Item 1.01. Entry into a Material Definitive Agreement.
On May 31, 2023, Adial Pharmaceuticals, Inc. (the "Company," "we," "us" or
"our") entered into a Purchase Agreement (the "Purchase Agreement") with Alumni
Capital LP ("Alumni Capital"). Pursuant to the Purchase Agreement, the Company
has the right to sell to Alumni Capital up to the lesser of (i) $3,000,000 of
newly issued shares, subject to increase to $10,000,000 at the option of the
Company (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 the option of the Company and the Company is under no obligation to
sell securities pursuant to this arrangement. Shares of Common Stock may be sold
by the Company pursuant to this arrangement over a period ending on the earlier
of December 31, 2024 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 the Company 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 $500,000, unless waived upon
mutual discretion between Alumni Capital and Company; provided, however, that
the maximum commitment under any single fixed purchase will not exceed
$2,000,000.
The purchase price per share of the Common Stock that may be sold to Alumni
Capital under the Purchase Agreement in such fixed purchases equals ninety five
percent (95%) of the lowest daily dollar volume-weighted average price for the
Common Stock during the three (3) consecutive trading-day period prior to the
purchase date for the fixed purchase, 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 could be obligated to pay for the Common Stock under
the Purchase Agreement; provided, however at no time can the purchase price be
below $0.15 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).
The Company will control the timing and amount of any sales of Common Stock to
Alumni Capital. Actual sales of shares of our Common Stock to Alumni Capital
under the Purchase Agreement will depend on a variety of factors to be
determined by the Company from time to time, including, among other things,
market conditions, the trading price of the Common Stock and determinations by
the Company as to the appropriate sources of funding for the Company and its
operations.
Under the applicable rules of the Nasdaq Stock Market LLC ("Nasdaq"), in no
event may we issue more than 5,916,575 shares of our Common Stock (including the
Commitment Shares, as defined below), which represents 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 (as
defined in the Purchase Agreement).
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 9.99% of the Common Stock.
The net proceeds from sales, if any, under the Purchase Agreement, will depend
on the frequency and prices at which the Company sells shares of Common Stock to
Alumni Capital. To the extent the Company sells shares under the Purchase
Agreement, the Company currently plans to use any proceeds therefrom for
strategic opportunities, increasing the staff and capabilities of the Company,
working capital and other general corporate purposes.
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There are no restrictions on future financings, rights of first refusal,
participation rights, penalties or liquidated damages in the Purchase Agreement.
Alumni Capital has agreed not to cause, or engage in any manner whatsoever, any
direct or indirect short selling or hedging of the Common Stock during certain
periods.
As consideration for Alumni Capital's irrevocable commitment to purchase shares
of Common Stock 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, the Company issued to Alumni Capital 199,620
shares of Common Stock (the "Commitment Shares"). In the event the Company were
to elect to increase the amount of the shares of common stock available for
purchase under the Purchase Agreement from $3,000,000, the Company would be
obligated to issue to Alumni additional shares of Common Stock as a commitment
fee equal to 2% of the increased 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 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.
The Company has the right to terminate the Purchase Agreement at any time, at no
cost or penalty, upon written notice to Alumni Capital. Neither the Company nor
Alumni Capital may assign or transfer its rights and obligations under the
Purchase Agreement, and no provision of the Purchase Agreement or the
Registration Rights Agreement may be modified or waived by the parties except in
writing.
The foregoing description of the Purchase Agreement does not purport to be
complete and is qualified in its entirety by reference to complete text of the
Purchase Agreement, copies of which are filed as Exhibit 10.1 to this Current
Report on Form 8-K and incorporated by reference into this Item 1.01.
Item 3.02. Unregistered Sales of Equity Securities.
The information set forth in Item 1.01 of this Current Report on Form 8-K is
incorporated herein by reference into this Item 3.02 in its entirety. The shares
of Common Stock that have been and may be issued under the Purchase Agreement
are being offered and sold in a transaction exempt from registration under the
Securities Act in reliance on Section 4(a)(2) thereof and Rule 506(b) of
Regulation D thereunder. Alumni Capital represented that it is an "accredited
investor," as defined in Regulation D, and is acquiring such shares under the
Purchase Agreement for investment purposes only and not with a view towards, or
for resale in connection with, the public sale or distribution thereof.
Accordingly, the shares of Common Stock that have been and may be issued to
Alumni Capital under the Purchase Agreement have not been registered under the
Securities Act or any applicable state securities laws and may not be offered or
sold in the United States absent registration or an exemption from registration
under the Securities Act and any applicable state securities laws.
This Current Report on Form 8-K shall not constitute an offer to sell or the
solicitation of an offer to buy any shares of our Common Stock nor shall there
be any sale of the shares in any state or jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state or other jurisdiction.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
10.1 Purchase Agreement, dated as of May 31, 2023, by and between Adial
Pharmaceuticals, Inc. and Alumni Capital LP
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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