ADIL Adial Pharmaceuticals Inc

Item 1.01. Entry into a Material Definitive Agreement.  

On July 5, 2019, Adial Pharmaceuticals, Inc. (the “Company”) entered into a Master Services Agreement (the “MSA”) and attached statement of work with Psychological Education Publishing Company (“PEPCO”) to administer a behavioral therapy program during the Company’s upcoming Phase 3 clinical trial (the “Trial”) using the Company’s lead investigational new drug product, AD04, for the treatment of alcohol use disorder. Specifically, PEPCO is engaged in the business of training and certifying clinical investigators in the administration of Brief Behavioral Compliance Enhancement Treatment (“BBCET”). PEPCO is owned by an affiliate of the Company, Dr. Bankole Johnson, the Company’s Chief Medical Officer, and currently the largest stockholder in the Company.

The Company may terminate the MSA at any time upon ten (10) days prior written notice to PEPCO. Unless otherwise indicated in the Company’s notice of termination, Work (as defined in the MSA) under any statement of work in progress at the time of the delivery of notice of termination shall continue as if the applicable statement of work had not been terminated, and the terms hereof shall continue to apply to such work. The Company may also terminate the MSA for cause due to PEPCO’s failure to perform its obligations thereunder upon three (3) days prior written notice to PEPCO; provided, however, the Company may terminate the MSA immediately in the event of PEPCO’s violation, or threatened violation, of certain provisions contained therein.

The statement of work under the MSA will terminate upon the completion the final study report for the Trial and delivery of the final report by PEPCO on the supervision and monitoring of the BBCET, including, without limitation, data reports. Notwithstanding the forgoing, the statement of work may be terminated by the Company upon written notice to PEPCO.

It is anticipated that the compensation to be paid to PEPCO for services under the MSA will be approximately $300,000, of which subject to approval of the Nasdaq Capital Market shares of the Company’s common stock having a value equal to twenty percent (20%) of the fees due thereunder (the “Company Shares”) will be issued to Dr. Johnson as a consultant under the Company’s 2017 Equity Incentive Plan.

The Company Shares issued thereunder will be subject to a six month lock-up and Dr. Johnson may not offer, pledge, announce, sell, contract to sell, announce any proposed issuance, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly the Company Shares for a period of six months from their date of issuance. The stock certificate issued, if a stock certificate is issued, for the Company Shares will bear a restrictive legend and if the shares are held in book entry the Company’s transfer agent shall have a restricted notation in its books and records.