MARINA
BIOTECH, INC.
Condensed
Consolidated Statements of Changes in STOCKHOLDERS’ Equity
(Unaudited)
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Additional
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Common
Stock
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Paid-in
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Deferred
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Accumulated
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Number
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Par
Value
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Capital
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Compensation
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Deficit
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Total
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Balance,
December 31, 2016
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8,977,138
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$
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53,863
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$
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5,115,983
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$
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$
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(1,951,082
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)
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$
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3,218,764
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Sale
of common stock to related party
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86,207
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517
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249,483
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–
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–
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250,000
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Common
stock issued for services
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30,000
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180
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53,820
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–
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–
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54,000
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Common
stock issued for accounts payable
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622,296
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3,734
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972,980
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–
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–
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976,714
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Return
of common stock for note receivable
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(8,725
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)
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(52
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(31,352
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)
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–
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–
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(31,404
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Restricted
stock issued to officers
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70,000
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420
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245,580
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(216,600
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–
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29,400
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Stock
option compensation
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–
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–
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59,568
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–
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–
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59,568
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Conversion
of warrants to common stock
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60,944
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366
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170,277
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–
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–
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170,643
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Effects
of rounding due to reverse split
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(1
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–
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–
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–
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–
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-
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Net
loss
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–
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–
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–
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(2,253,971
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(2,253,971
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Balance,
June 30, 2017
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9,837,859
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$
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59,028.00
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$
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6,836,339
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$
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(216,600
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$
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(4,205,053
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$
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2,473,714
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The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MARINA
BIOTECH, INC.
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
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For
the Six Months Ended June 30,
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2017
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2016
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Cash
Flows Used in Operating Activities:
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Net
loss
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$
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(2,253,971
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$
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(243,431
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Adjustments
to reconcile net loss to net cash used in operating activities:
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Share
based compensation
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88,968
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-
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Common
shares issued for third party services
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54,000
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-
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Warrants
issued for services
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-
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36,470
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Amortization
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204,604
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-
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Fair
value liabilities for price adjustable warrants
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113,787
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-
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Change
in fair value of derivative liability
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195,943
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-
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Changes
in operating assets and liabilities:
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Prepaid
expenses and other assets
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41,374
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(479
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Accounts
payable
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330,351
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25,531
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Accrued
expenses
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298,491
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(23,503
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Due
to related party
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193,966
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(54,150
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Net
Cash used in operating activities
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(732,487
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(259,562
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Cash
Flows Used in Investing Activities:
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Purchase
of intangible asset
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(300,000
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-
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Net
cash used in investing activities
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(300,000
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-
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Cash
Flows from Financing Activities:
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Proceeds
from sales of common stock to related party
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250,000
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-
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Proceed
from notes payable, related party
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80,410
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Proceed
from convertible notes
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400,000
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-
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Proceed
from convertible notes, related parties
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290,000
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-
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Proceeds
from conversion of warrants to common stock
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170,643
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-
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Net
cash provided by financing activities
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1,191,053
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-
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Increase
(decrease) in cash
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158,566
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(259,562
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Cash
– Beginning of Period
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105,347
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261,848
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Cash
- End of Period
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$
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263,913
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$
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2,286
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Supplementary
Cash Flow Information:
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$
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-
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$
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-
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Income
taxes paid
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$
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800
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$
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-
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Non-cash
Investing and Financing Activities:
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Issuance
of warrants for services
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$
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-
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$
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36,470
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Common
stock issued for accounts payable
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$
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976,714
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$
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-
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Return
of common stock for notes receivable
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$
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31,404
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$
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-
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Adjustment
to goodwill
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$
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55,247
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$
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-
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The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
MARINA
BIOTECH, INC.
Notes
to Condensed Consolidated Financial Statements
FOR
THE THREE and six MONTHS ENDED june 30, 2017
(Unaudited)
Note
1 – Nature of Operations, Basis of Presentation and Significant Accounting Policies
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.
Reverse
Merger with IThenaPharma
On
November 15, 2016, Marina Biotech, Inc. and subsidiaries (“we”, “us”) 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”). 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. 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. IThena accounted for the acquisition
of Marina under the purchase accounting method following completion.
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
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3,137,855
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Divided
by the percentage of Marina ownership of combined company
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35
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%
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Adjusted
total shares of common stock of combined company
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8,977,138
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Multiplied
by the assumed percentage of IThena ownership of combined company
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65
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%
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Shares
of Marina common stock issued to IThena upon closing of transaction
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5,839,283
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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 June 30, 2017 has been allocated based on a preliminary estimate of the fair value of assets acquired and
liabilities assumed:
Assets
and Liabilities Acquired:
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Cash
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$
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5,867
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Net
current liabilities assumed (excluding cash)
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(1,871,725
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)
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Identifiable
intangible assets
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2,361,066
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Debt
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(326,037
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)
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Net
assets acquired
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169,171
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Goodwill
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3,502,829
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Purchase
price
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$
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3,672,000
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The
above estimated purchase allocation and goodwill valuation reflects changes in fair value determinations of $55,246 for the six
months ended June 30, 2017 and approximately $1,238,000 since the Merger date.
In
connection with the Merger, Marina entered into a License Agreement with Autotelic LLC, a stockholder of IThena and an entity
in which Dr. Trieu serves as Chief Executive Officer, pursuant to which (A) Marina licensed to Autotelic LLC certain patent rights,
data and technology relating to Familial Adenomatous Polyposis and nasal insulin, for human therapeutics other than for oncology-related
therapies and indications, and (B) Autotelic LLC licensed to Marina certain patent rights, data and know-how relating to IT-102
and IT-103, in connection with individualized therapy of pain using a non-steroidal anti-inflammatory drug and an anti-hypertensive
without inducing intolerable edema, and treatment of certain aspects of proliferative disease, but not including rights to IT-102/IT-103
for Therapeutic Drug Monitoring (“TDM”) guided dosing for all indications using an Autotelic Inc. TDM Device. We also
granted a right of first refusal to Autotelic LLC with respect to any license by us of the rights licensed by or to us under the
License Agreement in any cancer indication outside of gastrointestinal cancers.
On
November 15, 2016, simultaneously with the Merger, Autotelic Inc., a related party, acquired a technology asset (IT-101) from
IThena, and IThena’s investment of $479 in a foreign entity from the Company. In exchange for the asset, Autotelic Inc.
agreed to cancel its stock purchase warrant agreements (see below), received all of IThena’s then cash balance as payment
against the liabilities and agreed to assume the remaining debts and liabilities of IThena, including accounts payable of $71,560,
accrued expenses of $11,470, due to related party of $5,375, other liabilities of $118,759, convertible note of $50,000, and accrued
interest payable of $567. IThena recognized contributed capital of $257,252 in connection with this transaction.
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 to be used for current operating expenses in an amount not to exceed $540,000, of which all had
been drawn at June 30, 2017 and $250,000 had been drawn at December 31, 2016. Dr. Trieu considered requests for advances under
the Line Letter until April 30, 2017. Dr. Trieu has the right at any time for any reason in his 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;
provided, that Dr. Trieu agreed that he shall not demand the repayment of any advances that are made under the Line Letter prior
to the earlier of: (i) May 15, 2017; and (ii) the date on which (x) we make a general assignment for the benefit of our creditors,
(y) we apply for or consent to the appointment of a receiver, a custodian, a trustee or liquidator of all or a substantial part
of our assets or (z) we cease operations. Dr. Trieu has advanced an aggregate of $540,000 under the Line Letter. 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 by us to Dr. Trieu, and are due and payable upon demand by Dr. Trieu.
Dr.
Trieu has the right, exercisable by delivery of written notice thereof (the “Election Notice”), to either: (i) receive
repayment for the entire unpaid principal amount advanced under the Line Letter and the accrued and unpaid interest thereon on
the date of the delivery of the Election Notice (the “Outstanding Balance”) or (ii) convert the Outstanding Balance
into such number of shares of our common stock as is equal to the quotient obtained by dividing (x) the Outstanding Balance by
(y) $1.00 (such price, the “Conversion Price”); provided, that in no event shall the Conversion Price be lower than
the lower of (x) $2.80 per share or (y) the lowest exercise price of any securities that have been issued by us in a capital raising
transaction (and that would otherwise reduce the exercise price of any other outstanding warrants issued by us) during the period
between November 15, 2016 and the date of the delivery of the Election Notice. No capital raising transactions have occurred through
the date of this filing with securities at a price lower than $2.80 per share. The embedded conversion feature in the Line
Letter qualified it as a derivative instrument since the number of shares issuable under the Line Letter is indeterminate based
on guidance under ASC 815, Derivatives and Hedging. The conversion feature of this line letter has been characterized as a derivative
liability during the three months ended June 30, 2017, to be re-measured at the end of every reporting period with the change
in value reported in the statement of operations. The Company recorded a derivative liability of $195,943 for the fair value of
this conversion feature as of June 30, 2017.
On
April 4, 2017, the Company entered into a Line Letter with Autotelic Inc., 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, for an unsecured line of credit in an amount not to exceed $500,000, to be used for current operating expenses. Autotelic
Inc. will consider requests for advances under the Line Letter until September 1, 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; provided, that Autotelic Inc. agreed that it shall not demand
the repayment of any advances that are made under the Line Letter prior to the earlier of: (i) October 4, 2017; and (ii) the date
on which (x) we make a general assignment for the benefit of our creditors, (y) we apply for or consents to the appointment of
a receiver, a custodian, a trustee or liquidator of all or a substantial part of our assets or (z) we cease operations. Advances
made under the Line Letter shall bear interest at the rate of five percent (5%) per annum, shall be evidenced by the Demand Promissory
Note issued to Autotelic Inc., and shall be due and payable upon demand by Autotelic, Inc.
The
balance under the line was $80,410 as of June 30, 2017 and is included in convertible notes to related parties on the accompanying
balance sheet.
Further,
we entered into a Master Services Agreement (“MSA”) with Autotelic Inc., a stockholder of IThena, pursuant to which
Autotelic Inc. agreed to provide certain business functions and services from time to time during regular business hours at our
request. See Note 3 for specific terms of the MSA.
On
November 15, 2016, Marina agreed to issue to Novosom Verwaltungs GmbH (“Novosom”) .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.
Common
Stock Offering
On
June 26, 2017, the Company filed a Form S-1 Registration Statement with the SEC, with amendments on July 27, 2017 and August 3,
2017, to allow the Company to offer directly to selected investors 2,058,823 units (adjusted to reflect the 1 for 10 reverse split
of our common stock), with each unit consisting of (i) one share of our common stock, par value $0.006 per share and (ii) a warrant
to purchase 0.5 shares of our common stock, at an assumed offering price of $3.40 per unit, which was the closing price of our
common stock on July 20, 2017. The warrants will be immediately exercisable at an exercise price that is not less than the offering
price per unit in this offering, and will expire on the fifth anniversary of the issuance date. This Registration Statement was
not yet effective as of this filing date.
Business
Operations
IThenaPharma,
Inc.
IThena
is a developer of personalized therapies for combined pain/hypertension through its proprietary Fixed Dose Combination (“FDC”)
technology and point of care 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.
Marina
Biotech, Inc
Marina
Biotech is
a fully integrated,
commercial stage biopharmaceutical company delivering proprietary drug therapeutics for significant unmet medical needs in the
U.S., Europe and 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 approach is meant
to reduce clinical risk and accelerate time to market by shortening the clinical development program through leveraging what is
already known or can be learned in our proprietary Patient Level Database.
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, 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.
Summary
of Significant Accounting Policies
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 10 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 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 six months ended June 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 June 30, 2017,
we had an accumulated deficit of $4,205,053 and a negative working capital of $3,756,388. We anticipate that we
will continue to incur operating losses as we execute our plan to raise additional funds and investigate strategic and business
development initiatives. In addition, we have had and will continue to have negative cash flows from operations. We have previously
funded our losses primarily through the sale of common and preferred stock and warrants, the sale of notes, revenue provided from
our license agreements and, to a lesser extent, equipment financing facilities and secured loans. In 2016 and 2015, we funded
operations with a combination of the issuance of notes and preferred stock, and license-related revenues. At June 30, 2017, we
had a cash balance of $263,913. Our operating activities consume the majority of our cash resources.
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 debt financing, or whether such actions would generate the expected liquidity as currently planned.
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. Actual results could
differ 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, 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 December 31, 2016 and June 30, 2017:
|
|
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
|
|
|
|
Balance
at
June 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
|
|
$
|
255,510
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
255,510
|
|
Derivative
liability
|
|
|
195,943
|
|
|
|
-
|
|
|
|
-
|
|
|
|
195,943
|
|
Total
liabilities at fair value
|
|
$
|
451,453
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
451,453
|
|
The
following presents activity of the fair value liability of price adjustable warrants determined by Level 3 inputs for the period
ended June 30, 2017:
|
|
Fair
value
liability for
price adjustable
warrants
|
|
|
|
|
|
Balance
at December 31, 2016
|
|
$
|
141,723
|
|
Fair
value of warrants issued
|
|
|
-
|
|
Exercise
of warrants
|
|
|
-
|
|
Change
in fair value included in condensed consolidated statement of operations
|
|
|
113,787
|
|
Balance
at June 30, 2017
|
|
$
|
255,510
|
|
The
fair value liability of price adjustable warrants for the six months ended June 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 $2.80, volatility of 70% to
136%, contractual lives of 0.2 to 4.4 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 June 30, 2017:
|
|
Fair
value
of derivtive
liability
|
|
|
|
|
|
Balance
at December 31, 2016
|
|
$
|
-
|
|
Derivative
on new loans
|
|
|
-
|
|
Reduction
due to debt conversions
|
|
|
-
|
|
Change
in fair value included in condensed consolidated statement of operations
|
|
|
195,943
|
|
Balance
at June 30, 2017
|
|
$
|
195,943
|
|
The
fair value liability of derivative liability for the six months ended June 30, 2017 was determined using the binomial pricing
model using exercise prices of $2.80, stock price of $3.80, volatility of 44%, contractual life of 63 days, and a risk-free rate
of 1.03%.
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 June 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. 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:
|
|
Six
Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Stock
options outstanding
|
|
|
233,400
|
|
|
|
-
|
|
Warrants
|
|
|
2,492,945
|
|
|
|
13,917
|
|
Convertible
Notes Payable
|
|
|
312,050
|
|
|
|
-
|
|
Restricted
common stock
|
|
|
70,000
|
|
|
|
|
|
Total
|
|
|
3,108,395
|
|
|
|
13,917
|
|
Subsequent
Events
Except
for the event(s) discussed in 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.
Note
2 – Intangible Assets
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.
Acquisition
of Assets from Symplmed
On
June 5, 2017, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Symplmed Pharmaceuticals
LLC (“Symplmed”) pursuant to which we purchased from Symplmed, for aggregate consideration of approximately $620,000
(consisting of $300,000 in cash plus the assumption of certain liabilities of Symplmed in the amount of approximately $320,000),
Symplmed’s assets relating to a single-pill fixed-dose combination of perindopril arginine and amlodipine besylate known
as 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.
Further,
we entered into an offer letter with Erik Emerson, the President and Chief Executive Officer of Symplmed, pursuant to which we
hired Mr. Emerson to serve as our Chief Commercial Officer, which appointment became effective on June 22, 2017. We also agreed
in such offer letter to issue to Mr. Emerson 60,000 restricted shares of our common stock under our 2014 Long-Term Incentive Plan,
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 that offers enhanced efficiency, control and information to empower patients, physicians and manufacturers
to help achieve optimal care.
The
purchase price of $620,000 has been allocated based on a preliminary estimate of the fair value of the assets acquired and is
included in intangible assets as of June 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
|
|
Total
|
|
$
|
2,981,066
|
|
|
|
|
|
|
$
|
496,844
|
|
The
net intangible asset was $2,727,273, net of accumulated amortization of $253,793, as of June 30, 2017. Amortization expense was
$204,604 and $0 for the six months ended June 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, Autotelic Inc., effective January 1, 2015. 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 January 1, 2015 (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 are no less than $10,000,000
(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 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 is 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. Personnel cost charged by Autotelic Inc. were $243,944 and $77,655 for the six months ended on June 30, 2017 and
2016, respectively. For the six months ended June 30, 2017 and 2016, Autotelic Inc. billed a total of $317,044 and $162,765,
including personnel costs (above), respectively. The unpaid balance of $277,132 is recorded as due to related party in the accompanying
balance as of June 30, 2017. The Company agreed to issue warrants at a future date for the remaining balance due of $291,735,
which is included in accrued expenses as of June 30, 2017.
Convertible
Notes Payable
In
July 2016, IThena issued convertible promissory notes with an aggregate principal balance of $50,000 to 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 the 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, as described in
Note 1 above. Dr. Trieu has advanced the full $540,000 under the Line Letter as of June 30, 2017. Accrued interest on the Line
Letter was $12,714 as of June 30, 2017 and is included in convertible notes payable to related parties on the accompanying balance
sheets.
Line
Letter with Autotelic Inc.
On
April 4, 2017, the Company entered into a Line Letter with Autotelic Inc., a stockholder of IThenaPharma that became the holder
of 5,255,354 shares of Marina common stock as a result of the Merger, and an entity of which Dr. Trieu serves as Chairman of the
Board, for an unsecured line of credit in an amount not to exceed $500,000, to be used for current operating expenses. Autotelic
Inc. will consider requests for advances under the Line Letter until September 1, 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; provided, that Autotelic Inc. agreed that it shall not demand
the repayment of any advances that are made under the Line Letter prior to the earlier of: (i) October 4, 2017; and (ii) the date
on which (x) we make a general assignment for the benefit of our creditors, (y) we apply for or consents to the appointment of
a receiver, a custodian, a trustee or liquidator of all or a substantial part of our assets or (z) we cease operations. Advances
made under the Line Letter shall bear interest at the rate of five percent (5%) per annum, shall be evidenced by the Demand Promissory
Note issued to Autotelic Inc., and shall be due and payable upon demand by Autotelic, Inc.
The
balance under the line was $80,410 as of June 30, 2017 and is included in notes to related parties on the accompanying balance
sheet.
Note
4 – Notes Payable
Note
Purchase Agreement and Amendment
On
June 20, 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 shall 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.
As
of June 30, 2017, the accrued interest expense on the Notes amounted to $28,300, with a total balance of principal and interest
of $328,300.
Subsequent
to June 30, 2017, this Purchase Agreement was amended (see Note 9 – Subsequent Events).
Note
Payable – Service Provider
On
December 28, 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 $109,523 as of June 30, 2017.
Bridge
Note Financing
On
June 1, 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).
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 June 30, 2017, the accrued interest expense on the Notes amounted to $1,283, with a total balance of principal and interest
of $401,283.
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”).
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 million 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. Marina incurred $0.01 million of
stock issuance costs in conjunction with the Series D Preferred, which were netted against the proceeds. The warrants issued in
connection with Series D Preferred contain an exercise price protection provision whereby the exercise price per share to purchase
common stock covered by these warrants is subject to reduction in the event of certain dilutive stock issuances at any time within
two years of the issuance date, but not to be reduced below $2.80 per share. Any such adjustment will not result in the issuance
of any additional shares of Marina’s common stock. 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.
To
account for the issuance of the Series D Preferred and warrants, Marina first assessed the terms of the warrants and determined
that, due to the exercise price protection provision, they should be recorded as derivative liabilities. Marina determined the
fair value of the warrants on the issuance date and recorded a liability and a discount of $0.6 million on the Series D Preferred
resulting from the allocation of proceeds to the warrants. Marina then determined the effective conversion price of the Series
D Preferred which resulted in a beneficial conversion feature of $0.7 million. The beneficial conversion feature was recorded
as both a debit and a credit to additional paid-in capital and as a deemed dividend on the Series D Preferred in determining net
income applicable to common stock holders in the consolidated statements of operations.
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. Also in November 2015, an investor converted 50 shares of Series D Preferred
into 62,500 shares of common stock with a value of $2.80 per share.
In
February 2016, an investor converted 110 shares of Series D Preferred into 137,500 shares of common stock with a value of $1.50
per share.
Common
Stock
Holders
of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the holders of
our common stock. Subject to the rights of the holders of any class of our capital stock having any preference or priority over
our common stock, the holders of our common stock are entitled to receive dividends that are declared by our board of directors
out of legally available funds. In the event of our liquidation, dissolution or winding-up, the holders of common stock are entitled
to share ratably in our net assets remaining after payment of liabilities, subject to prior rights of preferred stock, if any,
then outstanding. Our common stock has no preemptive rights, conversion rights, redemption rights or sinking fund provisions,
and there are no dividends in arrears or default. All shares of our common stock have equal distribution, liquidation and voting
rights, and have no preferences or exchange rights. Our common stock currently trades on the OTCQB tier of the OTC Markets.
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 will be no change to the authorized shares of our common
stock as a result of the reverse split. No fractional shares shall be issued in connection with the reverse split; any fraction
of a share of common stock that would otherwise have resulted from the reverse split shall be rounded up to the nearest whole
share of common stock. Unless indicated otherwise, all share and per share information included in these financial statements
give effect to the reverse split.
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 liability of approximately $948,000, which is
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.
On
February 6, 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.
On
March 31, 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.
On
April 13, 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.
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.
We
entered into an offer letter with Erik Emerson, the President and Chief Executive Officer of Symplmed, pursuant to which we hired
Mr. Emerson to serve as our Chief Commercial Officer, which appointment became effective on June 22, 2017. We also agreed in such
offer letter to issue to Mr. Emerson 60,000 restricted shares of our common stock under our 2014 Long-Term Incentive Plan, 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.
Warrants
As
of June 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,
June 30, 2017
|
|
|
233,400
|
|
|
|
26.90
|
|
Exercisable,
June 30, 2017
|
|
|
193,100
|
|
|
$
|
32.10
|
|
The
following table summarizes additional information on Marina’s stock options outstanding at June 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
|
|
|
|
4.38
|
|
|
$
|
1.00
|
|
|
|
14,000
|
|
|
$
|
1.00
|
|
$
|
0.17
- .018
|
|
|
|
64,600
|
|
|
|
4.55
|
|
|
|
1.70
|
|
|
|
24,300
|
|
|
|
1.70
|
|
$
|
0.26
- 0.82
|
|
|
|
48,400
|
|
|
|
2.99
|
|
|
|
4.60
|
|
|
|
48,400
|
|
|
|
4.60
|
|
$
|
1.07
- $2.20
|
|
|
|
102,150
|
|
|
|
5.99
|
|
|
|
10.70
|
|
|
|
102,150
|
|
|
|
10.70
|
|
$
|
47.60
- $87.60
|
|
|
|
2,100
|
|
|
|
.95
|
|
|
|
676.00
|
|
|
|
2,100
|
|
|
|
676.00
|
|
$
|
127.60
- $207.60
|
|
|
|
2,150
|
|
|
|
.95
|
|
|
|
1,583.00
|
|
|
|
2,150
|
|
|
|
1,583.00
|
|
|
Totals
|
|
|
|
233,400
|
|
|
|
4.78
|
|
|
$
|
26.90
|
|
|
|
193,100
|
|
|
$
|
3.21
|
|
Weighted-Average
Exercisable Remaining Contractual Life (Years) 4.83
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.
At
June 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 six months ended June 30, 2017.
At
June 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 .021 million shares of common stock valued at $0.06 million
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 $0.25 million and could
receive up to $40 million in success-based milestones. In April 2016, Marina issued Novosom 0.047 million shares of common stock
valued at $0.075 million 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 $0.35 million (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 $0.05 million per
the terms of this license agreement. In November 2016, we issued 0.012 million shares with a value of $0.015 million to Novosom
as the equity component owed under Marina’s July 2016 license agreement.
Arrangements
with LipoMedics
On
February 6, 2017, we entered into a License Agreement (the “License Agreement”) with LipoMedics, Inc., a related party
(“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 Biotech and Marina Biotech 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 $250,000, 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 Ten Million Dollars ($10,000,000) upon reaching Commercial Sales in the Territory in any given twelve month
period equal to or greater than Five Hundred Million Dollars ($500,000,000) for a given Licensed Product and of Twenty Million
Dollars ($20,000,000) upon reaching Commercial Sales in any given twelve month period equal to or greater than One Billion Dollars
($1,000,000,000) for such Licensed Product, such payments to be made within thirty (30) days following the month in which such
Commercial Sale targets are met.
Note
8 – Commitments and Contingencies
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. Management is currently not aware of any pending lawsuits.
Note
9 - Subsequent Events
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 Marina, 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;
|
|
|
|
|
(ii)
|
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 (including the financing transaction contemplated by the registration
statement of which this prospectus forms a part (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;
|
|
|
|
|
(iii)
|
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;
|
|
|
|
|
(iv)
|
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 (such securities, the “Consideration
Securities”);
|
|
|
|
|
(v)
|
the
Purchasers agreed to waive any claim that the exercise price of the Amended Prior Warrants should be reduced to an amount
less than $2.80 as a result of any issuance of securities that occurred while the Amended Prior Warrants were outstanding
and prior to the date of the Amendment Agreement;
|
|
|
|
|
(vi)
|
the
Purchasers agreed that they shall not, for a period of 90 days after the closing of the Qualifying Financing Transaction,
sell any Consideration Securities (or any securities issuable upon exercise or conversion of the Consideration Securities)
without the prior written consent of the placement agent with respect to such financing transaction;
|
|
|
|
|
(vii)
|
the
Purchasers agreed to certain trading limitations with respect to Consideration Securities (or shares of common stock issuable
upon exercise or conversion of the Consideration Securities) beginning ninety (90) days following the closing of the Qualifying
Financing Transaction. and
|
|
|
|
|
(viii)
|
each
Purchaser agreed that, prior to one year before the termination date of the Prior Amended Warrants, such Purchaser shall not
exercise any of the Prior Amended Warrants at such time as such Purchaser holds any Consideration Securities (or any securities
issued upon the exercise or conversion of any Consideration Securities).
|
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.
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
On
July 21, 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 $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.
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.
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 a the rights to license DiLA
2
outside of gene editing.
Asset
Purchase Agreement
On
July 21, 2017, Marina Biotech, Inc. (the “Company”) 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 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. 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 a single-pill fixed dose combination of perindopril arginine and amlodipine besylate known as Prestalia.
Erik
Emerson, the Chief Commercial Officer of the Company, is the President and Chief Executive Officer of Symplmed Pharma.