ITEM
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARINA
BIOTECH, INC.
Condensed
Consolidated Balance Sheets
|
|
September
30, 2017
|
|
|
December
31, 2016
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
8,676
|
|
|
$
|
105,347
|
|
Prepaid
expenses and other assets
|
|
|
54,631
|
|
|
|
211,133
|
|
Total
current assets
|
|
|
63,307
|
|
|
|
316,480
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets, net of amortization
|
|
|
2,679,235
|
|
|
|
2,311,877
|
|
Goodwill
|
|
|
3,502,829
|
|
|
|
3,558,076
|
|
|
|
|
6,182,064
|
|
|
|
5,869,953
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
6,245,371
|
|
|
$
|
6,186,433
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
1,027,508
|
|
|
$
|
663,261
|
|
Due
to related party
|
|
|
382,332
|
|
|
|
83,166
|
|
Accrued
expenses
|
|
|
1,022,369
|
|
|
|
1,393,521
|
|
Accrued
fee payable
|
|
|
320,000
|
|
|
|
-
|
|
Notes
payable
|
|
|
441,023
|
|
|
|
435,998
|
|
Notes
payable to related parties
|
|
|
92,590
|
|
|
|
-
|
|
Convertible
notes payable
|
|
|
406,324
|
|
|
|
-
|
|
Convertible
notes payable to related parties
|
|
|
559,029
|
|
|
|
250,000
|
|
Fair
value of liabilities for price adjustable warrants
|
|
|
248,068
|
|
|
|
141,723
|
|
Derivative
liability
|
|
|
115,271
|
|
|
|
-
|
|
Total
current liabilities
|
|
|
4,614,514
|
|
|
|
2,967,669
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.01 par value; 100,000 shares authorized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
C convertible preferred stock, $0.01 par value; $5,100 liquidation preference; 1,200 shares authorized; 750 and 1,020 shares
issued and outstanding as of September 30, 2017 and December 31, 2016, respectively
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Series
D convertible preferred stock, $0.01 par value; $300 liquidation preference; 220 shares authorized; 60 shares issued and outstanding
as of September 30, 2017 and December 31, 2016, respectively
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.006 par value; 180,000,000 shares authorized, 10,021,220 and 8,977,138 shares issued and outstanding as of September
30, 2017 and December 31, 2016, respectively
|
|
|
60,127
|
|
|
|
53,863
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
6,850,567
|
|
|
|
5,115,983
|
|
Deferred
compensation
|
|
|
(102,600
|
)
|
|
|
-
|
|
Accumulated
deficit
|
|
|
(5,177,237
|
)
|
|
|
(1,951,082
|
)
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
1,630,857
|
|
|
|
3,218,764
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
6,245,371
|
|
|
$
|
6,186,433
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MARINA
BIOTECH, INC.
Condensed
Consolidated Statements of Operations
(Unaudited)
|
|
For
the Three Months Ended
|
|
|
For
the Nine Months Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License
and other revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
232,896
|
|
|
|
50,683
|
|
|
|
746,221
|
|
|
|
107,910
|
|
General
and administrative
|
|
|
680,063
|
|
|
|
47,065
|
|
|
|
1,878,301
|
|
|
|
232,469
|
|
Amortization
|
|
|
123,038
|
|
|
|
-
|
|
|
|
327,642
|
|
|
|
-
|
|
Total
operating expenses
|
|
|
1,035,997
|
|
|
|
97,748
|
|
|
|
2,952,164
|
|
|
|
340,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(1,035,997
|
)
|
|
|
(97,748
|
)
|
|
|
(2,952,164
|
)
|
|
|
(340,379
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(24,301
|
)
|
|
|
(378
|
)
|
|
|
(51,575
|
)
|
|
|
(378
|
)
|
Change
in fair value liability of warrants
|
|
|
7,442
|
|
|
|
-
|
|
|
|
(106,345
|
)
|
|
|
-
|
|
Change
in fair value of derivative liability
|
|
|
80,672
|
|
|
|
-
|
|
|
|
(115,271
|
)
|
|
|
-
|
|
|
|
|
63,813
|
|
|
|
(378
|
)
|
|
|
(273,191
|
)
|
|
|
(378
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before provision for income taxes
|
|
|
(972,184
|
)
|
|
|
(98,126
|
)
|
|
|
(3,225,355
|
)
|
|
|
(340,757
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
-
|
|
|
|
800
|
|
|
|
800
|
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(972,184
|
)
|
|
$
|
(98,926
|
)
|
|
$
|
(3,226,155
|
)
|
|
$
|
(341,557
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share – basic and diluted
|
|
$
|
(0.10
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
9,869,672
|
|
|
|
4,227,641
|
|
|
|
9,645,954
|
|
|
|
4,118,826
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MARINA
BIOTECH, INC.
Condensed
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Deferred
|
|
|
Accumulated
|
|
|
|
|
|
|
Number
|
|
|
Par Value
|
|
|
Capital
|
|
|
Compensation
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2016
|
|
|
8,977,138
|
|
|
$
|
53,863
|
|
|
$
|
5,115,983
|
|
|
$
|
–
|
|
|
$
|
(1,951,082
|
)
|
|
$
|
3,218,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of common stock to related party
|
|
|
86,207
|
|
|
|
517
|
|
|
|
249,483
|
|
|
|
–
|
|
|
|
–
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services
|
|
|
30,000
|
|
|
|
180
|
|
|
|
53,820
|
|
|
|
–
|
|
|
|
–
|
|
|
|
54,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for accounts payable
|
|
|
622,296
|
|
|
|
3,734
|
|
|
|
972,980
|
|
|
|
–
|
|
|
|
–
|
|
|
|
976,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
of common stock for note receivable
|
|
|
(8,725
|
)
|
|
|
(52
|
)
|
|
|
(31,352
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
(31,404
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
stock issued to officers
|
|
|
70,000
|
|
|
|
420
|
|
|
|
245,580
|
|
|
|
(102,600
|
)
|
|
|
–
|
|
|
|
143,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
based compensation
|
|
|
–
|
|
|
|
–
|
|
|
|
74,895
|
|
|
|
–
|
|
|
|
–
|
|
|
|
74,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of warrants to common stock
|
|
|
60,944
|
|
|
|
366
|
|
|
|
170,277
|
|
|
|
–
|
|
|
|
–
|
|
|
|
170,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of Series C Preferred to common stock
|
|
|
180,000
|
|
|
|
1,080
|
|
|
|
(1,080
|
)
|
|
|
–
|
|
|
|
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects
of rounding due to reverse split
|
|
|
3,360
|
|
|
|
19
|
|
|
|
(19
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
(3,226,155
|
)
|
|
|
(3,226,155
|
)
|
Balance,
September 30, 2017
|
|
|
10,021,220
|
|
|
|
60,127
|
|
|
$
|
6,850,567
|
|
|
$
|
(102,600
|
)
|
|
$
|
(5,177,237
|
)
|
|
|
1,630,857
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MARINA
BIOTECH, INC.
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
For the Nine Months Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Cash
Flows Used in Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(3,226,155
|
)
|
|
$
|
(341,557
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Share
based compensation
|
|
|
218,295
|
|
|
|
-
|
|
Common
shares issued for third party services
|
|
|
54,000
|
|
|
|
-
|
|
Warrants
issued for services
|
|
|
-
|
|
|
|
36,470
|
|
Amortization
of intangibles
|
|
|
327,642
|
|
|
|
-
|
|
Change
in fair value liabilities for price adjustable warrants
|
|
|
106,345
|
|
|
|
-
|
|
Change
in fair value of derivative liability
|
|
|
115,271
|
|
|
|
-
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid
expenses and other assets
|
|
|
125,098
|
|
|
|
(479
|
)
|
Accounts
payable
|
|
|
419,494
|
|
|
|
64,928
|
|
Accrued
expenses
|
|
|
637,642
|
|
|
|
(1,355
|
)
|
Accrued
fee
|
|
|
-
|
|
|
|
-
|
|
Due
to related party
|
|
|
299,166
|
|
|
|
(54,150
|
)
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Operating Activities
|
|
|
(923,202
|
)
|
|
|
(296,143
|
)
|
|
|
|
|
|
|
|
|
|
Cash
Flows Used in Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of intangible asset
|
|
|
(375,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Investing Activities
|
|
|
(375,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from sale of common stock to related party
|
|
|
250,000
|
|
|
|
-
|
|
Proceeds
from notes payable, related party
|
|
|
90,888
|
|
|
|
-
|
|
Proceeds
from convertible notes
|
|
|
400,000
|
|
|
|
50,000
|
|
Proceeds
from convertible notes, related parties
|
|
|
290,000
|
|
|
|
-
|
|
Proceeds
from exercise of warrants to common stock
|
|
|
170,643
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
1,201,531
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
(Decrease)
in cash
|
|
|
(96,671
|
)
|
|
|
(246,143
|
)
|
|
|
|
|
|
|
|
|
|
Cash
– Beginning of Period
|
|
|
105,347
|
|
|
|
261,848
|
|
Cash
- End of Period
|
|
$
|
8,676
|
|
|
$
|
15,705
|
|
|
|
|
|
|
|
|
|
|
Supplementary
Cash Flow Information:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Income
taxes paid
|
|
$
|
800
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash
Investing and Financing Activities:
|
|
|
,
|
|
|
|
|
|
Issuance
of warrants for services
|
|
$
|
-
|
|
|
$
|
36,470
|
|
Common
stock issued for accrued expenses
|
|
$
|
976,714
|
|
|
$
|
-
|
|
Return
of common stock for other assets
|
|
$
|
31,404
|
|
|
$
|
-
|
|
Adjustment
to goodwill for change in value of pre-acquisition accounts payable
|
|
$
|
55,247
|
|
|
$
|
-
|
|
Accrued
interest
|
|
$
|
32,080
|
|
|
|
|
|
Assumption
of Liabilities for acquisition
|
|
$
|
320,000
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MARINA
BIOTECH, INC.
Notes
to Condensed Consolidated Financial Statements
FOR
THE THREE and NINE MONTHS ENDED SEPTEMBER 30, 2017
(Unaudited)
Note
1 – Nature of Operations, Basis of Presentation and Significant Accounting Policies
Business
Overview
Marina
Biotech, Inc. and its wholly-owned subsidiaries, MDRNA Research, Inc., Cequent Pharmaceuticals, Inc., Atossa Healthcare, Inc.,
and IthenaPharma, Inc. (collectively “Marina,” “we,” “our,” or “us”) is a
fully integrated, commercial stage biopharmaceutical company delivering proprietary drug therapeutics for significant unmet medical
needs in the U.S., Europe and certain additional international markets. Its portfolio of products currently focuses on fixed dose
combinations (“FDC”) in hypertension, arthritis, pain and oncology allowing for innovative solutions to such unmet
medical needs. Its mission is to provide effective and patient centric treatment for hypertension – including resistant
hypertension. In this connection, we acquired from Symplmed and its wholly-owned subsidiary, Symplmed Technologies, LLC, certain
of the intellectual property assets related to the patented technology platform known as DyrctAxess, also called Total Care, that
offers enhanced efficiency, control and information to empower patients, physicians and manufacturers to help achieve optimal
care.
In
doing so, we have created a universal platform for the effective treatment of hypertension as well as for the distribution of
FDC hypertensive drugs, such as our FDA-approved product Prestalia, and the other products in our pipeline, devices for therapeutic
drug monitoring, blood pressure, and other cardiac monitors, as well as services such as counseling and prescription reminders.
We
currently have one commercial and three clinical development programs underway: (i) Prestalia®, a single-pill fixed dose combination
of perindopril, an angiotensin-converting-enzyme (“ACE”) inhibitor and amlodipine, a calcium channel blocker (“CCB”),
which has been approved by the U.S. Food and Drug Administration (“FDA”) and is actively marketed in the U.S.; (ii)
our next generation celecoxib program drug candidates for the treatment of acute and chronic pain, IT-102 and IT-103, each of
which is an FDC of celecoxib, a COX-2 selective nonsteroidal anti-inflammatory drug (“NSAID”) and either lisinopril
(IT-102) or olmesartan (IT-103) – both Lisinopril and olmesartan are antihypertension drugs; (iii) CEQ508, an oral delivery
of small interfering RNA (“siRNA”) against beta-catenin, combined with IT-102 to suppress polyps in the precancerous
syndrome and orphan indication Familial Adenomatous Polyposis (“FAP”); and (iv) CEQ508 combined with IT-103 to treat
Colorectal Cancer.
Our
current focus is primarily on the commercialization of Prestalia and secondarily the development of IT-102 and IT-103. We believe
that by combining a COX-2 inhibitor with an antihypertensive in a single FDC oral tablet, IT-102 and IT-103 will each offer improved
safety profiles as compared to currently available and previously marketed COX-2 inhibitors as well as address patients with chronic
pain who are commonly taking antihypertension drugs concurrently. We further believe that the current opioid addiction epidemic
in the U.S. has been driven in part by the withdrawal from the market of certain COX-2 inhibitors due to their associated risk
of cardiovascular-related adverse events. We plan to license or divest our other assets since they no longer align with our focus
on the treatment of hypertension.
We
intend to create value through the continued commercialization of our FDA-approved product, Prestalia, while moving our FDC development
programs forward to further strengthen our commercial presence. We intend to retain ownership and control of all of our product
candidates, but in the interest of accelerated growth and market penetration, we will also consider partnerships with pharmaceutical
or biotechnology companies in order to reduce time to market and to balance development risks, both clinically and financially.
As
our strategy is to be a fully integrated biopharmaceutical company, we will drive a primary corporate focus on revenue generation
through our commercial assets, with a secondary focus on advancing our FDC pipeline to further enhance our commercial presence.
Reverse
Merger with IThenaPharma
On
November 15, 2016, Marina entered into, and consummated the transactions contemplated by, an Agreement and Plan of Merger between
and among IthenaPharma, Inc., a Delaware corporation (“IThena”), IThena Acquisition Corporation, a Delaware corporation
and wholly-owned subsidiary of Marina (“Merger Sub”), and Vuong Trieu as the IThena representative (the “Merger
Agreement”), pursuant to which IThena merged into Merger Sub (the “Merger”). For a more detailed discussion
on the reverse merger, refer to Note 2 – Intangible Assets below as well as our 2016 Annual Report on Form 10K filed with
the SEC.
IThena
is a developer of personalized therapies for combined pain/hypertension through its proprietary Fixed Dose Combination (“FDC”)
technology and point of care Therapeutic Drug Monitoring (“TDM”). Through the combination of these technologies, IThenaPharma
is looking to deliver therapies with improved compliance and personalized dosing. IThena’s lead products are the celecoxib
FDCs which include IT-102 and IT-103, fixed dose combinations of celecoxib and lisinopril and celecoxib and olmesartan, respectively.
IT-102 and IT-103 are being developed as celecoxib without the drug induced edema associated with celecoxib alone. IT-102 and
IT-103 are being developed initially for combined arthritis / hypertension and subsequently for treatment of pain, or cancer,
or other indications requiring high doses of celecoxib.
Reverse
Stock Split
On
August 1, 2017, we filed a Certificate of Amendment of our Amended and Restated Certificate of Incorporation to effect a one-for-ten
reverse split of our issued and outstanding shares of common stock. Our common stock commenced trading on the OTCQB tier of the
OTC Markets on a split-adjusted basis on Thursday, August 3, 2017. Unless indicated otherwise, all share and per share information
included in these financial statements give effect to the reverse split.
Basis
of Presentation
The
accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q
and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by U.S.
generally accepted accounting principles (“U.S. GAAP”) for complete audited financial statements. The accompanying
unaudited financial information should be read in conjunction with the audited consolidated financial statements, including the
notes thereto, as of and for the year ended December 31, 2016, included in our 2016 Annual Report on Form 10-K filed with the
SEC. The information furnished in this report reflects all adjustments (consisting of normal recurring adjustments), which are,
in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows
for each period presented. The results of operations for the nine months ended September 30, 2017 are not necessarily indicative
of the results for the year ending December 31, 2017 or for any future period.
Principles
of Consolidation
The
consolidated financial statements include the accounts of IThenaPharma Inc. and Marina Biotech, Inc. and the wholly-owned subsidiaries,
Cequent, MDRNA, and Atossa, and eliminate any inter-company balances and transactions.
Going
Concern and Management’s Liquidity Plans
The
accompanying condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern,
which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At September 30,
2017, we had a significant accumulated deficit of $5,177,237 and a negative working capital of $4,551,207. We had obtained a line
of credit from Autotelic Inc. of $500,000, of which we have utilized $92,590. As such, we currently have approximately $407,000
of available funds under our line of credit under this line of credit with Autotelic Inc. We believe this amount of
available funds is sufficient to fund our operations through December 31, 2017. Our operating activities consume the majority
of our cash resources. We anticipate that we will continue to incur operating losses as we execute our commercialization plans,
as well as strategic and business development initiatives. In addition, we have had and will continue to have negative cash flows
from operations, at least into the near future. We have previously funded, and plan to continue funding, our losses primarily
through the sale of common and preferred stock, combined with or without warrants, the sale of notes, revenue provided from our
license agreements and, to a lesser extent, equipment financing facilities and secured loans. However, we cannot be certain that
we will be able to obtain such funds required for our operations at terms acceptable to us or at all. In 2016, we funded operations
primarily through the issuance of convertible debt and license-related revenues.
There
is substantial doubt about our ability to continue as a going concern for one year from the issuance date of this Form 10-Q, which
may affect our ability to obtain future financing or engage in strategic transactions, and may require us to curtail our operations.
We cannot predict, with certainty, the outcome of our actions to generate liquidity, including the availability of additional
equity or debt financing, or whether such actions would generate the expected liquidity as currently planned.
Summary
of Significant Accounting Policies
Use
of Estimates
The
preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Significant
areas requiring the use of management estimates include valuation allowance for deferred income tax assets and fair value of financial
instruments. Actual results could differ materially from such estimates under different assumptions or circumstances.
Fair
Value of Financial Instruments
We
consider the fair value of cash, accounts payable, due to related parties, notes payable, notes payable to related parties, convertible
notes 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 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 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 probability adjusted Black-Scholes option pricing model (“Black-Scholes”), which management has
determined approximates values using more complex methods, using Level 3 inputs. The following tables summarize our liabilities
measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016:
|
|
Balance
at
September 30, 2017
|
|
|
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
|
|
$
|
248,068
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
248,068
|
|
Derivative
liability
|
|
|
115,271
|
|
|
|
-
|
|
|
|
-
|
|
|
|
115,271
|
|
Total
liabilities at fair value
|
|
$
|
363,339
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
363,339
|
|
|
|
Balance
at
December
31, 2016
|
|
|
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
|
|
$
|
141,723
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
141,723
|
|
Total
liabilities at fair value
|
|
$
|
141,723
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
141,723
|
|
The
following presents activity of the fair value liability of price adjustable warrants determined by Level 3 inputs for the period
ended September 30, 2017:
|
|
Fair
value
liability for
price adjustable
warrants
|
|
|
|
|
|
Balance
at December 31, 2016
|
|
$
|
141,723
|
|
Change
in fair value included in condensed consolidated statement of operations
|
|
|
106,345
|
|
Balance
at September 30, 2017
|
|
$
|
248,068
|
|
The
fair value liability of price adjustable warrants for the nine months ended September 30, 2017 was determined using the probability
adjusted Black-Scholes option pricing model using exercise prices of $2.80 to $7.50, stock price of $2.70, volatility of 174%
to 225%, contractual lives of 0.1 to 4.1 years, and risk-free rates of 0.62% to 1.93%.
The
following presents activity of the derivative liability determined by Level 3 inputs for the period ended September 30, 2017:
|
|
Fair
value
of
derivative
liability
|
|
|
|
|
|
Balance
at December 31, 2016
|
|
$
|
-
|
|
Additions
|
|
|
195,943
|
|
Change
in fair value included in condensed consolidated statement of operations
|
|
|
(80,672
|
)
|
Balance
at September 30, 2017
|
|
$
|
115,271
|
|
The
fair value liability of derivative liability for the nine months ended September 30, 2017 was determined using the binomial pricing
model using exercise prices of $2.80, stock price of $2.70, volatility of 168%, contractual life of 1 year, and a risk-free rate
of 1.31%.
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, 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, 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 acquired in-process R&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.
|
Management
determined that no impairment indicators were present and that no impairment charges were necessary as of September 30, 2017 or
December 31, 2016.
Net
Income (Loss) per Common Share
Basic
net income (loss) per common share (after giving effect of the one for ten reverse stock split) is computed by dividing the net
income (loss) by the weighted average number of common shares outstanding during the period, excluding any unvested restricted
stock awards. Diluted net income (loss) per share includes the effect of common stock equivalents (stock options, unvested restricted
stock, and warrants) when, under either the treasury or if-converted method, such inclusion in the computation would be dilutive.
Net income (loss) is adjusted for the dilutive effect of the change in fair value liability for price adjustable warrants, if
applicable. The following number of shares have been excluded from diluted net income (loss) since such inclusion would be anti-dilutive:
|
|
Nine
months ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Stock
options outstanding
|
|
|
233,400
|
|
|
|
-
|
|
Warrants
|
|
|
2,492,945
|
|
|
|
13,917
|
|
Convertible
Notes Payable
|
|
|
315,746
|
|
|
|
-
|
|
Restricted
common stock
|
|
|
70,000
|
|
|
|
|
|
Total
|
|
|
3,112,091
|
|
|
|
13,917
|
|
Note
2 – Intangible Assets
Reverse
Merger with IThenaPharma
On
November 15, 2016, we entered into, and consummated the transactions contemplated by, an Agreement and Plan of Merger between
and among Marina Biotech, Inc., IThenaPharma Inc., a Delaware corporation (“IThena”), IThena Acquisition Corporation,
a Delaware corporation and wholly-owned subsidiary of Marina (“Merger Sub”), and Vuong Trieu as the IThena representative
(the “Merger Agreement”), pursuant to which IThena merged into Merger Sub (the “Merger”). Upon completion
of the Merger and subject to the applicable provisions of the Merger Agreement, Merger Sub has ceased to exist and IThena continues
as the surviving corporation of the Merger and as a wholly-owned subsidiary of Marina. As consideration for the Merger, Marina
issued to the former shareholders of IThena 58,392,828 shares of the Company’s common stock (5,839,283 shares after adjustment
for the Company’s 1 for 10 reverse stock split in August 2017), representing approximately 65% of the issued and outstanding
shares of Marina’s common stock following the completion of the Merger. Outstanding warrants to purchase 30,000 shares of
common stock of IThena were converted into warrants to purchase common stock of Marina. In addition, Marina appointed Vuong Trieu,
the president of IThena, as the Chairman of the Board of Directors of Marina, effective November 15, 2016. Dr. Trieu, in his capacity
as the IThena representative, later appointed Philippe P. Calais, Ph.D., as a member of the Board of Directors of Marina effective
December 8, 2016, pursuant to the rights granted to the former shareholders of IThena in the Merger Agreement.
As
the former shareholders of IThena control greater than 50% of the Company subsequent to the Merger, for accounting purposes, the
Merger was treated as a “reverse acquisition” and IThena is considered the accounting acquirer. IThena accounted for
the acquisition of Marina under the purchase accounting method following completion. Accordingly, IThena’s historical results
of operations replace Marina’s historical results of operations for all periods prior to the Merger, and for all periods
following the Merger, the results of operations of both companies are included. As a result of the Merger, while we have presented
the results for the three and nine months ended September 30, 2017 and 2016; the results for the 2016 periods reflect only the
results of IThena.
The
purchase price of approximately $3.7 million represents the consideration in the reverse merger transaction and is calculated
based on the number of shares of common stock of the combined company that Marina stockholders owned as of the closing of the
transaction and the fair value of assets and liabilities assumed by IThena.
The
number of shares of common stock Marina issued to IThena stockholders is calculated pursuant to the terms of the Merger Agreement
based on Marina common stock outstanding as of November 15, 2016, as follows (retroactively adjusted for the 1 for 10 reverse
stock split in August 2017):
Shares
of Marina common stock outstanding as of November 15, 2016
|
|
|
3,137,855
|
|
Divided
by the percentage of Marina ownership of combined company
|
|
|
35
|
%
|
Adjusted
total shares of common stock of combined company
|
|
|
8,977,138
|
|
Multiplied
by the assumed percentage of IThena ownership of combined company
|
|
|
65
|
%
|
Shares
of Marina common stock issued to IThena upon closing of transaction
|
|
|
5,839,283
|
|
The
application of the acquisition method of accounting is dependent upon certain valuations and other studies that have yet to be
completed. The purchase price allocation will remain preliminary until IThena management determines the fair values of assets
acquired and liabilities assumed. The final determination of the purchase price allocation is anticipated to be completed as soon
as practicable after completion of the transaction and will be based on the fair values of the assets acquired and liabilities
assumed as of the transaction closing date. The final amounts allocated to assets acquired and liabilities assumed could differ
significantly from the amounts presented.
The
purchase price as of September 30, 2017 has been allocated based on a preliminary estimate of the fair value of assets acquired
and liabilities assumed:
Assets
and Liabilities Acquired:
|
|
|
|
|
Cash
|
|
$
|
5,867
|
|
Net
current liabilities assumed (excluding cash)
|
|
|
(1,871,725
|
)
|
Identifiable
intangible assets
|
|
|
2,361,066
|
|
Debt
|
|
|
(326,037
|
)
|
Net
assets acquired
|
|
|
169,171
|
|
Goodwill
|
|
|
3,502,829
|
|
Purchase
price
|
|
$
|
3,672,000
|
|
The
above estimated purchase price allocation and goodwill valuation reflects changes in fair value determinations of $55,246 for
the nine months ended September 30, 2017 and approximately $1,238,000 since the Merger date. As part of the Merger, the Company
allocated $3,502,829 to goodwill. Additionally, a substantial portion of the assets acquired were allocated to identifiable intangible
assets. The fair value of the identifiable intangible asset is determined primarily using the “income approach,” which
requires a forecast of all the expected future cash flows.
On
November 15, 2016, Marina agreed to issue to Novosom Verwaltungs GmbH (“Novosom”) 0.15 million shares of common stock
upon the closing of the Merger in consideration of Novosom’s agreement that the consummation of the Merger would not constitute
a “Liquidity Event” under that certain Asset Purchase Agreement dated as of July 27, 2010 between and among Marina,
Novosom and Steffen Panzner, Ph.D., and thus that no additional consideration under such agreement would be due to Novosom as
a result of the consummation of the Merger.
In
July 2016, Marina pledged to issue common stock valued at approximately $15,000 to Novosom for the portion due under our July
2010 Asset Purchase Agreement with Novosom, related to Marina’s license agreement with an undisclosed licensee that grants
such licensee rights to use Marina’s technology and intellectual property to develop and commercialize products combining
certain molecules with Marina’s liposomal delivery technology known as NOV582. In November 2016, we issued 11,905 shares
with a value of approximately $15,000 to Novosom as the equity component owed under our July 2016 license agreement.
Acquisition
of Assets from Symplmed
In
June 2017, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Symplmed Pharmaceuticals
LLC (“Symplmed”) pursuant to which we purchased from Symplmed, for aggregate consideration of approximately $0.62
million (consisting of $0.4 million in cash plus the assumption of certain liabilities of Symplmed in the amount of
approximately $0.32 million), Symplmed’s assets relating to a single-pill FDC of perindopril arginine and amlodipine
besylate known as Prestalia® (“Prestalia”), that has been approved by the FDA for the treatment of
hypertension. In addition, as part of the transactions contemplated by the Purchase Agreement: (i) Symplmed agreed to
transfer to us, not later than 150 days following the closing date, the New Drug Applications for the approval of Prestalia
as a new drug by the FDA; and (ii) Symplmed assigned to us all of its rights and obligations under that certain Amended and
Restated License and Commercialization Agreement by and between Symplmed and Les Laboratoires Servier (“Servier”)
dated January 11, 2012, pursuant to which Symplmed has an exclusive license from Servier to manufacture, have manufactured,
develop, promote, market, distribute and sell Prestalia in the U.S. (and its territories and possessions) in consideration of
regulatory and sales-based milestone payments and royalty payments based on net sales. Management has determined that this
acquisition was deemed an asset purchase under FASB ASC 805.
Further,
we entered into an offer letter to hire our current Chief Commercial Officer, who was the President and Chief Executive Officer
of Symplmed, which appointment became effective on June 22, 2017. We also agreed in such offer letter to issue 60,000 restricted
shares of our common stock under our 2014 Long-Term Incentive Plan to our Chief Commercial Officer, with all of such shares to
vest on the six (6) month anniversary of the date of grant.
In
furtherance of the acquisition and commercialization of Prestalia, on July 21, 2017 we acquired from Symplmed and its wholly-owned
subsidiary, Symplmed Technologies, LLC, certain of the intellectual property assets related to the patented technology platform
known as DyrctAxess, also known as Total Care, that offers enhanced efficiency, control and information to empower patients, physicians
and manufacturers to help achieve optimal care.
The
purchase price of $0.62 million has been allocated based on a preliminary estimate of the fair value of the assets acquired and
is included in intangible assets as of September 30, 2017, and is subject to change.
The
following table summarizes the estimated fair value of the identifiable intangible asset acquired, their useful life, and method
of amortization:
|
|
Estimated
Fair Value
|
|
|
Estimated
Useful Life
(Years)
|
|
|
Annual
Amortization
Expense
|
|
Intangible
asset from Merger
|
|
$
|
2,361,066
|
|
|
|
6
|
|
|
$
|
393,511
|
|
Intangible
asset - Prestalia
|
|
|
620,000
|
|
|
|
6
|
|
|
|
103,333
|
|
Intangible
asset – DyrctAxess
|
|
|
75,000
|
|
|
|
6
|
|
|
|
12,500
|
|
Total
|
|
$
|
3,056,066
|
|
|
|
|
|
|
$
|
509,344
|
|
The
net intangible asset was $2,679,235, net of accumulated amortization of $376,831, as of September 30, 2017. Amortization expense
was $327,642 and $0 for the nine months ended September 30, 2017 and 2016, respectively.
Note
3 - Related Party Transactions
Due
to Related Party
The
Company and other related entities have 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 has a Master Services Agreement (“MSA”) with a related party that is partly-owned by the Company’s
Executive Chairman, Autotelic Inc., effective November 15, 2016. Autotelic Inc. owns less than 10% of the Company. The MSA states
that Autotelic Inc. will provide business functions and services to the Company and allows Autotelic Inc. to charge the Company
for these expenses paid on its behalf. The MSA includes personnel costs allocated based on amount of time incurred and other services
such as consultant fees, clinical studies, conferences and other operating expenses incurred on behalf of the Company. The MSA
between Marina and Autotelic Inc. was effective on the reverse merger date of November 15, 2016.
During
the period commencing November 15, 2016 (the “Effective Date”) and ending on the date that the Company has completed
an equity offering of either common or preferred stock in which the gross proceeds therefrom is no less than $10 million (the
“Equity Financing Date”), the Company shall pay Autotelic the following compensation: cash in an amount equal to the
actual labor cost (paid on a monthly basis), plus 100% markup in warrants for shares of the Company’s common stock with
a strike price equal to the fair market value of the Company’s common stock at the time said warrants are issued. The Company
shall also pay Autotelic for the services provided by third party contractors plus 20% mark up. The warrant price per share will
be calculated based on the Black-Scholes model.
After
the Equity Financing Date, the Company shall pay Autotelic Inc. a cash amount equal to the actual labor cost plus 100% mark up
of provided services and 20% mark up of provided services by third party contractors or material used in connection with the performance
of the contracts, including but not limited to clinical trial, non-clinical trial, Contract Manufacturing Organizations (“CMO”),
FDA regulatory process, Contract Research Organizations (“CRO”) and Chemistry and Manufacturing Controls (“CMC”).
In
accordance with the MSA, Autotelic Inc. billed the Company for personnel and service expenses Autotelic Inc. incurred on behalf
of the Company. For the nine months ended September 30, 2017 and 2016, Autotelic Inc. billed a total of $492,406 and $238,673,
including personnel costs of $386,954 and $99,425, respectively. An unpaid balance of $382,332 is recorded as due to related party
in the accompanying balance sheet as of September 30, 2017. The Company agreed to issue warrants at a future date for the remaining
balance due of $388,745, which is included in accrued expenses as of September 30, 2017.
Convertible
Notes Payable
In
July 2016, IThena issued convertible promissory notes with an aggregate principal balance of $50,000 to certain related-party
investors. Borrowings under each of these convertible notes bore interest at 3% per annum and these notes mature on June 30, 2018.
Upon the completion of certain funding events, IThena had the right to convert the outstanding principal amount of these notes
into shares of the IThena’s common stock. The notes were assumed by Autotelic Inc. on November 15, 2016 as part of its acquisition
of the technology asset (IT-101).
Convertible
Notes Payable, Dr. Trieu
In
connection with the Merger, Marina entered into a Line Letter dated November 15, 2016 with Dr. Trieu, our Executive Chairman,
for an unsecured line of credit in an amount not to exceed $540,000, to be used for current operating expenses. Dr. Trieu has
advanced the full $540,000 under the Line Letter as of September 30, 2017 ($250,000 as of December 31, 2016). Accrued interest
on the Line Letter was $19,029 and $0 as of September 30, 2017 and December 31, 2016, respectively, and is included in convertible
notes payable to related parties on the accompanying balance sheets. The line of credit is currently convertible at any time into
shares of the Company’s common stock at a price of $2.80 per share.
Line
Letter with Autotelic Inc.
On
April 4, 2017, the Company entered into a Line Letter with Autotelic Inc for an unsecured line of credit in an amount not to exceed
$500,000, to be used for current operating expenses. Autotelic Inc. is., a stockholder of IThenaPharma that became the holder
of 525,535 shares of Marina common stock as a result of the Merger, and an entity of which Dr. Trieu serves as Chairman of the
Board. Autotelic Inc. was to consider requests for advances under the Line Letter until September 1, 2017. The Company and
Autotelic Inc. are in discussions to extend this line letter through December 31, 2017. Autotelic Inc. shall have the right
at any time for any reason in its sole and absolute discretion to terminate the line of credit available under the Line Letter
or to reduce the maximum amount available thereunder without notice. Advances made under the Line Letter bear interest at the
rate of five percent (5%) per annum, are evidenced by the Demand Promissory Note issued to Autotelic Inc., and are due and payable
upon demand by Autotelic, Inc.
The
balance under the line was $92,590 as of September 30, 2017 and is included in notes to related parties on the accompanying balance
sheet. As such, we currently have approximately $407,000 of available funds under this line of credit.
Note
4 – Notes Payable
Note
Purchase Agreement and Amendment
In
June 2016, Marina entered into a Note Purchase Agreement (the “Purchase Agreement”) with certain investors (the “Purchasers”),
pursuant to which Marina issued to the Purchasers unsecured promissory notes in the aggregate principal amount of $300,000 (the
“Notes”). Interest was to accrue on the unpaid principal balance of the Notes at the rate of 12% per annum beginning
on September 20, 2016. The Notes were due and payable on June 20, 2017, provided, that, upon the closing of a financing transaction
that occurs while the Notes are outstanding, each Purchaser shall have the right to either: (i) accelerate the maturity date of
the Note held by such Purchaser or (ii) convert the entire outstanding principal balance under the Note held by such Purchaser
and accrued interest thereon into Marina’s securities that are issued and sold at the closing of such financing transaction.
In
July 2017, we entered into an amendment agreement (the “Amendment Agreement”) with respect to those Notes and the
warrants to purchase shares of our common stock that are currently held by the Purchasers and that were originally issued pursuant
to a certain Note and Warrant Purchase Agreement dated as of February 10, 2012 by and among Marina, MDRNA Research, Inc., Cequent
Pharmaceuticals, Inc. and the purchasers identified on the signature pages thereto (as amended from time to time), to, among other
things, extend the maturity date of the Notes to December 31, 2017 and to extend the price protection applicable to certain
of the warrants held by the Purchasers with respect to dilutive offerings afforded thereunder to February 10, 2020. Refer
to our Form 10-Q for the six months ended June 30, 2017 for a more detailed discussion and additional terms for
these Notes.
As
of September 30, 2017, the accrued interest expense on the Notes amounted to $37,500, with a total balance of principal and interest
of $337,500.
Note
Payable – Service Provider
In
December 2016, we entered into an Agreement and Promissory Note with a law firm for past services performed totaling $121,523.
The note calls for monthly payments of $6,000 per month, beginning with an initial payment on March 31, 2017. The note is unsecured
and non-interest bearing. The note will be considered paid in full if the Company pays $100,000 by December 31, 2017. The balance
due on the note was $103,523 as of September 30, 2017.
Bridge
Note Financing
In
June 2017, we issued convertible promissory notes (the “Notes”) in the aggregate principal amount of $400,000 to 10
investors pursuant to a Note Purchase Agreement (the “Note Purchase Agreement”) that we entered into with such investors.
The Notes bear interest at a rate of five percent (5%) per annum and are due and payable at any time on or after the earlier of
(i) June 1, 2018 and (ii) the occurrence of an event of default (as defined in the Note Purchase Agreement). Our Executive Chairman
and our Chief Science Officer were each investors in the Notes.
Upon
written notice delivered to us by the holders of a majority in interest of the aggregate principal amount of Notes that are outstanding
at the time of such calculation (the “Majority Holders”) not more than five (5) days following the maturity date of
the Notes, the Majority Holders shall have the right, but not the obligation, on behalf of themselves and all other holders of
Notes, upon written notice delivered to us, to elect to convert the entire unpaid principal amount of all, but not less than all,
of the Notes and the accrued and unpaid interest thereon into such number of shares of our common stock as is equal to, with respect
to each Note: (x) the entire unpaid principal amount of such Note and the accrued and unpaid interest thereon on the date of the
delivery of such notice by (y) $3.50.
As
of September 30, 2017, the accrued interest expense on the Notes amounted to $6,324, with a total balance of principal and interest
of $406,324.
Note
5 – Stockholders’ Equity
Preferred
Stock
Marina
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”). No shares of Series B Preferred or Series A Preferred are outstanding. In
March 2014, Marina designated 1,200 shares as Series C Convertible Preferred Stock (“Series C Preferred”). In August
2015, Marina designated 220 shares as Series D Convertible Preferred Stock (“Series D Preferred”).
Series
C Preferred
Each
share of Series C Preferred has a stated value of $5,000 per share and is convertible into shares of common stock at a conversion
price of $7.50 per share. In June 2015, an investor converted 90 shares of Series C Preferred into 60,000 shares of common stock
with a value of $5.40 per share. In November 2015, an investor converted an additional 90 shares of Series C Preferred into 60,000
shares of common stock with a value of $3.10 per share. On September 15, 2017, an investor converted 270 shares of Series C Preferred
stock into 180,000 shares of our common stock in a cashless exercise.
Series
D Preferred
In
August 2015, Marina entered into a Securities Purchase Agreement with certain investors pursuant to which Marina sold 220 shares
of Series D Preferred, and warrants to purchase up to 344,000 shares of Marina’s common stock at an initial exercise price
of $4.00 per share before August 2021, 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 $4.00 per share. The
Series D Preferred is initially convertible into an aggregate of 275,000 shares of Marina’s 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.
In November 2015, an investor converted 50 shares of Series D Preferred into 62,500 shares of common stock. In February 2016,
an investor converted 110 shares of Series D Preferred into 137,500 shares of common stock.
Common
Stock
Our
common stock currently trades on the OTCQB tier of the OTC Markets.
Stock
Issuances
In
February 2017, we entered into two privately negotiated transactions pursuant to which we issued an aggregate of 615,368 shares
of our common stock for an effective price per share of $2.90 to settle aggregate liabilities of approximately $948,000, which
had been reflected in accrued expenses as of December 31, 2016.
In
February 2017, we issued 30,000 shares of our common stock with a fair value of $1.80 per share to a consultant providing investment
advisory services.
In
February 2017, we issued 10,000 restricted shares of our common stock with a fair value of $1.40 per share to our CEO for services.
In
February 2017, we entered into a Stock Purchase Agreement with LipoMedics, a related party, pursuant to which we issued to LipoMedics
an aggregate of 86,207 shares of our common stock for a total purchase price of $250,000.
In
March 2017, we entered into a Settlement Agreement, whereby a note receivable for $45,000 was settled with a cash payment by the
note holder to the Company of $14,049, the surrender of 6,000 warrants, and the surrender of 8,725 shares of common stock held
by the noteholder, which were cancelled effective March 31, 2017.
In
April 2017, the Company entered into a Compromise and Release Agreement to settle $36,047 due to a service provider for $15,957
in cash and $20,090 of the Company’s common stock at $2.90 per share (for a total issuance of 6,928 shares). The Company
issued 6,928 shares to the service provider in May 2017.
In
May 2017, the holders of warrants to purchase 60,944 shares of our common stock at an exercise price of $2.80 per share exercised
such warrants, yielding aggregate gross proceeds to us of $170,643.
In
June 2017, we entered into an offer letter to hire our current Chief Commercial Officer, who was the President and Chief Executive
Officer of Symplmed, which appointment became effective on June 22, 2017. We also agreed in such offer letter to issue 60,000
restricted shares of our common stock under our 2014 Long-Term Incentive Plan to our Chief Commercial Officer, with all of such
shares to vest on the six (6) month anniversary of the date of grant. These shares were issued in June 2017.
In
August 2017, in connection with the reverse split, we issued 3,360 shares of common stock due to rounding at exchange and participant
levels.
In
September 2017, an investor converted 270 shares of Series C Preferred stock into 180,000 shares of our common stock on a cashless
basis.
Warrants
As
of September 30, 2017, there were 2,492,945 warrants outstanding, with a weighted average exercise price of $4.40 per share, and
annual expirations as follows:
Expiring
in 2017
|
|
|
-
|
|
Expiring
in 2018
|
|
|
11,383
|
|
Expiring
in 2019
|
|
|
600,000
|
|
Expiring
in 2020
|
|
|
1,189,079
|
|
Expiring
in 2021
|
|
|
343,750
|
|
Expiring
thereafter
|
|
|
348,733
|
|
|
|
|
2,492,945
|
|
On
May 21, 2017, the holders of warrants to purchase 60,944 shares of our common stock at an exercise price of $2.80 per share exercised
such warrants, yielding aggregate gross proceeds to us of $170,643.
A
total of 149,111 warrants expired in May 2017.
Note
6 — Stock Incentive Plans
Stock
Options
Stock
option activity was as follows:
|
|
Options
Outstanding
|
|
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
|
|
Outstanding,
December 31, 2016
|
|
|
168,811
|
|
|
$
|
36.80
|
|
Options
granted
|
|
|
64,600
|
|
|
|
1.70
|
|
Options
expired
|
|
|
(11
|
)
|
|
|
5,264.00
|
|
Outstanding,
September 30, 2017
|
|
|
233,400
|
|
|
|
26.85
|
|
Exercisable,
September 30, 2017
|
|
|
193,100
|
|
|
$
|
32.10
|
|
The
following table summarizes additional information on Marina’s stock options outstanding at September 30, 2017:
|
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
|
|
$
|
0.10
|
|
14,000
|
|
|
|
4.30
|
|
|
$
|
1.00
|
|
|
|
14,000
|
|
|
$
|
1.00
|
|
$
|
0.17
- .018
|
|
64,600
|
|
|
|
4.13
|
|
|
|
1.72
|
|
|
|
24,300
|
|
|
|
1.70
|
|
$
|
0.26
- 0.82
|
|
48,400
|
|
|
|
2.73
|
|
|
|
4.62
|
|
|
|
48,400
|
|
|
|
4.62
|
|
$
|
1.07
- $2.20
|
|
102,150
|
|
|
|
5.74
|
|
|
|
10.73
|
|
|
|
102,150
|
|
|
|
10.73
|
|
$
|
47.60
- $87.60
|
|
2,100
|
|
|
|
.69
|
|
|
|
676.00
|
|
|
|
2,100
|
|
|
|
676.00
|
|
$
|
127.60
- $207.60
|
|
2,150
|
|
|
|
.69
|
|
|
|
1,582.98
|
|
|
|
2,150
|
|
|
|
1,582.98
|
|
|
Totals
|
|
233,400
|
|
|
|
4.53
|
|
|
$
|
26.85
|
|
|
|
193,100
|
|
|
$
|
32.10
|
|
Weighted-Average
Exercisable Remaining Contractual Life (Years) 4.53
In
January 2017, the Company granted a total of 48,600 stock options to directors and officers for services. One-half of the options
vest immediately and one-half of the options vest on the one-year anniversary of the grant date. The options have an exercise
price of $1.70 and a five-year term.
In
February 2017, the Company granted a total of 16,000 stock options to key employees for services. The options vest on the one-year
anniversary of the grant date, have an exercise price of $1.80, and have a five-year term.
Subsequent
to the date of the financial statements, in October 2017, we appointed our Chief Financial Officer and our Chief Legal Officer.
In connection with these appointments, we granted to each such officer options to purchase up to 60,000 shares of our common stock
under our 2014 Long-Term Incentive Plan, with all of such options vesting and becoming exercisable on the one-year anniversary
of the grant date.
At
September 30, 2017, we had $36,573 of total unrecognized compensation expense related to unvested stock options. Total expense
related to stock options was $59,568 for the nine months ended September 30, 2017.
At
September 30, 2017, the intrinsic value of options outstanding or exercisable was $201,100 as there were 101,800 options outstanding
with an exercise price less than $2.80, the per share closing market price of our common stock at that date.
Note
7 — Intellectual Property and Collaborative Agreements
Novosom
Agreements
In
July 2010, Marina entered into an agreement pursuant to which Marina acquired intellectual property for Novosom’s SMARTICLES-based
liposomal delivery system. In February 2016, Marina issued Novosom 20,548 shares of common stock valued at approximately $58,000
as additional consideration under such agreement.
In
March 2016, Marina entered into a license agreement covering certain of Marina’s platforms for the delivery of an undisclosed
genome editing technology. Under the terms of the agreement, Marina received an upfront license fee of $250,000 and could receive
up to $40 million in success-based milestones. In April 2016, Marina issued Novosom 47,468 shares of common stock valued at approximately
$75,000 for amounts due under this agreement.
In
July 2016, Marina entered into a license agreement with an undisclosed licensee that grants such licensee rights to use Marina’s
technology and intellectual property to develop and commercialize products combining certain molecules with Marina’s liposomal
delivery technology known as NOV582. Under the terms of this agreement, the licensee agreed to pay to us an upfront license fee
in the amount of $350,000 (to be paid in installments through the end of 2017), along with milestone payments on a per-licensed-product
basis and royalty payments in the low single digit percentages. As of September 30, 2016, Marina had received $50,000 per the
terms of this license agreement. In November 2016, we issued 11,905 shares with a value of $15,000 to Novosom as the equity component
owed under Marina’s July 2016 license agreement.
Arrangements
with LipoMedics
In
February 2017, we entered into a License Agreement (the “License Agreement”) with LipoMedics, pursuant to which, among
other things, we provided to LipoMedics a license to our SMARTICLES platform for further development of Lipomedics’s proprietary
phospholipid nanoparticles that can deliver protein, small molecule drugs, and peptides. These are not currently being developed
at Marina and Marina has no IP around these products. On the same date, we also entered into a Stock Purchase Agreement with LipoMedics
pursuant to which we issued to LipoMedics an aggregate of 86,207 shares of our common stock for a total purchase price of $250,000.
Under
the terms of the License Agreement, we could receive up to $90 million in success-based milestones based on commercial sales of
licensed products. In addition, if LipoMedics determines to pursue further development and commercialization of products under
the License Agreement, LipoMedics agreed, in connection therewith, to purchase shares of our common stock for an aggregate purchase
price of $500,000, with the purchase price for each share of common stock being the greater of $2.90 or the volume weighted average
price of our common stock for the thirty (30) trading days immediately preceding the date on which LipoMedics notifies us that
it intends to pursue further development or commercialization of a licensed product.
If
LipoMedics breaches the License Agreement, we shall have the right to terminate the License Agreement effective sixty (60) days
following delivery of written notice to LipoMedics specifying the breach, if LipoMedics fails to cure such material breach within
such sixty (60) day period. LipoMedics may terminate the License Agreement by giving thirty (30) days’ prior written notice
to us.
Vuong
Trieu, Ph.D., our Executive Chairman, is the Chairman of the Board and Chief Operating Officer of LipoMedics.
In
consideration Lipomedics agreed to the following fee schedule: 1) Evaluations License Fee. Simultaneous with the execution and
delivery of the License Agreement, Lipomedics shall enter into a Stock Purchase Agreement in form and substance reasonably acceptable
to Marina and Lipomedics, pursuant to which Marina will sell to Lipomedics shares of the common stock of Marina for an aggregate
purchase price of $0.25 million, with the purchase price for each share of Marina common stock being $2.90. 2) Commercial License
Fee. Unless the License Agreement is earlier terminated, within thirty (30) days following Lipomedics’s delivery of an Evaluation
Notice advising that it intends to pursue, or cause to be pursued, further development and commercialization of Licensed Products.
3) For up to and including three Licensed Products, Lipomedics shall pay to Marina a milestone (collectively the “Sales
Milestones”) of $10 million upon reaching Commercial Sales in the Territory in any given twelve month period equal to or
greater than $500 million for a given Licensed Product and of $20 million upon reaching Commercial Sales in any given twelve month
period equal to or greater than $1 million for such Licensed Product, such payments to be made within thirty (30) days following
the month in which such Commercial Sale targets are met.
Arrangements
with Oncotelic Inc.
In
July 2017, we entered into a License Agreement (the “License Agreement”) with Oncotelic, Inc. (“Oncotelic”)
pursuant to which, among other things, we provided to Oncotelic a license to our SMARTICLES platform for the delivery of antisense
DNA therapeutics, as well as a license to our conformationally restricted nucleotide (“CRN”) technology with respect
to TGF-Beta. Under the terms of the License Agreement, Oncotelic also agreed to purchase 49,019 shares of our common stock for
an aggregate purchase price of $0.25 million ($5.10 per share), with such purchase and sale to be made pursuant to a Stock Purchase
Agreement to be entered into between us and Oncotelic within thirty (30) days following the date of the License Agreement.
Under
the terms of the License Agreement, we could receive up to $90 million in success-based milestones based on commercial sales of
licensed products. In addition, if Oncotelic determines to pursue further development and commercialization of products under
the License Agreement, Oncotelic agreed, in connection therewith, to purchase shares of our common stock for an aggregate purchase
price of $0.5 million, with the purchase price for each share of common stock being the greater of $5.10 or the volume weighted
average price of our common stock for the thirty (30) trading days immediately preceding the date on which Oncotelic notifies
us that it intends to pursue further development or commercialization of a licensed product.
If
Oncotelic breaches the License Agreement, we shall have the right to terminate the License Agreement effective sixty (60) days
following delivery of written notice to Oncotelic specifying the breach, if Oncotelic fails to cure such material breach within
such sixty (60) day period. Oncotelic may terminate the License Agreement by giving thirty (30) days’ prior written notice
to us.
Dr.
Trieu, our Executive Chairman, is the principal stockholder and Chief Executive Officer of Oncotelic.
Sale
of DiLA
2
Assets
In
July 2017, we entered into a binding term sheet with a third-party purchaser (“Purchaser”) pursuant to which Purchaser
will purchase from us the patents, know-how, agreements, records and certain other assets relating to our DiLA
2
delivery
system. The consideration to be paid by Purchaser to us as a result of this transaction shall consist of: (i) an initial payment
of $0.3 million to be paid upon the closing of the asset sale; and (ii) an additional $1.2 million to be paid upon the first to
occur of (x) a financing in which third party investors purchase equity and/or debt securities of Purchaser resulting in aggregate
proceeds to Purchaser of not less than $15 million and (y) the twelve-month anniversary of the closing.
The
closing of the transaction is subject to the negotiation, execution and delivery of a definitive asset purchase agreement and
Purchaser’s determination that its due diligence has been completed and has been found satisfactory, in Purchaser’s
sole discretion.
In
the term sheet, we agreed that we will negotiate exclusively with Purchaser with respect to the sale of the DiLA
2
assets for a period of ninety (90) days from the date of the term sheet. Although this ninety (90) day period has expired according
to the term sheet, negotiations are ongoing between us and the Purchaser.
Pursuant
to the term sheet, at any time following the closing of the transaction and prior to the payment to us of the additional $1.2
million payment, Purchaser may elect to unwind the transaction by providing written notice to such effect to us. Within thirty
(30) days of Purchaser’s issuance of such notice, Purchaser shall assign the DiLA
2
assets back to us.
We
will retain an exclusive, fully paid and royalty free license to DiLA
2
outside of the field of gene editing as well
as the rights to license DiLA
2
outside of gene editing.
Asset
Purchase Agreement
In
July 2017, Marina entered into an Asset Purchase Agreement with Symplmed Pharmaceuticals LLC and its wholly-owned subsidiary Symplmed
Technologies, LLC pursuant to which the Company purchased from the Sellers, for an aggregate purchase price of $75,000 in cash,
certain specified assets of the Sellers relating to the Sellers’ patented technology platform known as DyrctAxess that offers
enhanced efficiency, control and information to empower patients, physicians and manufacturers to help achieve optimal care (see
Note 2).
Note
8 – Commitments and Contingencies
Amendment
to Agreement with Windlas Healthcare Private Limited
On
August 17, 2017, we entered into an amendment (the “Amendment”) of that certain Pharmaceutical Development Agreement
dated as of March 30, 2017 by and between Windlas Healthcare Private Limited (“Windlas”) and our company (the “Development
Agreement”), relating to the development by Windlas of certain pharmaceutical products to be used for conducting clinical
trials or for regulatory submissions, as more fully described therein. Pursuant to the Amendment, we and Windlas agreed to amend
the Development Agreement to reflect our agreement to issue to Windlas, and Windlas’ agreement to accept from us, in lieu
of cash payments with respect to forty percent (40%) of the total amount reflected on invoices sent from time to time by Windlas
to us, shares of our common stock having an aggregate value equal to forty percent (40%) of such invoiced amount (with the remaining
portion of the invoiced amount being paid in cash). The maximum value of common stock that may be issued to Windlas pursuant to
the Development Agreement (as modified by the Amendment) is $2 million. The parties also agreed that the foregoing payment arrangement
would apply to any Contract Manufacturing and Supply Agreement (or similar agreement) relating to the manufacturing of commercial
batches of the products covered by the Development Agreement that may be entered into between the parties.
Litigation
Because
of the nature of the Company’s activities, the Company is subject to claims and/or threatened legal actions, which arise
out of the normal course of business. Other than the disclosure below, as of the date of this filing, the Company is not aware
of any pending lawsuits against the Company, its officers or directors.
The
Company has been named on a complaint filed in New York State as a defendant in the matter entitled
Vaya Pharma, Inc. v. Symplmed
Technologies, Inc., Symplmed Pharmaceuticals, Inc., Erik Emerson and Marina Biotech, Inc.
While this complaint has been filed
in the Supreme Court of the State of New York, the Company has not been legally served. The complaint alleges, in relevant part,
that: (i) the sale by Symplmed Pharmaceuticals, Inc. of its assets related to its Prestalia product, and the sale by Symplmed
Technologies, Inc. of its assets related to its DyrctAxess platform, should be set aside pursuant to New York law as they were
consummated without fair consideration to the sellers (the “Symplmed Defendants”), and thereby had the effect of fraudulently
depriving the creditors of the Symplmed Defendants, including Vaya Pharma, Inc., of funds that could have been used to pay their
debts; and (ii) the Company is liable, as successor, for any and all claims by Vaya Pharma, Inc. against the Symplmed Defendants,
though pursuant to the agreement the Company is only contractually responsible for liabilities that accrue after the parties entered
into the agreement for Prestalia and any liabilities that existed prior to the agreement are contractually held by Symplmed. If
and when the Company is legally served, it is the intention of the Company to dispute jurisdiction, the sufficiency of the pleading
and the claims set forth in this complaint, and to defend this matter, vigorously. However, due to the inherent uncertainties
of litigation, the ultimate outcome of this matter is uncertain. An unfavorable outcome could materially and adversely affect
the business, financial condition and results of operations of the Company.
Note
9 - Subsequent Events
Except
for the event(s) discussed in this Note 9, there were no subsequent events that required recognition or disclosure. The Company
evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission.
In
September 2017, we entered into an engagement letter with a financial advisor pursuant to which, among other things, we agreed
to issue to such financial advisor, in partial consideration of the services to be rendered under the engagement letter, an aggregate
of 500,058 shares of our common stock. The shares were issued in November 2017.
I
n
October 2017, we appointed our Chief Financial Officer and our Chief Legal Officer. In connection with these appointments, we
granted to each such officer options to purchase up to 60,000 shares of our common stock under our 2014 Long-Term Incentive Plan,
with all of such options vesting and becoming exercisable on the one-year anniversary of the grant date.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking
Statements
This
report contains forward-looking statements. The following discussion should be read in conjunction with the financial statements
and related notes contained in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (“SEC”)
on March 31, 2017. Certain statements made in this discussion are “forward-looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995. 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 made in a quarterly report on Form 10-Q may include statements about:
●
|
our
ability to obtain additional and substantial funding for our company on an immediate basis, whether pursuant to a capital
raising transaction arising from the sale of our securities, a strategic transaction, debt or otherwise and at terms acceptable
to us;
|
●
|
our
ability to attract and/or maintain research, development, commercialization and manufacturing partners;
|
●
|
the
ability of our company and/or a partner to successfully complete product research and development, including pre-clinical
and clinical studies and commercialization;
|
●
|
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 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, employees and consultants as necessary; and
|
●
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the
costs associated with any product liability claims, patent prosecution, patent infringement lawsuits and other lawsuits.
|
These
statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the
section entitled “Risk Factors” set forth in our Annual Report on Form 10-K for the year ended December 31, 2016,
as filed with the SEC on March 31, 2017, any of which may cause our company’s or our industry’s actual results, levels
of activity, performance or achievements to be materially different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. These risks may cause the Company’s or its 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.
Although
we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity or performance. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness
of these forward-looking statements. We are under no duty to update any forward-looking statements after the date of this report
to conform these statements to actual results.
As
used in this quarterly report and unless otherwise indicated, the terms “we,” “us,” “our”
or the “Company” refer to Marina Biotech, Inc., a Delaware corporation, and its wholly-owned subsidiaries, , MDRNA
Research, Inc., Cequent Pharmaceuticals, Inc. and Atossa HealthCare, Inc.; and IThenaPharma Inc. Unless otherwise specified, all
dollar amounts are expressed in United States dollars. Our common stock is currently listed on the OTC Market, OTCQB tier, under
the symbol “MRNA.”
Corporate
Overview
We
are a fully integrated, commercial stage biopharmaceutical company delivering proprietary drug therapeutics for significant unmet
medical needs in the U.S., Europe and certain additional international markets. Our portfolio of products currently focuses on
fixed dose combinations (“FDC”) in hypertension, arthritis, pain and oncology allowing for innovative solutions to
such unmet medical needs. Our mission is to provide effective and patient centric treatment for hypertension – including
resistant hypertension. In this connection, we acquired from Symplmed and its wholly-owned subsidiary, Symplmed Technologies,
LLC, certain of the intellectual property assets related to the patented technology platform known as DyrctAxess, also called
Total Care, that offers enhanced efficiency, control and information to empower patients, physicians and manufacturers to help
achieve optimal care.
In
doing so, we have created a universal platform for the effective treatment of hypertension as well as for the distribution of
FDC hypertensive drugs, such as our FDA-approved product Prestalia, and the other products in our pipeline, devices for therapeutic
drug monitoring, blood pressure, and other cardiac monitors, as well as services such as counseling and prescription reminders.
We
currently have one commercial and three clinical development programs underway: (i) Prestalia®, a single-pill fixed dose combination
of perindopril, an angiotensin-converting-enzyme (“ACE”) inhibitor and amlodipine, a calcium channel blocker (“CCB”),
which has been approved by the U.S. Food and Drug Administration (“FDA”) and is actively marketed in the U.S.; (ii)
our next generation celecoxib program drug candidates for the treatment of acute and chronic pain, IT-102 and IT-103, each of
which is an FDC of celecoxib, a COX-2 selective nonsteroidal anti-inflammatory drug (“NSAID”) and either lisinopril
(IT-102) or olmesartan (IT-103) – both Lisinopril and olmesartan are antihypertension drugs; (iii) CEQ508, an oral delivery
of small interfering RNA (“siRNA”) against beta-catenin, combined with IT-102 to suppress polyps in the precancerous
syndrome and orphan indication Familial Adenomatous Polyposis (“FAP”); and (iv) CEQ508 combined with IT-103 to treat
Colorectal Cancer.
Our
current focus is primarily on the commercialization of Prestalia and secondarily the development of IT-102 and IT-103. We believe
that by combining a COX-2 inhibitor with an antihypertensive in a single FDC oral tablet, IT-102 and IT-103 will each offer improved
safety profiles as compared to currently available and previously marketed COX-2 inhibitors as well as address patients with chronic
pain who are commonly taking antihypertension drugs concurrently. We further believe that the current opioid addiction epidemic
in the U.S. has been driven in part by the withdrawal from the market of certain COX-2 inhibitors due to their associated risk
of cardiovascular-related adverse events. We plan to license or divest our other assets since they no longer align with our focus
on the treatment of hypertension.
We
intend to create value through the continued commercialization of our FDA-approved product, Prestalia, while moving our FDC development
programs forward to further strengthen our commercial presence. We intend to retain ownership and control of all of our product
candidates, but in the interest of accelerated growth and market penetration, we will also consider partnerships with pharmaceutical
or biotechnology companies in order to reduce time to market and to balance development risks, both clinically and financially.
As
our strategy is to be a fully integrated biopharmaceutical company, we will drive a primary corporate focus on revenue generation
through our commercial assets, with a secondary focus on advancing our FDC pipeline to further enhance our commercial presence.
Reverse
Merger with IThenaPharma
Marina
was incorporated under the laws of the State of Delaware under the name Nastech Pharmaceutical Company on September 23, 1983,
and IThena was incorporated under the laws of the State of Delaware on September 3, 2014. On November 15, 2016, Marina entered
into, and consummated the transactions contemplated by, an Agreement and Plan of Merger between and among Marina, IThenaPharma
Inc., a Delaware corporation (“IThena”), IThena Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary
of Marina (“Merger Sub”), and Vuong Trieu as the IThena representative (the “Merger Agreement”), pursuant
to which IThena merged into Merger Sub (the “Merger”). IThena is deemed to be the accounting acquirer in the Merger,
and thus the historical financial statements of IThena are treated as the historical financial statements of our company and are
reflected in our quarterly and annual reports for periods ending after the effective time of the Merger, or November 15, 2016.
Accordingly, beginning with our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed with the SEC
on March 31, 2017, we have reported the results of IThena and Marina and their respective subsidiaries on a consolidated basis.
As a result of the Merger, while we have presented the results for the three and nine periods ended September 30, 2017 and 2016,
the results for the 2016 periods reflect only the results of IThena.
IThena
is a developer of personalized therapies for combined pain/hypertension through its proprietary FDC technology and point of care
Therapeutic Drug Monitoring system (“TDM”). Through the combination of these technologies, IThena is looking to deliver
therapies with improved compliance and personalized dosing. IThena’s lead products are the celecoxib FDCs which include
IT-102 and IT-103, FDCs of celecoxib and lisinopril and celecoxib and olmesartan, respectively. IT-102 and IT-103 are being developed
as celecoxib without the drug induced edema associated with celecoxib alone. IT-102 and IT-103 are being developed initially for
combined arthritis / hypertension and subsequently for treatment of pain, or cancer, or other indications requiring high doses
of celecoxib.
Acquisition
of Prestalia
Subsequent
to the Merger we executed on our strategy to become a commercial stage company with the acquisition of Prestalia from Symplmed.
Specifically, on June 6, 2017 we entered into an Asset Purchase Agreement with Symplmed for the purchase of Prestalia, which is
an FDA-approved and marketed anti-hypertensive drug. This is a FDC of perindopril arginine, an ACE inhibitor, and amlodipine besylate,
a calcium channel blocker (“CCB”), and is indicated as a first line therapy for hypertension control.
We
believe that the acquisition of Prestalia transforms our company from a clinical stage company to a commercial organization. Prestalia
was approved in January 2015 and has been marketed in select U.S. states since then by Symplmed. Prestalia sales saw solid growth
through September of 2016, via new patient acquisition and strong patient retention. Due to lack of funding, further revenues
and marketing of Prestalia was ceased by the end of calendar year 2016. In the near term our focus will be dedicated to re-acquiring
prior Prestalia patients, with subsequent efforts dedicated to building a strong sales team to fully market the product. This
includes our efforts to re-establish our relationships with our contract manufacturers to support marketing Prestalia.
We
believe that the Prestalia acquisition will not only make us a revenue-stage company, but also that the marketing, distribution
and sales network that we will build will pave a strong foundation for the promotion and commercialization of our two other hypertension
pipeline products – namely IT-102 and IT-103, as well as any other similar products that we internally develop or acquire.
Line
Letters with Related Parties
In
connection with the Merger, Marina entered into a line of credit dated November 15, 2016 with Dr. Trieu, our Executive Chairman,
for an unsecured line of credit in an amount not to exceed $540,000, to be used for current operating expenses (“Line Letter”).
As of September 30, 2017, Dr. Trieu has advanced an aggregate of $540,00 under the Line Letter. Advances made under the Line Letter
bear interest at the rate of five percent (5%) per annum, are evidenced by a demand promissory note issued to Dr. Trieu, and are
due and payable upon demand by Dr. Trieu.
On
April 4, 2017, we entered into a Line Letter with Autotelic for an unsecured line of credit in an amount not to exceed $500,000,
to be used for current operating expenses. Autotelic was to consider requests for advances under the Line Letter until September
1, 2017. The Company and Autotelic Inc. are in discussions to extend this line letter through December 31, 2017. Advances
made under the Line Letter bear interest at the rate of five percent (5%) per annum, are evidenced by the Demand Promissory Note
issued to Autotelic, and are due and payable upon demand by Autotelic. We currently have approximately $407,000 of available
funds under this line of credit. We believe that this available cash is sufficient to fund our operations through December 31,
2017.
Recent
Developments During the Three Months Ended September 30, 2017
Amendment
of Notes and Warrants
On
July 3, 2017, we entered into an amendment agreement (the “Amendment Agreement”) with respect to those certain promissory
notes in the aggregate principal amount of $300,000 (each a “Note” and collectively the “Notes”) that
we issued to two accredited investors (the “Purchasers”) pursuant to that certain Note Purchase Agreement dated June
20, 2016 by and among us and the Purchasers (the “Purchase Agreement”), and those certain warrants to purchase up
to an aggregate of 951,263 shares of our common stock that were originally issued pursuant to that certain Note and Warrant Purchase
Agreement dated as of February 10, 2012 by and among the Company, MDRNA Research, Inc., Cequent Pharmaceuticals, Inc. and the
purchasers identified on the signature pages thereto (as amended from time to time), that are currently held by the Purchasers,
and that were amended concurrently with the Purchase Agreement to, among other things, extend the price protection with respect
to dilutive offerings afforded thereunder to June 19, 2017 (such warrants, as so amended, the “Amended Prior Warrants”).
Pursuant
to the Amendment Agreement, among other things: (i) the maturity date of the Notes was extended from June 20, 2017 to December
31, 2017; (iii) the Purchasers agreed, upon the closing of any financing transaction yielding aggregate gross proceeds to us of
not less than $3 million that occurs while the Notes are outstanding (any such financing transaction, the “Qualifying Financing
Transaction”), to convert the outstanding principal balance and any accrued interest thereon into the securities of our
company to be issued and sold at the closing of the Qualifying Financing Transaction at the most favorable price and terms at
which our securities are sold to investors in the Qualifying Financing Transaction; (iv) the parties agreed to extend the price
protection with respect to the Amended Prior Warrants resulting from dilutive issuances until the expiration of the term of the
Amended Prior Warrants (currently February 10, 2020); provided, that such protection shall not apply to the Qualifying Financing
Transaction; and (v) we agreed to issue to the Purchasers, on a pro rata basis, such number of our securities as are being issued
to investors in the Qualifying Financing Transaction as have an aggregate purchase price equal to $375,000.
Arrangements
with Oncotelic Inc.
On
July 17, 2017, we entered into a License Agreement (the “License Agreement”) with Oncotelic, Inc. (“Oncotelic”)
pursuant to which, among other things, we provided to Oncotelic a license to our SMARTICLES platform for the delivery of antisense
DNA therapeutics, as well as a license to our conformationally restricted nucleotide (“CRN”) technology with respect
to TGF-Beta. Under the terms of the License Agreement, Oncotelic also agreed to purchase 49,019 shares of our common stock for
an aggregate purchase price of $250,000 ($5.10 per share), with such purchase and sale to be made pursuant to a Stock Purchase
Agreement to be entered into between us and Oncotelic within thirty (30) days following the date of the License Agreement.
Under
the terms of the License Agreement, we could receive up to $90 million in success-based milestones based on commercial sales of
licensed products. In addition, if Oncotelic determines to pursue further development and commercialization of products under
the License Agreement, Oncotelic agreed, in connection therewith, to purchase shares of our common stock for an aggregate purchase
price of $500,000, with the purchase price for each share of common stock being the greater of $5.10 or the volume weighted average
price of our common stock for the thirty (30) trading days immediately preceding the date on which Oncotelic notifies us that
it intends to pursue further development or commercialization of a licensed product.
Dr.
Trieu, our Executive Chairman, is the principal stockholder and Chief Executive Officer of Oncotelic.
Sale
of DiLA
2
Assets
On
July 21, 2017, we entered into a binding term sheet with a third-party purchaser (the “Purchaser”) pursuant to which
the Purchaser will purchase from us the patents, know-how, agreements, records and certain other assets relating to our DiLA
2
delivery system. The consideration to be paid by Purchaser to us as a result of this transaction shall consist of: (i) an
initial payment of $300,000 to be paid upon the closing of the asset sale; and (ii) an additional $1.2 million to be paid upon
the first to occur of (x) a financing in which third party investors purchase equity and/or debt securities of Purchaser resulting
in aggregate proceeds to Purchaser of not less than $15 million and (y) the twelve-month anniversary of the closing.
The
closing of the transaction is subject to the negotiation, execution and delivery of a definitive asset purchase agreement and
Purchaser’s determination that its due diligence has been completed and has been found satisfactory, in Purchaser’s
sole discretion.
We
agreed that we will negotiate exclusively with Purchaser with respect to the sale of the DiLA
2
assets for a period
of ninety (90) days from the date of the term sheet. Although this ninety (90) day period has expired according to the term sheet,
negotiations are ongoing between us and the Purchaser. Pursuant to the term sheet, at any time following the closing of the transaction
and prior to the payment to us of the additional $1.2 million payment, Purchaser may elect to unwind the transaction by providing
written notice to such effect to us. Within thirty (30) days of Purchaser’s issuance of such notice, Purchaser shall assign
the DiLA
2
assets back to us. We will retain an exclusive, fully paid and royalty free license to DiLA
2
outside of the field of gene editing as well as the rights to license DiLA 2 outside of gene editing.
Acquisition
of DyrctAxess Platform
On
July 21, 2017, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Symplmed Pharmaceuticals
LLC (“Symplmed Pharma”) and its wholly-owned subsidiary Symplmed Technologies, LLC (“Symplmed Tech”, and
together with Symplmed Pharma, each as “Seller” and together the “Sellers”) pursuant to which we purchased
from the Sellers, for an aggregate purchase price of $75,000 in cash, certain specified assets of the Sellers relating to the
Sellers’ patented technology platform known as DyrctAxess that offers enhanced efficiency, control and information to empower
patients, physicians and manufacturers to help achieve optimal care. The parties entered into the Purchase Agreement in furtherance
of the obligations of Symplmed Pharma pursuant to that certain Asset Purchase Agreement dated as of June 5, 2017 between the Company
and Symplmed Pharma pursuant to which, among other things, the Company acquired the assets of Symplmed Pharma relating to Prestalia.
Reverse
Stock Split
On
August 1, 2017, we filed a Certificate of Amendment of our Amended and Restated Certificate of Incorporation to effect a one-for-ten
reverse split of our issued and outstanding shares of common stock. Our common stock commenced trading on the OTCQB tier of the
OTC Markets on a split-adjusted basis on Thursday, August 3, 2017. There was no change to the authorized shares of our common
stock as a result of the reverse split. No fractional shares were issued in connection with the reverse split; any fraction of
a share of common stock that would otherwise have resulted from the reverse split was rounded up to the nearest whole share of
common stock.
Amendment
to Agreement with Windlas Healthcare Private Limited
On
August 17, 2017, we entered into an amendment (the “Amendment”) of that certain Pharmaceutical Development Agreement
dated as of March 30, 2017 by and between Windlas Healthcare Private Limited (“Windlas”) and our company (the “Development
Agreement”), relating to the development by Windlas of certain pharmaceutical products to be used for conducting clinical
trials or for regulatory submissions, as more fully described therein. Pursuant to the Amendment, we and Windlas agreed to amend
the Development Agreement to reflect our agreement to issue to Windlas, and Windlas’ agreement to accept from us, in lieu
of cash payments with respect to forty percent (40%) of the total amount reflected on invoices sent from time to time by Windlas
to us, shares of our common stock having an aggregate value equal to forty percent (40%) of such invoiced amount (with the remaining
portion of the invoiced amount being paid in cash). The maximum value of common stock that may be issued to Windlas pursuant to
the Development Agreement (as modified by the Amendment) is $2 million. The parties also agreed that the foregoing payment arrangement
would apply to any Contract Manufacturing and Supply Agreement (or similar agreement) relating to the manufacturing of commercial
batches of the products covered by the Development Agreement that may be entered into between the parties.
Sale
of Smarticles Assets
On
September 8, 2017, we entered into an Intellectual Property Purchase Agreement (the “IP Purchase Agreement”) with
Novosom Verwaltungs GmbH (“Novosom”) pursuant to which we sold to Novosom substantially all of our intellectual property
estate relating to our Smarticles delivery technology (the “Smarticles IP”). We previously acquired such Smarticles
IP from Novosom pursuant to that certain Asset Purchase Agreement dated July 27, 2010 between us and Novosom (the “Original
Purchase Agreement”). Following the date of the Original Purchase Agreement, we entered into certain agreements with third
parties pursuant to which we provided to such third parties certain licenses and rights with respect to the Smarticles IP (the
“License Agreements”).
As
per the IP Purchase Agreement, Novosom paid to us $1.00 in cash, and thereafter we shall no longer be responsible for the ongoing
costs of maintaining the Smarticles IP. In addition, the parties agreed that we would retain rights to any future payments that
may be due to us from licensees pursuant to the License Agreements, including milestone and royalty payments, if any, and Novosom
agreed to relinquish any rights that it may have under the Original Purchase Agreement to any portion of such payments.
Appointment
of Executive Officers
On
October 2, 2017, we entered into an Offer Letter with Amit Shah pursuant to which Mr. Shah shall serve as our Chief Financial
Officer, and on October 12, 2017, we entered into an Offer Letter with Peter D. Weinstein, Ph.D., J.D. pursuant to which Dr. Weinstein
shall serve as our Chief Legal Officer, in each case effective immediately. We agreed to pay a base salary of $120,000 per year
to Mr. Shah and a base salary of $150,000 per year to Dr. Weinstein. It is anticipated that each of Mr. Shah and Dr. Weinstein
will devote approximately 50% of his business time to the performance of his duties for the Company. Each such officer shall be
shall be entitled to receive a discretionary bonus as determined by our Board of Directors in an amount up to 40% of such officer’s
base salary. Our obligations to make the foregoing payments shall not become effective unless and until the closing of a single
capital raising transaction involving the issuance by us of our equity (or equity-linked) securities yielding aggregate gross
proceeds to us of not less than $5 million on or prior to December 31, 2017. We also granted to each such officer options to purchase
up to 60,000 shares of our common stock at an exercise price of $2.70 per share (with respect to Mr. Shah) and $2.40 per share
(with respect to Dr. Weinstein) under our 2014 Long-Term Incentive Plan, with all of such options vesting and becoming exercisable
on the one-year anniversary of the grant date.
Results
of Operations
Comparison
of the Three Months Ended September 30, 2017 to the Three Months Ended September 30, 2017
Our
loss before income taxes for the three months ended September 30, 2017 is summarized as follows in comparison to the three months
ended September 30, 2016. As a result of the November 2016 Merger with IThena, the results of operations for the three months
ended September 30, 2017 include the operating expenses of Marina and IThena while the results for the three months ended September
30, 2016 include only the results of IThena.
|
|
Three
Months Ended
|
|
|
|
September
30, 2017
|
|
|
September
30, 2016
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
Research
and development
|
|
|
232,896
|
|
|
|
50,683
|
|
General
and administrative expenses
|
|
|
680,063
|
|
|
|
47,065
|
|
Amortization
|
|
|
123,038
|
|
|
|
-
|
|
Other
income (expense), net
|
|
|
63,813
|
|
|
|
(378
|
)
|
Loss
before provision for income taxes
|
|
$
|
(972,184
|
)
|
|
$
|
(98,126
|
)
|
Revenues
We
had no revenues in the three months ended September 30, 2017 or 2016. 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 continue to seek research and development collaborations as well as licensing transactions to fund business
operations.
Expenses
Our
expenses for the three months ended September 30, 2017 are summarized as follows in comparison to our expenses for the three months
ended September 30, 2016. As stated above, as a result of the November 2016 Merger with IThena, the results of operations for
the three months ended September 30, 2017 include the operating expenses of Marina and IThena while the results for the three
months ended September 30, 2016 include only the results of IThena:
Research
and Development
Research
and development (“R&D”) expense increased by $182,213, as compared to the three months ended September 30, 2016,
primarily due to costs related to the MSA with Autotelic Inc., where the Company pays cash to Autotelic Inc. for their services
totaling $96,151, on a non-cash basis, through the issuance of warrants valued at $96,151. Other R&D expenses consist of costs
of sublicensing fees, clinical development, pre-clinical studies, consulting, other outside services, and other costs.
General
and Administrative
General
and administrative (“G&A”) expense increased by $632,998 for the three months ended September 30, 2107, as compared
to the three months ended September 30, 2016, primarily due to personnel costs of $192,676 and costs related to the MSA with Autotelic
Inc., where the Company pays cash to Autotelic Inc. for their services totaling $46,859, on a non-cash basis, through the issuance
of warrants valued at $46,859. Other G&A expenses consisted of legal costs of approximately $176,000, accounting and auditing
fees of approximately $50,000, approximately $56,000 for board member fees and approximately $37,000 for insurance costs. No similar
expenses were recorded during the three months ended September 30, 2016.
Amortization
Expense
Amortization
expenses relates to amortization of intangible assets acquired in the November 15, 2016 merger and the asset purchases on June
5, 2017 and July 21, 2017, with a combined estimated fair value of $3,056,066.
Other
Income (Expense)
|
|
Three
Months Ended
|
|
|
|
September
30, 2017
|
|
|
September
30, 2016
|
|
Interest
expense
|
|
$
|
(24,301
|
)
|
|
$
|
(378
|
)
|
Change
in fair value liability of warrants
|
|
|
7,442
|
|
|
|
-
|
|
Change
in fair value of derivative liability
|
|
|
80,672
|
|
|
|
-
|
|
Total
other expense, net
|
|
$
|
63,813
|
|
|
$
|
(378
|
)
|
Total
net other expense for the three months ended September 30, 2017 increased $64,191 compared to the three months ended September
30, 2016. The increase is primarily attributable to a decrease in the estimated fair value of price adjustable warrants and the
derivative liability of approximately $7,000 and $81,000, respectively, partially offset by an increase in interest expense of
$24,000 on notes payable assumed in the Merger.
The
fair value liability is revalued each balance sheet date utilizing probability-weighted Black-Scholes computations, with the decrease
or increase in fair value being reported in the statement of operations as other income or expense, respectively.
Comparison
of the Nine Months Ended September 30, 2017 to the Nine Months Ended September 30, 2016
As
a result of the Merger with IThena, the results of operations for the nine months ended September 30, 2017 include the operating
expenses of Marina and IThena while the results for the nine months ended September 30, 2016 include only the expenses of IThena.
Our loss before income taxes for the nine months ended September 30, 2017 is summarized as follows in comparison to the nine months
ended September 30, 2016:
|
|
Nine
Months Ended
|
|
|
|
September
30, 2017
|
|
|
September
30, 2016
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
Research
and development
|
|
|
746,221
|
|
|
|
107,910
|
|
General
and administrative expenses
|
|
|
1,878,301
|
|
|
|
232,469
|
|
Amortization
|
|
|
327,642
|
|
|
|
-
|
|
Other
income (expense), net
|
|
|
(273,191
|
)
|
|
|
(378
|
)
|
Loss
before provision for income taxes
|
|
$
|
(3,225,355
|
)
|
|
$
|
(340,757
|
)
|
Revenues
We
had no in revenues in the nine months ended September 30, 2017 or 2016. 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 continue to seek research and development collaborations as well as licensing transactions to fund business
operations.
Expenses
Our
expenses for the nine months ended September 30, 2017 are summarized as follows in comparison to our expenses for the nine months
ended September 30, 2016. As a result of the November 2016 Merger with IThena, the results of operations for the three months
ended September 30, 2017 include the operating expenses of Marina and IThena while the results for the three months ended September
30, 2016 include only the results of IThena.
Research
and Development
Research
and development (“R&D”) expense increased by $638,311, as compared to the nine months ended September 30, 2016,
primarily due to costs related to the MSA with Autotelic Inc., where the Company pays cash to Autotelic Inc. for their services
totaling $245,255 and, on a non-cash basis, through the issuance of warrants valued at $245,255. Other R&D expenses consist
of costs of sublicensing fees, clinical development, pre-clinical studies, consulting, other outside services, and other costs.
General
and Administrative
General
and administrative (“G&A”) expense increased by $1,645,832 for the nine months ended September 30, 2107, as compared
to the nine months ended September 30, 2016, primarily due to personnel costs and costs related to the MSA with Autotelic Inc.,
where the Company pays Autotelic Inc., where the Company pays cash to Autotelic Inc. for their services totaling $141,699 and,
on a non-cash basis, through the issuance of warrants valued at $141,699. Other G&A expenses consisted of legal costs of approximately
$540,000, accounting and auditing fees of approximately $194,000, approximately $169,000 for board member fees and approximately
$97,000 for insurance costs. No similar expenses were recorded during the nine months ended September 30, 2016.
Amortization
Expense
Amortization
expenses relates to amortization of intangible assets acquired in the Merger and the asset purchases on June 5, 2017 and July
21, 2017, with a combined estimated fair value of $3,056,066.
Other
Income (Expense)
|
|
Nine
Months Ended
|
|
|
|
September
30,2017
|
|
|
September
30, 2016
|
|
Interest
expense
|
|
$
|
(51,575
|
)
|
|
$
|
(378
|
)
|
Change
in fair value liability of warrants
|
|
|
(106,345
|
)
|
|
|
-
|
|
Change
in fair value of derivative liability
|
|
|
(115,271
|
)
|
|
|
-
|
|
Total
other expense, net
|
|
$
|
(273,191
|
)
|
|
$
|
(378
|
)
|
Total
net other expense for the nine months ended September 30, 2017 increased $272,813 compared to the nine months ended September
30, 2016. The increase is primarily attributable to an increase in the estimated fair value of price adjustable warrants and derivative
liability and interest expense on notes payable acquired in the Merger.
The
fair value liability is revalued each balance sheet date utilizing probability-weighted Black-Scholes computations, with the decrease
or increase in fair value being reported in the statement of operations as other income or expense, respectively.
Liquidity
& Capital Resources
Working
Capital Deficiency
|
|
September
30, 2017
|
|
|
December
31, 2016
|
|
Current
assets
|
|
$
|
63,307
|
|
|
$
|
316,480
|
|
Current
liabilities
|
|
|
(4,614,514
|
)
|
|
|
(2,967,669
|
)
|
Working
capital deficiency
|
|
$
|
(4,551,207
|
)
|
|
$
|
(2,651,189
|
)
|
Current
assets decreased by $253,173, which was attributable to a decrease in cash of $96,671 and a decrease in prepaid expenses of $156,502.
Current
liabilities increased by $1,646,845, which was primarily attributable to an increase of accounts payable of $364,247, an increase
of $299,166 in amounts due related parties, and an increase of $715,353 in convertible notes to related and unrelated parties.
Cash
Flows
|
|
Nine
Months Ended
|
|
|
|
September
30, 2017
|
|
|
September
30, 2016
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
$
|
(923,202
|
)
|
|
$
|
(296,143
|
)
|
Net
cash used in investing activities
|
|
|
(375,000
|
)
|
|
|
-
|
|
Net
cash provided by financing activities
|
|
|
1,201,531
|
|
|
|
50,000
|
|
Increase
(decrease) in cash and cash equivalents
|
|
$
|
(96,671
|
)
|
|
$
|
(246,143
|
)
|
The
increase in net cash used in operating activities during the nine months ended September 30, 2017, compared to 2016, was mainly
due to increased operating expenses subsequent to the Merger, offset by non-cash stock compensation of $272,000, amortization
of intangibles of $328,000, an increase in accounts payable of $355,000, an increase in accrued expenses of $639,000 and an increase
in amounts due to related party of $353,000.
The
Company used cash of $300,000 in investing activities for payments towards the July 21, 2017 Prestalia acquisition and $75,000
towards the DyrctAxess acquisition during the nine months ended September 30, 2017. This investment was made to transform the
Company to be a commercial stage company from a development stage company.
The
$1,151,531 increase in net cash provided by financing activities during the nine months ended September 30, 2017, compared to
2016, is primarily attributable to proceeds of $250,000 from the sale of stock, $380,888 from additional borrowings on related
party notes and convertible notes, $400,000 from the issuance of convertible notes, and $170,643 received from the conversion
of warrants to common stock.
We
will need to raise additional operating capital in calendar year 2017 in order 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
may not have the cash resources to continue as a going concern thereafter.
Going
Concern
The
condensed consolidated financial statements contained in this report have been prepared assuming that the Company
will
continue as a going concern. We have an accumulated deficit for the period from inception through September 30, 2017 in excess
of $5 million, as well as negative cash flows from operating activities. We had obtained a line of credit from Autotelic Inc.
of $500,000, of which we have utilized $92,590. As such, we currently have approximately $407,000 of available funds under
our line of credit with Autotelic Inc. that is being used to maintain operations. We believe that this available cash is sufficient
to fund our operations through December 31, 2017. These factors raise substantial doubt about our ability to continue as a
going concern. Management is in the process of evaluating various financing alternatives for operations, as we will need to finance
future research and development and operational activities and general and administrative expenses through fund raising in the
public or private debt and equity markets and strategic transactions.
The
interim condensed consolidated financial statements do not include any adjustments that may be necessary should the Company be
unable to continue as a going concern. Our continuation as a going concern is dependent on our ability to obtain additional financing
as may be required and ultimately to attain profitability. If we raise additional funds through the issuance of equity or equity-linked
securities, the percentage ownership of current shareholders could be reduced, and such securities might have rights, preferences
or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate
funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective business
endeavors or opportunities, which could significantly and materially restrict our future plans for developing our business and
achieving commercial revenues. If we are unable to obtain the necessary capital when needed, we may have to cease operations.
During
2016 and 2017, we have funded our losses primarily through the sale of common stock and warrants, revenue provided from our license
agreements, loans provided by Dr. Trieu and Autotelic Inc. pursuant to the Line Letters, the issuance of convertible notes and,
to a lesser extent, equipment financing facilities and secured loans. During the nine months ended September 30, 2017, we raised
$250,000 from the private placement of our equity securities, raised $400,000 from the issuance of convertible notes, received
$170,643 from the conversion of warrants to common stock, and borrowed $380,888 under the Line Letter from Dr. Trieu. In
addition, in April 2017, we entered into an additional credit agreement with Autotelic Inc., pursuant to which Autotelic Inc.
offered to the Company an unsecured line of credit in an amount not to exceed $500,000, to be used for current operating expenses
of the Company. We have utilized $92,590 and have approximately $407,000 available under the Line Letter with Autotelic Inc.
We believe that the cash available to us under this Line Letter will be sufficient to fund our operations through December 31,
2017.
Future
Financing
We
will require additional funds to implement the growth strategy for our business. As mentioned above, we have, in the past, raised
additional capital to both supplement our commercialization, clinical development and operational expenses. We will need to raise
additional funds required through equity financing, debt financing, strategic alliances or other sources, which may result in
further dilution in the equity ownership of our shares. There can be no assurance that additional financing will be available
when needed or, if available, that it can be obtained on commercially reasonable terms. If we will not be able to obtain the additional
financing on a timely basis as required, or generate significant material revenues from operations, we will not be able to meet
our other obligations as they become due and will be forced to scale down or perhaps even cease our operations.
Off-Balance
Sheet Arrangements
As
of September 30, 2017, 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 financial statements included herein for the period
ended September 30, 2017 and in the notes to our consolidated financial statements included in our Annual Report on Form 10-K
for the year ended December 31, 2016.
New
and Recently Adopted Accounting Pronouncements
Any
new and recently adopted accounting pronouncements are more fully described in Note 1 to our financial statements included herein
for the period ended September 30, 2017.