ADHERA THERAPEUTICS, INC. Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect management's current views with respect to future events and financial performance including meeting our obligations under the Melior license agreement and our liquidity. The following discussion should be read in conjunction with the financial statements and related notes contained in our Annual Report on Form 10-K, for the year endedDecember 31, 2020 , as filed with theSecurities and Exchange Commission ("SEC") onApril 7, 2021 . Forward-looking statements are projections in respect of future events or financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, we can give no assurance that such expectations will be achieved. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements after the date of this Quarterly Report on Form 10-Q or to conform them to actual results, new information, future events or otherwise, except as otherwise required by securities and other applicable laws.
The following factors, among others, could cause our or our industry's future results to differ materially from historical results or those anticipated:
? our ability to obtain additional funding for our company, whether pursuant to a
capital raising transaction arising from the sale of our securities, a
strategic transaction or otherwise;
? 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; and
? our ability to attract and retain qualified officers, directors, employees and
consultants as necessary.
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, 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 our or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.
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 toAdhera Therapeutics, Inc. , aDelaware corporation. and its wholly-owned subsidiaries,MDRNA Research, Inc. ,Cequent Pharmaceuticals, Inc. ,Atossa Healthcare, Inc. , andIthenaPharma, Inc. Unless otherwise specified, all amounts are expressed inUnited States dollars. Our common stock is currently listed on the OTC Pink Market, under the symbol "ATRX." 25 Corporate Overview Nature of Business
We are an emerging specialty biotech company that, to the extent that resources and opportunities become available, is strategically evaluating its focus including a return to a drug discovery and development company.
OnJuly 28, 2021 , we as licensee andMelior Pharmaceuticals II, LLC entered into an exclusive license agreement for the development, commercialization and exclusive license of MLR-1019. MLR-1019 is being developed as a new class of therapeutic for Parkinson's disease (PD) and is, to the best of our knowledge, the only drug candidate today to address both movement and non-movement aspects of PD. Under the Agreement, we were granted an exclusive license to use the MP Patents and know-how to develop products in consideration for cash payments upon meeting certain performance milestones as well as a royalty of 5% of gross sales. OnAugust 24, 2021 , we as licensee entered into an exclusive license agreement withMelior Pharmaceuticals I, Inc. for the development, commercialization and exclusive license of MLR-1023. MLR-1023 is being developed as a novel therapeutic for Type 1 diabetes.
On
To the extent that resources have been available, we have continued to work with its advisors to restructure our company and to identify potential strategic transactions, including the Melior transaction described above to enhance the value of the company. Because of our substantial unpaid debt, if we do not raise substantial additional capital in the immediate future, it is likely that the company will discontinue all operations and seek bankruptcy protection. 26 Results of Operations
Comparison of the Three Months Ended
Operating Expenses Our operating expenses for the three months endedSeptember 30, 2021 , and 2020 are summarized as follows: Three Months Ended September 30, September 30, Increase/ 2021 2020 (Decrease) (in thousands) Sales and marketing $ - $ 20 $ (20 )
General and administrative expenses 232
174 58 Total operating expenses $ 232 $ 194 $ 38 Sales and Marketing
For the three months ended
General and Administrative General and administrative expense increased by approximately$58,000 for the three months endedSeptember 30, 2021 , as compared to the three months endedSeptember 30, 2020 . The increase was primarily due to an increase in public company fees including legal expenses and fees paid for investor relation services. Other Expense Three Months Ended September 30, September 30, Increase/ 2021 2020 (Decrease) (in thousands) Interest expense $ (261 ) $ (255 ) $ 6 Other income - 5 5
Loss on extinguishment of debt (177 ) -
177
Derivative expense (2,968 ) -
2,968
Amortization of debt discount (101 ) (95 )
6
Total other expense, net $ (3,507 ) $ (345 ) $ 3,162 Interest expense for the three months endedSeptember 30, 2021 increased by$6,000 compared to the three months endedSeptember 30, 2020 primarily due to an increase in interest as a result of an increase in our outstanding convertible notes. Other income for the three months endedSeptember 30, 2020 , was a result of fees received from release of certain intellectual property rights in 2019 from a third-party vendor and fees received from the cancellation of a contractual obligation with a third-party vendor. The increase of$2,968 for derivative expense was due to conversion features and warrants on convertible notes that were classified as a derivative on our balance sheet as ofSeptember 30, 2021 . The loss on extinguishment of debt was due to the conversion of principal and interest on our outstanding convertible notes.
Comparison of the Nine Months Ended
Operating Expenses Our operating expenses for the Nine months endedSeptember 30, 2021 , and 2020 are summarized as follows: Nine Months Ended September 30, September 30, Increase/ 2021 2020 (Decrease) (in thousands) Sales and marketing $ 17 $ 818 $ (801 ) General and administrative expenses 454 1,055 (601 ) Total operating expenses $ 471 $ 1,873$ (1,402 ) 27 Sales and Marketing
For the three months ended
General and Administrative
General and administrative expense decreased by approximately$601,000 for the nine months endedSeptember 30, 2021 , as compared to the nine months endedSeptember 30, 2020 . The decrease was primarily due to a reduction in personnel related expenses and public company fees including legal expenses and insurance for the nine months endedSeptember 30, 2021 as compared to the same period
of
2020.
Other Expense
Nine Months Ended
September 30, September 30, Increase/
2021 2020 (Decrease)
(in thousands)
Interest expense $ (749 ) $ (1,082 ) $ (333 )
Other income - 45 45
Derivative expense (3,055 ) 3,055Loss on extinguishment of debt (177 ) -
177
Amortization of debt discount (230 ) (373 )
(143 )
Total other expense, net $ (4,211 ) $ (1,410 ) $ 2,801 Interest expense for the nine months endedSeptember 30, 2021 , decreased by$333,000 compared to the nine months endedSeptember 30, 2020 primarily due to a decrease in the amortization of debt issuance costs for our term notes. The amortization of debt discount decreased by$143,000 primarily due to the maturity of our outstanding convertible notes. Other income for the nine months endedSeptember 30, 2020 , was a result of fees received from release of certain intellectual property rights in 2019 from a third-party vendor and fees received from the cancellation of a contractual obligation with a third-party vendor. The increase in derivative expense was due to conversion features on a convertible notes that were classified as a derivative on our balance sheet as ofSeptember 30, 2021 . The loss on extinguishment of debt was due to the conversion of principal and interest on our outstanding convertible notes.
Liquidity & Capital Resources
Working Capital (in thousands) September 30, 2021 December 31, 2020 Current assets $ 151 $ 1 Current liabilities (20,390 ) (14,774 ) Working capital deficit $ (20,239 ) $ (14,773 ) Negative working capital as ofSeptember 30, 2021 , was approximately$20.2 million as compared to negative working capital of approximately$14.8 million as ofDecember 31, 2020 . The decrease in working capital is primarily related to an increase in current liabilities of approximately$3.5 million including approximately$1.1 million in accrued dividends,$762,000 of accrued expenses and$3.5 million for a derivative liability related to our convertible notes. 28 Cash Flows and Liquidity
Net cash used in Operating Activities
Net cash used in operating activities was approximately$369,000 during the nine months endedSeptember 30, 2021 . This was primarily due to our net operating loss of approximately$4.6 million , partially offset by to our derivative expense of approximately$3.1 million , non-cash interest expense related to term loans of$749,000 , non-cash amortization of debt discount of$230,000 and other changes in operating assets and liabilities including an increase in accounts payable and accrued expenses of approximately$102,000 . Net cash used in operating activities was approximately$0.5 million during the nine months endedSeptember 30, 2020 . This was primarily due to our net loss of approximately$3.3 million , partially offset by non-cash interest expense related to our term loans of approximately$1.5 million and other changes in operating assets and liabilities including an increase in accounts payable and accrued expenses of approximately$1.0 million .
Net cash used in Investing Activities
There was no cash used in or provided by investing activities for the nine
months ended
Net cash provided by Financing Activities
Net cash provided by financing activities for the nine months endedSeptember 30, 2021 , and 2020 was approximately$519,000 and$448,000 , respectively from the issuance of convertible notes to certain accredited investors, net of issuance costs We will need to raise immediate additional operating capital to maintain our operations and to realize our business plan. Without additional sources of cash and/or the deferral, reduction, or elimination of significant planned expenditures, we will not have the cash resources to continue as a going concern thereafter. Future Financing We do not have sufficient funds to meet our working capital needs for the next 12 months.We will require immediate additional funds to continue our business. Historically, we have raised additional capital to 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. Failure to raise additional capital through one or more financings, divesting development assets or reducing discretionary spending could have a material adverse effect on our ability to achieve our intended business objectives. These factors raise substantial doubt about our ability to continue as a going concern.
Off-Balance Sheet Arrangements
As of
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 endedSeptember 30, 2021 , and in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year endedDecember 31, 2020 . 29
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
© Edgar Online, source
