $

 237,562

 $

 300,825

 (1)

 Audit fees were for professional services rendered for the annual audit and reviews of the interim results included in the Form 10-Q's of the financial statements of the Company, and professional services rendered in connection with our underwritten public offerings of shares as well as services provided with other statutory and regulatory filings.

 The Audit Committee has adopted procedures for
pre-approving all audit and non-audit services provided by the independent registered public accounting firm, including the fees and terms
of such services. These procedures include reviewing detailed back-up documentation for audit and permitted non-audit services. The documentation
includes a description of, and a budgeted amount for, particular categories of non-audit services that are recurring in nature and therefore
anticipated at the time that the budget is submitted. Audit Committee approval is required to exceed the pre-approved amount for a particular
category of non-audit services and to engage the independent registered public accounting firm for any non-audit services not included
in those pre-approved amounts. For both types of pre-approval, the Audit Committee considers whether such services are consistent with
the rules on auditor independence promulgated by the SEC and the PCAOB. The Audit Committee also considers whether the independent registered
public accounting firm is best positioned to provide the most effective and efficient service, based on such reasons as the auditor's
familiarity with our business, people, culture, accounting systems, risk profile, and whether the services enhance our ability to manage
or control risks, and improve audit quality. The Audit Committee may form and delegate pre-approval authority to subcommittees consisting
of one or more members of the Audit Committee, and such subcommittees must report any pre-approval decisions to the Audit Committee at
its next scheduled meeting. All of the services provided by the independent registered public accounting firm were pre-approved by the
Audit Committee.

 Item 15. Exhibits and Financial Statement Schedules
and Reports on Form 10-K.

 (a)(1)

 Financial Statements. The financial statements required to be filed in this Annual Report on Form 10-K are included in Part II, Item 8 hereof.

 (a)(2)

 All financial statement schedules have been omitted as the required information is either inapplicable or included in the Financial Statements or related notes included in Part II, Item 8 hereof.

 (a)(3)

 Exhibits. The exhibits listed below in the Exhibit Index are required by Item 601 of Regulation S-K. Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this report has been identified.

 Item 16. Form 10-K Summary.

 Not applicable.

 EXHIBIT INDEX

 Exhibit

Number

 Description of Exhibit

 2.1*

 Option Agreement for the Acquisition of Purnovate, Inc. by Adenomed, LLC dated as of January 27, 2023 (Incorporated by reference to Exhibit 2.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on February 1, 2023)

 2.2

 Option Exercise Agreement, dated May 8, 2023, by and between Adovate LLC and Adial Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 2.2 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on May 10, 2023)

 2.3

 Final Acquisition Agreement, dated September 18, 2023, by and between Adovate LLC and Adial Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 2.3 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on September 21, 2023)

 3.1

 Certificate of Incorporation of Adial Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 3.3 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on September 7, 2017)

 3.2

 Amended and Restated Bylaws of Adial Pharmaceuticals, Inc., dated February 22, 2022 (Incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form 10-K (File No. 001-38323), filed with the Securities and Exchange Commission on March 28, 2022)

 3.3

 Certificate of Amendment to Certificate of Incorporation of Adial Pharmaceuticals, Inc. Incorporated by reference to Exhibit 3.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on August 4, 2023)

 4.1

 Specimen Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on October 25, 2017)

 4.2

 Form of Representative's Warrant Agreement (Incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on September 7, 2017)

 4.3

 Form of Warrant to Purchase Membership Units (2011 Offering) (Incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on September 7, 2017)

 4.4+

 Option Agreement between ADial Pharmaceuticals, L.L.C and Tony Goodman, effective July 1, 2017 (Incorporated by reference to Exhibit 4.9 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on September 7, 2017)

 4.5+

 Grant Incentive Plan (Incorporated by reference to Exhibit 4.10 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on April 16, 2018)

 4.6+

 Form of Adial Pharmaceuticals, Inc. 2017 Equity Incentive Plan (Incorporated by reference to Exhibit 4.11 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on September 7, 2017)

 4.7+

 Form of Stock Option Grant Notice, Option Agreement (Incentive Stock Option or Nonstatutory Stock Option) and Notice of Exercise under the 2017 Equity Incentive Plan (Incorporated by reference to Exhibit 4.12 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on September 7, 2017)

 4.8

 Form of Common Stock Purchase Warrant dated November 21, 2017 by and among Adial Pharmaceuticals, Inc. and certain investors (Incorporated by reference to Exhibit 4.17 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on November 22, 2017)

 4.9

 Form of Common Stock Purchase Warrant by and between Adial Pharmaceuticals, Inc. certain investors (Incorporated by reference to Exhibit 4.20(a) to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on April 16, 2018)

 4.10

 Form of Common Stock Purchase Warrant by and among Adial Pharmaceuticals, Inc. and consultant (Incorporated by reference to Exhibit 4.20(b) to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on April 16, 2018)

 4.11

 Warrant to purchase 300,000 shares of Common Stock issued June 6, 2018 (Incorporated by reference to Exhibit 4.21 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on June 11, 2018)

 4.12

 Form of Warrant Agent Agreement (Incorporated by reference to Exhibit 4.22 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on June 11, 2018)

 4.13

 Form of Pre-Funded Warrant (Incorporated by reference to Exhibit 4.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on October 24, 2023)

 4.14

 Form of Series A Purchase Warrant (Incorporated by reference to Exhibit 4.2 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on October 24, 2023)

 4.15

 Form of Series B Purchase Warrant (Incorporated by reference to Exhibit 4.3 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on October 24, 2023)

 4.16

 Form of Placement Agent Warrant (Incorporated by reference to Exhibit 4.4 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on October 24, 2023)

 4.17

 Description of Securities (Incorporated by reference to Exhibit 4.19 to the Company's Annual Report on Form 10-K, File No. 001-38323, filed with the Securities and Exchange Commission on March 22, 2021)

 10.1

 License Agreement between the University of Virginia Patent Foundation and ADial Pharmaceuticals, L.L.C. effective January 21, 2011 (Incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on September 7, 2017)

 10.2

 Amendment #1 to License Agreement between University of Virginia Patent Foundation and ADial Pharmaceuticals, L.L.C effective October 21, 2013 (Incorporated by reference to Exhibit 10.2 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on September 7, 2017)

 10.3

 Amendment #2 to License Agreement between University of Virginia Patent Foundation and ADial Pharmaceuticals, L.L.C effective May 18, 2016 (Incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on September 7, 2017)

 10.4

 Amendment #3 to License Agreement between University of Virginia Patent Foundation and ADial Pharmaceuticals, L.L.C effective March 27, 2017 (Incorporated by reference to Exhibit 10.4 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on September 7, 2017)

 10.5+

 Form of Employment Agreement between the Company and William B. Stilley, III (Incorporated by reference to Exhibit 10.15 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on September 7, 2017)

 10.6+

 Form of Employment Agreement between the Company and Joseph Truluck (Incorporated by reference to Exhibit 10.16 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on September 7, 2017)

 10.7

 Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.18 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on September 7, 2017)

 10.8

 Amendment #4 to License Agreement between University of Virginia Patent Foundation and ADial Pharmaceuticals, L.L.C effective August 15, 2017 (Incorporated by reference to Exhibit 10.20 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on September 7, 2017)

 10.9

 Amendment #5 to License Agreement between University of Virginia Patent Foundation and Adial Pharmaceuticals, Inc., dated as of December 14, 2017 (Incorporated by reference to Exhibit 10.23 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on April 16, 2018)

 10.10

 Security Agreement dated June 6, 2018 (Incorporated by reference to Exhibit 10.31 to the Company's Registration Statement on Form S-1, File No. 333-220368, filed with the Securities and Exchange Commission on June 11, 2018)

 10.11

 Amendment No. 6 to License Agreement between the Company, University of Virginia Patent Foundation d/b/a the University of Virginia Licensing and Ventures Group dated as of December 18, 2018 (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on December 19, 2018)

 10.12+

 Amendment to Employment Agreement between Adial Pharmaceuticals, Inc. and William B. Stilley, III, dated as of March 11, 2019 (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on March 14, 2019)

 10.13+

 Amendment to Employment Agreement between Adial Pharmaceuticals, Inc. and Joseph Truluck, dated as of March 11, 2019 (Incorporated by reference to Exhibit 10.2 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on March 14, 2019)

 10.14+

 Consulting Agreement between Adial Pharmaceuticals, Inc. and Dr. Bankole Johnson, dated March 24, 2019 (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on March 26, 2019)

 10.15

 Amendment No. 1 to the Adial Pharmaceuticals, Inc. 2017 Equity Incentive Stock Plan (Incorporated by reference to Exhibit 4.2 to the Company's Form S-8, File No. 333-226884, filed with the Securities and Exchange Commission on September 13, 2019)

 10.16+

 Form of Stock Option Grant Notice, Option Agreement (Incentive Stock Option or Nonstatutory Stock Option) and Notice of Exercise under the 2017 Equity Incentive Plan (Incorporated by reference to Exhibit 4.3 to the Company's Form S-8, File No. 333-226884, filed with the Securities and Exchange Commission on September 13, 2019)

 10.17

 Amendment No. 7 to License Agreement by and between the University of Virginia Patent Foundation d/b/a the University of Virginia Licensing and Ventures Group and Adial Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on December 31, 2019)

 10.18+

 Amendment to Employment Agreement between Adial Pharmaceuticals, Inc. and Joseph Truluck, dated as of March 3, 2020 (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on March 6, 2020)

 10.19+

 Amendment No. 2 to the Adial Pharmaceuticals, Inc. 2017 Equity Incentive Plan (Incorporated by reference to Appendix A to the Company's Definitive Proxy Statement on Schedule 14A, File No. 001-38323, filed with the Securities and Exchange Commission on July 21, 2020)

 10.20

 Equity Purchase Agreement, dated December 7, 2020, by and among Adial Pharmaceuticals, Inc., Purnovate, LLC, the members of Purnovate, LLC and Robert D. Thompson, as member representative (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on December 10, 2020)

 10.21+

 Offer Letter, dated December 14, 2020 (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on December 17, 2020)

 10.22

 Amendment, dated January 25, 2021, by and among Adial Pharmaceuticals, Inc., Purnovate, Inc., a wholly owned subsidiary of Adial, PNV Conversion Corp. as successor-in interest to Purnovate, LLC, and Robert D. Thompson, as member representative, to the Equity Purchase Agreement, dated December 7, 2020. (Incorporated by reference to Exhibit 10.2 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on February 1, 2021)

 10.23+

 Amendment to Executive Employment Agreement with Joseph Truluck, effective as of February 12, 2021 (Incorporated by reference to Exhibit 10.38 to the Company's Annual Report on Form 10-K, File No. 001-3823, filed with the Securities and Exchange Commission on March 22, 2021)

 10.24+

 Amendment No. 3 to the Adial Pharmaceuticals, Inc. 2017 Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on September 29, 2021)

 10.25+

 Employment Agreement between Adial Pharmaceuticals, Inc. and Cary Claiborne, dated as of December 7, 2021 (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on December 9, 2021)

 10.26

 Amendment to Employment Agreement, dated as of August 22, 2022, between Adial Pharmaceuticals, Inc. and Cary J. Claiborne (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on August 23, 2022)

 10.27*

 Amendment, dated September 8, 2022, to Consulting Agreement between Adial Pharmaceuticals, Inc. and Dr. Bankole A. Johnson, dated March 24, 2019, as amended on March 22, 2022 (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on September 13, 2022)

 10.28

 Amendment No. 4 to the Adial Pharmaceuticals, Inc. 2017 Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on October 13, 2022)

 10.29

 Form of Securities Purchase Agreement (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on February 23, 2023)

 10.30

 Placement Agency Agreement (Incorporated by reference to Exhibit 10.2 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on February 23, 2023)

 10.31

 Voting Agreement (Incorporated by reference to Exhibit 10.3 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on February 23, 2023)

 10.32

 Master Services Agreement (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on March 21, 2023)

 10.33

 Purchase Agreement, dated as of May 31, 2023, by and between Adial Pharmaceuticals, Inc. and Alumni Capital LP (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on June 2, 2023)

 10.34

 Form of Securities Purchase Agreement, dated October 19, 2023, by and between Adial Pharmaceuticals, Inc. and the Purchaser signatory thereto* (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on October 24, 2023)

 10.35

 Form of Registration Rights Agreement, dated October 19, 2023, by and between Adial Pharmaceuticals, Inc. and the Purchaser signatory thereto (Incorporated by reference to Exhibit 10.2 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on October 24, 2023)

 10.36

 Amendment No. 5 to the Adial Pharmaceuticals, Inc. 2017 Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on November 6, 2023)

 10.37

 Statement of Work #2, dated January 17, 2024, to Master Services Agreement between Adial Pharmaceuticals, Inc. and The Keswick Group, LLC, dated March 15, 2023 (Incorporated by reference to Exhibit 10.2 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on January 18, 2024)

 10.38

 Form of Warrant Inducement Agreement dated March 1, 2024 by and between Adial Pharmaceuticals, Inc. and Holder (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on March 6, 2024)

 10.39+

 Separation Agreement between Adial Pharmaceuticals, Inc. and Dr. Bankole Johnson, dated April 22, 2024 (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on April 26, 2024)

 10.40+

 Separation Agreement between Adial Pharmaceuticals, Inc. and Joseph Truluck, dated November 1, 2024 (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on November 5, 2024)

 10.41+

 Employment Agreement between Adial Pharmaceuticals, Inc. and Vinay Shah, dated November 1, 2024 (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on November 5, 2024)

 10.42+

 Amendment No. 6 to the Adial Pharmaceuticals, Inc. 2017 Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on November 12, 2024)

 10.43+

 Amended and Restated Employment Agreement between Adial Pharmaceuticals, Inc. and Cary J. Claiborne, effective as of December 5, 2024 (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on December 6, 2024)

 10.44

 Purchase Agreement, dated as of December 13, 2024, by and between Adial Pharmaceuticals, Inc. and Alumni Capital LP (Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, File No. 001-38323, filed with the Securities and Exchange Commission on December 18, 2024)

 19.1#

 Insider Trading Policy

 21.1

 List of Subsidiaries of Adial Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 21.1 to the Company's Annual Report on Form 10-K, File No. 001-38323, filed with the Securities and Exchange Commission on April 1, 2024)

 23.1#

 Consent of Marcum LLP

 31.1#

 Certification of the Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 31.2#

 Certification of the Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 32.1#

 Certification of the Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 32.2#

 Certification of the Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 97.1

 Clawback
 Policy (Incorporated by reference to Exhibit 97.1 to the Company's Annual Report on Form 10-K, File No. 001-38323, filed with the Securities
and Exchange Commission on April 1, 2024)

 101.INS

 101.SCH

 101.CAL

 101.DEF

 101.LAB

 101.PRE

 #

 Filed herewith

 +

 Management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this report.

 *

 Certain portions of this Exhibit have been redacted pursuant to Item 601(b)(10) of Regulation S-K. The redacted information has been marked by brackets as [***]. The Company agrees to furnish supplementally an unredacted copy of this Exhibit to the SEC upon request.

 SIGNATURES

 Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K for the fiscal year ended
December 31, 2024 to be signed on its behalf by the undersigned, thereunto duly authorized, on the 4 th day of March, 2025.

 ADIAL PHARMACEUTICALS, INC.

 By:

 /s/ Cary Claiborne

 Name:

 Title:

 President and Chief Executive Officer

 POWER OF ATTORNEY

 KNOW ALL PERSONS BY THESE PRESENTS, that each
person whose signature appears below constitutes and appoints Cary Claiborne and Vinay Shah, and each of them, his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to
sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them
or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

 Pursuant to the requirements of the Securities
Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.

 Signature

 Title

 Date

 /s/ Cary Claiborne

 Chief Executive Officer and President

 (Principal Executive Officer)

 /s/ Vinay Shah

 Chief Financial Officer

 Vinay Shah

 (Principal Financial and Accounting Officer)

 /s/ Kevin Schuyler

 Kevin Schuyler, CFA

 Chairman of the Board of Directors

 /s/ J. Kermit Anderson

 J. Kermit Anderson

 /s/ Robertson H. Gilliland

 Robertson H. Gilliland

 /s/ Tony Goodman

 Tony Goodman

 /s/ James W. Newman, Jr.

 James W. Newman, Jr

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