UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended:June 30, 20182019

or

For the transition period from _____________ to _____________.

Commission File Number:000-13789

MARINA BIOTECH,ADHERA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

(626) 964-5788(919) 578-5901

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (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 [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

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

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 7(a)(2)(B) of the Securities Act: [  ]

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

As of August 10,12, 2019, there were 11,241,68410,869,530 shares of the registrant’s common stock outstanding.

MARINA BIOTECH,ADHERA THERAPEUTICS, INC.

FORM 10-Q

FOR THE THREE AND SIX MONTHSQUARTERLY PERIOD ENDED JUNE 30, 20182019

TABLE OF CONTENTS

Items 3, 4 and 5 have not been included as they are not applicable.

PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARINA BIOTECH,ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for share and per share amounts)

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

MARINA BIOTECH,ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except for share and per share amounts)

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITYCASH FLOWS

(Unaudited)

(in thousands)

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

MARINA BIOTECH,ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF CASH FLOWS

(Unaudited)

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

MARINA BIOTECH, INC.

Notes to Condensed Consolidated Financial Statements

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 20182019

(Unaudited)

Note 1 – Nature of Operations, Basis of Presentation and Significant Accounting Policies

Business Overview

Adhera Therapeutics, Inc. (formerly known as Marina Biotech, Inc.) and its wholly-owned subsidiaries, MDRNA Research, Inc. (“MDRNA”), Cequent Pharmaceuticals, Inc. (“Cequent”), Atossa Healthcare, Inc. (“Atossa”), and IthenaPharma,IThenaPharma, Inc. (“Ithena”IThena”) (collectively “Marina,“Adhera,” “we,” “our,” or “us”the “Company,) is a fully integrated, commercial stagean emerging specialty pharmaceutical company delivering proprietary drug therapeuticsthat leverages innovative distribution models and technologies to improve the quality of care for significant unmet medical needspatients in the U.S., Europe and certain additional international markets. Our portfolio of products currently focusesUnited States suffering from chronic diseases. The Company is focused on fixed dose combinationscombination (“FDC”) therapies in hypertension, arthritis, pain and oncology allowing for innovative solutionswith plans to such unmet medical needs. Itsexpand the portfolio of drugs we commercialize to include other therapeutic areas.

The Company’s mission is to provide effective and patient centric treatment for hypertension – including resistant hypertension. In this connection, we acquired from Symplmed and its wholly-owned subsidiary, Symplmed Technologies, LLC, certainwhile actively seeking additional assets that can be commercialized through our proprietary Total Care System (“TCS”). At the core of the intellectual property assets related to theour TCS system is DyrctAxess, our patented technology platform known asplatform. DyrctAxess also called Total Care, that offersis designed to offer enhanced efficiency, control and access to the information necessary to empower patients, physicians and manufacturers to help achieve optimal care.

In doing so, we have created a universal platform forThe Company is focused on demonstrating the effective treatmenttherapeutic and commercial value of hypertension as well as forTCS through the distributioncommercialization of FDC hypertensive drugs, such as our FDA-approved product Prestalia® (Prestalia)Prestalia^®, and the other products in our pipeline, devices for therapeutic drug monitoring, blood pressure, and other cardiac monitors, as well as services such as counseling and prescription reminders.

We currently have one commercial and three clinical development programs underway: (i) Prestalia, a single-pill FDC of perindopril argentine (perindoprol), an angiotensin-converting-enzymearginine (“ACE”perindopril”) inhibitor and amlodipine besylate (amlodipine),(“amlodipine”) which is used as a calcium channel blocker (“CCB”), which has beenfirst-line treatment for hypertension. Prestalia was developed in coordination with Les Laboratories, Servier, a French pharmaceutical conglomerate, that sells the formulation outside the United States under the brand names Coveram^®and/or Viacoram^®. Prestalia^® was approved by the U.S. Food and Drug Administration (“FDA”) in January 2015 and was licensed by the Company from Symplmed in June 2017. By combining Prestalia^®, DyrctAxess and an independent pharmacy network, the Company has created a proprietary system for drug adherence including patient counseling and prescription reminder services, as well as improving the distribution of blood pressure monitors for therapeutic drug monitoring (“TDM”).

In 2018, the Company discontinued all significant clinical development activities and is marketed in the U.S.; (ii) ourevaluating disposition options for its development assets, including but not limited to: (i) a next generation celecoxib program of drug candidates for the treatment of acute and chronic pain, IT-102 and IT-103, each of which ispain; (ii) an FDC of celecoxib, a COX-2 selective nonsteroidal anti-inflammatory drug (“NSAID”) and either lisinopril (IT-102) or olmesartan (IT-103) – both Lisinopril and olmesartan are antihypertension drugs; (iii) CEQ508, an oral delivery of small interfering RNA (“siRNA”) against beta-catenin, combined with IT-102used to suppress polyps in the precancerous syndrome and orphan indication Familial Adenomatous Polyposis (“FAP”); and (iv) CEQ508 combined with IT-103Polyposis; (iii) an FDC to treat Colorectal Cancer.

On November 15, 2016, Marina entered into,Cancer; and consummated the transactions contemplated by,(iv) an Agreement and Plan of Merger between and among IthenaPharma, Inc., a Delaware corporation (“IThena”), IThena Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of Marina (“Merger Sub”), and Vuong Trieu as the IThena representative (the “Merger Agreement”), pursuant to which IThena merged into Merger Sub (the “Merger”).

As reported in our Annual Report on Form 10-K, in April 2018, we raised in excess of $10 million, net of fees and expenses, from a private placement of our newly created Series E Convertible Preferred Stock (See Recent Developments: Series E Convertible Preferred Stock Private Placement Offering below)FDC for irritable bowel disease (IBD). Further, in May 2018, we raised an additional $2 million, net of fees and expenses, from the private placement. In July 2018, we raised $1.4 million net of fees and expenses, from a private placement of our newly created Series F Convertible Preferred Stock. The use of funds from the private placement will be on the commercialization of Prestalia, funding working capital, capital expenditure needs, payment of certain liabilities and other general corporate requirements. For the development of IT-102 and IT-103, we will seek partners or raise additional funds to advance the development programs. We believe that by combining a COX-2 inhibitor with an antihypertensive in a single FDC oral tablet, IT-102 and IT-103 will each offer improved safety profiles as compared to currently available and previously marketed COX-2 inhibitors as well as address patients with chronic pain who are commonly taking antihypertension drugs concurrently. We further believe that the current opioid addiction epidemic in the U.S. has been driven in part by the withdrawal from the market of certain COX-2 inhibitors due to their associated risk of cardiovascular-related adverse events. We planCompany plans to license or divest our otherthese development assets since they no longer align with ourthe Company’s focus on the treatment of hypertension.

In July 2018, we entered into Subscription Agreements with certain accredited investors and conducted a closing pursuant to which we sold 308 shares of our Series F convertible preferred stock at a purchase price of $5,000 per share. See Note 9 – Subsequent Events.

We intend to create value through the commercialization of our FDA-approved product, Prestalia, while moving our FDC development programs forward to further strengthen our commercial presence. We intend to retain ownership and control of all of our product candidates, but in the interest of accelerated growth and market penetration, we will also consider partnerships with pharmaceutical or biotechnology companies in order to reduce time to market and to balance development risks, both clinically and financially.

As our strategy is to be a fully integrated pharmaceutical company, we will drive a primary corporate focus on revenue generation through our commercial assets, with a secondary focus on advancing our FDC pipeline to further enhance our commercial presence.

Reverse Stock Split

In August 2017, we filed a Certificate of Amendment of our Amended and Restated Certificate of Incorporation to effect a one-for-ten reverse split of our issued and outstanding shares of common stock. Our common stock commenced trading on the OTCQB tier of the OTC Markets on a split-adjusted basis on Thursday, August 3, 2017. Unless indicated otherwise, all share and per share information included in these financial statements and Notes to the Consolidated Financial Statements give effect to the reverse split.Prestalia.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions pursuant to Form 10-Qthe rules and Article 8regulations of Regulation S-X.the Securities and Exchange Commission. Accordingly, they do not include all of the information and note disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete audited financial statements. The accompanying unaudited financial informationThis quarterly report should be read in conjunction with the audited consolidated financial statements includingin the notes thereto, as of andCompany’s Annual Report on Form 10-K for the year ended December 31, 2017, included in our 2017 Annual Report on Form 10-K filed with the SEC.2018. The information furnished in this report reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows for each period presented. The results of operations for the three or six months ended June 30, 20182019 are not necessarily indicative of the results for the year ending December 31, 20182019 or for any future period.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of IThena and Marina Biotech,Adhera Therapeutics, Inc. and the wholly-owned subsidiaries, Ithena, Cequent, MDRNA, and Atossa, and eliminate any inter-company balances and transactions.

Going Concern and Management’s Liquidity Plans

The accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As of June 30, 2019, the Company had cash and cash equivalents of $1.6 million and has negative working capital of approximately $3.0 million.

The Company has incurred recurring losses and negative cash flows from operations since inception and has funded its operating losses through the sale of common stock, preferred stock, warrants to purchase common stock, convertible notes and promissory notes. The Company incurred a net operating loss of approximately $2.8 million and $5.3 million for the three and six months ended June 30, 2019, respectively. The Company had an accumulated deficit of approximately $31.9 million as of June 30, 2019.

The Company expects to continue to incur operating losses as it executes the commercialization plans for Prestalia^®, as well as other strategic and business development initiatives. If the Company is unable to obtain additional financing in the future, there may be a negative impact on the financial viability of the Company. The Company plans to increase working capital by managing its cash flows and expenses, divesting development assets and raising additional capital through private or public equity or debt financing. There can be no assurance that such financing or partnerships will be available or on terms which are favorable to the Company. While management of the Company believes that it has a plan to fund ongoing operations, there is no assurance that its plan will be successfully implemented. Failure to raise additional capital through one or more financings, divesting development assets or reducing discretionary spending could have a material adverse effect on the Company’s ability to achieve its intended business objectives. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not contain any adjustments that might result from the resolution of any of the above uncertainties.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Significant areas requiring the use of management estimates include valuation allowance for deferred income tax assets,revenue and related discounts and allowances and accruals related to our operating activity including legal contingencies and fair value of financial instruments.other consulting expenses. Actual results could differ materially from such estimates under different assumptions or circumstances.

Fair Value of Financial Instruments

We considerThe Company considers the fair value of cash, accounts payable, due to related parties, notes payable, notes payable to related parties, convertible notes payableaccounts receivable and accrued liabilitiesexpenses not to be materially different from their carrying value. These financial instruments have short-term maturities. We follow authoritative guidance with respect to fair value reporting issued by the Financial Accounting Standards Board (“FASB”) for financial assets and liabilities, which defines fair value, provides guidance for measuring fair value and requires certain disclosures. The guidance does not apply to measurements related to share-based payments. The guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Our cash is subject to fair value measurement and is determined by Level 1 inputs. We measure the liability for committed stock issuances with a fixed share number using Level 1 inputs. There were no liabilities measured at fair value as of June 30, 20182019 or December 31, 2017.2018.

Accounts Receivable, net

Accounts receivable consists of amounts due from wholesale distributors and specialty pharmacy providers. The Company records an allowance for doubtful accounts at the time potential collection risk is identified. The Company estimates its allowance based on historical experience, assessment of specific risks and discussions with individual customers.  The Company believes the reserve is adequate to mitigate current collection risks. During the three and six months ended June 30, 2019 and 2018, the Company recorded an additional allowance of approximately $41,000 and $0, respectively.

Goodwill and Intangible Assets

The Company periodically reviews the carrying value of intangible assets, including goodwill, to determine whether impairment may exist. Goodwill and certain intangible assets are assessed annually, or when certain triggering events occur, for impairment using fair value measurement techniques. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors. Specifically, goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses level 3 inputs and a discounted cash flow methodology to estimate the fair value of a reporting unit. A discounted cash flow analysis requires one to make various judgmental assumptions including assumptions about future cash flows, growth rates, and discount rates. The assumptions about future cash flows and growth rates are based on the Company’s budget and long-term plans. Discount rate assumptions are based on an assessment of the risk inherent in the respective reporting units. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit.

During the year ended December 31, 2018, the Company determined that goodwill was impaired and recognized a loss on impairment of approximately $3.5 million. The impairment determination was primarily a result of the decision to divest assets that no longer aligned with the Company’s strategic objectives. No impairment charges were recognized for the three and six-month period ended June 30, 2019 or 2018.

Impairment of Long-Lived Assets

We review all of ourThe Company reviews long-lived assets for impairment indicators throughout the year and performperforms detailed testing whenever impairment indicators are present. In addition, we perform detailed impairment testing for indefinite-lived intangible assets, at least annually, at December 31. When necessary, we recordthe Company records charges for impairments. Specifically:

Management determined that noThe Company did not recognize any loss on impairment indicators were present and that no impairment charges were necessary as offor the three or six-month periods ended June 30, 20182019 or December 31, 2017.2018.

Revenue Recognition

Customers Concentration

The Company hassells its prescription drug (Prestalia^®) directly to specialty contracted retail pharmacies and indirectly through wholesalers. For the three months ended June 30, 2019, the Company’s three largest customers accounted for 46%, 31% and 23% of the Company’s total gross sales. For the six months ended June 30, 2019, the Company’s three largest customers accounted for 39%, 37%, and 24% of the Company’s total gross sales. The Company works with a third-party pharmacy network manager to attract, retain, and manage the Company’s pharmacy customers and distribution channels. The Company had no sales for the three or six-month periods ending June 30, 2018.

Revenue, Net

The Company adopted the new revenue recognition guidelines in accordance with ASC 606,Revenue from Contracts with Customers(ASC 606), commencing fromeffective with the period under this report.quarter ended March 31, 2018.

The Company analyzessells its contractsmedicines primarily to assess that they are withinwholesale distributors and specialty pharmacy providers under agreements with payment terms typically less than 90 days. These customers subsequently resell the scope and in accordance with ASC 606. In determining the appropriate amount of revenueCompany’s medicines to behealth care patients. Revenue is recognized as the Company fulfills itswhen performance obligations under each of its agreements, whether for goods and services or licensing, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

In terms of licensing agreements entered into by the Company, they typically include payment of one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; payments for manufacturing supply services; and royalties on net sales of licensed products. Each of these payments results in license, collaboration and other revenues, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenues. The core principle of ASC 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received in exchange for those goods or services.

Amounts received prior to satisfying the revenue recognition criteria are recorded as contract liabilities in the Company’s consolidated balance sheets. If the related performance obligation is expected to be satisfied within the next twelve months this will be classified in current liabilities. Amounts recognized as revenue prior to receipt are recorded as contract assets in the Company’s consolidated balance sheets. If the Company expects to have an unconditional right to receive the consideration in the next twelve months, this will be classified in current assets. A net contract asset or liability is presented for each contract with a customer.

At contract inception, the Company assesses the goods or services promised in a contract with a customer and identifies those distinct goods and services that representare satisfied. The majority of the Company’s contracts have a performance obligation. A promised good or service may not be identified as asingle performance obligation if it is immaterial in the context of the contract with the customer, if it is not separately identifiableto transfer medicines. Accordingly, revenues from other promises in the contract (either because it is not capable of being separated or because it is not separable in the context of the contract), or if the performance obligation does not provide the customer with a material right.

The Company considers the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration will only be included in the transaction price when it is not considered constrained, which is when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

If it is determined that multiple performance obligations exist, the transaction price is allocated at the inception of the agreement to all identified performance obligations based on the relative standalone selling prices. The relative selling price for each deliverable is estimated using objective evidence if it is available. If objective evidence is not available, the Company uses its best estimate of the selling price for the deliverable.

Revenue ismedicine sales are recognized when or as, the Company satisfies a performance obligation by transferring a promised good or service to a customer. An asset is transferred when, or as, the customer obtains control of that asset,the Company’s medicines, which foroccurs at a servicepoint in time, typically upon delivery to the customer. Revenue is considered to bemeasured as the servicesamount of consideration the Company expects to receive in exchange for transferring medicines and is generally based upon a list or fixed price less allowances for medicine returns, rebates and discounts. Company records an estimate of unrealized revenue reductions, and the related liability, for bottles sold to pharmacies but not yet prescribed.

Medicine Sales Discounts and Allowances

The nature of the Company’s contracts gives rise to variable consideration because of allowances for medicine returns, rebates and discounts. Allowances for medicine returns, rebates and discounts are receivedrecorded at the time of sale to wholesale pharmaceutical distributors and used.pharmacies. The Company recognizes revenue over timeapplies significant judgments and estimates in determining some of these allowances. If actual results differ from its estimates, the Company will be required to make adjustments to these allowances in the future. The Company’s adjustments to gross sales are discussed further below.

Patient Access Programs

The Company offers discounts to patients under which the patient receives a discount on his or her prescription. In circumstances when a patient’s prescription is rejected by measuringa third-party payer, the progress toward complete satisfactionCompany will pay for the full cost of the relevant performance obligation using an appropriate inputprescription. The Company reimburses pharmacies for this discount directly or output methodthrough third-party vendors. The Company reduces gross sales by the amount of actual co-pay and other patient assistance in the period based on the natureinvoices received. The Company also records an accrual to reduce gross sales for estimated co-pay and other patient assistance on units sold to distributors or pharmacies that have not yet been prescribed/dispensed to a patient. The Company calculates accrued co-pay and other patient assistance fee estimates using the expected value method. The estimate is based on contract prices, estimated percentages of medicine that will be prescribed to qualified patients, average assistance paid based on reporting from the third-party vendors and estimated levels of inventory in the distribution channel. Accrued co-pay and other patient assistance fees are included in “accrued expenses” on the condensed consolidated balance sheet. Patient assistance programs include both co-pay assistance and fully bought down prescriptions.

Sales Returns

Consistent with industry practice, the Company maintains a return policy that allows customers to return medicines within a specified period prior to and subsequent to the medicine expiration date. Generally, medicines may be returned for a period beginning six months prior to its expiration date and up to one year after its expiration date. The right of return expires on the earlier of one year after the medicine expiration date or the time that the medicine is dispensed to the patient. The majority of medicine returns result from medicine dating, which falls within the range set by the Company’s policy and are settled through the issuance of a credit to the customer. The Company calculates sales returns using the expected value method. The estimate of the good or service promisedprovision for returns is based upon industry experience. This period is known to the customer.

After contract inception, the transaction price is reassessed at every period end and updated for changes such as resolution of uncertain events. Any change in the transaction price is allocated to the performance obligationsCompany based on the same basis asshelf life of medicines at contract inception.

Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the stand-alone selling pricestime of identified performance obligations, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success, and estimating the progress towards satisfaction of performance obligations.

During the three months ended June 30, 2018, the Company entered into certain contracts for the sale and distribution of Prestalia and shipped orders totaling approximately $58,000.shipment. The Company has not recognized this revenue since it cannot yet determine that collectabilityrecords sales returns in “accrued expenses” and as a reduction of the entire amount is probable.revenue.

During the three months ended March 31, 2018, Marina entered into a Licensing Agreement, whereby Marina granted exclusive rights to the company’s DiLA²delivery system in exchange for an upfront paymentCost of $200,000 and further potential future consideration dependent upon event and sales-based milestones. Under the terms of the agreement, Marina has agreed to assign ownership of the intellectual property associated with the DiLA² delivery system to the purchaser. Goods Sold

Distribution Service Fees

The Company has yetincludes distribution service fees paid for inventory management services as cost of goods sold. The Company calculates accrued distribution service fee estimates using the most likely amount method. The Company accrues estimated distribution fees based on contractually determined amounts. Accrued distribution service fees are included in “accrued expenses” on the condensed consolidated balance sheet.

Shipping Fees

The Company includes fees incurred by pharmacies for shipping medicines to complete certain performance obligations underpatients as cost of goods sold. The Company calculates accrued shipping fee estimates using the agreement and accordingly has deferredexpected value method. The Company records accrued shipping fees in “accrued expenses” on the recognitioncondensed consolidated balance sheet.

Non-Commercial Product

The Company records the cost of revenue fromnon-commercial product distributed to patients as a cost of goods sold.

Royalties on Product Sales

The Company records royalty fees on the sale of the asset until such obligations are fulfilled.commercial product as a cost of goods sold.

Recently Issued Accounting Pronouncements

In May 2014,February 2016, the FASB issued ASU 2014-09, Revenue from Contracts with CustomersNo. 2016-02, Leases (Topic 606)842) (“ASU No. 2016-02”). Under ASU No. 2016-02, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. For leases with a term of twelve months or less, the provisionslessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities by class of underlying assets. ASU 2014-09, entities should recognize revenue in an amount that reflects the consideration to which they expect to be entitled to in exchange for goods and services provided. ASU 2014-09 isNo. 2016-02 became effective for annual reporting periodsthe Company beginning after December 15, 2017.in the first quarter of 2019. The Company adopted the provisions of this standard effectiveon January 1, 2018.2019, using a modified retrospective approach at the adoption date through a cumulative-effect adjustment to retained earnings. The adoption did not have a material impact on its condensed consolidated statement of operations. The Company elected to not recognize lease assets and liabilities for leases with an initial term of twelve months or less.

Net Income (Loss) per Common Share

Basic net income (loss)loss per common share (after giving effect of the one for ten reverse stock split) is computedcalculated by dividing the net income (loss)loss by the weighted average number of common shares outstanding during the period, excluding any unvested restricted stock awards.period. Diluted net income (loss)loss per share includesis computed by dividing the effectnet loss by the weighted average number of common shares and common stock equivalents (stock options, unvested restricted stock, and warrants) when, under either the treasury or if-converted method, such inclusion in the computation would be dilutive. Net income (loss) is adjustedoutstanding for the period. Common stock equivalents are only included when their effect is dilutive. Potentially dilutive effect of the change in fair value liability for price adjustablesecurities which include outstanding warrants, if applicable. The following number of sharesstock options and preferred stock have been excluded from the computation of diluted net (loss) since such inclusionloss per share as their effect would be anti-dilutive:anti-dilutive. For all periods presented, basic and diluted net loss were the same.

The following table presents the computation of net loss per share (in thousands, except share and per share data):

Potentially dilutive securities not included in the calculation of diluted net loss per common share because to do so would be anti-dilutive are as follows:

Reclassification of Prior Period PresentationNOTE 2 – Inventory

Certain priorInventory consists of raw material and finished goods stated at the lower of cost or net realizable value with cost determined on a first-in, first-out basis. The Company reviews the composition of inventory at each reporting period amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported resultsin order to identify obsolete, slow-moving, quantities in excess of operationsexpected demand, or cash flows.otherwise non-saleable items.

Note 2 –3 - Intangible Assets

Acquisition of Prestalia & Dyrct AxessIntangible Asset Summary

In June 2017, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Symplmed Pharmaceuticals LLC (“Symplmed”) pursuant to which we purchased from Symplmed, for aggregate consideration of approximately $620,000 (consisting of $300,000 in cash plus the assumption of certain liabilities of Symplmed in the amount of approximately $320,000), Symplmed’sIntangible assets relating to a single-pill FDC of perindopril arginine and amlodipine besylate known as Prestalia® (“Prestalia”), that has been approved by the FDA for the treatment of hypertension. In addition, as part of the transactions contemplated by the Purchase Agreement: (i) Symplmed agreed to transfer to us, not later than 150 days following the closing date, the New Drug Applications for the approval of Prestalia as a new drug by the FDA; and (ii) Symplmed assigned to us all of its rights and obligations under that certain Amended and Restated License and Commercialization Agreement by and between Symplmed and Les Laboratoires Servier (“Servier”) dated January 2012, pursuant to which Symplmed has an exclusive license from Servier to manufacture, have manufactured, develop, promote, market, distribute and sell Prestalia in the U.S. (and its territories and possessions) in consideration of regulatory and sales-based milestone payments and royalty payments based on net sales. Management has determined that this acquisition was deemed an asset purchase under FASB ASC 805.

The purchase price of $620,000 had been allocated based on a preliminary estimate of the fair value of the assets acquired and is included in intangible assets as of December 31, 2017 and June 30, 2018. No subsequent adjustments were deemed necessary by the Company.

Further, we hired our current Chief Commercial Officer, who was the President and Chief Executive Officer of Symplmed, which appointment became effective in June 2017. We also agreed in such offer letter to issue 60,000 restricted shares of our common stock under our 2014 Long-Term Incentive Plan to our Chief Commercial Officer, with all of such shares vesting on the six (6) month anniversary of the date of grant. These shares were fully vested on December 31, 2017.

In furtherance of the acquisition and commercialization of Prestalia, in July 2017 we acquired from Symplmed and its wholly-owned subsidiary, Symplmed Technologies, LLC, certain of the intellectual property assets related to the patented technology platform known as DyrctAxess, also known as Total Care, that offers enhanced efficiency, control and information to empower patients, physicians and manufacturers to help achieve optimal care for $75,000 in cash.

The following table summarizes the estimated fair value of the identifiable intangible asset acquired, their useful life, and method of amortization:

The net intangible asset was $2,309,451, net of accumulated amortization of $746,615, as of June 30, 2018. 2019 are as follows:

Amortization expense for the three months ended June 30, 2019 and June 30, 2018 was $246,523approximately $17,000 and $204,604$123,000, respectively. Amortization expense for the six months ended June 30, 2019 and June 30, 2018 was approximately $35,000 and 2017, respectively,$247,000 respectively.

Note 4 – Term Loan

On June 28, 2019, the Company entered into term loan subscription agreements with certain accredited investors, pursuant to which the Company issued secured promissory notes (the “Notes”) in the aggregate principal amount of approximately $1.5 million. The Company paid $236,000 in debt issuance costs which was recorded as a debt discount to be amortized as interest expense over the term of the loan using the effective interest rate method.

The Notes shall accrue interest at a rate of 12.0% per annum. Interest will be payable quarterly with the first interest payment to be made on the six-month anniversary of the date of the closing and $123,262each subsequent payment every three months thereafter.

The unpaid principal balance of the Notes, plus accrued and $106,226unpaid interest thereon, will mature on the earliest to occur of: (i) June 28, 2020 (subject to extension for up to sixty (60) days based upon the mutual agreement of the Company and the holders of a majority of the unpaid principal balance of all outstanding Notes) or (ii) at any time following an Event of Default. The Notes may not be prepaid without the prior written consent of the holders of the Notes. The Notes are secured by a first lien and security interest on all the assets of the Company and certain of its wholly owned subsidiaries.

The Company recognized approximately $1,000 in interest expense related to Notes for the three and six months ended June 30, 2018 and 2017, respectively.2019.

Note 35 - Related Party Transactions

Due to Related Party

The Company and other related entities have had a commonality of ownership and/or management control, and as a result, the reported operating results and /orand/or financial position of the Company could significantly differ from what would have been obtained if such entities were autonomous.

The Company hashad a Master Services Agreement (“MSA”) with Autotelic Inc., a related party that is partly-ownedpartly owned by one of the Company’s former Board members and executive officers, namely Vuong Trieu, Ph.D., effective November 15, 2016. Autotelic Inc. currently owns less than 5% of the Company. The MSA statesstated that Autotelic Inc. will provide business functions and services to the Company and allowsallowed Autotelic Inc. to charge the Company for these expenses paid on its behalf. The MSA includesincluded personnel costs allocated based on amount of time incurred and other services such as consultant fees, clinical studies, conferences and other operating expenses incurred on behalf of the Company. The MSA requiresrequired a 90-day written termination notice in the event either party requires to terminate such services. In August 2018, we have notifiedWe and Autotelic that we are terminating the services underInc. agreed to terminate the MSA and that such services would end oneffective October 31, 2018.

Dr. Trieu resigned as a director of our company effective October 1, 2018.

During the period commencing November 15, 2016 (the “Effective Date”) and ending on the date that the Company hashad completed an equity offering of either common or preferred stock in which the gross proceeds therefrom is no less than $10 million (the “Equity Financing Date”), the Company shall paypaid Autotelic the following compensation: cash in an amount equal to the actual labor cost (paid on a monthly basis), plus 100% markup in warrants for shares of the Company’s common stock with a strike price equal to the fair market value of the Company’s common stock at the time said warrants arewere issued. The Company shall also paypaid Autotelic for the services provided by third party contractors plus 20% mark up. The warrant price per share will bewas calculated based on the Black-Scholes model.

After the Equity Financing Date, the Company shall paypaid Autotelic Inc. a cash amount equal to the actual labor cost plus 100% mark up of provided services and 20% mark up of provided services by third party contractors or material used in connection with the performance of the contracts, including but not limited to clinical trial, non-clinical trial, Contract Manufacturing Organizations, (“CMO”), FDA regulatory process, Contract Research Organizations (“CRO”) and Chemistry and Manufacturing Controls (“CMC”).Controls.

In accordance with the MSA, Autotelic Inc. billed the Company for personnel and service expenses Autotelic Inc. incurred on behalf of the Company. For the six months ended June 30, 20182019 and 2017,2018, Autotelic Inc. billed a total of $616,385$0 and $317,044,approximately $616,000, respectively, including personnel costs of $284,091$0 and $243,944,$284,000, respectively. An unpaid balance of $64,478 and $730,629approximately $4,000 is included in due to related party in the accompanying balance sheet as ofsheets for both periods ending June 30, 20182019 and December 31, 2017, respectively.2018.

In April 2018, and in connection with the closing of our private placement on that date, we entered into a Compromise and Settlement Agreement with Autotelic Inc. pursuant to which we agreed to issue to Autotelic Inc. an aggregate of 162.59 shares of Series E Preferred Stock to settle accounts payable of $813,000 and Warrants to purchase up to 1,219,4251,345,040 shares of common stock to satisfy accrued and unpaid fees in the aggregate amount of approximately $812,950,$740,000, and other liabilities, owed to Autotelic Inc. as of March 31,June 30, 2018 pursuant to the MSA. The Securities that were issued to Autotelic Inc., which were issued upon the closing described above, have the same terms and conditions as the Securities that were issued to investors in the offering (See Note 5). Such warrants have a five-year term, an exercise price of $0.55. In addition, we issued 1,345,040 warrants to purchase shares of common stock to Autotelic to satisfy a liability to issue warrants as of March 31, 2018. Such warrants have a five-year term, aninitial exercise price of $0.55, and have a fair value of $1,494,469approximately $1.5 million resulting in a loss on settlement of debt of $754,697.

Resignation and Appointment of Officer and Directors

On April 27, 2018, our Board of Directors (the “Board”) increased the size of the entire Board from five (5) directors to seven (7) directors, and it appointed each of Erik Emerson and Tim Boris to fill the vacancies created thereby.

In May 2018, each of Philip C. Ranker and Philippe P. Calais, Ph.D. resigned as members of the Board, and all committees thereof, effective immediately. In connection with their resignations: (i) each of Mr. Ranker and Dr. Calais released us from all claims arising prior to the date of his resignation; (ii) we granted to Mr. Ranker fully-vested options to purchase up to 200,000 shares of our common stock at an exercise price equal to $0.98 per share of common stock; and (iii) we granted to Dr. Calais fully-vested options to purchase up to 80,000 shares of our common stock at an exercise price equal to $0.98 per share of common stock. The foregoing options are exercisable for a period of five years from the grant date.

In May 2018, the Board accepted the resignation of Joseph W. Ramelli, our Chief Executive Officer, whereby Mr. Ramelli resigned as an officer of our company, and as a director and/or officer of any and all subsidiaries of our company, effective immediately, to pursue other opportunities. In connection with his resignation, Mr. Ramelli released us from all claims arising prior to the date of his resignation and affirmed his obligations to be bound by the restrictive covenants contained in the employment agreement between Mr. Ramelli and our company dated February 2, 2017, and we: (i) agreed to make severance payments to Mr. Ramelli in the amount of $60,000 to be paid over a six (6) month period; and (ii) granted to Mr. Ramelli fully-vested options, exercisable for a period of five years from the grant date, to purchase up to 100,000 shares of our common stock at an exercise price equal to $0.98 per share of common stock. In May 2018, the Board appointed Vuong Trieu, a director of the Company and former Executive Chairman, to serve as our Interim Chief Executive Officer, to replace Mr. Ramelli, effective with Mr. Ramelli’s departure. In his capacity as Interim Chief Executive Officer, Dr. Trieu received a salary in the amount of $20,000 per month. Dr. Trieu resigned from the position of Interim Chief Executive Officer on June 18, 2018.

On June 18, 2018, the Board appointed Robert C. Moscato, Jr., to serve as our Chief Executive Officer effective immediately. In connection with the appointment of Mr. Moscato as Chief Executive Officer, Dr. Trieu resigned as Interim Chief Executive Officer, and also from his position as Executive Chairman of our company, effective immediately.

On June 18, 2018, the Board appointed Uli Hacksell, Ph.D.to serve as a member of the Board, and as Chairman of the Board, effective July 1, 2018. Dr. Hacksell agreed to devote half of his business time to Marina.

On June 28, 2018, the Board appointed Mr. Moscato to serve as a member of the Board, effective July 1, 2018.

Issuance of Preferred Stock and Warrants to Directors

In April 2018, and in connection with the closing of our private placement on that date, we entered into Compromise and Settlement Agreements with four of the current members of our Board of Directors and one former member of our Board of Directors pursuant to which we agreed to issue to such directors an aggregate of 58.25 shares of Preferred Stock and Warrants to purchase up to 436,875 shares of common stock to satisfy accrued and unpaid fees owed to such directors for service as members of the Board of Directors during the period ending on December 31, 2017 in the aggregate amount of approximately $291,250. The Securities that were issued to the directors, which were issued upon the closing of our private placement described above, have the same terms and conditions as the Securities that were issued to investors in the offering.$750,000.

Transactions with BioMauris, LLCLLC/Erik Emerson

Until February of 2019, the Company had engaged the services of BioMauris, LLC, of which Erik Emerson, our former Chief Commercial Officer and a current director of Adhera, is Executive Chairman.

During the six months ended June 30, 2019 and 2018, the company paidCompany recorded approximately $65,000 and $309,000, respectively, for related party expenses incurred under the agreement. As of December 31, 2018, the Company recorded approximately, $24,000 as a total of $309,116related party liability on the accompanying balance sheet for services provided byamounts due BioMauris, LLC, of which Erik Emerson, our Chief Commercial Officer and a director of Marina, is Executive Chairman. A total of $33,016LLC. No related party liability was due to BioMauris, LLCrecorded as of June 30, 2018.2019.

Note 4 – Notes Payable

Following is a breakdown of notes payable as of June 30, 2018 and December 31, 2017:

Note Payable – Service Provider

In December 2016, we entered into an Agreement and Promissory Note with a law firm for past services performed totaling $121,523. The note called for monthly payments of $6,000 per month, beginning with an initial payment on March 31, 2017. The note was unsecured and non-interest bearing. The note was paid in full in May 2018. The balance due on the note was $0 and $97,523 as of June 30, 2018 and December 31, 2017, respectively.

Note Purchase Agreement and Amendment

In June 2016, Marina entered into a Note Purchase Agreement (the “Purchase Agreement”) with certain investors (the “Purchasers”), pursuant to which Marina issued to the Purchasers unsecured promissory notesBeginning in the aggregate principal amountsecond quarter of $300,000 (the “2016 Notes”). Interest accrued on the unpaid principal balance2019 when components of the 2016 Notes atfinancial transaction took place and fully effective in July 2019, Erik Emerson, a member our Board of Directors and our former Chief Commercial Officer, became the rateowner of 12% per annum beginning on September 20, 2016. The 2016 Notes were due and payable on June 20, 2017.

In July 2017, we entered into an amendment agreement (the “Amendment Agreement”) with respect to those 2016 Notes and the warrants to purchase sharesequity interest of approximately 22% in Pharma Hub Network, our common stock that are currently held by the Purchasers and that were originally issued pursuant to a certain Note and Warrant Purchase Agreement dated as of February 10, 2012 by and among Marina, MDRNA, Cequent and the purchasers identified on the signature pages thereto (as amended from time to time), to, among other things, extend the maturity date of the 2016 Notes to December 31, 2017, to provide for the issuance of consideration securities at a cost of $375,000 (“Consideration Securities”) and to extend the price protection applicable to certain of the warrants held by the Purchasers with respect to dilutive offerings afforded thereunder to February 10, 2020. Refer to our Form 10-Q forthird-party network manager. During the six months ended June 30, 2017 for a more detailed discussion2019 and additional terms for these 2016 Notes.

In April 2018, the Company paid approximately $17,000 and in connection with the closing of our private placement on that date, we issued$0, respectively, to the holders (such holders, the “June 2016 Noteholders”) an aggregate of 71.46 shares of Preferred Stock and Warrants to purchase up to 535,950 shares of common stock as a result of the conversion of the 2016 Notes. As a result of the conversion of the 2016 Notes and the issuance of the Securities to the June 2016 Noteholders, the entirePharma Hub Network. An unpaid principal balance of the 2016 Notes,$27,000 and the accrued and unpaid interest thereon, has been satisfied in full, and such notes are no longer outstanding.

In addition, in April 2018, and in connection with the closing of our private placement on that date, we issued to the June 2016 Noteholders an aggregate of 75 shares of Preferred Stock and Warrants to purchase up to 562,500 shares of common stock in full and complete satisfaction of our obligations to issue $375,000 worth of Consideration Securities to the 2016 Noteholders pursuant to that certain amendment agreement dated July 3, 2017 by and among our company and the June 2016 Noteholders.

As of June 30, 2018 and December 31, 2017, the accrued interest expense on the Notes amounted to $0 and $46,700, respectively, with a total balance of principal and interest of $0 and $346,700, respectively.

Bridge Note Financing

In June 2017, we issued convertible promissory notes (the “2017 Notes”) in the aggregate principal amount of $400,000 to 10 investors pursuant to a Note Purchase Agreement (the “Note Purchase Agreement”) that we entered into with such investors. The 2017 Notes bear interest at a rate of five percent (5%) per annum and are due and payable at any time on or after the earlier of (i) June 1, 2018 and (ii) the occurrence of an event of default (as defined in the Note Purchase Agreement). Our then Executive Chairman and our Chief Science Officer were each investors in the 2017 Notes.

Upon written notice delivered to us by the holders of a majority in interest of the aggregate principal amount of 2017 Notes that are outstanding at the time of such calculation (the “Majority Holders”) not more than five (5) days following the maturity date of the 2017 Notes, the Majority Holders shall have the right, but not the obligation, on behalf of themselves and all other holders of 2017 Notes, upon written notice delivered to us, to elect to convert the entire unpaid principal amount of all, but not less than all, of the 2017 Notes and the accrued and unpaid interest thereon into such number of shares of our common stock as is equal to, with respect to each Note: (x) the entire unpaid principal amount of such Note and the accrued and unpaid interest thereon on the date of the delivery of such notice by (y) $3.50.

As of June 30, 2018 and December 31, 2017, the accrued interest expense on the 2017 Notes amounted to $0 and $11,365, with a total balance of principal and interest of $0 and $411,365, respectively, and iswas included in notesaccounts payable – related parties onand accrued expenses in the accompanying balance sheet.

In April 2018, and in connection with the closing of our private placement on that date, we issued to the holders (the “June 2017 Noteholders”) pursuant to Note Purchase Agreements that we entered into with the June 2017 Noteholders during June 2017 an aggregate of 83.44 shares of Preferred Stock and Warrants to purchase up to 505,705 shares of common stock, (of which 9.27 shares were subsequently cancelled and paid to such holders an aggregate of $46 thousand in cash) as full and complete satisfaction of the unpaid principal balance(and accrued but unpaid interest thereon) owed by us to the June 2017 Noteholders under the 2017 Notes. As a result of the conversion of the 2017 Notes and the issuance of the Securities to the June 2016 Noteholders (and payment of cash), the entire unpaid principal balance of the 2017 Notes, and the accrued and unpaid interest thereon, has been satisfied in full, and such notes are no longer outstanding. The Securities that were issued to the June 2017 Noteholders have the same terms and conditions as the Securities that were issued to investors in the offering.