0000737207 us-gaap:SubsequentEventMember us-gaap:ConvertibleDebtMember 2022-01-02

 

As filed with the Securities and Exchange Commission on August 28, 2015December 2, 2022.

File

Registration No. [______] 333-                  

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM S-1

UNITED STATESREGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form S-1ADHERA THERAPEUTICS, INC.

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

MARINA BIOTECH, INC.

(Exact name of registrant as specified in its charter)

 

Delaware
Delaware2834283411-2658569

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)Number)

P.O. Box 1559

Bothell, Washington 98041Adhera Therapeutics, Inc.

(425) 892-43228000 Innovation Parkway,

Baton Rouge, LA70820

(919)518-3748

(Address, including zip code, and telephone number, including area code, of registrant’s principal place of business)executive offices)

 

J. Michael FrenchZahed Subhan

President and Chief Executive Officer

Marina Biotech,Adhera Therapeutics, Inc.

P.O. Box 15598000 Innovation Parkway,

Bothell, WA 98041Baton Rouge, LA70820

(425) 892-4322(919) 518-3748

(Name, address, including zip code, and telephone number, including area code, of registrant’s agent for service)

 

Copies to:

Lawrence Remmel,

Gregory Sichenzia, Esq.

Darrin Ocasio, Esq.

Sichenzia Ross Ference LLP.

1185 Avenue of the Americas

New York, NY 10036

(212) 930-9700

Faith L. Charles, Esq.

Naveen Pogula, Esq.

Thompson Hine LLP

335 Madison Avenue

New York, NY 10017

(212) 344-5680

Pryor Cashman LLP

7 Times Square

New York, New York 10036

(212) 421-4100 (phone)

(212) 798-6365 (facsimile)

Approximate date of commencement of proposed sale to the public.public: As soon as practicable after the effective date of this registration statement.Registration Statement becomes effective.

If any of the Securitiessecurities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box:    xbox. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act Registration Statementregistration statement number of the earlier effective Registration Statementregistration statement for the same offering:    ¨offering. ☒

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act Registration Statementregistration statement number of the earlier effective Registration Statementregistration statement for the same offering:    ¨offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act Registration Statementregistration statement number of the earlier effective Registration Statementregistration statement for the same offering:    ¨offering. ☐

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

Large accelerated filer¨Accelerated filer¨
Non-accelerated filer¨  (Do not check if a smaller reporting company)Smaller reporting companyx
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 comply with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act. ☐

CALCULATION OF REGISTRATION FEE

         
Title Of Each Class Of Securities To Be Registered Amount
to be Registered (1)
 Proposed
Maximum Offering Price
Per Share (3)
 Proposed
Maximum Aggregate
Offering Price (3)
 Amount Of
Registration Fee
Common Stock, par value $0.006 per share 6,187,500 Shares (2)$0.36  $2,227,500  $259 

(1)Pursuant to Rule 416(a) of the Securities Act of 1933, as amended, this registration statement also covers such additional shares as may hereafter be offered or issued to prevent dilution resulting from stock splits, stock dividends, recapitalizations or similar transactions.
(2)Consists of 2,750,000 shares of common stock issuable upon conversion of the registrant’s Series D Convertible Preferred Stock, par value $0.01 per share, and 3,437,500 shares of common stock issuable upon exercise of warrants to purchase common stock.
(3)Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, as amended, based on the average of the high and low bid prices per share of common stock on the OTCQB Tier of the OTC Markets on August 24, 2015.

The registrant hereby amends this Registration Statementregistration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statementregistration statement shall thereafter become effective in accordance with sectionSection 8(a) of the Securities Act of 1933 or until the Registration Statementregistration statement shall become effective on such date as the commission,Commission, acting pursuant to sectionsuch Section 8(a), may determine.

 

 

 

The information contained in this prospectus is not complete and may be changed. The selling stockholdersThese securities may not sell these securitiesbe sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offeroffers to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUSDATED DECEMBER 2, 2022

Subject to Completion, dated August 28, 2015

Adhera Therapeutics, Inc.

6,187,500    Shares of Common Stock Issuable upon Conversion of Series D Convertible

Preferred Stock and upon Exercise of Warrants

This prospectus relates to the proposed resale or other disposition from time to time ofPurchase up to            6,187,500 sharesShares of theCommon Stock

Adhera Therapeutics, Inc. is offering units, each unit consisting of one share of our common stock, $0.006 par value, $0.006and one warrant exercisable for one share of common stock, at an assumed public offering price of $           per unit based on the last quoted price of our common stock on           , 2022, in a firm commitment underwritten offering. The warrants included within the units will be exercisable immediately, have an exercise price per share of Marina Biotech, Inc.common stock of $     , byequal to 100% of the selling stockholders identified in this prospectus.public offering price of one unit, and will expire five years from the date of issuance. The shares of common stock covered by this prospectus are issuable to the selling stockholders upon the conversion of the shares of the Series D Convertible Preferred Stock (the “Series D Stock”) and upon the exercise of common stock purchase warrants that are held bypart of the selling stockholders. Weunits are not selling any common stock under this prospectusimmediately separable and will be issued separately in this offering. In certain circumstances, each warrant may be exercised by way of a cashless exercise, meaning that the holder may not pay a cash purchase price upon exercise, but instead would receive anyupon such exercise the net number of the proceeds from the sale or other disposition of common stock by the selling stockholders. However, we may receive proceeds in the aggregate amount of up to $1.375 million if all of the warrants to purchase the shares of our common stock that are covered by this prospectus are exercised for cash.

determined according to the formula set forth in the warrant. Accordingly, we may not receive any additional funds upon the exercise of the warrants. The selling stockholders or their pledgees, assignees or successors-in-interest may offer and sell or otherwise dispose ofoffering also includes the shares of common stock described in this prospectusissuable from time to time through underwriters, broker-dealers or agents, in public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices. The selling stockholders will bear all commissions and discounts, if any, attributable to the sales of shares. We will bear all other costs, expenses and fees in connection with the registrationupon exercise of the shares. See “Plan of Distribution” beginning on page 56 for more information about how the selling stockholders may sell or dispose of their shares of common stock.warrants.

Our common stock is presently traded on the OTC Market Group Inc.’s QB tier, or OTCQB, under the symbol “MRNA”.“ATRX.” On August 25, 2015,November 30, 2022, the last reported salesales price forof our common stock as reported on the OTCQB was $0.40$0.64 per share. We intend to apply to have our common stock and warrants listed on The Nasdaq Capital Market under the symbol “          ” and “          ”, respectively. No assurance can be given that our application will be approved. If our application is not approved, we will not complete this offering.

INVESTING IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISKS. SEE THE SECTION TITLED “RISK FACTORS” BEGINNING ON PAGE 5 OF THIS PROSPECTUS TO READ ABOUT FACTORS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.The final public offering price per unit will be determined through negotiation between us and the underwriter in this offering and will take into account the recent market price of our common stock, the general condition of the securities market at the time of this offering, the history of, and the prospects for, the industry in which we compete, and our past and present operations and our prospects for future revenues. The recent market price used throughout this prospectus may not be indicative of the public offering price per unit.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.Our Board of Directors (the “Board of Directors” or the “Board”) approved resolutions authorizing reverse stock splits of the outstanding shares of our common stock by a ratio within the range from 1-for-2 to 1-for-200, and the Company’s stockholders approved the authorization of our Board of Directors to determine whether to effect a reverse stock split and, if so, to select the ratio of the reverse stock split within such range in their discretion at our annual meeting on August 23, 2022. On September 30, 2022, we filed a Certificate of Amendment to the Certificate of Incorporation with the Delaware Secretary of State to effect a reverse stock split of all outstanding shares of the Company’s common stock at a ratio of 1-for-20. The Certificate of Amendment became effective upon filing. All common stock share and per share numbers throughout this document have been retroactively adjusted based on the reverse stock split.

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 7 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.

Per UnitTotal
Public offering price(1)$$
Underwriting discounts and commissions(2)$$
Proceeds to us, before expenses$$

(1) The public offering price and underwriting discount and commissions in respect of each Unit correspond to a public offering price per share of common stock of $          , and a public offering price per accompanying warrant of $          .

(2) We have agreed to pay the underwriter a commission equal to 7% of the gross offering proceeds. This table does not include additional compensation payable to the underwriter, Aegis Capital Corp., including a non-accountable expense allowance equal to 1% of the public offering price and warrants (the “Underwriter’s Warrants”) to purchase up to 5% of the number of shares of common stock sold in this offering. See the “Underwriting” section for additional disclosure regarding underwriting discounts and commissions, overallotments, and reimbursement of expenses.

We have also granted the underwriter a 45-day option to purchase up to            additional shares of common stock and/or warrants to purchase up to            additional shares of common stock (equal to 15% of the common stock and warrants included in the units sold in the offering) in any combination thereof, solely to cover over-allotments, if any. The purchase price to be paid per additional share of common stock will be equal to the public offering price of one unit, less the underwriting discount, and the purchase price to be paid per additional warrant will be $          . If the underwriter exercise the option in full, the total underwriting discounts and commissions payable by us will be $          , and the total proceeds to us, before expenses, will be $          .

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriter expects to deliver our securities to purchasers in the offering on or about            , 2022.

Aegis Capital Corp.

The date of this prospectus is _______, 2015, 2022

 

 

TABLE OF CONTENTS

Page
SUMMARYCautionary Statement Regarding Forward-Looking Statements.ii
Prospectus Summary.1
RISK FACTORSRisk Factors.57
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTSUse of Proceeds.2033
USE OF PROCEEDSMarket for Common Stock and related Stockholder Matters2133
MARKET PRICE OF OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERSDilution.2134
Management’s discussion and analysis of financial condition and results of operationCapitalization.2235
BUSINESSManagement’s Discussion and Analysis of Financial Condition and Results of Operations.3236
MANAGEMENTBusiness.4543
EXECUTIVE COMPENSATIONManagement.4855
PRINCIPAL STOCKHOLDERSExecutive Compensation.5357
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONSCertain Relationships and Related Party Transactions.5459
SELLING STOCKHOLDERSSecurity Ownership of Certain Beneficial Owners and Management5460
PLAN OF DISTRIBUTIONDescription of Securities.5661
DESCRIPTION OF CAPITAL STOCKUnderwriting.5766
LEGAL MATTERSLegal Matters.5969
EXPERTSExperts.5970
WHERE YOU CAN FIND MORE INFORMATIONWhere You Can Find More Information.5970
INDEX TO FINANCIAL STATEMENTSIndex to Financial Statements.F-1

This prospectus is part of a registration statement that we have filed with the Securities and Exchange Commission pursuant to which the selling stockholders named herein may, from time to time, offer and sell or otherwise dispose of the shares of our common stock covered by this prospectus. You should rely only on the information contained in this prospectus, or any related prospectus supplement.as supplemented and amended. We have not authorized anyone to provide you with different information. If anyone provides you with differentinformation that is different. This prospectus may only be used where it is legal to sell these securities. The information in this prospectus may only be accurate on the date of this prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Neither we nor any of the underwriters is making an offer to sell or inconsistent information, you shouldseeking offers to buy these securities in any jurisdiction where, or to any person to whom, the offer or sale is not rely on it.permitted. The information contained in this prospectus is accurate only as of the date on the datefront cover of this prospectus.prospectus, regardless of the time of delivery of this prospectus or of any sale of our securities. Our business, financial condition, results of operations and future growth prospects may have changed since those dates.

For investors outside the United States: We have not and the underwriter has not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the securities and the distribution of this prospectus outside the United States.

In this prospectus, “Adhera,” the “Company,” “we” or “our” refers to Adhera Therapeutics, Inc. and its subsidiaries, MDRNA Research, Inc., Cequent Pharmaceuticals, Inc., Atossa Healthcare, Inc., and IthenaPharma, Inc., unless otherwise required by the context. Unless otherwise specified, all amounts are expressed in United States dollars.

INDUSTRY AND MARKET DATA

This prospectus includes statistical, market and industry data and forecasts which we obtained from publicly available information and independent industry publications and reports that we believe to be reliable sources. These publicly available industry publications and reports generally state that they obtain their information from sources that they believe to be reliable, but they do not guarantee the accuracy or completeness of the information. Although we are responsible for all of the disclosures contained in this prospectus, including such date. Other than as requiredstatistical, market and industry data, we have not independently verified any of the data from third-party sources, nor have we ascertained the underlying economic assumptions relied upon therein. In addition, while we believe the market opportunity information included in this prospectus is generally reliable and is based on reasonable assumptions, such data involves risks and uncertainties, including those discussed under the federal securities laws,heading “Risk Factors.”

TRADEMARKS, TRADE NAMES AND SERVICE MARKS

We own or have rights to trademarks, service marks and trade names that we use in connection with the operation of our business, including our corporate name, logos and website names. Other trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners. Solely for convenience, some of the trademarks, service marks and trade names referred to in this prospectus are listed without the® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, service marks and trade names.

This prospectus includes trademarks, service marks and trade names owned by us or other companies. All trademarks, service marks and trade names included in this prospectus are the property of their respective owners.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance. We may, in some cases, use words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes to identify these forward-looking statements.

These forward-looking statements reflect our management’s beliefs and views with respect to future events, are based on estimates and assumptions as of the date of this prospectus and are subject to risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those in these forward-looking statements. We discuss many of these risks in greater detail in this prospectus under “Risk Factors.” Moreover, new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

We undertake no obligation to publicly update or revise such information,any forward-looking statement, whether as a result of new information, future eventsdevelopments or any other reason.otherwise, except as may be required by applicable laws or regulations.

This prospectus does not constitute an offer to sell or the solicitation of an offer to buy any of our shares of common stock other than the shares of our common stock covered hereby, nor does this prospectus constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about, and to observe, any restrictions as to the offering and the distribution of this prospectus applicable to those jurisdictions.

Some of the industry data contained in this prospectus is derived from data from various third-party sources. We have not independently verified any of this information and cannot assure you of its accuracy or completeness. Such data is subject to change based on various factors, including those discussed under the “Risk Factors” section beginning on page 5 of this prospectus.

ii
Table of Contents

 

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before making an investment decision with respectdeciding whether to invest in our securities. You should carefully read thisthe entire prospectus, carefully, especiallyincluding the risks associated with an investment in our company discussed in the “Risk Factors” section beginning on page 5 of this prospectus, before making an investment decision. Some of the statements in this prospectus are forward-looking statements. See the section titled “Cautionary Statement Regarding Forward-Looking Statements.”

OUR COMPANY

Overview

Adhera is an emerging specialty biotech company that, the extent that resources and opportunities become available, is focused on drug development and commercialization of “small molecule” drugs to treat Parkinson’s disease (PD) and Type 1 diabetes.

Through the end of December 2019, the Company was a commercially focused entity that leveraged innovative distribution models and technologies to improve the quality of care for patients in the United States suffering from chronic and acute diseases with a focus on licensed fixed dose combination therapies for hypertension. On January 4, 2021, the licensor terminated the licensing agreement for the product candidate. As a result, we were left with several license agreements, none of which we are exploiting.

On July 28, 2021, we, as licensee, and Melior Pharmaceuticals II, LLC (“MP2”) entered into an exclusive license agreement (the “MLR-1019 Agreement”) for the development and commercialization of MLR-1019. MLR-1019 is being developed as a new class of therapeutic for Parkinson’s disease (“PD”) and is, to the best of our knowledge, the only drug candidate today to address both movement and non-movement aspects of PD. Under the MLR-1019 Agreement, we were granted an exclusive license to use MP’s patents and know-how related to MLR-1019 to develop products in consideration for cash payments upon meeting certain performance milestones as well as a royalty of 5% of gross sales.

On August 24, 2021, we, as licensee, entered into an exclusive license agreement (the “MLR-1023 Agreement”) with Melior Pharmaceuticals I, Inc. (“MP1”). In this Prospectus, we refer to MP2 and MP1 as “MP” or “Melior”. This second license is for the development and commercialization of MLR-1023, which is being developed as a novel therapeutic for Type 1 diabetes.

On October 20, 2021, we, as licensee, expanded the exclusive MLR-1023 Agreement with MP1 to include two additional clinical indications, one for Non-Alcoholic Steatohepatitis (NASH) and the other for pulmonary inflammation.

On November 17, 2021, Melior extended the Company’s timeline under the MLR-1023 Agreement from 120 days to 180 days from the effective of the MLR-1023 Agreement for the Company to raise $4 million unless, by 180 days. On February 16, 2022, an addendum to the MLR-1023 Agreement dated August 4, 2021, was executed by the Company and Melior, extending the requirement by the Company to raise $4 million to June 16, 2022.

On July 20, 2022, the Company and Melior entered into the Second Addendum to the MLR-1023 Agreement (the “Second Addendum”). The MLR-1023 license was extended until February 1, 2023.

The material obligations of the Company under the Second Addendum include:

license payment of approximately $137,000 by the Company to Melior (this payment was made on July 29, 2022);
maintaining the full-time employment of its Chief Scientific Officer; and
raising $500,000 in working capital.

To the extent that resources have been available, we have continued to work with our advisors in an effort to restructure our company and to identify potential strategic transactions, including the Melior transactions described above to enhance the value of the company. Because of our substantial unpaid debt, if we do not raise additional capital in the immediate future, it is likely that the Company will discontinue all operations and may seek bankruptcy protection.

1

Corporate History

Adhera was incorporated under Delaware law under the name Nastech Pharmaceutical Company on September 23, 1983.

On November 15, 2016, Adhera entered into an Agreement and Plan of Merger with IThenaPharma, Inc., a Delaware corporation (“IThena”), IThena Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of IThena (“Merger Sub”), and a representative of the stockholders of IThena (the “Merger Agreement”), pursuant to which, among other things, Merger Sub merged with and into IThena, with IThena surviving as a wholly-owned subsidiary of Adhera (such transaction, the “Merger”). As a result of the Merger, the former holders of IThena common stock immediately prior to the completion of the Merger owned approximately 65% of the issued and outstanding shares of Adhera common stock immediately following the completion of the Merger.

IThena was incorporated under Delaware law on September 3, 2014. IThena was deemed to be the accounting acquirer in the Merger, and thus the historical financial statements of IThena will be treated as the historical financial statements of our company and will be reflected in our quarterly and annual reports for periods ending after the effective time of the Merger. Accordingly, beginning with our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, we started to report the results of IThena and Adhera and their respective subsidiaries on a consolidated basis.

Subsequent to the Merger, we acquired the rights to commercialize Prestalia, an anti-hypertensive drug approved by the U.S. Food and Drug Administration (the “FDA”) from Symplmed Pharmaceuticals LLC in June 2017 pursuant to a license agreement with Les Laboratories, Servier, a French pharmaceutical conglomerate . We marketed Prestalia in the U.S. from June 2018 until December 2019. The license agreement with Les Laboratories, Servier together with all rights to future commercialization activities with respect to the product was terminated in January 2021.

Partnering and Licensing Agreements

Melior

As described above, the Company has acquired licenses to develop and commercialize certain products owned by Melior. The below table summarizes the milestones and payment obligations under each such license agreement.

MLR-1019:

Under the MLR-1019 license, we agreed to make the following milestone payments if the applicable milestone is reached:

Milestone Milestone Payment 
Last patient enrolled into the Phase 2a study $250,000 
Positive outcome of the Phase 2a study $1,500,000 
Initiation of a Phase 3 study $10,000,000 
New Drug Application approval $10,000,000 
Total Milestone Payments $21,750,000 

Under the license, the Company also agreed to royalty payments of 5% of gross sales if the product is commercialized. The MLR-1019 license terminates upon the last expiration of the patents licensed by the Company, which is presently 2038 subject extensions and renewals of any of such patents. If the Company fails to have its common stock listed on Nasdaq or the NYSE within 12 months after the Company receives a Clinical Trial Authorization from the European Medicines Agency, then the Company’s commercial license and rights to MLR-1019 under the license agreement will terminate.

2

MLR-1023:

Under the MLR-1023 license, we agreed to make the following milestone payments if the applicable milestone is reached:

Milestone Milestone Payment 
Last patient enrolled into the Phase 2a study $250,000 
Positive outcome of the Phase 2a study $1,500,000 
Initiation of a Phase 3 study $10,000,000 
New Drug Application approval $10,000,000 
Total Milestone Payments $21,750,000 

The agreement also included royalty payments upon commercialization of the product as follows: (i) 8% of future gross product sales, applicable to the first $400 million gross product sales; (ii) 10% of future gross product sales, applicable to sales after $400 million and up to $800 million; and (iii) 12% of future gross product sales applicable to sales after $800 million.

Company Information

The Company was incorporated in the State of Delaware on September 23, 1983. Our principal executive offices are located at 8000 Innovation Parkway, Baton Rouge, LA 70820, and our telephone number is (919) 518-3748. We maintain a website at www.adherathera.com. Information available on our website is not incorporated by reference in, and is not deemed a part of, this prospectus.

3

THE OFFERING

Securities offered by us:

           units, each consisting of one share of common stock and one warrant exercisable for one share of common stock. The shares of common stock and warrants that are part of the units are immediately separable and will be issued separately in this offering. The warrants included within the units are exercisable immediately, have an exercise price of $ per share, equal to 100% of the public offering price of one unit, and expire five years after the date of issuance.

Public offering price:

We currently estimate that the public offering price will be $           per unit.
Common stock outstanding immediately before the offering:

           shares of common stock

Common stock outstanding immediately after the offering:

           shares of common stock (assuming that none of the warrants or the Underwriter’s Warrants are exercised), or            shares if the underwriter exercises the over-allotment option in full.

Underwriting; Over-allotment option:

This offering is being conducted on a firm commitment basis. The underwriter is obligated to take and pay for all of the shares of common stock if any such shares are taken. We have granted to the underwriter an option for a period of 45 days from the date of this prospectus to purchase up to            additional shares of common stock and/or additional warrants to purchase up to            shares of common stock (constituting 15% of the total number of shares of, and warrants to purchase, common stock to be offered in this offering), in any combination thereof, from us at the public offering price of $           per share of common stock and $           per warrant, less the underwriting discounts and commissions, to cover over-allotments, if any.
Underwriter’s WarrantsWe have agreed to issue to the underwriter warrants to purchase up to a total of shares of common stock, equal to 5% of the aggregate number of the shares sold in this offering (excluding the over-allotment option), at an exercise price equal to 125% of the public offering price of the common stock sold in this offering. The Underwriter’s Warrants will be exercisable at any time, and from time to time, in whole or in part, commencing from the closing of the offering and expiring five (5) years from commencement of sales in the offering and will have a cashless exercise provision applicable if a registration statement registering the common stock underlying the Underwriter’s Warrants is not effective. See “Underwriting” for more information.

Use of proceeds:

We estimate that the net proceeds from this offering will be approximately $          , or approximately $           if the underwriter exercises the option to purchase additional shares to cover over-allotments in full, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the proceeds from this offering for research and development, general and administrative expenses, and working capital neeeds. See “Use of Proceeds.”

Risk factors:

Investing in our securities involves a high degree of risk. As an investor, you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section beginning on page 7 before deciding to invest in our common stock.

4

Lock-up

Our executive officers, directors and our security holder(s) of ten percent (10%) or more have agreed not to offer, sell, agree to sell, directly or indirectly, or otherwise dispose of any shares of our common stock for a lock-up period of six months following the closing of this offering, subject to certain exceptions. See “Underwriting” for more information.

Proposed trading market and symbol

Our common stock is presently quoted on the OTCQB under the symbol “ATRX.” In connection with this offering, we plan to file an application to list our shares of common stock under the symbol “          ” on The Nasdaq Capital Market and to have the warrants included within the units listed on The Nasdaq Capital Market under the symbol “          .” Without an active trading market, the liquidity of the shares will be limited. The closing of this offering is contingent upon the successful listing of our common stock and warrants on The Nasdaq Capital Market.

Reverse Stock Split

On September 30, 2022, we filed a Certificate of Amendment to the Certificate of Incorporation with the Delaware Secretary of State to effect a reverse stock split of all outstanding shares of the Company’s common stock at a ratio of 1-for-20. The Certificate of Amendment became effective upon filing. All historical common stock share and per share numbers have been adjusted to reflect the reverse stock split.

The number of shares of common stock outstanding immediately following this offering is based on 3,160,877 shares outstanding as of November 30, 2022, and excludes:

4,080,101 common shares issuable upon the conversion of approximately $1.7 million of outstanding convertible promissory notes including accrued interest with various conversion prices and an indeterminable number of common shares based on an agreed upon conversion of approximately $8.5 million in non-convertible notes including accrued interest;
446,500 shares of our common stock that are reserved for issuance under the 2018 Long-Term Incentive Plan and 19,000 common shares issuable upon the exercise of stock options that were issued outside of the 2018 Long-Term Incentive Plan;
6,291,278 shares of common stock issuable upon exercise of outstanding warrants including warrants with variable exercise prices;
             shares of common stock issuable upon exercise of warrants that will be issued to investors in this offering;
100 outstanding shares of Series C Preferred Stock convertible into 3,334 shares of common stock;
40 outstanding shares of Series D Preferred Stock convertible into 2,500 shares of common stock; and
267 outstanding shares of Series E Preferred Stock and accrued dividends convertible into 182,439 shares of common stock.

Unless otherwise indicated, all information in this prospectus assumes no exercise by the underwriter of its over-allotment option.

5

SUMMARY FINANCIAL INFORMATION

The following tables summarize certain financial data regarding our business and should be read in conjunction with our financial statements and related notes contained elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The following tables present our summary financial data and should be read together with our audited consolidated financial statements and accompanying notes and information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus. The summary financial data for the nine months ended September 30, 2022 and 2021 are unaudited and include all normal adjustments necessary for a fair presentation of the Company’s financial position at September 30, 2022 and 2021, and its results of operations and cash flows for the period then ended. These unaudited financial summaries should be read in conjunction with the audited financial statements for the years ended December 31, 2021 and 2020, which are included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Our historical results are not necessarily indicative of our future results.

Summary of Consolidated Statement of Operations Data:

 

 

 

Nine-Months Ended

September 30,

  

Year-ended

December 31,

 
(in thousands, except share, and per share data) 2022  2021  2021  2020 
  Unaudited   
Operating expenses                
Sales and marketing $-  $17  $17  $839 
General and administrative  1,257   454   657   1,198 
Total operating expenses  1,257   471   674   2,037 
Loss from operations  (1,257)  (471)  (674)  (2,037)
Other income (expense)  (522)  (4,211)  (5,677)  (1,729)
Net loss  (1,779)  (4,682)  (6,351)  (3,766)
Accrued and deemed dividends  (574)  (1,679)  (2,054)  (1,540)
Net Loss Applicable to Common Stockholders $(2,353) $(6,361) $(8,405) $(5,306)
Net loss per share – Common Stockholders - basic and diluted $(1.16) $(10.83) $(12.84) $(9.67)
Weighted average shares outstanding - basic and diluted  2,019,953   587,117   654,700   548,514 

  September 30,  December 31, 
Summary Balance Sheet Data: 2022  2021  2020 
(in thousands)      
          
Cash and cash equivalents $133  $76  $1 
Total Assets  256   196   1 
Term Loans and Convertible Notes  7,992   6,663   6,318 
Derivative liability  7,260   7,697   - 
Additional Paid-in Capital  33,547   27,906   29,836 
Stockholders’ Deficit  (55,370)  (53,017)  (44,612)
Total Stockholders’ Deficit  (21,807)  (25,106)  (14,773)

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RISK FACTORS

Summary of Risk Factors

An investment in our common stock involves a high degree of risk. You should carefully consider the risks summarized below. These risks are discussed more fully in the “Risk Factors” section immediately following this summary. These risks include, but are not limited to, the following:

Risks Related to Our Business

-Our ability to continue as a going concern is in doubt absent obtaining adequate new debt or equity financing.
-We have $12.3 million of indebtedness including accrued interest and penalties outstanding, substantially all of which is in default with increased interest rates, which we may be unable to pay as and when due or at all, and when combined with outstanding warrants and convertible preferred stock would have a dilutive effect on our stockholders and could reduce the price of our common stock.
-Because we expect to need additional capital to fund our growing operations, we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations, discontinue operations and/or commence bankruptcy proceedings.
-If we are not successful, you may lose your entire investment.
-Because we have a limited operating history under our current business model to evaluate our company, the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delay frequently encountered by a new company.
-If we are unable to successfully commercialize MLR-1019, MLR-1023 or any of our other future product candidates our result of operations would be adversely affected.
-Our business may be adversely affected by the COVID-19 pandemic or other world events, and the full extent of such impact remains uncertain.
-We do not have current research and development operations, and we may continue to incur significant operating losses for the foreseeable future and may never generate future revenue from product sales.
-Because we have yet to generate any revenue from product sales from our current business model on which to evaluate our potential for future success and to determine if we will be able to execute our business plan, it is difficult to evaluate our prospects and the likelihood of success or failure of our business.
-Because early-stage drug development requires major capital investment, as we continue to incur operating losses, we will need to raise additional capital and/or form strategic partnerships to support our research and development activities in the future.

Risks Related to the Discovery, Development, and Commercialization of Product Candidates

-If current or future strategic alliances are unsuccessful or are terminated including our Melior agreements, we may be unable to develop or commercialize certain product candidates and we may be unable to generate revenues from our development programs.

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-We expect to rely on third parties to conduct some or all aspects of our compound formulation, research and preclinical testing, if those third parties do not perform satisfactorily our business and future prospects would be materially and adversely affected.
-If we are able to commercialize a product candidate, we will rely on third-party manufacturers to produce our preclinical and clinical supplies, or commercial supplies of any approved product candidates, which would subject us to a variety of risks.
-Because we expect to rely on limited sources of supply for the drug substance and drug product of product candidates, any disruption in the chain of supply may cause a delay in developing and commercializing these product candidates.
-If third party manufacturing issues arise, it could increase product and regulatory approval costs or delay commercialization.
-If we do not succeed in our efforts to identify or discover additional potential product candidates, your investment may be lost.
-Because our future commercial success depends on gaining regulatory approval for our products, we cannot generate revenue without obtaining approvals.
-If we are unable to successfully complete preclinical testing and clinical trials of our product candidates or experience significant delays in doing so, our business will be materially harmed.
-Our product candidates may cause adverse effects or have other properties that could delay or prevent their regulatory approval or limit the scope of any approved label or market acceptance.
-We may not succeed in obtaining or maintaining necessary rights to drug compounds and processes for our development pipeline through acquisitions and in-licenses.
-Because third parties may develop or be developing competitive products without our knowledge, we may later learn that competitive products are superior to our product candidates which may force us to terminate our research efforts of one or more product candidates.

Risks Related to Our Business Operations and Industry

-If we cannot obtain or protect intellectual property rights related to our future products and product candidates, we may not be able to compete effectively in our markets.
-If third-party intellectual property infringement claims are asserted against us, it may prevent or delay our development and commercialization efforts and have a material adverse effect on our business and future prospects.
-We depend on intellectual property licensed from third parties, and termination of any of these licenses could have a material adverse effect on our business.
-We may need to obtain additional licenses to intellectual property rights from third parties.
-We may in the future be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming and unsuccessful.

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-Because we face significant competition from other biotechnology and pharmaceutical companies, our operating results will suffer if we fail to compete effectively.
-The commercial success of our product candidates will depend upon the acceptance of these product candidates by the medical community, including physicians, patients and healthcare payors.
-If we lose key management or scientific personnel, cannot recruit qualified employees, directors, officers, or other personnel or experience increases in our compensation costs, our business may materially suffer.

Risks Relating to this Offering and Ownership of Our Common Stock

-We may not be able to satisfy listing requirements of Nasdaq Capital Markets or maintain a listing of our common stock on any National market.
-The price of our common stock is volatile, which may cause investment losses for our stockholders.
-We have considerable discretion as to the use of the net proceeds from this offering and we may use these proceeds in ways with which you may not agree.
-You will experience immediate and substantial dilution as a result of this offering.
-The sale of a significant number of our shares of common stock could depress the price of our common stock.
-Future issuance of additional shares of common stock and/or preferred stock could dilute existing stockholders. We have and may issue preferred stock that could have rights that are preferential to the rights of common stock that could discourage potentially beneficial transactions to our common stockholders.
-Our articles of incorporation allow for our Board to create new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock.
-We do not anticipate paying any cash dividends on our capital stock in the foreseeable future.
-If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our common stock could be negatively affected.
-If our securities become subject to the penny stock rules, it would become more difficult to trade our shares.
-Anti-takeover provisions may limit the ability of another party to acquire our company, which could cause our stock price to decline.
-We are authorized to issue “blank check” preferred stock without stockholder approval, which could adversely impact the rights of holders of our securities.
-We filed a Certificate of Amendment to effect a reverse stock split of our outstanding common stock on September 30, 2022 at a ratio of 1-for-20. We may effect additional splits of our common stock to meet NASDAQ listing requirements.
-Even if the reverse stock split achieves the requisite increase in the market price of our common stock, we cannot assure you that we will be approved for listing on the Nasdaq Capital Market or able to comply with other continued listing standards of the Nasdaq Capital Market.
-The reverse stock split may decrease the liquidity of the shares of our common stock.

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Risk Factors

An investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors, together with the other information contained in this prospectus, before making an investment decision with respectpurchasing our common stock. We have listed below (not necessarily in order of importance or probability of occurrence) what we believe to be the most significant risk factors applicable to us, but they do not constitute all of the risks that may be applicable to us. Any of the following factors could harm our securities.business, financial condition, results of operations or prospects, and could result in a partial or complete loss of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please seerefer to the section titled “Where You Can Find More Information,“Cautionary Statement Regarding Forward-Looking Statements. beginning on page 59 of this prospectus. Unless the context indicates otherwise, references

Risks Related to “Marina Biotech,” “the Company,” “we,” “us,” or “our,” refers to Marina Biotech, Inc. and its wholly-owned subsidiaries.Our Business

Company Overview

 We are a biotechnology company focused on the discovery, development and commercialization of nucleic acid-based therapies to treat orphan diseases. Our pipeline includes CEQ508, a product in clinical development for the treatment of Familial Adenomatous Polyposis (“FAP”), for which we have received both Orphan Drug Designation (“ODD”) and Fast Track Designation (“FTD”) from the U.S. Food and Drug Administration (“FDA”), and preclinical programs for the treatment of type 1 myotonic dystrophy (“DM1”) and Duchenne muscular dystrophy (“DMD”). We will need additional capital in order to execute on our strategy to initiate the registration trial for and to commercialize CEQ508, and to file Investigational New Drug (“IND”) applications for both DM1 and DMD and to bring these two programs to human proof-of-concept. We are currently pursuing both non-dilutive means of obtaining such capital, primarily from existing and potential future licenses and partnerships, and dilutive means of obtaining such capital, primarily through the offering of our equity and debt securities.

Since 2010, we have strategically acquired/in-licensed and further developed nucleic acid chemistry and delivery-related technologies in order to establish a novel and differentiated drug discovery platform. This platform allows us to distinguish ourselves from others in the nucleic acid therapeutics area in that we are the only company capable of creating a wide variety of therapeutics targeting coding and non-coding RNA via multiple mechanisms of action such as RNA interference (“RNAi”), messenger RNA translational inhibition, exon skipping, microRNA (“miRNA”) replacement, miRNA inhibition, and steric blocking in order to modulate gene expression either up or down depending on the specific mechanism of action. Our goal is to improve the lives of the patients and families affected by orphan diseases through either our own efforts or those of our collaborators and licensees.

The breadth of our discovery platform allows us to pursue the most appropriate nucleic acid-based therapeutic approach, which is necessary to effectively modulate targets for a specific disease indication, many of which are considered undruggable by traditional methodologies. Each approach, i.e. small interfering RNA (“siRNA”), miRNA or single-strand oligonucleotide, has its advantages and disadvantages, and we can screen across multiple mechanisms of action to identify the most effective therapeutic. We believe this capability makes us unique amongst our peers. Currently, we employ our platform through our own efforts and those of our partners and licensees, to discover and develop multiple nucleic acid-based therapeutics including siRNA, miRNA mimics and single stranded oligonucleotide-based compounds. Our pipeline is orphan disease focused and includes a clinical program in FAP and preclinical programs in DM1 and DMD. Our licensees, ProNAi Therapeutics, Inc. (“ProNAi”), Mirna Therapeutics, Inc. (“Mirna”) and MiNA Therapeutics, Ltd. (“MiNA”), are focused on oncology and have clinical programs in recurrent or refractory non-Hodgkin’s lymphoma and unresectable primary liver cancer or solid cancers with liver involvement. We hopeability to continue to establish similar license agreements with additional biotechnology companies as well as larger therapeutic area-focused collaborative and strategic alliances with pharmaceutical companies.a going concern is in doubt absent obtaining adequate new debt or equity financing.

We have entered into multiple licenses for our technology. The following agreements continue to provide upside opportunity for our company in the form of milestones and/or royalties:

·Mirna – In December 2011, we entered into an exclusive license agreement with Mirna, a privately-held biotechnology company pioneering miRNA replacement therapy for cancer, regarding the development and commercialization of miRNA-based therapeutics utilizing Mirna’s proprietary miRNAs and our novel SMARTICLES®-based liposomal delivery technology (“SMARTICLES”). In December 2013 and May 2015, we amended this agreement such that Mirna paid certain pre-payments to us and now has additional rights to its lead program, MRX34, currently in Phase 1 clinical development. In addition, Mirna optioned exclusivity on several additional miRNA targets. We could receive up to an additional $44 million in clinical and commercialization milestone payments, as well as royalties in the low single digit percentages on sales, based on the successful development of Mirna’s product candidates.

·ProNAi– In March 2012, we entered into an exclusive license agreement with ProNAi, a privately-held biotechnology company pioneering DNA interference (“DNAi”) therapies for cancer, regarding the development and commercialization of DNAi-based therapeutics utilizing SMARTICLES. We could receive up

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to $14 million for each gene target in total upfront, clinicallimited capital and commercialization milestone payments, as well as royalties in the single digit percentages on sales, with ProNAi having the option to select any number of additional gene targets. For example, if ProNAi licenses five products over time under the license agreement, we could receive up to $70 million in total milestones, plus royalties.

·Monsanto Company – In May 2012, we entered into a worldwide exclusive license agreement with Monsanto Company (“Monsanto”), a global leader in agriculture and crop sciences, covering the agricultural applications for our delivery and chemistry technologies. We could receive royalties on product sales in the low single digit percentages based on the successful development of Monsanto’s product candidates.

·Avecia Nitto Denko – In May 2012, we entered into a strategic alliance with Girindus Group, now Avecia Nitto Denko (“Avecia”), a leader in process development, analytical method development and current good manufacturing practices (“cGMP”) manufacture of oligonucleotide therapeutics, regarding the development, supply and commercialization of certain oligonucleotide constructs using our conformationally restricted nucleotide (“CRN”) technology. We could receive single digit percentage royalties on the sales of research reagents utilizing our CRN technology.

·Rosetta Genomics – In April 2014, we entered into a strategic alliance with Rosetta Genomics, Ltd. (“Rosetta”) to identify and develop miRNA-based products designed to diagnose and treat various neuromuscular diseases and dystrophies. Under the terms of the alliance, Rosetta will apply its industry leading miRNA discovery expertise for the identification of miRNAs involved in the various dystrophy diseases. If the miRNA is determined to be correlative to the disease, Rosetta may further develop the miRNA into a diagnostic for patient identification and stratification. If the miRNA is determined to be involved in the disease pathology and represents a potential therapeutic target, we may develop the resulting miRNA-based therapeutic for clinical development. The alliance is exclusive as it relates to neuromuscular diseases and dystrophies, with both companies free to develop and collaborate outside this field both during and after the terms of the alliance.

·MiNA– In December 2014, we entered into a license agreement with MiNA regarding the development and commercialization of small activating RNA-based therapeutics utilizing SMARTICLES. We received an upfront fee of $0.5 million in January 2015. We could receive up to an additional $49 million in clinical and commercialization milestone payments, as well as royalties on sales, based on the successful development of MiNA’s product candidates.

Our business strategy is to discover and develop our own pipeline of nucleic acid-based compounds in order to commercialize drug therapies to treat orphan diseases. Orphan diseases are broadly defined as those rare disorders that typically affect no more than one person out of every 1,500 people. The United States Orphan Drug Act of 1983 was created to promote the development of new drug therapies for the treatment of diseases that affect fewer than 200,000 individuals in the United States. Specifically, an orphan disease is a disease for which a regulatory agency, i.e. FDA or European Medicines Agency (“EMA”), can grant ODD to a compound being developed to treat that particular disease. In other words, if the FDA will grant ODD for a compound being developed to treat a disease, then that disease is an orphan disease. The purpose of such designations is to incentivize pharmaceutical and biotechnology companies to develop drugs to treat smaller patient populations. In the U.S., ODD entitles a company to seven years of marketing exclusivity for its drug upon regulatory approval. In addition, ODD permits a company to apply for: (1) grant funding from the U.S. government to defray costs of clinical trial expenses, (2) tax credits for clinical research expenses and (3) exemption from the FDA's prescription drug application fee. Over the past several years, there has been a surge in rare disease activity due in part to the efforts of advocacy groups, the media, legislation and large pharmaceutical interest. Yet, orphan diseases continue to represent a significant unmet medical need with fewer than 500 drug approvals for over 7,500 rare diseases; clearly demonstrating the necessity for innovation in the development of therapeutics to treat orphan diseases. Our lead effort is the clinical development of CEQ508 to treat FAP, a rare disease for which CEQ508 received FDA ODD in 2010 and FTD in 2015. Currently, there is no approved therapeutic for the treatment of FAP. In April 2012, we announced the completion of dosing for Cohort 2 in the Dose Escalation Phase of the START-FAP (Safety and Tolerability of an RNAi Therapeutic in FAP) Phase 1b/2a clinical trial. Based on our financial situation and the stability of existing clinical trial material, we have decided to take advantage of this break in the clinical program to optimize the manufacturing process and produce new clinical trial material. With the support of a development and/or marketing partner, or the receipt of sufficient direct funding, we expect to initiate Cohort 3 in 2016. In addition, with sufficient funding, we expect to advance pre-clinical programs in DM1 and DMD through to human proof-of-concept.

We also seek to establish collaborations and strategic partnerships with pharmaceutical and biotechnology companies to generate revenue through up-front, milestone and royalty payments related to our technology and/or the products that are developed using such technology. Our near-term focus is to establish such collaborations and partnerships in order to generate sufficient funding to advance our pipeline.

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In order to protect our innovations, which encompass a broad platform of both nucleic acid-based therapeutic chemistry and delivery technologies, as well as the drug products that may emerge from that platform, we have aggressively built upon our extensive and enabling intellectual property (“IP”) estate worldwide, and plan to continue to do so. As of December 31, 2014, we owned or controlled 148 issued or allowed patents, and approximately 95 pending U.S. and foreign patent applications, to protect our proprietary nucleic acid-based drug discovery capabilities.

We believe we have created a unique industry-leading nucleic acid-based drug discovery platform, which is protected by a strong IP position and validated through: (1) licensing agreements for our SMARTICLES delivery technology with Mirna, ProNAi and MiNA for unique nucleic acid payloads – microRNA mimics, DNA interference oligonucleotides and small-activating RNA, respectively; (2) Mirna and ProNAi’s respective clinical experience with SMARTICLES; (3) a licensing agreement with Novartis Institutes for Biomedical Research, Inc. (“Novartis”) for our CRN technology; (4) a licensing agreement with Protiva Biotherapeutics, Inc. (“Tekmira”), a wholly-owned subsidiary of Tekmira Pharmaceuticals Corporation, for our Unlocked Nucleobase Analog (“UNA”) technology; (5) licensing agreements with two large international companies (i.e., Novartis and Monsanto) for certain chemistry and delivery technologies; and (6) our own FAP Phase 1b/2a clinical trial with theTransKingdom RNA™ interference (“tkRNAi”) platform.

Liquidity

 We have sustained recurring losses and negative cash flows from operations. At June 30, 2015, we had an accumulated deficit of approximately $336.5$55.4 million, ($110.4and have a working capital deficiency of $21.8 million as of which has beenSeptember 30, 2022. Because of our substantial accumulated since we focused on RNA therapeutics in June 2008),deficit and negative working capital of $1.27 million and $0.73 million in cash. We have been funded through a combination of licensing payments and debt and equity offerings. As a result of our financial condition, during the period between June 2012 and March 2014, substantially all of our research and development (“R&D”) activities were placed on hold, we exited all of our leased facilities, and all of our employees, other than our chief executive officer (“CEO”), either resigned or were terminated.

We have experienced and continue to experience operating losses and negative cash flows from operations, as well as $12.3 million of indebtedness of which $10.0 million is currently in default. On November 16, 2022, a majority of the holders of approximately $8.3 million in promissory notes including accrued interest, agreed to amend the notes to make them automatically convertible into units consisting of a new series of convertible preferred stock and warrants as defined in the agreement upon an ongoing requirementuplisting financing transaction in which the Company’s common stock is listed on The Nasdaq Capital Market or the NYSE American in exchange for the holders agreeing to forbear repayment of their Notes and accrued interest until the offering has been completed. However, there is no assurance this offering occurs. See “Management’s Discussion and Analysis of Financial Condition and Results of OperationsFinancings” for more information. If the Company does not complete any significant strategic transactions, or raise substantial additional capital, investments. We believein the immediate future, it is likely that the Company will seek bankruptcy protection or discontinue all operations. Because we do not have sufficient working capital and cash flows for continued operations for at least the next 12 months, our current cash resources, which includeauditors have issued a qualified opinion for the proceeds received from our sale of Series D Stock in August 2015, will enable us to fund our intended limited operations through March 2016.

The volatility in our stock price, as well as market conditions in general, could make it difficult for us to raise capital on favorable terms, or at all. If we fail to obtain additional capital when required, we may have to modify, delay or abandon some or all of our planned activities, or terminate our operations. These factors, among others, raiseyear ended December 31, 2021, indicating that there is substantial doubt about our ability to continue as a going concern. The consolidated financial statements included in this prospectus do not include any adjustments that may result fromOur continued existence is dependent upon us or obtaining the outcome of this uncertainty.necessary capital to meet our expenditures. We are currently pursuing both non-dilutive means of obtaining additional capital, primarily from existing and potential future licenses and partnerships, and dilutive means of obtaining additional capital, primarily through the offering of our equity and debt securities. However, there can be no assurancecannot assure you that we will be successful in such endeavors.able to raise adequate capital to meet our future working capital needs.

General

We were incorporated in the State of Delaware on September 23, 1983. We currently do not maintain any laboratory facilities. Our mailing address is c/o Marina Biotech, Inc., P.O. Box 1559, Bothell, WA 98041, and our telephone number is (425) 892-4322. We maintain an Internet website atwww.marinabio.com. We have not incorporated by reference into this prospectusapproximately $12.3 million of indebtedness outstanding including accrued interest, with $10.0 million currently in default with increased interest rates, which we may be unable to pay as and when due or at all, and the information in, or that can be accessed through,conversion when combined with outstanding warrants and convertible preferred stock would have a dilutive effect on our website,stockholders and you should not consider it to be a part of this prospectus.

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THE OFFERING

Common Stock offered by the Selling Stockholders:6,187,500 shares, which includes 2,750,000 shares of common stock issuable upon conversion of the Series D Stock and 3,437,500 shares of common stock issuable upon exercise of warrants.
Common stock outstanding prior to this offering:26,451,237 shares as of August 13, 2015
Use of proceeds:The selling stockholders will receive the proceeds from the sale of the shares of common stock offered hereby. We will not receive any proceeds from the sale of the shares of common stock.  However, we may receive proceeds in the aggregate amount of up to $1.375 million if all of the warrants to purchase shares of the common stock covered by this prospectus are exercised for cash. See “Use of Proceeds” on page 21 of this prospectus.
Risk Factors:The purchase of our securities involves a high degree of risk. See “Risk Factors” beginning on page 5 and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our securities.
OTCQB market symbol: “MRNA”

The number of sharescould reduce the price of our common stockstock.

As of September 30, 2022, we have a total of $12.3 million of outstanding as set forthindebtedness including approximately $1.7 million of outstanding convertible promissory notes including accrued interest with various conversion prices and $10.6 in non-convertible notes including accrued interest. Given our history of operating losses and continued expenditures, which we expect to increase in the table above, is basedshort-term as we attempt to establish and grow our operations and to develop and commercialize existing and new product candidates, we may face difficulty paying these obligations as and when they come due. All of our outstanding convertible notes are in default, with default interest rates from 15% - 24% per annum. The convertible notes may contain price protection or full-ratchets upon the issuance of additional equity which may entitle the holder to receive more shares of common stock upon conversion at a lower exercise price.. Conversions of our convertible debt would therefore have a dilutive effect on 26,451,237 shares outstanding as of August 13, 2015, and excludes, as of such date:

·24,752,128 shares of common stock issuable upon the exercise of warrants outstanding with a weighted average exercise price of $1.08 per share;

·1,316,106 shares of common stock issuable upon the exercise of options outstanding with a weighted average exercise price of $4.66 per share;

·8,000,000 shares of common stock issuable upon the conversion of shares of our Series C Convertible Preferred Stock outstanding at a conversion price of $0.75 per share; and

·2,750,000 shares of common stock issuable upon the conversion of shares of our Series D Convertible Preferred Stock outstanding at a conversion price of $0.40 per share.

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RISK FACTORS

Investing in our securities has a high degree of risk. Before making an investment in our securities, you should carefully consider the following risks, as well as the other information contained in this prospectus, including our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties of whichstockholders. Further, if we are unaware or that we believe are not material at this time could also materially adversely affect our business, financial condition or results of operations. In any case, the valueunable to raise sufficient capital to repay some of our securities could decline and you could lose alllenders or part of yourrestructure our outstanding indebtedness, we will likely be forced to cease operations or seek bankruptcy protection, in which case our stockholders would likely receive little to no return on their investment. See also the information contained under the heading “Cautionary Statement Regarding Forward-Looking Statements” elsewhere in this prospectus.

Risks Relating To Being An Early Stage Drug Development Company

Our cash and other sources of liquidity may only be sufficientBecause we expect to need additional capital to fund our intended limitedgrowing operations, through March 2016. We will require substantial additional funding to continue our operations beyond that date. If additional capital is not available, we may have to curtail or cease operations, or take other actions that could adversely impact our shareholders.

Our business does not generate the cash necessary to finance our operations. We incurred net losses of approximately $1.6 million in 2013 and $6.5 million in 2014. We will require significant additional capital to:

·fund research and development activities relating to our nucleic acid drug discovery platform and the development of our product candidates, including clinical and pre-clinical trials;
·obtain regulatory approval for our product candidates;
·pursue licensing opportunities for our technologies and product candidates;
·protect our intellectual property;
·attract and retain highly-qualified personnel;
·respond effectively to competitive pressures; and
·acquire complementary businesses or technologies.

Our future capital needs depend on many factors, including:

·the scope, duration and expenditures associated with our research and development;
·continued scientific progress in these programs;
·the outcome of potential partnering or licensing transactions, if any;
·competing technological developments;
·our proprietary patent position, if any, in our products; and
·the regulatory approval process for our products.

As of the date of this prospectus, our CEO is our only full-time employee. We are also utilizing approximately 10 consultants, the majority of whom previously were either employees of or consultants to our company, to support our on-going operations. Our internal R&D efforts since June 2012 have been, and as of the date of this prospectus they continue to be, minimal and focused on our business development activities and pipeline.

We believe that our currently available cash and cash equivalents will be sufficient to fund our intended limited operations through March 2016. We will need to raise substantial additional funds through public or private equity offerings, debt financings or additional strategic alliances and licensing arrangements to continue our operations beyond March 2016. To the extent that we wish to conduct significant pre-clinical activities prior to that date, which we plan to do, we will have to raise capital to do so. We may not be able to obtain sufficient capital and may be forced to limit the scope of our operations, discontinue operations and/or commence bankruptcy proceedings.

We currently need substantial working capital. Our accumulated deficit, outstanding indebtedness or a future slowdown in the global economy which may be caused by external forces such as the COVID-19 pandemic or geopolitical turmoil may adversely affect our ability to raise capital. If adequate additional debt and/or equity financing is not available on reasonable terms or at all, we may not be able to remain in business, and we will have to cease operations. If we do not complete any significant strategic transactions, or raise substantial additional capital, to continue in the biopharmaceutical industry or to enter any other industry in the immediate future, it is likely that we will discontinue all operations and seek bankruptcy protection.

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Even if we secure the necessary working capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future equity capital investments will dilute existing stockholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to our Common Stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.

If we are not successful, you may lose your entire investment.

Prospective investors should be aware that if we are not successful in our new business operations, which may involve the use of our legacy product candidates which we have failed to fully develop and commercialize in the past, or new product candidates which are unproven, their entire investment in the Company could become worthless. Even if the Company is successful, we can provide no assurances that investors will derive a profit from their investment. Even if we can raise sufficient capital or generate revenue, we cannot guarantee any resulting proceeds to us if at all. General market conditions, as well as market conditions for companies that have recently faced financial distress, may make it very difficultwill be sufficient for us to seek financing fromgrow our operations and become profitable. If we are not successful, you may lose your entire investment.

Because we have a limited operating history under our current business model to evaluate our company, the capital markets, and the terms of any financing may adversely affect the holdings or the rightslikelihood of our stockholders. For example, ifsuccess must be considered in light of the problems, expenses, difficulties, complications and delay frequently encountered by a new company.

Since we raise additional fundshave a limited operating history under our current business model, it is difficult for investors to evaluate our business and prospects. You must consider our prospects in light of the risks, expenses and difficulties we face as an early-stage company with a limited operating history. Investors should evaluate an investment in our company in light of the uncertainties encountered by issuing equity securities, further dilutionstart-up companies in a highly competitive industry such as ours, which contains significant barriers to our stockholders will result, which may substantially dilute the value of their investment. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. Debt financing, if available, may involve restrictive covenants that could limit our flexibility to conduct future business activities and, in the event of insolvency, could be paid before holders of equity securities received any distribution of corporate assets. We may be required to relinquish rights to our technologies or drug candidates, or grant licenses through alliance, joint venture or agreements on terms that are not favorable to us, in order to raise additional funds. If adequate funds are not available, we may have to further delay, reduce or eliminate one or more of our planned activities, or terminate our operations. These actions would likely reduce the market price of our common stock.

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We have no history of profitability and there is a potential for fluctuation in operating results.

We have experienced significant operating losses since inception. We currently have no revenues from product sales and will not have any such revenues unless and until a marketable product is successfully developed by us or our partners, receives regulatory approvals, and is successfully manufactured and distributed to the market. We expect to continue to experience losses for the foreseeable future. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Cautionary Statement Regarding Forward-Looking Statements”.

We and our partners are developing products based on modulation of coding and non-coding RNA targets. The process of developing such products requires significant research and development efforts, including basic research, pre-clinical and clinical development, and regulatory approval. These activities, together with our sales, marketing, general and administrative expenses, have resulted in operating losses in the past, and thereentry. There can be no assurance that we can achieve profitability in the future. Our ability to achieve profitability depends on our ability, aloneefforts will be successful or with our partners, to develop drug candidates, conduct pre-clinical development and clinical trials, obtain necessary regulatory approvals, and manufacture, distribute, market and sell drug products. We cannot assure you of the success of any of these activities or predict if or when we will ever become profitable.

There is substantial doubt about our ability to continue as a going concern, which may affect our ability to obtain future financing and may require us to curtail our operations.

Our financial statements as of December 31, 2014 were prepared under the assumption that we will continue as a going concern. The independent registered public accounting firm that audited our 2014 consolidated financial statements, in their report, included an explanatory paragraph referringbe able to our recurring losses and expressing substantial doubt in our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. At December 31, 2014, we had cash and cash equivalents of $1.8 million, andat June 30, 2015, we had cash and cash equivalents of $0.73 million. Our ability to continue as a going concern depends on our ability to raise substantial additional funds through public or private equity offerings, debt financings or additional strategic alliances and licensing arrangements.attain profitability.

If we are unable to raise sufficient additional capital, we may seek to merge withsuccessfully commercialize MLR-1019 or be acquired by another entity, and that transaction may adversely affect our business and the valueany of our securities.

If weother product candidates and are unable to raise sufficient additionalmake milestone payments, our result of operations would be adversely affected.

We recently entered into an exclusive license agreement with M2 to develop and commercialize MLR-1019 as a new class of therapeutics for Parkinson’s Disease, or PD. Upon MLR-1019 meeting certain milestones, the Company is required to make milestone payments which total approximately $21.75 million. We currently do not have enough capital to meet any of the milestone payment requirements and cannot assure you will be successful in raising the $250,000 we may seekneed to merge or combine with, or otherwise be acquired by, another entity with a stronger cash position, complementary work force, or product candidate portfolio ormeet the first milestone for other reasons. We believe the market price for our common stock may not accurately reflect the value of our business. While we will continue to seek to maximize the value of our business to our stockholders, the most attractive option for doing so may require us to consummate a transaction involving a merger or combination of our company with, or an acquisition of our company by, another entity. There are numerous risks associated with merging, combining or otherwise being acquired. These risks include, among others, incorrectly assessing the qualityenrollment of a prospective acquirer or merger-partner, encountering greater than anticipated costsfinal patient in integrating businesses, facing resistance from employees and being unable to profitably deploy the assets ofPhase 2a study for the new entity.product. The operations, financial condition, and prospects ofmilestone payments under the post-transaction entity depend in part on our and our acquirer/merger-partner’s ability to successfully integrateMLR 1023 license are the operations related to our product candidates, business and technologies. We may be unable to integrate operations successfully or to achieve expected cost savings, andsame as those for the MLR-1019 license. If any cost savings that are realized may be offset by losses in revenues or other charges to operations. As a result, our stockholders may not realize the full value of their investment.

If we lose our Chief Executive Officer, or if we are unable to attract and retain additional personnel, then we may be unable to successfully develop our business.

If we are unable to retain J. Michael French, our president and Chief Executive Officer (“CEO”), or any other executive officers that we hire after the date of this prospectus, our business could be seriously harmed. In addition, if we are unable to attract qualified personnel as we seek to re-start our operations, our business could be seriously harmed. Whether or not our key managers or our key personal have executed an employment agreement,milestone is met, there can be no assurance that we will be able to retain them or replaceraise sufficient capital in order to fund that milestone. Further, if the drug candidate fails to meet any of themthe milestones and therefore is unable to be commercialized, we will receive no benefits from these licenses. In any such event, our results of operations will suffer and we may need to cease operations including pursuing bankruptcy. Additionally, MLR–1019 is currently classified as a controlled substance in the United States which may have an adverse effect on our future revenues even if we lose their services for any reason. This uncertainty is particularly true givenare able to commercialize it in the United States.

Our business may be adversely affected by the COVID-19 pandemic or other world events, and the full extent of such impact remains uncertain.

Although the COVID-19 pandemic appears to be winding down, we cannot be certain new variants may not arise and cause significant future impact. The United States and global impact from the COVID-19 virus has had a material adverse effect on us in a number of ways including:

If our personnel or the third parties on which we depend (or the family members of such persons) are infected with the virus, it may hamper our ability to engage in future research activities;
If these third parties are affected by COVID-19, they may focus on other activities which they may devote their limited time to other priorities rather than to our joint research;

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There have been numerous supply chain disruptions, including shortages, delays and price increases in laboratory equipment and supplies, which could impact our research activities;
As a result of the continuing impact of the virus, we may fail to get access to third party laboratories which would hinder our research activities;
We may face challenges related to restrictions and efforts to avoid further spread of the virus, in our efforts the conduct our planned clinical trials consistent with normally applicable approaches and good clinical practice standards, and although regulators including the FDA have offered guidance applicable during the COVID-19 pandemic allowing for flexibility of standards in certain areas and alternate methods of meeting trial oversight obligations (for example, via remote monitoring), the potential impact of these challenges cannot be fully predicted at this time;
We may fail to appropriately allocate resources or adapt to the rapidly evolving market and regulatory environment caused by the pandemic; and
We may sustain problems due to the serious short-term and possible longer term economic disruptions and market volatility as the U.S. and global economy faces unprecedented uncertainty.

We have never generated revenue from product sales under our current financial condition, recent historybusiness model, do not have current research and requirements necessarydevelopment operations, and we may continue to potentially restartincur significant losses for the foreseeable future and never generate revenue from product sales.

We are a pre-clinical and early stage clinical, biopharmaceutical discovery and development company. We currently rely primarily on a license for two product candidates which may never be fully developed for a number of possible reasons which are described elsewhere in these Risk Factors but include the need for sufficient funding to meet milestones, regulatory challenges and uncertainty, and a large number of better capitalized competitors.

Because the research operations. Failureand development of a biopharmaceutical product is an expensive and time-consuming process, we do not anticipate generating revenue from any product sales for the near future and will continue to attractsustain considerable losses. Should we fail to raise sufficient capital to meet our needs to develop one or more products, we would be forced to discontinue our operations and retain qualified personnel may compromiseseek bankruptcy protection.

Because we have yet to generate any revenue from product sales on which to evaluate our potential for future success and to determine if we will be able to execute our business plan, it is difficult to evaluate our prospects and the likelihood of success or failure of our business.

Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or with partners, to negotiatesuccessfully complete the development of, obtain the regulatory approvals for and entercommercialize pharmaceutical product candidates. We have no pharmaceutical product candidates that have generated any commercial revenue, do not expect to generate revenues from the commercial sale of pharmaceutical products for foreseeable future, and might never generate revenues from the sale of pharmaceutical products. Our ability to generate revenue and achieve profitability will depend on, among other things, the following:

identifying and validating new therapeutic strategies;
entering into collaborations with other pharmaceutical or biotechnology companies;
initiating and completing clinical trials for pharmaceutical product candidates;
seeking and obtaining regulatory marketing approvals for pharmaceutical product candidates that successfully complete clinical trials;
establishing and maintaining supply and manufacturing relationships with third parties;

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launching and commercializing pharmaceutical product candidates for which we obtain regulatory marketing approval, with a partner or, if launched independently, successfully establishing a sales force, marketing and distribution infrastructure;
maintaining, protecting, enforcing, defending and expanding our intellectual property portfolio; and
attracting, hiring and retaining qualified personnel.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we cannot predict the timing or amount of increased expenses and when we will be able to achieve or maintain profitability, if ever. Our expenses could increase beyond expectations if we are required by regulatory agencies to perform additional collaborative arrangements, delayunanticipated studies and trials.

Even if one or more pharmaceutical product candidates we develop independently or with partners is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved pharmaceutical product candidate. Moreover, even if we can generate revenues from the sale of any approved pharmaceutical products, we may not become profitable and may need to obtain additional funding to continue operations.

Because early-stage drug development requires major capital investment, as we continue to incur operating losses, we will need to raise additional capital and/or form strategic partnerships to support our research and development efforts, delay testingactivities in the future.

We are still in the early stages of development of our product candidates delayand have no products presently in clinical trials or approved for commercial sale. Following the termination of our licensing agreement with Les Laboratories, Servier, a French pharmaceutical conglomerate, for a hypertension treatment product candidate in January 2021, we have continued to strategically evaluate our focus including a return to a drug discovery and development company. To that end, we have entered into licensing agreements for product candidates related to Parkinson’s Disease, Type 1 diabetes, Non-Alcoholic Steatohepatitis (NASH) and pulmonary inflammation, in addition to engaging in preliminary discussions regarding potential transactions in our legacy licenses for product candidates. Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is capital-intensive. As a rule, research and development expenses increase substantially as we advance our product candidates toward clinical programs. We currently have no product candidates that are in the process of or have completed Phase 3 clinical trials. To conduct trials for our product candidates, we will need to raise additional capital to support our operations and/or form partnerships, in addition to collaborative alliances, which may give substantial rights to a partner. Such funding or partnerships may not be available to us on acceptable terms, or at all. Moreover, any future financing may be very dilutive to our existing stockholders.

As we move lead compounds through toxicology and other preclinical studies, also referred to as nonclinical studies, we will be required to file an Investigational New Drug application (“IND”) or its equivalent in foreign countries, and as we conduct clinical development of product candidates, we may have adverse results that may cause us to consume additional capital. Our partners may not elect to pursue the development and commercialization of our product candidates subject to our respective agreements with them. These events may increase our development costs more than we expect. We may need to raise additional capital or otherwise obtain funding through strategic alliances if we initiate clinical trials for new product candidates other than programs currently partnered. We will require additional capital to obtain regulatory approval processfor, and to commercialize, product candidates.

In securing additional financing, such additional fundraising efforts may divert our management’s attention from our day-to-day activities, which may adversely affect our ability to develop and commercialize product candidates. We cannot guarantee that future financing will be available in sufficient amounts or preventon terms acceptable to us, if at all. If we cannot raise additional capital when required or on acceptable terms, we may be required to:

accept terms that restrict our ability to issue securities, incur indebtedness, or otherwise raise capital in the future, or restrict our ability to pay dividends or engage in acquisitions;

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significantly delay, scale back or discontinue the development or commercialization of any product candidates;
seek strategic alliances for research and development programs at an earlier stage than otherwise would be desirable or on terms less favorable than might otherwise be available; or
relinquish or license on unfavorable terms, our rights to technologies or any product candidates we otherwise would seek to develop or commercialize ourselves.

If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from successfully commercializingpursuing development and commercialization efforts, which will have a material adverse effect on our business, operating results and prospects or may render the Company unable to continue operations.

Risks Related to the Discovery, Development, and Commercialization of Product Candidates

If current or future strategic alliances are unsuccessful or are terminated, we may be unable to develop or commercialize certain product candidates and we may be unable to generate revenues from our development programs.

We use, and if we can continue our operations are likely to use, third-party alliance partners for financial, scientific, manufacturing, marketing and sales resources for the clinical development and commercialization of certain product candidates. These strategic alliances will likely constrain our control over development and commercialization of our product candidates. In addition, if we havecandidates, especially once a candidate has reached the stage of clinical development. Our ability to replace anyrecognize revenues from successful strategic alliances may be impaired by several factors including:

a partner may shift its priorities and resources away from our programs due to a change in business strategies, or a merger, acquisition, sale or downsizing of its company or business unit;
a partner may cease development in therapeutic areas which are the subject of our strategic alliances;
a partner may change the success criteria for a program or product candidate delaying or ceasing development of such program or candidate;
a significant delay in initiation of certain development activities by a partner could also delay payment of milestones tied to such activities, impacting our ability to fund our own activities;
a partner could develop a product that competes, either directly or indirectly, with an alliance product;
a partner with commercialization obligations may not commit sufficient financial or human resources to the marketing, distribution or sale of a product;
a partner with manufacturing responsibilities may encounter regulatory, resource or quality issues and be unable to meet demand requirements;
a partner may exercise its rights under the agreement to terminate a license or strategic alliance, including termination without cause or termination upon meeting certain conditions. For example, under our license agreement with M1 for the MLR-1023 product, if we fail to raise or be in final negotiations to raise at least $500,000 by February 1, 2023, the license will terminate;
a dispute may arise between us and a partner concerning the research, development or commercialization of a program or product candidate resulting in a delay in milestones, royalty payments or termination of a program and possibly resulting in costly litigation or arbitration which may divert management attention and resources; and
a partner may use our proprietary information or intellectual property to invite litigation from a third-party or fail to maintain or prosecute intellectual property rights possibly jeopardizing our rights in such property.

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Termination of these individuals,a strategic alliance may require us to seek out and establish alternative strategic alliances with third-party partners. This may not be possible, including due to restrictions under the terms of our existing collaborations, or we may not be able to replace knowledge that they have about our operations.

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do so on terms acceptable to us. If we makefail to establish alternative strategic acquisitions, we will incur a variety of costs and might never realize the anticipated benefits.

We have limited experience in independently identifying acquisition candidates and integrating the operations of acquisition candidatesalliances with our company. If appropriate opportunities become available, we might attemptthird-party partners on terms acceptable to acquire approved products, additional drug candidates, technologies or businesses that we believe are a strategic fit with our business. If we pursue any transaction of that sort, the process of negotiating the acquisition and integrating an acquired product, drug candidate, technology or business might result in operating difficulties and expenditures and might require significant management attention that would otherwise be available for ongoing development of our business, whether or not any such transaction is ever consummated. Moreover, we might never realize the anticipated benefits of any acquisition. Future acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities, or impairment expenses related to goodwill, and impairment or amortization expenses related to other intangible assets, which could harm our financial condition.

Failure of our internal control over financial reporting could harm our business and financial results.

Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of the financial statements; providing reasonable assurance that receipts and expenditures of our assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements would be prevented or detected on a timely basis. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud.

Our business and operations could suffer in the event of system failures.

Our internal computer systems and those of our contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Such events could cause interruption of our operations. For example, the loss of pre-clinical trial data or data from completed or ongoing clinical trials for our product candidates, if any, could result in delays in our regulatory filings and development efforts and significantly increase our costs. To the extent that any disruption or security breach were to result in a loss of or damage to our data, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the development of our product candidates could be delayed.

Risks Related to the Development and Regulatory Approval of Our Drug Candidates

RNA-based drug development is unproven and may never lead to marketable products.

Our future success depends on the successful development, by us, or our partners, of RNA-based products and technologies. Neither we, nor any other company, including any of our partners, has received regulatory approval to market siRNA, antagomir or miRNA mimics as therapeutic agents. The scientific discoveries that form the basis for our efforts to discover and develop new RNA-based drugs are relatively new. The scientific evidence to support the feasibility of developing drugs based on these discoveries is both preliminary and limited.

Relatively few RNA-based product candidates have ever been tested in animals or humans, none of which have received regulatory approval. We currently have only limited data suggesting that we can introduce typical drug-like properties and characteristics into oligonucleotides, such as favorable distribution within the body or tissues or the ability to enter cells and exert their intended effects. In addition, RNA-based compounds may not demonstrate in patients the chemical and pharmacological properties ascribed to them in laboratory studies, and they may interact with human biological systems in unforeseen, ineffective or harmful ways. We may make significant expenditures developing RNA-based technologies without success. As a result, we and our partners may never develop a marketable product utilizing our technologies. If neither we nor any of our partners develops and commercializes drugs based upon our technologies, our operations will not become profitable.

Further, our focus on oligonucleotide-based drug discovery and development, as opposed to more proven technologies for drug development, increases the risks associated with the ownership of our common stock. If neither we nor any of our partners is successful in developing a product candidate using our technology,at all, we may be required to changelimit the size or scope and directionof one or more of our programs or decrease our expenditures and seek additional funding by other means. Such events would likely have a material adverse effect on our results of operations and financial condition.

We expect to rely on third parties to conduct some or all aspects of our compound formulation, research and preclinical testing, if those third parties do not perform satisfactorily our business and future prospects would be materially and adversely affected.

We do not expect to independently conduct most aspects of our drug discovery activities, compound formulation research or preclinical testing of product candidates. Instead, we expect to rely on third parties to conduct some aspects of our preclinical testing and on third-party Clinical Research Organizations (“CROs”) to conduct clinical trials.

If these third parties terminate their engagements, we will need to enter into alternative arrangements which would delay our product development activities. InOur reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities. If in the future, we elect to develop and commercialize any product candidates on our own, we will remain responsible for ensuring that case,each of our IND-enabling preclinical studies and clinical trials are conducted under the respective study plans and trial protocols. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our studies under regulatory requirements or our stated study plans and protocols, we maywill not be able to identifycomplete, or may experience delays in completing, the necessary clinical trials and implement successfully an alternative business strategy.

All of our programs, other than our program for CEQ508, are in pre-clinicalpreclinical studies or early stage research. If weto enable us or our partners to select viable product candidates for IND submissions and will not be able to, or may be delayed in our efforts to, successfully develop and commercialize such product candidates.

If we are able to commercialize a product candidate, we will rely on third-party manufacturers to produce our preclinical and clinical supplies, or commercial supplies of any approved product candidates, which would subject us to a variety of risks.

We have limited manufacturing experience and expect to rely on third parties to assist with manufacturing and related functions. Our anticipated reliance on third-party manufacturers to produce products we may develop in the future entail risks to which we would not be subject if we supplied the materials needed to develop and manufacture our product candidates ourselves, including but not limited to:

the inability to meet any product specifications and quality requirements consistently;
a delay or inability to procure or expand sufficient manufacturing capacity;
discontinuation or recall of reagents, test kits, instruments, and other items used by us in the development, testing, and potential commercialization of products;
manufacturing and product quality issues related to scale-up of manufacturing;
costs and validation of new equipment and facilities required for scale-up;
a failure to comply with current Good Manufacturing Practices (“cGMP”) and similar foreign standards;
the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;
the possibility of breach or termination or nonrenewal of manufacturing agreements with third parties in a manner that is costly or damaging to us;

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the reliance on a few sources, and sometimes, single sources for raw materials, such that if we cannot secure a sufficient supply of these product components, we cannot manufacture and sell product candidates in a timely fashion, in sufficient quantities or under acceptable terms;
the lack of qualified backup suppliers for any raw materials currently purchased from a single source supplier;
operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier;
carrier disruptions or increased costs beyond our control;
misappropriation of our proprietary technology for the purpose of manufacturing a “generic” version of our product or sale of our product to organizations that distribute and sell counterfeit goods, including drugs; and
failing to deliver products under specified storage conditions and in a timely manner.

These events could lead to clinical study delays or failure to obtain regulatory approval or impact our ability to successfully commercialize future products. Some of these events could be the basis for regulatory actions, including injunction, recall, seizure or total or partial suspension of production.

Because we expect to rely on limited sources of supply for the drug substance and drug product of product candidates, any disruption in the chain of supply may cause a delay in developing and commercializing these product candidates.

We intend to establish manufacturing relationships with a limited number of suppliers to manufacture raw materials, the drug substance, and the drug product of any product candidate for which we are responsible for preclinical or clinical development. Each supplier may require licenses to manufacture such components if such processes are not owned by the supplier or in the public domain. As part of any marketing approval, a manufacturer and its processes must be qualified by the FDA or foreign regulatory authorities prior to commercialization. If supply from the approved vendor is interrupted, there could be a significant disruption in commercial supply. An alternative vendor would need to be qualified through a New Drug Application (“NDA”) or marketing authorization supplement, which could cause further delay. The FDA or other regulatory agencies outside of the United States may also require additional studies if a new supplier is relied upon for commercial production.

These factors could cause the delay of clinical trials, regulatory submissions, required approvals or commercialization of our product candidates, cause us to incur higher costs and prevent us from commercializing our products successfully. Furthermore, if our suppliers fail to deliver the required commercial quantities of drug substance or drug product on a timely basis and at commercially reasonable prices, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our clinical trials may be delayed, or we could lose potential revenue.

If third party manufacturing issues arise, it could increase product and regulatory approval costs or delay commercialization.

As third parties scale up manufacturing of product candidates and conduct required stability testing, product, packaging, equipment and process-related issues may require refinement or resolution to proceed with any clinical trials and obtain regulatory approval for commercial marketing. We or the manufacturers may identify significant impurities or stability problems, which could cause discontinuation or recall by us or our manufacturers, increased scrutiny by regulatory agencies, delays in clinical programs and regulatory approval, significant increases in our operating expenses, or failure to obtain or maintain approval for product candidates or any approved products.

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If we do not succeed in our efforts to develop product candidates, your investment may be lost.

The success of our business depends primarily upon our ability to identify, develop and commercialize product candidates utilizing our technologies, our business will be adversely affected.

A key element of our strategy is to discover, develop and commercialize a portfolio of newdrug products, through internal efforts and

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through those of our current or future strategic partnerships. Whether or not any product candidates are ultimately identified, research programs to identify new disease targets and product candidates require substantial technical, financial and human resources, which we currently do not have. Thesean extremely risky business. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield a successful commercial product candidates for manyclinical development for several reasons, including the following:including:

·competitors may develop alternatives that render ourpotential product candidates (or those of our partners) obsolete;
·a product candidate may not have a sustainable intellectual property position in major markets;
·a product candidate may, after additional studies, be shown to have harmful side effects or may have other characteristics that indicate it ismake the products unmarketable or unlikely to be effective;receive marketing approval; and
·
we or our partners may change their development profiles for potential product candidates or abandon a product candidate may not receive regulatory approval;
·a product candidate may not be capable of production in commercial quantities at an acceptable cost, or at all; or
·a product candidate may not be accepted by patients, the medical community or third-party payors.therapeutic area.

Clinical trials ofSuch events may force us to abandon our development efforts for a program or programs, which would have a material adverse effect on our business and could cause us to cease operations. Research programs to identify new product candidates utilizingrequire substantial technical, financial, and human resources. We may focus our technologies wouldefforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.

Because our future commercial success depends on gaining regulatory approval for our products, we cannot generate revenue without obtaining approvals.

Our long-term success and generation of revenue will depend upon the successful development of new products from research and development activities, including those licensed or acquired from third parties. Product development is very expensive and time-consuming, and the resultsinvolves a high degree of anyrisk. Only a small number of these trials would be uncertain.

The research and development programs result in the commercialization of our companya product. For example, the FDA indicates that approximately 70% of drugs proceed past Phase 1 studies, 33% proceed past Phase 2, and our partners with respectjust 25%-30% proceed past Phase 3 to oligonucleotide-based products are at an early stage. BeforePhase 4 which is the final phase in the FDA review and approval process for marketing therapeutic product candidates. The process for obtaining regulatory approval for the sale of anyto market product candidates is expensive, usually takes many years, and can vary substantially based on the type, complexity, and novelty of the product candidates involved. Our ability to generate revenues would be adversely affected if we are delayed or unable to successfully develop our products.

We cannot guarantee that any marketing application for our product candidates will be approved. If we do not obtain regulatory approval of our products or we are significantly delayed or limited in doing so, we cannot generate revenue, and we may need to significantly curtail operations.

If we are unable to successfully complete clinical trials of our product candidates or experience significant delays in doing so, our business will be materially harmed.

We intend to invest a significant portion of our efforts and financial resources in the identification and clinical development of pharmaceutical product candidates. Our ability to generate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our product candidates.

The commercial success of our product candidates will depend on several factors, including:

identification of viable product candidates and initiation and completion of research and development efforts;
successful completion of preclinical studies and clinical trials;
receipt of marketing and pricing approvals from regulatory authorities;
obtaining and maintaining patent and trade secret protection for product candidates;
establishing and maintaining manufacturing relationships with third parties or establishing our own manufacturing capability; and
commercializing our products, if and when approved, whether alone or in collaboration with others.

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If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully complete development of, or to successfully commercialize, our product candidates, which would materially harm our business. Most pharmaceutical products that do overcome the long odds of drug development and achieve commercialization still do not recoup their cost of capital. If we are unable to design and develop each drug to meet a commercial need far in the future, the approved drug may become a commercial failure and our partners must conduct expensiveinvestment in those development and extensive pre-clinical tests and clinical trialscommercialization efforts will have been commercially unsuccessful. In addition, we may be unable to demonstrate the safety and efficacy of such product candidates. Pre-clinical and clinical testing is a long, expensive and uncertain process, and the historical failure rate forour product candidates is high. The length of time generally varies substantially according to the typesatisfaction of drug, complexityregulatory authorities or we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of clinical trial design, regulatory compliance requirements, intended use of the drug candidate and rate of patient enrollment for the clinical trials.

A failure of one or more pre-clinical studies or clinical trials can occur at any stage of testing. We and our partners may experience numerous unforeseen events during, orproduct candidates as a result of, the pre-clinical testing and the clinical trial processresult.

Our product candidates may cause adverse effects or have other properties that could delay or prevent the receipt oftheir regulatory approval or limit the commercializationscope of any approved label or market acceptance.

Adverse events (“AEs”) or serious adverse events (“SAEs”), that may be observed during clinical trials of our product candidates including:could cause us, other reviewing entities, clinical trial sites or regulatory authorities to interrupt, delay or halt such trials and could cause denial of regulatory approval. If AEs or SAEs are observed in any clinical trials of our product candidates, including those our partners may develop under alliance agreements, our or our partners’ ability to obtain regulatory approval for product candidates may be negatively impacted.

Serious or unexpected side effects caused by an approved product could result in significant negative consequences, including the following:

·regulatorsregulatory authorities may not authorize uswithdraw prior approval of the product or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy (“REMS”) which may restrict the manner in which the product can be distributed or administered;
we may be required to commence a clinical trialadd labeling statements, such as warnings or contraindications;
we may be required to change the way the product is administered or conduct aadditional clinical trial at a prospective trial site;trials;
·pre-clinical tests or clinical trials may produce negative or inconclusive results, and
we or a partner may decide or a regulatorbe forced to remove the affected product temporarily or permanently from the marketplace;
we could be sued and held liable for harm caused to patients; and
our reputation may require us, to conduct additional pre-clinical testing or clinical trials, or we or a partner may abandon projects that were previously expected to be promising;
·enrollment in clinical trials may be slower than anticipated or participants may drop out of clinical trials at a higher rate than anticipated, resulting in significant delays;
·third party contractors may fail to comply with regulatory requirements or meet their contractual obligations in a timely manner;
·product candidates may have very different chemical and pharmacological properties in humans than in laboratory testing and may interact with human biological systems in unforeseen, ineffective or harmful ways;
·the suspension or termination of clinical trials if the participants are being exposed to unacceptable health risks;
·regulators, including the FDA, may require that clinical research be held, suspended or terminated for various reasons, including noncompliance with regulatory requirements;
·the cost of clinical trials may be greater than anticipated;
·the supply or quality of drug candidates or other materials necessary to conduct clinical trials may be insufficient or inadequate; and
·effects of product candidates may not have the desired effects or may include undesirable side effects or the product candidates may have other unexpected characteristics.suffer.

Further, even if the results of pre-clinical studies or clinical trials are initially positive, it is possible that we or a partner will obtain different results in the later stages of drug development or that results seen in clinical trials will not continue with longer term treatment. Drugs in late stages of clinical development may fail to show the desired safety and efficacy traits despite having progressed through initial clinical testing. For example, positive results in early Phase 1 or Phase 2 clinical trials may not be repeated in larger Phase 2 or Phase 3 clinical trials. It is expected that all of the drug candidates that may be developed byThese events could prevent us or our partners based on our technologies will be prone to the risks of failure inherent in drug development. The clinical trials of anyfrom achieving or allmaintaining market acceptance of the drug candidatesaffected product and could substantially increase the costs of us orcommercializing our partners could be unsuccessful, which would prevent the commercialization of these drugs. The FDA conducts its own independent analysis of some or all of the pre-clinicalproducts and clinical trial data submitted in a regulatory filing and often comes to different and potentially more negative conclusions than the analysis performed by the drug sponsor. The failure to develop safe, commercially viable drugs approved by the FDA would substantially impair our ability to generate revenues from the commercialization of these products either by us or by our partners.

Following regulatory approval for a product salescandidate, we would still face extensive regulatory requirements and sustainthe approved product may face future development and regulatory difficulties.

Even if we or our operations and would materially harm our business and adversely affect our stock price. In addition, significant delays in pre-clinical studies andcollaboration partners complete clinical trials will impedeand obtain regulatory approval in the abilityUnited States or elsewhere, the applicable regulators may still impose significant restrictions on the indicated uses or marketing of usproduct candidates or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. The following discussion is based on United States law. Similar types of regulatory provisions apply outside of the United States.

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The holder of an approved NDA must monitor and report AEs and SAEs and any failure of a product to meet the specifications in the NDA. The holder of an approved NDA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Advertising and promotional materials must comply with FDA rules and other applicable federal and state laws and are subject to FDA review.

Drug product manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP, and adherence to commitments made in the NDA. If we, our partners or a partner to seek regulatory approvals, commercialize drug candidates andagency discover previously unknown problems with a product such as AEs or SAEs of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product or the manufacturing facility, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.

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generate revenue, as well as substantially increase development costs.

Even if regulatory approvals are obtained for our products, such products will be subject to ongoing regulatory review. If we or a partnerour partners fail to comply with continuing U.S. and foreign regulations, the approvals to market drugs could be lost and our business would be materially adversely affected.

Following any initial FDA or foreign regulatory requirements following approval of any drugs we or a partner may develop, such drugs will continue to be subject to regulatory review, including the review of adverse drug experiences and clinical results that are reported after such drugs are made available to patients. This would include results from any post marketing studies or vigilance required as a condition of approval. The manufacturer and manufacturing facilities used to make any drug candidates will also be subject to periodic review and inspection by regulatory authorities, including the FDA. The discovery of any new or previously unknown problems with the product, manufacturer or facility may result in restrictions on the drug or manufacturer or facility, including withdrawal of the drug from the market. Marketing, advertising and labeling also will be subject to regulatory requirements and continuing regulatory review. The failure to comply with applicable continuing regulatory requirements may result in fines, suspension or withdrawal of regulatory approval, product recalls and seizures, operating restrictions and other adverse consequences.

We and our partners are subject to extensive U.S. and foreign government regulation, including the requirement of approval before products may be marketed.

We, our present and future collaborators, and the drug product candidates developed by us or in collaboration with partners are subject to extensive regulation by governmental authorities in the U.S. and other countries. Failure to comply with applicable requirements could result in, among other things, any of the following actions: warning letters, fines and other civil penalties, unanticipated expenditures, delays in approving or refusal to approve a product candidate, product recall or seizure, interruption of manufacturing or clinical trials, operating restrictions, injunctions and criminal prosecution.

Our product candidates and those of our partners cannot be marketed in the U.S. without FDA approval or clearance, and they cannot be marketed in foreign countries without applicable regulatory approval. Neither the FDA nor any foreign regulatory authority has approved any of the product candidates being developed by us or our partners based on our technologies. These product candidates are in pre-clinical and early clinical development and will have to be approved by the FDA or applicable foreign regulatory authorities before they can be marketed in the U.S. or abroad. Obtaining regulatory approval requires substantial time, effort, and financial resources, and may be subject to both expected and unforeseen delays, including, without limitation, citizen’s petitions or other filings with the FDA, and there can be no assurance that any approval will be granted on a timely basis, if at all, or that delays will be resolved favorably or in a timely manner. If our product candidates, are not approved in a timely fashion,regulatory agency may:

issue a warning letter asserting we are in violation of the law;
impose a REMS or other restrictions on the manufacturing, marketing or use of the product;
seek an injunction or impose civil or criminal penalties or monetary fines;
suspend or withdraw regulatory approval;
suspend any ongoing clinical trials;
refuse to approve a pending NDA or supplements to an NDA submitted by us;
seize the product; or
refuse to allow us to enter into supply contracts, including government contracts.

Our defense of any government investigation of alleged violations of law, or are not approved at all, our businessany lawsuit alleging such violations, could require us to expend significant time and financial condition may be adversely affected.

In addition, both beforeresources and aftercould generate negative publicity. Further, the FDA’s and other regulatory approval, we, our collaborators and our product candidates are subject to numerous requirements by the FDA and foreign regulatory authorities covering, among other things, testing, manufacturing, quality control, labeling, advertising, promotion, distribution and export. These requirementsauthorities’ policies may change, and additional government regulations may be promulgatedenacted that could affectprevent, limit or delay regulatory approval of our product candidates or increase the cost of compliance. The occurrence of any event or penalty described above may prevent or inhibit our ability to commercialize products and generate revenues.

We may not succeed in obtaining or maintaining necessary rights to further drug compounds and processes for our development pipeline through acquisitions and in-licenses.

We may be unable to acquire or in-license any further compositions, methods of use, processes, or other third-party intellectual property rights from third parties we identify. The licensing and acquisition of third-party intellectual property rights is a competitive area, and more established companies are also pursuing strategies to license or acquire third-party intellectual property rights we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.

Companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our collaboratorsinvestment. If we are unable to successfully obtain rights to required third-party intellectual property rights, our business, financial condition, and prospects for growth could suffer.

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Because third parties may develop or be developing competitive products without our knowledge, we may later learn that competitive products are superior to our product candidates which may force us to terminate our development efforts of one or more product candidates.

We face potential competition from companies, particularly privately-held companies and foreign companies that may be developing competitive products that are superior to one or more of our product candidates. If in the future, we learn of the existence of one or more competitive products, we may be required to:

cease our development efforts for a product candidate;
cause a partner to terminate its support of a product candidate; or
cause a potential partner to terminate discussions about a potential license.

Any of these events may occur after we have spent substantial sums in connection with the clinical research of one or more product candidates.

Our efforts to identify and develop product candidates are at an early stage. We may be unable to progress our product candidates through clinical trials.

Success in preclinical testing and early clinical trials does not ensure that later clinical trials will succeed, and favorable initial results from a clinical trial do not determine outcomes in subsequent clinical trials. The indications of use for which we pursue development may have clinical effectiveness endpoints not previously reviewed or validated by the FDA or foreign regulatory authorities, which may complicate or delay our effort to obtain marketing approval. We cannot predictguarantee that any clinical trials we undergo will succeed. In fact, most compounds fail in clinical trials, even at companies far larger and more experienced than us.

We have not commenced clinical trials, obtained marketing approval or commercialized any product candidates. We may not successfully develop a product candidate or design or implement clinical trials required for marketing approval to market our product candidates. If we are unsuccessful in conducting and managing our preclinical development activities or clinical trials or obtaining marketing approvals, we might not be able to commercialize our product candidates, or might be significantly delayed in doing so, which will materially harm our business.

Because of the likelihood, nature or extent of government regulation thatcurrent inflation affecting the economy, we may arise from future legislation or administrative action, eitherbe harmed in the U.S.future.

Although we currently only have minimal operations, rising prices may have a significant effect on us. In the event, we raise additional capital to ramp up our operations, we may be adversely affected due to increased costs for services from our suppliers. The more active our business is, the more inflation may affect us. As of the date of this Prospectus, we cannot predict how extensive the inflation will be, its duration or abroad.the ultimate impact on us.

Risks Related to Our Business Operations and Industry

If we cannot obtain or protect intellectual property rights related to our future products and product candidates, we may not be able to compete effectively in our markets.

We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our future products and product candidates. The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. The patent applications we own or in-license may fail to result in patents with claims that cover the products in the United States or in other countries. There can beis no assurance that neitherall potentially relevant prior art relating to our patents and patent applications has been found; such prior art can invalidate a patent or prevent issuance of a patent based on a pending patent application. Even if patents do successfully issue, third parties may challenge their validity, enforceability or scope, which may cause such patents to be narrowed or invalidated. Even if unchallenged, our patents and patent applications, or those of third-party licensors, may not adequately protect our intellectual property or prevent others from designing around our claims.

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If the patent applications we norhold or have in-licensed regarding our programs or product candidates fail to issue or if their breadth or strength of protection is threatened, it could dissuade companies from collaborating with us to develop product candidates, and threaten our ability to commercialize products. Patents may not issue and issued patents may be found invalid and unenforceable or challenged by third parties. Since patent applications in the United States and most other countries are confidential for a period after filing, and some remain so until issued, we cannot be certain that we were the first to invent a patent application related to a product candidate. In certain situations, if we and one or more third parties have filed patent applications in the United States and claiming the same subject matter, an administrative proceeding can be initiated to determine which applicant is entitled to the patent on that subject matter. Patents have a limited lifespan. In the United States, the natural expiration of a patent is 20 years after it is filed, although various extensions may be available. The life of a patent, and the protection it affords, is limited. When the patent life has expired for a product, we will become vulnerable to competition from generic medications attempting to replicate that product. Further, if we encounter delays in regulatory approvals, the time during which we will be able to market and commercialize a product candidate under patent protection could be reduced.

In addition to patent protection, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our partners willdrug discovery and development processes that involve proprietary know-how, information or technology not covered by patents. Notwithstanding protective measures we may take, our trade secrets and other confidential proprietary information may be requireddisclosed and competitors may otherwise gain access to incur significant costsour trade secrets or independently develop substantially equivalent information and techniques. In addition, in January 2018 the FDA as part of its Transparency Initiative, launched a voluntary pilot program calling on biopharmaceutical research companies to comply with suchrelease clinical study reports summarizing clinical trial data. Following the completion of this pilot program in March 2020, the FDA may consider making release of clinical study reports mandatory and may consider making additional information publicly available on a routine basis in response to concerns expressed by the academic community emphasized by the COVID-19 pandemic, including information we may consider to be trade secrets or other proprietary information. If the FDA takes these measures, we may be forced to disclose propriety information about our product candidates and research, which could materially harm our business.

The laws and regulationsof some foreign countries do not protect proprietary rights to the same extent or in the futuresame manner as the laws of the United States. We may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee we will have any such enforceable trade secret protection, we may not be able to establish or that such lawsmaintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.

If third-party intellectual property infringement claims are asserted against us, it may prevent or regulations will notdelay our development and commercialization efforts and have a material adverse effect uponon our business.business and future prospects.

Our commercial success depends in part on our avoiding infringement on the patents and proprietary rights of third parties. There is substantial litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions, and reexaminations and other post-grant proceedings before the U.S. Patent and Trademark Office, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we and our partners are pursuing product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.

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Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be patent applications currently pending that may later result in patents that our product candidates may infringe upon. Third parties may obtain patents in the future and claim that use of our technologies infringes on these patents. If any third-party patents were to be held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patents were to be held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all.

Parties making intellectual property claims against us may obtain injunctive or other equitable relief, which could block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, involves substantial litigation expense and diversion of our management’s attention from our business. If a claim of infringement against us succeeds, we may have to pay substantial damages, possibly including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.

Because of the costs involved in defending patent litigation, we currently lack and may in the future lack the capital to defend our intellectual property rights.

We depend on intellectual property licensed from third parties, and termination of any of these licenses could have a material adverse effect on our business.

We depend on the patents, know-how and other intellectual property, licensed from third parties for the development and, if approved, commercialization of product candidates. If these licenses are terminated, or found to be unenforceable, it could result in the loss of significant rights and could harm our ability to commercialize our future product candidates. For example, on January 4, 2021, Les Laboratories Servier, the licensor under the 2017 Amended and Restated License and Commercialization Agreement pursuant to which we previously had rights for the commercialization of Prestalia®, terminated the license agreement. Prior to the termination, sales by the Company of Prestalia constituted all of our revenue for prior periods, including all of our product revenue during fiscal year 2019.

License agreements impose certain obligations on us, including obligations to use diligent efforts to meet development thresholds, funding requirements and payment obligations. For example, under our license agreement with M1 for the MLR-1023 product, if we fail to raise or be in final negotiations to raise at least $500,000 by February 1, 2023, the license will terminate. Additionally, under the MLR-1019 license agreement, if the Company fails to get its Common Stock listed on Nasdaq or the NYSE within 12 months after the Company receives a Clinical Trial Authorization from the European Medicines Agency, then the license will terminate.

Further, license agreements are complex, and contain certain provisions which may be susceptible to multiple interpretations. Accordingly, disputes may arise between us and our licensors regarding intellectual property subject to a license agreement, including those relating to:

the scope of rights, if any, granted under the license agreement and other interpretation-related issues;
whether and to what extent our technology and processes infringe on intellectual property of the licensor that is not subject to the license agreement;
whether our licensor or its licensor had the right to grant the license agreement;
whether third parties are entitled to compensation or equitable relief, such as an injunction, for our use of the intellectual property without their authorization;
our right to sublicense patent and other rights to third parties under collaborative development relationships;

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whether we are complying with our obligations with respect to the use of the licensed technology in relation to our development and commercialization of product candidates;
our involvement in the prosecution and enforcement of the licensed patents and our licensors’ overall patent prosecution and enforcement strategy;
the allocation of ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and by us and any future partners or collaborators; and
the amounts of royalties, milestones or other payments due under the license agreement.

The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement.

We may need to obtain additional licenses to intellectual property rights from third parties.

We may need to obtain additional licenses from third parties to advance our research or allow commercialization of our product candidates. We may fail to obtain 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 one or more of our product candidates, which could harm our business significantly. We cannot provide any assurances that third-party patents do not exist that might be enforced against our products, resulting in either an injunction prohibiting our sales, or, with respect to our sales and other activities, an obligation on our part to pay royalties and/or other forms of compensation to third parties

The licensing and acquisition of third-party intellectual property rights is a competitive practice, and companies that may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary or attractive in order to develop and commercialize our product candidates. More established companies may have a competitive advantage over us due to their larger size and cash resources or greater clinical development and commercialization capabilities. We may not be able to successfully complete such negotiations and ultimately acquire the rights to the intellectual property surrounding product candidates that we may seek to acquire, in which case our business could be harmed.

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

Competitors may infringe on patents owned or licensed by us. To counter such infringement or unauthorized use, we or our partners may be required to file infringement claims, or we may be required to defend the validity or enforceability of such patents, which can be expensive and time-consuming. In an infringement proceeding, a court may decide that either one or more of our patents or our licensors’ patents is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue because our patents do not cover that technology. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions regarding our patents or patent applications or those of our partners or licensors. An unfavorable outcome could require us to cease using the related technology or 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. Our defense of litigation or interference proceedings may fail and, even if successful, may cause us to incur substantial costs and distract the attention of our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

Because of the substantial amount of discovery required in intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also 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 material adverse effect on the price of our Common Stock.

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

We employ individuals previously employed at other biotechnology or pharmaceutical companies. We may continuebe subject to use, hazardous chemicals and biological materialsclaims asserting that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of our employees’ former employers or other third parties. We may also be subject to claims that former employers or other third parties have an ownership interest in our business. Any disputes relatingpatents. Litigation may be necessary to improper use, handling, storage or disposaldefend against these claims. There is no guarantee of success in defending these materialsclaims, and if we succeed, litigation could cause substantial cost and be time-consuminga distraction to our management and costly.other employees.

Because we face significant competition from other biotechnology and pharmaceutical companies, our operating results will suffer if we fail to compete effectively.

The biotechnology and pharmaceutical industries are intensely competitive. We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, biotechnology companies and universities and other research institutions. Our competitors have substantially greater financial, technical and other resources, such as larger research and development operationsstaff and experienced marketing and manufacturing organizations. This enables them, among other things, to make greater research and development investments and efficiently utilize their research and development costs. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may cause even more resources being concentrated in our competitors. Additionally, smaller or early-stage companies of which we may not be aware could also prove to be material competitors, particularly through collaborative arrangements with larger, more well-established companies or by competing with us for limited resources and strategic alliances with our current or prospective partners. Competition may increase further because of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may develop, acquire or license drug products that are more effective or less costly than any product candidate we may develop.

Our current or future programs may be targeted toward indications for which there are approved products on the market or product candidates in clinical development. We will face competition from other drugs that are or will be approved for the same therapeutic indications. Our ability to compete successfully will depend largely on our ability to leverage our experience in drug discovery and development to:

discover and develop therapeutics superior to other products in the market;
attract and retain qualified scientific, product development and commercial personnel;
obtain patent and/or other proprietary protection for our technology platform and product candidates;
obtain required regulatory approvals; and
successfully collaborate with pharmaceutical companies in the discovery, development and commercialization of new therapeutics.

The availability of our competitors’ products could limit the demand, and the price we can charge, for any products we may develop and commercialize. We will not achieve our business plan if the acceptance of our products is inhibited by price competition or the reluctance of physicians to switch from existing drug products to our products, or if physicians switch to other new drug products or reserve our products for use in limited circumstances. Additionally, the biopharmaceutical industry is characterized by rapid technological and scientific change, and we may not be able to adapt to these rapid changes to the extent necessary to keep up with competitors or at all. The inability to compete with existing or subsequently introduced drug products would have involved,a material adverse impact on our business, financial condition and prospects.

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Established pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make our product candidates less competitive. Any new product that competes with an approved product must typically demonstrate advantages, such as in efficacy, convenience, tolerability or safety, to overcome price competition and to succeed. Our competitors may obtain patent protection, receive approval by FDA and/or foreign regulatory authorities or discover, develop and commercialize product candidates before we do, which would have a material adverse impact on our business.

The commercial success of our product candidates will depend upon the acceptance of these product candidates by the medical community, including physicians, patients and healthcare payors.

Assuming one or more product candidates achieve regulatory approval, and we commence marketing such products, the market acceptance of any product candidates will depend on several factors, including:

demonstration of clinical safety and efficacy compared to other products;
the relative convenience, ease of administration and acceptance by physicians, patients and healthcare payors;
the prevalence and severity of any adverse effects or serious adverse effects;
limitations or warnings in the label approved by FDA and/or foreign regulatory authorities for such products;
the timing of market introduction of our products relative to competitive products and the availability of alternative treatments;
pricing and cost-effectiveness;
the execution and effectiveness of our or any partners’ sales and marketing strategies;
our ability to obtain hospital formulary approval; and
our ability to obtain and maintain sufficient third-party payor coverage or reimbursement.

If we obtain regulatory approval for one product candidate, we expect sales to generate substantially all of our product revenues, and as such, the failure of these products to find market acceptance would adversely affect our results of operations. Further, if continuedinsurance and/or government coverage and adequate reimbursement are not available for our product candidates, it could impair our ability to achieve and maintain profitability.

Because of the psychotropic properties of MLR-1019, the drug is likely to be designated a controlled substance and subject to classification as a Schedule 1 drug until approval is granted for a medical use.

Schedule 1 drugs, substances, or chemicals are defined as drugs with no currently accepted medical use and a high potential for abuse. Given that MLR1019 has no currently accepted medical use in the USA, the drug is expected to be classified as Schedule 1, until such medical use is granted via an approval from FDA.

We may be subject to increased regulation as well as uncertainty, which may adversely affect our business.

Under the current federal government administration, the FDA, the Centers for Disease Control and other agencies which affect our business may increase their regulatory efforts. At the senior administrative level, new regulators with a regulatory zeal may tighten existing regulations and that approach may also be taken in the routine interactions between staff and our scientists and others. For example, in late calendar year 2021 the White House Office of Management and Budget issued the Fall 2021 Agency Rule List which contains 85 proposed and final rules that the agency plans to issue under the FDA’s purview. These rules or other regulatory developments which may occur in the future could have an adverse impact, directly or indirectly, on our operations or on the operations of our collaborators. Increased regulation and enforcement may lead to increased costs and further delays in getting approvals, which may adversely affect our business.

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If we lose key management or scientific personnel, cannot recruit qualified employees, directors, officers, or other personnel or experience increases in our compensation costs, our business may materially suffer.

We are highly dependent on our Chief Executive Officer and Interim Chief Scientific Officer, Dr. Zahed Subhan and our Chief Operating Officer and Acting Chief Financial Officer, Andrew Kucharchuk. In addition, services related to our accounting and financial management are being performed by independent contractors. We do not carry “key-man” life insurance on Dr. Subhan. The loss of the services of Dr. Subhan, would leave us without executive and scientific leadership, which could diminish our business and growth opportunities. We will likely continuealso need to involve,build an executive management team around Dr. Subhan, which could be a time consuming and expensive process and divert management’s attention from other pressing matters concerning the Company’s operations or growth. The market for highly qualified personnel in this industry is very competitive and we may be unable to attract such personnel in a timely manner, on favorable terms or at all. If we are unable to attract such personnel, our business could be harmed. If we fail to procure the services of additional executive management or implement and execute an effective contingency or succession plan for Dr. Subhan, the loss of Dr. Subhan would significantly disrupt our business.

Other than Dr. Subhan and Mr. Kucharchuk, we have no other officers. Our future success will also depend in part on our ability to identify, hire, and retain additional personnel. We may not be able to attract and retain personnel on acceptable terms, as there is significant competition among numerous pharmaceutical companies for individuals with similar skill sets. Because of this competition, our compensation costs may increase significantly. If we lose key employees or advisors or fail to procure their services on acceptable terms as and when needed, our business may suffer

If we expand our organization, we may experience difficulties in managing growth, which could disrupt our operations.

As of that date of this Prospectus, we employ one employee and our current Chief Operating Officer. Services related to our accounting and financial management are being performed by independent contractors. As our company matures, we expect to hire employees to increase our managerial, scientific and operational, commercial, financial and other resources and to hire more consultants and contractors. Future growth would impose significant additional responsibilities on our management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may cause weaknesses in our infrastructure, and give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as developing additional product candidates. If our management cannot effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and we may not be able to implement our business strategy. Our future financial performance and our ability to develop and commercialize product candidates and compete effectively will depend, in part, on our ability to manage our future growth.

Because we would face potential product liability if claims are brought against us with respect to any product we commercialize in the future, in such an event we may incur substantial liability and costs.

Any future use of hazardous and biological, potentially infectious, materials. Such use subjectsour product candidates in clinical trials or the sale of any products for which we obtain marketing approval exposes us to the risk of accidental contaminationproduct liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or dischargeothers selling or any resultant injury from these materials. Federal, stateotherwise coming into contact with our products. If we cannot successfully defend against product liability claims, we could incur substantial liability and localcosts. Regardless of merit or eventual outcome, product liability claims may cause:

impairment of our business reputation;
withdrawal of clinical trial participants;
costs due to related litigation;
distraction of management’s attention from our primary business;
substantial monetary awards to patients or other claimants;
regulatory scrutiny and product recalls, withdrawals or labeling, marketing or promotional restrictions;
the inability to commercialize our product candidates; and
decreased demand for our product candidates, if approved for commercial sale.

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Insurance coverage is becoming increasingly expensive and we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If we obtain marketing approval for product candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. Occasionally, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.

If we fail to comply with applicable laws and regulations, govern the use, manufacture, storage, handlingincluding environmental, health and disposal of these materialssafety laws and specific waste products. Weregulations, we could bebecome subject to damages, fines or penalties in the event of an improper or unauthorized release of, or exposure of individuals to, these hazardous materials, and our liabilityincur costs that could be substantial. The costs of complying with these current and future environmental laws and regulations may be significant, thereby impairinghave a material adverse effect on our business.

We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures exposure to blood-borne pathogens and the handling, use, storage, treatment and disposal of biohazardoushazardous materials and wastes, and the treatment of animals used in research. The research, development and commercialization of drug candidates involve using hazardous and flammable materials, including chemicals and biological materials. These activities also produce hazardous waste products. We maintain workers’ compensation insurance to cover usgenerally contract with third parties for coststhe disposal of these materials and expenses we may incur due to injuries towastes. We cannot eliminate the risk of contamination or injury from these materials. If contamination occurs or injury results from our employees resulting from the use of these materials. The limitshazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.

Risks Relating to this Offering and Ownership of Our Common Stock

We may not be able to satisfy listing requirements of Nasdaq Capital Markets or maintain a listing of our workers’ compensation insurance are mandatedcommon stock on Nasdaq Capital Markets.

Our common stock is quoted on the OTCQB market operated by state law, and our workers’ compensation liability is capped at these state-mandated limits. We do not maintain insurance for environmental liability or toxic tort claims that

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may be asserted against us inOTC Markets Group Inc. In connection with this offering, we plan to apply for the listing of our storagecommon stock on Nasdaq Capital Markets. The closing of this offering is contingent upon our up listing to the Nasdaq Capital Markets unless such condition is waived by the underwriter. In addition, we must meet certain financial and liquidity criteria to maintain the listing of our common stock on Nasdaq Capital Markets. If we fail to meet any listing standards or disposal of biological, hazardous or radioactive materials. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate any listing requirements, our common stock may be delisted. In addition, our Board of these laws or regulations.Directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common stock from the Nasdaq Capital Markets may materially impair our stockholders’ ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. The delisting of our common stock could significantly impair our ability to raise capital and the value of your investment.

Failure to comply with foreign regulatory requirements governing human clinical trials and marketing approval for drugs could prevent the saleThe price of drug candidates based on our technologies in foreign markets,common stock is volatile, which may adversely affect our operating results and financial condition.

The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement for marketing drug candidates based on our technologies outside the U.S. vary greatly from country to country. We have, and our partners may have, limited experience in obtaining foreign regulatory approvals. The time required to obtain approvals outside the U.S. may differ from that required to obtain FDA approval. Neither we nor our partners may be able to obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other countries or by the FDA. Failure to comply with these regulatory requirements or obtain required approvals could restrict the development of foreign marketscause investment losses for our drug candidatesstockholders.

The market price of our common stock has been and is likely in the future to be volatile. Our common stock price may fluctuate in response to factors such as:

Announcements by us regarding liquidity, significant acquisitions, equity investments and divestitures, strategic relationships, addition or loss of significant customers and contracts, capital expenditure commitments and litigation;
Issuance of convertible or equity securities and related warrants for general or merger and acquisition purposes;

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Issuance or repayment of debt, accounts payable or convertible debt for general or merger and acquisition purposes;
Sale of a significant number of shares of our common stock by stockholders;
General market and economic conditions;
Quarterly variations in our operating results;
Investor and public relation activities;
Announcements of technological innovations;
New product introductions by us or our competitors;
Competitive activities;
Low liquidity; and
Additions or departures of key personnel.

These broad market and industry factors may have a material adverse effect on our financial condition or results of operations.

Risks Related to our Dependence on Third Parties

We may become dependent on our collaborative arrangements with third parties for a substantial portionthe market price of our revenue, and our development and commercialization activities may be delayed or reduced if we fail to initiate, negotiate or maintain successful collaborative arrangements.

We are, in part, dependent on current and possible future collaborators to develop and commercialize products based on our technologies and to provide the regulatory compliance, sales, marketing and distribution capabilities required for the successcommon stock, regardless of our business. If we fail to secure or maintain successful collaborative arrangements, our development and commercialization activities will be delayed, reduced or terminated, and our revenues could be materially and adversely impacted.

Over the next several years, we may depend on these types of collaborations for a significant portion of our revenue. The potential future milestone and royalty payments and cost reimbursements from collaboration agreements could provide an important source of financing for our research and development programs, thereby facilitating the application of our technology to the development and commercialization of our products.actual operating performance. These collaborative agreements might be terminated either by us or by our partners upon the satisfaction of certain notice requirements. Our partners may not be precluded from independently pursuing competing products and drug delivery approaches or technologies. Even if our partners continue their contributions to our collaborative arrangements, of which there can be no assurance, they may nevertheless determine not to actively pursue the development or commercialization of any resulting products. Our partners may fail to perform their obligations under the collaborative arrangements or may be slow in performing their obligations. In addition, our partners may experience financial difficulties at any time that could prevent them from having available funds to contribute to these collaborations. If our collaborators fail to conduct their commercialization, regulatory compliance, sales and marketing or distribution activities successfully and in a timely manner, or if they terminate or materially modify their agreements with us, the development and commercialization of one or more product candidates could be delayed, curtailed or terminated because we may not have sufficient financial resources or capabilities to continue such development and commercialization on our own.

For example, since the beginning of 2011, we have entered into agreements with Mirna, ProNAi, Monsanto, Avecia and MiNA, among others, regarding the development and/or commercialization of certain programs and technologies in specified fields of use. We may receive milestone and/or royalty payments as a result of each of these agreements. If our partner with respect to any agreement terminates the applicable agreement or fails to perform its obligations thereunder, we may not receive any revenues from the technology that we have licensed pursuant to the agreement, including any milestone or royalty payments.

An interruption in the supply of raw and bulk materials needed for the development of our product candidates could cause product development to be slowed or stopped.

We and our partners may obtain supplies of critical raw and bulk materials used in research and development efforts from several suppliers, and long-term contracts may not be in place with any or all of these suppliers. While existing arrangements may supply sufficient quantities of raw and bulk materials needed to accomplish the current preclinical and clinical development of product candidates, there can be no assurance that sufficient quantities of product candidates could be manufactured if our suppliers are unable or unwilling to supply such materials. Any delay or disruption in the availability of raw or bulk materials could slow or stop research and development of the relevant product.

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We rely and anticipate that we will continue to rely on third parties to conduct clinical trials, and those third parties may not perform satisfactorily, including failing to meet established timelines for the completion of such clinical trials.

We are, and anticipate that we and certain of our partners will continue to be, dependent on contract research organizations, third-party vendors and investigators for performing or managing pre-clinical testing and clinical trials related to drug discovery and development efforts. These parties are not employed by us or our partners, and neither we nor our partners can control the amount or timing of resources that they devote to our programs. If they fail to devote sufficient time and resources to our drug development programs or if their performance is substandard, it will delay the development and commercialization of our product candidates. The parties with which we and our partners contract for execution of clinical trials play a significant role in the conduct of the trials and the subsequent collection and analysis of data. Their failure to meet their obligations could adversely affect clinical development of our product candidates. Moreover, these parties also may have relationships with other commercial entities, some of which may compete with us and our partners. If they assist our competitors, it could harm our competitive position.

If we or our partners lose our relationship with any one or more of these parties, there could be a significant delay in both identifying another comparable provider and then contracting for its services. An alternative provider may not be available on reasonable terms, if at all. Even if we locate an alternative provider, is it likely that this provider may need additional time to respond to our needs and may not provide the same type or level of service as the original provider. In addition, any alternative provider will be subject to current Good Laboratory Practices (“cGLP”) and similar foreign standards and neither we nor our partners have control over compliance with these regulations by these providers. Consequently, if these providers do not adhere to these practices and standards, the development and commercialization of our product candidates could be delayed.

We do not have experience in marketing, selling or distributing our products, and we may need to rely on marketing partners or contract sales companies.

Even if we are able to develop our products and obtain necessary regulatory approvals, we do not have experience or capabilities in marketing, selling or distributing our products. We currently have no sales, marketing and distribution infrastructure. Accordingly, we will be dependent on our ability to build this capability ourselves, which would require the investment of significant financial and management resources, or to find collaborative marketing partners or contract sales companies for commercial sale of our internally-developed products. Even if we find a potential marketing partner, of which there can be no assurance, we may not be able to negotiate a licensing contract on favorable terms to justify our investment or achieve adequate revenues.

We have very limited manufacturing experience or resources, and we must incur significant costs to develop this expertise or rely on third parties to manufacture our products.

We have very limited manufacturing experience. Prior to the cessation of substantially all of our business activities in June 2012, our internal manufacturing capabilities were limited to small-scale production of non-cGMP material for use inin vitro andin vivo experiments. Some of our product candidates utilize specialized formulations whose scale-up and manufacturing could be very difficult. We also have very limited experience in such scale-up and manufacturing, requiring us to depend on a limited number of third parties, who might not be able to deliver in a timely manner, or at all. In order to develop products, apply for regulatory approvals and commercialize our products, we will need to develop, contract for, or otherwise arrange for the necessary manufacturing capabilities. We may manufacture clinical trial materials ourselves or we may rely on others to manufacture the materials we will require for any clinical trials that we initiate. For example, in restarting our FAP clinical trial, we may find that the clinical trial material is no longer suitable for the FAP clinical trial in that the material no longer meets certain specifications agreed upon with the FDA. If we need to remanufacture clinical trial material to restart the FAP trial, we may incur substantial delays and costs associated with the manufacturing of new clinical material.

There are a limited number of manufacturers that supply RNA. We have relied on several contract manufacturers for our supply of synthetic RNA. There are risks inherent in pharmaceutical manufacturing that could affect the ability of our contract manufacturers to meet our delivery time requirements or provide adequate amounts of material to meet our needs. Included in these risks are synthesis and purification failures and contamination during the manufacturing process, which could result in unusable product and cause delays in our development process, as well as additional expense to us. To fulfill our RNA requirements, if any, we may also need to secure alternative suppliers of synthetic RNAs. In addition to the manufacture of the synthetic RNAs, we may have additional manufacturing requirements related to the technology required to deliver the RNA to the relevant cell or tissue type. In some cases, the delivery technology we utilize is highly specialized or proprietary, and for technical and legal reasons, we may have access to only one or a limited number of potential manufacturers for such delivery technology. Failure by these manufacturers to properly formulate our RNAs for delivery could also result in unusable product and cause delays in our discovery and development process, as well as additional expense to us.

The manufacturing process for any products based on our technologies that we or our partners may develop is subject to the FDA

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and foreign regulatory authority approval process, and we or our partners will need to contract with manufacturers who can meet all applicable FDA and foreign regulatory authority requirements on an ongoing basis. In addition, if we receive the necessary regulatory approval for any product candidate, we also expect to rely on third parties, including our commercial collaborators, to produce materials required for commercial supply. We may experience difficulty in obtaining adequate manufacturing capacity for our needs. If we are unable to obtain or maintain contract manufacturing for these product candidates, or to do so on commercially reasonable terms, we may not be able to successfully develop and commercialize our products.

To the extent that we enter into manufacturing arrangements with third parties, we will depend on these third parties to perform their obligations in a timely manner and consistent with regulatory requirements, including those related to quality control and quality assurance. The failure of a third-party manufacturer to perform its obligations as expected could adversely affect our business in a number of ways, including:

·we may not be able to initiate or continue pre-clinical and clinical trials of products that are under development;
·we may be delayed in submitting regulatory applications, or receiving regulatory approvals, for our product candidates;
·we may lose the cooperation of our collaborators;
·our products could be the subject of inspections by regulatory authorities;
·we may be required to cease distribution or recall some or all batches of our products; and
·ultimately, we may not be able to meet commercial demands for our products.

If a third-party manufacturer with whom we contract fails to perform its obligations, we may be forced to manufacture the materials ourselves, for which we may not have the capabilities or resources, or enter into an agreement with a different third-party manufacturer, which we may not be able to do on reasonable terms, if at all. In some cases, the technical skills required to manufacture our product may be unique to the original manufacturer and we may have difficulty transferring such skills to a back-up or alternate supplier, or we may be unable to transfer such skills at all. In addition, if we are required to change manufacturers for any reason, as may be the case for additional clinical material for the FAP clinical trial, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines. The delays associated with the verification of a new manufacturer could negatively affect our ability to develop product candidates in a timely manner or within budget. Furthermore, a manufacturer may possess technology related to the manufacture of our product candidate that such manufacturer owns independently. This would increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to have another third party manufacture our products.

Risks Related to our Intellectual Property and Other Legal Matters

If we are unable to adequately protect our proprietary technology from legal challenges, infringement or alternative technologies, our competitive position may be hurt and our operating results may be negatively impacted.

Our business is based upon the development and delivery of RNA-based therapeutics, and we rely on the issuance of patents, both in the U.S. and internationally, for protection against competitive technologies. Although we believe we exercise the necessary due diligence in our patent filings, our proprietary position is not established until the appropriate regulatory authorities actually issue a patent, which may take several years from initial filing or may never occur.

Moreover, even the established patent positions of pharmaceutical companies are generally uncertain and involve complex legal and factual issues. Although we believe our issued patents are valid, third parties may infringe our patents or may initiate proceedings challenging the validity or enforceability of our patents. The issuance of a patent is not conclusive as to its claim scope, validity or enforceability. Challenges raised in patent infringement litigation we initiate or in proceedings initiated by third parties may result in determinations that our patents have not been infringed or that they are invalid, unenforceable or otherwise subject to limitations. In the event of any such determinations, third parties may be able to use the discoveries or technologies claimed in our patents without paying us licensing fees or royalties, which could significantly diminish the value of these discoveries or technologies. As a result of such determinations, we may be enjoined from pursuing commercialization of potential products or may be required to obtain licenses, if available, to the third party patents or to develop or obtain alternative technology. Responding to challenges initiated by third parties may require significant expenditures and divert the attention of our management and key personnel from other business concerns.

Furthermore, it is possible others will infringe or otherwise circumvent our issued patents and that we will be unable to fund the cost of litigation against them or that we would elect not to pursue litigation. In addition, enforcing our patents against third parties may require significant expenditures regardless of the outcome of such efforts. We also cannot assure you that others have not filed patent applications for technology covered by our pending applications or that we were the first to invent the technology. There may also exist third party patents or patent applications relevant to our potential products that may block or compete with the technologies covered by our patent applications and third parties may independently develop IP similar to our patented IP, which could result in, among other things, interference proceedings in the U.S. Patent and Trademark Office to determine priority of invention.

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In addition, we may not be able to protect our established and pending patent positions from competitive technologies, which may provide more effective therapeutic benefit to patients and which may therefore make our products, technology and proprietary position obsolete.

We also rely on copyright and trademark protection, trade secrets, know-how, continuing technological innovation and licensing opportunities. In an effort to maintain the confidentiality and ownership of our trade secrets and proprietary information, we have typically required our employees, consultants, advisors and others to whom we disclose confidential information to execute confidentiality and proprietary information agreements. However, it is possible that these agreements may be breached, invalidated or rendered unenforceable, and if so, there may not be an adequate corrective remedy available. Furthermore, like many companies in our industry, we may from time to time hire scientific personnel formerly employed by other companies involved in one or more areas similar to the activities we conduct. In some situations, our confidentiality and proprietary information agreements may conflict with, or be subject to, the rights of third parties with whom our employees, consultants or advisors have prior employment or consulting relationships. Although we have typically required our employees and consultants to maintain the confidentiality of all confidential information of previous employers, we or these individuals may be subject to allegations of trade secret misappropriation or other similar claims as a result of their prior affiliations. Finally, others may independently develop substantially equivalent proprietary information and techniques, or otherwise gain access to our trade secrets. Our failure to protect our proprietary information and techniques may inhibit or limit our ability to exclude certain competitors from the market and execute our business strategies.

If we are unable to adequately protect our proprietary intellectual property from legal challenges, infringement or alternative technologies, we will not be able to compete effectively in the drug discovery and development business.

Because intellectual property rights are of limited duration, expiration of intellectual property rights and licenses will negatively impact our operating results.

Intellectual property rights, such as patents and license agreements based on those patents, generally are of limited duration. Our operating results depend on our patents and IP licenses. Therefore, the expiration or other loss of rights associated with IP and IP licenses can negatively impact our business.

Our patent applications may be inadequate in terms of priority, scope or commercial value.

We apply for patents covering our discoveries and technologies as we deem appropriate and as our resources permit. However, we or our partners may fail to apply for patents on important discoveries or technologies in a timely fashion or at all. Also, our pending patent applications may not result in the issuance of any patents. These applications may not be sufficient to meet the statutory requirements for patentability, and therefore we may be unable to obtain enforceable patents covering the related discoveries or technologies we may want to commercialize. In addition, because patent applications are maintained in secrecy for approximately 18 months after filing, other parties may have filed patent applications relating to inventions before our applications covering the same or similar inventions. In addition, foreign patent applications are often published initially in local languages, and until an English language translation is available it can be impossible to determine the significance of a third party invention. Any patent applications filed by third parties may prevail over our patent applications or may result in patents that issue alongside patents issued to us, leading to uncertainty over the scope of the patents or the freedom to practice the claimed inventions.

Although we have acquired and in-licensed a number of issued patents, the discoveries or technologies covered by these patents may not have any therapeutic or commercial value. Also, issued patents may not provide commercially meaningful protection against competitors. Other parties may be able to design around our issued patents or independently develop products having effects similar or identical to our patented product candidates. In addition, the scope of our patents is subject to considerable uncertainty and competitors or other parties may obtain similar patents of uncertain scope.

We are dependent on technologies we license, and if we lose the right to license such technologies or we fail to license new technologies in the future, our ability to develop new products would be harmed.

We currently are dependent on licenses from third parties for certain of our key technologies relating to fundamental chemistry technologies. Our current licenses impose, and any future licenses we enter into are likely to impose, various development, funding, royalty, diligence, sublicensing, insurance and other obligations on us. If our license with respect to any of these technologies is terminated for any reason, the development of the products contemplated by the licenses would be delayed, or suspended altogether, while we seek to license similar technology or develop new non-infringing technology. The costs of obtaining new licenses are high, and many patents in the RNA field have already been exclusively licensed to third parties, including our competitors. If our existing license is terminated, the development of the products contemplated by the licenses could be delayed or terminated and we may not be able to negotiate additional licenses on acceptable terms, if at all, which would have a material adverse effect on our business.

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We may be required to defend lawsuits or pay damages for product liability claims.

Our business inherently exposes us to potential product liability claims. We may face substantial product liability exposure in human clinical trials that we may initiate and for products that we sell, or manufacture for others to sell, after regulatory approval. The risk exists even with respect to those drugs that are approved by regulatory agencies for commercial distribution and sale and are manufactured in facilities licensed and regulated by regulatory agencies. Any product liability claims, regardless of their merits, could be costly, divert management’s attention, delay or prevent completion of our clinical development programs, and adversely affect our reputation and the demand for our products. We currently do not have product liability insurance. We will need to obtain such insurance as we believe is appropriate for our stage of development and may need to obtain higher levels of such insurance if we were ever to market any of our product candidates. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability claims that could have a material adverse effect on our business.

Risks Related to the Commercialization of our Product Candidates

Our product development efforts may not result in commercial products.

Our future results of operations depend, to a significant degree, upon our and any collaborators’ ability to successfully develop and commercialize pharmaceutical products. The development and commercialization process, particularly with respect to innovative products, is both time consuming and costly and involves a high degree of business risk. Successful product development in the pharmaceutical industry is highly uncertain, and very few research and development projects result in a commercial product. Product candidates that appear promising in the early phases of development, such as in preclinical testing or in early human clinical trials, may fail to reach the market for a number of reasons, such as:

·a product candidate may not perform as expected in later or broader trials in humans and limit marketability of such product candidate;
·necessary regulatory approvals may not be obtained in a timely manner, if at all;
·a product candidate may not be able to be successfully and profitably produced and marketed;
·third parties may have proprietary rights to a product candidate, and do not allow sale on reasonable terms; or
·a product candidate may not be financially successful because of existing therapeutics that offer equivalent or better treatments.

Three product candidates, our own FAP therapeutic and two through our partners, ProNAi and Mirna, utilizing our technologies have commenced human clinical studies. Such product candidates have not been approved by the FDA or any foreign regulatory authority. The FAP trial is currently on hold, and we expect to restart the trial and dose Cohort 3 at such time that we have reestablished clinical operations, obtained new clinical trial material and complied with all regulatory requirements. There can be no assurance that any of these product candidates, or other product candidates that may enter research or development, will ever be successfully commercialized, and delays in any part of the process or the inability to obtain regulatory approval could adversely affect our operating results by restricting introduction of new products by us or and collaborators.

Even if we are successful in developing and commercializing a product candidate, it is possible that the commercial opportunity for oligonucleotide-based therapeutics will be limited.

The product candidates based on our technologies that are being developed are based on new technologies and therapeutic approaches, none of which have yet been brought to market. Key participants in pharmaceutical marketplaces, such as physicians, third-party payors and consumers, may not accept a product intended to improve therapeutic results based on RNA mechanisms of action. Accordingly, while we believe there will be a commercial market for nucleic acid-based therapeutics utilizing our technologies, there can be no assurance that this will be the case, in particular given the novelty of the field. Many factors may affect the market acceptance and commercial success of any potential products, including:

·establishment and demonstration of the effectiveness and safety of the drugs;
·timing of market entry as compared to competitive products and alternative treatments;
·benefits of our drugs relative to their prices and the comparative price of competing products and treatments;
·availability of adequate government and third-party payor reimbursement;
·marketing and distribution support of our products;
·safety, efficacy and ease of administration of our product candidates;
·willingness of patients to accept, and the willingness of medical professionals to prescribe, relatively new therapies; and

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·any restrictions on labeled indications.

Risks Related to our Industry

Any drugs based on our technologies that we or any of our partners develop may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which could have a material adverse effect on our business, financial condition, and financial results.results of operations.

The success of the products based on our technologies will depend upon the extentWe have considerable discretion as to which third-party payors, such as Medicare, Medicaid and other domestic and international government programs, private insurance plans and managed care programs, provide reimbursement for the use of such products. Most third-party payorsthe net proceeds from this offering and we may deny reimbursement if they determine that a medical product was not useduse these proceeds in accordanceways with cost-effective treatment methods, as determined by the third-party payor, or was used for an unapproved indication.

Third-party payors also may refuse to reimburse for experimental procedures and devices. Furthermore, because our programs are in the early stages of development, we are unable at this time to determine their cost-effectiveness and the level or method of reimbursement. Increasingly, the third-party payors, who reimburse patients, such as government and private insurance plans, are requiring that drug companies provide them with predetermined discounts from list prices, and are challenging the prices charged for medical products. If the price charged for any products based on our technologies that we or our partners develop is inadequate in light of our development and other costs, our profitability could be adversely affected.

We expect that drugs based on our technologies that we or a partner develop may need to be administered under the supervision of a physician. Under currently applicable law, drugs that are not usually self-administered may be eligible for coverage by the Medicare program if they:

·are “incidental” to a physician’s services;
·are “reasonable and necessary” for the diagnosis or treatment of the illness or injury for which they are administered according to accepted standards of medical practice;
·are not excluded as immunizations; and
·have been approved by the FDA.

There may be significant delays in obtaining insurance coverage for newly-approved drugs, and insurance coverage may be more limited than the purpose for which the drug is approved by the FDA. Moreover, eligibility for insurance coverage does not imply that any drug will be reimbursed in all cases or at a rate that covers costs, including research, development, manufacture, sale and distribution. Interim payments for new drugs, if applicable, may also not be sufficient to cover costs andyou may not be made permanent. Reimbursement may be based on payments for other services and may reflect budgetary constraints or imperfections in Medicare data. Net prices for drugs may be reduced by mandatory discounts or rebates required by government health care programs or private payors and by any future relaxation of laws that presently restrict imports of drugsagree.

We intend to use the proceeds from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement rates. The inability to promptly obtain coverage and profitable reimbursement rates from both government-funded and private payors for new drugs based on our technologies that we or our partners develop could have a material adverse effect on our operating results, our ability to raise capital, and our overall financial condition.

We believe that the efforts of governments and third-party payors to contain or reduce the cost of healthcare and legislative and regulatory proposals to broaden the availability of healthcare will continue to affect the business and financial condition of pharmaceutical and biopharmaceutical companies. A number of legislative and regulatory changes in the healthcare system in the United States and other major healthcare markets have been proposed in recent years, and such efforts have expanded substantially in recent years. These developments have included prescription drug benefit legislation that was enacted and took effect in January 2006, healthcare reform legislation recently enacted by certain states, and major healthcare reform legislation that was passed by Congress and enacted into law in the United States in 2010. These developments could, directly or indirectly, affect our ability to sell our products, if approved, at a favorable price.

The full effects of the U.S. healthcare reform legislation cannot be known until the new law is fully implemented through regulations or guidance issued by the Centers for Medicare & Medicaid Services and other federal and state healthcare agencies. The financial impact of the U.S. healthcare reform legislation over the next few years will depend on a number of factors, including but not limited to the policies reflected in implementing regulations and guidance, and changes in sales volumes for products affected by the new system of rebates, discounts and fees. The new legislation may also have a positive impact on our future net sales, if any, by increasing the aggregate number of persons with healthcare coverage in the United States.

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Moreover, we cannot predict what healthcare reform initiatives may be adopted in the future. Further federal and state legislative and regulatory developments are likely, and we expect ongoing initiatives in the United States to increase pressure on drug pricing. Such reforms could have an adverse effect on anticipated revenues from product candidates based on our technologies that are successfully developed and for which regulatory approval is obtained, and may affect our overall financial condition and ability to develop drug candidates.

The pharmaceutical market is intensely competitive. If we are unable to compete effectively with existing drugs, new treatment methods and new technologies, we may be unable to commercialize successfully any drugs that we develop.

The pharmaceutical market is intensely competitive and rapidly changing. Many large pharmaceutical and biotechnology companies, academic institutions, governmental agencies and other public and private research organizations are pursuing the development of novel drugs for the same diseases that we are targeting or expect to target. Many of our competitors have:

·much greater financial, technical and human resources than we have at every stage of the discovery, development, manufacture and commercialization of products;
·more extensive experience in pre-clinical testing, conducting clinical trials, obtaining regulatory approvals, and in manufacturing, marketing and selling pharmaceutical products;
·product candidates that are based on previously tested or accepted technologies;
·products that have been approved or are in late stages of development; and
·collaborative arrangements in our target markets with leading companies and research institutions.

Products based on our technologies may face intense competition from drugs that have already been approved and accepted by the medical community for the treatment of the conditions for which we may develop drugs. We also expect to face competition from new drugs that enter the market. We believe a significant number of drugs are currently under development, and may become commercially available in the future, for the treatment of conditions for which we and our partners may try to develop drugs. These drugs may be more effective, safer, less expensive, or marketed and sold more effectively, than any products we and our partners develop.

If we and our partners successfully develop product candidates based on our technologies, and obtain approval for them, we will face competition based on many different factors, including:

·safety and effectiveness of such products;
·ease with which such products can be administered and the extent to which patients accept relatively new routes of administration;
·timing and scope of regulatory approvals for these products;
·availability and cost of manufacturing, marketing and sales capabilities;
·price;
·reimbursement coverage; and
·patent position.

Our competitors may develop or commercialize products with significant advantages over any products we develop based on any of the factors listed above or on other factors. Our competitors may therefore be more successful in commercializing their products than we are, which could adversely affect our competitive position and business. Competitive products may make any products we develop obsolete or noncompetitive before we can recover the expenses of developing and commercializing our product candidates. Such competitors could also recruit our future employees, which could negatively impact our level of expertise and the ability to execute on our business plan. Furthermore, we also face competition from existing and new treatment methods that reduce or eliminate the need for drugs, such as the use of advanced medical devices. The development of new medical devices or other treatment methods for the diseases we are targeting could make our product candidates noncompetitive, obsolete or uneconomical.

We may be unable to compete successfully against other companies that are working to develop novel drugs and technology platforms using technology similar to ours.

In addition to the competition we face from competing drugs in general, we also face competition from other biotechnology and pharmaceutical companies and medical institutions that are working to develop novel drugs using technology that competes more directly with our own. Among those companies that are working in this field are: Alnylam Pharmaceuticals, Arcturus, Benitec Biopharma, Dicerna Pharmaceuticals, Isis Pharmaceuticals, miRagen Therapeutics, Mirna, PhaseRx Pharmaceuticals, Quark Pharmaceuticals, Regulus Therapeutics, RXi Pharmaceuticals, Sarepta Therapeutics, Silence Therapeutics and Tekmira. Any of these companies may develop its technology more rapidly and more effectively than us.

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In addition to competition with respect to our technology and with respect to specific products, we and our partners face substantial competition to discover and develop safe and effective means to deliver the drugs based on our technologies that are developed to the relevant cell and tissue types. Substantial resources are being expended by third parties, both in academic laboratories and in the corporate sector, in the effort to discover and develop a safe and effective means of delivery into the relevant cell and tissue types. If safe and effective means of delivery to the relevant cell and tissue types were developed by our competitors, our ability to successfully commercialize a competitive product would be adversely affected.

Many of our competitors, either alone or together with their partners, have substantially greater R&D capabilities and financial, scientific, technical, manufacturing, sales, marketing, distribution, regulatory and other resources and experience than us. They may also have more established relationships with pharmaceutical companies. Even if we and and/or our partners are successful in developing products based on our technologies, in order to compete successfully we may need to be first to obtain IP protection for, or to commercialize, such products, or we may need to demonstrate that such products are superior to, or more cost effective than, products developed by our competitors (including therapies that are based on different technologies). If we are not first to protect or market our products, or if we are unable to differentiate our products from those offered by our competitors, any products for which we are able to obtain approval may not be successful.

Universities and public and private research institutions are also potential competitors. While these organizations primarily have educational objectives, they may develop proprietary technologies related to the drug delivery field or secure protection that we may needoffering for development of our technologiesproduct candidates and products. Wegeneral working capital purposes. However, we have considerable discretion in the application of the proceeds. Because of the number and variability of factors that will determine our use of our net proceeds from this offering, their ultimate use may attemptvary substantially from their currently intended use. You will not have the opportunity, as part of your investment decision, to license oneassess whether the proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. The net proceeds may be used for corporate or other purposes with which you do not agree or that do not improve our profitability or increase our share price. The net proceeds from this offering may also be placed in investments that do not produce income or that lose value. Please see “Use of Proceeds” below for more information.

You will experience immediate and substantial dilution as a result of these proprietary technologies, but these licenses may not be available to us on acceptable terms, if at all.this offering.

Risks Related toAs of September 30, 2022, our Common Stock

The tradingnet tangible book value was approximately $(21.8) million or approximately $(6.90) per share. Since the effective price per share of our common stock has been volatile, and investorsbeing offered in our common stock may experience substantial losses.

The trading pricethis offering is substantially higher than the net tangible book value per share of our common stock, has been volatile and may become volatile againyou will suffer substantial dilution with respect to the net tangible book value of the common stock that you purchase in this offering. Based on the future. The tradingassumed public offering price of $           per share of common stock being sold in this offering and our net tangible book value per share as of September 30, 2022, if you purchase shares in this offering, you will suffer immediate and substantial dilution of $           per share (or $           per share if the underwriter exercises the over-allotment option to purchase additional shares of common stock in full). See the section titled “Dilution” for a more detailed discussion of the dilution you will incur if you purchase shares in this offering.

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The sale or conversion of our shares of common stock could decline or fluctuate in response to a variety of factors, including:

·our general financial condition and ability to maintain sufficient capital to continue operations;
·our ability to enter into and maintain collaborative arrangements with third parties;
·our ability to meet the performance estimates of securities analysts;
·changes in buy/sell recommendations by securities analysts;
·negative results from clinical and pre-clinical trials;
·fluctuation in our quarterly operating results;
·reverse splits or increases in authorized shares;
·substantial sales of our common stock;
·general stock market conditions; or
·other economic or external factors.

The stock markets in general, and the markets for the securities of companies in our industry in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock.

We may not be able to consistently satisfy our reporting obligations under the Securities Exchange Act of 1934, and may be subject to penalties as a result of such failure.

Prior to the filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, which we filed on July 22, 2014, we did not file with the Securities and Exchange Commission any of the quarterly or annual reports that we are required to file pursuant to Section 13 of the Exchange Act since the filing of our Quarterly Report on Form 10-Q for the quarterly period ending on September 30, 2012, which we filed on December 5, 2012. Any future failure to satisfy our filing requirements under the Exchange Act in a timely manner could result in the suspension of trading in our common stock, either on a temporary or a permanent basis, as well as other penalties that may be imposed by the Commission.

We may not be able to achieve secondary trading of our stock in certain states because our common stock is not nationally traded.

Because our common stock is not listed for trading on a national securities exchange, our common stock is subject to the securities laws of the various states and jurisdictions of the U.S. in addition to federal securities law. This regulation covers any primary offering we might attempt and all secondary trading by our stockholders. If we fail to take appropriate steps to register our common stock or qualify for exemptions for our common stock in certain states or jurisdictions of the U.S., the investors in those

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jurisdictions where we have not taken such steps may not be allowed to purchase our stock or those who presently hold our stock may not be able to resell their shares without substantial effort and expense. These restrictions and potential costs could be significant burdens on our stockholders.

Our common stock is traded on the OTCQB, which may limit the ability of our stockholders to sell their securities, and may cause volatility indepress the price of our common stock.

OurAs of November 18, 2022, we had 3,160,877 shares of common stock issued and outstanding of which 2,241,482 or 71% of them have a 144 Legend and are thus not currently trades on the OTCQB. Securities trading on the OTCQB often experience a lacktrading. As of liquidity as compared to securities trading on a national securities exchange. Such securities also have experienced extreme priceSeptember 30, 2022, there were $1.7 million of outstanding convertible promissory notes including accrued interest with various conversion prices and volume fluctuations$10.6 million in recent years, which have particularly affected the market prices of many smaller companies like ours. We anticipate that our common stock will be subject to the lack of liquidity and this volume and price volatility that is characteristic of the OTCQB.

Our common stock may be considered a “penny stock,” and thereby be subject tonon-convertible notes including accrued interest, 446,500 additional sale and trading regulations that may make it more difficult to sell.

Our common stock may be considered to be a “penny stock” if it does not qualify for one of the exemptions from the definition of “penny stock” under Section 3a51-1 of the Exchange Act. The principal result or effect of being designated a “penny stock” is that securities broker-dealers participating in salesshares of our common stock that are reserved for issuance under the 2018 Long-Term Incentive Plan, 100 outstanding shares of Series C Preferred Stock convertible into 3,334 shares of common stock, 40 outstanding shares of Series D Preferred Stock convertible into 2,500 shares of common stock, 267 outstanding shares of Series E Preferred Stock convertible into 178,833 shares of commons stock. On November 16, 2022, a majority of the holders of approximately $8.3 million in non-convertible promissory notes including accrued interest, agreed to amend the notes to make them automatically convertible into units consisting of a new series of convertible preferred stock and warrants as defined in the agreement upon an uplisting financing transaction in which the Company’s common stock is listed on The Nasdaq Capital Market or the NYSE American in exchange for the Holders agreeing to forbear repayment of their Notes and accrued interest until the Uplisting Transaction has been completed. In addition, there are            shares of common stock issuable upon the exercise of warrants that will be issued to investors with this offering.

Significant shares of common stock are held by our principal stockholders and other large stockholders. As “affiliates,” as defined under Rule 144 under the Securities Act, our principal stockholders, other of our insiders and other large stockholders may only sell their shares of common stock in the public market pursuant to an effective registration statement or in compliance with Rule 144.

These options, warrants, convertible notes payable and convertible preferred stock could result in further dilution to common stockholders and may affect the market price of the common stock.

Future issuance of additional shares of common stock and/or preferred stock could dilute existing stockholders. We have and may issue preferred stock that could have rights that are preferential to the rights of common stock that could discourage potentially beneficial transactions to our common stockholders.

Pursuant to our articles of incorporation, we currently have authorized 180,000,000 shares of common stock and 100,000 shares of preferred stock. To the extent that common shares are available for issuance, subject to compliance with applicable stock exchange listing rules, our Board of Directors has the “penny stock” regulations set forthability to issue additional shares of common stock in Rules 15-2 through 15g-9 promulgated under the Exchange Act. For example, Rule 15g-2 requires broker-dealers dealingfuture for such consideration as the Board of Directors may consider sufficient. The issuance of any additional securities could, among other things, result in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receiptsubstantial dilution of the documentpercentage ownership of our stockholders at least two business days before effecting any transactionthe time of issuance, result in substantial dilution of our earnings per share and adversely affect the prevailing market price for our common stock.

An issuance of additional shares of preferred stock could result in a pennyclass of outstanding securities that would have preferences with respect to voting rights and dividends and in liquidation over our common stock forand could, upon conversion or otherwise, have all of the investor’s account.

Moreover, Rule 15g-9 requires broker-dealersrights of our common stock. Our Board of Directors’ authority to issue preferred stock could discourage potential takeover attempts or could delay or prevent a change in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning hiscontrol through merger, tender offer, proxy contest or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance withotherwise by making these requirements may make itattempts more difficult or costly to achieve. The issuance of preferred stock could impair the voting, dividend and time consumingliquidation rights of common stockholders without their approval.

Our articles of incorporation allow for our Board to create new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stockstock.

Our Board of Directors has the authority to resell their shares to third parties or to otherwise disposefix and determine the relative rights and preferences of them in the market or otherwise.

Various restrictions in our charter documents and Delaware law could prevent or delay a change in control of us that is not supported by our board of directors.

We are subject to a number of provisions in our charter documents and Delaware law that may discourage, delay or prevent a merger, acquisition or change of control that a stockholder may consider favorable. These anti-takeover provisions include:

·advance notice procedures for nominations of candidates for election as directors and for stockholder proposals to be considered at stockholders’ meetings; and
·the Delaware anti-takeover statute contained in Section 203 of the Delaware General Corporation Law.

Section 203 of the Delaware General Corporation Law prohibits a merger, consolidation, asset sale or other similar business combination between us and any stockholder of 15% or more of our voting stock for a period of three years after the stockholder acquires 15% or more of our voting stock, unless (1) the transaction is approved by ourpreferred stock. Our board of directors also has the authority to issue preferred stock without further stockholder approval. As a result, our Board of Directors could authorize the issuance of a series of preferred stock, beyond the series of preferred stock that has previously been issued, that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before the stockholder acquires 15% or more of our voting stock, (2) upon completing the transaction the stockholder owns at least 85% of our voting stock outstanding at the commencement of the transaction, or (3) the transaction is approved by our board of directors anddividends are distributed to the holders of 66 2/3%common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our Board of Directors could authorize the issuance of a series of preferred stock that has greater voting power than our common stock excluding sharesor that is convertible into our common stock, which could decrease the relative voting power of our votingcommon stock ownedor result in dilution to our existing stockholders.

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Future issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our securities.

In the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common stock. Moreover, if we issue preferred stock, the stockholder.holders of such preferred stock could be entitled to preferences over holders of common stock in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to issue debt or preferred stock in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of our securities must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our securities.

Future capital raises may dilute our existing stockholders’ ownership and/or have other adverse effects on our operations.

If we raise additional capital by issuing equity securities, our existing stockholders’ percentage ownership will be reduced, and these stockholders may experience substantial dilution. We may also issue equity securities that provide for rights, preferences and privileges senior to those of our common stock. If we raise additional funds by issuing debt securities, these debt securities would have never paid dividends onrights senior to those of our common stock and the terms of the debt securities issued could impose significant restrictions on our operations, including liens on our assets. If we raise additional funds through collaborations and licensing arrangements, we may be required to relinquish some rights to our technologies or candidate products, or to grant licenses on terms that are not favorable to us.

We do not anticipate paying any cash dividends on our capital stock in the foreseeable future.

We have notnever declared or paid anycash dividends on our common stockcapital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business, and we do not expect to do soanticipate paying any cash dividends on our capital stock in the foreseeable future. In addition, the terms of any financing arrangements that wefuture debt agreements may enter into may restrict our ability to paypreclude us from paying dividends. As a result, capital appreciation, if any, dividends.

A significant number of shares of our common stock are subject to options, warrants and conversion rights, and we expect to sell additional shareswill be your sole source of our common stock ingain for the foreseeable future. The issuance of these shares, which in some cases may occur

If securities industry analysts do not publish research reports on a cashless basis, will dilute the interests of other security holders and may depress the price of our common stock.

At August 13, 2015, there were outstanding warrants to purchase up to approximately 24.8 million shares common stock, with

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approximately 24.3 million of such warrants having an exercise price of less than $1.00. If any of these warrants are exercisedus, or publish unfavorable reports on a cashless basis, we will not receive any cash as a result of such exercises. At August 13, 2015, there were also outstanding 1,200 shares of Series C Convertible Preferred Stock, which shares are convertible into 8.0 million shares of common stock at an assumed conversion price of $0.75 per share of common stock, and 220 shares of Series D Stock, which shares are convertible into 2.75 million shares of common stock at an assumed conversion price of $0.40 per share of common stock. In addition, we may issue a significant number of additional shares of common stock (and securities convertible into or exercisable for common stock) from time to time to finance our operations, to fund potential acquisitions, or in connection with additional stock options or restricted stock granted to our employees, officers, directors and consultants. The issuance of common stock (or securities convertible into or exercisable for common stock), including the issuance of securities as described in this prospectus, and the exercise or conversion of securities exercisable for or convertible into common stock, will have a dilutive impact on other stockholders and could have a material negative effect onus, then the market price of our common stock.

There are outstanding a significant number of shares available for future sales under Rule 144.

A significant number of shares of our common stock may be deemed “restricted shares” and in the future, may be sold in compliance with Rule 144 promulgated under the Securities Act. Any sales of such shares of our common stock under Rule 144 could have a depressive effect on the market price of our common stock. In general, under Rule 144, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to the availability of current public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144. A person who is deemed to be an affiliate of ours and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months would be entitled to sell within any three-month period a number of shares that does not exceed the greater of one percent of the then outstanding shares of our common stock or the average weekly trading volume of our common stock duringcould be negatively affected.

Any trading market for our common stock may be influenced in part by any research reports that securities industry analysts publish about us. We do not currently have and may never obtain research coverage by securities industry analysts. If no securities industry analysts commence coverage of us, the four calendar weeks precedingmarket price and market trading volume of our securities could be negatively affected. In the event we are covered by analysts, and one or more of such sale. Such sales are alsoanalysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage of us, the market price and market trading volume of our securities could be negatively affected.

If our securities become subject to the penny stock rules, it would become more difficult to trade our shares.

The U.S. Securities and Exchange Commission (the “SEC”) has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain mannernational securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not retain a listing on Nasdaq Capital Markets or another national securities exchange and if the price of sale provisions, noticeour securities is less than $5.00, our securities could be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our securities, and the availability of current public information about us.therefore stockholders may have difficulty selling their securities.

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Our Board of Directors has

Anti-takeover provisions may limit the ability of another party to acquire our company, which could cause our stock price to decline.

Our articles of incorporation, our bylaws and Delaware law contain provisions that could discourage, delay or prevent a third party from acquiring our company, even if doing so may be beneficial to our stockholders. In addition, these provisions could limit the price investors would be willing to pay in the future for shares of our common stock.

We are authorized to issue “blank check” Preferred Stock.preferred stock without stockholder approval, which could adversely impact the rights of holders of our securities.

Our Certificatearticles of Incorporation authorizes the issuance ofincorporation authorize us to issue up to 100,000 shares of “blank check”blank check preferred stock. Any preferred stock withthat we issue in the future may rank ahead of our securities in terms of dividend priority or liquidation premiums and may have greater voting rights than our securities. In addition, such designation rights and preferences as may be determined from time to time by our Board of Directors. At August 13, 2015, 90,000 shares had been designated as Series A Junior participating preferred stock and 1,000may contain provisions allowing those shares had been designated as Series B Preferred Stock, none of which are issued and outstanding. Also at August 13, 2015, 1,200 shares had been designated as Series C Convertible Preferred Stock and 220 shares had been designated as Series D Convertible Preferred Stock. Our Board is empowered, without shareholder approval, to issuebe converted into shares of preferredcommon stock, with dividend, liquidation, conversion, voting or other rights which could dilute the value of our securities to current stockholders and could adversely affect the voting power or other rights of the holdersmarket price, if any, of our common stock.securities. In the event of such issuances,addition, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company. Although we have no present intention to issue any additional shares of ourauthorized preferred stock, there can be no assurance that we will not do so in the future.

We effected a reverse stock split of our outstanding common stock on September 30, 2022 at a ratio of 1-for-20.

On September 30, 2022, we filed a Certificate of Amendment to the Certificate of Incorporation with the Delaware Secretary of State to effect a reverse stock split of all outstanding shares of the Company’s common stock at a ratio of 1-for-20. The Certificate of Amendment became effective upon filing. We expect that the reverse stock split will increase the market price of our common stock while our stock is trading. However, the effect of a reverse stock split upon the market price of our common stock cannot be predicted with certainty, and the results of reverse stock splits by companies in similar circumstances have been varied. It is possible that the market price of our common stock following the reverse stock split will not increase sufficiently for us to be in compliance with the minimum market price requirement of the Nasdaq Capital Market, or if it does, that such price will be sustained. If we are unable to meet the minimum market price requirement, we may be unable to list our shares on the Nasdaq Capital Market, in which case such an offering may not be completed.

Even if the reverse stock split achieves the requisite increase in the market price of our common stock, we cannot assure you that we will be approved for listing on the Nasdaq Capital Market or able to comply with other continued listing standards of the Nasdaq Capital Market.

Even if the reverse stock split achieves the requisite increase in the market price of our common stock to be in compliance with the minimum bid price of Nasdaq, there can be no assurance that the market price of our common stock following the reverse stock split will remain at the level required for continuing compliance with that requirement. It is not uncommon for the market price of a company’s common stock to decline in the period following a reverse stock split. If the market price of our common stock declines following the effectuation of the reverse stock split, the percentage decline may be greater than would occur in the absence of a reverse stock split. In any event, other factors unrelated to the number of shares of our common stock outstanding, such as negative financial or operational results, could adversely affect the market price of our common stock and jeopardize our ability to meet or maintain Nasdaq’s minimum bid price requirement.

The Nasdaq Capital Market requires that the trading price of its listed stocks remain above one dollar in order for the stock to remain listed. If a listed stock trades below one dollar for more than 30 consecutive trading days, then it is subject to delisting from Nasdaq. In addition, to maintain a listing on Nasdaq, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, and certain corporate governance requirements. If we are unable to satisfy these requirements or standards, we could be subject to delisting, which would have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we would expect to take actions to restore our compliance with the listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the minimum bid price requirement, or prevent future non-compliance with the listing requirements.

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The reverse stock split may decrease the liquidity of the shares of our common stock.

The liquidity of the shares of our common stock may be affected adversely by the reverse stock split given the reduced number of shares that will be outstanding following the reverse stock split, especially if the market price of our common stock does not increase as a result of the reverse stock split. In addition, the reverse stock split may increase the number of stockholders who own odd lots (less than 100 shares) of our common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.

Following the reverse stock split, the resulting market price of our common stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve.

Although we believe that a higher market price of our common stock may help generate greater or broader investor interest, there can be no assurance that the reverse stock split will result in a share price that will attract new investors, including institutional investors. In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our common stock may not necessarily improve.

There is no public market for the warrants being offered in this offering.

There is no established public trading market for the warrants being offered in this offering. We intend to apply to have our warrants listed on The Nasdaq Capital Market under the symbol “          ”; however there can be no assurance that an active trading market will develop or be maintained. Without an active market, the liquidity of the warrants will be limited.

The warrants are speculative in nature.

The warrants do not confer any rights of common stock ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire shares of common stock at a fixed price for a limited period of time. Specifically, commencing on the [● anniversary] of the date of issuance, holders of the warrants may exercise their right to acquire the common stock and pay an exercise price of $[●] per share, subject to certain adjustments, prior to [●] years from the date on which such warrants were issued, after which date any unexercised warrants will expire and have no further value. Moreover, following this offering, the market value of the warrants, if any, is uncertain and there can be no assurance that the market value of the warrants will equal or exceed their imputed offering price. There can be no assurance that the market price of the common stock will ever equal or exceed the exercise price of the warrants and consequently, whether it will ever be profitable for holders of the warrants to exercise the warrants.

We may not receive any additional funds upon the exercise of the warrants.

Each warrant may be exercised by way of a cashless exercise, meaning that the holder may not pay a cash purchase price upon exercise, but instead would receive upon such exercise the net number of shares of our common stock determined according to the formula set forth in the warrant. If a registration statement registering the issuance of the shares of common stock underlying the warrants under the Securities Act is not effective or available and an exemption from registration under the Securities Act is not available for the issuance of such shares, the holder may elect to exercise the warrant through a cashless exercise, in which case the holder would receive upon such exercise the net number of shares of common stock determined according to the formula set forth in the warrant. Accordingly, we may not receive any additional funds upon the exercise of the warrants.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

USE OF PROCEEDS

We estimate that the net proceeds from the sale of the securities we are offering will be approximately $           million (or approximately $           million if the underwriter exercises in full its over-allotment option), after deducting the estimated underwriting discounts and commissions and estimated offering costs payable by us.

We intend to use the net proceeds from this offering for the development of our product candidates and our working capital requirements.

This expected use of the net proceeds from this offering represents our intentions based upon our current plans and business conditions. Pending our use of the net proceeds from this offering, we may invest the net proceeds in a variety of capital preservation investments, including short-term, investment grade, interest bearing instruments and U.S. government securities.

MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Our common stock is quoted on the OTCQB under the symbol “ATRX.” We plan to apply to have our common stock and warrants listed on The Nasdaq Capital Market under the symbol “          ” and “          ”, respectively. No assurance can be given that our application will be approved. If our application is not approved, we will not complete this offering.

As of November 18, 2022, there were approximately 1,350 holders of record of our common stock.

The holders of shares of common stock that were issued upon conversion of our Series E Preferred Stock and Series F Preferred Stock have piggy-back registration rights with respect to their shares. Approximately, 2,241,482 shares of common stock may be eligible for sale pursuant to Rule 144.

Equity Compensation Plan Information

See section labeled “Executive Compensation” for information on our equity compensation plan.

Dividend Policy

We have not paid any dividends since our incorporation and do not anticipate paying any dividends in the foreseeable future. At present, our policy is to retain earnings, if any, to develop and market our products. Our payment of dividends in the future will depend upon, among other factors, our earnings, capital requirements, and operating financial conditions.

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DILUTION

If you invest in our units in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per unit and the as adjusted net tangible book value per share of our common stock immediately after this offering.

Our net tangible book value as of September 30, 2022, was $(21.8) million or $(6.90) per share. Net tangible book value per share represents our total net tangible assets (which were total assets of $256,000 less intangible assets of $0, less our total liabilities of $22.1 million) at September 30, 2022 divided by the outstanding shares of common stock of 3,160,877.

After giving effect to (i) receipt of the net proceeds from our sale of units in this offering, at an assumed initial public offering price of $           per share (without assigning any value to the Warrants), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses, and(ii)           , our pro forma as adjusted net tangible book value as of September 30, 2022 would have been approximately $           or $           per share. This amount represents an immediate increase in as adjusted net tangible book value of $           per share to our existing stockholders and an immediate dilution of $           per share to new investors participating in this offering.

We determine dilution per share to investors participating in this offering by subtracting as adjusted net tangible book value per share after this offering from the assumed initial public offering price per share paid by investors participating in this offering. The following table illustrates this dilution on a per share basis to new investors:

Assumed initial public offering price per Unit $ 
Net tangible book value per share as of September 30, 2022 $(6.90)
Increase per share to existing stockholders attributable to investors in this offering $  
Pro forma as adjusted net tangible book value per share, to give effect to this offering $  
Dilution in pro forma net tangible book value per share to new investors in this offering $  

Each $1.00 increase (decrease) in the assumed initial public offering price of $           per Unit would increase (decrease) the net proceeds to us by approximately $          , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, contains forward-looking statements that areremains the same, and after deducting the estimated underwriting discounts and commissions.

The as adjusted information discussed above is illustrative only and will change based on current management expectations. Statementsthe actual initial public offering price, number of units and other thanterms of this offering determined at pricing.

If the underwriter exercises its option to purchase additional shares of common stock and/or Warrants in this offering in full at the assumed initial public offering price of $           per unit and assuming the number of units offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses, the as adjusted net tangible book value would be approximately $           per share, and the dilution in as adjusted net tangible book value per share to investors in this offering would be approximately $           per share.

To the extent that any outstanding options are exercised, new options, restricted stock units or other securities are issued under our stock-based compensation plans, or new shares of preferred stock are issued, or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering.

The table above excludes the following shares as of September 30, 2022:

2,389,770 common shares issuable upon the conversion of approximately $1.7 million of outstanding convertible promissory notes including accrued interest with various conversion prices and an agreed upon conversion of approximately $10.6 million in non-convertible notes including accrued interest;
446,500 shares of our common stock that are reserved for issuance under the 2018 Long-Term Incentive Plan and 19,000 common shares issuable upon the exercise of stock options that were issued outside of the 2018 Long-Term Incentive Plan;
5,192,652 shares of common stock issuable upon exercise of outstanding warrants
______ shares of common stock issuable upon exercise of warrants that will be issued to investors in this offering;
100 outstanding shares of Series C Preferred Stock convertible into 3,334 shares of common stock;
40 outstanding shares of Series D Preferred Stock convertible into 2,500 shares of common stock;
267 outstanding shares of Series E Preferred Stock and accrued dividends convertible into 178,833 shares of common stock.

34

CAPITALIZATION

The following table sets forth our capitalization as of September 30, 2022:

on an actual basis; and
on an as adjusted basis to reflect the sale of            units by us in this offering at an assumed price to the public of $           per unit, resulting in net proceeds to us of $           after deducting underwriter commissions of $          , $           non-accountable expense allowance and our estimated other offering expenses of $           (assuming no exercise of the over-allotment option).

The as adjusted information below is illustrative only and our capitalization following the completion of this offering is subject to adjustment based on the public offering price of our common stock and warrants and other terms of this offering determined at pricing. The following table summarizes the Company’s cash and cash equivalents, total debt and total shareholders’ equity. Total capitalization is the book value of the company’s total debt and total shareholder equity. You should read this table together with our financial statements of historical factand the related notes included elsewhere in this prospectus including statements about us and the future of our respective clinical trials, research programs, product pipelines, current and potential corporate partnerships, licenses and intellectual property, the adequacy of capital reserves and anticipated operating results and cash expenditures, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this prospectus the words “anticipate,” “objective,” “may,” “might,” “should,” “could,” “can,” “intend,” “expect,” “believe,” “estimate,” “predict,” “potential,” “plan” or the negative of these and similar expressions identify forward-looking statements. These statements reflect our current views with respect to uncertain future events and are based on imprecise estimates and assumptions and subject to risk and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. While we believe our plans, intentions and expectations reflected in those forward-looking statements are reasonable, these plans, intentions or expectations may not be achieved. Our actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained in this prospectus for a variety of reasons.

We have included more detailed descriptions of these risks and uncertainties and other risks and uncertainties applicable to our business in “Risk Factors,” “Management’sinformation under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations.”

  As of September 30, 2022 
  Actual  As Adjusted 
Cash and cash equivalents $133  $  
Debt, net of discounts $7,992     
Stockholders’ equity (deficit):        
Common stock, par $0.0006 $18     
Additional paid-in capital $33,547 $         
Accumulated deficit $(55,370) $  
Treasury stock $(2)    
Total stockholders’ deficit $(21,807) $  
Total capitalization $(29,799) $  

If the underwriter exercises the over-allotment option in full, each of our as adjusted cash, total stockholders’ equity and “Business,”total capitalization would be $          

Each $1.00 increase or decrease in the assumed offering price per unit of $          , assuming no change in the number of shares to be sold, would increase or decrease the net proceeds that we receive in this offering and include, among others:each of total stockholders’ equity and total capitalization by approximately $           (or $           if the underwriter exercises the over-allotment option in full), after deducting (i) estimated underwriter commissions and (ii) offering expenses, in each case, payable by us.

The table above excludes the following shares as of September 30, 2022:

·2,389,770 common shares issuable upon the conversion of approximately $1.7 million of outstanding convertible promissory notes including accrued interest with various conversion prices and an agreed upon conversion of approximately $8.5 million in non-convertible notes including accrued interest;
446,500 shares of our common stock that are reserved for issuance under the 2018 Long-Term Incentive Plan and 19,000 common shares issuable upon the exercise of stock options that were issued outside of the 2018 Long-Term Incentive Plan;
5,192,652 shares of common stock issuable upon exercise of outstanding warrants
_____ shares of common stock issuable upon exercise of warrants that will be issued to investors in this offering;
100 outstanding shares of Series C Preferred Stock convertible into 3,334 shares of common stock;
40 outstanding shares of Series D Preferred Stock convertible into 2,500 shares of common stock;
267 outstanding shares of Series E Preferred Stock and accrued dividends convertible into 178,833 shares of common stock.

35

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect management’s current views with respect to future events and financial performance including meeting our obligations under the Melior I and Melior II license agreements and our liquidity. The following discussion should be read in conjunction with the financial statements and related notes and the Risk Factors contained in this prospectus. Forward-looking statements are projections in respect of future events or financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology.

Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, we can give no assurance that such expectations will be achieved. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements after the date of this prospectus or to conform them to actual results, new information, future events or otherwise, except as otherwise required by securities and other applicable laws.

The following factors, among others, could cause our or our industry’s future results to differ materially from historical results or those anticipated:

our ability to obtain additional and substantial funding for our company;
·our abilitycompany, whether pursuant to attract and/or maintain research, development, commercialization and manufacturing partners;
·a capital raising transaction arising from the abilitysale of our company and/securities, a strategic transaction or a partner to successfully complete product research and development, including pre-clinical and clinical studies and commercialization;otherwise;
·the ability of our company and/or a partner to obtain required governmental approvals, including product and patent approvals;
·the ability of our company and/or a partner to develop and commercialize products that can compete favorably with those of our competitors;
·the timing of costs and expenses related to the research and development programs of our company and/or our partners;
·the timing and recognition of revenue from milestone payments and other sources not related to product sales;
·our ability to obtain suitable facilities in which to conduct our planned business operations on acceptable terms and on a timely basis;
·our ability to satisfy our disclosure obligations under the Securities Exchange Act of 1934, as amended, and to maintain the registration of our common stock thereunder;
·
our ability to attract and retain qualified officers, directors, employees and consultants as necessary;
the inability to comply with or obtain waivers or extensions under our current license agreements which expire on a timely basis asFebruary 1, 2023, in which case we seekmay be forced to re-startsuspend or terminate certain of our research and development activitiesprograms;
the cost of our research and development programs may be higher than expected, and there is no assurance that such efforts will be successful in a timely manner or at all; and
failure to meet our financial obligations under outstanding loans and other business operations; and
·costs associated with any product liability claims, patent prosecution, patent infringement lawsuits and other lawsuits.financing documents.

We urge investors to review carefullyThese statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section of this prospectus entitled “Risk Factors” in evaluating the forward-looking statements contained in this prospectus. We caution investors not to place significant reliance on forward-looking statements contained in this document; such statements needprospectus, any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be evaluatedmaterially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks may cause our or our industry’s actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.

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Corporate Overview

Nature of Business

We are an emerging specialty biotech company that, to the extent that resources and opportunities become available, is focused on drug development and commercialization of “small molecule” drugs to treat Parkinson’s disease (PD) and Type 1 diabetes.

On July 28, 2021, we as licensee and Melior II as licensor entered into an exclusive license agreement for the development, commercialization and exclusive license of MLR-1019. MLR-1019 is being developed as a new class of therapeutic for Parkinson’s disease (PD) and is, to the best of our knowledge, the only drug candidate today to address both movement and non-movement aspects of PD. Under the Agreement, we were granted an exclusive license to use the Melior II Patents and know-how to develop products in lightconsideration for cash payments of allapproximately $21.8 million upon meeting certain performance milestones as well as a royalty of 5% of gross sales.

On August 24, 2021, we as licensee entered into an exclusive license agreement with Melior I for the information contained herein.development, commercialization and exclusive license of MLR-1023 as a novel therapeutic for Type 1 diabetes.

All forward-looking statements attributableOn October 20, 2021, we as licensee expanded the MLR-1023 licensing agreement with Melior Pharmaceuticals I, Inc. to us or persons acting on our behalf are expressly qualifiedinclude two additional clinical indications for Non-Alcoholic Steatohepatitis (NASH) and pulmonary inflammation.

On July 20, 2022, the Company entered into an addendum to the License Agreement for MLR-1023 with Melior I pursuant to which Melior I extended the license to February 1, 2023 in their entirety byexchange for a $136,921 licensing payment. In addition, the risk factorsCompany is required to hire and retain a Chief Scientific Officer, and raise an additional $500,000 in capital in addition to other cautionary statementsrequirements set forth in this prospectus. Other thanthe addendum and the License Agreement.

Appointment of Company Executives

On September 8, 2022, the Board of Directors appointed Zahed Subhan as required by applicable securities laws, we are under no obligation,the Company’s Chief Executive Officer and we do not intend, to update any forward-looking statement, whether as result of new information, future events or otherwise.

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USE OF PROCEEDS

We will not receive anyChairman of the proceeds fromBoard and Andrew Kucharchuk as the saleCompany’s Chief Operating Officer, effective September 30, 2022.

On November 3, 2022, Trond Waerness resigned as member of sharesthe Board of Directors. Mr. Waerness withdrew his resignation on November 3, 2022, and the Board of Directors re-appointed him as a director.

As discussed above, our Board of Directors has approved a potential reverse split of our common stock in this offering. The selling stockholders will receivea range between 1-for-2 and 1-for-200, subject to shareholder approval. On September 30, 2022, we filed a Certificate of Amendment to the Certificate of Incorporation with the Delaware Secretary of State to effect a reverse stock split of all outstanding shares of the proceeds from this offering. However, we may receive proceeds inCompany’s common stock at a ratio of 1-for-20. The Certificate of Amendment became effective upon filing. All common stock share and per share numbers have been retroactively adjusted based on the aggregate amountreverse stock split.

Impact of upCOVID-19 Pandemic

Over the past two years the impact of COVID-19 has had adverse effects on our business by slowing down our ability to approximately $1.375 millionwork with third parties and continue fund raising efforts. We have witnessed supply chain related delays and increasing costs due to inflation. It is difficult to predict what other adverse effects, if allany, COVID-19 and related matters can have on our business, or against the various aspects of same.

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency caused by a new strain of the warrantscoronavirus (“COVID-19”) and advised of the risks to purchase the sharesinternational community as the virus spread globally. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. The spread of our common stock that are coveredCOVID-19 coronavirus caused public health officials to recommend precautions to mitigate the spread of the virus, especially as to travel and congregating in large numbers. Over time, the incidence of COVID-19 and its variants has diminished although periodic spikes in incidence occur. Consequently, restrictions imposed by this prospectus are exercised for cash. We cannot predict when, or if,various governmental health organizations may change over time. Several states have lifted restrictions only to reimpose such restrictions as the warrants will be exercised. number of cases rise and new variants arise.

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It is possible thatdifficult to isolate the warrants may expire and may never be exercised. We intend to use any proceeds from the exerciseimpact of the warrants for general corporate and working capital purposes.

The selling stockholders will pay any underwriting discounts and commissions and expenses incurred by the selling stockholders for brokerage, accounting, tax or legal services or any other expenses incurred by the selling stockholders in disposing of the shares. We will bear all other costs, fees and expenses incurred in effecting the registration of the shares covered by this prospectus, including all registration and filing fees, and fees and expenses ofpandemic on our counsel and our independent registered public accountants.

MARKET PRICE OF OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock has traded on the OTCQB under the symbol “MRNA” since September 17, 2014. Previously, our common stock traded on the OTC Pink under the symbol “MRNA” from July 11, 2012 until September 16, 2014. The table below sets forth, for each of the quarterly periods indicated, the range of high and low bid prices of our common stock, as reported by the OTC Markets. The prices reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

  High  Low 
Fiscal 2013:        
First Quarter $0.50  $0.22 
Second Quarter  0.32   0.18 
Third Quarter  0.31   0.22 
Fourth Quarter  0.49   0.19 
         
Fiscal 2014:        
First Quarter $1.81  $0.39 
Second Quarter  1.23   0.55 
Third Quarter  1.30   0.48 
Fourth Quarter  1.10   0.55 
         
Fiscal 2015:        
First Quarter $0.80  $0.53 
Second Quarter  0.65   0.40 
Third Quarter (through August 25, 2015)  0.55   0.33 

On August 25, 2015, the closing price of our common stock reported by the OTC Markets was $0.40 per share.

Holders

As of August 7, 2014, there were approximately 11,055 beneficial holders of record of our common stock.

Dividends

Payment of dividends and the amount of dividends depend on matters deemed relevant by our Board, such as ourbusiness, results of operations, financial condition cash requirements,and our future prospectsstrategic plans.

The Company may experience long-term disruptions to its operations resulting from changes in government policy or guidance; quarantines of employees, customers and any limitations imposedsuppliers in areas affected by law, credit agreementsthe pandemic and the presence of new variants of COVID-19; and closures of businesses or manufacturing facilities critical to its business or supply chains. The Company is actively monitoring, and will continue to actively monitor, the pandemic and the potential impact on its operations, financial condition, liquidity, suppliers, industry and workforce.

Results of Operations

Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020

Operating Expenses

Operating expenses were approximately $674,000 for the year ended December 31, 2021, a decrease of approximately $1.4 million compared to the same period in 2020. The following table summarizes our operating expenses for the years ended December 31, 2021 and 2020

  Year Ended 
(in thousands) 

December 31,2021

  December 31, 2020  Change 
Sales and marketing $17  $839  $(822)
General and administrative  657   1,198   (541)
Total operating expenses $674  $2,037  $(1,363)

Sales and Marketing

Sales and marketing expenses decreased by approximately $822,000, primarily due to the termination of our commercial operations related to the sale of Prestalia® in December 2019. Sales and marketing expenses for the year ended December 31, 2020, were primarily related to regulatory costs incurred for maintaining the Prestalia® NDA. Sales and marketing expenses for the year ended December 31, 2021, were primarily related to the storage and destruction of Prestalia® inventory.

General and Administrative

General and administrative expenses decreased by approximately $541,000 for the year ended December 31, 2021, as compared to the year ended December 31, 2020, primarily due to a reduction in corporate governance expenses including insurance, Board fees and other consulting fees incurred to maintain our public company regulatory obligations.

38

Other Expenses

The following table summarizes other expenses for the year December 31, 2021 and 2020:

  Year Ended 
(in thousands) 

December

31, 2021

  

December 31, 2020

  

Change

Inc/(Dec)

 
Interest expense $(1,035) $(935) $(100)
Other income      45   (45)
Initial and change in the fair value of derivative liability  (4,103)     (4,103)
Loss on extinguishment of debt  (141)     (141)
Amortization of debt discount  (398)  (839)  441 
Total other expense, net $(5,677) $(1,729) $3,948 

Interest expense for the year ended December 31, 2021, increased by $100,000 compared to the year ended December 31, 2020 primarily due to an increase in the issuance of convertible notes. The amortization of debt securities. To date, wediscount decreased by $441,000 primarily due to the maturity of our outstanding convertible notes. The $4.1 million increase in derivative expense was due to conversion features on convertible notes and embedded conversion options that have not paid any cash dividends or stock dividendsbeen bifurcated due to a lack of authorized shares that were classified as a derivative on our balance sheet as of December 31, 2021. The loss on extinguishment of debt was due to the conversion of principal and interest on our outstanding convertible notes. Other income for the year ended December 31, 2020 was a result of fees received from release of certain intellectual property rights from a third-party vendor and fees received from the cancellation of a contractual obligation with a third-party vendor.

Comparison of the Three Months Ended September 30, 2022 to the Three Months Ended September 30, 2021

Operating Expenses

Our operating expenses for the three months ended September 30, 2022, and 2021 are summarized as follows:

  Three Months Ended 
(in thousands) September 30, 2022  September 30,
2021
  

Increase/

(Decrease)

 
General and administrative expenses  548   232   316 
Total operating expenses $548  $232  $316 

General and Administrative

General and administrative expense increased by approximately $316,000 for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021. The increase was primarily due to a $137,000 licensing payment to Melior I for MLR-1023, an increase in compensation cost of $82,000 related to the hiring a Chief Scientific Officer, a $45,000 increase in fees paid for director and officer insurance and a $52,000 increase in other public company fees including legal expenses, audit fees and investor relations consulting.

Other Expense

  Three Months Ended 
(in thousands) September 30, 2022  September 30,
2021
  

Increase/

(Decrease)

 
Interest expense $(317) $(261) $56 
Gain/(loss) on extinguishment of debt  92   (177)  (269)
Initial and change in derivative liability  (254)  (2,968)  (2,714)
Amortization of debt discount  (777)  (101)  676 
Total other income (expense) $(1,256) $(3,507) $(2,251)

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Interest expense for the three months ended September 30, 2022, increased by $56,000 compared to the three months ended September 30, 2021, primarily due to an increase in interest expense related to our outstanding convertible notes. The derivative liability for the quarter ended September 30, 2022, decreased by $2.7 million as a result of a decrease in the fair value of our convertible notes and warrants that were classified as a derivative on our consolidated balance sheet as of September 30, 2022. The gain on extinguishment of debt was due to the payment and conversion of principal and interest on our outstanding convertible notes. The increase of $676,000 for the amortization of debt discounts was due an increase in our convertible notes outstanding.

Comparison of the Nine Months Ended September 30, 2022 to the Nine Months Ended September 30, 2021

Operating Expenses

Our operating expenses for the nine months ended September 30, 2022, and 2021 are summarized as follows:

  Nine Months Ended 
(in thousands) September 30,
2022
  September 30,
2021
  

Increase/

(Decrease)

 
Sales and marketing $-  $17  $(17)
General and administrative expenses  1,257   454   803 
Total operating expenses $1,257  $471  $786 

Sales and Marketing

Sales and marketing expenses for the nine months ended September 30, 2021, were primarily related to storage and destruction costs incurred for Prestalia® inventory. No sales and marketing expenses were incurred for the nine months ended September 30, 2022.

General and Administrative

General and administrative expense increased by approximately $803,000 for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021. The increase was primarily due to a $137,000 licensing payment to Melior I for MLR-1023, an increase in compensation cost of $82,000 related to the hiring a Chief Scientific Officer, a $161,000 increase in fees paid for director and officer insurance and a $423,000 increase in other public company fees including legal expenses, audit fees, investor relations services and financial consulting.

Other Expense

  Nine Months Ended 
(in thousands) September 30,
2022
  September 30,
2021
  

Increase/

(Decrease)

 
Interest expense $(989) $(749) $240 
Gain on extinguishment of debt  307   (177)  (484)
Initial and change in derivative liability  1,425   (3,055)  (4,480)
Amortization of debt discount  (1,265)  (230)  1,035 
Total other income (expense) $(522) $(4,211) $(3,689)

Interest expense for the nine months ended September 30, 2022 increased by $240,000 compared to the nine months ended September 30, 2021 primarily due to an increase in our outstanding convertible notes. The derivative liability for the quarter ended September 30, 2022, decreased by $4.5 million as a result of a decrease in the fair value of our convertible notes and warrants that were classified as a derivative on our consolidated balance sheet as of September 30, 2022 offset by an increase in the initial valuation of a derivative liability expense from the issuance of convertible notes for the period. The gain on extinguishment of debt was due to the payment and conversion of principal and interest on our outstanding convertible notes. The increase of $1.0 million for the amortization of debt discounts was due an increase in our convertible notes outstanding including the 2022 Bridge loan..

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Liquidity & Capital Resources

Working Capital

(in thousands) September 30,
2022
  December 31,
2021
 
Current assets $256  $196 
Current liabilities  (22,063)  (25,302)
Working capital deficit $(21,807) $(25,106)

Negative working capital as of September 30, 2022, was approximately $21.8 million as compared to negative working capital of approximately $25.1 million as of December 31, 2021. The increase in working capital is primarily related to an decrease in current liabilities of approximately $3.2 million including approximately $5.0 million in accrued dividends as a result of the conversion Series E and Series F Preferred Stock during the period, offset by an increase of $893,000 of accrued expenses including accrued interest for our promissory notes payable, an increase in our promissory notes payable of $1.3 million net of discounts and a decrease of $437,000 for a derivative liability related to our outstanding convertible notes and warrants.

Cash Flows and Liquidity

Net cash used in Operating Activities

Net cash used in operating activities was approximately $1.3 million during the nine months ended September 30, 2022. This was primarily due to our net operating loss of approximately $1.8 million, partially offset by a $1.4 million gain related to a decrease in the fair value of our outstanding derivative liability for our convertible notes and warrants, non-cash interest expense related to term loan and outstanding convertible notes of $989,000, non-cash amortization of debt discount of $1.3 million.

Net cash used in operating activities was approximately $369,000 during the nine months ended September 30, 2021. This was primarily due to our net operating loss of approximately $4.6 million, partially offset by to our derivative expense of approximately $3.1 million, non-cash interest expense related to term loans of $749,000, non-cash amortization of debt discount of $230,000 and other changes in operating assets and liabilities including an increase in accounts payable and accrued expenses of approximately $102,000.

Net cash used in Investing Activities

There was no cash used in or provided by investing activities for the nine months ended September 30, 2022, or September 30, 2021.

Net cash provided by Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2022, and 2021 was approximately $1.3 million and $519,000, respectively. Net cash provided by financing activities for the nine-months ended September 30, 2022, included approximately $1.9 million from the sale of promissory notes and warrants, net of issuance costs to certain accredited investors, offset by the repayment of principal and interest on outstanding convertible notes of $551,000 and $2,000 for the repurchase of common stock. In addition,stock outstanding.

Net cash provided by financing activities for the nine months ended September 30, 2021, of $519,000 was from the issuance of convertible notes to certain accredited investors, net of issuance costs

While we currently anticipate thatrecently raised $1.7 million, net of issuance costs as described in the next paragraph, we will need to raise additional operating capital within the next several months to maintain our operations and to realize our business plan. Without additional sources of cash and/or the deferral, reduction, or elimination of significant planned expenditures, we will not pay anyhave the cash dividends in the foreseeable future. Furthermore, the terms of any financing arrangements that we may enter into may restrict our abilityresources to pay any dividends.

21

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATION

You should read the following discussion in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. Statements made in this discussion other than statements of historical fact, including statements about us and our subsidiaries and our respective clinical and pre-clinical trials, research programs, current and potential partnerships, licenses and intellectual property, the adequacy of capital reserves and anticipated operating results and cash expenditures, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). As such, they are subject to a number of uncertainties that could cause actual results to differ materially from the statements made, including risks associated with the success of research and product development programs, the issuance and validity of patents, the development and protection of proprietary technologies, the ability to raise capital, operating expense levels and the ability to establish and retain partnerships. We do not undertake any obligation to update forward-looking statements.

Background

 We are a biotechnology company focused on the discovery, development and commercialization of nucleic acid-based therapies to treat orphan diseases. Our pipeline includes CEQ508, a product in clinical development for the treatment of Familial Adenomatous Polyposis (“FAP”), for which we have received both Orphan Drug Designation (“ODD”) and Fast Track Designation (“FTD”) from the U.S. Food and Drug Administration (“FDA”), and preclinical programs for the treatment of type 1 myotonic dystrophy (“DM1”) and Duchenne muscular dystrophy (“DMD”). We will need additional capital in order to execute on our strategy to initiate the registration trial for and to commercialize CEQ508, and to file Investigational New Drug (“IND”) applications for both DM1 and DMD and to bring these two programs to human proof-of-concept. We are currently pursuing both non-dilutive means of obtaining such capital, primarily from existing and potential future licenses and partnerships, and dilutive means of obtaining such capital, primarily through the offering of our equity and debt securities.

Since 2010, we have strategically acquired/in-licensed and further developed nucleic acid chemistry and delivery-related technologies in order to establish a novel and differentiated drug discovery platform. This platform allows us to distinguish ourselves from others in the nucleic acid therapeutics area in that we are the only company capable of creating a wide variety of therapeutics targeting coding and non-coding RNA via multiple mechanisms of action such as RNA interference (“RNAi”), messenger RNA translational inhibition, exon skipping, microRNA (“miRNA”) replacement, miRNA inhibition, and steric blocking in order to modulate gene expression either up or down depending on the specific mechanism of action. Our goal is to dramatically improve the lives of the patients and families affected by orphan diseases through either our own efforts or those of our collaborators and licensees.

Our business strategy is to discover and develop our own pipeline of nucleic acid-based compounds in order to commercialize drug therapies to treat orphan diseases. Our lead effort is the clinical development of CEQ508 to treat FAP, a rare disease for which CEQ508 received ODD from the FDA in 2010 and FTD from the FDA in 2015. Currently, there is no approved therapeutic for the treatment of FAP. In April 2012, we announced the completion of dosing for Cohort 2 in the Dose Escalation Phase of the START-FAP (Safety and Tolerability of an RNAi Therapeutic in FAP) Phase 1b/2a clinical trial. Based on our financial situation and the stability of existing clinical trial material, we have decided to take advantage of this break in the clinical program to optimize the manufacturing process and produce new clinical trial material. We expect to dose Cohort 3 in the fourth quarter of 2015. In addition, we expect to advance pre-clinical programs in DM1 and DMD through to human proof-of-concept.

We also seek to establish collaborations and strategic partnerships with pharmaceutical and biotechnology companies to generate revenue through up-front, milestone and royalty payments related to our technology and/or the products that are developed using such technology. Our near-term focus is to establish such collaborations and partnerships in order to generate sufficient funding to advance our pipeline.

We believe we have created a unique industry-leading nucleic acid-based drug discovery platform, which is protected by a strong intellectual property (“IP”) position and validated through: (1) licensing agreements for our SMARTICLES-based liposomal delivery technology (“SMARTICLES”) with Mirna Therapeutics, Inc. (“Mirna”), ProNAi Therapeutics, Inc. (“ProNAi”) and MiNA Therapeutics, Ltd. (“MiNA”) for unique nucleic acid payloads – microRNA mimics, DNA interference oligonucleotides and small-activating RNA, respectively; (2) Mirna and ProNAi’s respective clinical experience with SMARTICLES; (3) a licensing agreement with Novartis Institutes for Biomedical Research, Inc. (“Novartis”) for our conformationally restricted nucleotide (“CRN”) technology; (4) a licensing agreement with Protiva Biotherapeutics, Inc. (“Tekmira”), a wholly-owned subsidiary of Tekmira Pharmaceuticals Corporation, for our Unlocked Nucleobase Analog (“UNA”) technology; (5) licensing agreements with two large international companies (i.e., Novartis and Monsanto Company (“Monsanto”)) for certain chemistry and delivery technologies; and (6) our own FAP Phase 1b/2a clinical trial with theTransKingdom RNA™ interference (“tkRNAi”) platform.

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Cash Position and Liquidity

Liquidity

The accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern thereafter.

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Financings

In May 2022, we closed a private placement offering of $2,222,222 of notes and 1,111,112 warrants and received approximately $1.7 million in net proceeds. The notes come due upon the earliest to occur of (i) the 12 month anniversary of the original issuance date of the notes, or May 11, 2023, (ii) a financing transaction which contemplates realization of assets and the satisfaction of liabilitiesresults in the normal courseCompany’s common stock being listed on a national securities exchange, and (iii) an event of business. At June 30, 2015, we haddefault, in which case the amount payable could be increased to 125% of the outstanding balance if our common stock is not listed on a national securities exchange at the time of such event of default. If an accumulated deficitevent of approximately $336.5 million, $110.4 milliondefault occurs before the Company’s common stock is listed on a national securities exchange, the event of which has been accumulated since we focused on RNA therapeuticsdefault would require a 125% of the outstanding principal, accrued interest and other amounts owing thereon. The notes bear interest at 8% per annum, subject to an increase to 15% in June 2008. To the extent that sufficient funding is available, we will in the future continue to incur lossescase of an event of default as we continue our research and development (“R&D”) activities.provided for therein. In addition, we have hadat any time before the 12-month anniversary of the date of issuance of the Notes, the Company may, upon five days’ prior written notice to the Purchaser, prepay all of the then outstanding principal amount of the notes for cash in an amount equal to the sum of 105% of all amounts due and will continueowing hereunder, including all accrued and unpaid interest. The Company’s obligations under the Notes are secured by a first priority lien on all of the assets of the Company and its wholly-owned subsidiaries.

On November 16, 2022, holders of $8.3 million outstanding promissory notes issued by the Company representing a majority of the outstanding principal and accrued interest of the notes, agreed to have negative cash flows from operations. We have funded our losses primarily throughamend the salenotes to make them automatically convertible into units consisting of common anda new series of convertible preferred stock and warrants revenue provided from our license agreements(the upon an uplisting financing transaction in which the Company’s common stock is listed on The Nasdaq Capital Market or the NYSE American, in exchange for the holders agreeing to forbear repayment of their Notes and accrued interest until the uplisting transaction has been completed.

The terms for the amendment of the notes include no less than the following:

The Notes will automatically convert upon the uplisting transaction into the preferred stock at 90% of the public offering price;
In addition, each holder will receive 0.3 warrants for every $1.00 of principal on the holder’s original note;
The shares of preferred stock will be subject to a six-month lock-up period from date of issuance; and
The Company has agreed to register the holders’ sale of the shares of common stock issuable upon conversion of the preferred stock and upon the exercise of the warrants such that those shares will be freely tradeable following the uplisting transaction and expiration of the lock-up period.

The shares of the preferred stock will be entitled to vote on an as-converted-to-common basis together with other parties,the Company’s common stock. The shares of the preferred stock will automatically convert into shares of common stock upon expiration of the lock-up period at the conversion price of a percentage of a 30-day VWAP of common stock.

The warrants will have an exercise price of $0.80, subject to adjustments for splits and similar events, and expire on November 11, 2027.

The Company also agreed to provide the holders the right to participate in both a bridge and the uplisting transaction, up to a lesser extent, equipment financing facilities and secured loans. In 2014, we funded operations with a combination30% of issuancesthe total investment.

The 12% interest on the notes, as accrued through the date of preferred equity and license-related revenues. At December 31, 2014, we had aconversion, will convert into common stock at the offering price for the uplisting transaction.

We do not have sufficient funds to meet our working capital surplus of $0.6 million, a stockholders’ deficit of $4.4 millionneeds for the next 12 months. We will require additional funds in the near future to continue our business. Historically, we have raised additional capital to supplement our commercialization, clinical development and $1.8 millionoperational expenses. We will need to raise additional funds required, which may result in cash. At June 30, 2015, we had negative working capital of $1.27 million and $0.73 millionfurther dilution in cash. Our resumed operating activities consume the majorityequity ownership of our cash resources.

We have experienced and continueshares. There can be no assurance that additional financing will be available or, if available, that it can be obtained on commercially reasonable terms. Failure to experience operating losses and negative cash flows from operations, as well as an ongoing requirement for substantialraise additional capital investments. We believe thatthrough one or more financings, divesting development assets or reducing discretionary spending could have a material adverse effect on our current cash resources, which include the proceeds received from the sale of the Series D Stock in August 2015, will enable usability to fundachieve our intended limited operations through March 2016.

The volatility in our stock price, as well as market conditions in general, could make it difficult for us to raise capital on favorable terms, or at all. If we fail to obtain additional capital when required, we may have to modify, delay or abandon some or all of our planned activities, or terminate our operations.business objectives. These factors among others, raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements included in this prospectus do not include any adjustments that may result from the outcome of this uncertainty. We are currently pursuing both non-dilutive means of obtaining additional capital, primarily from existing and potential future licenses and partnerships, and dilutive means of obtaining additional capital, primarily through the offering of our equity and debt securities. However, there can be no assurance that we will be successful in such endeavors.

Cash Flows During the Six Months Ended June 30, 2015

Our operating activities used cash of $1.1 million in the six months ended June 30, 2015, compared to $2.3 million in the six months ended June 30, 2014. In the six months ended June 30, 2015, cash used in operating activities related primarily to funding our operating loss, adjusted for non-cash items. Adjustments for non-cash items, totaling $3.2 million, represented stock compensation, gain on settled liabilities and the change in fair value of price adjustable warrants. Changes in operating assets and liabilities provided $0.8 million from collecting $0.5 million due under a licensing agreement, and $0.3 million driven mainly by changes in accounts payable and accrued liabilities associated with costs incurred related to SEC filings in preparation for financing activities. During the six months ended June 30, 2014, cash used in operating activities related primarily to funding our net loss, adjusted for non-cash gains on the settlement of liabilities of $0.3 million. Adjustments for non-cash expenses, totaling $4.3 million, included interest expense related to beneficial conversion feature and debt extinguishment, stock-based compensation expense, and the changes in the fair values of stock-based liabilities. Changes in operating assets and liabilities used $1.1 million mostly from changes in accrued liabilities, predominantly related to payment of prior period accrued franchise taxes.

We undertook minimal financing activities in the six months ended June 30, 2015, compared to generating $5.7 million in the six months ended in June 30, 2014. In the six months ended June 30, 2014, changes in cash from financing activities were primarily due to the sale of our Series C preferred shares and warrants to purchase common stock, partially offset by a cash payment required under the terms of the notes before they were retired.

2014 Funding of Operations

Notes and Price Adjustable Warrants

In February 2012, we received net proceeds of approximately $1.5 million from the issuance of 15% secured promissory notes (the “Notes”) and price adjustable warrants to purchase up to 3.7 million shares of our common stock. Through a series of note amendments in 2012 and 2013, we issued additional price adjustable warrants to purchase 8.2 million shares of our common stock, all of which had an exercise price of $0.28 at December 31, 2013. These price adjustable warrants expire between August 2017 and April 2018.

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In February 2013, an amendment was executed that extended the maturity date of the Notes to the end of April 2013 and retained all of the terms of the Notes as amended in 2012. For consideration of this amendment, we issued additional warrants to purchase up to 1.0 million shares at a price of $0.28, such price being downward adjustable, including as a result of subsequent financings. The final amendment, executed in August 2013, extended the maturity date of the Notes to March 2014 and replaced the previously amended features and terms of the Notes with a limited claim on cash received as a result of financings or license payments and the balance of principal and accrued interest convertible to financing securities at the effective price paid for the securities by other parties.

Debt Conversion, Series C Convertible Preferred Stock, Series D Convertible Preferred Stock and Warrants

In February 2014, the holders of the Notes exchanged the Notes for 2.0 million shares of our common stock. In addition, in March 2014, we entered into a Securities Purchase Agreement with certain investors pursuant to which we sold 1,200 shares of our Series C Convertible Preferred Stock (“Series C Preferred”) and warrants to purchase up to 6.0 million shares of our common stock at an exercise price of $0.75 per share, for an aggregate purchase price of $6.0 million. Each share of Series C Stock has a stated value of $5,000 per share and is convertible into shares of common stock at a conversion price of $0.75 per dollar of stated value. The Series C Preferred Stock is initially convertible into 8.0 million shares of our common stock, subject to certain limitations and adjustments.

Further, subsequent to the end of the fiscal quarter ended June 30, 2015, on August 5, 2015, we entered into a Securities Purchase Agreement with certain investors pursuant to which we sold 220 shares of our Series D Convertible Preferred Stock (“Series D Preferred”), and price adjustable warrants to purchase up to 3.44 million shares of our common stock at an exercise price of $0.40 per share, for an aggregate purchase price of $1.1 million. Each share of Series D Preferred has a stated value of $5,000 per share and is convertible into shares of common stock at a conversion price of $0.40 per share. The Series D Preferred is initially convertible into an aggregate of 2.75 million shares of our common stock, subject to certain limitations and adjustments, has a 5% stated dividend rate, is not redeemable and has voting rights on an as-converted basis.

Licensing Payments

During 2014, we recorded an account receivable of $0.5 million for an upfront license payment from MiNA related to a license agreement executed in December 2014. We received payment in January 2015. During the six months ended June 30, 2015, we recorded $0.4 million in revenue as a result of an accelerated milestone payment from Mirna Therapeutics under our 2011 licensing agreement with Mirna Therapeutics.

Critical Accounting Policies and Estimates

Principles of Consolidation — We consolidate our financial statements with our wholly-owned subsidiaries, Cequent, MDRNA and Atossa, and eliminate any inter-company balances and transactions.

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Estimates having relatively higher significance include revenue recognition, R&D costs, stock-based compensation, valuation of warrants, valuation and estimated lives of identifiable intangible assets, impairment of long-lived assets, valuation of features embedded within note agreements and amendments, and income taxes. Actual results could differ from those estimates.

Fair Value of Financial Instruments — We consider the fair value of cash, restricted cash, accounts receivable, accounts payable and accrued liabilities 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:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets

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that are not active.

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use. 

Our cash is subject to fair value measurement and is valued determined by Level 1 inputs. We measure the liability for committed stock issuances with a fixed share number using Level 1 inputs. We measure the liability for price adjustable warrants and certain features embedded in notes, using the Black-Scholes-Merton valuation model (“Black-Scholes”), using Level 3 inputs.

Our determination of the fair value of price adjustable securities as of the reporting date is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the security, the risk-free interest rate, the likelihood of financing at a range of prices, the likelihood of the sale of our company at a range of prices, and the likelihood of insolvency. Other reasonable assumptions for these variables could provide differing results. In addition, Black-Scholes requires the input of an expected life for the securities for which we have used the remaining contractual life. The fair value liability is revalued each balance sheet date utilizing Black-Scholes with the decrease or increase in fair value being reported in the statement of operations as other income or expense, respectively. The primary factor affecting the fair value liability is our stock price.

The following illustrates the effect that reasonably likely changes in our stock price would have on the estimated fair value liability for price adjustable securities that were outstanding as of December 31, 2014.

  - 10% change in
stock price
  Weighted average
variables used in
valuation at
December 31, 2014
  + 10% change in
stock price
 
Effect of a 10% change in stock price            
Condition changed            
Stock price $0.59  $0.66  $0.73 
Assumptions and conditions held constant            
Exercise price $0.42  $0.42  $0.42 
Expected life in years  3.52   3.52   3.52 
Risk free rate  0.90%  0.90%  0.90%
Expected stock volatility  121%  121%  121%
Estimated fair value liability for price adjustable securities (in thousands) $8,044  $9,225  $10,429 

In December 2014, we pledged to issue common stock valued at $0.075 million to Novosom, related to our license agreement with MiNA, for the portion due under its sublicensing agreement. Pricing of the common stock was to occur on receipt of the payment from MiNA. As of December 2014, the pledge was issued as a dollar denominated liability and was not influenced by changes in stock price. This obligation is included in Fair Value of Stock to be Issued to Settle Liabilities at December 31, 2014.

Our reported net loss was $6.5 million for 2014. A 10% change in the stock price results in a change of $1.2 million in our net loss. If our December 31, 2014 closing stock price had been 10% lower, our net loss would have been $5.3 million. If our December 31, 2014 closing stock price had been 10% higher, our net loss would have been $7.7 million.

The following illustrates the effect of changing the volatility assumptions on the estimated fair value liability for price adjustable securities that were outstanding at December 31, 2014:

  - 10% change in
Expected Stock
Volatility
  Weighted average
variables used in
valuation at
December 31, 2014
  + 10% change in
Expected Stock
Volatility
 
Effect of a 10% change in volatility            
Condition changed            
Expected stock volatility  109%  121%  133%
Assumptions and conditions held constant            
Exercise price $0.42  $0.42  $0.42 
Expected life in years  3.52   3.52   3.52 
Risk free rate  0.90%  0.90%  0.90%
Stock Price $0.66  $0.66  $0.66 
Estimated fair value liability for price adjustable securities (in thousands) $8,829  $9,225  $9,588 

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A 10% reduction in volatility assumptions would reduce our net loss by $0.4 million to $6.1 million. A 10% increase in volatility assumptions would increase our net loss by $0.4 million to $6.9 million.

Identifiable intangible assets — Intangible assets associated with in-process R&D (“IPR&D”) acquired in business combinations are not amortized until approval is obtained in the United States, the European Union, or in a series of other countries, subject to certain specified conditions and management judgment. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated.

Accrued Restructuring — During 2011 and 2012,we ceased operating leased facilities in Bothell, Washington and recorded an accrued liability for remaining lease termination costs at fair value, based on the remaining payments due under the lease and other costs. In 2013, final payments were made to the landlord.

 Impairment of long-lived assets — We review all of our long-lived assets for impairment indicators throughout the year and perform detailed testing whenever impairment indicators are present. In addition, we perform detailed impairment testing for indefinite-lived intangible assets, specifically IPR&D, at least annually at December 31. When necessary, we record charges for impairments. Specifically:

·For finite-lived intangible assets, such as developed technology rights, and for other long-lived assets, such as property and equipment, we compare the undiscounted amount of the projected cash flows associated with the asset, or asset group, to the carrying amount. If the carrying amount is found to be greater, we record an impairment loss for the excess of book value over fair value. In addition, in all cases of an impairment review, we re-evaluate the remaining useful lives of the assets and modify them, as appropriate; and

·For indefinite-lived intangible assets, such as IPR&D assets, each year and whenever impairment indicators are present, we determine the fair value of the asset and record an impairment loss for the excess of book value over fair value, if any.

Notes Payable — Notes payable are recorded under liabilities, classified into short and long term, depending on the principal due in the subsequent twelve months. Interest is either accrued or paid according to the terms of the notes. Costs associated with the issuance of debt, such as legal fees, are recorded as prepaid expenses and are amortized on a straight-line basis over the period to maturity of the debt.

Note amendments and changes must be analyzed for correct accounting application based on our financial condition and the changes in the debt instrument features and terms. For each note amendment, a series of analyses is performed to determine first whether the amendment was a troubled debt restructuring (“TDR”), as defined by conditions of default, our financial state and ability to repay loan, and whether the lender made a concession. If an amendment is not a TDR, then we perform a further analysis to determine if the amended terms are “substantially different” from the existing debt facility. The debt is considered extinguished if the present value of the cash flows under the terms of the new debt instrument is at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. The new debt instrument is initially recorded at fair value, and that amount is used to determine the debt extinguishment gain or loss recognized and the effective rate of the new instrument. If it is determined that the original and new debt instruments are not substantially different, then a new effective interest rate is determined based on the carrying amount of the original debt instrument resulting from the modification, and the revised cash flows.  If the exchange or modification is to be accounted for in the same manner as a debt extinguishment and the new debt instrument is initially recorded at fair value, then the fees paid including the fair value of warrants issued are included in the debt extinguishment gain or loss.  If the exchange or modification is not to be accounted for in the same manner as a debt extinguishment, then the fees paid including the fair value of warrants issued are amortized as an adjustment of interest expense over the remaining term of the replacement or modified debt instrument using the interest method.

Revenue Recognition — Revenue is recognized when persuasive evidence that an arrangement exists, delivery has occurred, collectability is reasonably assured, and fees are fixed or determinable. Deferred revenue expected to be recognized within the next 12 months is classified as current. Substantially all of our revenues are generated from licensing arrangements that do not involve multiple deliverables and have no ongoing influence, control or R&D obligations. Our license arrangements may include upfront non-

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refundable payments, development milestone payments, patent-based or product sale royalties, and commercial sales, all of which are treated as separate units of accounting. In addition, we may receive revenues from sub-licensing arrangements. For each separate unit of accounting, we have determined that the delivered item has value to the other party on a stand-alone basis, we have objective and reliable evidence of fair value using available internal evidence for the undelivered item(s) and our arrangements generally do not contain a general right of return relative to the delivered item.

Revenue from licensing arrangements is recorded when earned based on the specific terms of the contracts. Upfront non-refundable payments, where we are not providing any continuing services as in the case of a license to our IP, are recognized when the license becomes available to the other party.

Milestone payments typically represent nonrefundable payments to be received in conjunction with the uncertain achievement of a specific event identified in the contract, such as initiation or completion of specified development activities or specific regulatory actions such as the filing of an IND. We believe a milestone payment represents the culmination of a distinct earnings process when it is not associated with ongoing research, development or other performance on our part and it is substantive in nature. We recognize such milestone payments as revenue when it becomes due and collection is reasonably assured.

Royalty and earn-out payment revenues are generally recognized upon commercial product sales by the licensee as reported by the licensee.

Stock-based Compensation — We use Black-Scholes as our method of valuation for stock-based awards. Stock-based compensation expense is based on the value of the portion of the stock-based award that will vest during the period, adjusted for expected forfeitures. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual or updated results differ from our current estimates, such amounts will be recorded in the period the estimates are revised. Black-Scholes requires the input of highly subjective assumptions, and other reasonable assumptions could provide differing results. Our determination of the fair value of stock-based awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected life of the award and expected stock price volatility over the term of the award. Stock-based compensation expense is recognized immediately for immediately vested portions of the grant, with the remaining portions recognized on a straight-line basis over the applicable vesting periods based on the fair value of such stock-based awards on the grant date. Forfeiture rates have been estimated based on historical rates and compensation expense is adjusted for general forfeiture rates in each period. Starting in September 2014, we did not use historical forfeiture rates and did not apply a forfeiture rate as the historical forfeiture rate was not believed to be a reasonable estimate of the probability that the outstanding awards would be exercised in the future and the company believes it is probable that the full awards will be exercised in the future.

Non-employee stock compensation expense is recognized immediately for immediately vested portions of the grant, with the remaining portions recognized on a straight-line basis over the applicable vesting periods. At the end of each financial reporting period prior to vesting, the value of the unvested stock options, as calculated using a Black-Scholes model, is re-measured using the fair value of our common stock and the stock-based compensation recognized during the period is adjusted accordingly.

Income Taxes – Income taxes are accounted for under 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 assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or pledged. The effect on deferred tax assets and liabilities of a change in tax rates in recognized in income in the period that includes the enactment date. Tax benefits in excess of stock-based compensation expense recorded for financial reporting purposes relating to stock-based awards will be credited to additional paid-in capital in the period the related tax deductions are realized. Our policy for recording interest and penalties associated with audits is to record such items as a component of loss before taxes.

We assess the likelihood that our deferred tax assets will be recovered from existing deferred tax liabilities or future taxable income. Factors we considered in making such an assessment include, but are not limited to, estimated utilization limitations of operating loss and tax credit carry-forwards, expected reversals of deferred tax liabilities, past performance, including our history of operating results, our recent history of generating tax losses, our history of recovering net operating loss carry-forwards for tax purposes and our expectation of future taxable income. We recognize a valuation allowance to reduce such deferred tax assets to amounts that are more likely than not to be ultimately realized. To the extent that we establish a valuation allowance or change this allowance, we would recognize a tax provision or benefit in the consolidated statements of operations. We use our judgment to determine estimates associated with the calculation of our provision or benefit income taxes and in our evaluation of the need for a valuation allowance recorded against our net deferred tax assets.

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Consolidated Results of Operations

Comparison of Results of Operations for the three and six months ended June 30, 2015 to the three and six months ended June 30, 2014

Revenue. We recorded $0.4 million in revenue in the six months ended June 30, 2015, which consisted of an accelerated milestone payment from Mirna under our 2011 licensing agreement. The majority of our licensing deals provide for clinical and regulatory milestones, so significant revenues could result from the existing licenses, but are uncertain as to timing or probability. We will seek R&D collaborations as well as licensing transactions to fund business operations.

Research and Development. R&D expense consists primarily of consulting and other outside services. R&D expense increased from $0.05 million and $0.1 million for the three and six months ended June 30, 2014 to $0.2 million and $0.5 million for the three and six months ended June 30, 2015, due primarily to the resumption of FAP product development and increased stock compensation expense for members of the scientific advisory board.

We anticipate continued increased spending on FAP product development in 2015.

General and administrative. General and administrative (“G&A”) expense consists primarily of salaries and other personnel-related expenses to support our R&D activities, stock-based compensation for G&A personnel and non-employee members of our Board, professional fees, such as accounting and legal, and corporate insurance costs. G&A costs increased by 92% and 98% from $0.6 million and $1.1 million in the three and six months ended June 30, 2014 to $1.2 million and $2.3 million in the three and six months ended June 30, 2015 as a result of the following:

·Personnel-related expenses (compensation, benefits, travel related) increased from $0.01 million and $0.2 million for the three and six months ended June 30, 2014 to $0.3 million and $0.6 million in the three and six months ended June 30, 2015, due primarily to revisions in compensation levels as stated within the 2014 revised employment agreement with our Chief Executive Officer and increased stock compensation expense for Directors.

·Costs of legal and accounting fees, consulting, corporate insurance and other administrative costs increased $0.5 million and $0.8 million in the three and six months ended June 30, 2014 to $0.9 million and $1.6 million in the three and six months ended June 30, 2015 due to increased legal, accounting and filing fees, primarily due to costs related to SEC filings in preparations for financing activities.

In general, G&A costs increased due to efforts associated with our company regaining compliance with our reporting obligations under the Exchange Act during the subsequent quarters of 2014. We incurred nominal compliance costs in the six months ended June 30, 2014 because we were not compliant with our reporting obligations and had not resumed the expenses associated with full SEC public company compliance and reporting. In addition to these costs, expense was incurred related to SEC filings in preparation for financing activities.

Interest & other expense. We incurred no interest and other expense in the three and six months ended June 30, 2015 versus interest expense of $1.0 million in the six months ended June 30, 2014. This was mostly due to the 2014 non-cash interest expense related to the conversion of the notes payable into common stock.

Change in fair value liability for price adjustable securities. The fair value liability is revalued each balance sheet date utilizing Black-Scholes Model computations, with the decrease or increase in fair value being reported in the statement of operations as other income or expense, respectively. The stock price decreases resulted in a $4.5 million gain and stock price increases and the issuance terms of the Series C related warrants resulted in a $0.8 million loss during the three and six months ended June 30, 2014, respectively. Stock price decreases resulted in a $1.9 million and $3.6 million gain during the three and six months ended June 30, 2015, respectively. There were no additional price adjustable warrants issued between reporting periods, thus the change is all related to the stock price decline between valuation dates.

Change in fair value liability for stock to be issued. In the six months ended June 30, 2014, we recognized a $2.5 million loss associated with the change in the fair value of share-denominated obligations. As of January 1, 2015, we had issued all share denominated contractually obligated stock and had taken on no new such obligations. As a result, there was no change in fair value of such stock during the three and six months ended June 30, 2015.

Gain on settled liabilities. During the three and six months ended June 30, 2014, we recorded a $0.05 million and $0.3 million gain due to the negotiated settlement of liabilities accrued for our executive officers. During the three and six months ended June 30, 2015, we recorded $0.01 million gain related to credits on vendor payables.

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Deemed dividend related to discount on beneficial conversion feature in Series C convertible preferred shares. The Series C Preferred share terms include an immediate beneficial conversion feature of $6.0 million, as the conversion price is established to be no higher than $0.75 while the closing price of common shares on the closing date for the issuance of the Series C Preferred was significantly higher, and the shares were immediately convertible. The deemed dividend is included in net income (loss) applicable to common stockholders.

Comparison of Fiscal Year 2013 and Fiscal Year 2014

  Year Ended December 31,  Change 
(In thousands, except shares and percentages) 2013  2014  $  % 
License and other revenue $2,115  $500  $(1,615)  (76)%
Operating expenses:                
Research and development  715   686   (29)  (4)%
General and administrative  1,765   3,334   1,569   89%
Total operating expenses  2,480   4,020   1,540   62%
Loss from operations  (365)  (3,520)  (3,155)  864%
Other income (expense):                
Interest and other expense  (249)  (1,006)  (757)  304%
Change in fair value liability for price adjustable warrants  151   13   (138)  (91)%
Change in fair value of stock reserved for issuance to settle liabilities  31   (2,503)  (2,534)  * 
Change in fair value of embedded features in notes payable and amendments to notes payable  829   -   (829)  * 
Loss on debt extinguishment  (2,037)  5   2,042   100%
Gain on equipment disposal  30   -   (30)  * 
Gain on settled liabilities  -   534   534   * 
Total other expense, net  (1,245)  (2,957)  (1,712)  138%
Net loss before income tax  (1,610)  (6,477)  (4,867)  302%
Income tax benefit  (39)  -   39   * 
Net loss $(1,571) $(6,477) $(4,906)  312%
Net loss per common share — basic and diluted $(0.09) $(0.26) $(0.17)  184%
Shares used in computing net loss per share — basic and diluted  16,937,661   24,634,535         

* Change not meaningful.

Revenue. We recorded $0.5 million in license related revenue in 2014, all from MiNA. In 2013, we received license related revenue of $0.2 million from Tekmira, $0.8 million from Arcturus, and $1.0 million from Mirna. Additionally, we recognized $0.1 million of deferred revenue on completion of service obligations to Mirna and sold $0.03 million of reagents to Novartis. The majority of these licensing deals provide for clinical and regulatory milestones, though the achievement of any such milestones and the realization of any revenues relating thereto is uncertain. We will seek R&D collaborations, as well as licensing transactions to fund business operations.

Research and Development. R&D expense consists primarily of salaries and other personnel-related expenses, costs of clinical development and pre-clinical studies, consulting and other outside services, laboratory supplies, patent license fees, and other costs. R&D expenses decreased 4% from $0.72 million in 2013 to $0.69 million, predominantly due to:

·Personnel-related expenses (compensation, benefits, travel related) decreased by 100% from $0.4 million to $0 due to the elimination of all R&D company employees. Consulting fees and outside services expenses increased from an immaterial amount in 2013 to $0.41 million in 2014. The net difference between 2013 employee expenses and 2014 consulting expenses is immaterial;

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·Resumption of the scientific advisory board compensation expense in 2014 added $0.05 million in expense, compared to $0 in 2013;

·Resumption of clinical development expense in 2014 added $0.06 million in expense compared to $0 in 2013; and

·Cost associated with license agreements decreased 50% from $0.30 million in 2013 to $0.15 million in 2014, due to activity in out-licensing arrangements involving technologies we sublicensed from a third party.

General and administrative. General and administrative (“G&A”) expense consists primarily of salaries and other personnel-related expenses, stock-based compensation for G&A personnel and non-employee members of our Board of Directors, professional fees (such as accounting and legal), and corporate insurance. G&A costs increased by 89% from $1.8 million to $3.3 million primarily due to:

·Personnel-related expenses (compensation, relocation, travel related) increased by 30% from $0.85 million to $1.1 million due to compensation, relocation, and travel expense increases related to our CEO;

·Costs of legal and accounting fees, consulting, corporate insurance and other administrative costs increased by 89% from $1.0 million to $1.9 million, predominantly due to increases in legal and patent, finance, public relations and web hosting, and fees associated with SEC filings and annual meeting hosting; and

·Resumption of the Board of Directors compensation expenses in 2014 added $0.13 million in expense compared to $0 in 2013.

Change in fair value liability for price adjustable securities. The fair value liability is revalued each balance sheet date utilizing Black-Scholes computations, with the decrease or increase in fair value being reported in the statement of operations as other income or expense, respectively. The change associated with this mark-to-fair value requirement declined 91% from a gain of $0.15 million in 2013 to a gain of $0.01 million in 2014. The largest factor of the change in the value of the liability is our stock price, which went from $0.43 as of December 31, 2012 to $0.40 as of December 31, 2013 to $0.66 as of December 31, 2014. A decrease in stock price during a period decreases the liability and increases our gain on the consolidated statements of operations. The other significant factor is the issuance of additional securities that require revaluation for reporting. In 2013, an additional 5.0 million warrants were issued and were subsequently re-valued based on stock price changes between the issuance date and December 31, 2014. Due to the multiple variables in the terms of the warrants associated with the Series C convertible preferred stock issuance, the warrants to purchase 6.0 million shares require revaluation and the decrease in the stock price between the warrant issuance and December 31, 2014 resulted in a gain that partially offset the revaluation loss.

Change in fair value liability for stock to be issued. In 2012, we had contractually pledged shares to vendors to settle accounts payable, to Novosom to settle amounts owed under our license agreement, and to our former landlord as part of a lease termination agreement. As these liabilities are denominated in shares, not value, they are required to be revalued for reporting. Share based liabilities were revalued at December 31, 2013 and the $0.03 million decrease in total liability was recorded as a gain on the consolidated statements of operations. In December 2013, we pledged an additional 0.5 million shares to Novosom in conjunction with our Mirna payment receipt. In 2014, all pre-existing share pledges were settled and the change in fair value between December 31, 2013 and the dates of such issuances resulted in a loss of $2.5 million for the year ended December 31, 2014. We additionally pledged $0.075 million of stock to be issued to Novosom in connection with the MiNA sublicense, but as this was dollar denominated, there were no changes in fair value between the date of the recorded liability and December 31, 2014.

Change in fair value of features embedded in notes payable. Certain features introduced within the notes payable and subsequent amendments are defined as separable units of accounting and represent stand-alone liabilities carried at fair value on the balance sheet. Such features include the right to convert at the note holders’ discretion and conversion price protection in the event of a sale of the company at a significant discount. These features are revalued at each reporting period and the liability adjusted accordingly, with changes in the liability reflected as a gain or loss on the consolidated statements of operations. In 2013, the embedded liabilities were eliminated, resulting in a gain of $0.8 million on the consolidated statements of operations. No embedded features remained in 2014.

Gain on settled liabilities.During 2012 and 2013, executives with contractual compensation obligations under employment agreements were paid only a portion of the obligation, with the remaining amount accrued for later payment. In January 2014, these accrued amounts were settled at a reduced rate and the gain arising from the discount amounted to $0.3 million. Additionally, in 2014, a number of vendor payables were settled for less than the accrued amount resulting in a net gain of $0.2 million.

Loss on debt extinguishment. Due to the requirements under debt extinguishment accounting, the fair value of the existing debt is

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extinguished on the date of the amendment. The warrants and the fair value of any embedded features within the notes are fully expensed as a gain or loss on extinguishment, then the note terms and features are revalued and rebooked on the balance sheet. In 2013, debt extinguishment resulted in a $2.0 million loss in connection with fair value expensing of warrants, offset by a gain of $0.8 million in connection with the elimination of the embedded features within the terms of the notes. The debt was converted to common shares in 2014, and the loss on debt extinguishment was immaterial.

Interest and other expense. In 2013, we recorded $0.2 million in interest on the notes payable. Interest expense in 2014 consisted of $0.03 million of interest on the notes and a $0.97 million charge related to the beneficial debt conversion feature that allowed conversion at $0.75 per share rather than at the prevailing market price.

Off-Balance Sheet Arrangements

At JuneAs of September 30, 2015,2022, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Critical Accounting Policies and Estimates

Our significant accounting policies are more fully described in the notes to our consolidated financial statements included herein for the three- and nine-month periods ended September 30, 2022, and for the year ended December 31, 2021.

New and Recently Adopted Accounting Pronouncements

Any new and recently adopted accounting pronouncements are more fully described in Note 1 to our consolidated financial statements included herein for the period ended September 30, 2022.

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BUSINESS

Overview Business Strategy and Recent Events

We are an emerging specialty biotech company with a biotechnology company focusedfocus on the discovery,drug development and commercialization of nucleic acid-based therapies“small molecule” drugs to treat orphan diseases. Our pipeline includes CEQ508,Parkinson’s disease (PD) and Type 1 diabetes. Companies operating in the drug development and biotech sectors typically in-license early-stage inventions or pre-clinical (stage) compounds from universities and other companies and apply their own drug discovery and development expertise and resources to further these drug candidates towards regulatory approval by the Food and Drug Administration (FDA), and potentially other regulatory bodies overseas. The ultimate objectives are to secure regulatory authorizations in the USA and territories internationally, and to generate revenues from marketing activities. Drug candidates may also be licensed (out) to pharmaceutical companies prior to obtaining final regulatory approvals and marketing authorizations for valuable consideration, including upfront payments, milestone payments and royalties.

We utilize a “virtual” drug development model, also prevalent in this industry sector. In this model, Contract Research Organizations (CROs) are typically employed to undertake certain drug discovery and development services on the Company’s behalf and under the Company’s direct supervision.

A unique feature of Adhera’s accelerated drug development strategy is to identify candidates that have previously been developed for other indications (uses), but where development was discontinued due to lack of efficacy (vs. safety) in these initial indications. The Company secures regulatory approval to commence Phase 2 clinical trials without the need to embark on costly drug discovery or Phase 1 clinical studies. The Company’s most advanced development programs are MLR-1019, a small molecule drug candidate being developed for Parkinson’s disease and MLR-1023 being developed to treat Type 1 diabetes. Both drugs are “clinical-stage,” i.e., are ready to proceed to Phase 2 clinical trials and to Phase 3 clinical trials within 24 months. Both drugs have been shown to be safe and well tolerated in previous clinical trials (in other indications) or following long-term exposure in large numbers of patients. .

MLR-1019 in Parkinson’s Disease and L-DOPA-Induced Dyskinesia

PD is a chronic neurodegenerative multi-system disorder. Its defining clinical manifestations are motor disturbances, specifically tremor, rigidity, bradykinesia, and postural instability, which are caused by the loss of dopaminergic neurons in the brain. The most effective current treatment for PD is dopamine replacement with the dopamine precursor levodopa (L-DOPA). However, long-term L-DOPA therapy is commonly associated with motor complications that include response fluctuations and involuntary movements called L-DOPA-induced dyskinesias (LID).

L-DOPA remains the most common, effective treatment to improve motor symptoms in PD. L-DOPA is initially well-tolerated for many patients and provides substantial improvement in motor function for Parkinson’s patients. However, the long-term use of L-DOPA in patients with PD is often associated with abnormal involuntary movements such as dystonia, chorea and athetosis (collectively referred to as dyskinesias). These L-DOPA-induced dyskinesias, referred to as PD-LID, can be as debilitating as the parkinsonian symptoms (lack of movement or akinesia) experienced by patients suffering from PD. Indeed, PD-LID can often limit the dose of L-DOPA that can be safely administered to patients. To the extent that any improvement of the occurrence of PD-LID is observed, it is largely due to an evolving practice of limiting L-DOPA administration and the drug-induced side-effects while potentially compromising direct therapeutic activity.

The pathogenesis of PD-LID remains enigmatic, but it has been shown that sudden changes in dopaminergic stimulation produced by pulsatile L-DOPA treatment plays a role. Because L-DOPA has a relatively short half-life (50 minutes), multiple doses must be administered during a day. Peak dose dyskinesias are the most common dyskinesia, occurring during peaks of L-DOPA-induced dopamine levels in the brain, a time during which the patient experiences the otherwise beneficial effect of L-DOPA in terms of treating the parkinsonian symptoms. Altering the dose and/or timing of L- DOPA can initially alleviate these dyskinesias, but once PD-LID is present, it becomes more difficult to control the clinical response to L-DOPA.

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The intermittent dosing schedule undertaken with L-DOPA leads to pulsatile stimulation of post- synaptic receptors. It has been suggested that this stimulation leads to downstream changes in proteins and genes, ultimately producing dyskinesias by permanently altering striatal dopaminergic homeostasis. As support for this theory, changes in levels of the neurotransmitters serotonin and norepinephrine occur, which may be an attempt to counteract the dysregulation in dopamine levels.

Any current option for addressing PD-LID is associated with compromises in patient benefit. Current strategies include preventing the onset of PD-LID by delaying the start of treatment with L-DOPA, or by initially treating with dopamine agonists instead of L-DOPA. Ropinirole and pramipexole are two dopamine agonist drugs that have been shown to help reduce the occurrence of PD-LID but, to date this strategy has been largely unsuccessful. Although the dyskinesias may be reduced, this is achieved at the expense of inadequately treating the parkinsonian symptoms.

There are few current strategies available for treating PD-LID once they have occurred. Amantadine, an N-methyl-D-aspartate (NMDA) receptor antagonist, was originally introduced as an antiviral compound to treat influenza and was found to ameliorate parkinsonian symptoms in a patient with PD. Since that original finding, many clinical trials have been conducted investigating the efficacy of amantadine alone and in combination with L-DOPA for treating the symptoms of PD. These clinical trials have shown amantadine to have anti-dyskinetic effects and reduce the severity of PD-LID when given in combination with L-DOPA. However, side effects of amantadine are numerous and significantly limit its use as a practical therapy. These side effects include anxiety, increased impulse control disorders, insomnia, nightmares, blotchy skin, and anti-cholinergic effects. Catechol-O-methyl transferase (COMT) inhibitors can be used to increase the half-life of L-DOPA by slowing the metabolism of L-DOPA, thereby reducing PD-LID between doses. There are currently two COMT inhibitors on the market, entacapone (Comtan®) and tolcapone (Tasmar®). A third medication, Stalevo®, is a combination of carbidopa, levodopa and entacapone and has proved beneficial for patients with advanced PD and PD-LID symptoms. Tolcapone has been associated with hepatic abnormalities and the FDA is evaluating clinical trial data suggesting that patients taking Stalevo® for PD may be at an increased risk of prostate cancer. The anti-psychotic medication clozapine has been assessed for the treatment of drug-induced psychosis often seen in patients with PD. Some studies have investigated the effectiveness of clozapine in decreasing the dyskinesia’s seen in patients with PD-LID. Although clozapine may show some beneficial effects on dyskinesia and psychosis in PD, patient compliance is poor due to the requirement for a weekly blood draw to monitor for the potential of drug-induced agranulocytosis.

At least two invasive procedures have been assessed for treating PD-LID, intra-duodenal infusion of L-DOPA in a specially formulated suspension (Duodopa®) and deep brain stimulation (DBS). However, the surgical procedures and post-surgical monitoring required for these interventions limit their acceptance. Duodopa® provides L-DOPA delivery directly to the duodenum. The continuous infusion of L-DOPA may prevent the pulsatile stimulation and therefore reduce PD-LID. DBS of the globus pallidus interna (GPi) or the subthalamic nucleus (STN) with implanted electrodes can reduce the severity and duration of PD-LID. Patients receiving this treatment experience significant improvement in PD-LID symptoms, possibly from the reduction in the need for L-DOPA treatments.

As successful as this surgery is for treating PD-LID symptoms, not all PD-LID patients can benefit from this procedure. Patients suffering from dementia or other impairments may not qualify to receive treatment in this manner. The fact that procedures that are as invasive as DBS and the administration of Duodopa® are considered a core part of the armamentarium towards PD-LID is a testimony to the debilitating nature of PD-LID and the significant unmet medical need that exists for well-tolerated oral therapeutics to treat this condition.

Rationale for the use of MLR-1019 as a treatment for PD-LID

The Company is developing MLR-1019, a highly selective dopamine re-uptake inhibitor, for treating PD-LID. As mentioned previously, dopamine-promoting agents may be effective in treating the dyskinesias associated with chronic L-DOPA treatment in PD patients. MLR-1019 prolongs dopamine activity by blocking dopamine re-uptake through the dopamine transporter (DAT) and in this way MLR-1019 maintains dopamine levels between L-DOPA doses and also stabilizes high flux synaptic dopamine associated with the pulsatile delivery of L-DOPA. Thus, MLR-1019 maintains dopamine “tone” by stabilizing dopamine levels and activity, and thereby dopamine receptor levels and activity, effectively maintaining dopamine homeostasis and reducing dyskinesias (see Figure 1). The remarkable attribute of MLR-1019 is that, it is the only DAT inhibitor that has no pharmacologically relevant activity for the inhibition of other catecholamine transporters (norepinephrine transporter [NET] or serotonin transporter [SERT]), which may be a critical feature for the purpose of PD-LID therapy.

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Figure 1: Mechanism of action for MLR-1019

 

The Importance of selective DAT inhibition

MLR-1019 is the most highly selective dopamine reuptake transporter (DAT) inhibitor that has been described in the scientific literature. It exhibits high selectivity for DAT versus the norepinephrine reuptake transporter (NET) (176-fold; 10-fold higher selectivity that the next most selective DAT inhibitor described) and 1,200- fold selectivity for DAT versus the serotonin reuptake transporter (SERT) (20-fold greater than the next most selective DAT inhibitor. In fact, the ki values for NET and SERT binding by MLR-1019 are high enough that there should effectively be no amount of NET or SERT inhibition by MLR-1019 at the doses typically administered in vivo. In this respect MLR-1019 is the only DAT inhibitor that does not possess physiologically relevant levels of NET or SERT inhibition.

A growing body of literature indicates that inhibition of other catecholamine transporters, especially NET, exacerbate or even induce dyskinesias. In this way, all DAT inhibitors, other than MLR-1019, presumably have opposing effects towards therapeutic effect on PD-LID; on the one hand providing benefit vis-à-vis DAT inhibition and mitigating dopamine flux as discussed above, but on the other hand exacerbating dyskinesias vis-à-vis NET and possibly SERT inhibition. This recently developed understanding for the role of NET and SERT towards dyskinesia can explain the disappointing results that have been observed with a number of DAT inhibitors evaluated in PD clinical trials. These results also strongly predict that MLR-1019 will be differentiated from all other DAT inhibitors in the context of PD therapy.

Patent protection

MLR-1019 is protected by a total of 21 issued patents, 2 allowed patent applications, and 4 pending patent applications in the following territories: United States, Australia, Brazil, Canada, China, Eurasia, Europe, France, Germany, Great Britain, Ireland, Luxemburg, Monaco, Switzerland, Hong Kong, Israel, Japan, Mexico, New Zealand, Singapore, South Africa, and South Korea. Patent expiry is 2034.

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Accelerated development pathway for MLR-1019

MLR-1019 is the active moiety of mesocarb, a product that was marketed in Russian and Eastern Europe for indications unrelated to PD for 37 years. The drug has strong safety and tolerability profiles following use in >1 million patients across a wide dosing range. In pre-clinical studies, MLR-1019 demonstrates robust attenuation of L-DOPA induced dyskinesia (PD-LID) and potentiates the anti-Parkinsonian activity of L-DOPA. In addition, MLR-1019 stabilizes the disrupted sleep/wake cycles commonly associated with PD.

Manufacturing of MLR-1019 is underway in preparation for a Phase 2 multi-center clinical trial in 60 PD patients with L-DOPA induced dyskinesias, with the potential to initiate a Phase 3 clinical trial within 24 months.

MLR-1023 in diabetes

MLR-1023 was originally developed by Pfizer and previously in clinical development for the treatment of Familial Adenomatous Polyposis (“FAP”),gastric ulcers in the 1970s. Pfizer discontinued development of the drug, due to lack of efficacy (vs safety issues) for which we have received both Orphan Drug Designation (“ODD”) and Fast Track Designation (“FTD”) from the U.S. Food and Drug Administration (“FDA”), and preclinical programsprimary indication (healing of gastric ulcers) in a phase 2 clinical trial.

The Company is developing MLR-1023 (tolimidone) for the treatment of Type 1 diabetes with additional potential indications for nonalcoholic steatohepatitis (NASH), and the prevention of pulmonary edema.

Type 1 and type 2 diabetes both occur when the body cannot properly store and use glucose, which is essential for energy. This glucose then collects in the blood and does not reach the cells that need it, leading to serious complications. Type 1 myotonic dystrophy (“DM1”) and Duchenne muscular dystrophy (“DMD”)Type 2 diabetes are similar insofar as both share (similar) symptoms, including excessive thirst, increased urination, increased infections, fatigue, weight loss, and blurred vision. However, there are often differences in how rapidly symptoms first appear. Type 1 diabetes (T1D) usually appears first in children and adolescents, but it can also occur in adults. In T1D, the immune system attacks pancreatic beta cells so that they can no longer produce insulin. Around 5-10% of people with diabetes have Type 1. T1D seems to have a genetic component and can be diagnosed early in life but also in adulthood. Its causes are not fully known, and there is currently no cure. People with T1D are dependent on injected or pumped insulin to survive.

Type 2 diabetes is more likely to appear as people age, but children may still develop it. In this type, the pancreas produces insulin, but the body cannot use it effectively. Lifestyle factors appear to play a role in its development. The majority of people with diabetes have Type 2, although some 1.7 million people are living with Type 1.

Initially evaluated for the treatment of Type 2 diabetes, MLR-1023 is pharmacologically and structurally different from metformin and sulfonylureas, drugs routinely used in clinical practice for the management of Type 2 diabetes and lowers blood glucose through a unique mechanism of action as a potent and selective inhibitor of lyn kinase (Lyn). We will need additional capitalLyn is a member of the Src family of protein tyrosine kinases, which is mainly expressed in orderhematopoietic cells, in neural tissues liver, and adipose tissue. MLR-1023 also demonstrates glycemic control via insulin sensitization in animal models of Type 2 diabetes. MLR-1023 does not affect PPARα, β, or γ-mediated transactivation, GLP-1-mediated insulin release, or DDP-IV activity. In studies conducted in in vivo models of Type 2 diabetes, MLR-1023 decreased blood glucose levels in mouse and rat oral glucose tolerance tests, in db/db mice and Zucker rats. Blood glucose lowering was produced with both acute and chronic dosing regimens. In addition, MLR-1023 produced efficacy with acute oral administration. In combination studies, MLR-1023 was additive with metformin in lowering blood glucose and blocked rosiglitazone-mediated weight gain in chronic dosing studies.

MLR-1023 and T1D

Most recently MLR-1023’s potential utility in T1D has been demonstrated by several studies including those conducted independently (of Adhera) at the University of Alberta, where Professor Jean Buteau confirmed lyn kinase (see also above) as a key factor for beta cell survival and proliferation. Importantly, MLR-1023 was able to execute on our strategyinduce proliferation in beta cells isolated from human cadavers and subsequent studies (at the University of Alberta) have demonstrated that the administration of MLR-1023 was able to initiate the registration trialinduce a “cure” for T1D in animal models. From a mechanism of action perspective, MLR-1023 has been shown to both preserve beta cell degradation and to commercialize CEQ508, and to filestimulate beta cell proliferation.

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Accelerated development pathway for MLR-1023 in T1D

Commensurate with Adhera’s accelerated drug development strategy, The FDA has granted an Investigational New Drug (“IND”) applicationsApplication (IND) for both DM1 and DMD anda Phase 2 study designed to bring these two programsevaluate the efficacy of MLR-1023 in adult T1D patients. It is anticipated that this clinical trial can be completed in 6 months paving the way to human proof-of-concept. We are currently pursuing both non-dilutive meansthe initiation of obtaining such capital, primarily from existing and potential future licenses and partnerships, and dilutive means of obtaining such capital, primarily through the offering of our equity and debt securities.a pivotal phase 3 clinical trial in less than 24 months.

Since 2010, we have strategically acquired/in-licensed and further developed nucleic acid chemistry and delivery-related technologies in order to establish a novel and differentiated drug discovery platform. This platform allows us to distinguish ourselves from othersRationale for MLR-1023 in the nucleic acid therapeutics areatreatment of nonalcoholic steatohepatitis (NASH), and the prevention of pulmonary edema

Extensive preclinical data is highly supportive of the development of MLR-1023 for NASH and also the prevention of pulmonary edema. MLR-1023 reduced fibrosis in a CCl4 liver fibrosis model and reduced several symptoms of NASH in a modified high fat diet mouse model of NASH as well as in a NASH model involving modified high fat diet model with chronic low dose CCl4. When administered prophylactically, once per day (q.d.) for 7 days, MLR-1023 significantly mitigated the development of pulmonary edema in mice challenged with an inflammatory insult that we aremodeled sepsis.

Patent Protection

MLR-1023 is protected by a total of 50 issued patents, 3 allowed patent applications, and 20 pending patent applications in the only company capable of creatingfollowing territories: United States, Australia, Brazil, Canada, China, Europe, France, Germany, Great Britain, Ireland, Luxemburg, Monaco, Switzerland, Hong Kong, Israel, Japan, Mexico, New Zealand, Russia, Singapore, South Africa, and South Korea. Patent expiries range between 2026 and 2038 (with patent term adjustments).

As described below, the Company was previously a wide variety of therapeutics targeting codingcommercially focused entity that leveraged innovative distribution models and non-coding RNA via multiple mechanisms of action such as RNA interference (“RNAi”), messenger RNA translational inhibition, exon skipping, microRNA (“miRNA”) replacement, miRNA inhibition, and steric blocking in order to modulate gene expression either up or down depending on the specific mechanism of action. Our goal istechnologies to improve the livesquality of care for patients in the patientsUnited States suffering from chronic and families affected by orphanacute diseases through either our own efforts or those of our collaborators and licensees.

The breadth of our discovery platform allows us to pursuewith a focus on licensed fixed dose combination therapies for hypertension. On January 4, 2021, the most appropriate nucleic acid-based therapeutic approach, which is necessary to effectively modulate targetslicensor terminated the licensing agreement for the product candidate. As a specific disease indication, manyresult, we were left with several license agreements, none of which we are considered undruggable by traditional methodologies. Each approach, i.e. small interfering RNA (“siRNA”), miRNA or single-strand oligonucleotide, has its advantagesexploiting.

On July 28, 2021, we as licensee and disadvantages, and we can screen across multiple mechanisms of action to identify the most effective therapeutic. We believe this capability makes us unique amongst our peers. Currently, we employ our platform through our own efforts and those of our partners and licensees, to discover and develop multiple nucleic acid-based therapeutics including siRNA, miRNA mimics and single stranded oligonucleotide-based compounds. Our pipeline is orphan disease focused and includes a clinical program in FAP and preclinical programs in DM1 and DMD. Our licensees, ProNAi Therapeutics, Inc. (“ProNAi”), Mirna Therapeutics, Inc. (“Mirna”) and MiNA Therapeutics, Ltd. (“MiNA”), are focused on oncology and have clinical programs in recurrent or refractory non-Hodgkin’s lymphoma and unresectable primary liver cancer or solid cancers with liver involvement. We hope to continue to establish similar license agreements with additional biotechnology companies as well as larger therapeutic area-focused collaborative and strategic alliances with pharmaceutical companies.

We have entered into multiple licenses for our technology. The following agreements continue to provide upside opportunity for our company in the form of milestones and/or royalties:

·Mirna– In December 2011, weMP2 entered into an exclusive license agreement with Mirna, a privately-held biotechnology company pioneering miRNA replacement therapy for cancer, regarding the development and commercialization of miRNA-based therapeutics utilizing Mirna’s proprietary miRNAs and our novel SMARTICLES®-based liposomal delivery technology (“SMARTICLES”). In December 2013 and May 2015, we amended this agreement such that Mirna paid certain pre-payments to us and now has additional rights to its lead program, MRX34, currently in Phase 1 clinical development. In addition, Mirna optioned exclusivity on several additional miRNA targets. We could receive up to an additional $44 million in clinical and commercialization milestone payments, as well as royalties in the low single digit percentages on sales, based on the successful development of Mirna’s product candidates.

·ProNAi– In March 2012, we entered into an exclusive license agreement with ProNAi, a privately-held biotechnology company pioneering DNA interference (“DNAi”) therapies for cancer, regarding the development and commercialization of DNAi-based therapeutics utilizing SMARTICLES. We could receive up to $14 million for each gene target in total upfront, clinical and commercialization milestone payments, as well as royalties in the single digit percentages on sales, with ProNAi having the option to select any number of additional gene targets. For example, if ProNAi licenses five products over time under the license agreement, we could receive up to $70 million in total milestones, plus royalties.

·Monsanto Company – In May 2012, we entered into a worldwide exclusive license agreement with Monsanto Company (“Monsanto”), a global leader in agriculture and crop sciences, covering the agricultural applications for our delivery and chemistry technologies. We could receive royalties on product sales in the low single digit

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percentages based on the successful development of Monsanto’s product candidates.

·Avecia Nitto Denko – In May 2012, we entered into a strategic alliance with Girindus Group, now Avecia Nitto Denko (“Avecia”), a leader in process development, analytical method development and current good manufacturing practices (“cGMP”) manufacture of oligonucleotide therapeutics, regarding the development, supply and commercialization of certain oligonucleotide constructs using our conformationally restricted nucleotide (“CRN”) technology. We could receive single digit percentage royalties on the sales of research reagents utilizing our CRN technology.

·Rosetta Genomics – In April 2014, we entered into a strategic alliance with Rosetta Genomics, Ltd. (“Rosetta”) to identify and develop miRNA-based products designed to diagnose and treat various neuromuscular diseases and dystrophies. Under the terms of the alliance, Rosetta will apply its industry leading miRNA discovery expertise for the identification of miRNAs involved in the various dystrophy diseases. If the miRNA is determined to be correlative to the disease, Rosetta may further develop the miRNA into a diagnostic for patient identification and stratification. If the miRNA is determined to be involved in the disease pathology and represents a potential therapeutic target, we may develop the resulting miRNA-based therapeutic for clinical development. The alliance is exclusive as it relates to neuromuscular diseases and dystrophies, with both companies free to develop and collaborate outside this field both during and after the terms of the alliance.

·MiNA– In December 2014, we entered into a license agreement with MiNA regarding the development and commercialization of small activating RNA based therapeutics utilizing SMARTICLES. We received an upfront fee of $0.5 million in January 2015. We could receive up to an additional $49 million in clinical and commercialization milestone payments, as well as royalties on sales, based on the successful development of MiNA’s product candidates.

Our business strategy to discover and develop our own pipeline of nucleic acid-based compounds in order to commercialize drug therapies to treat orphan diseases. Orphan diseases are broadly defined as those rare disorders that typically affect no more than one person out of every 1,500 people. The United States Orphan Drug Act of 1983 was created to promote the development of new drug therapies for the treatment of diseases that affect fewer than 200,000 individuals in the United States. Specifically, an orphan disease is a disease for which a regulatory agency, i.e. the FDA or European Medicines Agency (“EMA”), can grant ODD to a compound being developed to treat that particular disease. In other words, if the FDA will grant ODD for a compound being developed to treat a disease, then that disease is an orphan disease. The purpose of such designations is to incentivize pharmaceutical and biotechnology companies to develop drugs to treat smaller patient populations. In the U.S., ODD entitles a company to seven years of marketing exclusivity for its drug upon regulatory approval. In addition, ODD permits a company to apply for: (1) grant funding from the U.S. government to defray costs of clinical trial expenses, (2) tax credits for clinical research expenses and (3) exemption from the FDA's prescription drug application fee. Over the past several years, there has been a surge in rare disease activity due in part to the efforts of advocacy groups, the media, legislation and large pharmaceutical interest. Yet, orphan diseases continue to represent a significant unmet medical need with fewer than 500 drug approvals for over 7,500 rare diseases; clearly demonstrating the necessity for innovation in the development of therapeutics to treat orphan diseases. Our lead effort is the clinical development of CEQ508 to treat FAP, a rare disease for which CEQ508 received FDA ODD in 2010 and FTD in 2015. FTD is a process designed by the FDA to facilitate the development, and expedite the review, of new drugs that treat serious conditions and fill an unmet medical need. Drugs that receive FTD are eligible for more frequent communication with the FDA and may receive Accelerated Approval and Priority Review. Currently, there is no approved therapeutic for the treatment of FAP. In April 2012, we announced the completion of dosing for Cohort 2 in the Dose Escalation Phase of the START-FAP (Safety and Tolerability of an RNAi Therapeutic in FAP) Phase 1b/2a clinical trial. Based on our financial situation and the stability of existing clinical trial material, we have decided to take advantage of this break in the clinical program to optimize the manufacturing process and produce new clinical trial material. With the support of a development and/or marketing partner, or the receipt of sufficient direct funding, we expect to initiate Cohort 3 in 2016. In addition, with sufficient funding, we expect to advance pre-clinical programs in DM1 and DMD through to human proof-of-concept.

We also seek to establish collaborations and strategic partnerships with pharmaceutical and biotechnology companies to generate revenue through up-front, milestone and royalty payments related to our technology and/or the products that are developed using such technology. Our near-term focus is to establish such collaborations and partnerships in order to generate sufficient funding to advance our pipeline.

In order to protect our innovations, which encompass a broad platform of both nucleic acid-based therapeutic chemistry and delivery technologies, as well as the drug products that may emerge from that platform, we have aggressively built upon our extensive and enabling intellectual property (“IP”) estate worldwide, and plan to continue to do so. As of December 31, 2014, we owned or controlled 148 issued or allowed patents, and approximately 95 pending U.S. and foreign patent applications, to protect our proprietary nucleic acid-based drug discovery capabilities.

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We believe we have created a unique industry-leading nucleic acid-based drug discovery platform, which is protected by a strong IP position and validated through: (1) licensing agreements for our SMARTICLES delivery technology with Mirna, ProNAi and MiNA for unique nucleic acid payloads – microRNA mimics, DNA interference oligonucleotides and small-activating RNA, respectively; (2) Mirna and ProNAi’s respective clinical experience with SMARTICLES; (3) a licensing agreement with Novartis Institutes for Biomedical Research, Inc. (“Novartis”) for our CRN technology; (4) a licensing agreement with Protiva Biotherapeutics, Inc. (“Tekmira”), a wholly-owned subsidiary of Tekmira Pharmaceuticals Corporation, for our Unlocked Nucleobase Analog (“UNA”) technology; (5) licensing agreements with two large international companies (i.e., Novartis and Monsanto) for certain chemistry and delivery technologies; and (6) our own FAP Phase 1b/2a clinical trial with theTransKingdom RNA™ interference (“tkRNAi”) platform.

Liquidity

We have sustained recurring losses and negative cash flows from operations. At June 30, 2015, we had an accumulated deficit of approximately $336.5 million ($110.4 million of which has been accumulated since we focused on RNA therapeutics in June 2008), negative working capital surplus of $1.27 million and $0.73 million in cash. We have been funded through a combination of licensing payments and debt and equity offerings. As a result of our financial condition, during the period between June 2012 and March 2014, substantially all of our research and development (“R&D”) activities were placed on hold, we exited all of our leased facilities, and all of our employees, other than our chief executive officer (“CEO”), either resigned or were terminated.

We have experienced and continue to experience operating losses and negative cash flows from operations, as well as an ongoing requirement for substantial additional capital investments. We believe that our current cash resources, which include the proceeds received from the sale of Series D Stock in August 2015, will enable us to fund our intended limited operations through March 2016.

The volatility in our stock price, as well as market conditions in general, could make it difficult for us to raise capital on favorable terms, or at all. If we fail to obtain additional capital when required, we may have to modify, delay or abandon some or all of our planned activities, or terminate our operations. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements included in this prospectus do not include any adjustments that may result from the outcome of this uncertainty. We are currently pursuing both non-dilutive means of obtaining additional capital, primarily from existing and potential future licenses and partnerships, and dilutive means of obtaining additional capital, primarily through the offering of our equity and debt securities. However, there can be no assurance that we will be successful in such endeavors.

Current Operations

With the advancement of a clinical pipeline focused on orphan diseases, we expect to build our operations with limited internal resources by capitalizing on external consultants and contract research organizations. To date, we have engaged consultants with the necessary clinical trial, finance, medical, regulatory, and technical expertise to restart our FAP clinical trial and advance our preclinical efforts. Internal research activities and laboratory spending will be limited to supporting the FAP, DM1 and DMD clinical and pre-clinical efforts. Expansion of the research team will be based on requirements that are driven by the establishment of collaboration and strategic partnerships with pharmaceutical and biotechnology companies.

Nucleic Acid-Based Therapeutics

Overview

Nucleic acid-based therapeutics typically target two types of RNA – coding RNA and non-coding RNA. The targeting of coding RNA is usually associated with inhibition, or the down-regulation, of a specific mRNA via RNAi or mRNA translational inhibition, i.e. a single therapeutic inhibiting the protein expression of a single gene. The targeting of non-coding RNA is usually associated with the modulation (up or down) of a regulatory RNA via miRNA replacement therapy or miRNA inhibition, i.e. a single therapeutic repressing/de-repressing the expression of multiple genes (and thus proteins). The Nobel Prize winning discovery of RNAi in 1998 led not only to its widespread use in the research of biological mechanisms and target validation but also to its application in down-regulating the expression of disease-causing proteins. In this case, the RNAi-based therapeutic, typically a double-stranded siRNA, acts through a naturally occurring process within cells that has the effect of reducing levels of mRNA required for the production of proteins. RNAi enables the targeting of disease at a genetic level and thus is highly specific to particular disease-causing proteins. Like RNAi-based therapeutics, certain single stranded anti-sense oligonucleotides (“ASO”) can also interact with mRNA by inhibiting translation (commonly referred to as mRNA translational inhibition) and likewise are highly specific to a disease-causing protein. On the other hand, miRNAs are small non-coding RNAs that are important in both gene regulation and protein translation. miRNAs exert their biological effect upstream of the RNAi pathway and can ultimately influence the RNAi process. Similar to a siRNA or ASO, a miRNA mimic, which increases the level of a miRNA in the cell, can inhibit protein expression. However, unlike a siRNA or

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translational inhibitor that targets just one gene, a miRNA mimic can simultaneously repress the expression of multiple proteins associated with the genes controlled by that miRNA target. miRNA antagonists (or antagomirs), which bind to the natural miRNA in the cell and prevents the activity of that miRNA, can allow the simultaneous “de-represssion” of multiple proteins associated with the genes under control of a single miRNA target. The term de-repression is used to describe the biological process, i.e. the binding of a naturally occurring miRNA by an antagomir causes the miRNA to forego its normal activity in repressing/inhibiting protein expression. In other words, the antagomir removes the brakes a miRNA applies to protein expression resulting in increased protein expression. The overall result of an antagomir and miRNA inhibition is an increase in protein expression downstream of the target miRNA. This type of nucleic acid-based therapeutic sets itself apart not only from other nucleic acid-based therapeutics (i.e. siRNA, ASO mRNA translational inhibitors and miRNA mimics), but also from the majority of small molecules and monoclonal antibodies in that it is one of the few mechanisms of action that can cause an increase in protein expression. In summary, nucleic acid-based therapeutics target genes to either prevent the expression of disease causing proteins or to increase protein expression where the absence of the protein contributes to a disease state.

Although nucleic acid-based therapeutics are being developed for a number of diseases in therapeutic areas including cardiovascular, inflammation, and oncology, perhaps the greatest single opportunity for such therapeutics is in orphan diseases. Nucleic acid-based therapeutics are being advanced in indications characterized by “undruggable” targets; that is targets that cannot be modulated by small molecule or monoclonal antibodies. Therapeutic targets to treat rare and orphan diseases are typically “undruggable” targets. Within the biotechnology and pharmaceutical sectors, nucleic acid-based therapeutics are being developed for over a dozen rare and orphan diseases including: Alport Syndrome, Amyotrophic Lateral Sclerosis, Cystic Fibrosis, Duchenne Muscular Dystrophy, Friedreich’s Ataxia, Hemophilia, Hepatic Porphyrias, Hereditary Angioedema, Homozygous Familial Hypercholesterolemia, Huntington’s Disease, Primary Hyperoxaluria (Type I), Myotonic Dystrophy (Type 1), Sickle Cell Disease, Spinal Muscular Atrophy and Transthyretin Familial Amyloid Polyneuropathy. Various nucleic acid-based compounds are in either preclinical or clinical development for the above diseases and include both single- and double-stranded constructs such as: siRNA, miRNA mimics, antagomirs, and ASO utilizing various mechanisms of action such as: RNAi, mRNA translational inhibition, exon skipping, miRNA replacement, miRNA inhibition, and steric blocking. We believe a company that has the capability to develop both single- and double-stranded constructs with sufficient breadth of delivery technologies to get those constructs to the proper cellular targets can capitalize on the specific strength of various nucleic acid mechanisms of action thus creating the greatest chance for clinical success. We believe this multi-faceted approach is particularly applicable for rare and orphan disease indications. Such a capability has the possibility to significantly reduce the risks of failure associated with: (1) off-the-shelf chemistry and/or delivery, (2) one-off proprietary chemistry and/or delivery technologies or (3) mechanism of action.

In 2010, we executed on a strategy to consolidate key intellectual property and technologies necessary to create a broad nucleic acid drug discovery platform with the capability to develop both single- and double-stranded constructs and to deliver those constructs to the proper cellular targets. Besides a key chemistry – CRN – which provides us the freedom to develop single-stranded constructs, we acquired two additional delivery technologies providing us: (1) an ability to deliver oligonucleotides via oral administration to treat gastro-intestinal disorders and (2) a significant expansion of our lipid-based delivery capability. With these acquisitions and the further development and advancement of those technologies from 2010 to the present, we feel we have established the broadest nucleic acid drug discovery platform in the sector and validated that platform through the following partnerships and licensing transactions: (1) ProNAi licensing SMARTICLES for systemic administration of a DNAi oligonucleotide to treat recurrent and relapsed non-Hodgkin’s Lymphoma – currently in Phase 2 human testing; (2) Mirna licensing SMARTICLES for systemic administration of a miRNA mimic to treat unresectable primary liver cancer or solid cancers with liver involvement – currently in Phase 1 human testing; (3) Novartis licensing our CRN technology in connection with the development of both single and double-stranded oligonucleotide therapeutics; (4) Tekmira licensing our UNA technology in connection with the development of siRNAs utilizing RNAi for the down-regulation of gene expression; (5) Monsanto licensing certain of our delivery and chemistry technologies for agricultural applications; and (6) MiNA licensing SMARTICLES for systemic administration of a small activating RNA to treat unresectable primary liver cancer or solid cancers with liver involvement and liver diseases. Further, between the clinical programs of ProNAi and Mirna with SMARTICLES and our own clinical program using thetkRNAi technology, we believe we are the only company in the space whose delivery technologies are being used, in human clinical trials, to deliver three different types of nucleic acid compounds via two modes of administration: (1) oral administration of a double-stranded shRNA; (2) systemic administration of a double-stranded miRNA mimic and (3) systemic administration of a single-stranded DNA decoy. We believe every other company’s technologies, in clinical development, are limited to a single mode of administration (only intravenous, intramuscular and sub-cutaneous) and a single nucleic acid payload.

Together with our existing and potential future partners, we intend to continue to build our understanding of the unique chemistry and delivery technologies we have assembled in order to effectively develop novel nucleic acid-based therapeutics for the treatment of human disease while minimizing the risk of failure. We will focus our development efforts toward certain orphan disease indications and collaborate with both biotechnology and pharmaceutical companies in the development of other orphan and non-orphan diseases.

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Nucleic Acid-Based Drug Discovery Platform

Through the advancement of our FAP clinical program and pre-clinical programs in DM1 and DMD, we plan to continue to make improvements in both areas crucial to the development of nucleic acid-based therapeutics: constructs and delivery technologies. Although each area is equally important to the development of an effective therapeutic, the scientific challenges of delivery are one of the most significant obstacles to the broad use of nucleic acid-based therapeutics in the treatment of human disease including orphan diseases.

UsiRNA Constructs. Our UsiRNAs, which are siRNA with substitution of UNA bases in place of RNA bases in key regions of the double-stranded construct, have shown important advantages in terms of efficacy and safety, when compared to standard siRNA molecules and modifications. UsiRNAs are highly active in rodent-based disease models, non-disease rodent models, and non-human primates. UsiRNAs function via RNAi to cut the targeted mRNA into two pieces in such a manner that the target mRNA can no longer function and thereby decreasing the production of the protein associated with the gene target. In the case of bladder cancer, liver cancer and malignant ascites, the UsiRNAs decrease tumor growth in the respective rodent disease model. UsiRNAs have demonstrated a lower potential for cytokine induction and provide resistance to nuclease degradation, two effects that are often prominent with standard siRNAs. Most importantly, substitution with UNA at specific sites greatly increases the specificity for RNAi and improves their profile for therapeutic use. Substitution in the passenger strand can eliminate the ability of this strand to act in the RNAi pathway and, thereby, the potential for unwanted effects on other targets or competition with guide strand activity by loading into the intracellular RNAi machinery. Substitution of UNA within the guide strand can eliminate miRNA-like effects that occur with standard siRNA. This miRNA-like off-target activity cannot often be addressed by bioinformatics and can result in severe loss of activity if addressed with standard chemical modification of RNA. Overall these data indicate that not only do UsiRNAs maintain potent RNAi activity, they may also have superior drug like properties, through a combination of greater target specificity, improved safety and lower total dosing, when compared to typical siRNA-based compounds resulting in more effective protein down-regulation.

Conformationally Restricted Nucleotides (CRN). CRNs are novel nucleotide analogs in which the flexible ribose sugar is locked into a rigid conformation by a small chemical linker. By restricting the flexibility of the ribose ring, CRNs can impart a helix-type structure typically found in naturally occurring RNA. For single stranded oligonucleotide therapeutics, the impact of CRN substitution dramatically increases the therapeutics’ affinity for the target mRNA or miRNA while imparting significant resistance to nuclease degradation. Additionally, CRNs can significantly improve the thermal stability of double-stranded constructs, such as siRNAs. We reportedin vivo dose-dependent efficacy with a CRN-substituted antagomir against miRNA-122 (“miR-122”). The efficacy in a rodent model was demonstrated by up to a 5-fold increase in AldoA, a well-known downstream gene regulated by miR-122. In addition, downstream targets GYSI and SLC7A1 were also elevated. The increase in these downstream gene targets was achieved by the sequestration of miR-122 by a high affinity CRN-substituted antagomir. In addition, the CRN-substituted antagomir, which was dosed for three consecutive days at up to 50 mg/kg/day, was extremely well tolerated in rodents as evidenced by normal serum chemistry parameters and no body weight changes. CRNs are critical to our ability to develop single-stranded oligonucleotides.

Delivery. We have two liposomal-based delivery platforms. The first platform, SMARTICLES, defines a novel class of liposomes that are fully charge-reversible particles allowing delivery of active substance (siRNA, single-stranded oligonucleotides, etc.) inside a cell either by local or systemic administration. SMARTICLES-based liposomes are designed to ensure stable passage through the bloodstream and the release of nucleic acid payloads within the target cell where they can exert their therapeutic effect by engaging either the RNAi pathway or directly with mRNA. To date, SMARTICLES-delivered nucleic acid drug candidates, which have been administered to approximately 100 patients, have demonstrated: (1) delivery to tumor in Phase 1 and 2 clinical trials; (2) statistically significant, dose-dependent, and specific knockdown of a gene target in a Phase 1 clinical trial; (3) single agent anti-tumor activity in patients with recurrent or refractory non-Hodgkin’s lymphoma (NHL) in a Phase 2 clinical trial; and (4) anti-tumor efficacy with both single- and double-stranded oligonucleotides in rodent models.

ProNAi’s clinical compound, PNT2258, is a first-in-class, 24-base, single-stranded, chemically-unmodified DNA oligonucleotide drug targeting BCL2. PNT2258 exhibits single agent anti-tumor activity in patients with recurrent or refractory NHL. Eighty-two percent of patients had tumor shrinkage when receiving single-agent therapy with PNT2258. To date, overall response rate in patients with follicular lymphoma is 40 percent and in patients with diffuse large B-cell lymphoma overall response is 50 percent. PNT2258 is safe at a dose of 120 mg/m2 administered intravenously for 2 to 3 hours on days 1 through 5 of a 21-day schedule. No tumor lysis syndrome or major organ toxicities were observed. No occurrences of elevated liver enzymes, hyperkalemia, hyperphosphatemia, hypocalcemia, renal failure/dysfunction, or infections were noted nor were any Grade 4 toxicities. PNT2258 drug exposure levels (AUC) exceeded by at least four-fold that required for anti-tumor activity in xenograft studies of human tumors, consistent with the Phase 1 trial.In addition, as reported at the Annual Meeting of the American Society of Hematology in December 2014, investigators for the study concluded that: (1) PNT2258 treatment results in significant, durable responses in patients with relapsed or refractory non-Hodgkin’s Lymphoma (r/r NHL); (2) eleven of the thirteen (11/13) patients treated achieved clinical benefit, with ongoing Progression Free Survival (PFS) extending to 18 months and beyond; (3) PNT2258 is demonstrably active in patients with diffuse large B-cell lymphoma (DLBCL) – all four of the patients (4/4) with DLBCL responded to PNT2258, with three patients achieving complete responses (CR) and one patient achieving a partial response (PR), with durations extending to greater than 500 days; (4)

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durable and clinically meaningful CR’s and PR’s were achieved in subjects with aggressive disease, such as Richter’s transformation and Burkitt’s-like DLBCL; (5) noteworthy durable CR’s and PR’s were also observed in subjects with advanced stage follicular lymphoma (FL); and (6) PNT2258 therapy is safe and very well-tolerated with dosing periods up to and exceeding 18 months. In January 2015, ProNAi reported that the first patient with relapsed or refractory diffuse large B-cell lymphoma had enrolled in the “Wolverine” Phase 2 study and had been treated with PNT2258.

Mirna’s clinical compound, MRX34, is a double-stranded miRNA “mimic” of the naturally occurring tumor suppressor miR-34, which inhibits cell cycle progression and induces cancer cell death. The Phase 1 MRX34 study, for the treatment of patients with unresectable primary liver cancer or solid cancers with liver involvement, is designed with an initial dose-escalation phase of approximately 30 patients, followed by an expansion phase of approximately 18 additional patients after the recommended Phase 2 dose has been identified. MRX34 is administered intravenously twice a week for three weeks with one week off, during 28-day cycles, until disease progression or intolerance. Interim safety data from the multicenter, open-label Phase 1 clinical trial of MRX34 showed that MRX34 has a manageable safety profile with only one incident of a dose-limiting toxicity observed to date.In addition, as reported at the European Organisation for Research and Treatment of Cancer in November 2014, data show that MRX34 has a manageable safety profile in patients with advanced primary liver cancer (hepatocellular carcinoma), other solid tumors with liver metastasis, and hematological malignancies. At the 2015 Annual Meeting of the American Association for Cancer Research in April 2015, Mirna reported that a molecular analysis of white blood cells from patients treated with MRX34 showed a dose dependent repression of several key oncogenes previously identified as direct miR-34 targets including FOXP1, BCL2, HDAC1 and CTNNB1. These data suggest delivery of miR-34 into human white blood cells and engagement of several biological targets of miR-34. A maximum tolerated dose (MTD) was established at 110mg/m2 for MRX34 administered twice weekly for three weeks followed by one week off. While this Phase 1 study is intended to investigate safety, tolerability, pharmacokinetics, and dosing regimens, treatment with MRX34 has provided early signals of clinical activity in advanced cancer patients with primary liver, neuroendocrine, colorectal and small cell lung cancers, as well as diffuse large B-cell lymphoma.

We believe the combined clinical delivery experiences of ProNAi and Mirna are impressive and that SMARTICLES is a potential product differentiator in the further development of our orphan disease clinical pipeline.

The second platform utilizes amino-based liposomal delivery technology and incorporates a novel and proprietary molecule we call DiLA2 (Di-Alkylated Amino Acid). Our scientists designed this molecule based on amino acid (e.g., peptide/protein-based) chemistry. A DiLA2-based liposome has several potential advantages over other liposomes, such as: (1) a structure that may enable safe and natural metabolism by the body; (2) the ability to adjust liposome size, shape, and circulation time, to influence bio-distribution; and (3) the ability to attach molecules that can influence other delivery-related attributes such as cell specific targeting and cellular uptake. Our formulations for delivery of UsiRNAs, using different members of the DiLA2 family, have demonstrated safe and effective delivery in rodents with metabolic targets (e.g., ApoB) and in cancer models using both local and systemic routes of administration. Safe and effective delivery with DiLA2-based formulations has also been achieved in non-human primates.

In addition to our liposomal-based delivery platforms, we have used peptides for both the formation of stable siRNA nanoparticles as well as targeting moieties for siRNA molecules. This research has included: (1) the use of peptide technology to “condense” siRNAs into compact and potent nanoparticles; (2) screening of our proprietary Trp Cage phage display library for targeting peptides; and (3) internal discovery and development of peptides and other compounds recognized as having cellular targeting or cellular uptake properties. The goal in the use of such technologies is to minimize the amount of final drug required to produce therapeutic response by increasing the potency of the drug product as well as by directing more of the final drug product to the intended site of action.

TransKingdom RNA™ interference (tkRNAi) platform.tkRNAi is a broad-reaching platform that can be used to develop highly specific drug products for a diverse set of diseases. ThetkRNAi platform involves the modification of bacteria to deliver short-hairpin RNA (“shRNA”) to cells of the gastrointestinal tract. A significant advantage of thetkRNAi platform is oral (by mouth) delivery making this platform extremely patient friendly while harnessing the full potential of the RNAi process. ThetkRNAi platform has demonstratedin vivo mRNA down-regulation of both inflammatory and cancer targets, thus providing a unique opportunity to develop RNAi-based therapeutics against inflammation and oncology diseases such as Crohn’s Disease, ulcerative colitis and colon cancer. For our own clinical pipeline, we have used thetkRNAi platform to discover and develop CEQ508 for the treatment of FAP.

Clinical Program. CEQ508 is being developed for the treatment of FAP, a hereditary condition that occurs in approximately 1:10,000 persons worldwide. FAP is caused by mutations in the adenomatous polyposis coli gene. As a result of these mutations, epithelial cells lining the intestinal tract have increased levels of the protein ß-catenin, which in turn results in uncontrolled cell growth. Proliferation (uncontrolled cell growth) of the epithelial cells results in the formation of hundreds to thousands of non-cancerous growths (polyps) throughout the large intestine. By age 35, 95% of individuals with FAP have developed polyps and most will experience adverse effects including increased risk of bleeding and the potential for anemia. In more severe cases, obstruction of the intestines, abdominal pain, and severe bouts of diarrhea or constipation can occur. FAP patients are also at an increased risk of

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various cancers but specifically colon cancer. If measures are not taken to prevent the formation of polyps or to remove the polyps, nearly 100% of FAP patients will develop colon cancer. Currently, there is no approved therapeutic for the treatment of FAP. For many patients, complete colectomy (surgical removal of the entire large intestine), usually performed in the late teenage years or early twenties, is the only viable option for treatment. However, surgical intervention is not curative as the risk of polyps forming in the remaining portions of the intestinal tract and in the small intestine continues after colectomy. Most people with the genetic condition are in registries maintained in clinics and state institutions. Based on limited prevalence data, we believe the U.S. and European FAP patient population are each approximately 30,000 patients, with another 40,000 patients in Asia.

CEQ508 is the first drug candidate in a novel class of therapeutic agents utilizing the tkRNAi platform and the first orally administered RNAi-based therapeutic in clinical development. CEQ508 comprises attenuated bacteria that are engineered to enter into dysplastic tissue and release a payload of shRNA, a mediator in the RNAi pathway. The shRNA targets the mRNA of ß-catenin, which is known to be dysregulated in classical FAP. CEQ508 is being developed as an orally administered treatment to reduce the levels of ß-catenin protein in the epithelial cells of the small and large intestine. Upon enrollment in the Phase 1b/2a clinical trial, patients are placed in one of four dose-escalating cohorts. Following completion of the dose escalation phase, the trial plan calls for a stable-dose phase in which patients will receive the highest safe dose. Under the trial protocol, CEQ508 is administered daily in an oral suspension for 28 consecutive days. In April 2012, we announced the completion of dosing for Cohort 2 in the Dose Escalation Phase of the START-FAP (Safety and Tolerability of an RNAi Therapeutic in Familial Adenomatous Polyposis) clinical trial of CEQ508. We did not proceed with the dosing of Cohort 3 patients due to our financial situation in 2012. Based on our financial situation and the stability of existing clinical trial material, we have decided to take advantage of this break in the clinical program to optimize the manufacturing process and produce new clinical trial material. With the support of a development and/or marketing partner, or the receipt of sufficient direct funding, we expect to initiate Cohort 3 in 2016 with the Phase 2 trial starting within 18 months of the start of Cohort 3 dosing.

The FDA granted ODD and FTD to CEQ508 for the treatment of FAP. Orphan drug designation entitles us to seven years of marketing exclusivity for CEQ508 for the treatment of FAP upon regulatory approval, as well as the opportunity to apply for: (1) grant funding from the U.S. government to defray costs of clinical trial expenses, (2) tax credits for clinical research expenses and (3) exemption from the FDA's prescription drug application fee. Further, FTD will permit us to have more frequent communications with the FDA and may allow us to receive Accelerated Approval and Priority Review for CEQ508.

Pre-Clinical Programs. With the breadth of our nucleic acid-based drug discovery platform, we believe we are in a unique position to develop both single- and double-stranded clinical candidates to treat various neuromuscular disorders and dystrophies within the orphan drug space. Neuromuscular disorders affect the nerves that control voluntary muscles, such as those that control the arms and legs. Nerve cells, also called neurons, send messages that control these muscles. When the neurons become unhealthy or die, communication between the nervous system and muscles breaks down. As a result, muscles weaken and waste away. Likewise, dystrophies are progressive degenerative disorders affecting skeletal muscles. In both cases, the diseases can often affect other organ systems such as the heart and central nervous system. Many neuromuscular diseases and almost all dystrophies are genetic, which means there is a mutation in the genes which in many cases is passed from parent to child. Although a cure for these disorders may present itself in the future, the goal of our drug development effort will be to improve symptoms, increase mobility and increase the individual’s lifespan. We have chosen to pursue clinical efforts in two orphan disease indications – DM1 and DMD.

Myotonic dystrophy is one of a classification of inherited disorders named muscular dystrophies. It is the most common form of muscular dystrophy that begins in adulthood and is characterized by progressive muscle wasting and weakness. Individuals with this disorder often have prolonged muscle contractions (myotonia) and are not able to relax certain muscles after use. There are two major types of myotonic dystrophy: type 1 and type 2. Signs and symptoms overlap, although type 2 tends to be milder than type 1. Myotonic dystrophy affects at least 1:8,000 people worldwide. The prevalence of the two types of myotonic dystrophy varies among different geographic and ethnic populations. In most populations, type 1 appears to be more common than type 2.

Duchenne muscular dystrophy is a rare muscle disorder affecting approximately 1:3,500 male births worldwide. Like myotonic dystrophy, DMD is also characterized by muscle wasting and weakness starting first in the pelvic area followed by shoulder muscles. DMD is typically diagnosed between three and six years of age. As the disease progresses, muscle weakness and wasting spreads to the trunk and forearms and gradually progresses to involve additional muscles of the body. The disease is progressive and most affected individuals require a wheelchair by the teenage years. Serious life-threatening complications may ultimately develop including disease of the heart muscle and respiratory difficulties.

We believe our delivery technologies, combined with our CRN chemistry, will permit us to develop best-in-class miRNA antagonists and mimics as well as ASO targeting translational inhibition and exon-skipping ASOs targeting cytosine-uracil-guanine (CUG) repeats in affected mRNA for the treatment of DM1 and DMD. Further, our ability to work with all of these modalities is potentially critically important to the treatment of these multi-system diseases, as the disease is not limited to skeletal muscle but also affects the heart and central nervous system. While current technologies are limited by either a single-stranded or a double-stranded

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approach, we can pursue whichever nucleic acid modality most effectively treats each diseases.

Partnering and Licensing Agreements

 MiNA –On December 17, 2014, we entered into a license agreement with MiNA regarding the development and commercialization of small activating RNA based therapeutics utilizing MiNA’s proprietary oligonucleotides and our SMARTICLES nucleic acid delivery technology. MiNA will have full responsibility for the development and commercialization of anyMLR-1019. MLR-1019 is being developed as a new class of therapeutic for PD and is, to the best of our knowledge, the only drug candidate today to address both movement and non-movement aspects of PD. Under the Agreement, we were granted an exclusive license to use MP’s patents and know-how related to MLR-1019 to develop products arising under the agreement. We received an upfront fee of $0.5 million in January 2015. We could receive up to an additional $49 million in clinical and commercialization milestoneconsideration for cash payments upon meeting certain performance milestones as well as royalties on sales, based on the successful developmenta royalty of MiNA’s potential product candidates.5% of gross sales.

Rosetta –On April 1, 2014,August 24, 2021, we as licensee entered into a strategic alliancean exclusive license agreement (the “MLR-1023 Agreement”) with RosettaMelior Pharmaceuticals I, Inc., (“MP1”). In this Prospectus, we refer to identifyMP2 and develop miRNA-based products designed to diagnose and treat various neuromuscular diseases and dystrophies. Under the terms of the alliance, Rosetta will apply its industry leading miRNA discovery expertise for the identification of miRNAs involved in the various dystrophy diseases. If the miRNAMP1 as “MP” or “Melior”. This second license is determined to be correlative to the disease, Rosetta may further develop the miRNA into a diagnostic for patient identification and stratification. If the miRNA is determined to be involved in the disease pathology and represents a potential therapeutic target, Marina may develop the resulting miRNA-based therapeutic for clinical development. The alliance is exclusive as it relates to neuromuscular diseases and dystrophies, with both companies free to develop and collaborate outside this field both during and after the terms of the alliance.

Arcturus – On August 9, 2013, we and Arcturus entered into a Patent Assignment and License Agreement, pursuant to which we assigned our UNA technology for the development of RNAi therapeutics to Arcturus. In consideration for entering into the agreement, we received a one-time payment in full of $0.8 million for the Patent Assignment and License Agreement and transferred the Protiva Biotherapeutics, Inc. (i.e. Tekmira) and Ribotask AsP license agreements to Arcturus. In addition, under the terms of the agreement, we retained a worldwide, fully-paid, royalty free, non-exclusive license to the UNA technology equal to the non-exclusive rights licensed by Tekmira and F. Hoffman-La Roche Inc. and by F. Hoffman-La Roche Ltd. (rights owned now by Arrowhead Research, Inc.).

Tekmira – On November 28, 2012, we entered into a License Agreement with Tekmira, whereby we provided Tekmira a worldwide, non-exclusive license to our UNA technology for the development of RNAi therapeutics. Tekmira will have full responsibility for the development and commercialization of any products arisingMLR-1023, which is being developed as a novel therapeutic for Type 1 diabetes.

On October 20, 2021, we as licensee expanded the exclusive MLR-1023 Agreement with MP1 to include two additional clinical indications, one for Non-Alcoholic Steatohepatitis (NASH) and the other for pulmonary inflammation.

On November 17, 2021, Melior extended the Company’s timeline under the License Agreement. In considerationMLR-1023 Agreement from 120 days to 180 days from the effective of the MLR-1023 Agreement for enteringthe Company to raise $4 million unless, by 180 days Adhera is in the process of completing transactions to complete the fundraising then an additional 30 days shall be provided to allow for the completion of required fundraising. On February 16, 2022, an addendum to the MLR-1023 Agreement dated August 4, 2021, was executed by the Company and Melior, extending the requirement by the Company to raise $4 million to June 16, 2022.

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On July 20, 2022, the Company and Melior entered into the agreement, we received an upfront payment of $0.3 million, and are eligibleSecond Addendum to receive milestone payments upon the satisfaction of certain clinical and regulatory milestone events and royalty payments in the low single digit percentages on products developed by Tekmira that use UNA technology. Tekmira may terminate the agreement for convenience in its entirety, or in respect of any particular country or countries, by giving 90 days prior written notice to us, provided that no such termination shall be effective sooner than August 28, 2013. Either party may terminate the agreement immediately upon the occurrence of certain bankruptcy events involving the other party, or, following the expiration of a 120 day cure period(60 days in the event of adefault of a payment obligation by Tekmira), upon the occurrence of a material breach of the agreement by the other party. With the purchase of the UNA asset by Arcturus in August 2013, the Tekmira License Agreement transferred to Arcturus.

Novartis – On August 2, 2012, we and Novartis entered into a worldwide, non-exclusive License Agreement for our CRN technology for the development of both single and double-stranded oligonucleotide therapeutics. We received a $1.0 million one-time payment for the non-exclusive license. In addition, in March 2009, we entered into an agreement with Novartis pursuant to which we granted to Novartis a worldwide, non-exclusive, irrevocable, perpetual, royalty-free, fully paid-up license, with the right to grant sublicenses, to our DiLA2-based siRNA delivery platform in consideration of a one-time, non-refundable fee of $7.25 million, which was recognized as license fee revenue in 2009. Novartis may terminate this agreement immediately upon written notice to us.

Avecia – On May 18, 2012, we and Avecia entered into a strategic alliance pursuant to which Avecia will have exclusive rights to develop, supply and commercialize certain oligonucleotide constructs using our CRN chemistry and, in return, we will receive single digit percentage royalties from the sale of CRN-based oligonucleotide reagents, as well as a robust supply of cGMP material for us and our partners' pre-clinical, clinical and commercialization needs.

Monsanto – On May 3, 2012, we and Monsanto entered into a worldwide exclusive Intellectual Property License Agreement for our delivery and chemistry technologies. On May 3, 2012, we and Monsanto also entered into a Security Agreement pursuant to which we granted to Monsanto a security interest in that portion of our intellectual property that is the subject of the License Agreement in order to secure(the “Second Addendum”). The MLR-1023 Agreement dated August 24, 2021, granted the performance of our obligations under the License Agreement. Under the terms of theCompany an exclusive license agreement, we received $1.5 million in initiation fees, and may receive royalties on product sales in the low single digit percentages. Monsanto may terminate the License Agreement at any time in whole or as to any rights granted thereunder by giving prior written notice thereof to us, with termination becoming effective three months from the date of the notice.

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ProNAi – On March 13, 2012, we entered into an Exclusive License Agreement with ProNAi regarding the development and commercialization of ProNAi’s proprietary DNAi-based therapeutics utilizing SMARTICLES. The License Agreement provides that ProNAi will have full responsibility for the development and commercialization of any products arisingMelior’s MLR-1023. The MLR-1023 license was scheduled to terminate due to the inability to meet certain milestones in the Agreement. In accordance with the Second Addendum and subject to the terms and conditions therein, the MLR-1023 license was extended until February 2023.

The material obligations of the Company under the License Agreement. UnderSecond Addendum include:

license payment of approximately $137,000 by the Company to Melior (this payment was made on July 29, 2022);
maintaining the full-time employment of its Chief Scientific Officer; and
raising $500,000 in working capital.

The milestones and payment obligations and other material terms under the foregoing license agreements with Melior are summarized in the subsection titled “Partnering and Licensing Agreements” above.

To the extent that resources have been available, we have continued to work with our advisors in an effort to restructure our company and to identify potential strategic transactions, including the Melior transactions described above to enhance the value of the License Agreement,company. Because of our substantial unpaid debt, if we could receive up to $14 million for each gene target in upfront, clinical and commercialization milestone payments, as well as royaltiesdo not raise additional capital in the single digit percentages on sales, with ProNAi havingimmediate future, it is likely that the option to select any number of gene targets. Either partycompany will discontinue all operations and may terminate the License Agreement upon the occurrence of a default by the other party (subject to standard cure periods), or upon certain events involving theseek bankruptcy or insolvency of the other party. ProNAi may also terminate the License Agreement without cause upon ninety (90) days' prior written notice to us.protection.

Mirna– On December 22, 2011, we entered into a License Agreement with Mirna regarding the development and commercialization of miRNA-based therapeutics utilizing Mirna’s proprietary miRNAs and SMARTICLES. The License Agreement provides that Mirna will have full responsibility for the development and commercialization of any products arisingCorporate History

Adhera was incorporated under Delaware law under the License Agreement and that we will support pre-clinical and process development efforts. Under terms of the License Agreement, we could receive up to $63 million in upfront, clinical and commercialization milestone payments, as well as royalties in the low single digit percentagesname Nastech Pharmaceutical Company on sales, based on the successful development of Mirna’s product candidates. Either party may terminate the License Agreement upon the occurrence of a default by the other party. Mirna may also terminate the License Agreement without cause upon 60 days prior written notice to us. We and MirnaSeptember 23, 1983.

On November 15, 2016, Adhera entered into an amendmentAgreement and Plan of this agreement in December 2013Merger with IThenaPharma, Inc., a Delaware corporation (“Ithena”), IThena Acquisition Corporation, a Delaware corporation and in May 2015,a wholly-owned subsidiary of IThena (“Merger Sub”), and a representative of the stockholders of IThena (the “Merger Agreement”), pursuant to which, Mirna made certain pre-payments to us inamong other things, Merger Sub merged with and into IThena, with IThena surviving as a wholly-owned subsidiary of Adhera (such transaction, the aggregate amount of $1.4 million and now has additional rights to its lead program, MRX34. Further under the amendment, Mirna optioned exclusivity on several additional miRNA targets.

Novosom – On July 27, 2010, we entered into an agreement pursuant to which we acquired the intellectual property of Novosom AG (“Novosom”“Merger”) of Halle, Germany for SMARTICLES, which significantly broadens the number of approaches we may take for systemic and local delivery of our proprietary UNA and CRN-based oligonucleotide therapeutics. We issued an aggregate of .014 million shares of our common stock to Novosom as consideration for the acquired assets. The shares had a value equal to approximately $3.8 million, which was recorded as research and development expense.. As additional consideration for the acquired assets, we will pay to Novosom an amount equal to 30% of the value of each upfront (or combined) payment actually received by us in respect of the license of liposomal-based delivery technology or related product or disposition of the liposomal-based delivery technology by us, up to $3.3 million, which amount will be paid in shares of our common stock, or a combination of cash and shares of our common stock, at our discretion. To date we have issued an aggregate of 1.3 million shares of common stock to Novosom representing additional consideration of $1.5 million as a result of the license agreementsMerger, the former holders of IThena common stock immediately prior to the completion of the Merger owned approximately 65% of the issued and amendmentsoutstanding shares of Adhera common stock immediately following the completion of the Merger.

IThena was incorporated under Delaware law on September 3, 2014. IThena is deemed to such license agreements that we entered intobe the accounting acquirer in the Merger, and thus the historical financial statements of IThena will be treated as the historical financial statements of our company and will be reflected in our quarterly and annual reports for periods ending after the effective time of the Merger. Accordingly, beginning with our partners.Annual Report on Form 10-K for the fiscal year ended December 31, 2016, we started to report the results of IThena and Adhera and their respective subsidiaries on a consolidated basis.

Valeant Pharmaceuticals – On March 23, 2010,Subsequent to the Merger, we acquired intellectual property relatedthe rights to our CRN chemistrycommercialize Prestalia, an anti-hypertensive drug approved by the FDA from ValeantSymplmed Pharmaceuticals North America (“Valeant”)LLC in consideration of payment ofJune 2017 pursuant to a non-refundable licensing fee of $0.5 million which was included in research and development expense in 2010. Subject to meeting certain milestones triggering the obligation to make any such payments, we may be obligated to make a product development milestone payment of $5.0 million and $2.0 million within 180 days of FDA approval of a New Drug Application for our first and second CRN related product, respectively. To date, we had not made any such milestone payments but have milestone obligations of $0.13 million based on CRN licenses to date. Valeant is entitled to receive earn-outs based upon a percentagelicense agreement. We marketed Prestalia in the low single digits ofU.S. from June 2018 until December 2019. The license agreement together with all rights to future commercial salescommercialization activities with respect to the product was terminated in January 2021.

Partnering and earn-outs based upon a percentage inLicensing Agreements

Melior

As described above, the low double digits of future revenue from sublicensing. Under the agreement we are required to use commercially reasonable effortsCompany has acquired licenses to develop and commercialize at least one covered product. If we have not made earn-out payments of at least $5.0 million prior to March 2016, we are required to pay Valeant an annual amount equal to $50,000 per assigned patent which shall be creditable against othercertain products owned by Melior. The below table summarizes the milestones and payment obligations. The term of our financial obligations under the agreement shall end, on a country-by-country basis, when there no longer exists any valid claim ineach such country. We may terminate the agreement upon 30 day notice, or upon 10 day notice in the event of an adverse results from clinical studies. Upon termination, we are obligated to make all payments accrued as of the effective date of such termination but shall have no future payment obligations.license agreement.

University of Helsinki– On June 27, 2008, we entered into a collaboration agreement with Dr. Pirjo Laakkonen and the Biomedicum Helsinki. The goal of the work involves our patented phage display library, the Trp Cage library, for the identification of peptides to target particular tissues or organs for a given disease. In December 2009, we received a patent allowance in the U.S. covering a targeting peptide for preferential delivery to lung tissues that was identified by us using the Trp Cage Library. We believe the Trp Cage library will be a source of additional peptides for evaluation in our delivery programs, and we will have a strong IP position for these peptides and their use. This agreement terminated by its terms in June 2012. Under this agreement, we may be obligated to make product development milestone payments of up to €275,000 in the aggregate for each product developed under this research agreement if certain milestones are met. To date, we have not made, and are not under any current obligation to make, any such milestone payments, as the conditions that would trigger any such milestone payment obligations have not been satisfied. In addition, upon the first commercial sale of a product, we are required to pay an advance of 0.25€ million (based on currency conversion rates as of July 14, 2014 this equals approximately $0.34 million) against which future royalties will be credited. The

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percentage

MLR-1019:

Under the MLR-1019 license, we agreed to make the following milestone payments if the applicable milestone is reached:

Milestone Milestone Payment 
Last patient enrolled into the Phase 2a study $250,000 
Positive outcome of the Phase 2a study $1,500,000 
Initiation of a Phase 3 study $10,000,000 
New Drug Application approval $10,000,000 
Total Milestone Payments $21,750,000 

Under the license, the Company also agreed to royalty payment requiredpayments of 5% of gross sales if the product is commercialized. The MLR-1019 license terminates upon the last expiration of the patents licensed by the Company, which is presently 2034 subject extensions and renewals of any of such patents. If the Company fails to be made by ushave its common stock listed on Nasdaq or the NYSE within 12 months after the Company receives a Clinical Trial Authorization from the European Medicines Agency, then the Company’s commercial license and rights to MLR-1019 under the license agreement will terminate.

MLR-1023:

Under the MLR-1023 license, we agreed to make the following milestone payments if the applicable milestone is reached:

Milestone Milestone Payment 
Last patient enrolled into the Phase 2a study $250,000 
Positive outcome of the Phase 2a study $1,500,000 
Initiation of a Phase 3 study $10,000,000 
New Drug Application approval $10,000,000 
Total Milestone Payments $21,750,000 

The agreement also included royalty payments upon commercialization of the product as follows: (i) 8% of future gross product sales, applicable to the University of Helsinki is a percentagefirst $400,000,000 of gross revenues derived from work performed underproduct sales; (ii) 10% of future gross product sales, applicable to sales after $400,000,000 and up to $800,000,000; and (iii) 12% of future gross product sales applicable to sales after $800,000,000.

If we fail to obtain a financing resulting in at least $500,000 of proceeds, hire a Chief Scientific Officer with familiarity with both MLR-1019 and MLR-1023, and use our best efforts continue uplist to Nasdaq by February 1, 2023, the Helsinki Agreement inMLR-1023 license agreement will terminate. If we meet that deadline, the low single digits.MLR-1023 license terminates upon the last expiration of the patents licensed by the Company.

Proprietary Rights and Intellectual Property

We relyhave relied primarily on patents and contractual rights and obligations with employees and third parties to protect our proprietary rights.rights and further our operational objectives. We have sought, and, to the extent that we continue our business operations, intend to continue to seek, appropriate patent protection for important and strategic components of our proprietary technologies by filing patent applications in the U.S. and certain foreign countries. To date, the U.S. and non-U.S. patent applications that we have filed, and the patents that have been granted to us, relate to our legacy intranasal and RNA interference programs. As noted elsewhere in this Prospectus, we are in the process of evaluating the path forward for such programs, including seeking options to continue certain programs or to divest assets. There can be no assurance that any of our patents will guaranteebe guaranteed protection or market exclusivity for our products and product candidates. candidates, and to the extent that we do not properly maintain (including paying any required fees) such patents, it is possible that any protection provided to us will be impaired or lost altogether.

We also use license agreements both to access external intellectual property rights and technologies and to convey certain intellectual property rights to others. OurTo the extent that we continue our business operations, our financial success will be dependent in part on our ability to obtain (and maintain) commercially valuable patent claims and to protect our intellectual property rights and to operate without infringing upon the proprietary rights of others. As of December 31, 2014,

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Further, we owned or controlled 148 issued or allowedhave purchase rights for the Licensed Products including the patents and approximately 95 pending U.S.related intellectual property from Melior with respect to the following product candidates:

MRL 1019 (Patent No. 10,188,651) for the treatment of PD; and
MRL 1023 (Patent No. 11,033,548) for the treatment of Type 1 diabetes, NASH and pulmonary inflation.

Research and foreignDevelopment

On July 28, 2021, we as licensee and MP2 as licensor, entered into an exclusive license agreement for the development, commercialization, and exclusive license of MLR-1019. MLR-1019 is being developed as a new class of therapeutics for PD and is, to the best of our knowledge, the only drug candidate today with the potential to address both movement and non-movement aspects of PD.

On August 24, 2021, we as licensee entered into an exclusive license agreement with MP1 for the development, commercialization, and exclusive license of MLR-1023 as a novel therapeutic for Type 1 diabetes.

On October 20, 2021, we as licensee expanded the MLR-1023 licensing agreement with MP1 to include two additional clinical indications for Non-Alcoholic Steatohepatitis (NASH) and pulmonary inflammation.

During the latter part of 2021 and the year 2022, we have been actively engaged in early development activities relating to MLR-1019 and MLR-1023 alongside our licensing partner, CRO’s, and patent applications,counsel. In this regard, we have continued to protectconduct scientific experiments to expand potential clinical indications and file, prosecute, and maintain patents potentially enforceable in the USA and multiple overseas territories.

The drug development process requires ongoing dialogue with the FDA, including the submission of any new drug data. During 2022, the company has maintained an active Investigational New Drug (IND) application required to conduct a Phase 2 clinical trial of MLR-1023 in Type 1 diabetes. We have also developed a protocol for this clinical trial in conjunction with our proprietary nucleic acid-basedlicensing partner and the Global Contract Clinical Research Organization, PPD. The multi-center Phase 2 clinical trial seeks to evaluate the efficacy of MLR-1023 in 45 adult patients with established Type 1 diabetes. Most recently, in 2022 and in collaboration with the Alberta Diabetes Institute, we have developed a protocol for the initiation of a single center study of MLR-1023 in Type 1 diabetes patients.

The conduct of clinical trials (or the planned conduct of clinical trials) requires that clinical trial supplies are tested on an ongoing basis for stability. These studies have been conducted by Frontage Laboratories (PA) on behalf of the company.

In regard to MLR-1019, our drug candidate for PD, we have similarly developed a clinical protocol for the evaluation of MLR-1019 in up to 60 patients with Parkinson’s disease and managed issues arising from clinical supply manufacture, and regulatory considerations arising from these ongoing studies.

We have been also collaborating with two major pharmaceutical companies with a view to out-licensing certain rights to MLR-1019 in Europe, China, and potentially in the USA.

The direction and supervision of these activities necessitated the hire of a Chief Scientific Officer (Dr. Zahed Subhan) with both familiarity with the both MLR-1019 and MLR-1023, and expertise in drug discovery, capabilities.development, and commercialization.

Facilities

We do not own or lease any real property or facilities. If we advance our business operations, we may seek to lease facilities of our own in order to support our operational and administrative needs. There can be no assurance that such facilities will be available, or that they will be available on suitable terms. Our patent portfolio, as of December 31, 2014, consisted of the following:inability to obtain such facilities could have a material adverse effect on our future plans and operations.

Estimated
Expiration
No. of Issued/Allowed PatentsJurisdiction
20197 totalU.S.
20201 totalGermany
2 totalU.S.
20211 totalU.S.
20221 eachBelgium, Brazil, Ireland, Italy, Spain
2 eachAustralia, Canada, China, Japan, Singapore
3 eachGermany, Netherlands, Switzerland, U.K., Austria, France
6 totalU.S.
20231 eachAustria, France, Germany, Netherlands, Switzerland, U.K.
2 totalU.S.
20241 totalChina
20251 eachAustralia, Hong Kong, Ireland, Italy, Korea, Spain, Switzerland
2 totalJapan
3 eachCanada, France, Germany, U.K.
6 totalU.S.
20261 eachAustralia, China, Hong Kong, Mexico, Japan, U.S., Canada
20271 eachJP, France, Germany, U.K., Switzerland, Netherlands
20275 totalU.S.
20281 totalAustralia
2 eachNew Zealand, China, France, Germany, U.K., Switzerland, Netherlands, Spain, Italy, Ireland
4 totalU.S.
20291 eachItaly, Spain, Switzerland, China
2 eachFrance, Germany, U.K.
20301 eachSouth Africa, France, Germany, U.K., Switzerland, Ireland, Italy, Spain, Netherlands

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Sales and Marketing

We terminated our commercial activities related to Prestalia in December 2019, and the license agreement was subsequently terminated by the licensor in January 2021. Our activities in 2021, were primarily related to inventory storage and destruction for Prestalia.

Competition

The patents listedbiopharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. The key competitive factors affecting the success of any products and product candidates that we may develop or acquire, to the extent that we may continue to engage in the table above will expire generally between 2019biopharmaceutical industry, are their efficacy, safety, convenience, price, the level of generic competition and 2030, subject to anythe availability of reimbursement from government and other third-party payors. While we believe that our technology, knowledge and experience provide us with certain competitive advantages, we face potential patent term extensions and/or supplemental protection certificates that would extend the terms of the patents in countries where such extensions may become available.

Competition

There are a number of small, mid-sizedcompetition from many different sources, including major and largeminor pharmaceutical, specialty pharmaceutical and biotechnology companies, that compete with us. Universitiesacademic institutions, governmental agencies, and public and private research institutionsinstitutions. Many of these competitors have greater for capital resources and access to capital than we do, and personnel with more industry experience and scientific background than those we utilize. Our products, and any product candidates that we successfully develop and/or acquire, and later commercialize, will compete with existing therapies and new therapies that may become available in the future.

We anticipate that many of the companies against which we may compete in the future will have significantly greater financial and other resources and expertise in research and development, manufacturing, product acquisition, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the biopharmaceutical industry may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete, or may compete, with us in recruiting and retaining qualified scientific and management personnel, as well as in acquiring technologies and products complementary to, or that may be necessary for, our programs.

The commercial opportunity for any product candidates that we may acquire and/or develop could be reduced or eliminated if our competitors develop and commercialize drugs or therapies that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any drugs that we may acquire or develop. Our competitors also potential competitors.may obtain FDA or other regulatory approval for their product candidates more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic drugs. See “Risk Factors” for more information on the risks we face with respect to our competition.

To date, we have not fully developed, received regulatory approval for or commercialized any of our current product candidates. Our ability to compete will depend, to a great extent, on the speed in which we and our collaborators can develop safe and effective product candidates, complete clinical testing and regulatory approval processes, and coordinate with third parties to produce and distribute the resulting products in sufficient commercial quantities to create and maintain a market for such products at favorable costs and prices. If we do complete development of and obtain regulatory approval to market any product candidate, we anticipate that the competition is typically focusedwe would face with respect to such product would be based on a single nucleic acid mechanismcombination of action, i.e. RNAi or mRNA translational inhibition or exon skipping or miRNA replacement therapy. Somea number of these companies only have a proprietaryfactors including efficacy, safety, reliability, availability, price, patent position, around either chemistry or delivery and in fewer cases, their proprietary position arises from their belief that they can patent biology, i.e. miRNA targets. We believe we are the only company in the position of having proprietary chemistry and delivery technologies sufficient to pursue multiple nucleic acid mechanisms of action, i.e. RNAi and mRNA translational inhibition and exon skipping and miRNA replacement therapy. Such single mechanism of action competitors include: Alnylam Pharmaceuticals, Arcturus, Benitec Biopharma, Dicerna Pharmaceuticals, Isis Pharmaceuticals (“Isis”), miRagen Therapeutics, Mirna, PhaseRx Pharmaceuticals, Quark Pharmaceuticals, Regulus Therapeutics, RXi Pharmaceuticals, Sarepta Therapeutics (“Sarepta”), Silence Therapeutics and Tekmira. In 2014, two of our competitors were acquired. Santaris Pharma A/S was acquired by Roche Group for $250 million plus additional contingent payments of up to $200 million based on the achievement of certain predetermined milestones, and Prosensa Holding, N.V. was acquired by BioMarin Pharmaceuticals, Inc. for $680 million plus additional contingent payments of up to $160 million based on drisapersen regulatory approvals in the U.S. and Europe.other factors.

Several companies have clinical stage programs with the majority in an orphan disease indication. In particular, Isis has an early stage clinical program in DM1 and Sarepta has a late stage clinical program in DMD.

Government Regulation

Government authorities in the U.S. and other countries extensively regulate the research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing, among other things, of drugs and biologicpharmaceutical products. AllTo the extent that we continue to engage in the biopharmaceutical industry, of our foreseeable product candidates (including those for human usewhich there can be no assurance, all of the products that may be developed by our partners based on our licensed technologies)we anticipate seeking to develop and/or commercialize are expected to be regulated as drug products.

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In the U.S., the FDA regulates drug products under the Federal Food, Drug and Cosmetic Act (the “FDCA”), and other laws within the Public Health Service Act. Failure to comply with applicable U.S. requirements, both before and after approval, may subject us to administrative and judicial sanctions, such as a delay in approving or refusal by the FDA to approve pending applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, and/or criminal prosecutions. Before ourany drug products that we may develop and/or acquire are marketed, they must be approved by the FDA. The steps required before a novel drug product is approved by the FDA include: (1) pre-clinical laboratory, animal, and formulation tests; (2) submission to the FDA of an Investigational New Drug Application (“IND”)IND for human clinical testing, which must become effective before human clinical trials may begin; (3) adequate and well-controlled clinical trials to establish the safety and effectiveness of the product for each indication for which approval is sought; (4) submission to the FDA of a New Drug Application (“NDA”); (5) satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug product is produced to assess compliance with cGMP and FDA reviewreview; and finally (6) approval of an NDA.

Pre-clinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. The results of the pre-clinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND, which must become effective before human clinical trials may begin. An IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions, such as the conduct of the trials as outlined in the IND. In such a case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed. There can be no assurance that submission of an IND will result in FDA authorization to commence clinical trials. Once an IND is in effect, each clinical trial to be conducted under the IND must be submitted to the FDA, which may or may not allow the trial

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to proceed.

Clinical trials involve the administration of the investigational drug to human subjects under the supervision of qualified physician-investigators and healthcare personnel. Clinical trials are typically conducted in three defined phases, but the phases may overlap or be combined. Phase 1 usually involves the initial administration of the investigational drug or biologic product to healthy individuals to evaluate its safety, dosage tolerance and pharmacodynamics. Phase 2 usually involves trials in a limited patient population, with the disease or condition for which the test material is being developed, to evaluate dosage tolerance and appropriate dosage; identify possible adverse side effects and safety risks; and preliminarily evaluate the effectiveness of the drug or biologic for specific indications. Phase 3 trials usually further evaluate effectiveness and test further for safety by administering the drug or biologic candidate in its final form in an expanded patient population. OurTo the extent that we engage in any clinical studies, our product development partners, the FDA, or we may suspend clinical trials, if any, at any time on various grounds, including any situation where we or our partners believe that patients are being exposed to an unacceptable health risk or are obtaining no medical benefit from the test material.

Assuming successful completion of the required clinical testing, the results of the pre-clinical trials and the clinical trials, together with other detailed information, including information on the manufacture and composition of the product, are submitted to the FDA in the form of an NDA requesting approval to market the product for one or more indications. Before approving an application, the FDA will usually inspect the facilities where the product is manufactured and will not approve the product unless cGMP compliance is satisfactory. If the FDA determines the NDA is not acceptable, the FDA may outline the deficiencies in the NDA and often will request additional information. If the FDA approves the NDA, certain changes to the approved product, such as adding new indications, manufacturing changes or additional labeling claims are subject to further FDA review and approval. The testing and approval process requiresrequire substantial time, effort, and financial resources, and we cannot be sure that any approval of any products that we develop and/or acquire will be granted on a timely basis, if at all.

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Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the U.S. and for which there is no reasonable expectation that the cost of developing and making available in the U.S. a drug for this type of disease or condition will be recovered from sales in the U.S. for that drug. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same drug for the same indication, except in very limited circumstances, for seven years. The FDA granted orphan drug designation to CEQ508 for the treatment of FAP in December 2010. We are evaluating the best path forward to re-start development activities regarding CEQ508, and evaluating options for our other programs relating to RNA interference.

In addition, regardless of the type of approval, to the extent that we continue to engage in the biopharmaceutical industry, we and our partners arewill be required to comply with a number of FDA requirements both before and after approval.approval with respect to any products that we may develop, acquire or commercialize. For example, we and our partners arewill be required to report certain adverse reactions and production problems, if any, to the FDA, and to comply with certain requirements concerning advertising and promotion for products. In addition, quality control and manufacturing procedures must continue to conform to cGMP after approval, and the FDA periodically inspects manufacturing facilities to assess compliance with cGMP. Accordingly, manufacturers must continue to expend time, money and effort in all areas of regulatory compliance, including production and quality control to comply with cGMP. In addition, discovery of problems, such as safety problems, may result in changes in labeling or restrictions on a product manufacturer or NDA holder, including removal of the product from the market.

In addition to FDA regulations for the marketing of pharmaceutical products, there are various other state and federal laws that may restrict business practices in the biopharmaceutical industry. These include the following:

The federal Medicare and Medicaid Anti-Kickback laws, which prohibit persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce either the referral of an individual, or furnishing or arranging for a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;
Other Medicare laws, regulations, rules, manual provisions and policies that prescribe the requirements for coverage and payment for services performed by our customers, including the amount of such payment;
The federal False Claims Act which imposes civil and criminal liability on individuals and entities who submit, or cause to be submitted, false or fraudulent claims for payment to the government;
The Foreign Corrupt Practices Act (“FCPA”), which prohibits certain payments made to foreign government officials;
State and foreign law equivalents of the foregoing and state laws regarding pharmaceutical company marketing compliance, reporting and disclosure obligations;
The Patient Protection and Affordable Care Act (“ACA”), which among other things changes access to healthcare products and services; creates new fees for the pharmaceutical and medical device industries; changes rebates and prices for health care products and services; and requires additional reporting and disclosure; and
The Health Insurance Portability and Accountability Act, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH), which imposes requirements on certain types of people and entities relating to the privacy, security, and transmission of individually identifiable health information, and requires notification to affected individuals and regulatory authorities of certain breaches of security of individually identifiable health information;

If our operations are found to be in violation of any of these laws, regulations, rules or policies or any other law or governmental regulation, or if interpretations of the foregoing change, we may be subject to civil and criminal penalties, damages, fines, exclusion from the Medicare and Medicaid programs and the curtailment or restructuring of our operations.

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Product Liability

We currently do not carryIf we bring a product liability insurance as no patients are currently being treated with our products. We will renew our product liability insurance portfoliocandidate to clinical trial, we may undertake to commence such a trial in a foreign jurisdiction, in which case we and third parties on the resumption of patient accesswhich we rely would be subject to our products.

Environmental Compliance

Oursuch foreign government’s laws and regulations pertaining to the research and development, activities have involvedincluding clinical testing on human subjects, of therapeutic product candidates. Further, to the controlled useextent that any of potentially harmful biological materials as well as hazardous materials, chemicals and various radioactive compounds. Wethe products that we develop and/or acquire are sold in a foreign country, we may be subject to federal, state and localsimilar foreign laws and regulations, governing the use, storage, handlingwhich may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and disposal of these materials and specific waste products. We are also subject to numerous environmental, health and workplace safetyabuse laws, and regulations, including those governing laboratory procedures,implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals. None of our products were ever developed or sold outside the United States.

See the risk factors in the Risk Factor’s subsection labeled “Risks Related to the Discovery, Development, and Commercialization of Product Candidates” for more detail.

Impact of COVID-19

Over the past two years the impact of COVID-19 has had adverse effects on our business by slowing down our ability to work with third parties and continue fund raising efforts. We have witnessed supply chain related delays and increasing costs due to inflation. It is difficult to predict what other adverse effects, if any, COVID-19 and related matters can have on our business, or against the various aspects of same.

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency caused by a new strain of the coronavirus (“COVID-19”) and advised of the risks to the international community as the virus spread globally. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. The spread of COVID-19 coronavirus caused public health officials to blood-borne pathogensrecommend precautions to mitigate the spread of the virus, especially as to travel and congregating in large numbers. Over time, the incidence of COVID-19 and its variants has diminished although periodic spikes in incidence occur. Consequently, restrictions imposed by various governmental health organizations may change over time. Several states have lifted restrictions only to reimpose such restrictions as the number of cases rise and new variants arise.

It is difficult to isolate the impact of the pandemic on our business, results of operations, financial condition and our future strategic plans.

The Company may experience long-term disruptions to its operations resulting from changes in government policy or guidance; quarantines of employees, customers and suppliers in areas affected by the pandemic and the handlingpresence of bio-hazardous materials.new variants of COVID-19; and closures of businesses or manufacturing facilities critical to its business or supply chains. The cost of compliance with these lawsCompany is actively monitoring, and regulations could be significantwill continue to actively monitor, the pandemic and may adversely affect capital expenditures to the extent we are required to procure expensive capital equipment to meet regulatory requirements. At this time, we are not conducting any R&D activities that require compliance with federal, state or local laws.potential impact on its operations, financial condition, liquidity, suppliers, industry and workforce.

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EmployeesHuman Capital

With our focus on a rare disease clinical pipeline, we are able to operate our company with minimal full-time employees.

As of the date of this prospectus, our CEO is our only full-time employee. We are also utilizing approximately 10 consultants,Prospectus, we had one employee the majority of whom previously were either employees of or consultantsCEO. Our current Chief Operating Officer and services related to our accounting and financial management are being performed by independent contractors.

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MANAGEMENT

Directors and Executive Officers

Set forth below is information regarding our directors and executive officers as of the date of this prospectus.

NameAgePosition
Trond Waerness54Director
Andrew Kucharchuk42Vice Chairman of the Board; Acting Chief Financial Officer; Chief Business Officer; Chief Operating Officer
Charles Rice56Director
Zahed Subhan64Chief Executive Officer; Chairman of the Board; Interim Chief Scientific Officer

Trond K. Waerness – Mr. Waerness served as a director of the Company from April 2021 until his resignation on November 3, 2022. He was subsequently reappointed to the Board. Since 2016, Mr. Waerness has founded and co-founded three pharmaceutical services companies including Atna Consulting Services where he has served as President since June 2017.

Andrew Kucharchuk – Mr, Kucharchuk has served as a director since July 7, 2022 and served as Chief Executive Officer of the Company from July 7, 2020 to September 30, 2022. He has served as Chief Operating Officer since September 30, 2022. He has also served on the Board of Directors of Theralink Technologies, Inc. (“Theralink”) since 2020 after previously serving in such role from September 2015 to March 2017. Previously, he served as President and Chief Financial Officer of Theralink from February 2016 until June 2020, and as Chief Executive Officer of Theralink from November 2019 until June 2020. Mr. Kucharchuk has also served as Acting Chief Financial Officer of Theralink from June 2020 to September 2020.

Charles L. Rice – Mr. Rice has served as a director since July 10, 2020. He also served as a member of the Board of Directors of Theralink from November 2015 until June 2020. He was also the President of Entergy New Orleans, Inc. (“Entergy”), an electric and gas utility company, where he served from 2010 to support our on-going operations. NoneJanuary of 2022.

Zahed Subhan – Mr. Subhan has served as a director of the Company since November 2021. He was appointed as the Company’s Chief Scientific Officer on June 17, 2022 and Chief Executive Officer on September 30, 2022. He has served as the Chief Executive Officer and director of Aestas Pharma Inc. since 2015. Mr. Subhan has also been a director of Eppin Pharma Inc. (“Eppin”) since 2013, and the Chief Executive Officer of Eppin from 2013 to 2018.

Family Relationships

There are no family relationships among any of our employees are covered by collective bargaining agreements.officers or directors.

Company InformationInvolvement in Certain Legal Proceedings

We areFrom time-to-time, we may become a reporting companyparty to litigation and are requiredsubject to file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy these reports, proxy statements and other information at the SEC’s Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or e-mail the SEC at publicinfo@sec.gov for more information on the operation of the public reference room. Our SEC filings are also available at the SEC’s website athttp://www.sec.gov. Our Internet address is http://www.marinabio.com. There we make available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish such materialclaims incident to the SEC.

Properties

We do not own or lease any real property or facilitiesordinary course of our business. Although the results of such litigation and claims in the ordinary course of business cannot be predicted with certainty, we believe that are materialdue to our business operations. As we seek to restart our business operations, we plan to lease facilities in order to support our development, operational, and administrative needs under our current operating plan. There can be no assurance that such facilities will be available, or that they will be available on suitable terms. Our inability to obtain such facilitieslack of capital any litigation will have a material adverse effect on our future plans and operations.

Legal Proceedings

We are subject to various legal proceedings and claims that arise in the ordinary course of business. Our management currently believes that resolution of such legal matters will not have a material adverse impact on our financial position,business, results of operations or cash flows.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

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MANAGEMENT

Executive Officers and Directors

General

As of August 25, 2015, the number of members of our Board of Directors is fixed at five (5). The members of our Board of Directors as of such date are as follows:

NameAgePositionDirector Since

J. Michael French

55Chief Executive Officer, President and Chairman of the Board of Directors

September 2008

Stefan C. Loren, Ph.D.51Lead Independent DirectorAugust 2012
Joseph W. Ramelli47DirectorAugust 2012
Philip C. Ranker56DirectorJanuary 2014
Donald A. Williams56DirectorSeptember 2014

The biographies of each director below contains information regarding the person’s service as a director, business experience, director positions held currently or at any time during the last five years, and information regarding involvement in certain legal or administrative proceedings, if applicable.

J. Michael French – Mr. French has served as our chief executive officer (“CEO”) since June 23, 2008, as our president since October 1, 2008, and as a member of our board of directors since September 11, 2008. Mr. French was appointed chairman of our board of directors on August 21, 2012. Prior to joining us, Mr. French served as president of Rosetta Genomics, Inc. from May 2007 to August 2007. Mr. French also served as senior vice president of corporate development for Sirna Therapeutics, Inc. (“Sirna”) from July 2005 to January 2007, when Sirna was acquired by Merck and Co., Inc., and he served in various executive positions, including chief business officer, senior vice president of business development and vice president of strategic alliances, of Entelos, Inc., a pre-IPO biotechnology company, from 2000 to 2005. Mr. French, holds a B.S. in aerospace engineering from the U.S. Military Academy at West Point and a M.S. in physiology and biophysics from Georgetown University.

Stefan C. Loren, Ph.D. – Dr. Loren has served as a director of our company since August 2012. Dr. Loren is currently the founder at Loren Capital Strategy LLC, a health care-focused fund management firm. He was previously managing director at Westwicke Partners, a healthcare-focused consulting firm, from 2008 through February 2014. Dr. Loren has over 20 years of experience as a research and investment professional in the healthcare space, including roles at Perceptive Advisors, MTB Investment Advisors, Legg Mason, and Abbott Laboratories. Prior to industry, Dr. Loren served as a researcher at The Scripps Research Institute working with Nobel Laureate K. Barry Sharpless on novel synthetic routes to chiral drugs. His scientific work has been featured in Scientific American, Time, Newsweek and Discover, as well as other periodicals and journals. Dr. Loren has served as a director of GenVec, Inc. since September 2013 and as a director of Cellectar Biosciences, Inc. since June 2015, and within the past five years, he has served on the board of directors of Orchid Cellmark Inc. and Polymedix, Inc. Dr. Loren received a doctorate degree in organic chemistry from the University of California at Berkeley and a bachelor’s degree in chemistry from the University of California San Diego.

Joseph W. Ramelli– Mr. Ramelli has served as a director of our company since August 2012. Mr. Ramelli currently works as a consultant for several investment funds providing in-depth due diligence and investment recommendations. He has over 20 years of experience in the investment industry, having worked as both an institutional equity trader and as an equity analyst at Eos Funds, Robert W. Duggan & Associates and Seneca Capital Management. Mr. Ramelli graduated with honors from the University of California at Santa Barbara, with a B.A. in business economics.

Philip C. Ranker– Mr. Ranker has served as a director of our company since January 2014. Currently, Mr. Ranker serves as chief financial officer at Bioness, Inc. Previously he served as our chief accounting officer from September 7, 2011 until September 30, 2011, and then served as our interim chief financial officer and secretary from October 1, 2011 until December 31, 2013. Before that, Mr. Ranker served as chief financial officer of Suneva Medical, Inc. from 2009 to 2011, and as vice president of finance at Amylin Pharmaceuticals, Inc. from 2008 to 2009. Prior to Amylin, Mr. Ranker held various positions with Nastech Pharmaceutical Company Inc. (the predecessor to Marina Biotech) from 2004 to 2008, including vice president of finance from August 2004 until September 2005, and chief financial officer and secretary from September 2005 until January 2008. From September 2001 to August 2004, Mr. Ranker served as director of finance for ICOS Corporation. Prior to working at ICOS, Mr. Ranker served in various positions in corporate accounting, managed care contracting and research and development, including senior finance director, at Aventis Pharmaceutical and its predecessor companies during his nearly 15 years with the organization. From February 2006 until 2010, Mr. Ranker also served as a member of the board of directors and as the chair of the audit committee of ImaRx Therapeutics, Inc., which executed an initial public offering during his tenure. Prior to Aventis, Mr. Ranker was employed by Peat Marwick (currently KPMG)

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as a Certified Public Accountant. Mr. Ranker holds a B.S. in accounting from the University of Kansas.

Donald A. Williams– Mr. Williams has served as a director of our company since September 2014. Mr. Williams is a 35-year veteran of the public accounting industry, retiring in 2014. Mr. Williams spent 18 years as an Ernst & Young (EY) Partner and the last seven years as a partner with Grant Thornton (GT). Mr. Williams’ career focused on private and public companies in the technology and life sciences sectors. During the last seven years at GT, he served as the national leader of Grant Thornton’s life sciences practice and the managing partner of the San Diego Office. He was the lead partner for both EY and GT on multiple initial public offerings; secondary offerings; private and public debt financings; as well as numerous mergers and acquisitions. From 2001 to 2014, Mr. Williams served on the board of directors and is past president and chairman of the San Diego Venture Group and has served on the board of directors of various charitable organizations in the communities in which he has lived. Beginning in 2015, Mr. Williams has served as a director of Proove Biosciences, Inc. and of Alphatec Holdings, Inc. (and its wholly-owned operating subsidiary, Alphatec Spine, Inc.) Mr. Williams is a graduate of Southern Illinois University with a B.S. degree.

Executive Officers of Our Company

Biographical information concerning J. Michael French, our president and CEO, is set forth above. Biographical information concerning our interim chief financial officer is set forth below.

Daniel E. Geffken – Mr. Geffken, age 58, is a founder and managing director at Danforth Advisors, LLC, where he has served since 2011. He has worked in both the life science and renewable energy industries for the past 20 years. His work has ranged from early start-ups to publicly traded companies with market capitalizations of in excess of $1 billion. Previously, he served as chief operating officer (“COO”) or CFO of four publicly traded and four privately held companies, including Seaside Therapeutics, Inc., where he served as COO from 2009 to 2011.condition. In addition, he has been involved with multiple rare disease-focused companies in areas such as Huntington's disease, amyotrophic lateral sclerosis, fragile X syndrome, hemophilia Alitigation can have an adverse impact on us because of defense costs, diversion of management resources and Gaucher disease, including the approval of enzyme replacement therapies for the treatments of Fabry disease and Hunter syndrome. Mr. Geffken has raised more than $700 million in equity and debt securities. Mr. Geffken started his career as a C.P.A. at KPMG and, later, as a principal in a private equity firm. Mr. Geffken received his M.B.A from the Harvard Business School and his B.S. in economics from The Wharton School, University of Pennsylvania.other factors.

Director’s QualificationsCorporate Governance

In selecting a particular candidate to serve on our Board of Directors, we consider the needs of our company based on particular attributes that we believe would be advantageous for our Board members to have and would qualify such candidate to serve on our Board given our business profile and the environment in which we operate. The table below sets forth such attributes and identifies which attributes each director possesses.

AttributesMr. FrenchDr. LorenMr. RamelliMr. RankerMr. Williams
Financial ExperienceXXXXX
Public Board ExperienceXXX
Industry ExperienceXXXX
Scientific ExperienceX
Commercial ExperienceXXXX
Corporate Governance ExperienceXXXX
Capital Markets ExperienceXXXXX
Management ExperienceXXXXX

Certain Relationships and Related Transactions

J. Michael French. Pursuant to the terms and conditions of Mr. French’s employment agreement, we agreed, for the term of Mr. French’s employment with us, to nominate Mr. French for successive terms as a member of the Board of Directors, and to use all best efforts to cause Mr. French to be elected by our shareholders as a member of the Board of Directors.

Family Relationships

There are no familial relationships between any of our officers and directors.

Director or Officer Involvement in Certain Legal ProceedingsIndependence

Our directors and executive officers were not involved in any legal proceedings as described in Item 401(f) of Regulation S-K in

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the past ten years.

Audit Committee

Our Audit Committee consists of Mr. Williams (chair) and Mr. Ramelli. The Audit Committee authorized and approved the engagement of the independent registered public accounting firm, reviewed the results and scope of the audit and other services provided by the independent registered public accounting firm, reviewed our financial statements, reviewed and evaluated our internal control functions, approved or established pre-approval policies and procedures for all professional audit and permissible non-audit services provided by the independent registered public accounting firm and reviewed and approved any proposed related party transactions.

Code of Ethics

We have adopted a Code of Business Conduct and Ethics that applies to all of our employees and officers, and the members of our Board of Directors. The Code of Business Conduct and Ethics is available on our corporate website at www.marinabio.com. You can access the Code of Business Conduct and Ethics on our website by first clicking “About Marina Biotech” and then “Corporate Governance.” Printed copies are available upon request without charge. Any amendment to or waiver of the Code of Business Conduct and Ethics will be disclosed on our website promptly following the date of such amendment or waiver.

Independence of the Board of Directors

The Board of Directors utilizes NASDAQ’sThe Nasdaq Stock Market’s (“Nasdaq”) standards for determining the independence of its members. In applying these standards, the Board considers commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others, in assessing the independence of directors, and must disclose any basis for determining that a relationship is not material. The Board has determined that three (3)with the exception of its current members, namely Stephen Loren, Ph.D., Joseph W. RamelliMessrs. Kucharchuk and Donald A. Williams, areSubhan, each of our directors is independent directors within the meaning of the NASDAQ independence standards, and that two (2) of its current members, namely J. Michael French and Philip C. Ranker, are not independent directors within the meaning of the NASDAQNasdaq independence standards. In making thesethis independence determinations,determination, the Board did not exclude from consideration as immaterial any relationship potentially compromising the independence of any of the above directors.

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Board of Directors Term of Office

Directors are elected at our annual meeting of stockholders and serve for one year until the next annual meeting of stockholders or until their successors are elected and qualified.

Committees of our Board of Directors

We have adopted charters for, but have not yet established an Audit Committee, a Compensation Committee or a Nominating Committee, or any committees performing similar functions. We intend to establish such committees prior to completion of this offering. The functions of those committees are currently undertaken by our Board of Directors as a whole.

Board Diversity

While we do not have a formal policy on diversity, our Board, as part of its review of potential director candidates, considers each candidate’s character, judgment, skill set, background, reputation, type and length of business experience, personal attributes, and a particular candidate’s contribution to that mix. While no particular criteria are assigned specific weights, the Board believes that the backgrounds and qualifications of our directors, as a group, should provide a composite mix of experience, knowledge, backgrounds and abilities that will allow our Board to be effective, collegial and responsive to the nature of our business and our needs, and satisfy the requirements of applicable the rules and regulations, including the rules and regulations of the SEC.

Board Leadership Structure

While our Board has no fixed policy with respect to combining or separating the offices of Chairman of the Board and Chief Executive Officer, those positions are presently held by separate individuals. We believe that this Board leadership structure is the most appropriate for the Company at this time because it allows for sufficient Board oversight of the business and supervision of our Chief Executive Officer, while still providing sufficient autonomy to our management team to oversee day-to-day operations of the Company. Further, the current separation of the roles allows the Chief Executive Officer to focus his time and energy on operating and managing the Company while also enabling our Company to benefit from leveraging the experience and perspectives of the Chairman against that of the Company’s senior management.

Board Assessment of Risk

The Board is actively involved in the oversight of risks that could affect Adhera. This oversight is conducted primarily through the Board for general oversight of risks. The Board considers and reviews with management the adequacy of our internal controls, including the processes for identifying significant risks and exposures, and elicits recommendations for the improvements of such procedures where desirable. The Board is involved in oversight and administration of risk and risk management practices. Members of our management have day-to-day responsibility for risk management and establishing risk management practices, and members of management are expected to report matters relating specifically to the Board directly thereto. Our management has an open line of communication to the Board and have the discretion to raise issues from time-to-time in any manner they deem appropriate, and management’s reporting on issues relating to risk management typically occurs through direct communication with directors or committee members as matters requiring attention arise. Our sole executive officer is a member of the Board.

The Board actively interfaces with management on seeking solutions to any perceived risk.

 

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, including our executive officers, and to members of our Board. Our Code of Business Conduct and Ethics is filed as Exhibit 10.18 to the Amendment to our Annual Report on Form 10-K for the year ended December 31, 2021 filed on April 29, 2022. Printed copies are available upon request without charge by contacting us at our corporate headquarters at 8000 Innovation Parkway, Baton Rouge, LA 70820 Attention: Corporate Secretary. Any amendment to or waiver of the Code of Business Conduct and Ethics will be disclosed on our website promptly following the date of such amendment or waiver.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information regarding compensation earnedpaid, distributed or accrued by us during 2014for the years ended December 31, 2021 and 20132020 by our CEO and our other most highly compensatedprincipal executive officers as of the end of the 2014 fiscal year (“officer.

2021 Summary Compensation Table

Name and Principal Position Year  Salary
($)
  Total
($)
 
          
Andrew Kucharchuk(1)  2021   186,000   186,000 
Chief Executive Officer  2020   60,000   60,000 

(1)Mr. Kucharchuk served as our Chief Executive Officer from July 7, 2020 to September 30, 2022. He currently serves as Chief Operating Officer.

Named Executive Officers”).

Name and Principal Position Year  Salary
($)
  Bonus
($)
  Stock
Awards
($)
  Option
Awards
($)(3)
  All Other
Compensation
($)
  Total
($)
 
J. Michael French,  2014   288,083(1)        774,929      1,063,012 
President, CEO and Director  2013   127,500               127,500 
Daniel E. Geffken, Interim CFO(2)  2014               136,422   136,422 

(1)Although Mr. French’s employment agreement provides for an annual base salary of $340,000, due to our company’s financial challenges in 2012 and 2013 he worked for a reduced wage during a significant portion of each of those fiscal years. Mr. French agreed to settle outstanding compensation obligations with respect to the 2012 and 2013 fiscal years in the amount of $415,000 in return for the issuance of 1,130,000 shares of common stock. We approved the issuance of these shares to Mr. French, which were valued based on the volume weighted average price of our common stock for the ten trading days ending December 31, 2013 (i.e., $0.33), in January 2014.

(2)Mr. Geffken was appointed to serve as our interim chief financial officer on May 13, 2014. Mr. Geffken is compensated for his services in this position pursuant to a Consulting Agreement, effective as of January 9, 2014, that we entered into with Danforth Advisors, LLC (“Danforth”). Mr. Geffken is a founder and managing director at Danforth. We paid an aggregate amount of $299,947 to Danforth during the 2014 fiscal year pursuant to the terms of the Consulting Agreement, of which amount Danforth paid $136,422 to Mr. Geffken, with the remainder being paid by Danforth to third-party contractors who performed services under the Consulting Agreement or being utilized for entity expenses. Upon the effectiveness of the Consulting Agreement, we issued to Danforth 10-year warrants to purchase up to 100,800 shares of our common stock, which warrants are exercisable at $0.481 per share and shall vest on a monthly basis over the two-year period beginning on the effective date of the Consulting Agreement.

(3)Represents the aggregate grant date fair value under FASB ASC Topic 718 of options to purchase shares of our common stock granted during 2014. On September 15, 2014, pursuant to the Amended and Restated Employment Agreement that we entered into with Mr. French, we granted ten-year options to Mr. French to purchase up to 771,000 shares of common stock at an exercise price of $1.07 per share, of which 257,000 options shall vest on the first anniversary of the grant date, and 514,000 options shall vest in 24 equal monthly installments commencing after the first anniversary of the grant date and shall be vested in full on the third anniversary of the grant date.

Narrative Disclosures Regarding Compensation;Officers’ Employment Agreements

We haveAndrew Kucharchuk. On July 7, 2021, Mr. Kucharchuk entered into an employment agreement with Mr. French, which was amended and restated on September 15, 2014, and a consulting agreement with Danforth, an entity controlled by Mr. Geffken. The terms and conditions of these agreements are summarized below.

J. Michael French Employment Agreement,

On June 10, 2008, we entered into an employment agreement (the “Original French Agreement”) with J. Michael French pursuant to which we agreed to pay to Mr. French servedKucharchuk a base salary of $250,000 per year for his services as our president and our CEO. The initial term began on June 23, 2008 and ended on June 9, 2011. Thereafter, it continued per its terms on a quarter-to-quarter basis. On September 15, 2014, we entered into an Amended and RestatedChief Executive Officer. Under his Employment Agreement, (the “Restated French Agreement”) with Mr. French pursuant to which Mr. French shall serve as our President and CEO until September 14, 2017. A copy of the Original French Agreement was filed as Exhibit 10.2 to our Current Report on Form 8-K dated June 10, 2008, and a copy of the Restated French Agreement was filed as Exhibit 10.1 to our Current

48

Report on Form 8-K dated September 15, 2014.

Pursuant to the Original French Agreement, Mr. French was entitled to annual base compensation of $340,000, which amount was increased to $425,000 in the Restated French Agreement. HeKucharchuk is also eligible to receive an annual performance-based incentive cash compensation,bonus during the term of the agreement with a target amount of up to 20% of his base salary, or up to $50,000, based on performance criteria mutually determined in good faith by the Board and Mr. Kucharchuk. The Employment Agreement is for an initial term of two years, subject to an automatic renewal for successive one-year terms unless prior notice of non-renewal is given by either party. Under his Employment Agreement, Mr. Kucharchuk is entitled to severance payments if his employment is terminated under certain circumstances.

Pursuant to Mr. Kucharchuk’s Employment Agreement, in the event of termination by the Company without “cause,” or resignation for “good reason,” Mr. Kucharchuk is entitled to receive six months base salary and continued benefits for six months

Generally, “good reason” is defined as (i) a material diminution in Mr. Kucharchuk’s authority, duties or responsibilities due to no fault of his own, or any other action or inaction that constitutes a material breach by the Company under the Employment Agreement; or (ii) generally a relocation of the principal place of employment to a location outside of a 50-mile radius from Baton Rouge, Louisiana.

Under the terms of the Employment Agreements, Mr. Kucharchuk is subject to non-competition and non-solicitation covenants during the term of his employment and for one year following termination of employment with the targetedCompany. His Employment Agreement also contains customary confidentiality and non-disparagement covenants.

Zahed Subhan. Pursuant to the amendment to the Melior Agreement described above, the Company was required to hire a Chief Scientific Officer by June 16, 2022. On June 17, 2022, the Board approved and authorized the Company’s hiring of Zahed Subhan, a director of the Company, as the Company’s Chief Scientific Officer. In connection with his appointment, the Company entered into an Employment Agreement with Mr. Subhan under which Mr. Subhan is entitled to a base salary of $300,000 and will also be eligible to receive an annual incentive bonus if certain performance milestones and criteria mutually agreed by Mr. Subhan and the Board are met. The Employment Agreement provides that Mr. Subhan’s employment is at will, but if his employment is terminated without cause by the Company or for good reason by Mr. Subhan, Mr. Subhan will be entitled to severance payments as follows: (a) if the termination is within the first six months of his employment, an amount of such incentive cash compensation being 40%equal to three-fourths of his annual base compensation for the year under the Original French Agreement,salary, or nine months’ severance, and 50% of his annual base compensation for the year under the Restated French Agreement, but with the actual amount to be determined by the Board or the Compensation Committee.

We agreed in the Restated French Agreement to pay to Mr. French a lump sum within thirty (30) days following full execution of the Restated French Agreement, with(b) if such amount being the excess of Mr. French’s base salary under the Restated French Agreement from April 1, 2014 through September 15, 2014, over whatever compensation we had paid to Mr. French as base salary during such period.

Under the Original French Agreement, we granted options to Mr. French to purchase up to 31,500 shares of common stock, of which 10,500 options were exercisable at $50.80 per share, 10,500 options were exercisable at $90.80 per share, and 10,500 options were exercisable at $130.80 per share. The options had a term of 10 years beginning on June 23, 2008. Mr. French has agreed to cancel these options effective as of December 31, 2014. Under the Restated French Agreement, we granted ten-year options to Mr. French to purchase up to 771,000 shares of common stock at an exercise price of $1.07 per share, of which 257,000 options shall vest on the first anniversary of the grant date, 257,000 options shall vest monthly in equal installments commencingtermination is after the first anniversarysix months of the grant date and shall be vested in full on the second anniversary of the grant date, and 257,000 options shall vest monthly commencing after the second anniversary of the grant date and shall be vested in full on the third anniversary of the grant date.

If Mr. French’s employment under the Restated French Agreement is terminated without cause or he chooses to terminate his employment, for good reason, all of Mr. French’s options that are outstanding on the date of termination shall be fully vested and exercisable upon such termination and shall remain exercisable for the remainder of their terms. In addition, he will receive (i) base salary, (ii) incentive cash compensation determined on a pro-rated basis as to the year in which the termination occurs, (iii) pay for accrued but unused paid time off, and (iv) reimbursement for expenses through the date of termination, plus an amount equal to 12 months of his specifiedannual base salary, ator twelve months’ severance; plus the rate in effect on the datecontinuation of termination.

If Mr. French’s employment under the Restated French Agreement is terminated for cause or he chooses to terminate his employment other than for good reason, vesting of the options shall cease on the date of termination and any then unvested options shall terminate, however the then-vested options shall remain vested and exercisablecertain benefits for the remainderapplicable severance period. The term “cause” is defined as gross negligence, willful misconduct or embezzlement in the course of their respective terms. He will also receive salary, pay for accrued but unused paid time off,Mr. Subhan’s employment or service, and reimbursement of expenses through the date of termination.

 If Mr. French’s employment under the Restated French Agreementphrase “good reason” is terminated due to deathdefined as (a) a material reduction or disability, Mr. Frenchdiminution in position, duties or his estate, as applicable, is entitled to receive (i) salary, reimbursement of expenses, and pay for accrued but unused paid time off; (ii) incentive cash compensation determined onresponsibilities, (b) a pro-rated basis as to the yearmaterial reduction in which the termination occurs; and (iii) a lump sum equal to base salary ator benefits, (c) the rate in effect onfailure of any successor entity to assume and honor the date of termination for the lesser of (A) twelve (12) monthsmaterial terms and (B) the remaining termconditions of the Employment Agreement, ator (d) the time of such termination. In addition, vesting of all of Mr. French’s options that are outstanding on the date of termination shall cease, and any then vested options shall remain exercisable as specified in the applicable grant agreements.

If Mr. French’s employment under the Restated French Agreement is terminated by us (other than for cause)Company violates a material term or by Mr. French (for good reason), and in either case other than because of death or disability, during the one-year period following a change in control of our company, then Mr. French will be entitled to receive as severance: (i) salary, expense reimbursement and pay for unused paid time off through the date of termination; and (ii) a lump-sum amount equal to twelve (12) months of base salary at the rate in effect on the date of termination. In addition, all of Mr. French’s outstanding stock options shall be fully vested and exercisable upon a change of control and shall remain exercisable as specified in the option grant agreements.

Pursuant to the Restated French Agreement, a change in control generally means (i) the acquisition by any person or group of 40% or more of our voting securities, (ii) our reorganization, merger or consolidation, or sale of all or substantially all of our assets, following which our stockholders prior to the consummation of such transaction hold 60% or lesscondition of the voting securities of the surviving or acquiring entity, as applicable, (iii) a turnover of the majority of the Board as currently constituted, provided that under most circumstances any individual approved by a majority of the incumbent Board shall be considered as a member of the incumbent Board of Directors for this purpose, or (iv) a complete liquidation or dissolution of our company.Employment Agreement.

The Restated French Agreement also provides that we shall cause the nomination and recommendation of Mr. French for election as a director at the annual meetings of our stockholders that occur during the employment term, and use all best efforts to cause Mr. French to be elected as a non-independent director.

4957

 

In general, Mr. French has agreed in the Restated French Agreement not to compete with us during the employment term and for six months thereafter, to solicit our partners, consultants or employees for one year following the end of the employment term, or to solicit our clients during the employment term and for twelve months thereafter.

Daniel E. Geffken Consulting Agreement

We have entered into a Consulting Agreement, effective as of January 9, 2014, with Danforth, pursuant to which we engaged Danforth to serve as an independent consultant for the purpose of providing us with certain strategic and financial advice and support services during the one-year period beginning on January 9, 2014. In January 2015, we extended the term of the Consulting Agreement to January 2016. Mr. Geffken, who was appointed to serve as our interim chief financial officer on May 13, 2014, is a founder and managing director at Danforth. We paid to Danforth approximately $299,947 during 2014, of which amount Danforth paid $136,422 to Mr. Geffken, with the remainder being paid by Danforth to third-party contractors who performed services under the Consulting Agreement or being utilized for entity expenses. We also issued to Danforth, upon the effectiveness of the consulting agreement, 10-year warrants to purchase up to 100,800 shares of our common stock, which warrants are exercisable at $0.481 per share and shall vest on a monthly basis over the two-year period beginning on the effective date of the consulting agreement. The Consulting Agreement may be terminated by either party thereto: (a) with Cause (as defined below), upon thirty (30) days prior written notice; or (b) without Cause upon sixty (60) days prior written notice. “Cause” shall include: (i) a breach of the terms of the Consulting Agreement which is not cured within thirty (30) days of written notice of such default or (ii) the commission of any act of fraud, embezzlement or deliberate disregard of a rule or policy of our company.

Outstanding Equity Awards at Fiscal Year End

2014 Outstanding Equity Awards at Fiscal Year-end Table

The following table sets forth information regarding the outstanding equity awards held by our Named Executive Officers as of the end of our 2014 fiscal year:

    Option Awards  Stock Awards 
    Number of
Securities
Underlying
Unexercised
Options
(#)
  Number of
Securities
Underlying
Unexercised
Options
(#)
  Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
  Option
Exercise
Price
  Option
Expiration
  Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
  Market
Value
of
Shares
or
Units of
Stock
That
Have Not
Vested
  Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or Other
Rights
That
Have Not
Vested
  Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
 
Name   Exercisable  Unexercisable  (#)  ($)  Date  (#)  ($)  (#)  ($) 
J. Michael French (1)     771,000(2)    $1.07   9/15/24            
                                       
Daniel E. Geffken (3)          $                

(1)As per an agreement between Mr. French and our company, options to purchase up to 88,972 shares of common stock previously granted to Mr. French were cancelled effective as of December 31, 2014.
(2)One-third of these options shall vest on September 15, 2015. The remaining options shall vest in 24 equal monthly installments during the two-year period commencing after September 15, 2015.
(3)Pursuant to the Consulting Agreement, effective as of January 9, 2014, that we entered into with Danforth, an entity controlled by Mr. Geffken, we issued to Danforth, upon the effectiveness of the Consulting Agreement, 10-year warrants to purchase up to 100,800 shares of our common stock, which warrants are exercisable at $0.481 per share and vest on a monthly basis over the two-year period beginning on January 9, 2014.

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Option re-pricings

We haveCompany has not engaged ingranted any option re-pricings or other modifications to any of our outstanding equity awards to our Named Executive Officers during fiscal year 2014.its named executive officer (as that term is defined under Item 402 of Regulation S-K).

Director Compensation of Directors

2014 Director Compensation TableProgram

Our director compensation program generally entails paying our non-employee directors cash fees for their services. With the exception of Mr. Subhan, who pursuant to an agreement with the Company was entitled to receive monthly payments of $4,167, or $50,000 per year for services rendered as a member of the Board and for scientific consulting prior to his employment, and Mr. Waerness, who was entitled to an annual cash payment of $30,000 (payable quarterly) for his services as Chairman of the Board, our compensation program for directors for 2021 consisted of an annual cash payment of $24,000 per year, payable quarterly.

Director Compensation at Fiscal Year-End

The following Director Compensation table sets forth information concerning compensation for services rendered by our independentnon-employee directors for fiscalthe year 2014.ended December 31, 2021.

Name Fees Earned
or
Paid in Cash
($)
  Stock
Awards
($)
  Option
Awards
($)(3)
  All Other
Compensation
($)
  Total
($)
 
Stefan C. Loren, Ph.D. (1)(2) $32,500     $15,579     $48,079 
Joseph W. Ramelli (1)(2)  32,500      15,579      48,079 
Philip C. Ranker(2)  32,500      15,579       48,079 
Donald A. Williams(4)  22,500      15,579       38,079 
Total $120,000     $62,316     $182,316 
Name 

Fees Earned or Paid in Cash

($)

  

Total

($)

 
Charles Rice $24,000  $24,000 
Trond Waerness  16,000   16,000 
Zahed Subhan(1)  8,334   8,334 
         
Total  48,334   48,334 

(1)(1)Due to our financial condition prior to March 2014, neither Dr. Loren nor Mr. Ramelli, each of whom was appointed in August 2012, received any cash payments during 2012 or 2013 in connection with their service to our company. However, in January 2014 we issued to each such non-employee director 151,000 shares of common stock in lieu of approximately $50,000 ofZahed Subhan’s fees otherwise due to such director with respect to his service on the Board representing approximately $10,000 of fees from the period August 2012 through December 2012 and approximately $40,000 of feesearned for 2013. The number of shares issued to each of Dr. Loren and Mr. Ramelli was based on the volume weighted average price of our common stock for the 10-trading day period ending on December 31, 2013 (i.e., $0.33).

(2)On January 1, 2014, we issued 30,303 shares of our common stock to each of Dr. Loren, Mr. Ramelli and Mr. Ranker, in lieu of a cash payment in the amount of $10,000, as compensation for service on our Board of Directors during the first quarter of 2014. The number of shares issued to each director was based on the volume weighted average price of our common stock for the 10-trading day period ending on December 31, 2013 (i.e., $0.33).

(3)Represents the aggregate grant date fair value under FASB ASC Topic 718 of options to purchase shares of our common stock granted during 2014. On September 15, 2014, we granted to each of our non-employee directors options to purchase up2021 were pursuant to an aggregateagreement dated November 1, 2021, between Mr. Subhan and the Company which provides for payment of 62,000 shares of our common stock at an exercise price of $1.07$4,167 per share, of which 43,000 options represented the initial option grant to such non-employee directors, and 19,000 options represented the option grant covering service during the third and fourth quarters of 2014.

(4)Mr. Williams becamemonth for services rendered as a member of our Board and for scientific consulting. The agreement terminated upon execution of Directors on September 15, 2014.his employment agreement dated June 17, 2022.

As of December 31, 2014, Dr. Loren, Mr. Ramelli and Mr. Williams each held options to purchase up to 62,000 shares of our common stock, and Mr. Ranker held options to purchase up to 64,500 shares of our common stock.

J. Michael French, current director, has not been included in the Director Compensation Table because he is a Named Executive Officer and does not receive any additional compensation for services provided as a director.

2014 Director Compensation Program: On January 1, 2014, our Board approved a compensation program for non-employee directors during the 2014 calendar year that consisted of an annual fee of $40,000, payable in advance. We paid the portion of this annual fee attributable to the first quarter of 2014 by the issuance of 30,303 shares of our common stock to each of our non-employee directors who served as members of our Board of Directors during the first quarter of 2014, with the number of shares issued to each director being based on the volume weighted average price of our common stock for the 10-trading day period ending on December

51

31, 2013 (i.e., $0.33). On September 15, 2014, the Board revised the compensation program for non-employee directors, effective starting in the third quarter of 2014, so that it would consist of: (i) an initial grant of 5-year options to purchase up to 43,000 shares of our common stock, which options shall vest 50% immediately and 50% after one year; (ii) an annual grant of 5-year options to purchase up to 38,000 shares of our common stock, which options shall vest 50% immediately and 50% after one year; and (iii) an annual cash payment of $45,000 per year, payable quarterly in advance.

Equity Compensation Plan Information

The following table provides aggregate information as of the end of the 2014 fiscal yearSeptember 30, 2022 with respect to all of the compensation plans under which our common stock is authorized for issuance, includingfor our 2004 Stock Incentive Plan (the “2004 Plan”), our 2008 Stock Incentive Plan (the “2008 Plan”) and our 20142018 Long-Term Incentive Plan (the “2014 Plan”):Plan:

    Number of Securities 
    Remaining Available
for
 
 Number of
Securities to be
 Weighted-
Average
 Future Issuance
Under Equity
 
 Issued Upon
Exercise of
 Exercise Price
of
 Compensation Plans
(Excluding Securities
 
Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) 
 Outstanding
Options
 Outstanding
Options
 Reflected in
Column(a))
  (a) (b) (c) 
Equity compensation plans approved by security holders  1,084,106(1)  5.52   8,412,519   -   -   446,500 
Equity compensation plans not approved by security holders(1)  19,000  $19.60   - 
Total  1,084,106   5.52   8,412,519   19,000       446,500 

(1)Consists of: (i) 106 shares of common stock underlying awards made pursuantoptions granted to non-employees during the 2004 Plan, (ii) 45,000 shares of common stock underlying awards made pursuant to the 2008 Plan and (iii) 1,039,000 shares of common stock underlying awards made pursuant to the 2014 Plan.year ended 2018.

5258

 

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the ownership of our common stock as of August 13, 2015 (the “Determination Date”) by: (i) each current director of our company; (ii) each of our Named Executive Officers; (iii) all current executive officers and directors of our company as a group; and (iv) all those known by us to be beneficial owners of more than five percent (5%) of our common stock.

Beneficial ownership and percentage ownership are determined in accordance with the rules of the SEC. Under these rules, beneficial ownership generally includes any shares as to which the individual or entity has sole or shared voting power or investment power and includes any shares that an individual or entity has the right to acquire beneficial ownership of within 60 days of the Determination Date, through the exercise of any option, warrant or similar right (such instruments being deemed to be “presently exercisable”). In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of our common stock that could be issued upon the exercise of presently exercisable options and warrants are considered to be outstanding. These shares, however, are not considered outstanding as of the Determination Date when computing the percentage ownership of each other person.

To our knowledge, except as indicated in the footnotes to the following table, and subject to state community property laws where applicable, all beneficial owners named in the following table have sole voting and investment power with respect to all shares shown as beneficially owned by them. Percentage of ownership is based on 26,451,237 shares of common stock outstanding as of the Determination Date. Unless otherwise indicated, the business address of each person in the table below is c/o Marina Biotech, Inc., P.O. Box 1559, Bothell, WA 98041. No shares identified below are subject to a pledge.

Name Number of
Shares
  Percent of
Shares
Outstanding
(%)
 
Officers and Directors:        
J. Michael French, Director, President and CEO  1,100,699(1)  4.1%
Stefan Loren, Ph.D., Director  266,335(2)  1.0%
Joseph W. Ramelli, Director  288,603(3)  1.1%
Philip C. Ranker, Director  984,053(4)  3.7%
Donald A. Williams, Director  81,000(5)  * 
Daniel E. Geffken, Interim CFO  94,500(6)  * 
All directors and executive officers as a group (6 persons)  2,815,190(7)  10.37%


* Beneficial ownership of less than 1.0% is omitted.

(1)Includes presently exercisable options to purchase 278,416 shares of common stock. Pursuant to a settlement agreement, certain securities beneficially owned by Mr. French are held in constructive trust by Mr. French for the benefit of Mr. French and his former spouse.
(2)Includes presently exercisable options to purchase 81,000 shares of common stock and presently exercisable warrants to purchase 4,032 shares of common stock.
(3)Includes presently exercisable options to purchase 81,000 shares of common stock.
(4)Includes presently exercisable options to purchase 83,500 shares of common stock.
(5)Consists of presently exercisable options to purchase 81,000 shares of common stock.
(6)Consists of presently exercisable warrants to purchase up to 94,500 shares of common stock issued to Danforth Advisors, LLC.
(7)Includes presently exercisable options to purchase 604,916 shares of common stock and presently exercisable warrants to purchase 98,532 shares of common stock.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Approval for Related Party Transactions

It has beenis our practice and policy to comply with all applicable laws, rules and regulations regarding related-person transactions. Our Code of Business Conduct and Ethics requires that all employees, including officers and directors, disclose to the CFOChief Executive Officer the nature of any company business that is conducted with any related party of such employee, officer or director (including any immediate family member of such employee, officer or director, and any entity owned or controlled by such persons). If the transaction involves an officer or director of our company,Company, the CFOChief Executive Officer must bring the transaction to the attention of the Audit Committee or, in the absence of an Audit Committee the full Board, which must review and approve the transaction in writing in advance. In consideringreviewing such transactions the Audit Committee (or the full Board as applicable) takes into accountconsiders the relevant available facts and circumstances.

Related Party Transactions

Since January 1, 2020, other than as disclosed below, there have been no transactions in which the Company was a participant and in which any director or executive officer of the Company, any known 5% or greater stockholder of the Company or any immediate family member of any of the foregoing persons, had a direct or indirect material interest as defined in Item 404(a) of Regulation S-K. As permitted by the SEC rules, discussion of employment relationships or transactions involving the Company’s executive officers and directors, and compensation solely resulting from such employment relationships or transactions, or service as a director of the Company, as the case may be, has been omitted to the extent disclosed in the Executive Compensation or the Director Compensation sections of this prospectus, as applicable.

59

 

SELLING STOCKHOLDERS

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL

OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the namebeneficial ownership of our common stock as of November 18, 2022, by: (i) each selling stockholdercurrent director of our Company; (ii) each executive officer (named executive officer); (iii) all current executive officers and the numberdirectors of our Company as a group; and (iv) all those known by us to be beneficial owners of more than 5% of our common stock.

Percentage of beneficial ownership is calculated based on 3,160,877 shares of common stock that each selling stockholder may offer from timeoutstanding as of November 18, 2022. Beneficial ownership is determined in accordance with the rules of the SEC which generally attribute beneficial ownership of securities to time pursuantpersons who possess sole or shared voting power or investment power with respect to this prospectus. The shares of common stock that may be offered by the selling stockholders hereunder may be acquired by the selling stockholders upon the exercise by the selling stockholders of warrants to purchasethose securities and includes shares of our common stock issuable pursuant to the exercise of stock options, warrants, preferred stock or other securities that are held byimmediately exercisable or convertible or exercisable or convertible within 60 days of November 18, 2022.

To calculate a stockholder’s percentage of beneficial ownership of common stock, we must include in the selling stockholdersnumerator and that were previously issued in private transactions by our company. Thedenominator those shares of common stock underlying options, warrants and convertible securities that may be offered by the selling stockholders hereunder consist of 2,750,000 sharessuch stockholder is considered to beneficially own. Shares of common stock issuable upon the conversion of Series D Stock hold by the selling stockholdersunderlying options, warrants and 3,437,500 shares of common stock issuable upon the exercise of common stock purchase warrantsconvertible securities held by other stockholders, however, are disregarded in this calculation. Therefore, the selling stockholders. Except as otherwise indicated, we believe thatdenominator used in calculating beneficial ownership of each of the stockholders may be different.

To our knowledge, except as indicated in the footnotes to the following table, and subject to state community property laws where applicable, all beneficial owners and selling stockholders listed below hasnamed in the following table have sole voting and investment power with respect to suchall shares shown as beneficially owned by them. Unless otherwise indicated, the business address of common stock, subject to community property laws, where applicable.

Except as notedeach person in the table below none of the selling stockholders has had a material relationship with us other than as a stockholder at any time within the past three years or has ever been one of our or our affiliates’ officers or directors.  Each of the selling stockholders has acquired the Series D Stock, and the warrants to purchase the shares of our common stock to be resold hereunder, in the ordinary course of business and, at the time of acquisition, none of the selling stockholders was a party to any agreement or understanding, directly or indirectly, with any person to distribute the shares of common stock to be resold by such selling stockholder under the registration statement of which this prospectus forms a part.is c/o Adhera Therapeutics, Inc., 8000 Innovation Parkway, Baton Rouge, LA 70820.

Because a selling stockholder may sell all, some or none of the shares of common stock that it holds that are covered by this prospectus, and because the offering contemplated by this prospectus is not underwritten, no estimate can be given as to the number of shares of our common stock that will be held by a selling stockholder upon termination of the offering. The information set forth in the following table regarding the beneficial ownership after resale of shares is based upon the assumption that the selling stockholders will sell all of the shares of common stock covered by this prospectus.

Beneficial Owner 

Amount of

Common Stock Beneficially Owned and

Nature of Beneficial Ownership (1)

 Percent of
Class (1)
 Percent of
Class after the Offering (1)
Officers and Directors:                       
Andrew Kucharchuk  -     *   %
Charles Rice  -     *   %
Trond Waerness  -     *   %
Zahed Subhan  -     *   %
All officers and directors as a group (4 persons)      *     
             
5% Stockholders:            
Cavalry Fund I.(2)  1,112,777   26.04%  %
Vuong Trieu, Ph.D. (4)  589,736   15.72%  %
GS Capital Fund(3)  649,847   17.05%  %
Raymond Debane. (5)  293,211   8.49%  %
SE Holdings. (6)  255,479   7.48%  %
ELI Properties Trust. (7)  255,711   7.48%  %
Steven Newby. (8)  233,445   7.21%    

In accordance with the rules and regulations of the SEC, in computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, shares issuable through the exercise of any option, warrant or right, through conversion of any security held by that person that are currently exercisable or that are exercisable within 60 days are included. These shares are not, however, deemed outstanding for the purpose of computing the percentage ownership of any other person.

  Shares Owned Prior to
the Offering
  Number of
Shares
Offered
  Shares Owned After
the Offering
 
Name Number  Percent (1)  Shares  Number  Percent (1) 
Steven T. Newby (2)  17,143,333   39.7%  4,500,000   12,643,333   32.7%
James H. Stebbins (3)  3,018,509   10.5%  1,125,000   1,893,519   6.9%
Lincoln Park Capital Fund, LLC (4)  567,500   2.1%  562,500   5,000   * 

__________

* Less than 1%.

(1)(1)BasedApplicable percentages are based on 26,451,237 shares issued and outstanding as of August 13, 2015.

(2)We issued to the selling stockholder 160 shares of Series D Stock and warrants to purchase up to 2,500,000 shares of our common stock in August 2015. The Series D Stock is convertible into common stock at a conversion price of $0.40 per share of common stock. The warrants have an exercise price of $0.40 per share of common stock and are exercisable for a period of six (6) years

54

beginning on August 7, 2015. We also issued to an account controlled by the selling stockholder 1,100 shares of our Series C Convertible Preferred Stock (the “Series C Stock”) and warrants to purchase up to 5,500,000 shares of our common stock in March 2014. The Series C Stock is convertible into common stock at a conversion price of $0.75 per share of common stock. The warrants have an exercise price of $0.75 per share of common stock and are exercisable for a period of five (5) years beginning on September 1, 2014. The Certificate of Designation of Rights, Preferences and Privileges of both the Series D Stock and the Series C Stock, and the warrants that were issued in connection with each financing transaction, contain a provision that limits the selling stockholder’s ability to convert the Series D Stock or the Series C Stock, or to exercise the warrants, as applicable, to the extent that such conversion or exercise would result in the selling stockholder owning in excess of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares upon such conversion or exercise. The number of shares and the percentages set forth in the table above do not give effect to the beneficial ownership limitation with respect to either the Series D Stock, the Series C Stock or the warrants. The address for the selling stockholder is 12716 Split Creek Court, North Potomac, MD.

(3)We issued to the selling stockholder 40 shares of Series D Stock and warrants to purchase up to 625,000 shares of our common stock in August 2015. The Series D Stock is convertible into common stock at a conversion price of $0.40 per share of common stock. The warrants have an exercise price of $0.40 per share of common stock and are exercisable for a period of six (6) years beginning on August 7, 2015. We also issued to an account controlled by the selling stockholder 100 shares of Series C Stock and warrants to purchase up to 500,000 shares of our common stock in March 2014. The Series C Stock is convertible into common stock at a conversion price of $0.75 per share of common stock. The warrants have an exercise price of $0.75 per share of common stock and are exercisable for a period of five (5) years beginning on September 1, 2014. The Certificate of Designation of Rights, Preferences and Privileges of both the Series D Stock and the Series C Stock, and the warrants that were issued in connection with each financing transaction, contain a provision that limits the selling stockholder’s ability to convert the Series D Stock or the Series C Stock, or to exercise the warrants, as applicable, to the extent that such conversion or exercise would result in the selling stockholder owning in excess of 4.99% of the number of3,160,877 shares of common stock outstanding immediatelyas of November 18, 2022. Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days after giving effectthe date of determination, whether upon the exercise of options, warrants or conversion of notes. Unless otherwise indicated in the footnotes to this table, we believe that each of the issuance of shares upon such conversion or exercise. The number of shares and the percentages set forthstockholders named in the table above do not give effect to the beneficial ownership limitationhas sole voting and investment power with respect to either the Series D Stock, the Series C Stork or the warrants. The address for the selling stockholder is 2001 Spring Road, Suite 700, Oak Brook, IL.

(4)We issued to the selling stockholder 20 shares of Series D Stock and warrants to purchase up to 312,500 shares of our common stock in August 2015. The Certificate of Designation of Rights, Preferences and Privileges of the Series D Stock, and the warrants that were issued in connection therewith, contain a provision that limits the selling stockholder’s ability to convert the Series D Stock, or to exercise the warrants, as applicable, to the extent that such conversion or exercise would result in the selling stockholder owning in excess of 4.99% of the number of shares of common stock indicated as beneficially owned by them.

60

(2)Includes 551,459 warrants currently exercisable for common stock and 561,318 shares issuable upon the conversion of outstanding immediately after giving effectconvertible debt and excludes 2,079,700 shares issuable upon conversion of outstanding convertible notes and 3,251,153 shares issuable upon the exercise of outstanding warrants as of November 18, 2022 as a result of a 4.99% blocker.
(3)Dr. Trieu previously served as an executive officer and as a director of our company. Includes 130,922 shares of common stock and exercisable warrants to the issuancepurchase 56,775 shares of common stock held by Dr. Trieu. Also includes 115,618 shares upon such conversion or exercise. The numberheld by Autotelic LLC, of which entity Dr. Trieu serves as an executive officer, and 4,311 shares and the percentages set forth in the table above do not give effect to the beneficial ownership limitation with respect to either the Series D Stock or the warrants. Joshua Scheinfeld and Jonathan Cope, the principalsheld by LipoMedics Inc., of which entity Dr. Trieu serves as Chairman of the selling stockholder, are deemed to be beneficial ownersBoard and as an executive officer. Also includes the following shares held by Autotelic Inc., of allwhich entity Dr. Trieu serves as Chairman of the securitiesBoard: (i) 146,764 shares of our company that are owned bycommon stock; (ii) presently exercisable warrants to purchase 135,349 shares of common stock. Information based on a Schedule 13D/A filed with the selling stockholder. Messrs. ScheinfeldSEC on April 27, 2018.
(4)Includes 333,761 warrants currently exercisable for common stock and Cope have shared voting316,086 shares issuable upon the conversion of outstanding convertible debt and disposition power overexcludes 593,937 shares issuable upon conversion of outstanding convertible notes as of November 18, 2022 as a result of a 4.99% blocker.
(5)Includes 143,211 shares of common stock, 150,000 warrants to purchase commons stock and does not include 124,543 shares issuable upon the securitiesconversion of our company that are owned byoutstanding Series E Preferred Stock including accrued dividends as of November 18, 2022, as a result of a 4.99% blocker.
(6)Includes 97,436 warrants currently exercisable for common stock and 158,043 shares issuable upon the selling stockholder. The addressconversion of outstanding convertible debt and excludes 205,714 shares issuable upon exercise of outstanding warrants as of November 18, 2022 as a result of a 4.99% blocker.
(7)Includes 143,211 shares of common stock, 112,500 warrants to purchase commons stock and does not include 57,545 shares issuable upon the conversion of outstanding Series E Preferred Stock including accrued dividends as of November 18, 2022 as a result of a 4.99% blocker.
(8)Includes 158,445 shares of common stock and 75,000 warrants currently exercisable for the selling stockholder is 440 N. Wells Street, Suite 410, Chicago, IL 60654.common stock.

55

PLANDESCRIPTION OF DISTRIBUTIONSECURITIES

Each selling stockholderGeneral

Our authorized capital stock currently consists of the180,100,000 shares, and anyconsisting of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares covered hereby on the OTCQB or any other stock exchange, market or trading facility on which the securities are traded or in private transactions.  These sales may be at fixed or negotiated prices.  A selling stockholder may use any one or more of the following methods when selling shares:

·ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

·block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;

·purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

·an exchange distribution in accordance with the rules of the applicable exchange;

·privately negotiated transactions;

·in transactions through broker-dealers that agree with the selling stockholders to sell a specified number of such securities at a stipulated price per security;

·through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

·a combination of any such methods of sale; or

·any other method permitted pursuant to applicable law.

The selling stockholders may also sell shares under Rule 144, if available, rather than under this prospectus.

Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales.  Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated.

In connection with the sale of the shares or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the shares in the course of hedging the positions they assume.  The selling stockholders may also sell shares short and deliver these shares to close out their short positions, or loan or pledge the shares to broker-dealers that in turn may sell these securities.  The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

We will pay certain fees and expenses incurred by us incident to the registration of the shares. 

The selling stockholders may be deemed to be statutory underwriters under the Securities Act. In addition, any broker-dealers who act in connection with the sale of the shares hereunder may be deemed to be “underwriters” within the meaning of Section 2(11) of the Securities Act, and any commissions received by them and profit on any resale of the shares as principal may be deemed to be underwriting discounts and commissions under the Securities Act. Because selling stockholders may be deemed to be “underwriters” within the meaning of the Securities Act, they may be subject to the prospectus delivery requirements of the Securities Act including Rule 172 thereunder.

The selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M, which may limit the timing of purchases and sales of any of the securities by the selling stockholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the securities to engage in market-making activities with respect to the securities. All of the foregoing may affect the marketability of the securities and the ability of any person or entity to engage in market-making activities with respect to the securities.

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There can be no assurance that the selling stockholders will sell any or all of the180,000,000 shares of common stock, registered pursuant to the registration statement of which this prospectus forms a part.

We are not aware of any plans, arrangements or understandings between the selling stockholderspar value $0.006 per share, and any underwriter, broker-dealer or agent regarding the sale of100,000 shares of common“blank check” preferred stock, by the selling stockholders.par value $0.01 per share.

DESCRIPTION OF CAPITAL STOCK

The following is a summarydescription summarizes important terms of all material characteristicsthe classes of our capital stock as set forth in our certificate of incorporation and bylaws. Thecapital. This summary does not purport to be complete and is qualified in its entirety by referencethe provisions of our articles of incorporation as amended, restated and supplemented to date, or our certificatearticles of incorporation, and our second amended and restated bylaws, andor our bylaws, which have been filed as exhibits to the provisionsregistration statement of the General Corporation Lawwhich this prospectus is a part.

Units

Each unit consists of the Stateone share of Delaware,common stock and one warrant exercisable for one share of common stock, each as amended,described further below. The units will not be issued or the DGCL.

Common Stock

We are authorized to issue up to 180,000,000certificated. Purchasers will receive only shares of common stock par value $0.006 per share. and warrants. The common stock and warrants may be transferred separately immediately upon issuance.

Common Stock

As of August 13, 2015, 26,451,237 shares of our common stockNovember 18, 2022, there were issued and outstanding, 8,000,000 unissued shares of common stock were reserved for issuance upon the conversion of outstanding shares of our Series C Convertible Preferred Stock, 2,750,000 unissued shares of common stock were reserved for issuance upon the conversion of outstanding shares of our Series D convertible Preferred Stock, 24,752,128 unissued shares of common stock were reserved for issuance upon the exercise of outstanding warrants and 1,316,106 unissued shares of common stock were reserved for issuance upon the exercise of outstanding options.

All3,160,877 shares of common stock issued will be duly authorized, fully paid and non-assessable. The holdersoutstanding.

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Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a votestockholder vote. Holders of common stock do not have cumulative voting rights. Therefore, holders of a majority of the holdersvoting power of our common stock. Under Delaware law, stockholders generally are not liable for our debts or obligations. Our certificate of incorporation does not authorize cumulative voting for the election of directors can elect all of the directors. SubjectHolders of the majority of the voting power of the Company’s stockholders, outstanding and entitled to the rightsvote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of stockholders. A vote by the holders of any classa majority of our capital stock having any preferencethe voting power of the Company’s stockholders is required to effectuate certain fundamental corporate changes such as liquidation, merger or priority over our common stock,an amendment to the holdersCompany’s certificate of sharesincorporation.

Holders of our common stock are entitled to receiveshare in all dividends that are declared by the boardBoard of directors out ofDirectors, in its discretion, declares from legally available funds. In the event of oura liquidation, dissolution or winding-up, the holders of common stock are entitledwinding up, each outstanding share entitles its holder to share ratablyparticipate pro rata in our netall assets remainingthat remain after payment of liabilities subject to prior rightsand after providing for each class of preferred stock, if any, then outstanding. Ourhaving preference over the common stock. The Company’s common stock has no preemptivepre-emptive rights, no conversion rights redemption rights or sinking fund provisions, and there are no dividendswithdrawal provisions applicable to the Company’s common stock.

Warrants to be Issued in arrearsthis Offering

The following summary of certain terms and provisions of the warrants included in the units offered hereby is not complete and is subject to, and qualified in its entirety by the provisions of the form of warrant, which is filed as an exhibit to the registration statement of which this prospectus is a part. Prospective investors should carefully review the terms and provisions set forth in the form of warrant.

Exercisability. The warrants are exercisable at any time after their original issuance and at any time up to the date that is five years after their original issuance. The warrants will be exercisable, at the option of each holder, in whole or default. Allin part by delivering to us a duly executed exercise notice and, at any time a registration statement registering the issuance of the shares of common stock underlying the warrants under the Securities Act is effective and available for the issuance of such shares, or an exemption from registration under the Securities Act is available for the issuance of such shares, by payment in full in immediately available funds for the number of shares of common stock purchased upon such exercise. If a registration statement registering the issuance of the shares of common stock underlying the warrants under the Securities Act is not effective or available and an exemption from registration under the Securities Act is not available for the issuance of such shares, the holder may elect to exercise the warrant through a cashless exercise, in which case the holder would receive upon such exercise the net number of shares of common stock determined according to the formula set forth in the warrant. No fractional shares of common stock will be issued in connection with the exercise of a warrant. In lieu of fractional shares, we will pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price.

Exercise Limitation. A holder will not have the right to exercise any portion of the warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days following notice from the holder to us.

Exercise Price. The exercise price per whole share of common stock purchasable upon exercise of the warrants is            per share or 100% of public offering price of the unit. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock and also upon any distributions of assets, including cash, stock or other property to our stockholders.

Transferability. Subject to applicable laws, the warrants may be offered for sale, sold, transferred or assigned without our consent.

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Fundamental Transactions. In the event of a fundamental transaction, as described in the warrants and generally including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, the holders of the warrants will be entitled to receive upon exercise of the warrants the kind and amount of securities, cash or other property that the holders would have equal distribution, liquidation andreceived had they exercised the warrants immediately prior to such fundamental transaction.

Rights as a Stockholder. Except as otherwise provided in the warrants or by virtue of such holder’s ownership of shares of our common stock, the holder of a warrant does not have the rights or privileges of a holder of our common stock, including any voting rights, until the holder exercises the warrant.

Governing Law. The warrants and have no preferences or exchange rights.the warrant agency agreement are governed by law.

Blank Check Preferred Stock

General

Our boardarticles of directors hasincorporation authorize the authority, without action by the stockholders, to designate and issue up toissuance of 100,000 shares of preferred stock, par value $0.01 per share, in one or more series, subject to any limitations prescribed by law, without further vote or action by the stockholders. Each such series of preferred stock shall have such number of shares, designations, preferences, voting powers, qualifications, and to designate thespecial or relative rights preferences andor privileges as shall be determined by our Board of each series, any or all ofDirectors, which may be greater than theinclude, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

Series C Preferred Stock

Each share of Series C Preferred Stock has a stated value of $5,000 per share, has a $5,100 liquidation preference per share, has voting rights of our common stock. We have designated 1,000 shares as Series B Preferred Stock (“Series B Preferred”)666.67 votes per share, and 90,000 shares as Series A Junior Participating Preferred Stock (“Series A Preferred”). Nois convertible into shares of Series B Preferred or Series A Preferred are outstanding. In March 2014, we designated and issued 1,200common stock at a conversion price of $150.00 per share.

As of the date of this prospectus, 100 shares of Series C Convertible Preferred Stock for $6.0 million,were outstanding.

Series D Preferred Stock

Each share of Series D Preferred Stock has a stated value of $5,000 per share, has a liquidation preference of $300 per share, has voting rights of 1,250 votes per share and in August 2015, we designatedis convertible into shares of common stock at a conversion price of $80.00 per share. The Series D Preferred Stock has a 5% stated dividend rate when, and issued 220if declared by the Board of Directors, is not redeemable and has voting rights on an as-converted basis.

As of the date of this prospectus, 40 shares of Series D Preferred Stock were outstanding.

Series E Convertible Preferred Stock for $1.1 million.and Warrants

We may issue shares of our authorized but unissued preferred stock in one or more series having the rights, privileges, and limitations, including voting rights, conversion rights, liquidation preferences, dividend rights and redemption rights, as may, from time to time, be determined by our board of directors.The Series E Preferred stock may be issued in the future in connection with acquisitions, financings, or other matters, as our board of directors deems appropriate. In the event that we determine to issue any shares of our authorized but unissued preferred stock, a certificate of designation containing the rights, privileges and limitations of this series of preferred stock will be filed with the Secretary of State of the State of Delaware. The effect of this preferred stock designation power is that our board of directors alone, subject to Federal securities laws, applicable blue sky laws, and Delaware law, may be able to authorize the issuance of preferred stock which could have the effect of delaying, deferring, or preventing a change in control without further action by our stockholders, and may adversely affect the voting and other rights of the holders of our common stock.

Series D Stock

A total of 220 shares of Series D Stock have been authorized for issuance under the Certificate of Designation of Rights, Preferences and Privileges of Series D Stock (the “Certificate of Designation”) which we filed with the Secretary of State of the State of Delaware on August 7, 2015. The shares of Series D Stock havehas a stated value of $5,000 per share and accrues 8% dividends per annum that are initially convertible into

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shares of commonpayable in cash or stock at a price of $0.40 per share (subject to appropriate adjustment for certain events, including stock splits, stock dividends, combinations, recapitalizations or other recapitalizations affecting the Series D Stock).

Under the Certificate of Designation, the holders of Series D Stock have the following rights, preferences and privileges:

Company’s discretion. The Series DE Preferred Stock may,has voting rights, dividend rights, liquidation preferences, conversion rights at the option of the holder be converted at any time or from time to timeand anti-dilution rights. Series E Preferred Stock is convertible into fully paid and non-assessable shares of common stock at $10.00. Anti-dilution price protection on Series E Preferred Stock expired on February 10, 2020. Warrants issued with Series E Preferred Stock have anti-dilution price protection, are exercisable for a period of five years, and contain customary exercise limitations.

As of the conversion price in effect at the timedate of conversion. this prospectus, 267 Series E shares were outstanding.

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Series F Convertible Preferred Stock and Warrants

The number of shares into which one share of Series DF Preferred Stock shall be convertible is determined by dividing thehas a stated value of $5,000 per share by the initial conversion price.

The Series D Stock will automatically be converted into commonand accrues 8% dividends per annum that are payable in cash or stock at the then applicableCompany’s discretion. The Series F Preferred Stock has voting rights, dividend rights, liquidation preferences, conversion price upon the earliest to occur of: (a) the written election of the holders of a majority of the outstanding shares of Series D Stock; and (b)rights at the election of our company, the closing of a “Qualified Acquisition” (as defined in the Certificate of Designation).

On any matter presented to the holders of common stock for their action or consideration, each holder of outstanding shares ofholder’s option and anti-dilution rights. Series D Stock shall be entitled to vote together with the holders of common stock (and the holders of any other class or series of the preferred stock of the company that by its terms shall vote together with the holders of common stock) as a single class on an as-converted basis. In addition, for as long as any shares of Series D Stock are outstanding, we shall not, without the affirmative vote of the holders of at least a majority of the Series D Stock: (a) alter or change adversely the powers, preferences or rights given to the Series D Stock or alter or amend the Certificate of Designation; (b) authorize or create any class of stock ranking senior to, or otherwisepari passu with, the Series D Stock; (c) amend our organizational documents in any manner that adversely affects any rights of the Series D Stock; (d) increase the number of authorized shares of Series D Stock; or (e) enter into any agreement with respect to any of the foregoing.

In the event of any voluntary or involuntary liquidation or dissolution of our company, before any payment shall be made to the holders of common stock, the holders of shares of Series D Stock then outstanding shall be entitled to be paid an amount per share of Series D Stock equal to the greater of (a) the stated value for such share of Series D Stock, plus any accrued but unpaid dividends thereon, whether or not declared, together with any other dividends declared but unpaid thereon, or (b) the amount as would have been payable had such share of Series D Stock been converted into common stock immediately prior to such liquidation or dissolution. If upon any liquidation or dissolution of our company, the funds and assets available for distribution are insufficient to pay the holders of Series D Stock and the holders of our Series C ConvertibleF Preferred Stock the full amount to which they are entitled, the holders of shares of Series D Stock and the holders of shares of Series C Convertible Preferred Stock shall share ratably in any distribution of the funds and assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares of Series D Stock and Series C Convertible Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. The remaining funds shall be distributed to the holders of common stock.

Holders of Series D Stock shall be entitled to receive dividends at the annual rate of 5% of the stated value per share of Series D Stock, when, as and if declared by our Board of Directors. In addition, the holders of Series D Stock shall be entitled to receive, and we shall pay, dividends on shares of Series D Stock (on an as-if-converted-to-common-stock basis) equal to and in the same form as dividends (other than dividends in the form of common stock) actually paid on shares of the common stock or other securities ranking junior to the Series D Stock when, as and if such dividends (other than dividends in the form of common stock) are paid on shares of the common stock or junior securities.

Warrants

The selling stockholders hold warrants to purchase up to an aggregate of 3,437,500 shares of our common stock, which are exercisable at a price of $0.40 per share, are currently exercisable, and expire on August 7, 2021.

If the registration statement covering the shares issuable upon exercise of any of the foregoing warrants is no longer effective, such warrants may be exercised on a “cashless” basis and, in such event, will be issued with restrictive legends unless such shares are eligible for sale under Rule 144. Warrant holders do not have any voting or other rights as a stockholder of our company. The exercise price and the number ofconvertible into shares of common stock purchasable uponat $10.00. Anti-dilution price protection on Series F Preferred Stock expired on February 10, 2020. Warrants issued with Series F Preferred Stock have anti-dilution price protection, are exercisable for a period of five years, and contain customary exercise limitations.

As of the exercisedate of each warrant are subject to adjustment upon the happeningthis prospectus, no shares of certain events, such as stock dividends, distributions and splits, and the issuanceSeries F Preferred Stock were outstanding.

Series G Convertible Preferred Stock

The Series G Preferred Stock has a stated value of securities at an effective price$5,000 per share and accrues 8% dividends per annum that is less than the exercise price of such warrantsare payable in cash or stock at the timeCompany’s discretion. The Series G Preferred Stock has voting rights, dividend rights, liquidation preferences, conversion rights and anti-dilution rights. Series G Preferred Stock is convertible into shares of such subsequent issuance.common stock at $10.00.

As of the date of this prospectus, no shares of Series G Preferred were outstanding.

Anti-Takeover Provisions

Some provisions of Delaware Anti-Takeover Statutelaw, our amended and restated certificate of incorporation and our bylaws may have the effect of delaying, deferring or discouraging another party from acquiring control of us.

Delaware Law

We are subject to Section 203 of the DGCL. This lawDelaware General Corporation Law, which regulates, subject to some exceptions, acquisitions of publicly-held Delaware corporations. In general, Section 203 prohibits a publicly held Delaware corporationus from engaging in any business combinationa “business combination” with any interested stockholderan “interested stockholder” for a period of three years following the date that the stockholder becameperson becomes an interested stockholder, unless:

prior to the date of the transaction, the board of directors of the corporation approved either the business combination or

58our Board of Directors approved the business combination or the transaction in which the person became an interested stockholder prior to the date the person attained this status;
upon consummation of the transaction that resulted in the person becoming an interested stockholder, the person owned at least 85 percent of our voting stock outstanding at the time the transaction commenced, excluding shares owned by persons who are directors and also officers and issued under employee stock plans under which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
on or subsequent to the date the person became an interested stockholder, our Board of Directors approved the business combination and the stockholders other than the interested stockholder authorized the transaction at an annual or special meeting of stockholders by the affirmative vote of at least 66 2/3 percent of the outstanding stock not owned by the interested stockholder.

the transaction which resulted in the stockholder becoming an interested stockholder;

upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned by persons who are directors and also officers and by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

on or subsequent to the date of the transaction, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.  

Section 203 defines a “business combination” to include:

any merger or consolidation involving us and the interested stockholder;
any sale, transfer, pledge or other disposition involving the interested stockholder of 10 percent or more of our assets;
in general, any transaction that results in the issuance or transfer by us of any of our stock to the interested stockholder;

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Any merger or consolidation involving the corporation and the interested stockholder;

Any sale, transfer, pledge or other disposition of 10% or more of our assets involving the interested stockholder;
any transaction involving us that has the effect of increasing the proportionate share of our stock owned by the interested stockholders; and
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges, or other financial benefits provided by or through us.

In general, any transaction that results in the issuance or transfer by a corporation of any of its stock to the interested stockholder; or

The receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

In general, Section 203 defines an “interested stockholder” as any person who, together with the person’s affiliates and associates, owns, or within three years prior to the time of determination of interested stockholder status did own, 15 percent or more of a corporation’s voting stock.

Amended and Restated Certificate of Incorporation and Bylaw Provisions

Following the completion of this offering, our amended and restated certificate of incorporation and bylaws will provide that:

no action can be taken by stockholders except at an annual or special meeting of the stockholders called in accordance with our bylaws, and stockholders may not act by written consent;
the approval of holders of two-thirds of the shares entitled to vote at an election of directors will be required to adopt, amend or repeal our bylaws or amend or repeal the provisions of our certificate of incorporation regarding the election and removal of directors and the ability of stockholders to take action;
our Board of Directors will be expressly authorized to make, alter or repeal our bylaws;
stockholders may not call special meetings of the stockholders or fill vacancies on the Board of Directors;
our Board of Directors will be divided into three classes of service with staggered three-year terms. This means that only one class of directors will be elected at each annual meeting of stockholders, with the other classes continuing for the remainder of their respective terms;
our Board of Directors will be authorized to issue preferred stock without stockholder approval;
directors may only be removed for cause by the holders of two-thirds of the shares entitled to vote at an election of directors; and
we will indemnify officers and directors against losses that may incur investigations and legal proceedings resulting from their services to us, which may include services in connection with takeover defense measures.

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UNDERWRITING

Aegis Capital Corp. is acting as the underwriter of the offering. We have entered into an entity underwriting agreement dated , 2022 with the underwriter. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriter named below, and the underwriter named below has severally agreed to purchase, at the public offering price less the underwriting discounts set forth on the cover page of this prospectus, the number of units listed next to its name in the following table:

UnderwriterNumber of Units
Aegis Capital Corp.
Total

The underwriter is committed to purchase all the units offered by us, other than those covered by the over-allotment option to purchase additional shares of common stock and/or warrants described below, if they purchase any units. The obligations of the underwriter may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement, the underwriter’s obligations are subject to customary conditions, representations and warranties contained in the underwriting agreement, such as receipt by the underwriter of officers’ certificates and legal opinions.

We have agreed to indemnify the underwriter against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriter may be required to make in respect thereof.

The underwriter is offering the units, shares of common stock and warrants subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and other conditions specified in the underwriting agreement. The underwriter reserves the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

We have granted the underwriter an over-allotment option. This option, which is exercisable for up to 45 days after the date of this prospectus, permits the underwriter to purchase up to an aggregate of                   additional shares of common stock and/or warrants to purchase up to              additional shares of common stock (equal to 15% of the common stock and warrants included in the units sold in the offering) in any combination thereof, solely to cover over-allotments, if any. The purchase price to be paid per additional share of common stock shall be equal to the public offering price of one unit consisting of common stock and/or warrants in any combination at a purchase price of $           per share of common stock and $           per warrant, less the underwriting discount, and the purchase price to be paid per additional warrant shall be $          . If this option is exercised in full, the total price to the public will be $           and the total net proceeds, before expenses, to us will be $          .

Discounts, Commissions and Reimbursement

The following table shows the public offering price, underwriting discount and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriter of their over-allotment option.

Per UnitTotal with no
Over-Allotment
Total with
Over-Allotment
Public offering price$$$
Underwriting discount (7.0%)$$$
Non-accountable expense allowance (1.0%)((1)$$$
Proceeds, before expenses, to us$$$

(1) We have also agreed to pay a non-accountable expense allowance to the underwriter equal to 1.0% of the gross proceeds received in this offering.

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The underwriter proposes to offer the units to the public at the public offering price set forth on the cover of this prospectus. In addition, the underwriter may offer some of the units to other securities dealers at such price less a concession not in excess of $ per unit. If all of the units offered by us are not sold at the public offering price, the underwriter may change the offering price and other selling terms by means of a supplement to this prospectus.

The Company will be responsible for and will pay all expenses relating to the offering, including, without limitation, (a) all filing fees and expenses relating to the registration of the securities with the SEC; (b) all FINRA public offering filing fees; (c) all fees and expenses relating to the listing of the Company’s securities on Nasdaq; (d) all fees, expenses and disbursements relating to the registration or qualification of the securities under the “blue sky” securities laws of such states and other jurisdictions as the underwriter may reasonably designate (including, without limitation, all filing and registration fees, and the reasonable fees and disbursements of the Company’s “blue sky” counsel, which will be the underwriter’s counsel) unless such filings are not required in connection with the Company’s proposed Nasdaq listing; (e) all fees, expenses and disbursements relating to the registration, qualification or exemption of the securities under the securities laws of such foreign jurisdictions as the underwriter may reasonably designate; (f) the costs of all mailing and printing of this prospectus; (g) transfer and/or stamp taxes, if any, payable upon the transfer of securities from the Company to the underwriter; and (h) the fees and expenses of the Company’s accountants. We have also agreed to pay up to $100,000 of the underwriter’s expenses relating to the offering, including for road show, diligence, and legal expenses.

We estimate that the total expenses of the offering payable by us, excluding the discount and non-accountable expense allowance, will be approximately $[      ].

Discretionary Accounts

The underwriter does not intend to confirm sales of the securities offered hereby to any accounts over which they have discretionary authority.

Company Standstill

The Company has agreed that, for a period of 180 days from the closing date, without the prior written consent of the underwriter, it will not (a) offer, sell, issue, or otherwise transfer or dispose of, directly or indirectly, any equity securities of the Company or any securities convertible into or exercisable or exchangeable for equity securities of the Company; (b) file or caused to be filed any registration statement with the SEC relating to the offering of any equity securities of the Company or any securities convertible into or exercisable or exchangeable for equity securities of the Company; or (c) enter into any agreement or announce the intention to effect any of the actions described in (a) or (b) above (all of such matters, the “Standstill”). So long as none of such equity securities shall be saleable in the public market until the expiration of the 180 day period described above, the following matters shall not be prohibited by the Standstill: (i) the adoption of an equity incentive plan and the grant of awards or equity pursuant to any equity incentive plan, and the filing of a registration statement on Form S-8; and (ii) the issuance of equity securities in connection with an acquisition or a strategic relationship, which may include the sale of equity securities. In no event should any equity securities transaction during the Standstill period result in the sale of equity at an offering price to the public less than that of the offering price of this offering.

Lock-Up Agreements

Pursuant to “lock-up” agreements, we and our executive officers, directors, employees and stockholders holding at least 10% of the outstanding common stock have agreed, subject to limited exceptions, without the prior written consent of the underwriter not to directly or indirectly offer to sell, sell, pledge or otherwise transfer or dispose of any of shares of (or enter into any transaction or device that is designed to, or could be expected to, result in the transfer or disposition by any person beneficially owning 15%at any time in the future of) our common stock, enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of our common stock, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any of our other securities or publicly disclose the intention to do any of the foregoing, subject to customary exceptions, for a period of 180 days from the closing date.

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Right of First Refusal and Tail Financing

We have granted the underwriter a right of first refusal, for a period of 12 months from the consummation of this offering, to act as sole book-runner, sole manager, sole placement agent, sole agent, sole book-runner, sole book-running manger and/or sole underwriter, at the underwriter’s sole discretion, for each and every future public and private equity or debt offering or debt refinancing, including all equity linked financings (each, a “Subject Transaction”), during such 12-month period, of the Company, or any successor to or subsidiary of the Company, on terms and conditions customary to the underwriter for such Subject Transactions.

In addition, we have agreed to pay the above cash compensation to the extent that any fund which the underwriter contacted or introduced to us during the term of our engagement agreement with the underwriter provides financing or capital in any public or private offering or capital raising transaction during the six-month period following expiration or termination of our engagement letter with the underwriter.

Underwriter’s Warrants

We have agreed to issue to the underwriter, warrants to purchase up to a total of            shares of common stock equal to 5% of the aggregate number of the shares sold in this offering (excluding the over-allotment option) at an exercise price equal to 125% of the public offering price of the common stock sold in this offering. The Underwriter’s Warrants will be exercisable at any time, and from time to time, in whole or in part, commencing from the closing of the offering and expiring five (5) years from commencement of sales in the offering and will have a cashless exercise provision. The Underwriter’s Warrants also provide for customary anti-dilution provisions, a one-time demand registration right and immediate “piggyback” registration rights with respect to the registration of the shares of common stock underlying the Underwriter’s Warrants. We have registered the Underwriter’s Warrants and the shares underlying the Underwriter’s Warrants in this offering.

The Underwriter’s Warrants and the underlying shares are deemed to be compensation by FINRA, and therefore will be subject to a 180-day lock-up period pursuant to FINRA Rule 5110(e)(1). In accordance with FINRA Rule 5110(e)(1), neither the Underwriter’s Warrants nor any of our common stock issued upon exercise of the Underwriter’s Warrants may be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities by any person, for a period of 180 days immediately following commencement of sale of this offering subject to certain exceptions permitted by FINRA Rule 5110(e)(2).

Electronic Offer, Sale and Distribution of Securities

A prospectus in electronic format may be made available on the websites maintained by one or more of the outstanding voting stockunderwriters or selling group members. The underwriter may agree to allocate a number of securities to underwriters and selling group members for sale to its online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on these websites is not part of, nor incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us, and should not be relied upon by investors.

Stabilization

In connection with this offering, the underwriter may engage in stabilizing transactions, over-allotment transactions, syndicate-covering transactions, penalty bids and purchases to cover positions created by short sales.

Stabilizing transactions permit bids to purchase shares so long as the stabilizing bids do not exceed a specified maximum, and are engaged in for the purpose of preventing or retarding a decline in the market price of the corporation and any entity or person affiliated with or controlling or controlledshares while the offering is in progress.

68

Over-allotment transactions involve sales by the entityunderwriter of shares in excess of the number of shares the underwriter is obligated to purchase. This creates a syndicate short position which may be either a covered short position or person.a naked short position. In a covered short position, the number of shares over-allotted by the underwriter is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriter may close out any short position by exercising its over-allotment option and/or purchasing shares in the open market.

Common Stock ListingSyndicate covering transactions involve purchases of shares in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriter will consider, among other things, the price of shares available for purchase in the open market as compared with the price at which they may purchase shares through exercise of the over-allotment option. If the underwriter sells more shares than could be covered by exercise of the over-allotment option and, therefore, have a naked short position, the position can be closed out only by buying shares in the open market. A naked short position is more likely to be created if the underwriter is concerned that after pricing there could be downward pressure on the price of the shares in the open market that could adversely affect investors who purchase in the offering.

OurPenalty bids permit the underwriter to reclaim a selling concession from a syndicate member when the shares originally sold by that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our shares of common stock currently is tradingor preventing or retarding a decline in the market price of our shares of common stock. As a result, the price of our common stock in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriter make any representation or prediction as to the effect that the transactions described above may have on OTCQBthe price of our common stock. These transactions may be effected in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.

Passive Market Making

In connection with this offering, underwriters and selling group members may engage in passive market making transactions in our common stock on The Nasdaq Capital Market in accordance with Rule 103 of Regulation M under the symbol “MRNA”.Exchange Act, during a period before the commencement of offers or sales of the shares and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, then that bid must then be lowered when specified purchase limits are exceeded.

Transfer AgentOther Relationships

The underwriter and Registrarits affiliates may in the future provide various investment banking, commercial banking and other financial services for us and our affiliates for which they may in the future receive customary fees.

American Stock Transfer & Trust Company, LLCOffer Restrictions Outside the United States

Other than in the United States, no action has been taken by us or the underwriter that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the transfer agentoffer and registrar for our common stock.sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

LEGAL MATTERS

Sichenzia Ross Ference LLP has acted as our counsel in connection with the preparation of this prospectus. The validity of the shares of common stock registered for resale herebycovered by this prospectus will be passed upon for us by Pryor CashmanSichenzia Ross Ference LLP. Thompson Hine LLP New York, New York.is acting as counsel to the underwriter.

69

 

EXPERTS

The consolidated financial statements of Marina Biotech,Adhera Therapeutics, Inc. as of December 31, 2014 and 2013, and for each of the years in the two-year periodyear ended December 31, 2014,2021 have been included herein in reliance upon the report of WolfSalberg & Company, P.C.P.A., an independent registered public accounting firm, includedand as of and for the year ended December 31, 2020 in reliance upon the report of Baker Tilly US, LLP, an independent registered accounting firm, appearing elsewhere herein, and upon the authority of said firmfirms as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement, of which this prospectus is a part, on Form S-1 with the SEC arelating to this offering. This prospectus does not contain all of the information in the registration statement underand the Securities Act of 1933 that registersexhibits included with the distribution of the securities offered under this prospectus. The registration statement, including the attached exhibits and schedules, contains additional relevantstatement. For further information aboutpertaining to us and the securities. The rulescommon stock to be sold in this offering, you should refer to the registration statement and regulationsits exhibits. References in this prospectus to any of our contracts, agreements or other documents are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contracts, agreements or documents. You can read our SEC allow us to omit from this prospectus certain information included infilings, including the registration statement.statement, on the internet at the SEC’s website. The address of that site is http://www.sec.gov.

In addition,We are subject to the informational requirements of the Exchange Act, and, in accordance with the Exchange Act, we file annual, quarterlyreports, proxy and special reports, proxyinformation statements and other information with the SEC. You may readSuch annual, quarterly and copy thisspecial reports, proxy and information statements and the registration statementother information can be inspected and copied at the SEC public reference room locatedlocations set forth above. We also make these documents publicly available, free of charge, on our website at 100 F Street, N.E., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference room.

In addition, any information we filehttps://adherathera.com/ as soon as reasonably practicable after filing such documents with the SEC is also availableSEC. Information on, the SEC’sor accessible through, our website at http://www.sec.gov. We also maintain a web site at www.marinabio.com, which provides additional information about our company and through which you can also access our SEC filings. The information set forth on our web site is not part of this prospectus.

70

ADHERA THERAPEUTICS, INC.

 

59

INDEX TOAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the fiscal year ended December 31, 2021 and December 31, 2020 

Audited Financial Statements
Report of Independent Registered Public Accounting FirmF-2
Consolidated Balance Sheets at December 31, 2013 and 2014F-3
Consolidated Statements of Operations for the years ended December 31, 2013 and 2014F-4
Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2013 and 2014F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2014F-6
Notes to Consolidated Financial StatementsF-7
Unaudited Financial Statements
Condensed Consolidated Balance Sheets at December 31, 2014 and June 30, 2015F-19
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2015F-20
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2015F-21
Notes to Condensed Consolidated Financial StatementsF-22

F-1

Report of Independent Registered Public Accounting Firm 

ADHERA THERAPEUTICS, INC.

CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 and 2020

TABLE OF CONTENTS

Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (current auditor PCAOB ID 106)F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (former auditor PCAOB ID 23)F-5
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance SheetsF-7
Consolidated Statements of OperationsF-8
Consolidated Statements of Stockholders’ (Deficit)F-9
Consolidated Statements of Cash FlowsF-10
Notes to Consolidated Financial StatementsF-11 to F-39

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors and Stockholders of Marina Biotech,of:

Adhera Therapeutics, Inc.:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheetssheet of Marina Biotech,Adhera Therapeutics, Inc. (the “Company”) as of December 31, 2014 and 2013, and2021, the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the years then ended.year ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021, and the consolidated results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has a net loss and cash used in operations of approximately $6.4 million and $665,000 respectively, in 2021 and a working capital deficit, shareholders’ deficit and accumulated deficit of $25.1 million, $25.1 million and $53 million respectively, at December 31, 2021. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s Plan in regard to these matters is 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 consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesethe Company’s consolidated financial statements based on our audits.audit. 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 auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.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. Our audits included considerationAs part of our audit, we are required to obtain an understanding of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An

Our audit also includesincluded performing procedures to assess the risks of material misstatement of the consolidated 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 supportingregarding the amounts and disclosures in the consolidated financial statements, assessingstatements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement presentation.statements. We believe that our audits provideaudit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated 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 consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

2295 NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431-7328

Phone: (561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920

www.salbergco.com • info@salbergco.com

Member National Association of Certified Valuation Analysts • Registered with the PCAOB Member CPAConnect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality

F-3

Derivative Liabilities

As described in Footnote 2 “Fair Value of Financial Instruments”, Footnote 2 “Convertible Debt and Warrant Accounting”, Footnote 4 “Notes payable and Convertible Promissory Notes” and Footnote 4 “Derivatives Liabilities Pursuant to Convertible Notes and Warrants”, the Company recorded derivative activity during 2021 that resulted primarily in a net aggregate derivative related expense of $4.103 million and derivative liabilities of $7.697 million at December 31, 2021.

We identified the evaluation of instruments and contracts to determine whether there are derivatives to be recorded, the analysis of the accounting treatment and presentation for derivative transactions and the valuation of derivatives as critical audit matters. Auditing management’s analysis of the above critical audit matters was complex and involved a high degree of subjectivity.

The primary procedures we performed to address these critical audit matters included (a) Reviewed and tested management’s conclusions as to whether certain instruments or contracts qualified for derivative treatment by comparing management’s analysis and conclusions to authoritative and interpretive literature, (b) Compared the accounting treatment and presentation to that described by the authoritative and interpretive literature, (c) Tested management’s process for valuing derivatives by comparing it to generally accepted methodologies for valuing derivatives, (d) Tested management’s valuation of the derivatives by testing assumptions and data used in the valuation model including the term, volatility and interest rate, and (e) Recomputed the derivative valuations.

/s/ Salberg & Company, P.A.

SALBERG & COMPANY, P.A.

We have served as the Company’s auditor since 2021.

Boca Raton, Florida April 15, 2022 (except for the reverse stock-split discussed in Note 11 as to which the date is November 28, 2022)

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Adhera Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Adhera Therapeutics, Inc. and its subsidiaries (the Company) as of December 31, 2020, the related consolidated statements of operations, stockholders’ (deficit) and cash flows for the year then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Marina Biotech, Inc.the Company as of December 31, 2014 and 2013,2020, and the results of its operations and its cash flows for the yearsyear then ended, in conformity with U.S.accounting principles generally accepted accounting principles.in the United States of America.

Going Concern Uncertainty

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 12 to the financial statements, the Company has suffered recurring losses from operations has a significant accumulated deficit and has been unable to raise sufficient capital to fund its operations through the end of 2015.negative cash flows from operations. This raises substantial doubt about the Company'sCompany’s ability to continue as a going concern. Management'sIn addition, with respect to the ongoing and evolving coronavirus (COVID-19) outbreak, which was designated as a pandemic by the World Health Organization on March 11, 2020, the outbreak has caused substantial disruption in international and U.S. economies and markets and if repercussions of the outbreak are prolonged, could have a significant adverse impact on the Company’s business. Management’s plans in regard to these matters also are described in Note 1.2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

 

/s/ Wolf & Company, P.C.

Boston, Massachusetts

February 17, 2015

F-2

MARINA BIOTECH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

  December 31,  December 31, 
(In thousands, except per share data) 2013  2014 
       
ASSETS        
Current assets:        
Cash $909  $1,824 
Accounts receivable  5   500 
Prepaid expenses and other current assets  128   192 
Total current assets  1,042   2,516 
Intangible assets  6,700   6,700 
Total assets $7,742  $9,216 
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
Current liabilities:        
Accounts payable $1,614  $687 
Accrued payroll and employee benefits  1,505   183 
Accrued interest  147   - 
Other accrued liabilities  1,315   1,072 
Accrued restructuring  12   - 
Notes payable  1,615   - 
Other debt  8   - 
Total current liabilities  6,216   1,942 
Fair value liability for price adjustable warrants  5,226   9,225 
Fair value of stock to be issued to settle liabilities  1,019   75 
Deferred tax liabilities  2,345   2,345 
Total liabilities $14,806  $13,587 
Commitments and contingencies        
Stockholders’ deficit:        
Preferred stock, $.01 par value; 100,000 shares authorized, 0 and 1,200 shares of Series C convertible preferred stock issued and outstanding at December 31, 2013 and 2014, respectively (preference in liquidation of Series C convertible preferred stock of $6,000,000 at December 31, 2014)  -   - 
Common stock, $0.006 par value; 180,000,000 shares authorized, 16,937,661 and 25,523,216 shares issued and outstanding at December 31, 2013 and 2014, respectively  102   153 
Additional paid-in capital  324,145   333,264 
Accumulated deficit  (331,311)  (337,788)
Total stockholders’ deficit  (7,064)  (4,371)
Total liabilities and stockholders’ deficit $7,742  $9,216 

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

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements.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 audit 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.

F-3

MARINA BIOTECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

  Year Ended December 31, 
(In thousands, except per share data) 2013  2014 
License and other revenue $2,115  $500 
Operating expenses:        
Research and development  715   686 
General and administrative  1,765   3,334 
Total operating expenses  2,480   4,020 
Loss from operations  (365)  (3,520)
Other income (expense):        
Interest and other expense  (249)  (1,006)
Change in fair value liability for price adjustable warrants  151   13 
Change in fair value of stock reserved for issuance to settle liabilities  31   (2,503)
Change in fair value of embedded features in notes payable and amendments to notes payable  829   - 
Gain (loss) on debt extinguishment  (2,037)  5 
Gain on equipment disposal  30   - 
Gain on settled liabilities  -   534 
Total other expense, net  (1,245)  (2,957)
Loss before income tax  (1,610)  (6,477)
Income tax benefit  (39)  - 
Net loss $(1,571) $(6,477)
Net loss per common share — basic and diluted $(0.09) $(0.26)
Shares used in computing net loss per share — basic and diluted  16,937,661   24,634,535 

See reportOur audit included performing procedures to assess the risks of independent registered public accounting firmmaterial misstatement of the financial statements, whether due to error or fraud, and accompanying notesperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the consolidatedamounts and disclosures in the financial statements.

F-4

MARINA BIOTECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

  Preferred Stock, par
value $0.01
  Common Stock, par value
$0.006
          
(In thousands, except share data) Shares  Amount  Shares  Amount  Additional
Paid-in
Capital
  Accumulated
Deficit
  Total
Stockholders’
Deficit
 
Balance December 31, 2012  -  $-   16,937,661  $102   324,010  $(329,740) $(5,628)
Compensation related to stock options  -   -   -   -   135   -   135 
Net loss  -   -   -   -   -   (1,571)  (1,571)
Balance December 31, 2013  -   -   16,937,661   102   324,145   (331,311)  (7,064)
Issuance of Series C convertible preferred stock, net of issuance costs of $71  1,200   -   -   -   5,929   -   5,929 
Fair value of price-adjustable warrants issued in connection with Series C Convertible Preferred Stock  -   -   -   -   (5,929)  -   (5,929)
Shares issued in connection with lease termination  -   -   1,500,000   9   1,851   -   1,860 
Shares issued in connection with director and management compensation  -   -   2,473,854   15   882   -   897 
Shares issued in connection with science advisory board compensation  -   -   107,988   1   55   -   56 
Shares issued in connection with consulting services  -   -   39,945   -   19   -   19 
Shares issued in connection with warrant exercises  -   -   1,405,706   8   1,930   -   1,938 
Shares issued in connection with licensing and vendor payables  -   -   1,098,673   6   1,667   -   1,673 
Shares issued in debt conversion  -   -   1,959,389   12   1,467   -   1,479 
Beneficial debt conversion feature  -   -   -   -   971   -   971 
Compensation related to stock options  -   -   -   -   277   -   277 
Net loss  -   -   -   -   -   (6,477)  (6,477)
Balance December 31, 2014  1,200  $-   25,523,216  $153  $333,264  $(337,788) $(4,371)

See reportOur audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of independent registered public accounting firm and accompanying notes to the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

F-5

MARINA BIOTECH, INC. AND SUBSIDIARIES

Critical Audit Matters

CONSOLIDATED STATEMENTS OF CASH FLOWS

  Year Ended December 31, 
(In thousands) 2013  2014 
Operating activities:        
Net loss $(1,571) $(6,477)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:        
Non-cash (gain)/loss on debt extinguishment  2,037   (5)
Non-cash interest expense  249   1,006 
Non-cash gain on settlement of liabilities  -   (534)
Deferred income tax benefit  (39)  - 
Compensation related to stock options, restricted stock and employee stock purchase plan  135   277 
Gain on disposition of property and equipment  (30)  - 
Changes in fair market value of liabilities:        
Stock reserved for issuance to settle liabilities  (31)  2,503 
Embedded debt features  (829)  - 
Price adjustable warrants  (151)  (13)
Changes in assets and liabilities:        
    Accounts receivable  2   (495)
Prepaid expenses and other assets  22   (181)
Accounts payable  8   (563)
Deferred revenue  (115)  - 
Accrued restructuring  (380)  (12)
Accrued and other liabilities  978   (285)
Net cash provided by (used in) operating activities  285   (4,779)
Investing activities:        
Change in restricted cash  380   - 
Proceeds from the sale of property and equipment  30   - 
Net cash provided by investing activities  410   - 
Financing activities:        
Proceeds from sales of Series C preferred shares and warrants, net  -   5,929 
Cash payments of notes payable  -   (250)
Cash proceeds from exercise of warrants  -   23 
Insurance financing  (2)  (8)
Net cash provided by (used in) financing activities  (2)  5,694 
Net increase in cash  693   915 
Cash and cash equivalents — beginning of year  216   909 
Cash and cash equivalents —end of year $909  $1,824 
Non-cash financing activities:        
Reclassification of fair value liability for price adjustable warrants exercised  -  $1,917 
Issuance of common stock to settle liabilities  -  $3,517 
Debt conversion to common shares  -  $1,479 
Deemed dividend to Series C convertible preferred stockholders  -  $6,000 
Supplemental Disclosure        
Cash paid for interest $1  $83 

See reportThe critical audit matter communicated below is a matter arising from the December 31, 2020 audit of independent registered public accounting firmthe consolidated financial statements that was communicated to the audit committee and accompanying notesthat: (1) relate to accounts or disclosures that are material to the consolidated financial statements.statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

CONVERTIBLE DEBT AND WARRANT ACCOUNTING

Critical Audit Matter Description

As described in Note 4 to the consolidated financial statements, the Company issued a convertible note for approximately $500k along with a warrant to purchase 1,944,250 shares, subject to adjustments of exercise price. The Company accounted for the note as a liability and the warrant as a freestanding instrument qualifying for equity classification.

We identified the convertible note and warrant as a critical audit matter. Accounting for the issuance of the convertible note and warrant was complex due to the inherent estimation uncertainty in the Company’s valuation of the note and warrant. Management used a Monte Carlo simulation model to estimate the value of the note, embedded conversion feature, and warrant, before utilizing the relative fair value method to record the transaction. The inherent estimation uncertainty was primarily attributed to assumptions used in the Monte Carlo simulation, which involved a high degree of subjectivity.

How the Critical Audit Matter Was Addressed in the Audit

The primary procedures we performed to address this critical audit matter included:

Obtaining an understanding of the Company’s process to account for the issuance of convertible note and warrant.
Reviewing convertible debt and warrant agreements
Examining management’s memo for accounting treatment and management specialist’s valuation on convertible note and warrant.
Tested the completeness and accuracy of the underlying data used in the Monte Carlo simulation model by tracing to terms contained in the note and warrant agreement and historical data.
With the assistance of auditor’s valuation specialist, evaluated the valuation methodology used by the Company and significant assumptions used in the Monte Carlo model by evaluating individual assumptions used by management and developing an independent model to assess the reasonableness of the Company’s valuation.

/s/ Baker Tilly US LLP

We have served as the Company’s auditor from 2015 to 2021.

Los Angeles, California

April 7, 2021, except for the effects of the reverse stock split discussed in Note 11 to the consolidated financial statements, as to which the date is December 2, 2022

F-6

MARINA BIOTECH,ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands except share and per share data)

  December 31, 2021  December 31, 2020 
ASSETS        
Current assets        
Cash $76  $1 
Prepaid expenses  120    
Total current assets  196   1 
Total assets $196  $1 
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
Current liabilities        
Accounts payable $2,309  $2,257 
Due to related parties  46   4 
Accrued expenses  3,110   2,112 
Accrued dividends  5,477   4,083 
Term loan  5,677   5,677 
Convertible notes payable, net  986   641 
Derivative liability  7,697    
Total current liabilities  25,302   14,774 
Total liabilities  25,302   14,774 
Commitments and contingencies (Note 9)      -  
Stockholders’ deficit        
Preferred stock, $0.01 par value; 100,000 shares authorized      
Series C convertible preferred stock, $0.01 par value; 1,200 shares authorized; 100 shares issued and outstanding as of December 31, 2021 and 2020. ($510,000 liquidation preference)      
Series D convertible preferred stock, $0.01 par value; 220 shares authorized; 40 shares issued and outstanding as of December 31, 2021 and 2020 ($12,000 liquidation preference)      
Series E convertible preferred stock, $0.01 par value; 3,500 shares authorized; 3,326 and 3,458 shares issued and outstanding as of December 31, 2021 and 2020, respectively. ($21,618,999 liquidation preference)      
Series F convertible preferred stock, $0.01 par value; 2,200 shares authorized; 358 and 361 shares issued and outstanding as of December 31, 2021 and 2020, respectively. ($2,277,509 liquidation preference)      
Series G convertible preferred stock, $0.01 par value; $5,000 liquidation preference; 6,000 shares authorized; no shares issued and outstanding as of December 31, 2021 and 2020.     
Preferred stock, value        
Common stock, $0.006 par value; 180,000,000 shares authorized, 853,946 and 560,140 shares issued and outstanding as of December 31, 2021 and 2020, respectively  5   3 
Additional paid-in capital  27,906   29,836 
Accumulated deficit  (53,017)  (44,612)
Treasury stock (5,954 shares)        
Total stockholders’ deficit  (25,106)  (14,773)
Total liabilities and stockholders’ deficit $196  $1 

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

F-7

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except share and per share data)

  2021  2020 
  For the Year Ended
December 31,
 
  2021  2020 
Operating expenses        
Sales and marketing  $17  839 
General and administrative  657   1,198 
Total operating expenses  674   2,037 
Loss from operations  (674)  (2,037)
Other income (expense)        
Interest expense, net  (1,035)  (935)
Other income     45 
Initial and change in fair value of derivative liability  (4,103)   
Loss on extinguishment of debt  (141)   
Amortization of debt discount  (398)  (839)
Total other income (expense)  (5,677)  (1,729)
Loss before provision for income taxes  (6,351)  (3,766)
Provision for income taxes      
Net loss  (6,351)  (3,766)
Accrued and deemed dividends  (2,054)  (1,540)
Net Loss Applicable to Common Stockholders $(8,405) $(5,306)
Net loss per share - Common Stockholders, basic and diluted $(12.84) $(9.67)
Weighted average shares outstanding, basic and diluted  654,700   548,514 

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

F-8

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(in thousands, except share and per share amounts)

 

                                        
  Series C Preferred Stock  Series D Preferred Stock  Series E Preferred Stock  Series F Preferred Stock  Common Stock  Additional       
  Number  Par Value  Number  Par Value  Number  Par Value  Number  Par Value  Number  Par Value  

Paid-in

Capital

  Accumulated Deficit  Total 
Balance, December 31, 2019  100   $    -   40   $    -   3,478   -   361   $   -   547,981  

$

3  $29,439  $(39,327) 

$

(9,887)
Accrued dividends  -   -   -   -   -   -   -   -   -   -   -   (1,540)  (1,540)
Issuance of warrants with convertible notes  -   -   -   -   -   -   -   -   -   -   294   -   294 
Issuance of common stock for Series E conversion  -   -   -   -   (20)  -   -   -   12,159   -   -   21   23 
Share based compensation  -   -   -   -   -   -   -   -   -   -   8   -   8 
Benefical conversion feature - convertible notes  -   -   -   -   -   -   -   -   -   -   95   -   95 
Net loss  -   -   -   -   -   -   -   -   -   -   -   (3,766)  (3,766)
Balance, December 31, 2020  100   $-   40   $-   3,458      -  361  $   -   560,140  $3   $29,836  $(44,612) $(14,773)
Accrued and deemed dividend  -   -   -   -   -   -   -   -   -   -   541   (2,054  (1,513)
Reclassification of derivative from equity  -   -   -   -   -   -   -   -   -   -   (3,462)  -   (3,462)
Issuance of common stock for cashless exercise of warrant  -   -   -   -   -   -   -   -   10,341   -   -  -   - 
Issuance of warrants and common stock with convertible notes  -   -   -   -   -   -   -   -   35,767   -   320   -   320 
Issuance of common stock for convertible note conversions  -   -   -   -   -   -   -   -   168,294   1   553   -   554 
Issuance of common stock for Series F conversion  -   -   -   -   -      (3)  -   1,853   -   3   -   3 
Issuance of common stock for Series E conversion  -   -   -   -   (132)  -   -   -   77,551   1   115   -   116 
Net loss  -   -   -   -   -   -   -   -   -   -   -   (6,351)  (6,351)
Balance, as of 12/31/2021  100  $-   40  $-   3,326  $-   358  $-   853,946  5  27,906  $(53,017) $(25,106)

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

F-9

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

  2021  2020 
  For the Year Ended December 31, 
  2021  2020 
Cash Flows Used in Operating Activities:        
Net loss $(6,351) $(3,766)
Adjustments to reconcile net loss to net cash used in operating activities:        
Share based compensation     8 
Amortization of debt discount  398   839 
Accrued interest expense  1,035   935 
Derivative expense  4,103    
Loss on debt extinguishment  141    
Changes in operating assets and liabilities:        
Prepaid expenses  (120)  370 
Accounts payable  94   854 
Accrued expenses  36   172
Net Cash Used in Operating Activities  (664)  (588)
Cash Flows Provided by Financing Activities:        
Proceeds from notes payable, net of original issue discounts  840   653 
Notes payable issuance costs  (101)  (114)
Repurchase of common stock        
Repayment of principal and interest on notes payable        
Net Cash Provided by Financing Activities  739   539 
Net increase (decrease) in cash  75   (49)
Cash – Beginning of Year  1   50 
Cash - End of Year $76  $1 
Supplementary Cash Flow Information:        
Cash paid for interest        
Cash paid for taxes        
Supplemental disclosure of non-cash investing and financing activities:        
Non-cash Investing and Financing Activities:        
Issuance of common stock for conversion of Series E Preferred $116  $23 
Issuance of common stock for conversion of Series F Preferred  3    
Debt discounts for issuance costs, warrants and derivatives  320   294 
Issuance of common stock for conversion of convertible notes  554    
Reclassification of derivative liability  

3,462

    
Accrued and deemed dividends  2,054   1,540 
Beneficial conversion feature     95 

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

F-10

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended DecemberFOR THE YEARS ENDED DECEMBER 31, 2013 and 20142021 AND 2020

Note 1Organization and Business LiquidityOperations

Adhera Therapeutics, Inc. and its wholly-owned subsidiaries, MDRNA Research, Inc. (“MDRNA”), Cequent Pharmaceuticals, Inc. (“Cequent”), Atossa Healthcare, Inc. (“Atossa”), and IThenaPharma, Inc. (“IThena”) (collectively “Adhera,” or the “Company”), is an emerging specialty biotech company that, to the extent that resources and opportunities become available, is strategically evaluating its focus including a return to a drug discovery and development company.

On July 28, 2021, we as licensee and Melior Pharmaceuticals II, LLC entered into an exclusive license agreement for the development, commercialization and exclusive license of MLR-1019. MLR-1019 is being developed as a new class of therapeutic for Parkinson’s disease (PD) and is, to the best of our knowledge, the only drug candidate today to address both movement and non-movement aspects of PD. Under the Agreement, we were granted an exclusive license to use the MP Patents and know-how to develop products in consideration for cash payments upon meeting certain performance milestones as well as a royalty of 5% of gross sales.

On August 20, 2021, we as licensee entered into an exclusive license agreement with Melior Pharmaceuticals I, Inc. for the development, commercialization and exclusive license of MLR-1023. MLR-1023 is being developed as a novel therapeutic for Type 1 diabetes.

On October 20, 2021, we as licensee expanded the exclusive licensing agreement with Melior Pharmaceuticals I, Inc. to include two additional clinical indications for Non-Alcoholic Steatohepatitis (NASH) and pulmonary inflammation.

To the extent that resources have been available, the Company has continued to work with its advisors in an effort to restructure our company and to identify potential strategic transactions to enhance the value of our company as such opportunities arise, including potential transactions and capital raising initiatives involving the assets relating to our legacy RNA interference programs, as well as business combination transactions with operating companies. There can be no assurance that the Company will be successful at identifying any such transactions, that it will continue to have sufficient resources to actively attempt to identify such transactions, or that such transactions will be available upon terms acceptable to us or at all. If the Company does not complete any significant strategic transactions, or raise substantial additional capital, in the immediate future, it is likely that the Company will discontinue all operations and seek bankruptcy protection.

F-11

Note 2 – Summary of Significant Accounting Policies

BusinessBasis of Presentation

We are a biotechnology company focused on the discovery, development and commercialization of nucleic acid-based therapies to treat orphan diseases. Our pipeline includes CEQ508, a productThe accompanying consolidated financial statements have been prepared in clinical development for the treatment of Familial Adenomatous Polyposis (“FAP”), for which we have received Orphan Drug Designation (“ODD”) from the U.S. Food and Drug Administration (“FDA”), and preclinical programs for the treatment of type 1 myotonic dystrophy (“DM1”) and Duchenne muscular dystrophy (“DMD”).

Since 2010, we have strategically acquired/in-licensed and further developed nucleic acid chemistry and delivery-related technologies in order to establish a novel and differentiated drug discovery platform. This platform allows us to distinguish ourselves from othersaccordance with accounting principles generally accepted in the nucleic acid therapeutics areaUnited States of America (“GAAP”). The summary of significant accounting policies presented below is designed to assist in that weunderstanding the Company’s financial statements. Such financial statements and accompanying notes are the only company capablerepresentations of creating a wide varietyCompany’s management, who is responsible for their integrity and objectivity.

Principles of therapeutics targeting codingConsolidation

The consolidated financial statements include the accounts of Adhera Therapeutics, Inc. and non-coding RNA via multiple mechanismsthe wholly-owned subsidiaries, Ithena, Cequent, MDRNA, and Atossa, and eliminate any inter-company balances and transactions. All wholly-owned subsidiaries of action such as RNA interference (“RNAi”), messenger RNA translational inhibition, exon skipping, microRNA (“miRNA”) replacement, miRNA inhibition,Adhera Therapeutics, Inc. are inactive.

Going Concern and steric blocking in order to modulate gene expression either up or down depending on the specific mechanism of action. Our goal is to dramatically improve the lives of the patients and families affected by orphan diseases through either our own efforts or those of our collaborators and licensees.Management’s Liquidity Plans

Liquidity

The accompanying consolidated financial statements have been prepared on the basis that wethe Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. AtAs of December 31, 2014, we2021, the Company had cash and cash equivalents of approximately $76,000 and has negative working capital of approximately $25.1 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 secured promissory notes. The Company incurred a net loss of approximately $6.4million for the year ended December 31, 2021 and used cash in operating activities of approximately $664,000. The Company had an accumulated deficit of approximately $337.8 $53.0 million $112.1 millionas of which has been accumulated since the corporation focused on RNA therapeutics in June 2008. ToDecember 31, 2021.

In addition, to the extent that sufficient funding is available, we will in the future continue to incur losses as we continue our research and development (“R&D”) activities. In addition, we have had andCompany continues its business operations, the Company anticipates that it will continue to have negative cash flows from operations. We have funded our losses primarily throughoperations, at least into the sale of common and preferred stock and warrants, revenue provided from our license agreements with other parties and, to a lesser extent, equipment financing facilities and secured loans. In 2014, we funded operations with a combination of issuances of preferred stock and license-related revenues. At December 31, 2014, we had a working capital surplus of $0.6 million and $1.8 million in cash. Our resumed operating activities consumednear future. However, the majority of our cash resources during 2014.

In February 2014,Company cannot be certain debt holders exchanged secured promissory notes in the aggregate principal and interest amount of $1.5 million for 2.0 million shares of our common stock. In addition, in March 2014, we sold 1,200 shares of our Series C Convertible Preferred Stock and 6.0 million warrants to purchase one share of common stock for $0.75 per share, resulting in gross proceeds of $6.0 million. We believe that our current cash resources, which include an upfront licensing fee received from MiNA in January 2015,it will enable us to fund our intended operations through July 2015. Our ability to execute our operating plan beyond July 2015 depends on our abilitybe able to obtain additional funding. The volatility insuch funds required for its our stock price,operations at terms acceptable to the Company or at all. General market conditions, as well as market conditions for companies in general, couldthe Company’s financial and business position, as well as the ongoing issue arising from the COVID-19 pandemic, may make it difficult for usthe Company to raiseseek financing from the capital markets, and the terms of any financing may adversely affect the holdings or the rights of its stockholders. 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 on terms which are favorable terms,to the Company or at all. If we failWhile management of the Company believes that it has a plan to obtainfund ongoing operations, there is no assurance that its plan will be successfully implemented. Failure to raise additional capital when required, we maythrough one or more financings, divesting development assets or reducing discretionary spending could have a material adverse effect on the Company’s ability to modify, delay or abandon some or all of our planned activities, or terminate our operations.achieve its intended business objectives. These factors among others, raise substantial doubt about ourthe Company’s ability to continue as a going concern.concern for a period of twelve months from the issuance date of this Report. The consolidated financial statements included in this prospectus do not includecontain any adjustments that maymight result from the outcomeresolution of this uncertainty. We are currently pursuing both non-dilutive meansany of obtaining additional capital, primarily from existing and potential future licenses and partnerships, and dilutive means of obtaining additional capital, primarily through the offering of our equity and debt securities. However, there can be no assurance that we will be successful in such endeavors.above uncertainties.

F-12

Summary of Significant Accounting Policies

PrinciplesCash and Cash Equivalents

The Company considers all highly liquid investments with maturities of Consolidation — We consolidate ourthree months or less at the time of purchase to be cash equivalents. As of December 31, 2021, the Company had approximately $76,000 in cash equivalents.

The Company deposits its cash with major financial statements with our wholly-owned subsidiaries, Cequent, MDRNA,institutions and Atossa, and eliminate any inter-company balances and transactions.may at times exceed the federally insured limit. At December 31, 2021, the Company’s cash balance did not exceed the federal insurance limit.

Use of Estimates —

The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States of AmericaGAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and

F-7

liabilities theand disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenuesrevenue and expenses during the reporting periods. Estimates having relatively higher significancereported period. Significant areas requiring the use of management estimates include revenue recognition, R&D costs, stock-based compensation,accruals related to our operating activity including legal and other consulting expenses, the fair value of non-cash equity-based issuances, the fair value of derivative liabilities, and the valuation of warrants, valuation and estimated lives of identifiable intangible assets, impairment of long-lived assets, valuation of features embedded within note agreements and amendments, and income taxes.allowance on deferred tax assets. Actual results could differ materially from those estimates.such estimates under different assumptions or circumstances.

Restricted Cash – Amounts pledged as collateral underlying letters of credit for lease deposits are classified as restricted cash. Changes in restricted cash have been presented as investing activities in the Consolidated Statements of Cash Flows.

Fair Value of Financial Instruments— We consider

The Company considers the fair value of cash, restricted cash, accounts receivable, accounts payable, debt, 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:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2:
Level 1:Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3:Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

F-13

As of December 31, 2021, the Company measured conversion features on outstanding convertible notes and warrants as a derivative liability using significant unobservable prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs in whichbased on little or no verifiable market data, exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

Our cash is subject toLevel 3 in the fair value measurement and is valuedhierarchy, resulting in a fair value estimate of approximately $7.7 million. The value of the derivative liability as of December 31, 2021, was determined by Level 1 inputs. We measure the liability for committed stock issuances with a fixed share number using Level 1 inputs. We measure the liability for price adjustable warrants and certain features embedded in notes, using the Black-Scholes option pricingbinomial lattice model (“Black-Scholes”), using Level 3 inputs. Thethe following tables summarize our inputs: 0.069% to 1.26% risk free rate, volatility of 255% to 399% and time to maturity of 0 - 0.60 years. There were no liabilities or assets measured at fair value on a non-recurring basis as of December 31, 2021, and there were no liabilities or assets measured at fair value on a recurring or non-recurring basis as of December 31, 2013 and 2014:2020.

Schedule of Fair Value Measurements

  Balance at
December 31,
2013
  Level 1 Quoted
prices in active
markets for
identical assets
  Level 2
Significant other
observable inputs
  Level 3
Significant
unobservable
inputs
 
Liabilities:                
Fair value liability for price adjustable warrants $5,226  $-  $-  $5,226 
Fair value liability for shares to be issued  1,019   1,019   -   - 
Total liabilities at fair value $6,245  $1,019  $-  $5,226 
(in thousands) (Level 1)  (Level 2)  (Level 3)  Total 
  Fair Value Measurements at December 31, 2021 
  Quoted Prices in Active Markets for Identical Assets  Other Observable Inputs  Significant Unobservable Inputs    
(in thousands) (Level 1)  (Level 2)  (Level 3)  Total 
Derivative liability $-  $-  $7,697  $7,697 
Total $-  $-  $7,697  $7,697 

  Balance at
December 31,
2014
  Level 1 Quoted
prices in active
markets for
identical assets
  Level 2
Significant other
observable inputs
  Level 3
Significant
unobservable
inputs
 
Liabilities:                
Fair value liability for price adjustable warrants $9,225  $-  $-  $9,225 
Fair value liability for shares to be issued  75   75   -   - 
Total liabilities at fair value $9,300  $75  $-  $9,225 

The following presentsA roll forward of the activity in our accrued restructuring liability determined bylevel 3 valuation financial instruments is as follows:

Schedule of Roll Forward of Level 3 inputsFinancial Instruments

             
  

Year Ended

December 31, 2021

 
(In thousands) Warrants  Notes  Total 
Balance at December 31, 2020 $  $  $ 
Initial valuation of derivative liabilities included in debt discount     377   377 
Initial valuation of derivative liabilities included in derivative expense  246   1,348   1,594 
Reclassification of derivative liabilities gain to loss on debt extinguishment  (52)  (193)  (245)
Reclass from additional paid-in capital  3,107   355   3,462 
Change in fair value included in derivative expense  2,035   474   2,509 
Balance at December 31, 2021 $5,336  $2,361  $7,697 

ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding equity instruments.

Convertible Debt and Warrant Accounting

Debt with warrants

In accordance with ASC Topic 470-20-25, when the Company issues debt with warrants, the Company treats the relative fair value of the years ended December 31, 2013warrants as a debt discount, recorded as a contra-liability against the debt, and 2014 (excludes stockamortizes the balance over the life of the underlying debt as amortization of debt discount expense in the consolidated statements of operations. The offset to be issued,the contra-liability is recorded as additional paid in capital in the Company’s consolidated balance sheets if the warrants are not carriedtreated as a derivative. The Company determines the fair value of the warrants using the Black-Scholes Option Pricing Model (“Black-Scholes”), the binomial model or the Monte Carlo Method based upon the underlying conversion features of the debt and then computes and records the relative fair value as a debt discount. If the debt is retired early, the associated debt discount is then recognized immediately as amortization of debt discount expense in this liability account):the consolidated statements of operations.

F-8F-14

  Facility Related Liabilities 
(In thousands) 2013  2014 
Balance, January 1 $392  $12 
Cash payments  (380)  (12)
Balance, December 31 $12  $- 

Convertible debt – derivative treatment

When the Company issues debt with a conversion feature, it first assesses whether the conversion feature meets the requirements to be accounted for as stock settled debt. If it does not meet those requirements then it is assessed on whether the conversion feature should be bifurcated and treated as a derivative liability, as follows: a) one or more underlyings, typically the price of our common stock; b) one or more notional amounts or payment provisions or both, generally the number of shares upon conversion; c) no initial net investment, which typically excludes the amount borrowed; and d) net settlement provisions, which in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. An embedded equity-linked component that meets the definition of a derivative does not have to be separated from the host instrument if the component qualifies for the scope exception for certain contracts involving an issuer’s own equity. The following presents activityscope exception applies if the contract is both a) indexed to its own stock; and b) classified in stockholders’ equity in its statement of financial position.

Convertible debt – beneficial conversion feature

Prior to the Company’s adoption of ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) on January 1, 2021, if the conversion feature was not treated as a derivative, the Company assessed whether it is a beneficial conversion feature (“BCF”). A BCF exists if the effective conversion price of the convertible debt instrument is less than the stock price on the commitment date. This typically occurs when the conversion price is less than the fair value liability of the stock on the date the instrument was issued. The value of a BCF is equal to the intrinsic value of the feature, the difference between the conversion price adjustable warrants determinedand the common stock into which it is convertible and is recorded as additional paid in capital and as a debt discount in the consolidated balance sheets. The Company amortizes the balance over the life of the underlying debt as amortization of debt discount expense in the consolidated statements of operations. If the debt is retired early, the associated debt discount is then recognized immediately as amortization of debt discount expense in the consolidated statements of operations.

If the conversion feature does not qualify for either the derivative treatment or as a BCF, the convertible debt is treated as traditional debt.

Recently Issued Accounting Pronouncements

Recently Adopted

In January 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles-Goodwill and Other (Topic 350) (“ASU 2017-04”), which will simplify the goodwill impairment calculation by Level 3 inputseliminating Step 2 from the current goodwill impairment test. The new standard does not change how a goodwill impairment is identified. The Company will continue to perform its quantitative goodwill impairment test by comparing the fair value of its reporting unit to its carrying amount, but if the Company is required to recognize a goodwill impairment charge, under the new standard, the amount of the charge will be calculated by subtracting the reporting unit’s fair value from its carrying amount. Under the current standard, if the Company is required to recognize a goodwill impairment charge, Step 2 requires it to calculate the implied value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination and the amount of the charge is calculated by subtracting the reporting unit’s implied fair value of goodwill from the goodwill carrying amount. The standard was effective January 1, 2020. The adoption of ASU 2017-04 did not have a material impact on the Company’s historical consolidated financial statements.

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which will simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including certain convertible instruments and contracts on an entity’s own equity. Specifically, the new standard will remove the separation models required for convertible debt with cash conversion features and convertible instruments with beneficial conversion features. It will also remove certain settlement conditions that are currently required for equity contracts to qualify for the years ended December 31, 2013derivative scope exception and 2014:will simplify the diluted earnings per share calculation for convertible instruments. ASU 2020-06 will be effective January 1, 2022, for the Company and may be applied using a full or modified retrospective approach. Early adoption is permitted, but no earlier than January 1, 2021, for the Company. The Company adopted ASU No. 2020-06 on January 1, 2021. Management determined such adoption did not have a material impact on the overall stockholders’ equity (deficit) in the Company’s consolidated financial statements.

     Weighted average as of each measurement date 
  Fair value
liability for
price
adjustable
warrants (in
thousands)
  Exercise
Price
  Stock
Price
  Volatility  Contractual
life
(in years)
  Risk free rate 
Balance at December 31, 2012 $4,169  $0.28  $0.46   146%  4.64   0.66%
Fair value of warrants issued in connection to amendments to notes payable  1,208   0.28   0.28   140%  5.50   1.55%
Change in fair value included in consolidated statement of operations  (151)  -   -   -   -   - 
Balance at December 31, 2013  5,226   0.28   0.4   124%  4.08   1.30%
Fair value of price-adjustable warrants issued in connection with Series C Convertible Preferred Shares  5,929   0.75   1.50   123%  7.0   0.55%
Exercise of Warrants  (1,917)  0.36   1.14   133%  3.07   0.77%
Change in fair value included in consolidated statement of operations  (13)  -   -   -   -   - 
Balance at December 31, 2014 $9,225  $0.42   0.95   121%  3.51   0.90%
F-15

ImpairmentNot Yet Adopted

In May 2021, FASB issued ASU 2021-04: Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40), to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of Long Lived Assets — We review allfreestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in ASU 2021-04 provide the following guidance for a modification or an exchange of our long-lived assets for impairment indicators throughouta freestanding equity-classified written call option that is not within the year and perform 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 record charges for impairments. Specifically:scope of another Topic:

1.·For finite-lived intangible assets, such as developed technology rights, and for other long-lived assets, such as property and equipment, we compare the undiscounted amountAn entity should treat a modification of the projected cash flows associated withterms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the asset,original instrument for a new instrument.
2.An entity should measure the effect of a modification or asset group,an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as follows:
a.For a modification or an exchange that is a part of or directly related to the carrying amount. If the carrying amount is found to be greater, we recorda modification or an impairment loss for the excess of book value over fair value. In addition, in all casesexchange of an impairment review, we re-evaluateexisting debt instrument or line-of-credit or revolving-debt arrangements (hereinafter, referred to as a “debt” or “debt instrument”), as the remaining useful lives of the assets and modify them, as appropriate; and

·For indefinite-lived intangible assets, such as acquired in-process R&D assets, each year and whenever impairment indicators are present, we determinedifference between the fair value of the assetmodified or exchanged written call option and recordthe fair value of that written call option immediately before it is modified or exchanged. Specifically, an impairment loss forentity should consider:
i.An increase or a decrease in the fair value of the modified or exchanged written call option in applying the 10 percent cash flow test and/or calculating the fees between debtor and creditor in accordance with Subtopic 470-50, Debt—Modifications and Extinguishments.
ii.An increase (but not a decrease) in the fair value of the modified or exchanged written call option in calculating the third-party costs in accordance with Subtopic 470-50.
b.For all other modifications or exchanges, as the excess, if any, of book value overthe fair value of the modified or exchanged written call option over the fair value of that written call option immediately before it is modified or exchanged.
3.An entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction, in the same manner as if any.cash had been paid as consideration, as follows:
a.A financing transaction to raise equity. The effect should be recognized as an equity issuance cost in accordance with the guidance in Topic 340, Other Assets and Deferred Costs.
b.A financing transaction to raise or modify debt. The effect should be recognized as a cost in accordance with the guidance in Topic 470, Debt, and Topic 835, Interest.
c.Other modifications or exchanges that are not related to financings or compensation for goods or services or other exchange transactions within the scope of another Topic. The effect should be recognized as a dividend. For entities that present EPS in accordance with Topic 260, that dividend should be an adjustment to net income (or net loss) in the basic EPS calculation.

Accrued Restructuring — An entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option to compensate for goods or services in accordance with the guidance in Topic 718, Compensation—Stock Compensation. In a multiple-element transaction (for example, one that includes both 2011debt financing and 2012,we ceased operating leased facilities in Bothell, Washington and recorded an accrued liability for remaining lease termination costs at fair value, based onequity financing), the remaining payments due undertotal effect of the lease and other costs. In 2013, final payments were mademodification should be allocated to the landlord.respective elements in the transaction.

Concentration of Credit Risk and Significant Customers — We operate in an industry that is highly regulated, competitive and rapidly changing and involves numerous risks and uncertainties. Significant technological and/or regulatory changes, the emergence of competitive products and other factors could negatively impact our consolidated financial position or results of operations.

We have been dependent on our collaborative and license agreements with a limited number of third parties for a substantial portion of our revenue, and our discovery and development activities may be delayed or reduced if we do not maintain successful collaborative arrangements. We had $2.1 million in licensing revenue in 2013 with 53% from Mirna Therapeutics, Inc. (“Mirna”), 38% from Arcturus, and 9% from Protiva Biotherapeutics, Inc. (“Tekmira”), a wholly-owned subsidiary of Tekmira Pharmaceuticals Corporation. We had $0.5 million in licensing revenue in 2014 from MiNA Therapeutics, Ltd. (“MiNA”).

We maintain our cash in a single bank account. Any amount over the limits insured by the Federal Deposit Insurance Corporation

F-9F-16

couldThe amendments in ASU 2021-04 are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt the amendments in ASU 2021-04 in an interim period, the guidance should be at risk inapplied as of the eventbeginning of the fiscal year that includes that interim period. The Company is evaluating the impact of the revised guidance and believes that it will not have a bank default.significant impact on its financial statements.

Revenue Recognition — Revenue is recognized when persuasive evidenceOther accounting standards that an arrangement exists, delivery has occurred, collectability is reasonably assured, and fees are fixedhave been issued or determinable. Deferred revenue expected to be recognized within the next 12 months is classified as current. Substantially all of our revenues are generated from licensing arrangementsproposed by FASB that do not involve multiple deliverables andrequire adoption until a future date are not expected to have no ongoing influence, control or R&D obligations. Our license arrangements may include upfront non-refundable payments, development milestone payments, patent-based or product sale royalties, and commercial sales, all of which are treated as separate units of accounting. In addition, we may receive revenues from sub-licensing arrangements. For each separate unit of accounting, we have determined that the delivered item has value to the other party on a stand-alone basis, we have objective and reliable evidence of fair value using available internal evidence for the undelivered item(s) and our arrangements generally do not contain a general right of return relative to the delivered item.

Revenue from licensing arrangements is recorded when earned basedmaterial impact on the specific terms of the contracts. Upfront non-refundable payments, where wefinancial statements upon adoption. The Company does not discuss recent pronouncements that are not providing any continuing services as in the caseanticipated to have an impact on or are unrelated to its financial condition, results of a license to our IP, are recognized when the license becomes available to the other party.operations, cash flows or disclosures.

Milestone payments typically represent nonrefundable payments to be received in conjunction with the uncertain achievement of a specific event identified in the contract, such as initiation or completion of specified development activities or specific regulatory actions such as the filing of an Investigational New Drug Application (“IND”). We believe a milestone payment represents the culmination of a distinct earnings process when it is not associated with ongoing research, development or other performance on our part and it is substantive in nature. We recognize such milestone payments as revenue when it becomes due and collection is reasonably assured.

Royalty and earn-out payment revenues are generally recognized upon commercial product sales by the licensee as reported by the licensee.

R&D Costs — All R&D costs are charged to operations as incurred. R&D expenses consist of costs incurred for internal and external R&D and include direct and research-related overhead expenses.

Stock-based Compensation — We use Black-Scholes as our method of valuation for stock-based awards. Stock-based compensation expense is based on the value of the portion of the stock-based award that will vest during the period, adjusted for expected forfeitures. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual or updated results differ from our current estimates, such amounts will be recorded in the period the estimates are revised. Black-Scholes requires the input of highly subjective assumptions, and other reasonable assumptions could provide differing results. Our determination of the fair value of stock-based awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected life of the award and expected stock price volatility over the term of the award. Stock-based compensation expense is recognized immediately for immediately vested portions of the grant, with the remaining portions recognized on a straight-line basis over the applicable vesting periods based on the fair value of such stock-based awards on the grant date. Forfeiture rates have been estimated based on historical rates and compensation expense is adjusted for general forfeiture rates in each period. Starting in September 2014, we did not use historical forfeiture rates and did not apply a forfeiture rate as the historical forfeiture rate was not believed to be a reasonable estimate of the probability that the outstanding awards would be exercised in the future. Given the specific terms of the awards and the recipient population, we expect these options will all be exercised in the future.

Non-employee stock compensation expense is recognized immediately for immediately vested portions of a grant, with the remaining portions recognized on a straight-line basis over the applicable vesting periods. At the end of each financial reporting period prior to vesting, the value of the unvested stock options, as calculated using Black-Scholes, is re-measured using the fair value of our common stock, and the stock-based compensation recognized during the period is adjusted accordingly.

Net Loss per Common Share —

Basic and diluted net loss per common share is computedcalculated by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share excludesis computed by dividing the effectnet loss by the weighted average number of common shares and common stock equivalents (stockoutstanding for the period. Common stock equivalents are only included when their effect is dilutive. Potentially dilutive securities which include outstanding warrants, stock options, unvested restrictedconvertible notes and preferred stock warrantshave been excluded from the computation of diluted net loss per share as their effect would be anti-dilutive. For all periods presented, basic and subscription investment units, convertible debt related shares)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):

Schedule of Earnings Per Share, Basic and Diluted

(in thousands except share and per share data) 2021  2020 
  December 31, 
(in thousands except share and per share data) 2021  2020 
Numerator      
Net loss $(6,351) $(3,766)
Preferred stock dividends  (2,054)  (1,540)
Net Loss allocable to common stockholders $(8,405) $(5,306)
Denominator        
Weighted average common shares outstanding used to compute net loss per share, basic and diluted  654,700   548,514 
Net loss per share of common stock, basic and diluted        
Net loss per share, basic and diluted $(12.84) $(9.67)

The following number of shares have been excluded from diluted net (loss) since such inclusion in the computation would be anti-dilutive. The following shares have been excluded:anti-dilutive:

 

  Year Ended December 31, 
  2013  2014 
Stock options outstanding  284,829   1,084,106 
Warrants  17,017,601   21,212,813 
Common shares underlying Series C convertible preferred stock  -   8,000,000 
Total  17,302,430   30,296,919 

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share 

  2021  2020 
  Year Ended December 31, 
  2021  2020 
Stock options outstanding  19,203   19,568 
Convertible notes  2,434,842   1,682,930 
Warrants  3,731,263   3,909,100 
Series C Preferred Stock  3,334   3,334 
Series D Preferred Stock  2,500   2,500 
Series E Preferred Stock  2,162,076   2,102,801 
Series F Preferred Stock  227,761   215,199 
Total  8,580,979   7,935,432 

As of December 31, 2021, the Company’s fully diluted common stock equivalents exceeded the 180,000,000 shares currently authorized prior to the reverse stock split. (See Note 11)

F-10F-17

Notes Payable Stock-Based Compensation— Notes payable are recorded under liabilities, classified into short

The Company applies the provisions of ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and long term, depending on the principal duerecognition of compensation expense for all stock-based awards made to employees and non-employees, including stock options, in the subsequent twelve months. Interest is either accrued or paid accordingstatements of operations.

For stock options issued, the Company estimates the grant date fair value of each option using the Black-Scholes option pricing model. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the termsexpected term of the notes. Costs associatedoption, the expected volatility of the common stock consistent with the issuanceexpected life of debt, such as legal fees, are recorded as prepaid expensesthe option, risk-free interest rates and are amortizedexpected dividend yields of the common stock. For awards subject to service-based vesting conditions, including those with a graded vesting schedule, the Company recognizes stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally the vesting term. Forfeitures are recorded as they are incurred as opposed to maturitybeing estimated at the time of the debt.grant and revised if and when a forfeiture becomes probable.

Note amendments and changes must be analyzed for correct accounting application based on our financial condition and the changes in the debt instrument features and terms. For each note amendment, a series of analyses is performed to determine first whether the amendment was a troubled debt restructuring, as defined by conditions of default, our financial state and ability to repay loan, and whether the lender made a concession. If an amendment is not a troubled debt restructuring, then we perform a further analysis to determine if the amended terms are “substantially different” from the existing debt facility. The debt is considered extinguished if the present value of the cash flows under the terms of the new debt instrument is at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. The new debt instrument is initially recorded at fair value, and that amount is used to determine the debt extinguishment gain or loss recognized and the effective rate of the new instrument. If it is determined that the original and new debt instruments are not substantially different, then a new effective interest rate is determined based on the carrying amount of the original debt instrument resulting from the modification, and the revised cash flows.  If the exchange or modification is to be accounted for in the same manner as a debt extinguishment and the new debt instrument is initially recorded at fair value, then the fees paid including the fair value of warrants issued are included in the debt extinguishment gain or loss.  If the exchange or modification is not to be accounted for in the same manner as a debt extinguishment, then the fees paid including the fair value of warrants issued are amortized as an adjustment of interest expense over the remaining term of the replacement or modified debt instrument using the interest method.

Income Taxes — Income taxes are accounted for under 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 bases and operatingbases. Deferred tax assets, including tax loss and tax credit carry-forwards. Deferred tax assetscarry forwards, 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 pledged.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. Tax benefits in excess of stock-based compensation expense recorded for financial reporting purposes relating to stock-based awards will be credited to additional paid-in capital in the period the related tax deductions are realized. Our policy for recording interest and penalties associated with audits is to record such items as a component of loss before taxes.

We assess the likelihood that our deferred tax assets will be recovered from existing deferred tax liabilities or future taxable income. Factors we considered in making such an assessment include, but are not limited to, estimated utilization limitations of operating loss and tax credit carry-forwards, expected reversals of deferred tax liabilities, past performance, including our history of operating results, our recent history of generating tax losses, our history of recovering net operating loss carry-forwards for tax purposes and our expectation of future taxable income. We recognize a valuation allowance to reduce such deferred tax assets to amounts that are more likely than not to be ultimately realized. To the extent that we establish a valuation allowance or change this allowance, we would recognize a tax provision or benefit in the consolidated statements of operations. We use our judgment to determine estimates associated with the calculation of our provision or benefitThe Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates.

Note 3 – Prepaid Expenses

As of December 31, 2021, prepaid expenses totaled approximately $120,000 and included prepaid manufacturing expenses for the Company’s clinical development candidate MLR-1019. As of December 31, 2020, no prepaids were recorded on the accompanying balance sheet.

Note 4 – Notes Payable and Convertible Promissory Notes

2019 Term Loan

During 2019, the Company entered into term loan subscription agreements with certain accredited investors, pursuant to which the Company issued secured promissory notes in our evaluationthe aggregate principal amount of approximately $5.7 million. The Company paid $707,000 in debt issuance costs which was recorded as a debt discount to be amortized as interest expense over the term of the need forloan using the straight-line method.

The promissory notes accrued interest at a valuation allowance recorded against our net deferred tax assets.rate of 12% per annum. Interest is payable quarterly with the first interest payment to be made on December 28, 2019, and each subsequent payment every three months thereafter. On December 28, 2019, the Company defaulted on the initial interest payment on the loan and the interest rate per annum increased to the default rate of 15%.

Note 2 — Intangible assets

In July 2010, we acquired Cequent. A substantial portionThe unpaid principal balance of the notes, plus accrued and unpaid interest thereon, matured on June 28, 2020. The notes are secured by a first lien and security interest on all the assets acquired were allocated to identifiable intangible assets related to in-process researchof the Company and development (“IPR&D”) projects identified by our chief executive officer. Our chief executive officer estimated acquisition-date fair valuescertain of these intangible assets basedits wholly owned subsidiaries. On June 28, 2020, the Company defaulted on a number of factors. Utilizing the income approach, a discounted cash flow model using forecasted operating resultsmaturity date principal payment.

F-18

The Company recognized approximately $1.2 million in interest expense related to the identified intangible assets, fair value was determined2019 Term Loan for the year ended December 31, 2020 including $347,000 related to be $19.3 the amortization of debt issuances costs. The Company recognized approximately $852,000 in interest expense related to the notes for the year ended December 31, 2021. As of December 31, 2021, the debt discount and issuance costs for this term loan were fully amortized.

As of December 31, 2021, the Company had approximately $2.0 million for FAPof accrued interest on the notes included in accrued expenses and $3.4 million fortkRNAi, for a totalremains in default on the repayment of $22.7 million. We recorded a loss on impairment of these intangible assets of $16.0approximately $5.7 million in principal and $2.0 million in 2011.accrued interest on the 2019 Term Loan.

Convertible Promissory NotesWe tested

The following table summarizes the carrying value of our intangible assets for impairmentCompany’s outstanding convertible notes as of December 31, 20132021, and 2014, utilizingDecember 31, 2020:

Schedule of Convertible Promissory Notes

(in thousands) December 31, 2021  December 31, 2020 
Convertible Notes $1,516  $720 
Unamortized discounts  (530)  (79)
Convertible Notes Payable $986  $641 

Eight convertible notes with outstanding principal of approximately $1.3 million were in default as of the income approach. We estimatedissuance date of this Report.

Secured Convertible Promissory Note – February 2020

On February 5, 2020, the Company entered into a Securities Purchase Agreement with accredited investors and issued the investors, (i) original issue discount Convertible Promissory Notes with a principal of $550,500 issued at a 10% original issue discount, for a total purchase price of $499,950, and (ii) warrants to purchase up to such number of shares of the common stock of the Company as is equal to the product obtained by multiplying 1.75 by the quotient obtained by dividing (A) the principal amount of the Notes by (B) the then applicable conversion price of the Notes.

The Convertible Notes matured on August 5, 2020. Prior to default, interest accrued to the Holders on the aggregate unconverted and then outstanding principal amount of the Notes at the rate of 10% per annum, calculated on the basis of a 360-day year and accrues daily. On June 15, 2020, the Company defaulted on certain covenants in the 2020 term loan and the interest rate reset to the default rate of 18%.

Until the Convertible Notes are no longer outstanding, the Convertible Notes are convertible, in whole or in part, at any time, and from time to time, into shares of Common Stock at the option of the noteholder. The conversion price is the lower of: (i) $10.00 per share of Common Stock and (ii) 70% of the volume weighted average price of the Common Stock on the trading market on which the Common Stock is then listed or quoted for trading for the prior ten (10) trading days (as adjusted for stock splits, stock combinations and similar events); provided, that if the Notes are not prepaid on or before May 5, 2020, then the conversion price shall be the lower of (x) 60% of the conversion price as calculated above or (y) $1.00 (as adjusted for stock splits, stock combinations and similar events). The conversion price of the Convertible Notes shall also be adjusted as a result of subsequent equity sales by the Company, with customary exceptions.

The exercise price of the Warrants shall be equal to the conversion price of the Convertible Notes, provided, that on the date that the Convertible Notes are no longer outstanding, the exercise price shall be fixed at the conversion price of the Convertible Notes on such date, with the exercise price of the Warrants thereafter (and the number of shares of Common Stock issuable upon the exercise thereof) being subject to adjustment as set forth in the Warrants. The warrants have a 5-year term.

The Company recorded a discount related to the Warrants of approximately $322,000, which includes an allocation of original issue discount (“OID”) and issue costs of $30,000 and $53,000 based on the relative fair value of these intangible assetsthe instruments as determined by using athe Monte-Carlo simulation model. The Company also recorded the remaining debt discount raterelated to the convertible debt OID of 22%. We probability adjusted our estimationapproximately $21,000 and debt issuance costs of $38,000 using the relative fair value method to be amortized as interest expense over the term of the expected future cash flows associated with each project and then determined the present value of the expected future cash flowsloan using the discount rate. The projected cash flows from the projectsstraight-line method. Total discounts recorded were based on key assumptions, including those outlined above. As no impairment was indicated, no loss was recorded in 2013. Using a similar analysis with a 22% discount rate, no impairment was indicated at December 31, 2014 and no loss on impairment was recorded in 2014.approximately $381,000.

F-11F-19

Deferred Taxes — Our acquisitionThe Company recognized $75,000 in interest expense related to the notes for the year ended December 31, 2020. The Company amortized $381,000 of Cequentdebt discount including the $38,000 related to debt issuance cost for the year ended December 31, 2020. The Company recognized approximately $96,000 in 2010interest expense related to the notes for the year ended December 31, 2021. As of December 31, 2021, the debt discounts for this Convertible Note were fully amortized.

On March 19, 2021, the holder of the Convertible Note converted $25,900 of interest into 25,900 shares of common stock.

On July 29, 2021, the holder of the Convertible Note converted $27,500 of interest into 27,500 shares of common stock.

On August 16, 2021, the holder of the Convertible Note converted $25,000 of principal and interest into 25,000 shares of common stock.

On September 13, 2021, the holder of the Convertible Note converted $32,500 of principal and interest into 32,500 shares of common stock.

On October 4, 2021, the holder of the Convertible Note converted $26,250 of principal and interest into 26,250 shares of common stock.

On November 29, 2021, the holder of the Convertible Note converted $31,150 of principal and interest into 31,151 shares of common stock.

The total note principal and interest converted during the year ended December 31, 2021, was treated as a tax-free merger. Deferred tax assets acquired$168,300 and 168,294 common shares issued were comprised of $7.0 million of federal and state net operating loss carry-forwards and $1.1 million of tax credit carry-forwards. The tax basis for acquired intangible assets of $22.7 million is nil, which resultsvalued at fair value based on the quoted trading prices on the conversion dates aggregating approximately $554,000 resulting in a deferred tax liabilityloss on debt extinguishment of $8.0 million, as there$386,000. In addition, derivative fair value of $245,000 relating to the portion of the Note converted was settled resulting in gain on extinguishment of approximately $245,000. The net loss on extinguishment was approximately $141,000.

As of December 31, 2021, the Company had accrued interest on the February 2020 Convertible Note of approximately $101,000.

As of December 31, 2021, the Company remains in default on the repayment of remaining principal of $457,359 and accrued interest on the February 2020 Convertible Notes. Upon demand for repayment at the election of the holder, the holder of the Convertible Note is due 140% of the aggregate of outstanding principal, interest, and other expenses due in respect of this Convertible Note. The 40% premium will be no tax deduction whenrecorded once a demand occurs.

F-20

Secured Convertible Promissory Note – June 2020

On June 26, 2020, the bookCompany issued to an existing investor in the Company a 10% original issue discount Senior Secured Convertible Promissory Note with a principal of $58,055, for a purchase price of $52,500, net of the original issue discount of $5,555. The Convertible Note matured on December 26, 2020. Prior to default, interest accrued on the aggregate unconverted and then outstanding principal amount of the Note at the rate of 10% per annum, calculated on the basis is expensedof a 360-day year. The Company incurred approximately $14,000 in debt issuance costs. On August 5, 2020, the Company defaulted on certain covenants in the loan and the deferred tax liabilityinterest rate reset to the default rate of 18%.

The Note is reduced. After consideringconvertible, in whole or in part, into shares of common stock of the impairment lossCompany at the option of the noteholder at a conversion price of $0.40 (as adjusted for stock splits, stock combinations and similar events); provided, that if an event of default has occurred under the Note, then the conversion price shall be 65% of the lowest closing bid price of the Company’s common stock as reported on its principal trading market for the twenty consecutive trading day period ending on (and including) the trading day immediately preceding the date on which the conversion notice was delivered. The conversion price shall also be adjusted for subsequent equity sales by the Company. Because the share price on the commitment date was in 2011excess of the conversion price, the Company recorded a beneficial conversion feature of $50,000 related to this note that was credited to additional paid in capital and reduced the current carrying amount. At the commitment date, the actual intrinsic value of the intangiblebeneficial conversion feature was approximately $203,000. The discount recorded is being amortized to interest expense over the life of the loan using the straight-line method.

The obligations of the Company under the Note are secured by a senior lien and security interest in all of the assets atof the Company and certain of its wholly-owned subsidiaries pursuant to the terms and conditions of a Security Agreement dated June 26, 2020 by the Company in favor of the noteholder. In connection with the issuance of the Note, the holders of the secured promissory notes that the Company issued to select accredited investors between June 28, 2019 and August 5, 2019 in the aggregate principal amount of approximately $5.7 million agreed to subordinate their lien and security interest in the assets of the Company and its subsidiaries as set forth in the Security Agreement dated June 28, 2019 that such holders entered into with the Company and its subsidiaries to the security interest granted to the holder of the Note.

For the year ended December 31, 2013 and 2014, we had a deferred tax liability of $2.4 million2020, the Company recognized approximately $5,000 in interest expense. For the year ended December 31, 2020, the Company recognized $70,000 related to these intangible assets. No material change was recorded in 2013 or 2014. Due to uncertainty asthe amortization of debt discount. Including $14,000 related to the timingamortization of debt issuance costs, respectively. For the year ended December 31, 2021, the Company recognized approximately $11,000 in interest expense related to the notes. As of December 31, 2021, the debt discount and issuance costs for the loan were fully amortized.

As of December 30, 2021, the Company remains in default on the repayment of principal of $58,055 and approximately $16,000 in accrued interest on the notes. Upon demand for repayment at the election of the reversal, we determined thatholder, the deferred tax liability did not support realization of any deferred tax assets (see Note 8).

Note 3 — Accrued Expenses

The following summarizes the major componentsholder of the accruednote is due 140% of the aggregate of outstanding principal, interest, and other expenses balancedue in respect of this Note. The 40% premium will be recorded once a demand occurs.

Secured Convertible Promissory Note – October 2020

On October 30, 2020, the Company issued to an existing investor in and lender to the Company a 10% original issue discount senior secured convertible promissory note with a principal of $111,111, for a purchase price of $100,000. The note is convertible into shares of common stock of the Company at December 31, 2013the option of the noteholder at a conversion price of $1.40 (as adjusted for stock splits, stock combinations and 2014.similar events); provided, that if an event of default has occurred under the Note, then the conversion price shall be 70% of then conversion price. The conversion price of the notes is subject to anti-dilution price protection and on March 19, 2021, the conversion price of the notes was adjusted to $1.00 per share as a result of subsequent equity sales by the Company.

  Year Ended December 31, 
  2013  2014 
Corporate legal fees $138  $564 
Audit, tax and filing services  454   189 
Interest accrued  138   - 
Taxes and Delaware fees  450   96 
Board fees  -   45 
Consulting equity instruments  -   40 
Sublicense fees  125   125 
Other miscellaneous  10   13 
  $1,315  $1,072 

Note 4 —Restructuring Charges

In September 2012, we executed a lease termination agreement effective March, 2013 for our Bothell, Washington facility. UnderThe obligations of the agreement,Company under the remaining 2012 rent of $0.5 million and remaining 2013 rent of $0.4 million would be paid, mostlynote are secured by a drawsenior lien and security interest in all of the assets of the Company.

The Company recorded approximately $9,000 in debt issuance cost to be amortized over the life of the loan using the straight-line method.

The interest rate on the letternote was 10% per annum, calculated on the basis of credit. a 360-day year. On April 30, 2021, the note matured and the Company defaulted on the note and the interest rate on the loan reset to 18%.

F-21

Additionally, we agreedthe Company issued the noteholder 79,366 warrants to issue 1.5 million shares of ourpurchase the Company’s common stock onat $1.60 per share subject to certain future financing events valuedadjustments as defined in the agreement. Until the Notes are no longer outstanding, the warrants have full-ratchet protection, are exercisable for a period of five years, and contain customary exercise limitations. On March 19, 2021, the exercise price of the warrants was adjusted to $1.00 and the Company issued an additional 47,619 warrants to the note holder. The Company recorded approximately $57,000 as a charge to restructuring of $0.45 million. The stock was issued ondeemed dividend upon the closing of our March 2014 financing, resulting in a 2014 charge of $1.1 millionrepricing based onupon the change in fair value of the warrants using a binomial valuation model. The Company used a risk-free rate of 0.16%, volatility of 262.27%, and expected term of 0.92 years in calculating the fair value of the warrants.

The Company recorded a discount related to the warrants of approximately $66,000, Including a discount of $6,000 and issuance costs of $5,000 based on the relative fair value of the instruments as determined by using the Black-Scholes valuation model. The Company recorded a beneficial conversion feature of $45,000 related to the note that was credited to additional paid in capital and reduced the carrying amount. The discount recorded is being amortized to interest expense over the life of the loan using the straight-line method. At the commitment date, the actual intrinsic value of the beneficial conversion feature was approximately $69,000. The Company also recorded a debt discount related to the convertible debt of approximately $5,000 and debt issuance cost of $4,000 using the relative fair value method to be amortized as interest expense over the term of the loan using the straight-line method.

For the year ended December 31, 2020, the Company recognized approximately $2,000 in interest expense. For the year ended December 31, 2020, the Company recognized $41,300 related to the amortization of debt discount including $1,300 of debt issuance costs. For the year ended December 31, 2021, the Company recognized approximately $17,000 in interest expense. For the year ended December 31, 2021, the Company recognized $79,000 related to the amortization of debt discount including debt issuance costs.

As of December 31, 2021, the Company has outstanding principal of $111,111 and accrued interest on the note of approximately $19,000.

As of December 31, 2021, the Company remains in default on the repayment of principal and interest on the notes. Upon demand for repayment at the election of the holder, the holder of the note is due 125% of the aggregate of outstanding principal, interest, and other expenses due in respect of this Note. The 25% premium will be recorded once a demand occurs

Secured Convertible Promissory Note – January 2021

On January 31, 2021, the Company issued to an existing investor in and lender to the Company a 10% original issue discounted Senior Secured Convertible Promissory Note with a principal of $52,778, for a purchase price of $47,500, net of original issue discount of $5,278. The Note is convertible into shares of common stock reservedof the Company at the option of the noteholder at a conversion price of $1.40 (as adjusted for stock splits, stock combinations and similar events); provided, that if an event of default has occurred under the Note, then the conversion price shall be 70% of the then conversion price. The conversion price of the notes is subject to settleanti-dilution price protection and will be adjusted upon subsequent equity sales by the liability. Company.

The lease termination in 2012 resulted inobligations of the elimination of $1.1 million of deferred rent, offset by restructuring future rent charges of $0.85 million and a stock liability of $0.45 million. There were no additional restructuring charges in 2013 or 2014.

Company under the Note 5 — Notes Payable

Original Issuance and Amendments— In February 2012, we issued $1.5 million of notes payable at 15% interest to two investors. The notes wereare secured by thea senior lien and security interest in all assets of our company. The original maturity date was May 2012, and the notes were callable on condition of default. Price adjustableCompany.

Additionally, the Company issued to the investor 37,699 warrants to purchase 3.7 millionthe Company’s common sharesstock at $0.508 were issuedan exercise price of $1.60 per share subject to certain adjustments as defined in the agreement. Until the Notes are no longer outstanding, the warrants have full-ratchet protection, are exercisable for a period of five years, and were exercisable through August 2017. Through a series of subsequent amendments, we were required to pay $0.2 million of accrued interest and issued additional price adjustable warrants to purchase 3.2 million shares andcontain customary exercise limitations. On March 19, 2021, the exercise price of these and the original warrants was adjusted to $0.28. Each warrant had$1.00 and the Company issued an additional 22,619 warrants to the note holder. The Company recorded approximately $27,000 as a contractualdeemed dividend upon the repricing based upon the change in fair value of the warrants using a binomial valuation model. The Company used a risk-free rate of 0.16%, volatility of 262.27%, and expected term of five0.97 years afterin calculating the fair value of the warrants.

F-22

The Company recorded approximately $2,000 in debt issuance cost to be amortized over the life of the loan using the straight-line method.

The interest rate on the note was 10% per annum, calculated on the basis of a 360-day year. On July 31, 2021, the note matured and the Company defaulted on the note and the interest rate on the loan reset to the default rate of 18% per annum.

The Company recorded a discount related to the warrants of approximately $32,000, which includes an allocated original issue date.discount, of $3,000 and allocated issuance costs of $1,000 based on the relative fair value of the instruments as determined by using the Black-Scholes valuation model. The assumptions used in the Black-Scholes model were a risk-free rate of 0.45%, volatility of 240.83%, and an expected term of one year in calculating the fair value of the warrants.

AmendmentsThe Company also recorded a debt discount related to the convertible debt of approximately $2,000 remaining original issue discount and remaining debt issuance cost of $1,000 using the relative fair value method to be amortized as interest expense over the term of the loan using the straight-line method.

Total discounts recorded including the original issue discount were approximately $35,000.

For year ended December 31, 2021, the Company recognized approximately $6,700 in 2013 - In February 2013, we amendedinterest expense. For year ended December 31, 2021, the notesCompany recognized $35,000 related to the amortization of debt discount including the amortization of debt issuance costs. No interest expense or debt discount was recognized for the same period of 2020. As of December 31, 2021, the debt discount and issuance costs on the note were fully amortized.

As of December 31, 2021, the Company has outstanding principal of $52,778 on the note, and has recorded approximately $6,700 of accrued interest included in accrued expenses on the accompanying balance sheet.

As of December 31, 2021, the Company remains in default on the repayment of principal and accrued interest on the notes. Upon demand for repayment at the election of the holder, the holder of the note is due 125% of the aggregate of outstanding principal, interest, and other expenses due in respect of this Note. The 25% premium will be recorded once a demand occurs

Secured Convertible Promissory Note – April 2021

On April 12, 2021, the Company issued to an accredited investor in and lender to the Company a 10% original issue discounted Senior Secured Convertible Promissory Note with a principal amount of $66,667, for a purchase price of $60,000 net of an original discount of $6,667. Additionally, the Company issued to the investor 40,000five-year warrants to purchase the Company’s common stock at an exercise price of $1.90 per share. The warrants have full ratchet protection.

The note matured on October 12, 2021, Prior to default, interest accrued on the aggregate unconverted and then outstanding principal amount of the note at the rate of 10% per annum, calculated on-the-basis of a 360-day year. On October 12, 2021, the Company defaulted on the note and the interest rate on the note reset to 18% per annum.

The Note is convertible, in whole or in part, at any time, and from time to time, into shares of the common stock of the Company at the option of the noteholder at a conversion price of $1.50 (as adjusted for stock splits, stock combinations and similar events); provided, that if an event of default has occurred under the Note, then the conversion price shall be 70% of the then conversion price. The conversion price shall also be adjusted upon subsequent equity sales by the Company. The obligations of the Company under the Note are secured by a senior lien and security interest in all assets of the Company.

The Company recorded a discount related to the warrants of approximately $34,000, which includes approximately $3,700 of OID discount allocated under the relative fair value method, and a remaining discount related to the OID of $3,000 based on the relative fair value of the instruments. The fair value of the warrants on which the relative fair value is based was determined by using the Black-Scholes valuation model. The assumptions used in the Black-Scholes model were a risk-free rate of 0.89%, volatility of 240.64%, and an expected term of one year in calculating the fair value of the warrants.

F-23

On June 25, 2021, the exercise price of the warrants was adjusted to $1.50 and the Company issued an additional 10,667 warrants to the note holder. The Company recorded approximately $11,000 as a deemed dividend upon the repricing based upon the change in fair value of the warrants using a binomial valuation model. The Company used a risk-free rate of 0.92%, volatility of 247.52%, and expected term of 0.96 years in calculating the fair value of the warrants.

On November 4, 2021, the Company issued 7,662 shares of common stock upon a cashless exercise of 12,500 warrants issued with the April 2021 Convertible Note.

On November 30, 2021, the exercise price of the warrants was adjusted to $1.00 based on a note conversion at $1.00 and the Company issued an additional 19,084 warrants to the note holder.

For the year ended December 31, 2021, the Company recognized approximately $6,100 in interest expense for the notes. For the year ended December 31, 2021, the Company recognized approximately $37,500, related to the amortization of debt discount including debt issuance costs. No interest expense or debt discount was recognized for the same period of 2020.

As of December 31, 2021, the Company has recorded $66,667 of principal and approximately $6,100 of accrued interest for the note on the accompanying balance sheet. As of December 31, 2021, the debt discount and issuance costs on the note were fully amortized.

As of December 31, 2021, the Company remains in default on the repayment of principal and accrued interest on the notes. Upon demand for repayment at the election of the holder, the holder of the note is due 125% of the aggregate of outstanding principal, interest, and other expenses due in respect of this Note. The 25% premium will be recorded once a demand occurs.

Secured Convertible Promissory Note – June 2021

On June 25, 2021, the Company issued to an accredited investor in and lender to the Company a 5% original issue discounted Senior Secured Convertible Promissory Note with a principal amount of $66,500, for a purchase price of $63,000, net of an original issue discount of $3,500. Additionally, the Company issued to the investor 40,000 three-year warrants to purchase the Company’s common stock at an exercise price of $1.90 per share. Upon subsequent down-round equity sales by the Company, the number of shares issuable upon exercise of the Warrant shall be proportionately adjusted such that the aggregate exercise price of this Warrant shall remain $76,000 which is a full ratchet price protection provision.

The note matures one year from issuance, or such earlier date as the note is required or permitted to be repaid. Interest shall accrue on the aggregate unconverted and then outstanding principal amount of the note at the rate of 10% per annum, calculated on the basis of a 365-day year.

The Note is convertible, in whole or in part, at any time, and from time to time, into shares of the common stock of the Company at the option of the noteholder at a conversion price of $1.50 (as adjusted for stock splits, stock combinations and similar events); provided, however that in the event, the Company’s Common Stock trades below $1.60 per share for more than three (3) consecutive trading days, the Holder of this Note is entitled, at its option, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock at a price for each share of Common Stock equal to 65% of the lowest trading price of the Common Stock for the twenty prior trading days including the day upon which a Notice of Conversion is received. The conversion discount, look back period and other terms of the Note will be adjusted on a ratchet basis if the Company offers a more favorable conversion discount, prepayment rate, interest rate, (whether through a straight discount or in combination with an original issue discount), look back period or other more favorable term to another party for any financings while this Note is in effect

F-24

The obligations of the Company under the Note are secured by a senior lien and security interest in all assets of the Company.

The Company incurred approximately $9,300 in debt issuance costs.

The Company also issued 2,377 shares of common stock as a commission fee to the investment banker. The fair value of the common stock which was approximately $5,040 was recorded as debt issuance expense.

Due to the variability in the conversion price of the Note the embedded conversion option has been bifurcated and reflected as a derivative liability with an initial fair value of $102,823 with $87,039 charged to derivative expense and $15,784 recorded as a debt discount.

Total discounts recorded were $66,500. The Company recorded an original issue discount of $3,500, a discount of $9,300 for issuance costs, a discount related to the warrants of approximately $37,916 and a discount related to the derivative of $15,784 based on the relative fair value of the instruments. The warrant fair value on which the relative fair value was based was determined by using a simple binomial lattice model. The assumptions used in the model were a risk-free rate of 0.48%, volatility of 302.11%, and an expected term of 0.60 years in calculating the fair value of the warrants.

On August 11, 2021, the exercise price of the warrants was adjusted to $1.50 and the Company issued an additional 10,667 warrants to the note holder. The Company recorded approximately $25,000 as a deemed dividend upon the repricing based upon the change in fair value of the warrants using a binomial valuation model. The Company used a risk-free rate of 0.81, volatility of 209%, and expected term of 0.57 years in calculating the fair value of the warrants.

On October 27, 2021, the Company and the institutional investor who holds the convertible promissory note agreed to extend the maturity date of the note by six months to AprilDecember 25, 2022 for no consideration.

On November 30, 2013. In exchange2021, the exercise price of the warrants was adjusted to $1.00 based on a note conversion at $1.00and the Company issued an additional 25,333 warrants to the note holder.

For the year ended December 31, 2021, the Company recognized approximately $27,800 related to the amortization of debt discount. For the year ended December 30, 2021, the Company recognized approximately $5,800 in interest expense related to the note. No interest expense or debt discount was recognized for the extension, wesame period of 2020.

At December 31, 2021, the Company has recorded $66,500 of outstanding principal and approximately $5,700 of accrued interest and $38,700 of unamortized discount and issuance expenses.

Convertible Promissory Note – August 11, 2021

On August 11, 2021, the Company entered into a Securities Purchase Agreement with an accredited institutional investor pursuant to which the Company issued additional price adjustableto the investor its Original Issue Discount Secured Convertible Promissory Note in the principal amount of $220,500 and warrants to purchase 1.0 million40,000 shares of the common stock of the Company for which the Company received consideration of $210,000 net of an original issue discount of $10,500. In addition, the Company entered into a Registration Rights Agreement with the investor and issued the investor 5,000 common shares as a commitment fee.

The note matured one year from issuance and absent an event of default provides for an interest rate of 10% per annum, payable at $0.28 before August 2018. The termsmaturity, and is convertible into common stock of the amended notes were determinedCompany at a price of $1.50 per share, subject to anti-dilution adjustments in the event of certain corporate events as set forth in the Note, provided that if the average closing price of the Company’s common stock during any Nine consecutive trading days is below $1.60, the conversion price shall be substantially different fromreduced to 65% of the priorlowest trading price during the 20 consecutive trading days immediately preceding the conversion date. On November 9, 2021, the Company defaulted on certain covenants in the note terms, and the amendment, therefore, wasinterest rate on the note reset to 24% per annum.

F-25

In addition to customary anti-dilution adjustments the Note provides, subject to certain limited exceptions, that if the Company issues any common stock or common stock equivalents, as defined in the Note, at a per share price lower than the conversion price then in effect, the conversion price will be reduced to the per share price at which such shares or common share equivalents were sold.

The Warrants are initially exercisable for a period of five years at a price of $1.90 per share, subject to customary anti-dilution adjustments upon the occurrence of certain corporate events as set forth in the Warrant.

The Company incurred approximately $30,000 in debt issuance costs.

The Company also issued 7,000 shares of common stock to the investment banker as a commission on the note.

Due to the variability in the conversion price of the Note the embedded conversion option has been bifurcated and reflected as a derivative liability with an initial fair value of $340,893 with $234,388 charged to derivative expense and $106,505 recorded as a debt discount.

The Company recorded a total debt discount of $220,500 including an extinguishment.original issue discount of $10,500, a discount related to the warrants of approximately $56,454 a discount related to issuance costs of $30,000 and a discount related to the issuance of common stock of approximately $17,041, and a $106,505 discount related to the initial derivative value of the embedded conversion feature on the note all based on the relative fair value of the instruments,

The fair value of the warrants on which the relative fair value was based was determined by using a simple binomial lattice model. The assumptions used in the model were a risk-free rate of 0.81%, volatility of 253%, and an expected term of one year in calculating the fair value of the warrants. The discounts are being amortized over the term of the convertible note.

On November 30, 2021, the exercise price of the warrants was adjusted to $1.00 based on a note conversion at $1.00 and the Company issued an additional 36,000 warrants to the note holder.

For the year ended December 30, 2021, the Company recognized approximately $86,400 related to the amortization of debt discount. For the year ended December 30, 2021, the Company recognized approximately $15,800 in interest expense related to the note. No interest expense or debt discount was recognized for the same period of 2020.

At December 31, 2021, the Company has remaining $220,500 of outstanding principal and approximately $15,800 of accrued interest and $134,100 of unamortized discount.

Convertible Promissory Note – August 17, 2021

On August 17, 2021, the Company entered into a Securities Purchase Agreement with an accredited institutional investor pursuant to which the Company issued to the investor its Original Issue Discount Secured Convertible Promissory Note in the principal amount of $220,500 and warrants to purchase 40,000 shares of the common stock of the Company for which the Company received consideration of $210,000 net of original discount of $10,500. In August 2013, we amendedaddition, the notesCompany entered into a Registration Rights Agreement with the investor and issued the investor 5,000 common shares as a commitment fee.

The note matures one year from issuance and provides for an interest rate of 10% per annum, payable at maturity, and is convertible into common stock of the Company at a price of $1.50 per share, subject to anti-dilution adjustments in the event of certain corporate events as set forth in the Note, provided that if the average closing price of the Company’s common stock during any three consecutive trading days is below $1.60, the conversion price shall be reduced to 65% of the lowest trading price during the 20 consecutive trading days immediately preceding the conversion date. The embedded conversion option will be treated as a bifurcated derivative liability.

F-26

In addition to customary anti-dilution adjustments the Note provides, subject to certain limited exceptions, that if the Company issues any common stock or common stock equivalents, as defined in the Note, at a per share price lower than the conversion price then in effect, the conversion price will be reduced to the per share price at which such shares or common share equivalents were sold.

The Warrants are initially exercisable for a period of five years at a price of $1.90 per share, subject to customary anti-dilution adjustments upon the occurrence of certain corporate events as set forth in the Warrant

The Company incurred approximately $30,000 in debt issuance costs. The Company also issued 5,631 shares of common stock to the investment banker as a commission on the note.

Due to the variability in the conversion price of the Note, the embedded conversion option has been bifurcated and reflected as a derivative liability with an initial fair value of $398,404 with $297,833 charged to derivative expense and $100,571 recorded as a debt discount.

The Company recorded a total debt discount of $220,500 including an original issue discount of $10,500, a discount related to the warrants of approximately $62,220 a discount related to issuance costs of $30,000 a discount related to the issuance of common stock of approximately $17,209, and a $100,571 discount related to the initial derivative value of the embedded conversion feature on the Note all based on the relative fair value of the instruments.

The fair value of the warrants on which the relative fair value was based was determined by using a simple binomial lattice model. The assumptions used in the model were a risk-free rate of 0.77%, volatility of 254%, and an expected term of one year in calculating the fair value of the warrants. The discounts are being amortized over the life of the convertible note.

On October 27, 2021, the Company and the institutional investor who holds the promissory note agreed to extend the maturity date the notes by six months to March 2014. Additionally,February 17, 2023for no consideration.

On November 15, 2021, the Company defaulted on certain covenants in the note and the interest rate on the note reset to 24% per annum.

On November 30, 2021, the exercise price of the warrants was adjusted to $1.00 based on a note conversion at $1.00 and the Company issued an additional 36,000 warrants to the note holder.

For the year ended December 31, 2021, the Company recognized approximately $62,600 related to the amortization of debt discount. For the year ended December 30, 2021, the Company recognized approximately $15,400 in interest expense related to the note. No interest expense or debt discount was recognized for the same period of 2020.

At December 31, 2021, the Company has recorded $220,500 of outstanding principal and approximately $15,400 of accrued interest and $157,900 of unamortized discount and issuance expenses.

F-27

Convertible Promissory Note – October 4, 2021

On October 4, 2021, the Company entered into a Securities Purchase Agreement (“SPA”) with an institutional investor pursuant to which the Company issued the Buyer a 10% Convertible Redeemable Note in the principal amount of $131,250 and a six-year warrant to purchase 23,810 shares of common stock of the Company for which the Company received proceeds of $110,000. In addition, the Company entered into a Registration Rights Agreement with the investor and issued the investor 2,977 common shares as a commitment fee.

The Note is due October 4, 2022. The Note provides for interest at the rate of 10% per annum, payable in seven equal monthly payments beginning on August 15, 2022 through the maturity date. The Note is convertible into shares of common stock at any time following the date of cash payment at the Buyer’s option at a conversion price of $1.50 per share, subject to certain adjustments.

The Warrants are exercisable for three-years from October 4, 2021, at an exercise price of $1.90 per share, subject to certain adjustments, which exercise price may be paid on a cashless basis. The aggregate exercise price is $45,238.

The Company incurred approximately $15,000 in debt issuance costs. The Company also issued 2,173 shares of common stock to the investment banker as a commission on the note.

Due to the lack of authorized shares, the embedded conversion option has been bifurcated and reflected as a derivative liability with an initial fair value of $564,943 with $487,052 charged to derivative expense and $77,891 recorded as a debt discount.

The Company recorded a total debt discount of $131,250 including an original issue discount of $6,250, a discount related to issuance costs of $15,000, a discount related to the issuance of common stock of $32,109, and a $77,891 discount related to the initial derivative value of the embedded conversion feature on the Note all based on the relative fair value of the instruments. The discounts are being amortized over the life of the convertible note.

For the year ended December 31, 2021, the Company recognized approximately $32,000 related to the amortization of debt discount. For the year ended December 30, 2021, the Company recognized approximately $3,200 in interest expense related to the note. No interest expense or debt discount was recognized for the same period of 2020.

At December 31, 2021, the Company has recorded $131,250 of outstanding principal and approximately $3,200 of accrued interest and $99,200 of unamortized discount and issuance expenses.

Convertible Promissory Note – October 7, 2021

On October 7, 2021, the Company entered into a Securities Purchase Agreement (“SPA”) with an institutional investor pursuant to which the Company issued the investor a 10% Convertible Redeemable Note in the principal amount of $131,250 and a three-year warrant to purchase 23,810 shares of common stock of the Company for which the Company received proceeds of $110,000. In addition, the Company entered into a Registration Rights Agreement with the investor and issued the investor 2,977 common shares as a commitment fee and an additional 2,632 shares as a commission to the broker.

The Note is due October 7, 2022. The Note provides for interest at the rate of 10% per annum, payable at maturity. The Note is convertible into shares of common stock at any time following the date of cash payment at the Buyer’s option at a conversion price of $1.50 per share, subject to certain adjustments.

The Warrants are exercisable for three-years from October 7, 2021, at an exercise price of $1.90 per share, subject to certain adjustments, which exercise price may be paid on a cashless basis. The aggregate exercise price is $45,238.

The Company incurred approximately $15,000 in debt issuance costs.

Due to the lack of authorized shares, the embedded conversion option has been bifurcated and reflected as a derivative liability with an initial fair value of $564,184 with $487,667 charged to derivative expense and $76,517 recorded as a debt discount.

The Company recorded a total debt discount of $131,250 including an original issue discount of $6,250, a discount related to issuance costs of $15,000, a discount related to the issuance of common stock of approximately $33,483, and a $76,517 discount related to the initial derivative value of the embedded conversion feature on the Note all based on the relative fair value of the instruments. The discounts are being amortized over the life of the convertible note.

For the year ended December 31, 2021, the Company recognized approximately $30,900 related to the amortization of debt discounts. For the year ended December 30, 2021, the Company recognized approximately $3,100 in interest expense related to the note. No interest expense or debt discount was recognized for the same period of 2020.

At December 31, 2021, the Company has recorded $131,250 of outstanding principal and approximately $3,100 of accrued interest and $100,300 of unamortized discount and issuance expenses.

F-28

Derivative Liabilities Pursuant to Convertible Notes and Warrants

In connection with the issuance of the unrelated party convertible notes (collectively referred to as “Notes”) and warrants (collectively referred to as “Warrants”), discussed above, the Company determined that the terms of certain Notes and Warrants contain an embedded conversion options to be accounted for as derivative liabilities due to the notes were changedholder having the potential to a claim on a portiongain value upon conversion and provisions which includes events not within the control of the cash receipts from license payments and any financing, with any remaining principal and accrued interest to convert in any financingCompany. Due to the securities underlyingfact that the financingnumber of shares of common stock issuable exceed the Company’s authorized share limit as of December 31, 2021, the equity environment was tainted and with a conversion price equal toall convertible debentures and warrants were included in the effective price paid by other participating investors. In exchange for the amendment, we issued additional price adjustable warrants to purchase 4.0 million shares at $0.28 before February 2019. The termsvalue of the amended notesderivative. Accordingly, for existing embedded conversion options and existing warrants that were not previously accounted for as derivatives, the Company reclassified $3,462,000 from additional paid-in capital to derivative liability on December 31, 2021. In accordance with ASC 815-40 –Derivatives and Hedging – Contracts in an Entity’s Own Stock, the embedded conversion options contained in the Notes and the Warrants were accounted for as derivative liabilities at the date of issuance or on the reclassification date and shall be adjusted to fair value through earnings at each reporting date. The fair value of the embedded conversion options and the warrants was determined to be substantially differentusing the Binomial Lattice valuation model. At the end of each period and on note conversion date or repayment or on the warrant exercise date, the Company revalues the derivative liabilities resulting from the prior note terms, and the amendment, therefore, was recorded as an extinguishment.embedded option.

During the year ended December 31, 2013, we2021, in connection with the issuance of the Notes and Warrants, on the initial measurement dates, the fair values of the embedded conversion options of approximately $2.0 millionwas recorded interest expense related toas derivative liabilities of which $377,269 was allocated as a debt discount and $1,593,978 as derivative expense.

At the notesend of $0.25 million,the period, the Company revalued the embedded conversion option derivative liabilities. In connection with the initial valuations and these revaluations, the Company recorded a loss on debt extinguishmentsfrom the initial and change in the derivative liabilities fair value of $2.0 approximately $4.1 million and a gain onfor the change inyear ended December 31, 2021.

During the year ended December 31, 2021, the fair value of the derivative liabilities was estimated at issuance and at the December 31, 2021, using the Binomial Lattice valuation model with the following assumptions:

Schedule of Fair Value of Derivative Liabilities Estimated Issuance and Valuation Mode

Dividend rate%
Term (in years)0.01 to 1 year
Volatility247% to 412%
Risk-free interest rate0.07% to 1.26%

Other than the effect on the derivative valuation recognized in operations, there was no accounting effect to the ratchet adjustments of certain convertible notes to reduce the conversion price to $1.00 in November 2021 since all of the embedded debt featuresconversion options in the convertible notes were treated as derivatives.

Note 5 - Licensing Agreements

Les Laboratories Servier

As a result of $0.8 million. In the yearAsset Purchase Agreement that the Company entered into with Symplmed Pharmaceuticals LLC in June 2017, Symplmed assigned to the Company an Amended and Restated License and Commercialization Agreement with Les Laboratories Servier, pursuant to which the Company has the exclusive right to manufacture, have manufactured, develop, promote, market, distribute and sell Prestalia® in the U.S. (and its territories and possessions).

On January 4, 2021, the licensor terminated the licensing agreement with the Company for the commercialization of Prestalia®.

No royalties were paid for the years ended December 31, 2021 or 2020.

F-12F-29

ended December 31, 2014, we recorded interest expense relatedNovosom Agreements

In 2010, the Company entered into an asset purchase agreement with Novosom Verwaltungs GmbH (“Novosom”), pursuant to which the notes of $1.0 million and an immaterial gain on debt extinguishment.

Company acquired intellectual property for Novosom’s SMARTICLES-based liposomal delivery system. In February 2014,May 2018, the note holders exchanged the notes in the aggregate principal and interest amount of $1.5 million for approximately 2.0 million Company issued to Novosom 2,599 shares of our common stock.stock, with a fair value of $75,000, as additional consideration pursuant to the Asset Purchase Agreement. Such shares were due to Novosom as a result of the receipt by our company of a license fee under the License Agreement that we entered into with Lipomedics Inc. in February 2017. On December 23, 2019, Novosom repurchased the acquired intellectual property for $45,000 of which $20,000 was payable upon execution of the agreement and $25,000 was to be paid upon the Company’s achievement of certain performance obligations by June 30, 2020.

The Company recognized $45,000 as other income from the agreement for the year ended December 31, 2020. No revenue was recorded for the year ended December 31, 2021.

License of DiLA2 Assets

On March 16, 2018, the Company entered into an exclusive sublicensing agreement for certain intellectual property rights to its DiLA2 delivery system. The agreement included an upfront payment of $200,000 and future additional consideration for sales and development milestones. The upfront fee was contingent upon the Company obtaining a third-party consent to the agreement within ninety days of execution. As of December 31, 2021, and December 31, 2020, the Company had not obtained consent for the sublicense and has classified the upfront payment it had previously recorded as an accrued liability on its balance sheet.

Note 6 - 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/or financial position of the Company could significantly differ from what would have been obtained if such entities were autonomous.

The Company had a Master Services Agreement (“MSA”) with Autotelic Inc., a related party that is partly owned by one of the Company’s former Board members and executive officers, namely Vuong Trieu, Ph.D., effective November 15, 2016. The MSA stated that Autotelic Inc. would provide business functions and services to the Company and allowed Autotelic Inc. to charge the Company for these expenses paid on its behalf. Dr. Trieu resigned as a director of our company effective October 1, 2018. The Company and Autotelic Inc. agreed to terminate the MSA effective October 31, 2018.

An unpaid balance for previous years services performed under the agreement of approximately $4,000 is included in due to related party in the accompanying consolidated balance sheets at December 31, 2021, and December 31, 2020.

 

In addition, as of December 31, 2021, the Company owed various officers and directors approximately $42,000 for services rendered which is included as due to related party on the accompanying balance sheet.

Note 6 — 7 - Stockholders’ Equity

Preferred Stock — Our board of directors

Adhera has the authority, without action by the stockholders, to designate and issue up to authorized 100,000shares of preferred stock in one or more seriesfor issuance and to designate the rights, preferences and privileges of each series, any or all of which may be greater than the rights of our common stock. We havehas designated 1,000 shares as Series B Preferred Stock (“Series B Preferred”) and 90,000 shares as Series A Junior Participating Preferred Stock (“Series A Junior Preferred”). No shares of Series BA Preferred or Series A JuniorB Preferred are outstanding. In March 2014, weAdhera designated 1,200 shares as Series C Convertible Preferred Stock (“Series C Preferred”). In August 2015, Adhera designated 220 shares as Series D Convertible Preferred Stock (“Series D Preferred”). In April 2018, Adhera designated 3,500 shares of Series E Convertible Preferred Stock (“Series E Preferred”). In July 2018, Adhera designated 2,200 shares of Series F Convertible Preferred Stock (“Series F Preferred”). In December 2019, Adhera designated 6,000 shares of Series G Convertible Preferred Stock (“Series G Preferred”). The Company plans to file a certificate of elimination with respect to the Series A and issued 1,200Series B stock and a certificate of decrease with respect to each of its Series C, D and F Preferred stock. As of December 31, 2021 the Company has not filed the certificate of elimination. Each subsequent authorization of Preferred Stock has liquidation preference over the previous Series.

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Series C Preferred

Each share of Series C Preferred has a stated value of $5,000 per share, has a $5,100 liquidation preference per share, has voting rights of 33.33 votes per Series C Preferred share, and is convertible into shares of common stock at a conversion price of $150.00 per share.

As of December 31, 2021, and December 31, 2020, 100 shares of Series C Preferred stock were outstanding.

Series D Preferred

Each share of Series D Preferred has a stated value of $5,000 per share, has a liquidation preference of $300 per share, has voting rights of 62.5 votes per Series D Preferred shareand is convertible into shares of common stock at a conversion price of $80.00 per share. The Series D Preferred has a 5% stated dividend rate when, and if declared by the Board of Directors, is not redeemable and has voting rights on an as-converted basis.

As of December 31, 2021, and December 31, 2020, 40 shares of Series D Preferred were outstanding.

Series E Convertible Preferred Stock (“and Warrants

The Series C Preferred”)E Preferred Stock has a stated value of $5,000 per share and accrues 8% dividends per annum that are payable in cash or stock at the Company’s discretion. The Series E Preferred has voting rights, dividend rights, liquidation preferences, conversion rights at the option of the holder and anti-dilution rights. Series E Preferred stock is convertible into shares of common stock at $10.00. Anti-dilution price protection on Series E Preferred stock expired on February 10, 2020. Warrants issued with Series E Convertible Preferred Stock have anti-dilution price protection, are exercisable for $6.0 million.a period of five years, and contain customary exercise limitations.

Stockholder Rights Plan On March 19, 2021, the exercise price of the Series E warrants was adjusted from $10.00 to $1.00 per share upon the conversion of $25,900 debt for 25,900 shares common stock. The Company recorded approximately $390,000 as a deemed dividend based upon the change in fair value of the Series E Preferred stock warrants using a binomial valuation model. The Company used a risk-free rate of 0.16%, volatility of 262.27%, and expected term of .41 to .43 years in calculating the fair value of the warrants.

As of May 17, 2021, the three-year anniversary of the closing of the Series E Preferred stock offering, all outstanding Series E Preferred stock may be converted by the Company into common stock upon written notification being provided by the Company to stockholders. As of December 31, 2021, the Company has not provided notice of conversion to the holders of the Series E Preferred stock.

On June 8, 2021, an investor converted 8 shares of Series E Preferred and accrued dividends of approximately $10,000 into 5,051 shares of common stock. In 2000, our board of directors adopted a stockholder rights plan and declared a dividend of one preferred stock purchase right for each outstanding shareaddition, the Company issued 2,679 shares of common stock to shareholdersthe investor for a cashless exercise of record in March 2000 and for any3,750 warrants.

On July 30, 2021, an investor converted 50 shares of Series E Preferred stock with a state value of $250,000 into 25,000 shares of common stock.

On October 4, 2021, the Company issued 12,777 shares of common stock upon the conversion of 20 shares Series E Preferred stock including accrued dividends of $27,770.

On October 5, 2021, the Company issued thereafter. The preferred share purchase rights expired in March 2013.

Common Stock — Holders19,271 shares of our common stock upon the conversion of 30 shares of Series E Preferred stock including accrued dividends of $42,707.

On October 8, 2021, the Company issued 2,571 shares of common stock upon the conversion of 4 shares of Series E Preferred stock including accrued dividends of $5,707.

F-31

On October 12, 2021, the Company issued 3,216 shares of common stock upon the conversion of 5 shares of Series E Preferred stock including accrued dividends of $7,156.

On November 23, 2021, the Company issued 9,665 shares of common stock upon the conversion of 15 shares of Series E Preferred stock including accrued dividends of $21,649.

As of December 31, 2021, the Company had a total of 1,520,280 warrants issued with Series E Preferred stock outstanding. The warrants expire in 2023 and have an exercise price of $1.00.

The Company had accrued dividends on the Series E Preferred stock of approximately $5.0 and $3.7 million, as of December 31, 2021, and December 31, 2020, respectively.

At December 31, 2021 and December 31, 2020, there were 3,326 and 3,458 Series E shares outstanding, respectively.

Series F Convertible Preferred Shares and Warrants

The Series F Preferred Stock has a stated value of $5,000 per share and accrues 8% dividends per annum that are entitledpayable in cash or stock at the Company’s discretion. The Series F Preferred has voting rights, dividend rights, liquidation preferences, conversion rights at the holders option and anti-dilution rights. Series F Preferred stock is convertible into shares of common stock at $10.00 Anti-dilution price protection on Series F Preferred stock expired on February 10, 2020. Warrants issued with Series F Convertible Preferred Stock have anti-dilution price protection, are exercisable for a period of five years, and contain customary exercise limitations.

On October 30, 2019, the Company repurchased 20 shares of Series F Convertible Preferred Stock including accrued and unpaid dividends and warrants to one votepurchase 7,500 shares of common stock for each share$100,000 from our former CEO pursuant to an amendment to the settlement agreement dated April 4, 2019. The Company also committed to purchase from such officer the remaining Series F Convertible Preferred Stock and related warrants held by such officer for $100,000 by not later than March 1, 2020. As of record onDecember 31, 2021, the Company had not repurchased the remaining shares.

On March 19, 2021, the exercise price of the Series F warrants was adjusted from $10.00 to $1.00 upon the conversion of $25,900 of debt for 25,900 shares of common stock. The Company recorded approximately $31,000 as a deemed dividend based upon the change in fair value of the Series F Preferred stock using a binomial valuation model. The Company used a risk-free rate of 0.16%, volatility of 262.27%, and an expected term of .46 to .53 years in calculating the fair value of the warrants.

On October 15, 2021, the Company issued 1,853shares of common stock upon the conversion of 3 shares of Series F Preferred stock and including total accrued dividends of $3,521.

As of November 9, 2021, three-year anniversary of the closing of the Series F Preferred stock offering, all matters submittedoutstanding Series F Preferred stock and accrued dividends became convertible by the Company into common stock upon written notification being provided by the Company to a votestockholders. As of December 31, 2021, the Company has not provided notice of conversion to the holders of our commonthe Series F Preferred stock. Subject to

As of December 31, 2021, the rightsCompany had a total of 154,425 Series F Preferred stock warrants outstanding. The warrants expire in 2023.

The Company had accrued dividends on the holdersSeries F Preferred stock of any classapproximately $488,000 and $347,000, as of our capital stock having any preference or priority over our common stock, the holdersDecember 31, 2021, and December 31, 2020, respectively.

At December 31, 2021 and December 31, 2020, there were 358 and 361 Series F Preferred shares outstanding, respectively.

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Series G Convertible Preferred Shares

The Series G Preferred Stock has a stated value of our common stock are entitled to receive$5,000 per share and accrues 8% dividends per annum that are declared by our board of directors out of legally available funds. Inpayable in cash or stock at the event of ourCompany’s discretion. The Series G Preferred has voting rights, dividend rights, liquidation dissolution or winding-up, the holderspreferences, conversion rights and anti-dilution rights. Series G Preferred stock is convertible into shares of common stock are entitled to share ratably in our net assets remaining after paymentat $10.00.

As of liabilities, subject to prior rights of preferred stock, if any, then outstanding. Our common stockDecember 31, 2021, no Series G Preferred Stock has no preemptive rights, conversion rights, redemption rights or sinking fund provisions, and there are no dividends in arrears or default. All shares of our common stock have equal distribution, liquidation and voting rights, and have no preferences or exchange rights. Our common stock currently trades onbeen issued by the OTCQB.Company.

In March 2014, weCommon Stock

On December 11, 2020, the Company issued 0.1 million shares with a fair value of $0.01 million to a vendor under the terms of a 2012 compromise and release agreement.

In September 2012, as part of the lease termination agreement, we agreed to issue 1.5 million6,085 shares of our common stock to a landlord. The shares were issued in March 2014 at a valueholder of $1.9 million.

As part of the asset purchase agreement that we entered into with Novosom in July 2010, we are obligated to pay Novosom 30% of any payments received by us for sub-licensed SMARTICLES® technology. The consideration is payable in a combination of cash (no more than 50% of total due) and common stock (between 50% and 100% of total due), at our discretion. For such consideration related to MiRNA and ProNAi payments received in 2012 and 2013, we issued 0.96 million common shares with a fair value of $1.5 million in March 2014.

In January 2014, we issued 2.8 million shares of common stock with fair value of $1.0 million to employees and board members for amounts due under certain employment and board of director agreements, of which 0.3 million shares were repurchased and retired in December 2014Series E Convertible Preferred Stock in connection with the satisfactionconversion of tax withholding obligations.10 shares Series E Convertible Preferred Stock plus accrued dividends for a total value of $60,850.

 

In January 2014, weOn December 21, 2020, the Company issued 0.09 million shares of common stock with a fair value of $0.03 million to scientific advisory board members for services to be provided during the three months ended March 31, 2014.

In January 2014 and April 2014, we issued an aggregate of 0.04 million shares of common stock with a fair value of $0.02 million to consultants for services provided during the six months ended June 30, 2014.

In February 2014, we issued an aggregate of 2.0 million shares of common stock with a fair value of $1.48 million on the conversion of outstanding principal and unpaid accrued interest associated with our convertible debt.

In April 2014, we issued 0.02 million shares of common stock with a fair value of $0.03 million to scientific advisory board members for services to be provided during the three months ended June 30, 2014.

In September 2014, we issued 0.05 million shares of common stock with fair value of $0.06 million to a vendor to settle an outstanding payable under the terms of a 2012 compromise and release agreement.

F-13

During 2014, we issued 1.32 million shares of common stock upon net share exercises and 0.08 million shares of common stock on cash exercises of warrants.

In December 2014, we pledged to issue common stock valued at $0.075 million to Novosom, related to our license agreement with MiNA, for the portion due under its sublicensing agreement. Pricing of the common stock was to occur on receipt of the payment from MiNA. As of December 2014, the pledge was issued as a dollar denominated liability and was not influenced by changes in stock price. This obligation is included in Fair Value of Stock to be Issued to Settle Liabilities at December 31, 2014.

Warrants — In consideration of additional promissory note amendments in 2013, we issued additional price adjustable warrants to purchase 5.0 million shares of our common stock at an exercise price of $0.28, expiring in 2018 and 2019.

In December 2013, we issued warrants to purchase up to 0.10 million6,074 shares of our common stock to a consultant who is our interim chief financial officer. These warrants vest over two years, haveholder of Series E Convertible Preferred Stock in connection with the conversion of 10 shares Series E Convertible Preferred Stock plus accrued dividends for total value of $60,740.

On June 8, 2021, an investor converted 8 shares of Series E Preferred and accrued dividends of approximately $10,000 into 5,051 shares of common stock.

On June 8, 2021, the Company issued 2,679shares of common stock to the investor for a fixed strike pricecashless exercise of $0.48,3,750 warrants.

On July 30, 2021, and expire in December 2023. At December 31, 2014,investor converted 50 shares of Series E Preferred stock with a stated value of $250,000 into 25,000 shares of common stock.

On August 11, 2021, the unvested warrants haveCompany issued 5,000 shares of common stock to a convertible note investor as a commitment fee which was valued at its relative fair value of $0.03 million.$56,464.

F-33

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

On August 18, 2021, the Company issued 5,000 shares of common stock to a convertible note investor as a commitment fee which was valued at its relative fair value of $62,220.

On September 22, 2021, the Company issued 15,008 shares of common stock to an investment banker for commissions due under a banking agreement. The shares were recorded at their relative fair value of approximately $39,290.

 

In March 2014, in conjunction withOn October 4, 2021, the issuance of Series C Preferred, weCompany issued price adjustable warrants to purchase up to 6.0 million shares of our common stock at an exercise price of $0.75 per share.

During 2014, we issued 1.32 million12,777 shares of common stock upon net share exercises and 0.08 millionthe conversion of 20 shares on cash exercisesSeries E Preferred stock including accrued dividends of warrants.$27,770.

 

In April 2014, weOn October 4, 2021, the Company issued warrants to purchase up to 0.075 million2,977 shares of our common stock to a vendor. These warrants haveconvertible note investor as a fixed strike price of $0.89 and expire in April 2014. Thecommitment fee which was valued at its relative fair value of these warrants is immaterial.$10,859.

 

In December 2014, weOn October 5, 2021, the Company issued warrants19,271 shares of common stock upon the conversion of 30 shares of Series E Preferred stock including accrued dividends of $42,707.

On October 8, 2021, the Company issued 2,571 shares of common stock upon the conversion of 4 shares of Series E Preferred stock including accrued dividends of $5,707.

On October 8, 2021, the Company issued 2,977 shares of common stock to purchase up to 0.117 million shares to five consultants providing financial, scientific and development consulting services to our company. Thea convertible note investor as a commitment fee which was valued at its relative fair value of these$12,233.

On October 12, 2021, the Company issued 3,216 shares of common stock upon the conversion of 5 shares of Series E Preferred stock including accrued dividends of $7,156.

On October 15, 2021, the Company issued 1,853 shares of common stock upon the conversion of 3 shares of Series F Preferred stock including accrued dividends of $3,521.

On November 4, 2021, the Company issued 7,662 shares of common stock upon a cashless exercise of 12,500 warrants issued with the April 2021 Convertible Note.

On November 23, 2021, the Company issued 9,665 shares of common stock upon the conversion of 15 shares of Series E Preferred stock including accrued dividends of $21,649.

On December 6, 2021, the Company issued 4,805 shares of common stock to an investment banker for commissions due under a banking agreement. The shares were recorded at their relative fair value of approximately $18,745.

During the twelve-month period ending December 31, 2021, the company issued 168,294 common shares upon the conversion of $98,141 principal and $70,160 of accrued interest on the February 2020 convertible note. The common shares issued upon conversions of the note for the period ended December 31, 2021 were valued at fair value based on the quoted trading prices on the conversion dates aggregating approximately $554,000 resulting in a loss on debt extinguishment of approximately $386,000.

Warrants

As of December 31, 2021, there were 3,731,263 common stock warrants outstanding, with a weighted average exercise price of $1.0 per share, and annual expirations as follows:

Schedule of Stockholders’ Equity Note, Warrants or Rights

Warrant Summary:               
  Shares  2023  2024  2025  2026 
Issued with Series E Preferred Stock  1,520,280   1,520,280          
Issued with Series F Preferred Stock  154,425   154,425          
Issued with Convertible Notes  2,039,117      123,620   1,645,930   269,567 
Other  17,441   504   16,775   162    
Total Warrants  3,731,263   1,675,209   140,395   1,646,092   269,567 

The above includes 3,713,822 price adjustable warrants.

The intrinsic value of 3,731,263 warrants as of December 31, 2021 was $1,492,503.

A total of 17,188 Series D warrants expired during the period ended December 31, 2021. In addition, there were 3,750 Series E warrants and 12,500 warrants issued with convertible notes exercised on a cashless basis for the twelve-month period ended December 31, 2021.

As discussed in Note 2 above, the Company has issued convertible notes and warrants with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock and various default provisions related to the payment of the notes in Company stock. The number of shares of common stock to be issued under the convertible notes and warrants is immaterial.based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is therefore, indeterminate. Due to the fact that the number of shares of common stock issuable exceed the Company’s authorized share limit as of December 31, 2021, the equity environment was tainted and all convertible debentures and warrants were included in the value of the derivative as of that date. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the warrants were recorded as derivative liabilities. On December 31, 2021, the Company evaluated all outstanding warrants to determine whether these instruments are tainted and, due to reasons discussed above, all warrants outstanding were considered tainted and were therefore, accounted for as derivative liabilities.

F-34

NOTE 8 - Stock Incentive Plans

Stock Options

The following table summarizes warrantstock option activity for the year ended December 31, 2021 and 2020:

Schedule of Share Based Payments Arrangement, Option Activity

  Options Outstanding 
  Shares  

Weighted

Average

Exercise

Price

 
Outstanding, December 31, 2019  203,568  $11.60 
Options expired / forfeited  (184,000) $10.60 
Outstanding, December 31, 2020  

19,568

  $

20.00

 
Options expired / forfeited  (365) $36.60 
Outstanding, December 31, 2021  19,203  $19.40 
Exercisable, December 31, 2021  19.203  $19.40 

No stock options were granted during the years ended December 31, 2013 and 2014.2020 or 2021.

  Warrant Shares  Weighted Average
Exercise Price
 
Outstanding, January 1, 2013  11,916,801   1.71 
Issued  5,100,800   0.28 
Outstanding, December 31, 2013  17,017,601   1.29 
Issued  6,191,500   0.75 
Exercised or cancelled  (1,996,288)  0.36 
Outstanding, December 31, 2014  21,212,813   1.19 
Expiring in 2015  285,345     
Expiring in 2016  -     
Expiring in 2017  7,235,622     
Expiring thereafter  13,691,846     

Note 7 — Stock Incentive Plans

At December 31, 2014, options to purchase up to 1.1 million shares of our common stock were outstanding, and 8.4 million shares were reserved for future awards under our stock incentive plans.

Our current stock incentive plans include the 2008 Stock Incentive Plan and the 2014 Long Term Incentive Plan. Under our stock compensation plans, we are authorized to grant options to purchase shares of common stock to our employees, officers and directors and other persons who provide services to us. The options to be granted are designated as either incentive stock options or non-qualified stock options by our board of directors, which also has discretion as to the person to be granted options, the number of shares subject to the options and the terms of the option agreements. Only employees, including officers and part-time employees, may be granted incentive stock options. Under our 2008 and 2014 stock incentive plans, we are authorized to grant awards of stock options, restricted stock, stock appreciation rights and performance shares. At December 31, 2014, no stock appreciation rights or performance shares have been granted. Standard options granted under the plans generally have terms of ten years from the date of grant and vest

F-14

over three years.

Stock-based Compensation. Certain option and share awards provide for accelerated vesting if there is a change in control as defined in the applicable plan and certain employment agreements. The following table summarizes stock-based compensation expense:

  Year Ended December 31, 
(In thousands) 2013  2014 
Research and development $53  $48 
General and administrative  82   229 
Total $135  $277 

Stock Options — Stock option activity in 2013 and 2014 was as follows:

  Year Ended December 31, 
  2013  2014 
  Shares  Weighted Average
Exercise Price
  Shares  Weighted Average
Exercise Price
 
Outstanding on January 1  284,829  $39.46   284,829  $39.46 
Issued  -   -   1,039,000   1.07 
Forfeited/Expired  -   -   (239,723)  18.02 
Outstanding on December 31  284,829  $39.46   1,084,106  $5.52 
Exercisable as of December 31  246,559  $45.28   179,106  $28.06 

The following table summarizes additional information on ourthe Company’s stock options outstanding at December 31, 2014:2021:

  Options Outstanding  Options Exercisable 
Range of Exercise Prices Number
Outstanding
  Weighted-Average
Remaining
Contractual
Life (Years)
  Weighted Average
Exercise Price
  Number Exercisable  Weighted Average
Exercise Price
 
$0.82  20,000   4.80  $0.82   10,000  $0.82 
$1.07  1,019,000   8.49   1.07   124,000   1.07 
$2.00 - $2.20  2,500   6.70   2.20   2,500   2.20 
$11.60 - $50.00  10,500   3.44   47.60   10,500   47.60 
$50.00 - $90.80  10,500   3.40   87.60   10,500   87.60 
$127.60 - $207.60  21,500   3.40   158.30   21,500   158.30 
$420.00 - $588.80  106   2.10   526.40   106   526.40 
Totals  1,084,106   8.23  $5.52   179,106  $28.06 
Weighted-Average Exercisable Remaining Contractual Life (Years)4.44 

We use Black-Scholes to determine the fair valueSchedule of our stock-based awards. The determination of the fair value of stock-based awards on the date of grant using an option-pricing model is affected by ourShare Based Payment Arrangement, Option, Exercise Price Range

  Options Outstanding  Options Exercisable 

Range of

Exercise

Prices

 Number Outstanding  

Weighted- Average Remaining Contractual

Life (Years)

  Weighted Average Exercise Price  Number Exercisable  Weighted Average Exercise Price 
$19.60  19,000   1.33  $19.60   19,000  $19.60 
$34.00  203   0.02  $34.00   203  $34.00 
Totals  19,203   1.32  $19.75   19,203  $19.75 

No stock price, as well as by assumptions regarding a number of complex and subjective variables. We meet the criteria, having had significant past structural changes, such that our historical exercise data are not reasonably extrapolated to an expected term. Given the terms of the awards and the population of recipients, we believe that expected term is equal to the contractual term. We estimate volatility of our common stock by using our stock price history to forecast stock price volatility. The risk-free interest rates used in the valuation model were based on U.S. Treasury issues with terms similar to the expected term on the options. We do not anticipate paying any dividends in the foreseeable future. No options were granted in 2013 and 1.0 million options were granted in 2014.

F-15

Atissued by the Company during the year ended December 31, 2014, we2021.

As of December 31, 2021, the Company had $1.6 million of totalno unrecognized compensation expense related to unvested stock options. We expectTotal expense related to recognize this cost over a weighted average period of 2.0 years.

Atstock options was zero and approximately $8,000 for the years ended December 31, 2014,2021 and 2020, respectively.

As of December 31, 2021, the intrinsic value of options outstanding or exercisable was zero as there were no options outstanding with an exercise price less than $1.40, the per share closing market price of our common stock at that date. No options were exercised

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NOTE 9 - Commitments and Contingencies

Litigation

Because of the nature of the Company’s business, it is subject to claims and/or threatened legal actions, which arise out of the normal course of business. As of the date of this filing, the Company is not aware of any pending lawsuits against it, its officers or directors.

Leases

The Company does not own or lease any real property or facilities that are material to its current business operations. If the Company continues its business operations, the Company may seek to lease facilities in either 2013 or 2014. The total grant date fair valueorder to support its operational and administrative needs.

Share Repurchase Agreement

On October 30, 2019, the Company repurchased 20 shares of options that vested during 2013Series F Convertible Preferred Stock including accrued and 2014 was $0.15 millionunpaid dividends and $0.12 million, respectively.

In January 2015, we issued optionswarrants to purchase 7,500 shares of common stock for $100,000 from our former CEO pursuant to an amendment to the settlement agreement dated April 4, 2019. The Company also committed to purchase from such officer the remaining Series F Convertible Preferred Stock and related warrants held by such officer for $100,000 by not later than March 1, 2020. As of December 31, 2021, the Company had not repurchased the remaining shares.

Licensing Agreement – MLR 1019

On July 28, 2021, the Company and Melior Pharmaceuticals II, LLC (“MP”) entered into an exclusive license agreement for the development, commercialization and exclusive license of MLR-1019. MLR-1019 is being developed as a new class of therapeutic for Parkinson’s disease (PD) and is, to the best of the Company’s knowledge, the only drug candidate today to address both movement and non-movement aspects of PD. Under the Agreement, the Company was granted an exclusive license to use the MP Patents and know-how to develop products in consideration for cash payments up to approximately $21.8 million upon meeting certain performance milestones, as well as a royalty of 5% of gross sales.

The license terminates upon the last expiration of the patents licensed by the Company, which is presently 2034 subject extensions and renewals of any of such patents. If the Company fails to have its common stock listed on Nasdaq or the NYSE (an “Uplisting Event”) within 12 months after the Company receives a Clinical Trial Authorization from the European Medicines Agency, then the Company’s commercial license and rights for using MP’s data shall terminate. Additionally, if the Company has completed the necessary steps to affect an aggregateUplisting Event, the Company will have the option to purchase all rights held by MP on the MLR-1019 licensed products in consideration for 10% of 152,000the outstanding shares of ourthe Company’s common stock (immediately post Uplisting Event) and 2.5% royalty of future gross product sales.

As of December 31, 2021, no performance milestones had been met under the agreement.

F-36

Licensing Agreement – MLR 1023

On August 24, 2021, the Company as licensee entered into an exclusive license agreement with Melior Pharmaceuticals I, Inc. for the development, commercialization and exclusive license of Melior’s MLR-1023. MLR-1023 is being developed as a novel therapeutic for Type 1 diabetes.

Under the Agreement, the Company was granted an exclusive license to use the non-employee members of our board of directors at an exercise price of $0.635 per share as the annual grantMP Patents and know-how to such directorsdevelop products in consideration for their service on our board of directors during 2015, and we issued options to purchasecash payments up to approximately $21.8 million upon meeting certain performance milestones, as well as a tiered royalty of 8-12% of gross sales.

Under the original terms of the agreement if the Company failed to raise $4.0 million dollars within 120 days of the Effective Date then the License would immediately terminate unless, by 120 Days Adhera was in the process of completing transactions to complete the fundraising then an aggregateadditional 30 Days would be provided to allow for the completion of 80,000 sharesthe raise.

On November 17, 2021, Melior Pharmaceuticals I, Inc. extended the Company’s timeline from 120 days to 180 days from the effective of our common stockthe agreement for the Company to raise $4.0 million dollars unless, by 180 Days Adhera is in the membersprocess of our scientific advisory board atcompleting transactions to complete the fundraising then an exercise priceadditional 30 Days shall be provided to allow for the completion of $0.63 per share asrequired fundraising.

As of December 31, 2021, no performance milestones had been met under the annual grant to such persons for their service on our scientific advisory board during 2015.agreement.

Note 8 — NOTE 10 - Income Taxes

We have

The Company has identified ourits federal and MassachusettsCalifornia and Louisiana state tax returns as “major” tax jurisdictions. The periods ourthe Company’s income tax returns are first subject to examination for these jurisdictions are 2018 through 2021 for federal and Massachusetts jurisdictions are 2010 and 2005, respectively. We believe our2019 through 2021 for Louisiana. The Company believes its income tax filing positions and deductions will be sustained on audit and we dodoes not anticipate any adjustments that would result in a material change to our financial position. Therefore, no liabilities for uncertain income tax positions have been recorded.

 

At December 31, 2014, we2021, the Company had available net operating loss carry-forwards for federal and state income tax reporting purposes of $310.0 million and $0.0 million, respectively, and had available tax credit carry-forwards for federal and state income tax reporting purposes of $10.6 and $0.1 million,approximately $326 million. which are available to offset future taxable income. Portions of these carry-forwardscarryforwards will expire through 20322037 if not otherwise utilized. We haveLosses from 2018 and onwards will be carryforward indefinitely. The Company has not performed a formal analysis but ourbelieves its ability to use such net operating losses and tax credit carry-forwardscarryforwards is subject to annual limitations due to change of control provisions under Sections 382 and 383 of the Internal Revenue Code, and such limitation could be significant.which significantly impacts its ability to realize these deferred tax assets.

  

OurThe Company’s net deferred tax assets, deferred tax liabilities and valuation allowance as of December 31, 20132021 and 20142020 are summarized as follows:

Schedule of Deferred Tax Assets and Liabilities

(in thousands) 2021 2020 
 Year Ended December 31,  Years Ended December 31, 
(In thousands) 2013  2014 
(in thousands) 2021 2020 
Deferred tax assets:                
Net operating loss carryforwards $108,110  $108,348  $8,402  $7,741 
Tax credit carryforwards  10,783   10,696 
Inventory reserve     114 
Depreciation and amortization  3,605   3,709   1,272   2,226 
Share based compensation  647   599 
Other  78   185   613   297 
Total deferred tax assets  122,576   122,938   10,935   10,977 
Valuation allowance  (122,576)  (122,938)  (10,935)  (10,977)
Net deferred tax assets  -   -       
Deferred tax liabilities:                
Intangible assets  (2,345)  (2,345)      
Net deferred tax liabilities $(2,345) $(2,345) $  $ 

We record

The Company records a valuation allowance in the full amount of our net deferred tax assets not otherwise offset by deferred tax liabilities that we expect to reverse since realization of such tax benefits has been determined by our management to be less likely than not. The valuation allowance decreased $0.06 million$42,000 and increased $0.36$0.6 million during 20132021 and 2014,2020, respectively.

 

Income Tax Expense. In 2013 there was adeferredAs of the date of this filing, the Company has not filed its 2021 federal and state corporate income tax benefitreturns. The Company expects to file the 2021 return by the extension filing date.

F-37

NOTE 11 - Subsequent Events

Default on Convertible Notes

On January 2, 2022, the company defaulted on certain covenants contained in the October 4, 2021, convertible note and the interest rate reset to 16%.

On January 5, 2022, the company defaulted on certain covenants contained in the October 7, 2021, convertible note and the interest rate reset to 16%.

Conversion of $0.04Principal and Interest on Convertible Note

On January 27, 2022, the holder of the June 25, 2021, convertible note converted $9,500 of principal and $421 of interest at $0.78 per share into 12,721 shares of common stock.

Amendment to Licensing Agreement

On February 16, 2022, an addendum to the licensing agreement dated August 4, 2021, was executed by the Company and Melior Pharmaceuticals I, Inc, extending the requirement by the Company to raise $4.0 million duedollars to changes in effective state tax rates and in 2014 there was no income tax benefit or recorded expense.June 16, 2022.

Issuance of Convertible Promissory Note 9 — Intellectual Property and Collaborative Agreements

MiNA –In December 2014, weOn March 15, 2022, the Company entered into a license agreementSecurities Purchase Agreement (“SPA”) with MiNA regardingan institutional investor pursuant to which the Company issued the Buyer a 10% Convertible Note in the principal amount of $250,000 for a purchase price of $200,000 reflecting a $50,000 original issue discount. The Company received total consideration of $180,000 after debt issuance costs of $20,000. In addition, the Company issued 2,500 shares of common stock as a commitment fee to the investor. The company will record a debt discount related to the original issue discount and will evaluate the note terms for derivative accounting treatment.

The Note provides for guaranteed interest at the rate of 10% per annum for the 12 months from and after the original issue date of the Note for an aggregate guaranteed interest of $25,000, all of which guaranteed interest shall be deemed earned as of the date of the note. The principal amount and the guaranteed interest shall be due and payable in seven equal monthly payments each, $39,285.71, commencing on August 15, 2022, and continuing on the 15th day of each month until paid in full not later than March 15, 2023, the maturity date.

The Note is convertible into shares of common stock at any time following any event of default at the Buyer’s option at a conversion price of ninety percent (90%) per share of the lowest per-share trading price of the Company; stock during the ten trading day periods before the conversion, subject to certain adjustments.

Reverse Stock Split

On September 30, 2022, the Company filed a Certificate of Amendment to the Certificate of Incorporation with the Delaware Secretary of State to effect a reverse stock split of all outstanding shares of the Company’s common stock at a ratio of 1-for-20. On October 5, 2022, the Company effected the 1-for-20 reverse stock split of its common stock. The reverse stock split did not cause an adjustment to the par value or the authorized shares of the common stock. As a result of the reverse stock split, the Company retroactively adjusted all share and per share amounts in the accompanying consolidated financial statements and footnotes.

F-38

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended September 30, 2022 and 2021

F-39

Page
Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 202141
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022, and 2021 (unaudited)42
Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Nine Months Ended September 30, 2022, and 2021 (unaudited)43
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022, and 2021 (unaudited)44
Notes to Unaudited Condensed Consolidated Financial Statements45

F-40

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands except share and per share data)

  September 30, 2022  December 31, 2021 
  (unaudited)    
ASSETS        
Current assets        
Cash $133  $76 
Prepaid expenses  123   120 
Total current assets  256   196 
Total assets $256  $196 
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
Current liabilities        
Accounts payable $2,312  $2,309 
Due to related parties  5   46 
Accrued expenses  4,041   3,110 
Accrued dividends  453   5,477 
Term loans  6,870   5,677 
Convertible notes payable, net  1,122   986 
Derivative liabilities  7,260   7,697 
Total current liabilities  22,063   25,302 
Total liabilities  22,063   25,302 
Commitments and contingencies (Note 9)  -   - 
Stockholders’ deficit        
Preferred stock, $0.01 par value; 100,000 shares authorized      
Series C convertible preferred stock, $0.01 par value; 1,200 shares authorized; 100 shares issued and outstanding as of September 30, 2022 and December 31, 2021. ($510,000 liquidation preference)      
Series D convertible preferred stock, $0.01 par value; 220 shares authorized; 40 shares issued and outstanding as of September 30, 2022 and December 31, 2021. ($12,000 liquidation preference)      
Series E convertible preferred stock, $0.01 par value; 3,500 shares authorized; 267 and 3,326 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively. ($1,788,319 liquidation preference)      
Series F convertible preferred stock, $0.01 par value; 2,200 shares authorized; zero and 358 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.      
Series G convertible preferred stock, $0.01 par value; $5,000 liquidation preference; 6,000 shares authorized; no shares issued and outstanding as of September 30, 2022, and December 31, 2021.      
Preferred stock, value      
         
Common stock, $0.006 par value; 180,000,000 shares authorized, 3,160,877 and 853,946 shares issued and outstanding as of September 30, 2022, and December 31, 2021, respectively  18   5 
Common stock value  18   5 
Additional paid-in capital  33,547   27,906 
Accumulated deficit  (55,370)  (53,017)
Treasury stock (5,954 shares)  (2)   
Total stockholders’ deficit  (21,807)  (25,106)
Total liabilities and stockholders’ deficit $256  $196 

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

F-41

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except share and per share data)

(unaudited)

  2022  2021  2022  2021 
  For the Three-Months ended  For the Nine-Months ended 
  September 30,  September 30, 
  2022  2021  2022  2021 
             
Operating expenses                
Sales and marketing $-  $-  $-  $17 
General and administrative  548   232   1,257   454 
Total operating expenses  548   232   1,257   471 
Loss from operations  (548)  (232)  (1,257)  (471)
Other income (expense)                
Interest expense  (317)  (261)  (989)  (749)
Initial and change in the fair value of derivative liabilities  (254)  (2,968)  1,425   (3,055)
Gain (loss) on extinguishment of debt  92   (177)  307   (177)
Amortization of debt discount  (777)  (101)  (1,265)  (230)
Total other expense, net  (1,256)  (3,507)  (522)  (4,211)
Net loss  (1,804)  (3,739)  (1,779)  (4,682)
Accrued and deemed dividends  (8)  (406)  (574)  (1,679)
Net Loss Applicable to Common Stockholders $(1,812) $(4,145) $(2,353) $(6,361)
Net loss per share – Common Stockholders - basic and diluted $(0.57) $(6.38) $(1.16) $(10.83)
Weighted average shares outstanding - basic and diluted  3,160,877   649,321   2,019,953   587,117 

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

F-42

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(in thousands, except share and per share data)

  Number  Par Value  Number  Par Value  Number  Par Value  Number  Par Value  Number  Par Value  Paid-in Capital  Accumulated Deficit  Treasury Stock  Total 
  Series C Preferred Stock  Series D Preferred Stock  Series E Preferred Stock  Series F Preferred Stock  Common Stock  Additional          
  Number  Par Value  Number  Par Value  Number  Par Value  Number  Par Value  Number  Par Value  Paid-in Capital  Accumulated Deficit  Treasury Stock  Total 
Balance as of December 31, 2020  100  $-   40  $-   3,458   -   361  $-   560,140  $3  $29,836  $(44,612) $-  $(14,773)
Accrued dividend  -   -   -   -   -   -   -   -   -   -   505   (882)  -  $(377)
Issuance of common stock for term loan conversion  -   -   -   -   -   -   -   -   25,900   -   26   -   -  $26 
Issuance of warrants with convertible notes  -   -   -   -   -   -   -   -   -   -   28   -   -  $28 
Beneficial conversion feature convertible notes  -   -   -   -   -   -   -   -   -   -   19   -   -  $19 
Net loss  -   -   -   -   -   -   -   -   -   -   -   (428)  -  $(428)
Balance as of March 31, 2021  100  $-   40  $-   3,458  $-   361  $-   586,040   3  $30,414  $(45,922) $-  $(15,505)
Accrued and deemed dividend  -   -   -   -   -   -   -   -   -   -   11   (392)  -  $(381)
Issuance of warrants with convertible notes  -   -   -   -   -   -   -   -   -   -   69   -   -  $69 
Issuance of common stock for cashless exercise of warrants  -   -   -   -   -   -   -   -   2,679   -   -   -   -  $- 
Issuance of common stock for Series E conversion  -   -   -   -   (8)  -   -   -   5,051   -   10   -   -  $10 
Net loss  -   -   -   -   -   -   -   -   -   -   -   (514)  -  $(514)
Balance, June 30, 2021  100  $-   40  $-   3,450  $-   361  $-   593,770   3  $30,504  $(46,828) $-  $(16,340)
Accrued and deemed dividend  -   -   -   -   -   -   -   -   -   -   25   (406) $-  $381 
Reclassification of derivative from equity                                  -   -   (21)   -   -  $(21) 
Issuance of warrants and common stock with convertible notes  -   -   -   -   -   -   -   -   25,008   -   157   -   -  $157 
Issuance of common stock for convertible note conversions                                  85,000   1   84   -   -  $85 
Issuance of common stock for Series E conversion  -   -   -   -   (50)  -   -   -   25,000   -   -   -   -  $- 
Net loss  -   -   -   -   -   -   -   -   -   -   -   (3,739)  -  $(3,739)
Balance, September 30, 2021  100  $-   40  $-   3,400  $-   361  $-   728,778  $4  $30,749  $(50,973) $-  $(20,239)
                                                         
Balance as of December 31, 2021  100  $-   40  $-   3,326   -   358   -   853,946  $5  $27,906  $(53,017) $-  $(25,106)
Accrued dividend  -   -   -   -   -   -   -   -   -   -   -   (364)  -  $(364)
Issuance of common stock with convertible notes  -   -   -   -   -   -   -   -   12,500   -   18   -   -  $18 
Issuance of common stock for convertible note conversions  -   -   -   -   -   -   -   -   12,721   -   28   -   -  $28 
Net loss  -   -   -   -   -   -   -   -   -   -   -   (74)  -  $(74)
Balance as of March 31, 2022  100  $-   40  $-   3,326  $-   358  $-   879,167   5  $27,952  $(53,455) $-  $(25,498)
Accrued dividend  -   -   -   -   -   -   -   -   -   -   -   (202)  -  $(202)
Issuance of common stock with term loan  -   -   -   -   -   -   -   -   19,231   -   11   -   -  $11 
Conversion of Series E Preferred to common stock  -   -   -   -   (3,059)  -   -   -   2,035,306   12   5,044   -   -  $5,056 
Conversion of Series F Preferred to common stock  -   -   -   -   -   -   (358)  -   233,127   1   540   -   -  $541 
Repurchase of common stock              -   -   -   -   -   (5,954  -   -   -   (2) $(2)
Net loss  -   -   -   -   -   -   -   -   -   -   -   99   -  $99 
Balance as of June 30, 2022  100  $-   40  $-   267  $-   -  $-   3,160,877   18  $33,547  $(53,558) $(2) $(19,995)
Accrued dividend  -   -   -   -   -   -   -   -   -   -   -   (8)  -  $(8)
Net loss  -   -   -   -   -   -   -   -   -   -   -   (1,804)  -  $(1,804)
Balance as of September 30, 2022  100  $-   40  $-   267  $-   -  $-   3,160,877   18  $33,547  $(55,370) $(2) $(21,807)

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

F-43

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

  2022  2021 
  For the Nine-Months Ended September 30, 
  2022  2021 
Cash Flows Used in Operating Activities:        
Net loss $(1,779) $(4,682)
Adjustments to reconcile net loss to net cash used in operating activities:        
Amortization of debt discount and fees  1,265   230 
Accrued interest expense  989   749 
Derivative income (expense)  (1,425)  3,055 
(Gain) Loss on debt extinguishment  (307)  177 
Changes in operating assets and liabilities:        
Prepaid expenses  (3)   
Accounts payable  (38)  30 
Accrued expenses  36   72 
Net Cash Used in Operating Activities  (1,262)  (369)
Cash Flows Provided by Financing Activities:        
Proceeds from notes payable and convertible notes, net of original issue discounts  2,200   591 
Notes payable and convertible notes issuance costs  (328)  (72)
Repurchase of common stock  (2)   
Repayment of principal and interest on notes payable  (551)   
Net Cash Provided by Financing Activities  1,319   519 
Net increase in cash  57   150 
Cash – Beginning of Period  76   1 
Cash - End of Period $133  $1,514 
Supplementary Cash Flow Information:        
         
Cash paid for interest  94    
Cash paid for taxes      
Supplemental disclosure of non-cash investing and financing activities:        
Non-cash Investing and Financing Activities:        
Conversion of Series E Preferred stock to common stock  5,056   4 
Conversion of Series F Preferred stock to common stock  541    
Debt discounts for issuance costs, warrants and derivatives  10     
Issuance of common stock for conversion of convertible notes  28   111 
Issuance of common stock and warrants with convertible notes  20   473 
Cashless exercise of warrants     4 
Accrued and deemed dividends  574   1,679 

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

F-44

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

Note 1 – Organization and Business Operations

Adhera Therapeutics, Inc. and its wholly-owned subsidiaries, MDRNA Research, Inc. (“MDRNA”), Cequent Pharmaceuticals, Inc. (“Cequent”), Atossa Healthcare, Inc. (“Atossa”), and IThenaPharma, Inc. (“IThena”) (collectively “Adhera,” or the “Company”), is an emerging specialty biotech company that, to the extent that resources and opportunities become available, is focused on drug development and commercialization of small activating RNA-based therapeutics utilizing MiNA’s proprietary oligonucleotides“small molecule” drugs to treat Parkinson’s disease (PD) and our SMARTICLES nucleic acid delivery technology. MiNA will have full responsibilityType 1 diabetes.

On July 28, 2021, we as licensee and Melior Pharmaceuticals II, LLC (“Melior II”) entered into an exclusive license agreement for the development, commercialization and commercializationexclusive license of anyMLR-1019. MLR-1019 is being developed as a new class of therapeutic and is, to the best of our knowledge, the only drug candidate today to address both movement and non-movement aspects of PD. Under the Agreement, we were granted an exclusive license to use the Melior II Patents and know-how to develop products arising under the agreement. We received an upfront fee of $0.5 million in January 2015. We could receive up to an additional $49 million in clinical and commercialization milestoneconsideration for cash payments upon meeting certain performance milestones as well as royalties on sales, based on the successful developmenta royalty of MiNA’s potential5% of gross sales.

F-16

product candidates.

Arcturus - InOn August 2013,20, 2021, we and Arcturusas licensee entered into a patent assignment andan exclusive license agreement pursuant to which Arcturus was granted an assignment of select RNA related patents and certain transferable agreements, including agreements with F. Hoffmann-La RocheMelior Pharmaceuticals I, Inc. and F. Hoffmann-La Roche Ltd., dated February 2009, and Tekmira, dated November 2012. We received an irrevocable, royalty-free, worldwide, non-exclusive sublicense to use the transferred technologies in the development and commercialization of our products. As compensation under this agreement, we received a one-time payment of $0.8 million.

Tekmira - In November 2012, we and Tekmira entered into a license agreement pursuant to which Tekmira was granted a worldwide, non-exclusive and selectively sub-licensable license to develop and commercialize products using our Unlocked Nucleobase Analog (“UNA”Melior I”) technology. We received a $0.3 million upfront payment and an additional $0.2 million received in April 2013. This agreement was transferred to Arcturus as part of the patent assignment and license agreement in August 2013.

Mirna — In December 2011, we entered into agreement with Mirna relating to the development and commercialization of miRNA-based therapeutics utilizing Mirna’s proprietary miRNAs and our SMARTICLES delivery technology. The agreement provides that Mirna will have full responsibility for the development, commercialization and commercializationexclusive license of any products arising under the agreement and that we will support pre-clinical and process development efforts. Under terms of the agreement, we could receive up to $63.0 million in upfront, clinical and commercialization milestone payments, as well as royalties on product sales in the low single digit percentages. Either party may terminate the agreement upon the occurrence of a default by the other party. Mirna has the right to terminate the agreement upon 60 days prior written notice. In December 2013, the agreement was amended to add the right for Mirna to select additional compounds for development. Mirna identified three selected compounds for an upfront payment of $1.0 million. Future additional selections can be identified for an upfront payment of $0.5 million per selection. All other per compound payments remain unchanged, except that no royalties will be owed on sales of the original licensed compound.

Novosom — In July 2010, we entered into an agreement pursuant to which we acquired the intellectual property for Novosom AG’s (“Novosom”) SMARTICLES-based liposomal delivery system. We issued to Novosom 0.14 million shares of our common stock with a value of $3.8 million as consideration for the acquired assets, which was recorded as an R&D expense. As additional consideration, we are obligated to pay an amount equal to 30% of the value of each upfront (or combined) payment received by us in respect of the license or disposition of SMARTICLES technology or related product, up to a maximum of $3.3 million, which will be paid in a combination of cash and/or shares of our common stock, at our discretion. In December 2011, we recognized $0.1 million as R&D expense for additional consideration paid to Novosom for an upfront payment receipt. During 2012, we reserved 0.51 million shares of common stock for future issuance with no cash component as additional considerationMLR-1023. MLR-1023 is being developed as a result ofnovel therapeutic for Type 1 diabetes.

On October 20, 2021, we as licensee expanded the license agreements that we entered into with Mirna and Monsanto Company. During 2013, as a result of the payment received from Mirna for additional compounds, we opted to record a $0.15 million cash payable and reserve an additional 0.45 million shares for future issuance. All balances due Novosom as of December 2013, both cash and stock, were paid or issued in March 2014. In December 2014, we recorded an upfront license fee from MiNA, and recorded an amount due Novosom of $0.075 million and pledged to issue $0.075 million in common stock. In January 2015, we settled amounts due with cash and 0.12 million shares of common stock.

Valeant Pharmaceuticals — In March 2010, we acquired intellectual property related to conformationally restricted nucleotide (“CRN”) technology from Valeant Pharmaceuticals North America (“Valeant”) for aexclusive licensing fee recorded as R&D expense. Subject to meeting certain milestones, we may be obligated to make a development milestone payment of $5.0 million and $2.0 million within 180 days of FDA approval of a New Drug Application for our first and second CRN related product, respectively. As of December 31, 2014, we had not satisfied any conditions triggering milestone payments. Valeant is entitled to receive low single-digit percentage based earn-out payments on commercial sales and revenue from sublicensing. The agreement requires us to use commercially reasonable efforts to develop and commercialize at least one covered product and if we have not made earn-out payments of at least $5.0 million prior to March 2016, we are required to pay Valeant an annual amount equal to $0.05 million per assigned patent, which shall be creditable against other payment obligations. The term of our financial obligations under the agreement shall end, on a country-by-country basis, when there no longer exists any valid claim in such country. We may terminate the agreement upon 30 days written notice, or upon 10 days written notice in the event of adverse results from clinical studies. Upon termination, we are obligated to pay all accrued amounts due but shall have no future payment obligations.

University of Helsinki — In June 2008, we entered into a collaboration agreement with Dr. Pirjo LaakkonenMelior I to include two additional clinical indications for Non-Alcoholic Steatohepatitis (NASH) and the Biomedicum Helsinki. The agreement terminated in June 2012. After termination, we may still be obligated to make development milestone payments of up to €0.275 million for each product developed. At December 31, 2014, none of the milestone triggers had been met. In addition, upon the first commercial sale of a product, we are required to pay an advance of €0.25 million credit against future royalties. We will owe in low single digit percentage royalty payments on product sales.pulmonary inflammation.

F-17

Note 10 — Commitments and Contingencies

Standby Letter of Credit/Leases— In connection with the lease termination of our Bothell, Washington facility, the landlord drew $0.38 million from our letter of credit in 2013 before the credit facility was closed in March 2013. At March 1, 2013, we had terminated all facility leases.

Contingencies — We are subject to various legal proceedings and claims that arise in the ordinary course of business. Our management currently believes that resolution of such legal matters will not have a material adverse impact on our consolidated financial position, results of operations or cash flows.

Note 11 — Subsequent Events

All material subsequent events have been included within footnotes 1, 6, 7 and 9 of the Consolidated Financial Statements.

F-18

MARINA BIOTECH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

  December 31,  June 30, 
(In thousands, except share and per share data) 2014  2015 
ASSETS        
Current assets:        
Cash $1,824  $726 
Accounts receivable  500   - 
Prepaid expenses and other current assets  192   83 
Total current assets  2,516   809 
Intangible assets  6,700   6,700 
Other assets  -   45 
Total assets $9,216  $7,554 
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
Current liabilities:        
Accounts payable $687  $502 
Accrued payroll and employee benefits  183   271 
Other accrued liabilities  1,072   1,349 
Total current liabilities  1,942   2,122 
Fair value liability for price adjustable warrants  9,225   5,582 
Fair value of stock to be issued to settle liabilities  75   - 
Deferred tax liabilities  2,345   2,345 
Total liabilities  13,587   10,049 
Commitments and contingencies        
Stockholders’ deficit:        
Series C convertible preferred stock, $.01 par value; 100,000 shares authorized, 1,200 and 1,110 shares issued and outstanding at December 31, 2014 and June 30, 2015, respectively (preference in liquidation of $5,550,000 at June 30, 2015)  -   - 
Common stock, $0.006 par value; 180,000,000 shares authorized, 25,523,216 and 26,451,237 shares  issued and outstanding at December 31, 2014 and June 30, 2015, respectively  153   159 
Additional paid-in capital  333,264   333,816 
Accumulated deficit  (337,788)  (336,470)
Total stockholders’ deficit  (4,371)  (2,495)
Total liabilities and stockholders’ deficit $9,216  $7,554 
         

See accompanying notes to the condensed consolidated financial statements.

F-19

MARINA BIOTECH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

  Three Months Ended June 30,  Six Months Ended June 30, 
(In thousands, except per share amounts) 2014  2015  2014  2015 
Revenue:                
License and milestone $-  $400  $-  $400 
                 
Operating expenses:                
Research and development  49   230   95   484 
General and administrative  622   1,192   1,139   2,253 
Total operating expenses  671   1,422   1,234   2,737 
Loss from operations  (671)  (1,022)  (1,234)  (2,337)
Other income (expense):                
Interest and other expense  -   -   (1,007)  - 
Change in fair value liability for price adjustable warrants  4,545   1,914   (769)  3,643 
Change in fair value of stock reserved for issuance to settle liabilities  -   -   (2,455)  - 
Gain on foreign exchange  2   -   2   - 
Gain on debt extinguishment  -   -   4   - 
Gain on settled liabilities  45   12   302   12 
Total other income (expense), net  4,592   1,926   (3,923)  3,655 
Net income (loss) applicable to common stockholders  3,921   904   (5,157)  1,318 
Deemed dividend related to discount on beneficial conversion feature in Series C convertible preferred shares  -   -   (6,000)  - 
Net income (loss) applicable to common stockholders $3,921  $904  $(11,157) $1,318 
                 
Net income (loss) per common share                
Basic $0.15  $0.03  $(0.47) $0.05 
Diluted $0.11  $(0.03) $(0.47) $(0.08)
                 
Shares used in computing net income (loss) per share                
Basic  25,633   26,036   23,563   26,036 
Diluted  34,801   30,293   23,563   30,293 

See accompanying notes to the condensed consolidated financial statements.

F-20

MARINA BIOTECH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

  Six months ended June 30, 
(In thousands) 2014  2015 
Operating activities:        
Net income (loss) $(5,157) $1,318 
Adjustments to reconcile net income (loss) to net cash used in operating activities:        
Non-cash (gain) on debt extinguishment  (4)  - 
Non-cash interest expense  1,007   - 
Non-cash license expense  -   120 
Non-cash gain on settlement of liabilities  (302)  (12)
Compensation related to stock options and warrants  107   296 
Gain on foreign exchange transactions  (2)  - 
Changes in fair market value of liabilities        
Stock reserved for issuance to settle liabilities  2,455   - 
Price adjustable warrants  769   (3,643)
Cash changes in assets and liabilities        
    Accounts receivable  5   500 
Prepaid expenses and other assets  43   64 
Accounts payable  (561)  (173)
Accrued and other liabilities  (626)  431 
Net cash used in operating activities  (2,266)  (1,099)
         
Financing activities:        
Proceeds from sales of Series C preferred shares and warrants, net  5,929   - 
Cash payments of notes payable  (250)  - 
Insurance financing  (5)  - 
Proceeds from exercise of warrants for common stock  -   1 
Net cash provided by financing activities  5,674   1 
Net increase (decrease) in cash  3,408   (1,098)
Cash — Beginning of period  909   1,824 
Cash — End of period $4,317  $726 
Supplemental disclosure of cash flow information and non-cash financing activities:        
Cash paid for interest $83  $- 
Reclassification of fair value liability for price adjustable warrants exercised $1,862  $- 
Issuance of common stock to settle liabilities $3,474  $195 
Fair value of warrants issued to purchase common stock to settle liabilities $-  $65 
Debt conversion to common stock $1,479  $- 
Deemed dividend to Series C convertible preferred stockholders $6,000  $- 
Par value of common stock issued upon conversion of Series C convertible preferred stock $-  $4 
         

See accompanying notes to the condensed consolidated financial statements.

F-21

MARINA BIOTECH, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2014 and 2015

(Unaudited)

Note 1 — Business, Liquidity and Summary of Significant Accounting Policies

Business

We are a biotechnology company focused on the discovery, development and commercialization of nucleic acid-based therapies to treat orphan diseases. Our pipeline includes CEQ508, a product in clinical development for the treatment of Familial Adenomatous Polyposis (“FAP”), for which we have received Orphan Drug Designation (“ODD”) from the U.S. Food and Drug Administration (“FDA”), and preclinical programs for the treatment of type 1 myotonic dystrophy (“DM1”) and Duchenne muscular dystrophy (“DMD”).

Since 2010, we have strategically acquired/in-licensed and further developed nucleic acid chemistry and delivery-related technologies in order to establish a novel and differentiated drug discovery platform. This platform allows us to distinguish ourselves from others in the nucleic acid therapeutics area in that we are the only company capable of creating a wide variety of therapeutics targeting coding and non-coding RNA via multiple mechanisms of action such as RNA interference (“RNAi”), messenger RNA translational inhibition, exon skipping, microRNA (“miRNA”) replacement, miRNA inhibition, and steric blocking in order to modulate gene expression either up or down depending on the specific mechanism of action. Our goal is to dramatically improve the lives of the patients and families affected by orphan diseases through either our own efforts or those of our collaborators and licensees.

Liquidity

The accompanying condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At June 30, 2015, we had an accumulated deficit of approximately $336.5 million, $110.4 million of which has been accumulated since we focused on RNA therapeutics in June 2008. To the extent that sufficient funding isresources have been available, we will continuethe Company has continued to incur losses as we continuework with its advisors in an effort to restructure our research and development (“R&D”) activities. In addition, we have had and will continue to have negative cash flows from operations. We have funded our losses primarily through the sale of common and preferred stock and warrants, revenue provided from our license agreementscompany and to a lesser extent, equipment financing facilities and secured loans. In 2014, we funded operations with a combination ofidentify additional strategic transactions to enhance the issuance of preferred stock and license-related revenues. At June 30, 2015, we had negative working capital of $1.27 million and $0.73 million in cash. Our resumed operating activities consume the majorityvalue of our cash resources.

We believe that our current cash resources will enable us to fund our intended operations through March 2016. Our ability to execute our operating plan beyond March 2016 depends on our ability to obtain additional funding. The volatility in our stock price,company as such opportunities arise, including potential transactions and capital raising initiatives, as well as market conditions in general, could make it difficult for us to raise capital on favorable terms, or at all. If we fail to obtain additional capital when required, we may have to modify, delay or abandon some or all of our planned activities, or terminate our operations. We are currently pursuing both non-dilutive means of obtaining additional capital, primarily from existing and potential future licenses and partnerships, and dilutive means of obtaining additional capital, primarily through the offering of our equity and debt securities. However, therebusiness combination transactions with operating companies. There can be no assurance that wethe Company will be successful at identifying any such transactions, that it will continue to have sufficient resources to actively attempt to identify such transactions, or that such transactions will be available upon terms acceptable to us or at all. If the Company does not complete any significant strategic transactions, or raise substantial additional capital, in such endeavors. The accompanying condensed consolidated financial statements do not include any adjustmentsthe near future, it is likely that might result from the outcome of this uncertainty.Company will discontinue all operations and seek bankruptcy protection.

F-45

Basis of PreparationADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

Note 2 – Summary of Significant Accounting Policies

Basis of PreparationPresentation

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 10regulations of Regulation S-X.the Securities and Exchange Commission (the “SEC”). 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 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, 2014, included in our 2014 Annual Report on Form 10-K filed with the SEC.2021. The information furnished in this reportReport 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 and sixnine months ended JuneSeptember 30, 20152022, are not necessarily indicative of the results for the year ending December 31, 20152022, or for any future period.

Principles of Consolidation

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

Going Concern and Management’s Liquidity Plans

The accompanying 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 September 30, 2022, the Company had cash and cash equivalents of approximately $133,000 and has negative working capital of approximately $21.8 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 secured promissory notes. The Company recognized a net loss of approximately $1.8 million for the nine months ended September 30, 2022 and used cash in operating activities of approximately $1.3 million. The Company had an accumulated deficit of approximately $55.4 million as of September 30, 2022.

In addition, to the extent that the Company continues its business operations, the Company anticipates that it will continue to have negative cash flows from operations, at least into the near future. However, the Company cannot be certain that it will be able to obtain such funds required for its our operations at terms acceptable to the Company or at all. General market conditions, as well as market conditions for companies in the Company’s financial and business position, as well as the ongoing issues arising from the COVID-19 pandemic, the Ukraine war and inflation and the Federal Reserve interest rate increases in response, and any recessionary environment or market downturns that could result, may make it difficult for the Company to seek financing from the capital markets, and the terms of any financing may adversely affect the holdings or the rights of its stockholders. 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 on terms which are favorable to the Company or at all. 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 for a period of twelve months from the issuance date of this Report. The consolidated financial statements do not contain any adjustments that might result from the resolution of any of the above uncertainties.

Reverse Stock-split

On September 30, 2022, the Company filed a Certificate of Amendment to the Certificate of Incorporation with the Delaware Secretary of State to effect a reverse stock split of all outstanding shares of the Company’s common stock at a ratio of 1-for-20. On October 5, 2022, the Company effected the 1-for-20 reverse stock split of its common stock. The reverse stock split did not cause an adjustment to the par value or the authorized shares of the common stock. As a result of the reverse stock split, the Company retroactively adjusted all outstanding common stock equivalents including options, warrants, convertible notes and other agreements with third parties.

All disclosures of common shares and per common share data in the accompanying consolidated financial statements and related notes reflect the reverse stock split for all periods presented. As a result of the reverse split the Company recorded a $361,000 adjustment to the par value of common stock which was offset to additional paid-in capital.

 

Summary of Significant Accounting Policies

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of six months or less at the time of purchase to be cash equivalents. As of December 31, 2021 and September 30, 2022, the Company had approximately $76,000 and $133,000 in cash, respectively.

The Company deposits its cash with major financial institutions that may at times exceed the federally insured limit. As of December 31, 2021 and September 30, 2022, the Company did not have cash in excess of the federally insured limit of $250,000.

F-22F-46

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

Use of Estimates

The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenuesrevenue and expenses during the reporting periods. Estimates having relatively higher significancereported period. Significant areas requiring the use of management estimates include revenue recognition, stock-based compensation,accruals related to our operating activity including legal and other consulting expenses, the fair value of non-cash equity-based issuances, the fair value of derivative liabilities, and the valuation of warrants, valuation and estimated lives of identifiable intangible assets, impairment of long-lived assets, valuation of features embedded within note agreements and amendments, and income taxes.allowance on deferred tax assets. Actual results could differ materially from those estimates.such estimates under different assumptions or circumstances.

Fair Value of Financial Instruments —We consider

The Company considers the fair value of cash, accounts receivable, accounts payable, debt, and accrued liabilitiesexpenses not to not 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:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2:
Level 1:Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3:Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

As of September 30, 2022, the Company measured conversion features on outstanding convertible notes and warrants as a derivative liability using significant unobservable prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs in whichbased on little or no verifiable market data, exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

Our cash is subject toLevel 3 in the fair value measurement andhierarchy, resulting in a fair value isestimate of approximately $7.3 million. The value of the derivative liability as of September 30, 2022, was determined by Level 1 inputs. We measure the liability for committed stock issuances with a fixed share number using Level 1 inputs. We measure the liability for price adjustable warrants and certain features embedded in notes using the Black-Scholes option pricingbinomial lattice model (“Black-Scholes Model”) under various probability weighted scenarios, using Level 3 inputs. Thethe following tables summarize our inputs: risk free rate of 4.05% to 4.25%, volatility of 147% to 317% and time to maturity of zero to one year. There were noliabilities or assets measured at fair value on a recurringnon-recurring basis as of December 31, 2014 and JuneSeptember 30, 2015:2022.

     Level 1     Level 3 
  Balance at  Quoted prices in  Level 2  Significant 
  December 31,  active markets for  Significant other  unobservable 
(In thousands) 2014  identical assets  observable inputs  inputs 
Liabilities:                
Fair value liability for price adjustable warrants $9,225  $-  $-  $9,225 
Fair value liability for shares to be issued  75   75   -   - 
Total liabilities at fair value $9,300  $75  $-  $9,225 

     Level 1     Level 3 
     Quoted prices in  Level 2  Significant 
  Balance at  active markets for  Significant other  unobservable 
(In thousands) June 30, 2015  identical assets  observable inputs  inputs 
Liabilities:                
Fair value liability for price adjustable warrants $5,582  $-  $-  $5,582 
Total liabilities at fair value $5,582  $-  $-  $5,582 

The following presents activitySchedule of the fair value liability of price adjustable warrants determined by Level 3 inputs for the six-month period ended June 30, 2015:Fair Value Measurements

             
  Fair Value Measurements at September 30, 2022 
  Quoted
Prices in
Active
Markets for
Identical
Assets
  Other
Observable
Inputs
  Significant
Unobservable
Inputs
    
(in thousands) (Level 1)  (Level 2)  (Level 3)  Total 
Derivative liabilities $        -  $         -  $        7,260  $7,260 
Total $-  $-  $7,260  $7,260 

     Weighted average as of each measurement date 
  Fair value                
  liability for price           Contractual    
  adjustable warrants  Exercise  Stock     life  Risk free 
  (in thousands)  Price  Price  Volatility  (in years)  rate 
                   
Balance at December 31, 2014 $9,225  $0.42  $0.95   121%  3.51   0.90%
Change in fair value included in Statement of Operations  (3,643)                    
Balance at June 30, 2015 $5,582  $0.42  $0.59   102%  2.09   0.70%

F-23F-47

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

A roll forward of the level 3 valuation financial instruments is as follows:

Schedule of Roll Forward of Level 3 Financial Instruments

(in thousands) Warrants  Notes  Total 
  

Nine-Months Ended

September 30, 2022

 
(in thousands) Warrants  Notes  Total 
Balance at December 31, 2021 $5,336  $2,361  $7,697 
Initial valuation of derivative liabilities included in debt discount  1,151   163   1,314 
Initial valuation of derivative liabilities included in derivative expense     108   108 
Reclassification of derivative liabilities loss to gain on debt extinguishment     (325)  (325)
Change in fair value included in derivative expense  (318)  (1,216)  (1,534)
Balance at September 30, 2022 $6,169  $1,091  $7,260 

ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding equity instruments.

Convertible Debt and Warrant Accounting

Debt with warrants

In accordance with ASC Topic 470-20-25, when the Company issues debt with warrants, the Company treats the relative fair value of the warrants as a debt discount, recorded as a contra-liability against the debt, and amortizes the balance over the life of the underlying debt as amortization of debt discount expense in the consolidated statements of operations. The offset to the contra-liability is recorded as additional paid in capital in the Company’s consolidated balance sheets if the warrants are not treated as a derivative. The Company determines the fair value of the warrants using the Black-Scholes Option Pricing Model (“Black-Scholes”), the binomial model or the Monte Carlo Method based upon the underlying conversion features of the debt and then computes and records the relative fair value as a debt discount. If the debt is retired early, the associated debt discount is then recognized immediately as amortization of debt discount expense in the consolidated statements of operations.

Convertible debt – derivative treatment

When the Company issues debt with a conversion feature, it first assesses whether the conversion feature meets the requirements to be accounted for as stock settled debt. If it does not meet those requirements then it is assessed on whether the conversion feature should be bifurcated and treated as a derivative liability, as follows: a) one or more underlyings, typically the price of our common stock; b) one or more notional amounts or payment provisions or both, generally the number of shares upon conversion; c) no initial net investment, which typically excludes the amount borrowed; and d) net settlement provisions, which in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. An embedded equity-linked component that meets the definition of a derivative does not have to be separated from the host instrument if the component qualifies for the scope exception for certain contracts involving an issuer’s own equity. The scope exception applies if the contract is both a) indexed to its own stock; and b) classified in stockholders’ equity in its statement of financial position.

Convertible debt – beneficial conversion feature

Prior to the Company’s adoption of ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) on January 1, 2021, if the conversion feature was not treated as a derivative, the Company assessed whether it is a beneficial conversion feature (“BCF”). A BCF exists if the effective conversion price of the convertible debt instrument is less than the stock price on the commitment date. This typically occurs when the conversion price is less than the fair value of the stock on the date the instrument was issued. The value of a BCF is equal to the intrinsic value of the feature, the difference between the conversion price and the common stock into which it is convertible and is recorded as additional paid in capital and as a debt discount in the consolidated balance sheets. The Company amortizes the balance over the life of the underlying debt as amortization of debt discount expense in the consolidated statements of operations. If the debt is retired early, the associated debt discount is then recognized immediately as amortization of debt discount expense in the consolidated statements of operations.

F-48

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

If the conversion feature does not qualify for derivative treatment, the convertible debt is treated as traditional debt.

Recently Issued Accounting Pronouncements

Recently Adopted

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which will simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including certain convertible instruments and contracts on an entity’s own equity. Specifically, the new standard will remove the separation models required for convertible debt with cash conversion features and convertible instruments with beneficial conversion features. It will also remove certain settlement conditions that are currently required for equity contracts to qualify for the derivative scope exception and will simplify the diluted earnings per share calculation for convertible instruments. ASU 2020-06 will be effective January 1, 2022, for the Company and may be applied using a full or modified retrospective approach. Early adoption is permitted, but no earlier than January 1, 2021, for the Company. The Company adopted ASU No. 2020-06 on January 1, 2021. Management determined such adoption did not have a material impact on the overall stockholders’ equity (deficit) in the Company’s consolidated financial statements.

In May 2021, FASB issued ASU 2021-04: Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40), to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in ASU 2021-04 provide the following guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic:

1.An entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument.
2.An entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as follows:

a.For a modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements (hereinafter, referred to as a “debt” or “debt instrument”), as the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged. Specifically, an entity should consider:

i.An increase or a decrease in the fair value of the modified or exchanged written call option in applying the 10 percent cash flow test and/or calculating the fees between debtor and creditor in accordance with Subtopic 470-50, Debt—Modifications and Extinguishments.

F-49

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

ii.An increase (but not a decrease) in the fair value of the modified or exchanged written call option in calculating the third-party costs in accordance with Subtopic 470-50.

b.For all other modifications or exchanges, as the excess, if any, of the fair value of the modified or exchanged written call option over the fair value of that written call option immediately before it is modified or exchanged.

3.An entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration, as follows:

a.A financing transaction to raise equity. The effect should be recognized as an equity issuance cost in accordance with the guidance in Topic 340, Other Assets and Deferred Costs.
b.A financing transaction to raise or modify debt. The effect should be recognized as a cost in accordance with the guidance in Topic 470, Debt, and Topic 835, Interest.
c.Other modifications or exchanges that are not related to financings or compensation for goods or services or other exchange transactions within the scope of another Topic. The effect should be recognized as a dividend. For entities that present EPS in accordance with Topic 260, that dividend should be an adjustment to net income (or net loss) in the basic EPS calculation.

An entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option to compensate for goods or services in accordance with the guidance in Topic 718, Compensation—Stock Compensation. In a multiple-element transaction (for example, one that includes both debt financing and equity financing), the total effect of the modification should be allocated to the respective elements in the transaction.

The amendments in ASU 2021-04 are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt the amendments in ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year. The adoption by the Company as of January 1, 2022, did not have a significant impact on its financial statements.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

Net Income (Loss)Loss per Common Share —

Basic net income (loss)loss per common share is computedcalculated by dividing the net income (loss)loss by the weighted average number of common shares outstanding during the 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 (stockoutstanding for the period. Common stock equivalents are only included when their effect is dilutive. Potentially dilutive securities which include outstanding warrants, stock options, unvested restrictedconvertible notes and preferred stock warrants) when, under either the treasury or if-converted method, such inclusion inhave been excluded from the computation of diluted net loss per share as their effect would be dilutive. anti-dilutive. For all periods presented, basic and diluted net loss were the same.

F-50

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

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

Schedule of Earnings Per Share, Basic and Diluted

  2022  2021  2022  2021 
  Three Months Ended  Nine Months Ended 
  2022  2021  2022  2021 
Numerator                
Net loss $(1,804) $(3,739) $(1,779) $(4,682)
Dividends  (8)  (406)  (574)  (1,679)
Net Loss allocable to common stockholders $(1,812) $(4,145) $(2,353) $(6,361)
Denominator                
Weighted average common shares outstanding used to compute net loss per share, basic and diluted  3,160,877   649,321   2,019,953   587,117 
Net loss per share of common stock, basic and diluted                
Net loss per share $(0.57) $(6.38) $(1.16) $(10.83)

The following number of shares have been excluded from diluted net income (loss) since such inclusion would be anti-dilutive:

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

 2022  2021 
 Three Months Ended June 30,  Six Months Ended June 30,  

Nine-Months Ended

September 30,

 
 2014  2015  2014  2015  2022  2021 
Stock options outstanding  284,505   1,316,106   284,505   1,316,106   19,000   19,378 
Convertible notes  2,389,770   1,216,640 
Warrants  7,031,058   1,323,291   21,310,695   1,323,291   5,192,652   3,065,318 
Convertible preferred stock  -   8,000,000   8,000,000   8,000,000 
Series C Preferred Stock  3,334   3,334 
Series D Preferred Stock  2,500   2,500 
Series E Preferred Stock  178,833   2,175,826 
Series F Preferred Stock     225,995 
Total  7,315,563   10,639,397   29,595,200   10,639,397   7,786,089   6,708,991 

Stock-Based Compensation

The Company applies the provisions of ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and non-employees, including stock options, in the statements of operations.

For stock options issued, the Company estimates the grant date fair value of each option using the Black-Scholes option pricing model. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the common stock. For awards subject to service-based vesting conditions, including those with a graded vesting schedule, the Company recognizes stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally the vesting term. Forfeitures are recorded as they are incurred as opposed to being estimated at the time of grant and revised if and when a forfeiture becomes probable.

F-51

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

Income Taxes

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 bases. Deferred tax assets, including tax loss and credit carry forwards, 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.

The Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates.

Note 3 – Prepaid Expenses

As of September 30, 2022, and December 31, 2021, prepaid expenses were approximately $123,000 and $120,000, respectively, and included prepaid manufacturing expenses for the Company’s clinical development candidate MLR-1019 and other prepaid expenses recorded on the accompanying balance sheet.

Note 4 – Notes Payable and Convertible Promissory Notes

The following table summarizes the Company’s outstanding term loans:

Schedule of Outstanding Term Loans

(in thousands) September 30,
2022
  December 30,
2021
 
2019 Term Loan $5,677  $5,677 
2022 Term Loan  2,222   - 
Notes payable  7,899   5,677 
Unamortized discounts  (1,029)  - 
Loans payable $6,870  $5,677 

2019 Term Loans

During 2019, the Company entered into term loan subscription agreements with certain accredited investors, pursuant to which the Company issued secured promissory notes in the aggregate principal amount of approximately $5.7 million (collectively, the “2019 Term Loans”). The Company paid $707,000 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 straight-line method.

The promissory notes accrued interest at a rate of 12% per annum. Interest is payable quarterly with the first interest payment to be made on December 28, 2019, and each subsequent payment every Nine months thereafter. On December 28, 2019, the Company defaulted on the initial interest payment on the loan and the interest rate per annum increased to the default rate of 15%.

The unpaid principal balance of the notes, plus accrued and unpaid interest thereon, matured on June 28, 2020. The notes were secured by a first lien and security interest on all the assets of the Company and certain of its wholly owned subsidiaries. On June 28, 2020, the Company defaulted on the maturity date principal payment.

On June 26, 2021, the holders of the 2019 Term Loans agreed to subordinate their lien and security interest in the assets of the Company and its subsidiaries as set forth in the Security Agreement dated June 28, 2019, to the holders of the June 2021 convertible notes.

On April 19, 2022, a majority of the noteholders of the secured non-convertible promissory notes of the Company issued between June 18, 2019, and August 5, 2019, which matured on August 5, 2020, consented to forbear collection efforts until September 30, 2022. Accordingly, the collateral agent for the note holders in consideration of the signed noteholder agreements agreed to forbear all notes outstanding.

F-52

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

The Company recognized approximately $212,000 and $637,000 in interest expense related to the Notes for the three and nine months ended September 30, 2022, respectively. The Company recognized approximately $215,000 and $637,000 in interest expense related to the Notes for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, the Company had approximately $2.7 million of accrued interest on the notes included in accrued expenses and is in default on the repayment of approximately $5.7 million in principal and the $2.7 million in accrued interest on the 2019 Term Loans.

2022 Term Loan

On May 11, 2022, the Company entered into a Securities Purchase Agreement with investors whereby the Company issued the Purchasers Original Issue Discount Promissory Notes in the aggregate principal amount of $2,222,222, net of an original issue discount of $222,222 for a purchase price of $2,000,000 and warrants to purchase 1,111,112 shares of the Company’s common stock, pursuant to the terms and conditions of the SPA and secured by a Security Agreement as described below. In addition, the Company issued 19,231 commons shares to an investment banker as commission on the sale. The Company received total consideration of $1,692,200 after debt issuance costs of $307,800.

The Notes are due on the earliest to occur of (i) the 12-month anniversary of the original issuance date of the Notes, or May 11, 2023, (ii) a financing transaction which results in the Company’s common stock being listed on a national securities exchange, and (iii) an event of default. If an event of default occurs before the Company’s common stock is listed on a national securities exchange, the event of default would require a repayment of 125% of the outstanding principal, accrued interest and other amounts owing thereon unless the Company is trading on a national securities exchange in which case the repayment would be 100%. The Notes bear interest at 8% per annum, subject to an increase to 15% in case of an event of default as provided for therein. In addition, at any time before the 12-month anniversary of the date of issuance of the Notes, the Company may, upon five days’ prior written notice to the Purchaser, prepay all of the then outstanding principal amount of the Notes for cash in an amount equal to the sum of 105% of all amounts due and owing hereunder, including all accrued and unpaid interest.

The Warrants are exercisable for a 66 month period (five years and six months) ending November 11, 2027, at an exercise price of $0.80 per share, subject to certain adjustments.

The Company recorded a total debt discount of $1,693,000 including an original issue discount of $222,222, a discount related to issuance costs of $307,800, a discount related to the issuance of common stock of $11,820, and a $1,151,000 discount related to the initial warrant derivative liability. The discounts are being amortized over the life of the note.

The Company’s obligations under the Notes are secured by a first priority lien on all of the assets of the Company and its wholly-owned subsidiaries pursuant to a Security Agreement, dated May 11, 2022 and among the Company, its wholly-owned subsidiaries, the Purchasers, and the lead investor as the collateral agent.

For the three and nine months ended September 30, 2022, the Company recognized approximately $562,300 and $663,300 related to the amortization of debt discounts and fees and approximately $45,400 and $70,600 in interest expense, respectively. No interest expense or debt discount was recognized for the same period of 2021.

As of September 30, 2022, the Company has recorded $2,222,222 of outstanding principal, $70,600 of accrued interest and approximately $1,029,000 of unamortized discount and issuance expenses on the 2022 Term Loans.

Convertible Promissory Notes

The following table summarizes the Company’s outstanding convertible notes as of September 30, 2022, and December 31, 2021:

Schedule of Convertible Promissory Notes

(in thousands) September 30, 2022  December 31, 2021 
Convertible Notes $1,300  $1,516 
Unamortized discounts and fees  (178)  (530)
Convertible notes payable, net $1,122  $986 

Ten convertible notes with outstanding principal of approximately $1.1 million were in default as of September 30, 2022.

F-53

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

Secured Convertible Promissory Note – February 2020

On February 5, 2020, the Company entered into a Securities Purchase Agreement with accredited investors and issued the investors, (i) original issue discount Convertible Promissory Notes with a principal of $550,500 issued at a 10% original issue discount, for a total purchase price of $499,950, and (ii) warrants to purchase up to such number of shares of the common stock of the Company as is equal to the product obtained by multiplying 1.75 by the quotient obtained by dividing (A) the principal amount of the Notes by (B) the then applicable conversion price of the Notes. This results in a variable quantity of warrants at any point in time due to the variable conversion price of the Notes. (See Note 7).

The Convertible Notes matured on August 5, 2020. Prior to default, interest accrued to the Holders on the aggregate unconverted and then outstanding principal amount of the Notes at the rate of 10% per annum, calculated on the basis of a 360-day year and accrues daily. On June 15, 2020, the Company defaulted on certain covenants in the 2020 term loan and the interest rate reset to the default rate of 18%.

Until the Convertible Notes are no longer outstanding, the Convertible Notes are convertible, in whole or in part, at any time, and from time to time, into shares of Common Stock at the option of the noteholder. The conversion price is the lower of: (i) $10.00 per share of Common Stock and (ii) 70% of the volume weighted average price of the Common Stock on the trading market on which the Common Stock is then listed or quoted for trading for the prior ten (10) trading days (as adjusted for stock splits, stock combinations and similar events); provided, that if the Notes are not prepaid on or before May 5, 2020, then the conversion price shall be the lower of (x) 60% of the conversion price as calculated above or (y) $1.00 (as adjusted for stock splits, stock combinations and similar events). The conversion price of the Convertible Notes shall also be adjusted as a result of subsequent equity sales by the Company, with customary exceptions.

The exercise price of the Warrants shall be equal to the conversion price of the Convertible Notes, provided, that on the date that the Convertible Notes are no longer outstanding, the exercise price shall be fixed at the conversion price of the Convertible Notes on such date, with the exercise price of the Warrants thereafter (and the number of shares of Common Stock issuable upon the exercise thereof) being subject to adjustment as set forth in the Warrants. The warrants have a 5-year term.

The Company recorded a discount related to the Warrants of approximately $322,000, which includes an allocation of original issue discount (“OID”) and issue costs of $30,000 and $53,000 based on the relative fair value of the instruments as determined by using the Monte-Carlo simulation model. The Company also recorded the remaining debt discount related to the convertible debt OID of approximately $21,000 and debt issuance costs of $38,000 using the relative fair value method to be amortized as interest expense over the term of the loan using the straight-line method. Total discounts recorded were approximately $381,000.

On March 19, 2021, the holder of the Convertible Note converted $25,900 of interest into 25,900 shares of common stock.

On July 29, 2021, the holder of the Convertible Note converted $27,500 of interest into 27,500 shares of common stock.

On August 16, 2021, the holder of the Convertible Note converted $25,000 of principal and interest into 25,000 shares of common stock.

On September 13, 2021, the holder of the Convertible Note converted $32,500 of principal and interest into 32,500 shares of common stock.

On October 4, 2021, the holder of the Convertible Note converted $26,250 of principal and interest into 26,250 shares of common stock.

On November 29, 2021, the holder of the Convertible Note converted $31,150 of principal and interest into 31,151 shares of common stock.

F-54

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

The total note principal and interest converted during the year ended December 31, 2021, was $168,300 and 168,294 common shares issued were valued at fair value based on the quoted trading prices on the conversion dates aggregating approximately $554,000 resulting in a loss on debt extinguishment of $386,000. In addition, derivative fair value of $245,000 relating to the portion of the Note converted was settled resulting in gain on extinguishment of approximately $245,000. The net loss on extinguishment was approximately $141,000.

On January 27, 2022, the conversion price of the notes and warrants was adjusted to be the lower of (x) 60% of the conversion price as calculated above or (y) $0.78 as a result of issuance of common stock for a convertible note conversion.

For the three and nine months ended September 30, 2022, the Company recognized approximately $21,000 and $66,800 in interest expense related to the note, respectively. The Company recognized approximately $25,000 and $76,000 in interest expense related to the notes for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, the Company had accrued interest on the February 2020 Convertible Note of approximately $168,000.

As of September 30, 2022, the Company remains in default on the repayment of remaining principal of $457,359 and accrued interest on the February 2020 Convertible Notes. Upon demand for repayment at the election of the holder, the holder of the Convertible Note is due 140% of the aggregate of outstanding principal, interest, and other expenses due in respect of this Convertible Note. The 40% premium will be recorded once a demand occurs.

Secured Convertible Promissory Note – June 2020

On June 26, 2020, the Company issued to an existing investor in the Company a 10% original issue discount Senior Secured Convertible Promissory Note with a principal of $58,055, for a purchase price of $52,500, net of the original issue discount of $5,555. The Convertible Note matured on December 26, 2020. Prior to default, interest accrued on the aggregate unconverted and then outstanding principal amount of the Note at the rate of 10% per annum, calculated on the basis of a 360-day year. The Company incurred approximately $14,000 in debt issuance costs. On August 5, 2020, the Company defaulted on certain covenants in the loan and the interest rate reset to the default rate of 18%.

The Note is convertible, in whole or in part, into shares of common stock of the Company at the option of the noteholder at a conversion price of $0.40 (as adjusted for stock splits, stock combinations and similar events); provided, that if an event of default has occurred under the Note, then the conversion price shall be 65% of the lowest closing bid price of the Company’s common stock as reported on its principal trading market for the twenty consecutive trading day period ending on (and including) the trading day immediately preceding the date on which the conversion notice was delivered. The conversion price shall also be adjusted for subsequent equity sales by the Company. Because the share price on the commitment date was in excess of the conversion price, the Company recorded a beneficial conversion feature of $50,000 related to this note that was credited to additional paid in capital and reduced the carrying amount. At the commitment date, the actual intrinsic value of the beneficial conversion feature was approximately $203,000. The discount recorded is being amortized to interest expense over the life of the loan using the straight-line method.

The obligations of the Company under the Note are secured by a senior lien and security interest in all of the assets of the Company and certain of its wholly-owned subsidiaries pursuant to the terms and conditions of a Security Agreement dated June 26, 2020 by the Company in favor of the noteholder. In connection with the issuance of the Note, the holders of the secured promissory notes that the Company issued to select accredited investors between June 28, 2019 and August 5, 2019 in the aggregate principal amount of approximately $5.7 million agreed to subordinate their lien and security interest in the assets of the Company and its subsidiaries as set forth in the Security Agreement dated June 28, 2019 that such holders entered into with the Company and its subsidiaries to the security interest granted to the holder of the Note.

On January 27, 2022, the conversion price of the note was adjusted to the lower of 65% of the lowest closing bid price of the Company’s common stock as reported on its principal trading market for the twenty consecutive trading day period ending on (and including) the trading day immediately preceding the date on which the conversion notice was delivered or $0.78 as a result of issuance of common shares for a convertible note conversion.

F-55

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

For both the three and nine-month periods ended September 30, 2022 and September 31, 2021 the Company recognized approximately $2,700 and $7,900 in interest related to the note.

As of September 30, 2022, the Company remains in default on the repayment of principal of $58,055 and approximately $23,500 in accrued interest on the notes. Upon demand for repayment at the election of the holder, the holder of the note is due 140% of the aggregate of outstanding principal, interest, and other expenses due in respect of this Note. The 40% premium will be recorded once a demand occurs.

Secured Convertible Promissory Note – October 2020

On October 30, 2020, the Company issued to an existing investor in and lender to the Company a 10% original issue discount senior secured convertible promissory note with a principal of $111,111, for a purchase price of $100,000. The note is convertible into shares of common stock of the Company at the option of the noteholder at a conversion price of $1.40 (as adjusted for stock splits, stock combinations and similar events); provided, that if an event of default has occurred under the Note, then the conversion price shall be 70% of then conversion price. The conversion price of the notes is subject to anti-dilution price protection and on March 19, 2021, the conversion price of the notes was adjusted to $1.00 per share as a result of subsequent equity sales by the Company.

The obligations of the Company under the note are secured by a senior lien and security interest in all of the assets of the Company.

The Company recorded approximately $9,000 in debt issuance cost to be amortized over the life of the loan using the straight-line method.

The interest rate on the note was 10% per annum, calculated on the basis of a 360-day year. On April 30, 2021, the note matured and the Company defaulted on the note and the interest rate on the loan reset to 18%.

Additionally, the Company issued the noteholder 79,366 warrants to purchase the Company’s common stock at $1.60 per share subject to certain adjustments as defined in the agreement. Until the Notes are no longer outstanding, the warrants have full-ratchet protection, are exercisable for a period of five years, and contain customary exercise limitations. On March 19, 2021, the exercise price of the warrants was adjusted to $1.00 and the Company issued an additional 47,619 warrants to the note holder. The Company recorded approximately $57,000 as a deemed dividend upon the repricing based upon the change in fair value of the warrants using a binomial valuation model. The Company used a risk-free rate of 0.16%, volatility of 262.27%, and expected term of 0.92 years in calculating the fair value of the warrants.

The Company recorded a discount related to the warrants of approximately $66,000, including a discount of $6,000 and issuance costs of $5,000 based on the relative fair value of the instruments as determined by using the Black-Scholes valuation model. The Company recorded a beneficial conversion feature of $45,000 related to the note that was credited to additional paid in capital and reduced the carrying amount. The discount recorded is being amortized to interest expense over the life of the loan using the straight-line method. At the commitment date, the actual intrinsic value of the beneficial conversion feature was approximately $69,000. The Company also recorded a debt discount related to the convertible debt of approximately $5,000 and debt issuance cost of $4,000 using the relative fair value method to be amortized as interest expense over the term of the loan using the straight-line method.

On January 27, 2022, the exercise price of the notes and warrants was adjusted from the default conversion price of $0.98 to $0.78 as a result of a convertible note exercise and the Company issued an additional 35,816 warrants to the note holder.

As of September 30, 2022, 162,800 warrants were outstanding that were issued with the October 2020 convertible note at an exercise price of $0.78.

For the three and nine months ended September 30, 2022, the Company recognized approximately $5,100 and $15,200 in interest expense for the note, respectively. For the three and nine months ended September 30, 2021, the Company recognized approximately $5,000 and $14,800in interest expense including $0 and $2,600 related to the amortization of debt issuance costs, respectively. For the three and nine-month period ended September 30, 2021, the Company recognized $0 and $79,000 and related to the amortization of debt discount. As of September 30, 2022, the debt discount and issuance costs for the note were fully amortized.

F-56

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

As of September 30, 2022, the Company has outstanding principal of $111,111 and accrued interest on the note of approximately $34,400.

As of September 30, 2022, the Company remains in default on the repayment of principal and interest on the notes. Upon demand for repayment at the election of the holder, the holder of the note is due 125% of the aggregate of outstanding principal, interest, and other expenses due in respect of this Note. The 25% premium will be recorded once a demand occurs.

Secured Convertible Promissory Note – January 2021

On January 31, 2021, the Company issued to an existing investor in and lender to the Company a 10% original issue discounted Senior Secured Convertible Promissory Note with a principal of $52,778, for a purchase price of $47,500, net of original issue discount of $5,278. The Note is convertible into shares of common stock of the Company at the option of the noteholder at a conversion price of $1.40 (as adjusted for stock splits, stock combinations and similar events); provided, that if an event of default has occurred under the Note, then the conversion price shall be 70% of the then conversion price. The conversion price of the notes is subject to anti-dilution price protection and will be adjusted upon subsequent equity sales by the Company.

The obligations of the Company under the Note are secured by a senior lien and security interest in all assets of the Company.

Additionally, the Company issued to the investor 37,699 warrants to purchase the Company’s common stock at an exercise price of $1.60 per share subject to certain adjustments as defined in the agreement. Until the Notes are no longer outstanding, the warrants have full-ratchet protection, are exercisable for a period of five years, and contain customary exercise limitations. On March 19, 2021, the exercise price of the warrants was adjusted to $1.00 and the Company issued an additional 22,619 warrants to the note holder. The Company recorded approximately $27,000 as a deemed dividend upon the repricing based upon the change in fair value of the warrants using a binomial valuation model. The Company used a risk-free rate of 0.16%, volatility of 262.27%, and expected term of 0.97 years in calculating the fair value of the warrants.

The Company recorded approximately $2,000 in debt issuance cost to be amortized over the life of the loan using the straight-line method.

The interest rate on the note was 10% per annum, calculated on the basis of a 360-day year. On July 31, 2021, the note matured and the Company defaulted on the note and the interest rate on the loan reset to the default rate of 18% per annum.

The Company recorded a discount related to the warrants of approximately $32,000, which includes an allocated original issue discount, of $3,000 and allocated issuance costs of $1,000 based on the relative fair value of the instruments as determined by using the Black-Scholes valuation model. The assumptions used in the Black-Scholes model were a risk-free rate of 0.45%, volatility of 240.83%, and an expected term of one year in calculating the fair value of the warrants.

The Company also recorded a debt discount related to the convertible debt of approximately $2,000 remaining original issue discount and remaining debt issuance cost of $1,000 using the relative fair value method to be amortized as interest expense over the term of the loan using the straight-line method.

Total discounts recorded including the original issue discount were approximately $35,000.

On January 27, 2022, the exercise price of the notes and warrants was adjusted from the default conversion price of $0.98 to $0.78, as a result of a convertible note exercise and the Company issued an additional 17,012 warrants to the note holder.

As of September 30, 2022, 77,330 warrants were outstanding that were issued with the January 2021 convertible note at an exercise price of $0.78.

For the three and nine months ended September 30, 2022, the Company recognized approximately $2,400 and $7,200 in interest expense on the note, respectively. For the three and nine-month periods ended September 30, 2021, the Company recognized approximately $2,900 and $5,700 in interest expense including approximately $100 and $700 related to the amortization of debt issuance costs, respectively. For the three and nine-month period ended September 30, 2021, the Company recognized $5,600 and $34,000 related to the amortization of debt discount. As of September 30, 2022, the debt discount and issuance costs on the note were fully amortized.

F-57

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

As of September 30, 2022, the Company has outstanding principal of $52,778 on the note and has recorded approximately $13,900 of accrued interest included in accrued expenses on the accompanying balance sheet.

As of September 30, 2022, the Company remains in default on the repayment of principal and accrued interest on the notes. Upon demand for repayment at the election of the holder, the holder of the note is due 125% of the aggregate of outstanding principal, interest, and other expenses due in respect of this Note. The 25% premium will be recorded once a demand occurs.

Secured Convertible Promissory Note – April 2021

On April 12, 2021, the Company issued to an accredited investor in and lender to the Company a 10% original issue discounted Senior Secured Convertible Promissory Note with a principal amount of $66,667, for a purchase price of $60,000 net of an original discount of $6,667. Additionally, the Company issued to the investor 40,000five-year warrants to purchase the Company’s common stock at an exercise price of $1.90 per share. The warrants have full ratchet protection.

The note matured on October 12, 2021. Prior to default, interest accrued on the aggregate unconverted and then outstanding principal amount of the note at the rate of 10% per annum, calculated on-the-basis of a 360-day year. On October 12, 2021, the Company defaulted on the note and the interest rate on the note reset to 18% per annum.

The Note is convertible, in whole or in part, at any time, and from time to time, into shares of the common stock of the Company at the option of the noteholder at a conversion price of $1.50 (as adjusted for stock splits, stock combinations and similar events); provided, that if an event of default has occurred under the Note, then the conversion price shall be 70% of the then conversion price. The conversion price shall also be adjusted upon subsequent equity sales by the Company. The obligations of the Company under the Note are secured by a senior lien and security interest in all assets of the Company.

The Company recorded a discount related to the warrants of approximately $34,000, which includes approximately $3,700 of OID discount allocated under the relative fair value method, and a remaining discount related to the OID of $3,000 based on the relative fair value of the instruments. The fair value of the warrants on which the relative fair value is based was determined by using the Black-Scholes valuation model. The assumptions used in the Black-Scholes model were a risk-free rate of 0.89%, volatility of 240.64%, and an expected term of one year in calculating the fair value of the warrants.

On June 25, 2021, the exercise price of the warrants was adjusted to $1.50 and the Company issued an additional 10,667 warrants to the note holder. The Company recorded approximately $11,000 as a deemed dividend upon the repricing based upon the change in fair value of the warrants using a binomial valuation model. The Company used a risk-free rate of 0.92%, volatility of 247.52%, and expected term of 0.96 years in calculating the fair value of the warrants.

On November 4, 2021, the Company issued 7,662 shares of common stock upon a cashless exercise of 12,500 warrants issued with the April 2021 Convertible Note.

On November 30, 2021, the exercise price of the warrants was adjusted to $1.00 based on a note conversion at $1.00 and the Company issued an additional 19,084 warrants to the note holder.

On January 27, 2022, the exercise price of the note and warrants was adjusted from the default conversion price of $1.05 to $0.78 based on a convertible note conversion at $0.78 and the Company issued an additional 16,147 warrants to the note holder.

As of September 30, 2022, 73,398 warrants were outstanding that were issued with the April 2021 convertible note at an exercise price of $0.78.

During the three-months ended September 30, 2022, the Company repaid $25,000 of principal on the note. The Company recorded approximately $19,500 gain on debt extinguishment resulting from the settlement of the derivative as a result of repayment of the note.

For the three and nine months ended September 30, 2022, the Company recognized approximately $1,800 and $7,800 in interest expense for the notes. For the three and nine-month period ended September 30, 2021, the Company recognized approximately $19,000 and $35,000, respectively related to the amortization of debt discount. For the three and nine-month periods ended September 30, 2021, the Company recognized approximately $1,700 and $3,200 in interest expense, As of September 30, 2022, the debt discounts and issuance costs on the note were fully amortized.

F-58

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

As of September 30, 2022, the Company has recorded $41,667 of principal and approximately $13,900 of accrued interest for the note on the accompanying balance sheet.

As of September 30, 2022, the Company remains in default on the repayment of principal and accrued interest on the notes. Upon demand for repayment at the election of the holder, the holder of the note is due 125% of the aggregate of outstanding principal, interest, and other expenses due in respect of this Note. The 25% premium will be recorded once a demand occurs.

Secured Convertible Promissory Note – June 2021

On June 25, 2021, the Company issued to an accredited investor in and lender to the Company a 5% original issue discounted Senior Secured Convertible Promissory Note with a principal amount of $66,500, for a purchase price of $63,000, net of an original issue discount of $3,500. Additionally, the Company issued to the investor 40,000 three-year warrants to purchase the Company’s common stock at an exercise price of $1.90 per share. Upon subsequent down-round equity sales by the Company, the number of shares issuable upon exercise of the Warrant shall be proportionately adjusted such that the aggregate exercise price of this Warrant shall remain $76,000 which is a full ratchet price protection provision.

The note matured on June 25, 2022. Interest accrues on the aggregate unconverted and then outstanding principal amount of the note at the rate of 10% per annum, calculated on the basis of a 365-day year.

The Note is convertible, in whole or in part, at any time, and from time to time, into shares of the common stock of the Company at the option of the noteholder at a conversion price of $1.50 (as adjusted for stock splits, stock combinations and similar events); provided, however that in the event, the Company’s Common Stock trades below $1.60 per share for more than three consecutive trading days, the holder of this Note is entitled, at its option, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock at a price for each share of Common Stock equal to 65% of the lowest trading price of the Common Stock for the twenty prior trading days including the day upon which a Notice of Conversion is received. The conversion discount, look back period and other terms of the Note will be adjusted on a ratchet basis if the Company offers a more favorable conversion discount, prepayment rate, interest rate, (whether through a straight discount or in combination with an original issue discount), look back period or other more favorable term to another party for any financings while this Note is in effect.

The obligations of the Company under the Note are secured by a senior lien and security interest in all assets of the Company.

The Company incurred approximately $9,300 in debt issuance costs.

The Company also issued 2,377 shares of common stock as a commission fee to the investment banker. The fair value of the common stock which was approximately $5,040 was recorded as debt issuance expense.

Due to the variability in the conversion price of the Note the embedded conversion option has been bifurcated and reflected as a derivative liability with an initial fair value of $102,823 with $87,039 charged to derivative expense and $15,784 recorded as a debt discount.

Total discounts recorded were $66,500. The Company recorded an original issue discount of $3,500, a discount of $9,300 for issuance costs, a discount related to the warrants of approximately $37,916 and a discount related to the derivative of $15,784 based on the relative fair value of the instruments. The warrant fair value on which the relative fair value was based was determined by using a simple binomial lattice model. The assumptions used in the model were a risk-free rate of 0.48%, volatility of 302.11%, and an expected term of 0.60 years in calculating the fair value of the warrants.

On August 11, 2021, the exercise price of the warrants was adjusted to $1.50 and the Company issued an additional 10,667 warrants to the note holder. The Company recorded approximately $25,000 as a deemed dividend upon the repricing based upon the change in fair value of the warrants using a binomial valuation model. The Company used a risk-free rate of 0.81, volatility of 209%, and expected term of 0.57 years in calculating the fair value of the warrants.

F-59

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

On October 27, 2021, the Company and the institutional investor who holds the convertible promissory note agreed to extend the maturity date of the note by six months to December 25, 2022 for no consideration.

On November 30, 2021, the exercise price of the warrants was adjusted to $1.00 based on a note conversion at $1.00 and the Company issued an additional 25,333 warrants to the note holder.

On January 27, 2022, the holder of the June 25, 2021, convertible note converted $9,500 of principal and $421 of interest at $0.78 per share into 12,721 shares of common stock that were valued at fair value based on the quoted trading prices on the conversion dates aggregating approximately $28,000 resulting in a loss on debt extinguishment of $18,000. In addition, derivative fair value of $23,000 relating to the portion of the Note converted was settled resulting in a gain on extinguishment of approximately $23,000. The net gain on extinguishment was approximately $5,000. In addition, the conversion price of the warrants issued with the notes were adjusted to $0.78 per share and the Company issued an additional 21,436 warrants to the holder of the note.

As of September 30, 2022, 97,436 warrants were outstanding that were issued with the June 2021 convertible note at an exercise price of $0.78.

For the three and nine months ended September 30, 2022, the Company recognized approximately $10,000 and $29,600 related to the amortization of debt discounts and approximately $3,400 and $10,400 in interest expense related to the note. For the three and nine-month period ended September 30, 2021, the Company recognized approximately $30,810 for the amortization of the debt discount. For both the three and nine-month periods ended September 30, 2021, the Company recognized approximately $3,000 in interest expense.

As of September 30, 2022, the Company has recorded $57,000 of outstanding principal and approximately $15,700 of accrued interest and $9,100 of unamortized discount and issuance expenses.

Convertible Promissory Note – August 11, 2021

On August 11, 2021, the Company entered into a Securities Purchase Agreement with an accredited institutional investor pursuant to which the Company issued to the investor its Original Issue Discount Secured Convertible Promissory Note in the principal amount of $220,500 and warrants to purchase 40,000 shares of the common stock of the Company for which the Company received consideration of $210,000 net of an original issue discount of $10,500. In addition, the Company entered into a Registration Rights Agreement with the investor and issued the investor 5,000 common shares as a commitment fee.

The note matured on August 11, 2022 and absent an event of default provides for an interest rate of 10% per annum, payable at maturity, and is convertible into common stock of the Company at a price of $1.50 per share, subject to anti-dilution adjustments in the event of certain corporate events as set forth in the Note, provided that if the average closing price of the Company’s common stock during any Nine consecutive trading days is below $1.60, the conversion price shall be reduced to 65% of the lowest trading price during the 20 consecutive trading days immediately preceding the conversion date. On November 9, 2021, the Company defaulted on certain covenants in the note and the interest rate on the note reset to 24% per annum.

F-60

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

In addition to customary anti-dilution adjustments the Note provides, subject to certain limited exceptions, that if the Company issues any common stock or common stock equivalents, as defined in the Note, at a per share price lower than the conversion price then in effect, the conversion price will be reduced to the per share price at which such shares or common share equivalents were sold.

The warrants are initially exercisable for a period of five years at a price of $1.90 per share, subject to customary anti-dilution adjustments upon the occurrence of certain corporate events as set forth in the warrant.

The Company incurred approximately $30,000 in debt issuance costs.

The Company also issued 7,000 shares of common stock to the investment banker as a commission on the note.

Due to the variability in the conversion price of the Note the embedded conversion option has been bifurcated and reflected as a derivative liability with an initial fair value of $340,893 with $234,388 charged to derivative expense and $106,505 recorded as a debt discount.

The Company recorded a total debt discount of $220,500 including an original issue discount of $10,500, a discount related to the warrants of approximately $56,454 a discount related to issuance costs of $30,000 and a discount related to the issuance of common stock of approximately $17,041, and a $106,505 discount related to the initial derivative value of the embedded conversion feature on the note all based on the relative fair value of the instruments.

The fair value of the warrants on which the relative fair value was based was determined by using a simple binomial lattice model. The assumptions used in the model were a risk-free rate of 0.81%, volatility of 253%, and an expected term of one year in calculating the fair value of the warrants. The discounts are being amortized over the term of the convertible note.

On November 30, 2021, the exercise price of the warrants was adjusted to $1.00 based on a note conversion at $1.00 and the Company issued an additional 36,000 warrants to the note holder.

On January 27, 2022, the conversion price of the notes was adjusted to the lower of $0.78per share, or provided that if the average closing price of the Company’s common stock during any six consecutive trading days is below $1.60, the conversion price shall be reduced to 65% of the lowest trading price during the 20 consecutive trading days immediately preceding the conversion date. In addition, the exercise price of the warrant was adjusted to $0.78 per share and the Company issued an additional 21,436 warrants to the holder of the note. Both the conversion price of the note and warrants were adjusted as a result of a convertible note exercise at $0.78 per share.

On May 12, 2022, the Company repaid $135,695 of principal and $64,305 of interest including $54,278 of interest due as a result of early redemption on the note. In addition, the holder of the note extended the maturity date on the note to September 30, 2022, when the outstanding balance of principal and interest of $128,502 is due on the note. The Company recorded a $45,200 gain on debt extinguishment as a result of repayment of the note. On September 30, 2022, the Company defaulted on the outstanding balance of principal and interest on the note.

As of September 30, 2022, 97,436 warrants were outstanding that were issued with the August 11, 2021 convertible note at an exercise price of $0.78.

For the three and nine months ended September 30, 2022, the Company recognized approximately $39,900 and $134,000 related to the amortization of debt discount and approximately $6,800 and $92,000 in interest expense related to the note. Interest expense for the three months ended September 30, 2022, included approximately $67,000 in additional interest accrued due to penalties incurred for early redemption of the note. For the three and nine-month period ended September 30, 2021, the Company recognized approximately $30,810 for the amortization of the debt discount. For both the three and nine-month periods ended September 30, 2021, the Company recognized approximately $3,000 in interest expense.

As of September 30, 2022, the Company has remaining $85,000 of outstanding principal and approximately $43,700 of accrued interest.

Convertible Promissory Note – August 17, 2021

On August 17, 2021, the Company entered into a Securities Purchase Agreement with an accredited institutional investor pursuant to which the Company issued to the investor its Original Issue Discount Secured Convertible Promissory Note in the principal amount of $220,500 and warrants to purchase 40,000 shares of the common stock of the Company for which the Company received consideration of $210,000 net of original discount of $10,500. In addition, the Company entered into a Registration Rights Agreement with the investor and issued the investor 5,000 common shares as a commitment fee.

F-61

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

The note matures on August 17, 2022 and provides for an interest rate of 10% per annum, payable at maturity, and is convertible into common stock of the Company at a price of $1.50 per share, subject to anti-dilution adjustments in the event of certain corporate events as set forth in the Note, provided that if the average closing price of the Company’s common stock during any three consecutive trading days is below $1.60, the conversion price shall be reduced to 65% of the lowest trading price during the 20 consecutive trading days immediately preceding the conversion date. The embedded conversion option will be treated as a bifurcated derivative liability.

In addition to customary anti-dilution adjustments the Note provides, subject to certain limited exceptions, that if the Company issues any common stock or common stock equivalents, as defined in the Note, at a per share price lower than the conversion price then in effect, the conversion price will be reduced to the per share price at which such shares or common share equivalents were sold.

The Warrants are initially exercisable for a period of five years at a price of $1.90 per share, subject to customary anti-dilution adjustments upon the occurrence of certain corporate events as set forth in the Warrant.

The Company incurred approximately $30,000 in debt issuance costs. The Company also issued 5,631 shares of common stock to the investment banker as a commission on the note.

Due to the variability in the conversion price of the Note, the embedded conversion option has been bifurcated and reflected as a derivative liability with an initial fair value of $398,404 with $297,833 charged to derivative expense and $100,571 recorded as a debt discount.

The Company recorded a total debt discount of $220,500 including an original issue discount of $10,500, a discount related to the warrants of approximately $62,220 a discount related to issuance costs of $30,000 a discount related to the issuance of common stock of approximately $17,209, and a $100,571 discount related to the initial derivative value of the embedded conversion feature on the Note all based on the relative fair value of the instruments.

The fair value of the warrants on which the relative fair value was based was determined by using a simple binomial lattice model. The assumptions used in the model were a risk-free rate of 0.77%, volatility of 254%, and an expected term of one year in calculating the fair value of the warrants. The discounts are being amortized over the life of the convertible note.

On October 27, 2021, the Company and the institutional investor who holds the promissory note agreed to extend the maturity date the notes by Nine months to February 17, 2023 for no consideration.

On November 15, 2021, the Company defaulted on certain covenants in the note and the interest rate on the note reset to 24% per annum.

On November 30, 2021, the exercise price of the warrants was adjusted to $1.00 based on a note conversion at $1.00 and the Company issued an additional 36,000 warrants to the note holder.

On January 27, 2022, the conversion price of the notes was adjusted to the lower of $0.78 per share, or provided that if the average closing price of the Company’s common stock during any six consecutive trading days is below $1.60, the conversion price shall be reduced to 65% of the lowest trading price during the 20 consecutive trading days immediately preceding the conversion date. In addition, the exercise price of the warrant was adjusted to $0.78 per share and the Company issued an additional 21,436 warrants to the holder of the note. Both the conversion price of the note and warrants were adjusted as a result of a convertible note exercise at $0.78 per share.

As of September 30, 2022, 97,436 warrants were outstanding that were issued with the August 17, 2021 convertible note at an exercise price of $0.78.

For the three and nine months ended September 30, 2022, the Company recognized approximately $35,400 and $105,000 related to the amortization of debt discount and $12,700 and $37,700 in interest expense related to the note, respectively. For both the three and nine months ended September 30, 2021, the Company recognized approximately $27,200 related to the amortization of debt discount and $2,700 in interest expense related to the note.

As of September 30, 2022, the Company has recorded $220,500 of outstanding principal and approximately $53,100 of accrued interest and $52,800 of unamortized discount and issuance expenses.

F-62

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

Convertible Promissory Note – October 4, 2021

On October 4, 2021, the Company entered into a Securities Purchase Agreement (“SPA”) with an institutional investor pursuant to which the Company issued the Buyer a 10% Convertible Redeemable Note in the principal amount of $131,250 and a six-year warrant to purchase 23,810 shares of common stock of the Company for which the Company received proceeds of $110,000. In addition, the Company entered into a Registration Rights Agreement with the investor and issued the investor 2,977 common shares as a commitment fee.

The Note is due October 4, 2022. The Note provides for interest at the rate of 10% per annum, payable in seven equal monthly payments beginning on August 15, 2022, through the maturity date. The Note is convertible into shares of common stock at any time following the date of cash payment at the Buyer’s option at a conversion price of $1.50 per share, subject to certain adjustments.

The warrants are exercisable for three-years from October 4, 2021, at an exercise price of $1.90 per share, subject to certain adjustments, which exercise price may be paid on a cashless basis. The aggregate exercise price is $45,238.

The Company incurred approximately $15,000 in debt issuance costs. The Company also issued 2,173 shares of common stock to the investment banker as a commission on the note.

Due to insufficient authorized shares, the embedded conversion option has been bifurcated and reflected as a derivative liability with an initial fair value of $564,943 with $487,052 charged to derivative expense and $77,891 recorded as a debt discount.

The Company recorded a total debt discount of $131,250 including an original issue discount of $6,250, a discount related to issuance costs of $15,000, a discount related to the issuance of common stock of $32,109, and a $77,891 discount related to the initial derivative value of the embedded conversion feature on the Note all based on the relative fair value of the instruments. The discounts are being amortized over the life of the convertible note.

On January 2, 2022, the Company defaulted on certain covenants contained in the October 4, 2021, convertible note and the interest rate reset to 16%.

On January 27, 2022, the exercise price of the note was adjusted to $0.78 based on a convertible note conversion at $0.78.

On May 12, 2022, the Company repaid $83,500 of principal on the note and repurchased 2,977 shares of common stock issued to the holder as an original commitment fee on the note for $1,000. The repurchase was recorded at cost as treasury stock on the accompanying balance sheet. In addition, the Company repaid an additional $11,571 of principal and $8,428 of interest on the note. The Company recorded approximately $81,700 gain on debt extinguishment resulting from the settlement of the derivative as a result of repayment of the note.

For the three months ended September 30, 2022, the Company repaid $19,471 of principal and $476 of interest on the note. The Company recorded approximately $14,800 gain on debt extinguishment resulting from the settlement of the derivative as a result of repayment of the note.

As of September 30, 2022, 23,810 warrants were outstanding that were issued with the October 4, 2021 convertible note at an exercise price of $1.90.

For the three and nine months ended September 30, 2022, the Company recognized approximately $33,100 and $98,200 related to the amortization of debt discount and approximately $500 and $5,700 in interest expense related to the note, respectively. No interest expense or debt discount was recognized for the same period of 2021.

As of September 30, 2022, the Company has recorded $16,708 of outstanding principal and $1,100 of unamortized discount and issuance expenses. No interest on the note was due as of September 30, 2022.

Convertible Promissory Note – October 7, 2021

On October 7, 2021, the Company entered into a Securities Purchase Agreement (“SPA”) with an institutional investor pursuant to which the Company issued the investor a 10% Convertible Redeemable Note in the principal amount of $131,250 and a three-year warrant to purchase 23,810 shares of common stock of the Company for which the Company received proceeds of $110,000. In addition, the Company entered into a Registration Rights Agreement with the investor and issued the investor 2,977 common shares as a commitment fee and an additional 2,632 shares as a commission to the broker.

The Note is due October 7, 2022. The Note provides for interest at the rate of 10% per annum, payable at maturity. The Note is convertible into shares of common stock at any time following the date of cash payment at the investor’s option at a conversion price of $1.50 per share, subject to certain adjustments.

F-63

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

The Warrants are exercisable for six-years from October 7, 2021, at an exercise price of $1.90 per share, subject to certain adjustments, which exercise price may be paid on a cashless basis. The aggregate exercise amount per the warrant agreement is $45,238.

The Company incurred approximately $15,000 in debt issuance costs.

Due to insufficient authorized shares, the embedded conversion option has been bifurcated and reflected as a derivative liability with an initial fair value of $564,184 with $487,667 charged to derivative expense and $76,517 recorded as a debt discount.

The Company recorded a total debt discount of $131,250 including an original issue discount of $6,250, a discount related to issuance costs of $15,000, a discount related to the issuance of common stock of approximately $33,483, and a $76,517 discount related to the initial derivative value of the embedded conversion feature on the Note all based on the relative fair value of the instruments. The discounts are being amortized over the life of the convertible note.

On January 5, 2022, the Company defaulted on certain covenants contained in the October 7, 2021, convertible note and the interest rate reset to 16%.

On January 27, 2022, the exercise price of the note was adjusted to $0.78 based on a convertible note conversion at $0.78.

On May 12, 2022, the Company repaid $83,500 of principal on the note and repurchased 2,977 shares of common stock issued to the holder as an original commitment fee on the note for $1,000. The repurchase was recorded at cost as treasury stock on the accompanying balance sheet. In addition, the Company repaid an additional $11,571 of principal and $8,428 of interest on the note during the three-month period ended September 30, 2022. The Company recorded approximately $82,900 gain on debt extinguishment related to the settlement of the derivative liability as a result of repayment of the note.

For the three months ended September 30, 2022, the Company repaid $19,471 of principal and $476 of interest on the note. The Company recorded approximately $15,200 gain on debt extinguishment resulting from the settlement of the derivative as a result of repayment of the note.

As of September 30, 2022, 23,810 warrants were outstanding that were issued with the October 7, 2021, convertible note at an exercise price of $1.90.

For the three and nine months ended September 30, 2022, the Company recognized approximately $33,100 and $98,200 related to the amortization of debt discounts and approximately $500 and $5,800 in interest expense related to the note. No interest expense or debt discount was recognized for the same period of 2021.

As of September 30, 2022, the Company has recorded $16,708 of outstanding principal and $2,200 of unamortized discount and issuance expenses. No interest on the note was due as of September 30, 2022.

Convertible Promissory Note – March 15, 2022

On March 15, 2022, the Company entered into a Securities Purchase Agreement (“SPA”) with an institutional investor pursuant to which the Company issued the investor a 10% Convertible Note in the principal amount of $250,000 for a purchase price of $200,000 reflecting a $50,000 original issue discount. The Company received total consideration of $180,000 after debt issuance costs of $20,000. In addition, the Company issued 2,500 shares of common stock as a commitment fee to the investor. The Company also issued 10,000 shares to the broker as a commission on the sale.

The Note provides for guaranteed interest at the rate of 10% per annum for the 12 months from and after the original issue date of the Note for an aggregate guaranteed interest of $25,000, all of which guaranteed interest shall be deemed earned as of the date of the note. The principal amount and the guaranteed interest shall be due and payable in seven equal monthly payments each, $39,285.71, commencing on August 15, 2022, and continuing on the 15th day of each month until paid in full not later than March 15, 2023, the maturity date.

The Note is convertible into shares of common stock at any time following any event of default at the investor’s option at a conversion price of ninety percent (90%) per share of the lowest per-share trading price of the Company; stock during the ten trading day periods before the conversion, subject to certain adjustments.

The Company recorded a total debt discount of $250,000 including an original issue discount of $50,000, a discount related to issuance costs of $34,384, a discount related to the issuance of common stock of approximately $3,596, and a $162,020 discount related to the initial derivative value of the embedded conversion feature on the Note all based on the relative fair value of the instruments. The discounts are being amortized over the life of the convertible note.

For the three months ended September 30, 2022, the Company repaid $67,176 of principal and $11,396 of interest on the note. The Company recorded approximately $42,600 gain on debt extinguishment resulting from the settlement of the derivative as a result of repayment of the note.

For the three and nine months ended September 30, 2022, the Company recognized approximately $63,000 and $137,000 related to the amortization of debt discounts and approximately $25,000 in interest expense related to the note that was deemed earned as of the date of issuance.

F-64

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

At September 30, 2022, the Company has recorded $182,800 of outstanding principal $13,600 of accrued interest and $113,000 of unamortized discount and issuance expenses.

Derivative Liabilities Pursuant to Convertible Notes and Warrants

In connection with the issuance of the unrelated party convertible notes (collectively referred to as “Notes”) and warrants (collectively referred to as “Warrants”), discussed above, the Company determined that the terms of certain Notes contained an embedded conversion options to be accounted for as derivative liabilities due to the holder having the potential to gain value upon conversion and provisions which includes events not within the control of the Company. Due to the fact that the number of shares of common stock potentially issuable exceed the Company’s authorized share limit as of September 30, 2022, the equity environment was tainted and all convertible debentures and warrants were included in the value of the derivative. In accordance with ASC 815-40 –Derivatives and Hedging – Contracts in an Entity’s Own Stock, the embedded conversion options contained in the Notes were accounted for as derivative liabilities at the date of issuance or on the reclassification date and shall be adjusted to fair value through earnings at each reporting date. The fair value of the embedded conversion options and the warrants was determined using the Binomial Lattice valuation model. At the end of each period and on note conversion date or repayment or on the warrant exercise date, the Company revalues the derivative liabilities resulting from the embedded option.

For the nine-month period ended September 30, 2022, in connection with the issuance of the Notes and warrants, on the initial measurement dates, the fair values of the embedded conversion option of approximately $1,422,000 was recorded as derivative liabilities of which $1,314,000 was allocated as a debt discount and $108,000 as derivative expense.

At the end of the period, the Company revalued the embedded conversion option derivative liabilities. In connection with the initial valuations and these revaluations, the Company recorded a gain from the initial and change in the derivative liabilities fair value of approximately $1,534 for the nine-month period ended September 30, 2022.

During the nine months period ended September 30, 2022, the fair value of the derivative liabilities was estimated at issuance and at September 30, 2022, using the Binomial Lattice valuation model with the following assumptions:

Schedule of Fair Value of Derivative Liabilities Estimated Issuance and Valuation Mode

Dividend rate%
Term (in years)0.0 to 1.07 year
Volatility147% to 317.47%
Risk-free interest rate1.28% to 4.25%

Other than the effect on the derivative valuation recognized in operations, there was no accounting effect to the ratchet adjustments of certain convertible notes to reduce the conversion price to $0.78 in January 2022 since all of the embedded conversion options in the convertible notes were treated as derivatives.

Note 5 - Licensing Agreements

License of DiLA2 Assets

On March 16, 2018, the Company entered into an exclusive sublicensing agreement for certain intellectual property rights to its DiLA2 delivery system. The agreement included an upfront payment of $200,000 and future additional consideration for sales and development milestones. The upfront fee was contingent upon the Company obtaining a third-party consent to the agreement within ninety days of execution. As of September 30, 2022, the Company had not obtained consent for the sublicense and has classified the upfront payment it had previously recorded as an accrued liability on its consolidated balance sheet.

F-65

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

Note 6 - 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/or financial position of the Company could significantly differ from what would have been obtained if such entities were autonomous.

The followingCompany had a Master Services Agreement with Autotelic Inc., a related party that was partly owned by one of the Company’s former Board members and executive officers, namely Vuong Trieu, Ph.D., effective November 15, 2016. The Master Services Agreement terminated in 2018 with an unpaid balance for previous years services performed of approximately $4,000 is a reconciliationincluded in due to related party in the accompanying consolidated balance sheets at September 30, 2022, and December 31, 2021.

In addition, as of basicSeptember 30, 2022, and diluted net income (loss) per share:December 31, 2021, the Company owed various officers and directors approximately $1,000 and $42,000, respectively for services rendered which is included as due to related party on the accompanying consolidated balance sheet.

  Three Months Ended June 30,  Six Months Ended June 30, 
  2014  2015  2014  2015 
Net income (loss) – numerator basic $3,921  $904  $(11,157) $1,318 
Change in fair value liability for price adjustable warrants  -   (1,914)  -   (3,643)
Net loss excluding change in fair value liability for price adjustable warrants $3,921  $(1,010) $(11,157) $(2,325)
Weighted average common shares outstanding – denominator basic  25,633   26,036   23,563   26,036 
Assumed conversion of Series C  102   -   -   - 
Effect of price adjustable warrants  9,066   4,257   -   4,257 
Weighted average dilutive common shares outstanding  34,801   30,293   23,563   30,293 
Net income (loss) per common share – basic $0.15  $0.03  $(0.47) $0.05 
Net income (loss) per common share – diluted $0.11  $(0.03) $(0.47) $(0.08)

Note 2 — 7 - Stockholders’ DeficitEquity

Preferred Stock — Our board of directors

Adhera has the authority, without action by the stockholders, to designate and issue up to authorized 100,000 shares of preferred stock in one or more seriesfor issuance and to designate the rights, preferences and privileges of each series, any or all of which may be greater than the rights of our common stock. We havehas designated 1,000 shares as Series B Preferred Stock (“Series B Preferred”) and 90,000 shares as Series A Junior Participating Preferred Stock (“Series A Preferred”). NoAs of December 31, 2021 and September 30, 2022, no shares of Series BA Preferred or Series AB Preferred are outstanding. In March 2014, weAdhera designated 1,200 shares ofas Series C Convertible Preferred Stock (“Series C Preferred”).

In March 2014, we entered into a Securities Purchase Agreement with certain investors pursuant to which we sold 1,200August 2015, Adhera designated 220 shares as Series D Convertible Preferred Stock (“Series D Preferred”). In April 2018, Adhera designated 3,500 shares of Series CE Convertible Preferred Stock (“Series E Preferred”). In July 2018, Adhera designated 2,200 shares of Series F Convertible Preferred Stock (“Series F Preferred”). In December 2019, Adhera designated 6,000 shares of Series G Convertible Preferred Stock (“Series G Preferred”). The Company plans to file a certificate of elimination with respect to the Series A Preferred and price adjustable warrantsSeries B Preferred and a certificate of decrease with respect to purchase up to 6.0 million shareseach of our commonits Series C, D and F Preferred stock. As of September 30, 2022, the Company had not filed the certificate of elimination. Each subsequent designated series of preferred stock at an exercise price of $0.75 per share, for an aggregate purchase price of $6.0 million. has liquidation preference over the previous series.

Series C Preferred

Each share of Series C Preferred has a stated value of $5,000 $5,000 per share, has a $5,100 liquidation preference per share, has voting rights of 33.33 votes per share, and is convertible into shares of common stock at a conversion price of $0.75 $150.00 per share. The Series C Preferred is initially convertible into an aggregate

As of 8,000,000 shares of our common stock, subject to certain limitationsSeptember 30, 2022, and adjustments, has no stated dividend rate, is not redeemable and has voting rights on an as-converted basis.

F-24

To account for the issuance of the Series C Preferred and warrants, we first assessed the terms of the warrants and determined that, due to certain anti-dilution provisions, they should be recorded as derivative liabilities. We determined the fair value of the warrants on the issuance date and recorded a liability of $6.5 million. Since the fair value of the warrants exceed the total proceeds received of $6.0 million, we recorded a loss of $0.5 million upon issuance, which is included in the change in fair value of price adjustable warrants in the consolidated statements of operations. The discount of $6.0 million on the Series C Preferred resulting from the allocation of the entire proceeds to the warrant was accreted as a dividend on the Series C Preferred through the earliest conversion date, which was immediately. The Series C Preferred dividend of $6.0 million was recorded to additional paid-in capital and as a deemed dividend on the Series C Preferred in determining net loss applicable to common stock holders in the consolidated statements of operations. We incurred $0.07 million of stock issuance costs in conjunction with the Series C Preferred, which were netted against the proceeds.

Common Stock— Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the holders of our common stock. Subject to the rights of the holders of any class of our capital stock having any preference or priority over our common stock, the holders of our common stock are entitled to receive dividends that are declared by our board of directors out of legally available funds. In the event of our liquidation, dissolution or winding-up, the holders of common stock are entitled to share ratably in our net assets remaining after payment of liabilities, subject to prior rights of preferred stock, if any, then outstanding. Our common stock has no preemptive rights, conversion rights, redemption rights or sinking fund provisions, and there are no dividends in arrears or default. All shares of our common stock have equal distribution, liquidation and voting rights, and have no preferences or exchange rights. Our common stock currently trades on the OTC Pink tier of the OTC Markets.

In January 2015, we issued 0.12 million shares with a value of $0.075 million to Novosom as the equity component owed under our December 2014 license agreement with MiNA Therapeutics.

In May 2015, we issued 0.21 million shares with a value of $0.12 million to Novosom as the equity component owed as a result of an accelerated milestone payment under our December 2011 license agreement with Mirna Therapeutics.

In June 2015, an investor converted 9031, 2021, 100 shares of Series C Preferred into 0.6 million shares of common stock.were outstanding.

Warrants— In January 2015, an investor exercised 2,500 warrants at an exercise price of $0.28.

From January to June 2015, we issued warrants to purchase up to an aggregate of 0.102 million shares to a vendor providing scientific and development consulting services to our company. The fair value of these warrants at issuance was $0.065 million of which $0.05 million was accrued at December 31, 2014.

The following table summarizes warrant activity during the six months ended June 30, 2015:

  Warrant Shares  Weighted Average
Exercise Price
 
Outstanding, December 31, 2014  21,212,813  $1.19 
Exercised warrants  (2,500)  0.28 
Warrants issued to vendor  104,315   0.68 
Outstanding, June 30, 2015  21,314,628  $1.19 
Expiring in 2015  285,345     
Expiring in 2016  6,000,000     
Expiring in 2017  7,235,622     
Expiring thereafter  7,793,661     

Note 3 — Stock Incentive Plans

Stock-based Compensation. Certain option and share awards provide for accelerated vesting if there is a change in control as defined in the applicable plan and certain employment agreements. The following table summarizes stock-based compensation expense:

F-25

  Three months ended June 30,  Six months ended June 30, 
(In thousands) 2014  2015  2014  2015 
Research and development $10  $5  $20  $31 
General and administrative  10   112   20   265 
Total $20  $117  $40  $296 

Stock Options — Stock option activity was as follows:

  Options Outstanding 
  Shares  Weighted Average
Exercise Price
 
Outstanding, December 31, 2014  1,084,106  $5.52 
Options Issued  232,000  $0.63 
Outstanding, June 30, 2015  1,316,106  $4.66 
Exercisable, June 30, 2015  293,856  $17.34 

The following table summarizes additional information on our stock options outstanding at June 30, 2015:

  Options Outstanding  Options Exercisable 
     Weighted-Average          
     Remaining        Weighted 
Range of Exercise Number  Contractual Life  Weighted Average  Number  Average 
Prices Outstanding  (Years)  Exercise Price  Exercisable  Exercise Price 
$0.63 - $0.82  252,000   4.50  $0.65   126,000  $0.65 
$0.83 - $1.07  1,019,000   8.00   1.07   124,000   1.07 
$1.08 - $2.20  2,500   6.19   2.20   1,250   2.20 
$2.21 - $50.00  10,500   2.95   47.60   10,500   47.60 
$50.01 - $100.00  10,500   2.95   87.60   10,500   87.60 
$100.01 - $200.00  16,000   2.95   141.35   16,000   141.35 
$200.01 - $526.40  5,606   2.92   213.63   5,606   213.63 
Totals  1,316,106   7.16  $4.66   293,856  $17.34 
   Weighted-Average Exercisable Remaining Contractual Life (Years)  4.16 

In January 2015, we issued options to purchase of 0.15 million shares of our common stock to non-employee members of our board of directors at an exercise price of $0.635 per share as the annual grant to such directors for their service on our board of directors during 2015, and we issued options to purchase 0.08 million shares of our common stock to the members of our scientific advisory board at an exercise price of $0.63 per share as the annual grant to such persons for their service on our scientific advisory board during 2015.

At June 30, 2015, we had $0.64 million of total unrecognized compensation expense related to unvested stock options. We expect to recognize this cost over a weighted average period of 2.0 years.

At June 30, 2015, the intrinsic value of options outstanding or exercisable was zero as there were no options outstanding with an exercise price less than $0.48, the per share closing market price of our common stock at that date. No options were exercised during the six months ended June 30, 2015.

F-26

Note 4 — Intellectual Property and Collaborative Agreements

Novosom — In July 2010, we entered into an agreement pursuant to which we acquired intellectual property for Novosom’s SMARTICLES-based liposomal delivery system. In January 2015, we paid Novosom $0.08 million cash and issued 0.12 million shares of common stock valued at $0.075 million for amounts due related to the MiNA license signed in December 2014. In May 2015, we issued Novosom 0.21 million shares of common stock with a value of $0.12 million for amounts due related to an accelerated milestone payment under the Mirna license signed in December 2011.

Note 5 — Commitments and Contingencies

Contingencies— We are subject to various legal proceedings and claims that arise in the ordinary course of business. Our management currently believes that resolution of such legal matters will not have a material adverse impact on our consolidated financial position, results of operations or cash flows.

Note 6 — Subsequent Events

On August 5, 2015, we entered into a Securities Purchase Agreement with certain investors pursuant to which we sold 220 shares of Series D Preferred and price adjustable warrants to purchase up to 3.44 million shares of our common stock at an exercise price of $0.40 per share, for an aggregate purchase price of $1.1 million.

Each share of Series D Preferred has a stated value of $5,000 $5,000 per share, has a liquidation preference of $300 per share, has voting rights of 62.5 votes per shareand is convertible into shares of common stock at a conversion price of $0.40 $80.00 per share. The Series D Preferred is initially convertible into an aggregate of 2,750,000 shares of our common stock, subject to certain limitations and adjustments, has a 5%5% stated dividend rate when, and if declared by the Board of Directors, is not redeemable and has voting rights on an as-converted basis.

As of September 30, 2022, and December 31, 2021, 40 shares of Series D Preferred were outstanding.

F-27F-66

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

Series E Convertible Preferred Stock and Warrants

The Series E Preferred Stock has a stated value of $5,000 per share and accrues 8% dividends per annum that are payable in cash or stock at the Company’s discretion. The Series E Preferred has voting rights, dividend rights, liquidation preferences, conversion rights at the option of the holder and anti-dilution rights. Series E Preferred stock is convertible into shares of common stock at $10.00. Anti-dilution price protection on Series E Preferred stock expired on February 10, 2020. Warrants issued with Series E Convertible Preferred Stock have anti-dilution price protection, are exercisable for a period of five years, and contain customary exercise limitations.

On March 19, 2021, the exercise price of the Series E warrants was adjusted from $10.00 to $1.00 per share upon the conversion of $25,900 debt for 25,900 shares common stock. The Company recorded approximately $390,000 as a deemed dividend based upon the change in fair value of the Series E Preferred stock warrants using a binomial valuation model. The Company used a risk-free rate of 0.16%, volatility of 262.27%, and expected term of .41 to .43 years in calculating the fair value of the warrants.

As of May 17, 2021, the three-year anniversary of the closing of the Series E Preferred stock offering, all outstanding Series E Preferred stock were convertible by the Company into common stock.

On June 8, 2021, an investor converted 8 shares of Series E Preferred and accrued dividends of approximately $10,000 into 5,051 shares of common stock. In addition, the Company issued 2,679 shares of common stock to the investor for a cashless exercise of 3,750 warrants.

On July 30, 2021, an investor converted 50 shares of Series E Preferred stock with a state value of $250,000 into 25,000 shares of common stock.

On October 4, 2021, the Company issued 12,777 shares of common stock upon the conversion of 20 shares Series E Preferred stock including accrued dividends of $27,770.

On October 5, 2021, the Company issued 19,271 shares of common stock upon the conversion of 30 shares of Series E Preferred stock including accrued dividends of $42,707.

On October 8, 2021, the Company issued 2,571 shares of common stock upon the conversion of 4 shares of Series E Preferred stock including accrued dividends of $5,707.

On October 12, 2021, the Company issued 3,216 shares of common stock upon the conversion of 5 shares of Series E Preferred stock including accrued dividends of $7,156.

On November 23, 2021, the Company issued 9,665 shares of common stock upon the conversion of 15 shares of Series E Preferred stock including accrued dividends of $21,649.

On January 27, 2022, the exercise price of the Series E warrants was adjusted to $0.78 per share as a result of a convertible note exercise at $0.78 per share.

On May 17, 2022, the Company effected the conversion of 3,059 shares of Series E Preferred stock and accrued dividends of approximately $5.1 million into 2,035,306 shares of unregistered common stock at a conversion price of $10.00 per share in accordance with the conversion provisions of the certificate of designation.

As of September 30, 2022, the Company had a total of 1,453,028 warrants issued with Series E Preferred stock outstanding. The warrants expire in 2023 and have an exercise price of $0.78.

The Company had accrued dividends on the Series E Preferred stock of approximately $453,000 and $5.0 million, as of September 30, 2022, and December 31, 2021, respectively.

As of September 30, 2022, and December 31, 2021, there were 267 and 3,326 Series E shares outstanding, respectively.

Series F Convertible Preferred Shares and Warrants

The Series F Preferred Stock has a stated value of $5,000 per share and accrues 8% dividends per annum that are payable in cash or stock at the Company’s discretion. The Series F Preferred has voting rights, dividend rights, liquidation preferences, conversion rights at the holders option and anti-dilution rights. Series F Preferred stock is convertible into shares of common stock at $10.00. Anti-dilution price protection on Series F Preferred stock expired on February 10, 2020. Warrants issued with Series F Convertible Preferred Stock have anti-dilution price protection, are exercisable for a period of five years, and contain customary exercise limitations.

F-67

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

On March 19, 2021, the exercise price of the Series F warrants was adjusted from $10.00 to $1.00 upon the conversion of $25,900 of debt for 25,900 shares of common stock. The Company recorded approximately $31,000 as a deemed dividend based upon the change in fair value of the Series F Preferred stock using a binomial valuation model. The Company used a risk-free rate of 0.16%, volatility of 262.27%, and an expected term of .46 to .53 years in calculating the fair value of the warrants.

On October 15, 2021, the Company issued 1,853 shares of common stock upon the conversion of 3 shares of Series F Preferred stock and including total accrued dividends of $3,521.

As of November 9, 2021, three-year anniversary of the closing of the Series F Preferred stock offering, all outstanding Series F Preferred stock and accrued dividends became convertible by the Company into common stock upon written notification being provided by the Company to stockholders.

On January 27, 2022, the exercise price of the Series F warrants was adjusted to $0.78 per share as a result of a convertible note exercise at $0.78 per share. 

On May 17, 2022, the Company effected the conversion of 358 shares of Series F Preferred stock and accrued dividends of approximately $541,000 into 233,127 shares of unregistered common stock at a conversion rate of $10.00 per share in accordance with the conversion provisions of the certificate of designation.

As of September 30, 2022, the Company had a total of 154,425 Series F Preferred stock warrants outstanding. The warrants expire in 2023. 

The Company had accrued dividends on the Series F Preferred stock of approximately $448,000, as of December 31, 2021. No dividends were accrued as of September 30, 2022.

At September 30, 2022 and December 31, 2021, there were zero shares and 358 Series F Preferred shares outstanding, respectively.

Series G Convertible Preferred Shares

The Series G Preferred Stock has a stated value of $5,000 per share and accrues 8% dividends per annum that are payable in cash or stock at the Company’s discretion. The Series G Preferred has voting rights, dividend rights, liquidation preferences, conversion rights and anti-dilution rights. Series G Preferred stock is convertible into shares of common stock at $10.00.

As of September 30, 2022, no Series G Preferred Stock has been issued by the Company.

Common Stock

On June 8, 2021, an investor converted 8 shares of Series E Preferred and accrued dividends of approximately $10,000 into 5,051 shares of common stock.

On June 8, 2021, the Company issued 2,679 shares of common stock to the investor for a cashless exercise of 3,750 warrants.

On July 30, 2021, and investor converted 50 shares of Series E Preferred stock with a stated value of $250,000 into 25,000 shares of common stock.

On August 11, 2021, the Company issued 5,000 shares of common stock to a convertible note investor as a commitment fee which was valued at its relative fair value of $56,464.

F-68

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

On August 18, 2021, the Company issued 5,000 shares of common stock to a convertible note investor as a commitment fee which was valued at its relative fair value of $62,220.

On September 22, 2021, the Company issued 15,008 shares of common stock to an investment banker for commissions due under a banking agreement. The shares were recorded at their relative fair value of approximately $39,290.

On October 4, 2021, the Company issued 12,777shares of common stock upon the conversion of 20 shares Series E Preferred stock including accrued dividends of $27,770.

On October 4, 2021, the Company issued 2,977 shares of common stock to a convertible note investor as a commitment fee which was valued at its relative fair value of $10,859.

On October 5, 2021, the Company issued 19,271 shares of common stock upon the conversion of 30 shares of Series E Preferred stock including accrued dividends of $42,707.

On October 8, 2021, the Company issued 2,571 shares of common stock upon the conversion of 4 shares of Series E Preferred stock including accrued dividends of $5,707.

On October 8, 2021, the Company issued 2,977 shares of common stock to a convertible note investor as a commitment fee which was valued at its relative fair value of $12,233.

On October 12, 2021, the Company issued 3,216 shares of common stock upon the conversion of 5 shares of Series E Preferred stock including accrued dividends of $7,156.

On October 15, 2021, the Company issued 1,853 shares of common stock upon the conversion of 3 shares of Series F Preferred stock including accrued dividends of $3,521.

On November 4, 2021, the Company issued 7,662 shares of common stock upon a cashless exercise of 250,000 warrants issued with the April 2021 Convertible Note.

On November 23, 2021, the Company issued 9,665 shares of common stock upon the conversion of 15 shares of Series E Preferred stock including accrued dividends of $21,649.

On December 6, 2021, the Company issued 4,805 shares of common stock to an investment banker for commissions due under a banking agreement. The shares were recorded at their relative fair value of approximately $18,745.

During the twelve-month period ending December 31, 2021, the company issued 168,301 million common shares upon the conversion of $98,141 principal and $70,160 of accrued interest on the February 2020 convertible note. The common shares issued upon conversions of the note for the period ended December 31, 2021 were valued at fair value based on the quoted trading prices on the conversion dates aggregating approximately $554,000 resulting in a loss on debt extinguishment of approximately $386,000.

On January 27, 2022, the Company issued 12,721 shares of common stock upon the conversion of $9,500 principal and $422 of interest on the June 2021 convertible note that were valued at fair value based on the quoted trading prices on the conversion dates aggregating approximately $28,000 resulting in a loss on debt extinguishment of $18,000. In addition, derivative fair value of $23,000 relating to the portion of the Note converted was settled resulting in a gain on extinguishment of approximately $23,000. The net gain on extinguishment was approximately $5,000.

On March 15, 2022, the Company issued 2,500 shares of common stock to a convertible note investor as a commitment fee which was valued at its relative fair value of $3,596.

On March 15, 2022, the Company issued 10,000 shares of common stock to an investment banker for commissions due under a banking agreement for issuance of a convertible note. The shares were recorded at their fair value of approximately $14,384.

On May 11, 2022, the Company issued 19,231 shares of common stock to an investment banker for commissions due under a banking agreement for issuance of a convertible note. The shares were recorded at a fair value of approximately $11,820.

On May 17, 2022, the Company effected the conversion of 3,059 shares of Series E Preferred stock and accrued dividends of approximately $5.1 million into 2,035,306 shares of unregistered common stock at a conversion price of $10.00 per share.

On May 17, 2022, the Company effected the conversion of 358 shares of Series F Preferred stock and accrued dividends of approximately $541,000 into 233,127 shares of unregistered common stock at a conversion rate price $10.00 per share in accordance with the conversion provisions in the certificate of designation.

Treasury Stock

On May 12, 2022, the Company repurchased 5,954 shares of common stock issued to the holders of outstanding notes as an original commitment fee on the notes for $2,000. The repurchase was recorded at cost as treasury stock on the accompanying consolidated balance sheet.

F-69

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

Warrants

As of September 30, 2022, there were 5,192,652 common stock warrants outstanding, with a weighted average exercise price of $0.88 per share, with annual expirations as follows:

Schedule of Stockholders’ Equity Note, Warrants or Rights

  Shares  2023  2024  2025  2026  2027 
Series E Preferred Stock  1,520,280   1,520,280   -   -   -   - 
Series F Preferred Stock  154,425   154,425   -   -   -   - 
Bridge Loan  1,111,112   -   -   -   -   1,111,112 
Convertible Notes (CVN)  2,389,394   -   145,056   36,777,552   345,600   - 
Other  17,441   13   1,179   3,201   -   - 
Total Warrants  5,192,652   1,674,718   3,236,550   1,899,917   345,600   1,111,112 

Schedule of Warrants

Shares
Warrants as of ContentsDecember 31, 20213,731,263
Issued as a result of price adjustments on convertible notes133,284
Variable quantity of warrants related to the February 2020 note216,993
Warrants issued with 2022 Bridge Note1,111,112
Warrants as of September 30, 20225,192,652

Warrants outstanding as of September 30, 2022, included 5,127,591 price adjustable warrants.

The intrinsic value of 5,192,652 warrants as of September 30, 2022, was approximately $2.5 million.

As discussed in Note 2 above, the Company has issued convertible notes and warrants with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock and various default provisions related to the payment of the notes in Company stock. The number of shares of common stock to be issued under the convertible notes and warrants is based on the future price of the Company’s common stock. The number of shares of common stock potentially issuable upon conversion of the promissory notes are therefore, indeterminate. Due to the fact that the number of shares of common stock potentially issuable exceed the Company’s authorized share limit as of September 30, 2022, the equity environment was tainted and all convertible debentures and warrants were included in the value of the derivative as of that date. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the convertible notes were recorded as derivative liabilities. On September 30, 2022, the Company evaluated all outstanding warrants and due to reasons discussed above, all warrants outstanding were considered tainted and were therefore, accounted for as derivative liabilities.

Other than the effect on the derivative valuation recognized in operations, there was no accounting effect to the ratchet adjustments of certain warrants to reduce the conversion price to $0.78 in January 2022 since all of the embedded conversion options in the warrants were treated as derivatives.

NOTE 8 - Stock Incentive Plans

Stock Options

The following table summarizes stock option activity for the nine-month period ended September 30, 2022:

Schedule of Share Based Payments Arrangement, Option Activity

  Options Outstanding 
  Shares  

Weighted

Average

Exercise

Price

 
Outstanding, December 31, 2021  19,203  $19.40 
Options expired / forfeited  (203)  34.00 
Outstanding, September 30, 2022  19,000   19.60 
Exercisable, September 30, 2022  19,000  $19.60 

No stock options were granted during the nine-month period ended September 30, 2022.

The following table summarizes additional information on the Company’s stock options outstanding at September 30, 2022:

Schedule of Share Based Payment Arrangement, Option, Exercise Price Range

  Options Outstanding  Options Exercisable 

Exercise

Price

 

Number

Outstanding

  

Weighted- Average

Remaining

Contractual

Life (Years)

  

Weighted

Average

Exercise

Price

  

Number

Exercisable

  

Weighted

Average

Exercise

Price

 
19.60  19,000   0.59  $19.60   19,000  $19.60 
Totals  19,000   0.59  $19.60   19,000  $19.60 

F-70

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

As of September 30, 2022, the Company had no unrecognized compensation expense related to unvested stock options. No stock based compensation expenses was recognized for the three or nine-month periods ended September 30, 2022 or 2021.

As of September 30, 2022, the intrinsic value of options outstanding or exercisable was zero there were no options outstanding with an exercise price less than the closing market price of our common stock at that date.

NOTE 9 - Commitments and Contingencies

Litigation

Because of the nature of the Company’s business, it is subject to claims and/or threatened legal actions, which arise out of the normal course of business. As of the date of this filing, the Company is not aware of any pending lawsuits against it, its officers or directors.

Leases

The Company does not own or lease any real property or facilities that are material to its current business operations. If the Company continues its business operations, the Company may seek to lease facilities to support its operational and administrative needs.

Licensing Agreement – MLR 1019

On July 28, 2021, the Company and Melior II entered into an exclusive license agreement for the development, commercialization and exclusive license of MLR-1019. MLR-1019 is being developed as a new class of therapeutic for Parkinson’s disease (PD) and is, to the best of the Company’s knowledge, the only drug candidate today to address both movement and non-movement aspects of PD. Under the Agreement, the Company was granted an exclusive license to use Melior II’s Patents and know-how to develop products in consideration for cash payments up to approximately $21.8 million upon meeting certain performance milestones, as well as a royalty of 5% of gross sales.

The license agreement terminates upon the last expiration of the patents licensed by the Company, which is presently 2038 subject to any potential extensions and renewals of any of such patents. If the Company fails to have its common stock listed on Nasdaq or the NYSE (an “Uplisting Event”) within 12 months after the Company receives a Clinical Trial Authorization from the European Medicines Agency, then the Company’s commercial license and rights for using Melior II’s data shall terminate. Additionally, if the Company has completed the necessary steps to effect an Uplisting Event, the Company will have the option to purchase all rights held by Melior II on the MLR-1019 licensed products in consideration for 10% of the outstanding shares of the Company’s common stock (immediately post Uplisting Event) and 2.5% royalty of future gross product sales.

As of September 30, 2022, no performance milestones had been met under the agreement.

F-71

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2022

(Unaudited)

Licensing Agreement – MLR 1023

On August 24, 2021, the Company as licensee entered into an exclusive license agreement with Melior I for the development, commercialization and exclusive license of Melior I’s MLR-1023. MLR-1023 is being developed as a novel therapeutic for Type 1 diabetes.

Under the Agreement, the Company was granted an exclusive license to use the Melior I’s Patents and know-how to develop products in consideration for cash payments up to approximately $21.8 million upon meeting certain performance milestones, as well as a tiered royalty of 8-12% of gross sales.

Under the original terms of the agreement if the Company failed to raise $4.0 million dollars within 120 days of the Effective Date of the agreement then the License would immediately terminate unless, by 120 Days Adhera was in the process of completing transactions to complete the fundraising then an additional 30 Days would be provided to allow for the completion of the raise.

On October 20, 2021, the Company expanded the exclusive licensing agreement with Melior I to include two additional clinical indications for Non-Alcoholic Steatohepatitis (NASH) and pulmonary inflammation.

On November 17, 2021, Melior I extended the Company’s timeline from 120 days to 180 days from the effective of the agreement for the Company to raise $4.0 million dollars unless, by 180 Days Adhera is in the process of completing transactions to complete the fundraising then an additional 30 Days shall be provided to allow for the completion of required fundraising.

On February 16, 2022, an addendum to the licensing agreement dated August 4, 2021, was executed by the Company and Melior I, extending the requirement by the Company to raise $4.0 million dollars to June 16, 2022.

On July 20, 2022, the Company entered into an addendum to the License Agreement for MLR-1023 with Melior I pursuant to which Melior I extended the license to February 1, 2023, in exchange for a $136,921 licensing payment. In addition, the Company was required to hire and retain a Chief Scientific Officer, and raise an additional $500,000 in capital in addition to other requirements set forth in the addendum and the License Agreement.

As of September 30, 2022, no performance milestones have been met under the agreement.

NOTE 10 – Subsequent Events

Convertible Note Default(s)

On October 4, 2022, the Company defaulted on the final payment on the October 4, 2021, convertible note. As a result of the default, the interest rate on the note reset to 16%.

On October 7, 2022, the Company defaulted on the final payment on the October 7, 2021, convertible note. As a result of the default, the interest rate on the note reset to 16%.

On October 15, 2022, the Company defaulted on the March 15, 2022 note. As a result of the default the interest rate on the note reset to 18% calculated based on a 360-day year.

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Units

Adhera Therapeutics, Inc.

______________________

PROSPECTUS

______________________

Aegis Capital Corp.

, 2022

PART II -

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 13.Other Expenses of Issuance and Distribution.

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than underwriting discounts and placement agent fees,commissions, payable by the registrantus in connection with the sale of thecommon shares of common stock being registered. All amounts, other than the SEC registration fee, NYSE American listing fee and FINRA filing fee, are estimates except the fees payable to the SEC.estimates. We will pay all these expenses.

SEC registration fee $259.00 
Legal fees and expenses $10,000.00 
Accounting fees and expenses $5,000.00 
Miscellaneous fees and expenses $5,000.00 
Total $20,259.00 
Securities and Exchange Commission registration fee $

3,905.21

 
Nasdaq listing fee    
FINRA filing fee    
Accountant’s fees and expenses    
Legal fees and expenses    
Blue Sky fees and expenses    
Transfer agent’s fees and expenses    
Printing and related fees    
Miscellaneous    
     
Total expenses $

3,905.21

 

*     Previously paid.Item 14. Indemnification of Directors and Officers

__________

Item 14.Indemnification of Directors and Officers.

Our Certificate of Incorporation currently provides that our board of directors has the authority to utilize, to the fullest extent possible, the indemnification provisions of Sections 102(b)(7) and 145Section 145(a) of the Delaware General Corporation Law (the “DGCL”), and our directors and officers are provided with the broadest available indemnification coverage. Such indemnification for our directors and officers is mandatory. Our Certificate of Incorporation also expressly provides, that the advancement of expenses is mandatory and not subject to the discretion of our board of directors, except that any of our directors or officers who request advancement must undertake to repay the advanced amounts if it is determined that such person is not entitled to be indemnified by us. Further, our Certificate of Incorporation contains provisions to eliminate the liability of our directors to us or our stockholders to the fullest extent permitted by Section 102(b)(7) of the DGCL, as amended from time to time.

Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporationgeneral, that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions, or (iv) for any transaction from which the director derived an improper personal benefit. Our Certificate of Incorporation provides for such limitation of liability.

Under Section 145 of the DGCL, a corporation may indemnify any individual madeperson who was or is a party to or is threatened to be made a party to any type ofthreatened, pending or completed action, suit or proceeding, otherwhether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation,corporation), because he or she is or was ana director, officer, director, employee or agent of the corporation, or is or was serving at the request of the corporation as ana director, officer, director, employee or agent of another corporation, partnership, joint venture, trust or entityother enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such proceeding: (1)action, suit or proceeding, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation;corporation and, with respect to any criminal action or (2) in the case of a criminal proceeding, he or she had no reasonable cause to believe that his or her conduct was unlawful. A

Section 145(b) of the DGCL provides, in general, that a corporation may indemnify any individual madeperson who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit brought by or in the right of the corporation to procure a judgment in its favor because hethe person is or she was ana director, officer, director, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other entity,enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, providedexcept that suchno indemnification willshall be denied if the individual is foundmade with respect to any claim, issue or matter as to which he or she shall have been adjudged to be liable to the corporation unless in such a case,and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the person is nonetheless entitled to indemnification for such expenses. A corporation must indemnify a present or former director or officer who successfully defends himself or herselfadjudication of liability but in a proceeding to whichview of all of the circumstances of the case, he or she was a party because heis fairly and reasonably entitled to indemnity for such expenses that the Court of Chancery or she was a director or officerother adjudicating court shall deem proper.

Section 145(g) of the DGCL provides, in general, that a corporation against expenses actuallymay purchase and reasonably incurred by him or her. Expenses incurred by an officer or director, or any employees or agents as deemed appropriate by the board of directors, in defending civil or criminal proceedings may be paid by the corporation in advance of the final disposition of such proceedings upon receipt of an undertaking by ormaintain insurance on behalf of suchany person who is or was a director, officer, employee or agent to repayof the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. The Delaware law regarding indemnificationperson and expense advancement is not exclusive of any other rights which may be granted by our restated certificate of incorporation or restated bylaws, a vote of stockholders or disinterested directors, agreement or otherwise.

We maintain a policy of directors and officer’s liability insurance covering certain liabilities incurred by our directors and officerssuch person in connection withany such capacity, or arising out of his or her status as such, whether or not the performancecorporation would have the power to indemnify the person against such liability under Section 145 of their duties.the DGCL.

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Additionally, our amended and restated certificate of incorporation (the “Charter”) provides that our officers and directors will be indemnified by us to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended. In addition, our Charter provides that our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from their actions as directors.

These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against officers and directors pursuant to these indemnification provisions.

Insofar as indemnification for liabilities arising under the Securities Act ismay be permitted for ourto directors, officers, or controllingcontrol persons, pursuant toin the above mentioned statutes or otherwise, we understand thatopinion of the SEC, is of the opinion that such indemnification may contravene federal public policy, as expressed in the Securities Act, and therefore, is unenforceable. Accordingly, in the event that a claim for such indemnification is asserted by any of our directors, officers or controlling persons, and the SEC is still of the same opinion, we (except insofar as such claim seeks reimbursement from us of expenses paid or incurred by a director, officer of controlling person in successful defense of any action, suit or proceeding) will, unless the matter has theretofore been adjudicated by precedent deemed by our counsel to be controlling, submit to a court of appropriate jurisdiction the question whether or not indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudicationis therefore unenforceable.

Item 15. Recent Sales of such issue.Unregistered Securities

At present, there is no pending litigation or proceeding involving any of our directors, officers or employees as to which indemnification is sought, nor are we aware of any threatened litigation or proceeding that may result in claims for indemnification.

Item 15.Recent Sales of Unregistered Securities.

During the lastpast three years, we issued the registrant has notfollowing securities:

Secured Convertible Promissory Note – February 2020

On February 5, 2020, the Company entered into a securities purchase agreement with accredited investors and issued unregistered securities to any person, except as described below. Nonethe investors, (i) original issue discount convertible promissory notes with a principal of these transactions involved any underwriters, underwriting discounts or commissions, except as specified below, or any public offering,$550,500 issued at a 10% original issue discount, for a total purchase price of $499,950, and unless otherwise indicated below, the registrant believes that each transaction was exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(a)(2) thereof and/or Rule 506 of Regulation D promulgated thereunder. All recipients had adequate access, though their relationships with the registrant, to information about the registrant.

In August 2015, the registrant issued 200 shares of Series D Convertible Preferred Stock and(ii) warrants to purchase up to 3.44 millionsuch number of shares of ourthe common stock of the Company as is equal to the product obtained by multiplying 1.75 by the quotient obtained by dividing (A) the principal amount of the notes by (B) the then applicable conversion price of the notes.

The convertible notes matured on August 5, 2020. Prior to default, interest accrued to the holders on the aggregate unconverted and then outstanding principal amount of the notes at anthe rate of 10% per annum, calculated on the basis of a 360-day year and accrues daily. On June 15, 2020, the Company defaulted on certain covenants in the 2020 term loan and the interest rate reset to the default rate of 18%.

The exercise price of $0.40 per share,the warrants shall be equal to the conversion price of the convertible notes, provided, that on the date that the convertible notes are no longer outstanding, the exercise price shall be fixed at the conversion price of the convertible notes on such date, with the exercise price of the warrants thereafter (and the number of shares of Common Stock issuable upon the exercise thereof) being subject to adjustment as set forth in the warrants. The warrants have a 5-year term.

On January 27, 2022, the conversion price of the notes and warrants was adjusted to be the lower of (x) 60% of the conversion price as calculated above or (y) $0.78 as a result of issuance of Common Stock for a convertible note conversion.

Secured Convertible Promissory Note – June 2020

On June 26, 2020, the Company issued to an aggregateexisting investor in the Company a 10% original issue discount senior secured convertible promissory note with a principal of $58,055, for a purchase price of $1.1 million.

In June 2015,$52,500, net of the registrant issued warrantsoriginal issue discount of $5,555. The convertible note matured on December 26, 2020. Prior to purchase up to 0.02 million sharesdefault, interest accrued on the aggregate unconverted and then outstanding principal amount of its common stock tothe Note at the rate of 10% per annum, calculated on the basis of a vendor providing scientific360-day year. On August 5, 2020, the Company defaulted on certain covenants in the loan and development consulting servicesthe interest rate reset to the registrant.default rate of 18%.

In April 2015, the registrant issued warrants to purchase up to 0.02 million shares of its common stock to a vendor providing scientific and development consulting services to the registrant.

In January and February 2015, the registrant issued warrants to purchase up to an aggregate of 0.064 million shares of its common stock to a vendor providing scientific and development consulting services to the registrant.

In December 2014, the registrant issued warrants to purchase up to 0.117 million shares of its common stock to five consultants providing financial, scientific and development consulting services.

In September 2014, the registrant issued 0.05 million shares to a vendor to settle an outstanding vendor payable.

In April 2014, the registrant issued 0.02 million shares of its common stock to scientific advisory board members for services to be provided during the three months ended June 30, 2014.

In April 2014, the registrant issued warrants to purchase up to 0.075 million shares of its common stock to a vendor as consideration for services rendered.

As part of the asset purchase agreement that the registrant entered into with Novosom in July 2010, the registrant is obligated to pay Novosom 30% of any payments received by the registrant for sub-licensed SMARTICLES® technology. The consideration is payable in a combination of cash (no more than 50% of total due) and common stock (between 50% and 100% of total due), at the discretion of the registrant. For such consideration, the registrant issued approximately 1.0 million shares of common stock in March 2014, approximately 0.1 million shares of common stock in January 2015 and approximately 0.2 million shares of common stock in June 2015.

During 2014, the registrant issued approximately 1.3 million shares upon net share exercise of warrants and 0.8 million shares upon cash exercises of warrants.

In March 2014, the registrant issued 1,200 shares of Series C Convertible Preferred Stock and warrants to purchase up to 6.0 million shares of our common stock at an exercise price of $0.75 per share, for an aggregate purchase price of $6.0 million.

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Table of Contents

 

The note is convertible, in whole or in part, into shares of common stock of the Company at the option of the noteholder at a conversion price of $0.40 (as adjusted for stock splits, stock combinations and similar events); provided, that if an event of default has occurred under the note, then the conversion price shall be 65% of the lowest closing bid price of the Company’s common stock as reported on its principal trading market for the twenty consecutive trading day period ending on (and including) the trading day immediately preceding the date on which the conversion notice was delivered. The conversion price shall also be adjusted for subsequent equity sales by the Company.

The obligations of the Company under the note are secured by a senior lien and security interest in all of the assets of the Company and certain of its wholly-owned subsidiaries pursuant to the terms and conditions of a security agreement dated June 26, 2020 by the Company in favor of the noteholder. In February 2014,connection with the registrant issued toissuance of the note, the holders of the secured promissory notes that that registrant originally issued pursuant to that certain Note and Warrant Purchase Agreement, dated as of February 10, 2012, among the registrant, certain of its wholly-owned subsidiaries, and the purchasers identified on the signature pages thereto, an aggregate of 2.0 million shares of the registrant’s common stock in exchange for the notes.

In January and April 2014, the registrant issued an aggregate of 0.04 million shares of its common stock to consultants for services provided during the six months ended June 30, 2014.

In January 2014, the registrant issued approximately 2.8 million shares of common stock to employees and board members for amounts due under employment and board of director agreements.

In January 2014, the registrant issued an aggregate of 0.09 million shares of its common stock to scientific advisory board members for services to be provided during the three months ended March 31, 2014.

In December 2013, the registrant issued warrants to purchase up to 0.1 million shares of its common stock to a consultant who is the interim chief financial officer of the registrant.

As additional consideration for that certain Lease Termination Agreement, effective as of October 1, 2012, between the registrant and Ditty Properties Limited Partnership (“Ditty”) with respect to that certain Lease Agreement dated March 1, 2006 between the registrant and Ditty regarding the registrant’s facilities located at 3830 Monte Villa Parkway, Bothell, WA, the registrant agreed to issue 1.5 million shares of common stock to Ditty contingent upon and immediately prior to the first to occur of certain specified events. The shares were issued in March 2014.

In August, October and November 2012, the registrantCompany issued to eleven of its vendors an aggregate of approximately 3.8 million shares of common stock to settle outstanding amounts due to such vendors in the aggregate amount of approximately $1.2 million. The registrant also agreed to issue an additional 0.087 million shares to settle approximately $30,000 in amounts due to one vendor contingent uponselect accredited investors between June 28, 2019 and immediately prior to the first to occur of certain specified events. The shares were issued in March 2014.

In February 2012, in connection with the issuance by the registrant of secured promissory notesAugust 5, 2019 in the aggregate principal amount of $1.5approximately $5.7 million agreed to subordinate their lien and security interest in the registrant alsoassets of the Company and its subsidiaries as set forth in the security agreement dated June 28, 2019 that such holders entered into with the Company and its subsidiaries to the security interest granted to the holder of the note.

On January 27, 2022, the conversion price of the note was adjusted to the lower of 65% of the lowest closing bid price of the Company’s common stock as reported on its principal trading market for the twenty consecutive trading day period ending on (and including) the trading day immediately preceding the date on which the conversion notice was delivered or $0.78 as a result of issuance of common shares for a convertible note conversion.

Secured Convertible Promissory Note – October 2020

On October 30, 2020, the Company issued to an existing investor in and lender to the Company a 10% original issue discount senior secured convertible promissory note with a principal of $111,111, for a purchase price of $100,000. The note is convertible into shares of common stock of the Company at the option of the noteholder at a conversion price of $1.40 (as adjusted for stock splits, stock combinations and similar events); provided, that if an event of default has occurred under the Note, then the conversion price shall be 70% of then conversion price. The conversion price of the notes is subject to anti-dilution price protection and on March 19, 2021, the conversion price of the notes was adjusted to $1.00 per share as a result of subsequent equity sales by the Company.

The obligations of the Company under the note are secured by a senior lien and security interest in all of the assets of the Company.

The interest rate on the note was 10% per annum, calculated on the basis of a 360-day year. On April 30, 2021, the note matured and the Company defaulted on the note and the interest rate on the loan reset to 18%.

Additionally, the Company issued the noteholder 79,366 warrants to purchase upthe Company’s common stock at $1.60 per share subject to 3.7 millioncertain adjustments as defined in the agreement. Until the notes are no longer outstanding, the warrants have full-ratchet protection, are exercisable for a period of five years, and contain customary exercise limitations. On March 19, 2021, the exercise price of the warrants was adjusted to $1.00 and the Company issued an additional 47,619 warrants to the note holder.

On January 27, 2022, the exercise price of the notes and warrants was adjusted from the default conversion price of $0.98 to $0.78 as a result of a convertible note exercise and the Company issued an additional 35,816 warrants to the note holder.

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As of September 30, 2022, 162,800 warrants were outstanding that were issued with the October 2020 convertible note at an exercise price of $0.78.

As of September 30, 2022, the Company remains in default on the repayment of principal and interest on the notes. Upon demand for repayment at the election of the holder, the holder of the note is due 125% of the aggregate of outstanding principal, interest, and other expenses due in respect of this Note. The 25% premium will be recorded once a demand occurs.

Secured Convertible Promissory Note – January 2021

On January 31, 2021, the Company issued to an existing investor in and lender to the Company a 10% original issue discounted senior secured convertible promissory note with a principal of $52,778, for a purchase price of $47,500, net of original issue discount of $5,278. The note is convertible into shares of its common stock.stock of the Company at the option of the noteholder at a conversion price of $1.40 (as adjusted for stock splits, stock combinations and similar events); provided, that if an event of default has occurred under the note, then the conversion price shall be 70% of the then conversion price. The registrant hasconversion price of the notes is subject to anti-dilution price protection and will be adjusted upon subsequent equity sales by the Company.

The obligations of the Company under the note are secured by a senior lien and security interest in all assets of the Company.

Additionally, the Company issued additionalto the investor 37,699 warrants to purchase upthe Company’s common stock at an exercise price of $1.60 per share subject to approximately 8.2 millioncertain adjustments as defined in the agreement. Until the notes are no longer outstanding, the warrants have full-ratchet protection, are exercisable for a period of five years, and contain customary exercise limitations. On March 19, 2021, the exercise price of the warrants was adjusted to $1.00 and the Company issued an additional 22,619 warrants to the note holder.  

The interest rate on the note was 10% per annum, calculated on the basis of a 360-day year. On July 31, 2021, the note matured and the Company defaulted on the note and the interest rate on the loan reset to the default rate of 18% per annum.

On January 27, 2022, the exercise price of the notes and warrants was adjusted from the default conversion price of $0.98 to $0.78, as a result of a convertible note exercise and the Company issued an additional 17,012 warrants to the note holder.

As of September 30, 2022, 77,330 warrants were outstanding that were issued with the January 2021 convertible note at an exercise price of $0.78.

As of September 30, 2022, the Company remains in default on the repayment of principal and accrued interest on the notes. Upon demand for repayment at the election of the holder, the holder of the note is due 125% of the aggregate of outstanding principal, interest, and other expenses due in respect of this Note. The 25% premium will be recorded once a demand occurs.

Secured Convertible Promissory Note – April 2021

On April 12, 2021, the Company issued to an accredited investor in and lender to the Company a 10% original issue discounted senior secured convertible promissory note with a principal amount of $66,667, for a purchase price of $60,000 net of an original discount of $6,667. Additionally, the Company issued to the investor 40,000 five-year warrants to purchase the Company’s Common Stock at an exercise price of $1.90 per share. The warrants have full ratchet protection.

The note matured on October 12, 2021. Prior to default, interest accrued on the aggregate unconverted and then outstanding principal amount of the note at the rate of 10% per annum, calculated on-the-basis of a 360-day year. On October 12, 2021, the Company defaulted on the note and the interest rate on the note reset to 18% per annum.

II-4

The note is convertible, in whole or in part, at any time, and from time to time, into shares of the common stock of the Company at the option of the noteholder at a conversion price of $1.50 (as adjusted for stock splits, stock combinations and similar events); provided, that if an event of default has occurred under the note, then the conversion price shall be 70% of the then conversion price. The conversion price shall also be adjusted upon subsequent equity sales by the Company. The obligations of the Company under the note are secured by a senior lien and security interest in all assets of the Company.

On June 25, 2021, the exercise price of the warrants was adjusted to $1.50 and the Company issued an additional 10,667 warrants to the note holder.

On November 30, 2021, the exercise price of the warrants was adjusted to $1.00 based on a note conversion at $1.00 and the Company issued an additional 19,084 warrants to the note holder.

On January 27, 2022, the exercise price of the note and warrants was adjusted from the default conversion price of $1.05 to $0.78 based on a convertible note conversion at $0.78 and the Company issued an additional 16,147 warrants to the note holder.

As of September 30, 2022, 73,398 warrants were outstanding that were issued with the April 2021 convertible note at an exercise price of $0.78.

During the three-months ended September 30, 2022, the Company repaid $25,000 of principal on the note.

As of September 30, 2022, the Company has recorded $41,667 of principal and approximately $13,900 of accrued interest.

As of September 30, 2022, the Company remains in default on the repayment of principal and accrued interest on the notes. Upon demand for repayment at the election of the holder, the holder of the note is due 125% of the aggregate of outstanding principal, interest, and other expenses due in respect of this Note. The 25% premium will be recorded once a demand occurs.

Secured Convertible Promissory Note – June 2021

On June 25, 2021, the Company issued to an accredited investor in and lender to the Company a 5% original issue discounted senior secured convertible promissory note with a principal amount of $66,500, for a purchase price of $63,000, net of an original issue discount of $3,500. Additionally, the Company issued to the investor 40,000 three-year warrants to purchase the Company’s Common Stock at an exercise price of $1.90 per share. Upon subsequent down-round equity sales by the Company, the number of shares issuable upon exercise of the warrant shall be proportionately adjusted such that the aggregate exercise price of this warrant shall remain $76,000 which is a full ratchet price protection provision.

The note matured on June 25, 2022. Interest accrues on the aggregate unconverted and then outstanding principal amount of the note at the rate of 10% per annum, calculated on the basis of a 365-day year.

The note is convertible, in whole or in part, at any time, and from time to time, into shares of the Common Stock of the Company at the option of the noteholder at a conversion price of $1.50 (as adjusted for stock splits, stock combinations and similar events); provided, however that in the event, the Company’s Common Stock trades below $1.60 per share for more than three consecutive trading days, the holder of this note is entitled, at its option, to convert all or any amount of the principal face amount of this note then outstanding into shares of the Company’s common stock at a price for each share of Common Stock equal to 65% of the lowest trading price of the Common Stock for the twenty prior trading days including the day upon which a notice of conversion is received. The conversion discount, look back period and other terms of the Note will be adjusted on a ratchet basis if the Company offers a more favorable conversion discount, prepayment rate, interest rate, (whether through a straight discount or in combination with an original issue discount), look back period or other more favorable term to another party for any financings while this note is in effect.

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The obligations of the Company under the note are secured by a senior lien and security interest in all assets of the Company.

The Company also issued 2,377 shares of common stock as a commission fee to the investment banker.

On August 11, 2021, the exercise price of the warrants was adjusted to $1.50 and the Company issued an additional 10,667 warrants to the note holder.

On November 30, 2021, the exercise price of the warrants was adjusted to $1.00 based on a note conversion at $1.00 and the Company issued an additional 25,333 warrants to the note holder.

On January 27, 2022, the holder of the June 25, 2021, convertible note converted $9,500 of principal and $421 of interest at $0.78 per share into 12,721 shares of common stock. In addition, the conversion price of the warrants issued with the notes were adjusted to $0.78 per share and the Company issued an additional 21,436 warrants to the holder of the note.

As of September 30, 2022, 97,436 warrants were outstanding that were issued with the June 2021 convertible note at an exercise price of $0.78.

As of September 30, 2022, the Company has recorded $57,000 of outstanding principal and approximately $15,700 of accrued interest.

Convertible Promissory Note – August 11, 2021

On August 11, 2021, the Company entered into a securities purchase agreement with an accredited institutional investor pursuant to which the Company issued to the investor its original issue discount secured convertible promissory note in the principal amount of $220,500 and warrants to purchase 40,000 shares of the common stock of the Company for which the Company received consideration of $210,000 net of an original issue discount of $10,500. In addition, the Company entered into a registration rights agreement with the investor and issued the investor 5,000 common shares as a commitment fee.

The note matured on August 11, 2022 and absent an event of default provides for an interest rate of 10% per annum, payable at maturity, and is convertible into common stock of the Company at a price of $1.50 per share, subject to anti-dilution adjustments in the event of certain corporate events as set forth in the note, provided that if the average closing price of the Company’s common stock during any nine consecutive trading days is below $1.60, the conversion price shall be reduced to 65% of the lowest trading price during the 20 consecutive trading days immediately preceding the conversion date. On November 9, 2021, the Company defaulted on certain covenants in the note and the interest rate on the note reset to 24% per annum.

In addition to customary anti-dilution adjustments the note provides, subject to certain limited exceptions, that if the Company issues any common stock or common stock equivalents, as defined in the Note, at a per share price lower than the conversion price then in effect, the conversion price will be reduced to the per share price at which such shares or common share equivalents were sold.

The warrants are initially exercisable for a period of fice years at a price of $1.90 per share, subject to customary anti-dilution adjustments upon the occurrence of certain corporate events as set forth in the warrant.

The Company also issued 7,000 shares of common stock to the lenders in connection withinvestment banker as a seriescommission on the note.

On November 30, 2021, the exercise price of amendmentsthe warrants was adjusted to $1.00 based on a note conversion at $1.00 and the Company issued an additional 36,000 warrants to the note holder.

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On January 27, 2022, the conversion price of the notes was adjusted to the lower of $0.78 per share, or provided that if the average closing price of the Company’s Common Stock during any six consecutive trading days is below $1.60, the conversion price shall be reduced to 65% of the lowest trading price during the 20 consecutive trading days immediately preceding the conversion date. In addition, the exercise price of the warrant was adjusted to $0.78 per share and the Company issued an additional 21,436 warrants to the holder of the note. Both the conversion price of the note and warrants were adjusted as a result of a convertible note exercise at $0.78 per share.

On May 12, 2022, the Company repaid $135,695 of principal and $64,305 of interest including $54,278 of interest due as a result of early redemption on the note. In addition, the holder of the note extended the maturity date on the note to September 30, 2022, when the outstanding balance of principal and interest of $128,502 is due on the note. On September 30, 2022, the Company defaulted on the outstanding balance of principal and interest on the note.

As of September 30, 2022, 97,436 warrants were outstanding that were issued with the August 11, 2021 convertible note at an exercise price of $0.78.

As of September 30, 2022, the Company has remaining $85,000 of outstanding principal and approximately $43,700 of accrued interest.

Convertible Promissory Note – August 17, 2021

On August 17, 2021, the Company entered into a securities purchase agreement with an accredited institutional investor pursuant to which the Company issued to the investor its original issue discount secured convertible promissory note in the principal amount of $220,500 and warrants to purchase 40,000 shares of the common stock of the Company for which the Company received consideration of $210,000 net of original discount of $10,500. In addition, the Company entered into a registration rights agreement with the investor and issued the investor 5,000 common shares as a commitment fee.

The note matures on August 17, 2022 and provides for an interest rate of 10% per annum, payable at maturity, and is convertible into common stock of the Company at a price of $1.50 per share, subject to anti-dilution adjustments in the event of certain corporate events as set forth in the note, provided that if the average closing price of the Company’s Common Stock during any three consecutive trading days is below $1.60, the conversion price shall be reduced to 65% of the lowest trading price during the 20 consecutive trading days immediately preceding the conversion date. The embedded conversion option will be treated as a bifurcated derivative liability.

In addition to customary anti-dilution adjustments the note provides, subject to certain limited exceptions, that if the Company issues any Common Stock or common stock equivalents, as defined in the Note, at a per share price lower than the conversion price then in effect, the conversion price will be reduced to the per share price at which such shares or common share equivalents were sold.

The Warrants are initially exercisable for a period of five years at a price of $1.90 per share, subject to customary anti-dilution adjustments upon the occurrence of certain corporate events as set forth in the warrant.

The Company recorded a total debt discount of $220,500 including an original issue discount of $10,500, a discount related to the warrants of approximately $62,220 a discount related to issuance costs of $30,000 a discount related to the issuance of common stock of approximately $17,209, and a $100,571 discount related to the initial derivative value of the embedded conversion feature on the note all based on the relative fair value of the instruments.

On November 15, 2021, the Company defaulted on certain covenants in the note and the interest rate on the note reset to 24% per annum.

On November 30, 2021, the exercise price of the warrants was adjusted to $1.00 based on a note conversion at $1.00 and the Company issued an additional 36,000 warrants to the note holder.

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On January 27, 2022, the conversion price of the notes was adjusted to the lower of $0.78 per share, or provided that if the average closing price of the Company’s Common Stock during any six consecutive trading days is below $1.60, the conversion price shall be reduced to 65% of the lowest trading price during the 20 consecutive trading days immediately preceding the conversion date. In addition, the exercise price of the warrant was adjusted to $0.78 per share and the Company issued an additional 21,436 warrants to the holder of the note. Both the conversion price of the note and warrants were adjusted as a result of a convertible note exercise at $0.78 per share.

As of September 30, 2022, 97,436 warrants were outstanding that were issued with the August 17, 2021 convertible note at an exercise price of $0.78.

As of September 30, 2022, the Company has recorded $220,500 of outstanding principal and approximately $53,100 of accrued interest.

Convertible Promissory Note – October 4, 2021

On October 4, 2021, the Company entered into a securities purchase agreement with an institutional investor pursuant to which the Company issued the buyer a 10% convertible redeemable note in the principal amount of $131,250 and a six-year warrant to purchase 23,810 shares of common stock of the Company for which the Company received proceeds of $110,000. In addition, the Company entered into a registration rights agreement with the investor and issued the investor 2,977 common shares as a commitment fee.

The note is due October 4, 2022. The note provides for interest at the rate of 10% per annum, payable in seven equal monthly payments beginning on August 15, 2022, through the maturity date. The note is convertible into shares of common stock at any time following the date of cash payment at the buyer’s option at a conversion price of $1.50 per share, subject to certain adjustments.

The warrants are exercisable for three-years from October 4, 2021, at an exercise price of $1.90 per share, subject to certain adjustments, which exercise price may be paid on a cashless basis. The aggregate exercise price is $45,238.

The Company incurred approximately $15,000 in debt issuance costs. The Company also issued 2,173 shares of Common Stock to the investment banker as a commission on the note.

Due to insufficient authorized shares, the embedded conversion option has been bifurcated and reflected as a derivative liability with an initial fair value of $564,943 with $487,052 charged to derivative expense and $77,891 recorded as a debt discount.

The Company recorded a total debt discount of $131,250 including an original issue discount of $6,250, a discount related to issuance costs of $15,000, a discount related to the issuance of common stock of $32,109, and a $77,891 discount related to the initial derivative value of the embedded conversion feature on the Note all based on the relative fair value of the instruments. The discounts are being amortized over the life of the convertible note.

On January 2, 2022, the Company defaulted on certain covenants contained in the October 4, 2021, convertible note and the interest rate reset to 16%.

On January 27, 2022, the exercise price of the note was adjusted to $0.78 based on a convertible note conversion at $0.78.

On May 12, 2022, the Company repaid $83,500 of principal on the note and repurchased 2,977 shares of common stock issued to the holder as an original commitment fee on the note for $1,000. The repurchase was recorded at cost as treasury stock on the accompanying balance sheet. In addition, the Company repaid an additional $11,571 of principal and $8,428 of interest on the note. The Company recorded approximately $81,700 gain on debt extinguishment resulting from the settlement of the derivative as a result of repayment of the note.

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For the three months ended September 30, 2022, the Company repaid $19,471 of principal and $476 of interest on the note. The Company recorded approximately $14,800 gain on debt extinguishment resulting from the settlement of the derivative as a result of repayment of the note.

As of September 30, 2022, 23,810 warrants were outstanding that were issued with the October 4, 2021 convertible note at an exercise price of $1.90.

For the three and nine months ended September 30, 2022, the Company recognized approximately $33,100 and $98,200 related to the amortization of debt discount and approximately $500 and $5,700 in interest expense related to the note, respectively. No interest expense or debt discount was recognized for the same period of 2021.

As of September 30, 2022, the Company has recorded $16,708 of outstanding principal and $1,100 of unamortized discount and issuance expenses. No interest on the note was due as of September 30, 2022.

Convertible Promissory Note – October 7, 2021

On October 7, 2021, the Company entered into a securities purchase agreement with an institutional investor pursuant to which the Company issued the investor a 10% convertible redeemable note in the principal amount of $131,250 and a three-year warrant to purchase 23,810 shares of common stock of the Company for which the Company received proceeds of $110,000. In addition, the Company entered into a registration rights agreement with the investor and issued the investor 2,977 common shares as a commitment fee and an additional 2,632 shares as a commission to the broker.

The note is due October 7, 2022. The note provides for interest at the rate of 10% per annum, payable at maturity. The note is convertible into shares of common stock at any time following the date of cash payment at the investor’s option at a conversion price of $1.50 per share, subject to certain adjustments.

The warrants are exercisable for three-years from October 7, 2021, at an exercise price of $1.90 per share, subject to certain adjustments, which exercise price may be paid on a cashless basis. The aggregate exercise amount per the warrant agreement is $45,238.

The Company recorded a total debt discount of $131,250 including an original issue discount of $6,250, a discount related to issuance costs of $15,000, a discount related to the issuance of common stock of approximately $33,483, and a $76,517 discount related to the initial derivative value of the embedded conversion feature on the note all based on the relative fair value of the instruments. The discounts are being amortized over the life of the convertible note.

On January 5, 2022, the Company defaulted on certain covenants contained in the October 7, 2021, convertible note and the interest rate reset to 16%.

On January 27, 2022, the exercise price of the note was adjusted to $0.78 based on a convertible note conversion at $0.78.

On May 12, 2022, the Company repaid $83,500 of principal on the note and repurchased 2,977 shares of common stock issued to the holder as an original commitment fee on the note for $1,000. The repurchase was recorded at cost as treasury stock on the accompanying balance sheet. In addition, the Company repaid an additional $11,571 of principal and $8,428 of interest on the note during the three-month period ended September 30, 2022.

As of September 30, 2022, 23,810 warrants were outstanding that were issued with the October 7, 2021, convertible note at an exercise price of $1.90.

As of September 30, 2022, the Company has recorded $16,708 of outstanding principal. No interest on the note was due as of September 30, 2022.

Convertible Promissory Note – March 15, 2022

On March 15, 2022, the Company entered into a securities purchase agreement with an institutional investor pursuant to which the Company issued the investor a 10% convertible note in the principal amount of $250,000 for a purchase price of $200,000 reflecting a $50,000 original issue discount. The Company received total consideration of $180,000 after debt issuance costs of $20,000. In addition, the Company issued 2,500 shares of Common Stock as a commitment fee to the investor. The Company also issued 10,000 shares to the broker as a commission on the sale.

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The note provides for guaranteed interest at the rate of 10% per annum for the 12 months from and after the original issue date of the note for an aggregate guaranteed interest of $25,000, all of which guaranteed interest shall be deemed earned as of the date of the note. The principal amount and the guaranteed interest shall be due and payable in seven equal monthly payments each, $39,285.71, commencing on August 15, 2022, and continuing on the 15th day of each month until paid in full not later than March 15, 2023, the maturity date.

The note is convertible into shares of common stock at any time following any event of default at the investor’s option at a conversion price of ninety percent (90%) per share of the lowest per-share trading price of the Company; stock during the ten trading day periods before the conversion, subject to certain adjustments.

For the three months ended September 30, 2022, the Company repaid $67,176 of principal and $11,396 of interest on the note.

As of September 30, 2022, the Company has recorded $182,800 of outstanding principal $13,600 of accrued interest. The note is currently in default.

2022 Term Loan

On May 11, 2022, the Company entered into a securities purchase agreement with investors whereby the Company issued the purchaser’s, Original Issue Discount Promissory Notes (the “Original Issue Discount Promissory Notes”) in the aggregate principal amount of $2,222,222 and warrants to purchase 1,111,112 shares of the Company’s common stock, pursuant to the terms and conditions of the securities purchase agreement and secured by a security agreement. The notes are convertible and the warrants were issued.are exercisable into shares of common stock at conversion and exercise prices of $0.80 per share.

Item 16.Exhibits and Financial Statement Schedules.

 

The exhibitsnotes are due on the earliest to occur of (i) the 12 month anniversary of the original issuance date of the notes, or May 11, 2023, (ii) a financing transaction which results in the Company’s common stock being listed on a national securities exchange, and (iii) an event of default. If an event of default occurs before the IndexCompany’s common stock is listed on a national securities exchange, the event of default would require a 125% of the outstanding principal, accrued interest and other amounts owing thereon. The notes bear interest at 8% per annum, subject to Exhibitsan increase to 15% in case of this Registration Statement are filed herewith or are incorporated herein by referencean event of default as provided for therein. In addition, at any time before the 12 month anniversary of the date of issuance of the notes, the Company may, upon five days’ prior written notice to other filings.the purchaser, prepay all of the then outstanding principal amount of the notes for cash in an amount equal to the sum of 105% of all amounts due and owing hereunder, including all accrued and unpaid interest.

 

(a) Exhibits.The following exhibitswarrants are included herein or incorporated herein by reference. exercisable for a five year and six month period ending November 11, 2027, at an exercise price of $0.80 per share, subject to certain adjustments.

 

The Company’s obligations under the notes are secured by a first priority lien on all of the assets of the Company and its wholly-owned subsidiaries pursuant to a security agreement, dated May 11, 2022 (the “Security Agreement”) by and among the Company, its wholly-owned subsidiaries, the purchasers, and the lead investor as the collateral agent.

Item 16. Exhibits.

(a) Exhibits.

Exhibit No.Description
2.11.1**Agreement and PlanForm of Merger dated as of March 31, 2010 by and among the Registrant, Cequent Pharmaceuticals, Inc., Calais Acquisition Corp. and a representative of the stockholders of Cequent Pharmaceuticals, Inc. (filed as Exhibit 2.1 to our Current Report on Form 8-K dated March 31, 2010, and incorporated herein by reference).Underwriting Agreement
3.1
3.1Restated Certificate of Incorporation of the Registrant dated July 20, 2005 (filed as Exhibit 3.1 to our Current Report on Form 8-K dated July 20, 2005, and incorporated herein by reference).
3.2
3.2Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Registrant, dated June 10, 2008 (filed as Exhibit 3.1 to our Current Report on Form 8-K dated June 10, 2008, and incorporated herein by reference).
3.3
3.3Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Registrant, dated July 21, 2010 (filed as Exhibit 3.1 to our Current Report on Form 8-K dated July 21, 2010, and incorporated herein by reference).
3.4Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Registrant, dated

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3.4July 21, 2010 (filed as Exhibit 3.1 to our Current Report on Form 8-K dated July 21, 2010, and incorporated herein by reference).
3.5Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Registrant, dated July 18, 2011 (filed as Exhibit 3.1 to our Current Report on Form 8-K dated July 14, 2011, and incorporated herein by reference).
3.5
3.6Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Registrant, dated December 22, 2011 (filed as Exhibit 3.1 to our Current Report on Form 8-K dated December 22, 2011, and incorporated herein by reference).
3.6
3.7Certificate of Amendment of the Amended and Restated BylawsCertificate of Incorporation of the Registrant, dated August 21, 20121, 2017 (filed as Exhibit 3.73.1 to our AnnualCurrent Report on Form 10-K for the fiscal year ended December 31, 2011,8-K dated August 1, 2017, and incorporated herein by reference).
3.7Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Registrant, dated October 4, 2018 (filed as Exhibit 3.1 to our Current Report on Form 8-K dated October 4, 2018, and incorporated herein by reference.
3.8Certificate of Designation, Rights and Preferences of Series A Junior Participating Preferred Stock dated January 17, 2007 (filed as Exhibit 3.1 to our Current Report on Form 8-K dated January 19, 2007, and incorporated herein by reference).
3.9
3.9Amended Designation, Rights, and Preferences of Series A Junior Participating Preferred Stock, dated June 10, 2008 (filed as Exhibit 3.2 to our Current Report on Form 8-K dated June 10, 2008, and incorporated herein by reference).
3.10
3.10Certificate of Designations or Preferences, Rights and Limitations of Series B Preferred Stock dated December 22, 2011 (filed as Exhibit 3.1 to our Current Report on Form 8-K dated December 22, 2011, and incorporated herein by reference).
3.11
3.11Certificate of Designation of Rights, Preferences and Privileges of Series C Convertible Preferred Stock (filed as Exhibit 3.1 to our Current Report on Form 8-K dated March 7, 2014, and incorporated herein by reference).
3.12
3.12Certificate of Designation of Rights, Preferences and Privileges of Series D Convertible Preferred Stock (filed as Exhibit 3.1 to our Current Report on Form 8-K dated August 5, 2015, and incorporated herein by reference).
3.13
4.1FormCertificate of AmendedDesignation of Preferences, Rights and Restated CommonLimitations of the Series E Convertible Preferred Stock Purchase Warrant originally issued byof the Registrant in April 2008 (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, and incorporated herein by reference).
4.2Form of Common Stock Purchase Warrant issued by the Registrant in June 2009 (filed as Exhibit 10.33.1 to our Current Report on Form 8-K dated June 10, 2009, andApril 16, 2018, incorporated herein by reference).
3.14
4.3FormCertificate of CommonDesignation of Preferences, Rights and Limitations of the Series F Convertible Preferred Stock Purchase Warrant issued byof the Registrant in December 2009 (filed as Exhibit 4.2 to our Current Report on Form 8-K dated December 22, 2009, and incorporated herein by reference).
4.4Form of Common Stock Purchase Warrant issued by the Registrant in January 2010 (filed as Exhibit 4.1 to our Current Report on Form 8-K dated January 13, 2010, and incorporated herein by reference).
4.5Form of Common Stock Purchase Warrant issued by the Registrant in November 2010 (filed as Exhibit 4.2 to our Current Report on Form 8-K dated November 4, 2010, and incorporated herein by reference).
4.6Form of Warrant Certificate issued by the Registrant in February 2011 (filed as Exhibit 4.1 to our Current Report on Form 8-K dated February 10, 2011, and incorporated herein by reference).
4.7Form of Warrant Agreement by and between the Registrant and American Stock Transfer & Trust Company, LLC (filed as Exhibit 4.2 to our Current Report on Form 8-K dated February 10, 2011, and incorporated herein by reference).
4.8Form of Series A Warrant (Common Stock Purchase Warrant) issued to the investors in the Registrant’s underwritten offering of securities that closed in May 2011 (filed as Exhibit 4.13 to Amendment No. 2 to our Registration Statement on Form S-1 (No. 333-173108) filed with the SEC on May 10, 2011, and incorporated herein by reference).

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4.9Form of 15% Secured Promissory Note issued by the Registrant in February 2012 (filed as Exhibit 4.1 to our Current Report on Form 8-K dated February 10, 2012, and incorporated herein by reference).
4.10Form of Common Stock Purchase Warrant issued by the Registrant to the holders of the 15% Secured Promissory Notes (filed as Exhibit 4.2 to our Current Report on Form 8-K dated February 10, 2012, and incorporated herein by reference).
4.11Form of Common Stock Purchase Warrant issued by the Registrant in March 2012 (filed as Exhibit 4.1 to our Current Report on Form 8-K dated March 19, 2012, and incorporated herein by reference).
4.12Form of Common Stock Purchase Warrant issued by the Registrant in March 2014 (filed as Exhibit 4.1 to our
Current Report on Form 8-K dated March 7, 2014, and incorporated herein by reference).
4.13Form of Common Stock Purchase Warrant issued by the Registrant in August 7, 2015 (filed as Exhibit 4.1 to our Current Report on Form 8-K dated August 5, 2015, and incorporated herein by reference).
5.1Opinion of Pryor Cashman LLP (2)
10.1Employment Agreement effective as of June 23, 2008 by and between the Registrant and J. Michael French (filed as Exhibit 10.2 to our Current Report on Form 8-K dated June 10, 2008, and incorporated herein by reference).**
10.2Letter Agreement, dated August 7, 2012, between the Registrant and J. Michael French (filed as Exhibit 10.2 to our Current Report on Form 8-K dated August 2, 1012, and incorporated herein by reference).**
10.3The Registrant’s 2004 Stock Incentive Plan (filed as Exhibit 99 to our Registration Statement on Form S-8, File No. 333-118206, and incorporated herein by reference).**
10.4Amendment No. 1 to the Registrant’s 2004 Stock Incentive Plan (filed as Exhibit 10.43.1 to our Current Report on Form 8-K dated July 20, 2005, and11, 2018, incorporated herein by reference).**
3.15
10.5Amendment No. 2 toAmended and Restated Bylaws of the Registrant’s 2004 Stock Incentive PlanRegistrant dated August 21, 2012 (filed as Exhibit 10.18 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by reference).**
10.6Amendment No. 3 to the Registrant’s 2004 Stock Incentive Plan (filed as Exhibit 10.243.7 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2005,2011, incorporated herein by reference).
3.16Certificate of Amendment to the Certificate of Incorporation dated September 30, 2022 (filed as Exhibit 3.1 to our Current Report on Form 8-K dated October 6, 2022, and incorporated herein by reference).**
4.1**Form of Investor Warrant
10.74.2**Amendment No. 4 to the Registrant’s 2004 Stock Incentive Plan (filed as Exhibit 10.5 to our Registration Statement on Form S-8, File No 333-135724, and incorporated herein by reference).**of Underwriter’s Warrant
5.1**Opinion of Sichenzia Ross Ference LLP
10.810.1#Amendment No. 5 to the Registrant’s 2004 Stock Incentive Plan (filed as Exhibit 10.27 to our Quarterly Report on Form 10-K for the quarter ended September 30, 2006, and incorporated herein by reference).**
10.9The Registrant’s 2008 Stock Incentive Plan (filed as Appendix A to our Definitive Proxy Statement on Schedule 14A filed on April 29, 2008, and incorporated herein by reference).**

10.10License Agreement dated as of March 20, 2009 by and between Novartis Institutes for BioMedical Research, Inc. and the Registrant (filed as Exhibit 10.3 to our Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2009, and incorporated herein by reference). (1)

10.11License Agreement, effective as of December 22, 2011, by and between the Registrant and Mirna Therapeutics, Inc. (filed as Exhibit 10.3 to our Current Report on Form 8-K/A filed on February 22, 2012, and incorporated herein by reference). (1)
10.2†
10.12Note and Warrant Purchase Agreement, dated as of February 10, 2012, among the Registrant, Cequent Pharmaceuticals, Inc., MDRNA Research, Inc., and the purchasers identified in the signature pages thereto (filed as Exhibit 10.1 to our Current Report on Form 8-K dated February 10, 2012, and incorporated herein by reference).

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10.13First Amendment to Note and Warrant Purchase Agreement and Secured Promissory Notes, dated April 30, 2012, among the Registrant, Cequent Pharmaceuticals, Inc., MDRNA Research, Inc., and the purchasers identified on the signature pages thereto (filed as Exhibit 10.80 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and incorporated herein by reference).
10.14Second Amendment to Note and Warrant Purchase Agreement and Secured Promissory Notes, dated May 31, 2012, among the Registrant, Cequent Pharmaceuticals, Inc., MDRNA Research, Inc., and the purchasers identified on the signature pages thereto (filed as Exhibit 10.81 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and incorporated herein by reference).
10.15Third Amendment to Note and Warrant Purchase Agreement and Secured Promissory Notes, dated August 3, 2012, among the Registrant, Cequent Pharmaceuticals, Inc., MDRNA Research, Inc., and the purchasers identified on the signature pages thereto (filed as Exhibit 10.1 to our Current Report on Form 8-K dated August 2, 2012, and incorporated herein by reference).
10.16Fourth Amendment to Note and Warrant Purchase Agreement and Secured Promissory Notes, dated October 4, 2012, among the Registrant, Cequent Pharmaceuticals, Inc., MDRNA Research, Inc., and the purchasers identified on the signature pages thereto (filed as Exhibit 10.1 to our Current Report on Form 8-K dated October 4, 2012, and incorporated herein by reference).
10.17Fifth Amendment to Note and Warrant Purchase Agreement and Secured Promissory Notes, dated February 7, 2013, among the Registrant, Cequent Pharmaceuticals, Inc., MDRNA Research, Inc., and the purchasers identified on the signature pages thereto (filed as Exhibit 10.1 to our Current Report on Form 8-K dated February 7, 2013, and incorporated herein by reference).
10.18Sixth Amendment to Note and Warrant Purchase Agreement and Secured Promissory Notes, dated August 9, 2013, among the Registrant, Cequent Pharmaceuticals, Inc., MDRNA Research, Inc., and the purchasers identified on the signature pages thereto (filed as Exhibit 10.43 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, and incorporated herein by reference).

10.19Security Agreement, dated as of February 10, 2012, among the Registrant, Cequent Pharmaceuticals, Inc., MDRNA Research, Inc. and Genesis Capital Management, LLC (filed as Exhibit 10.2 to our Current Report on Form 8-K dated February 10, 2012, and incorporated herein by reference).
10.20Intellectual Property Security Agreement, dated as of February 10, 2012, by the Registrant, Cequent Pharmaceuticals, Inc. and MDRNA Research, Inc. in favor of Genesis Capital Management, LLC (filed as Exhibit 10.3 to our Current Report on Form 8-K dated February 10, 2012, and incorporated herein by reference).
10.21Form of Securities Purchase Agreement, dated as of March 19, 2012, between and among the Registrant and the purchasers identified on the signature pages thereto (filed as Exhibit 10.1 to our Current Report on Form 8-K dated March 19, 2012, and incorporated herein by reference).
10.22Placement Agent Agreement, dated March 19, 2012, between the Registrant and Rodman & Renshaw, LLC (filed as Exhibit 10.2 to our Current Report on Form 8-K dated March 19, 2012, and incorporated herein by reference).
10.23Exclusive License Agreement, effective as of March 13, 2012, by and between the Registrant and ProNAi Therapeutics, Inc. (filed as Exhibit 10.2 to our Current Report on Form 8-K/A dated March 13, 2012, and incorporated herein by reference).(1)
10.24Term Sheet for Convertible Preferred Stock Financing (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated February 23, 2014, and incorporated herein by reference).
10.25Securities Purchase Agreement, dated as of March 7, 2014, between and among the Registrant and each purchaser identified on the signature pages thereto (filed as Exhibit 10.1 to our Current Report on Form 8-K dated March 7, 2014, and incorporated herein by reference).

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10.26Consulting Agreement, dated as of January 9, 2014, by and between the Registrant and Danforth Advisors, LLC (filed as Exhibit 10.51 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, and incorporated herein by reference).**
10.27Amended And Restated Employment Agreement, effective as of September 15, 2014, by and between the Registrant and J. Michael French (filed as Exhibit 10.1 to our Current Report on Form 8-K dated September 15, 2014, and incorporated herein by reference).**
10.282014 Long-Term Incentive Plan of the Registrant (filed as Exhibit 10.2 to our Current Report on Form 8-K dated September 15, 2014, and incorporated herein by reference).

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10.3#License Agreement dated February 6, 2017 between the Registrant and Lipomedics Inc. (filed as Exhibit 10.5 to our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2017, and incorporated herein by reference).**(#)

10.2910.4†Amendment No. 2,Settlement Agreement, dated May 14, 2015, to that certain License Agreement, effective as of December 22, 2011,April 4, 2019, by and between Adhera Therapeutics, Inc. and Robert C. Moscato, Jr. (filed as Exhibit 10.2 to our Current Report on Form 8-K dated April 4, 2019, and incorporated herein by reference).
10.5Form of Subscription Agreement used in connection with the offering of the Series F Convertible Preferred Stock of the Registrant (filed as Exhibit 10.34 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, incorporated herein by reference).
10.62018 Long-Term Incentive Plan of the Registrant (filed as Exhibit 10.35 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, incorporated herein by reference).
10.7Security Agreement, dated as of June 26, 2020, among the Registrant, IThena Pharma, Inc., Cequent Pharmaceuticals, Inc., MDRNA Research, Inc., the purchasers of secured promissory notes identified on the signature pages thereto, and Mirna Therapeutics, Inc.Jeff S. Phillips as agent (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on May 14, 2015,dated June 30, 2020, and incorporated herein by reference).
10.8
10.30Securities Purchase Agreement dated as of AugustFebruary 5, 2015,2020 between and among the Registrant and each purchaserthe purchasers identified onin the signature pages thereto (filed as Exhibit 10.1 to our Current Report on Form 8-K dated February 5, 2020, incorporated herein by reference).
10.9Consulting Agreement, dated July 7, 2020, by and between Adhera Therapeutics, Inc. and Andrew Kucharchuk (filed as Exhibit 10.1 to our Current Report on Form 8-K dated July 7, 2020, and incorporated herein by reference).***
10.10License Agreement between Adhera Therapeutics, Inc. and Melior Pharmaceuticals II, LLC dated July 28, 2021 (filed as Exhibit 10.1 to our Current Report on Form 8-K dated August 5, 2015,4, 2021, and incorporated herein by reference).
10.11License Agreement between Adhera Therapeutics, Inc. and Melior Pharmaceuticals I, LLC dated August 20, 2021 (filed herewith) (2)
21.110.12Addendum to License Agreement Adhera Therapeutics, Inc. and Melior Pharmaceuticals I, LLC dated August 20, 2021 dated February 16, 2022 (filed herewith) (2)
10.13Form of Securities Purchase Agreement issued by Adhera Therapeutics, Inc. to select accredited investors on August 18, 2021 (filed as Exhibit 10.1 to our Current Report on Form 8-K dated August 24, 2021, and incorporated herein by reference)
10.14Form of Securities Purchase Agreement issued by Adhera Therapeutics, Inc. to select accredited investors on October 8, 2021. (filed as Exhibit 4.3 to our Current Report on Form 8-K dated October 13, 2021, and incorporated herein by reference)
10.15Form of Securities Purchase Agreement issued by Adhera Therapeutics, Inc. to select accredited investors on October 7, 2021. (filed as Exhibit 4.3 to our Current Report on Form 8-K dated November 12, 2021, and incorporated herein by reference)
10.16Form of Securities Purchase Agreement issued by Adhera Therapeutics, Inc. to select accredited investors on March 15, 2022. (filed herewith)(2)
10.17Form of Securities Purchase Agreement dated May 11, 2022 filed as Exhibit 10.6 on our Quarterly Report on Form 10-Q dated May 16, 2022, and incorporated herein by reference)****
10.18Form of Senior Secured Original Issue Discount Promissory Note dated May 11, 2022filed as Exhibit 10.6 on our Quarterly Report on Form 10-Q dated May 16, 2022, and incorporated herein by reference)
10.20Form of Warrant dated May 11, 2022 (filed as Exhibit 10.5 on our Quarterly Report on Form 10-Q dated May 16, 2022, and incorporated herein by reference)

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10.21Form of Security Agreement dated May 11, 2022 (filed as Exhibit 10.6 on our Quarterly Report on Form 10-Q dated May 16, 2022, and incorporated herein by reference)
10.22Second Addendum to the License Agreement (filed as Exhibit 10.1 to our Current Report on Form 8-K dated August 4, 2022, and incorporated herein by reference).
10.23†Employment Agreement with Andrew Kucharchuk dated July 5, 2021 (filed as Exhibit 10.16 to the Amendment to our Annual Report on Form 10-K dated April 29, 2022 and incorporated herein by reference.)
10.24†

Agreement with Zahed Subhan dated November 1, 2021 (filed as Exhibit 10.17 to the Amendment to our Annual Report on Form 10-K dated April 29, 2022 and incorporated herein by reference).

10.25Code of Business Conduct and Ethics (filed as Exhibit 10.18 to the Amendment to our Annual Report on Form 10-K dated April 29, 2022 and incorporated herein by reference).
21.1Subsidiaries of the Registrant.(2)Registrant (filed as Exhibit 21.1 to our Annual Report on Form 10-K/A dated April 29, 2022 and incorporated herein by reference)
23.1*Consent of Salberg & Company, P.A., Independent Registered Public Accounting Firm
23.123.2*Consent of Wolf & Company, P.C., independent registered public accounting firm.(2)Baker Tilly US, LLP, Independent Registered Public Accounting Firm
24.1*Power of Attorney (included in the signature page)
23.2101.INS*Consent of Pryor Cashman LLC (included in Exhibit 5.1)
101INSInline XBRL Instance Document (3)(the instance document does not appear in the Interactive Data File because iXBRL tags are embedded within the Inline XBRL document).
101.SCH*
101SCHInline XBRL Taxonomy Extension Schema Document (3)
101.CAL*
101CALInline XBRL Taxonomy Extension Calculation Linkbase Document (3)
101.DEF*
101DEFInline XBRL Taxonomy Extension Definition Linkbase Document (3)
101.LAB*
101LABInline XBRL Taxonomy Extension LabelLabels Linkbase Document (3)
101.PRE*
101PREInline XBRL Taxonomy Extension Presentation Linkbase Document (3)
104*The Cover Page Interactive Data File, formatted in Inline XBRL (included within the Exhibit 101 attachments)
107*Filing Fee Table

 

Executive compensation plan or arrangement.

*(1)Portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934, amended, and the omitted material has been separately filed with the SEC.
(2)Filed herewith.
**(3)To be filed by amendment.
Furnished herewith.
**

Indicates management contract or compensatory plan or arrangement.

#Exhibits and/or Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby agrees to furnish to the SEC upon request any omitted information.

(b) Financial Statement Schedules.

All financial statement schedules are omitted because they are not applicable orthe information called for is not required or because the required information is includedshown either in the financial statements or in the notes thereto.

Item 17. Undertakings

The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

(a)Item 17.Undertakings.

(a)The undersigned registrant hereby undertakes:

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(1)(1)To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change

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in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2)(i)To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the “Act”);
(ii)To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement; and
(iii)To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement.

(2)That, for the purpose of determining any liability under the Securities Act, of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein,herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3)(3)To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4)
(4)That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5)That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(b)(i)InsofarAny preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii)Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii)The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv)Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

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(b)As far as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than athe payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
(c)The undersigned registrant hereby undertakes that:

(1)For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2)For purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York,Baton Rouge, State of New York,Louisiana, on August 28, 2015.December 2, 2022.

MARINA BIOTECH, INC.

Adhera Therapeutics, Inc.

By:/s/ Zahed Subhan
By:/s/ J. Michael French
Name:J. Michael French
Title:

President, Zahed Subhan

Chief Executive Officer; Chairman of the Board;

Interim Chief Scientific Officer and Director

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the personsEach person whose signature appears below constituteconstitutes and appoint J. Michael Frenchappoints Zahed Subhan as his or her true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any andor all amendments (including pre-effective and post-effective amendments) to this registration statement and to sign anyfile a new registration statement and amendments thereto for the same offering filed pursuant tounder Rule 462(b) under the Securities Act of 1933,461, 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,and about the foregoing, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all whichthat said attorneys-in-fact and agents, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicatedand on August 28, 2015.the dates indicated.

SignatureSIGNATURETitleTITLEDATE
/s/ J. Michael FrenchZahed Subhan

Chief Executive Officer; Chairman of the Board, President andBoard;

Interim Chief Scientific Officer (Principal Executive OfficerOfficer)

December 2, 2022

J. Michael French

Zahed Subhan
(Principal Executive
/s/ Trond WaernessDirectorDecember 2, 2022
Trond Waerness
/s/ Charles RiceDirectorDecember 2, 2022
Charles Rice
Director; Chief Operating Officer; Acting Chief Financial Officer; Chief Business Officer
/s/ Andrew Kucharchuk

and Principal Financial Officer)and Accounting Officer

December 2, 2022
Andrew Kucharchuk
/s/ Philip C. RankerDirector

Philip C. Ranker

/s/ Stefan LorenDirector

Stefan Loren, Ph.D.

/s/ Joseph W. RamelliDirector
Joseph W. Ramelli
/s/ Donald A. WilliamsDirector
Donald A. Williams

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