Adhera Therapeutics, Inc. - Annual Report: 2022 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________________ to __________________________

Commission file number 000-13789

ADHERA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

8000 Innovation Parkway, Baton Rouge, LA 70820

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (919) 518-3748

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common stock, par value $0.006 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2022, was approximately $3.1 million as computed by reference to the closing price of such common stock on the OTC Markets on such date.

The registrant had 3,178,738 shares of common stock, par value $0.006 per share, outstanding as of March 31, 2023.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be filed by the registrant for its 2023 Annual Meeting of Stockholders are incorporated by reference in Items 10, 11, 12, 13, and 14 of Part III of this Annual Report on Form 10-K.

ADHERA THERAPEUTICS, INC.

2022 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

PART I

ITEM 1. BUSINESS

Overview

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Figure 1: Mechanism of action for MLR-1019

The Importance of selective DAT inhibition

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

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

Patent protection

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

Accelerated development pathway for MLR-1019

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

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

MLR-1023 in diabetes

MLR-1023 was originally developed by Pfizer and previously in clinical development for the treatment of gastric ulcers in the 1970s. Pfizer discontinued development of the drug, due to lack of efficacy (vs safety issues) for the primary indication (healing of gastric ulcers) in a phase 2 clinical trial.

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

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

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

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

MLR-1023 and T1D

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

Accelerated development pathway for MLR-1023 in T1D

Commensurate with Adhera’s accelerated drug development strategy, The FDA has granted an Investigational New Drug Application (IND) for a Phase 2 study designed to evaluate the efficacy of MLR-1023 in adult T1D patients. It is anticipated that this clinical trial can be completed in 6 months paving the way to the initiation of a pivotal phase 3 clinical trial in less than 24 months.

Rationale for MLR-1023 in the treatment of nonalcoholic steatohepatitis (NASH), and the prevention of pulmonary edema

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

Patent Protection

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

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

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

On August 20, 2021, we as licensee entered into an exclusive license agreement regarding the development and commercialization of Melior’s MLR-1023 (the “MLR-1023 Agreement”) with Melior Pharmaceuticals I, Inc. (“MP1”). In this Annual Report, we refer to MP2 and MP1 as “MP” or “Melior”. This second license is for the development and commercialization of MLR-1023, which is being developed as a novel therapeutic for Type 1 diabetes.

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

On November 17, 2021, Melior extended the Company’s timeline under the MLR-1023 Agreement from 120 days to 180 days from the effective of the MLR-1023 Agreement for the Company to raise $4 million unless, by 180 days Adhera is in the process of completing transactions to complete the fundraising, then an additional 30 days would be provided to allow for the completion of required fundraising. On February 16, 2022, an addendum to the MLR-1023 Agreement dated August 4, 2021 (the “First Addendum”), was executed by the Company and Melior, which extended the requirement by the Company to raise $4 million (the “Raise Requirement”) to June 16, 2022.

On July 18, 2022, the Company and Melior entered into the Second Addendum to the License Agreement (the “Second Addendum”). In accordance with the Second Addendum and subject to the terms and conditions therein, the Raise Requirement was extended to February 1, 2023. Pursuant to the Second Addendum, Melior has a right to terminate the MLR-1023 Agreement as a result of the Company’s inability to achieve certain milestones, including the requirement to:

As of February 1, 2023, the Company had not raised the additional $500,000 of capital, commenced API manufacturing, nor completed the Raise Requirement as defined in the MLR-1023 Agreement. In March 2023, the Company obtained a verbal agreement with Melior to extend the terms of the MLR-1023 Agreement until such time that the milestones have been met, including payment of the maintenance costs of the MLR-1023 patent. However, Melior may terminate the license of MLR-1023 at any time due to non-performance of continuing license obligations with a 60-day required notice to cure non-performance. Any termination or loss of use of MLR-1023 would have a material adverse effect on our business, which would likely result in the Company discontinuing all operations and seeking bankruptcy protection.

To the extent that resources have been available, we have continued to work with our advisors in an effort to restructure our Company and to identify potential strategic transactions, including the Melior transactions described above, to enhance the value of the Company. However, because of our substantial unpaid debt, if we do not raise additional capital in the immediate future, we might not have sufficient funds available to meet our obligations and it is likely that this would also result in the Company discontinuing all operations and seek bankruptcy protection.

The milestones, payment obligations and other material terms under the foregoing license agreements with Melior are qualified in its entirety by the complete text of the agreements, each of which are provided as an exhibit to this Annual Report on Form 10-K.

Corporate History

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

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

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

Subsequent to the Merger, we acquired the rights to commercialize Prestalia, an anti-hypertensive drug approved by the FDA from Symplmed Pharmaceuticals LLC in June 2017 pursuant to a license agreement. We marketed Prestalia in the U.S. from June 2018 until December 2019. The license agreement together with all rights to future commercialization activities with respect to the product was terminated in January 2021.

Partnering and Licensing Agreements

Melior

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

MLR-1019:

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

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

MLR-1023:

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

The agreement also included royalty payments upon commercialization of the product as follows: (i) 8% of future gross product sales, applicable to the first $400,000,000 of gross product sales; (ii) 10% of future gross product sales, applicable to sales after $400,000,000 and up to $800,000,000; and (iii) 12% of future gross product sales applicable to sales after $800,000,000.

Proprietary Rights and Intellectual Property

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

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

Further, we have purchase rights for the Licensed Products including the patents and related intellectual property from Melior with respect to the following product candidates:

Research and Development

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

On August 20, 2021, we as licensee entered into the MLR-1023 Agreement for the exclusive license regarding the development and commercialization of Melior’s MLR-1023. This second license is for the development and commercialization of MLR-1023, which is being developed as a novel therapeutic for Type 1 diabetes.

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

On July 20, 2022, the Company and Melior entered into the Second Addendum. In accordance with the Second Addendum and subject to the terms and conditions therein, the Raise Requirement was extended to February 1, 2023, in exchange for a $136,921 licensing payment that was made by the Company on July 28, 2022. In addition, the Company was required to hire and retain a Chief Scientific Officer, and raise an additional $500,000 in capital in addition to other requirements set forth in the Second Addendum and MLR-1023 Agreement.

As of February 1, 2023, the Company had not raised the additional $500,000 of capital, commenced API manufacturing, nor completed the Raise Requirement as defined in the MLR-1023 Agreement. In March 2023, the Company obtained a verbal agreement with Melior to extend the terms of the MLR-1023 Agreement until such time that the milestones have been met and the Company pays outstanding patent maintenance costs. However, Melior may terminate the license of MLR-1023 at any time due to non-performance of continuing license obligations with a 60-day required notice to cure non-performance.

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

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

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

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

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

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

Facilities

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

Corporate History

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

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

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

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

Need for Future Financing

We will require substantial additional funds on an immediate basis to continue our business operations. We have in the past raised additional capital to supplement our commercialization, clinical and pre-clinical development and operational expenses through the issuance of common stock, indebtedness including promissory notes and convertible notes, and other derivative securities which have a dilutive effect on existing stockholders. We will need to raise additional funds through equity financing, debt financing, strategic alliances, or other sources, which may result in significant further dilution in the equity ownership of our shares or result in further encumbrances being placed on our assets. 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, or that it will be sufficient for us to successfully engage in any of our planned business operations, including re-starting the drug development and discovery programs relating to our legacy RNA interference assets and furthering the research and development efforts with respect to product candidates under our license from Melior. If we are not able to obtain additional financing on a timely basis as required or generate significant capital from the out-licensing and/or divestiture of existing assets, we will not be able to meet our other obligations as they become due and will be forced to scale down or even cease our operations altogether.

As of December 31, 2022, we have $1.7 million of convertible notes including approximately $424,000 in accrued interest outstanding. All of the convertible notes including accrued interest are currently in default. In addition, we have $8.0 million of non-convertible notes and approximately $3.0 of accrued interest outstanding with approximately $5.7 million of principal and $2.9 million of interest in default.

On November 16, 2022, holders of approximately $5.7 million of principal on outstanding promissory notes that were in default agreed to amend the Notes to make them automatically convertible into units consisting of a new series of convertible preferred stock and warrants upon an up-listing financing transaction in which the Company’s common stock is listed on The Nasdaq Capital Market or the NYSE American, in exchange for the Holders agreeing to forbear repayment of their Notes and accrued interest until the up-listing transaction has been completed.

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

The interest on the Notes, as accrued through the date of conversion, will convert into common stock at the offering price for the Up-listing Transaction.

We can provide no assurance that the Company will be able to complete an up-list transaction per the amended terms of the notes or be able to raise additional funding to repay the notes.

Sales and Marketing

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

Competition

The biopharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. The key competitive factors affecting the success of any products and product candidates that we may develop or acquire, to the extent that we may continue to engage in the biopharmaceutical industry, are their efficacy, safety, convenience, price, the level of generic competition and the availability of reimbursement from government and other third-party payors. While we believe that our technology, knowledge and experience provide us with certain competitive advantages, we face potential competition from many different sources, including major and minor pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions, governmental agencies, and public and private research institutions. Many of these competitors have greater for capital resources and access to capital than we do, and personnel with more industry experience and scientific background than those we utilize. Our products, and any product candidates that we successfully develop and/or acquire, and later commercialize, will compete with existing therapies and new therapies that may become available in the future.

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

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

To date, we have not fully developed, received regulatory approval for or commercialized any of our current product candidates. Our ability to compete will depend, to a great extent, on the speed in which we and our collaborators can develop safe and effective product candidates, complete clinical testing and regulatory approval processes, and coordinate with third parties to produce and distribute the resulting products in sufficient commercial quantities to create and maintain a market for such products at favorable costs and prices. If we do complete development of and obtain regulatory approval to market any product candidate, we anticipate that the competition we would face with respect to such product would be based on a combination of a number of factors including efficacy, safety, reliability, availability, price, patent position, and other factors.

Government Regulation

Government authorities in the U.S. and other countries extensively regulate the research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing, among other things, of drugs and pharmaceutical products. To the extent that we continue to engage in the biopharmaceutical industry, of which there can be no assurance, all of the products that we anticipate seeking to develop and/or commercialize are expected to be regulated as drug products.

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

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

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

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

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

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

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

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

If we bring a product candidate to clinical trial, we may undertake to commence such a trial in a foreign jurisdiction, in which case we and third parties on which we rely would be subject to such foreign government’s laws and regulations pertaining to the research and development, including clinical testing on human subjects, of therapeutic product candidates. Further, to the extent that any of the products that we develop and/or acquire are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals. None of our products were ever developed or sold outside the United States.

ITEM 1A. RISK FACTORS

Summary of Risk Factors

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

Risks Related to Our Business

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

Risks Related to Our Business Operations and Industry

Risks Relating to Ownership of Our Common Stock

Risk Factors

Investing in our Common Stock involves a high degree of risk. You should carefully consider the following Risk Factors before deciding whether to purchase or sell securities of Adhera. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations or our financial condition. If any of the events discussed in the Risk Factors below occur, our business, consolidated financial condition, results of operations or prospects could be materially and adversely affected. In such case, the value and marketability of the Common Stock could decline.

Risks Related to Our Business

We rely on a license agreement with Melior Pharmaceuticals I, Inc. for the development and commercialization of Melior’s MLR-1023, and if this license is breached or otherwise terminated, we could lose the ability to continue the development and potential commercialization of MLR-1023.

We have entered into the Melior Agreement with Melior under which we have an exclusive license to develop and commercialize MLR-1023 worldwide. Under the Melior Agreement, we are subject to various obligations, including obligations with respect to development and commercialization activities, payment obligations upon achievement of certain milestones, capital raising activities, engagement with third parties, as well as other material obligations. Melior has a right to terminate the MLR-1023 Agreement at any time and as a result of the Company’s inability to achieve certain milestones, including the requirement under the Second Addendum to: (i) raise $500,000 in working capital; (ii) resume engagement with Davos Pharmaceutical Manufacturing and Maladi Drugs & Pharmaceuticals such that the initial steps of MLR-1019 API manufacture were initiated; (iii) pay Melior Pharma l, $136,921 as a license payment; (iv) maintain the full-time employment of the Chief Scientific Officer who was hired pursuant to the First Addendum; (v) continue to engage with Aegis Capital on activities aimed at providing an up-listing event; (vi) for the duration of the MLR-1023 Agreement, Adhera will not in-license any additional assets other than those which it has already in-licensed (MLR-1023 and MLR-1019), except for the Taxeme compound (PGT) previously mentioned in the Second Addendum, however, no funds will be expended on discovery or development of the Taxeme compound during this period and (vii) fulfill the Raise Requirement defined in the MLR-1023 Agreement which was extended to February 1, 2023.

As of February 1, 2023, the Company had not raised the additional $500,000 of capital, commenced API manufacturing, nor completed the Raise Requirement as defined in the MLR-1023 Agreement. In March 2023, the Company obtained a verbal agreement with Melior to extend the terms of the MLR-1023 Agreement until such time that the milestones have been met, including payment of the maintenance costs of the MLR-1023 patent. However, Melior may terminate the license of MLR-1023 at any time due to non-performance of continuing license obligations with a 60-day required notice to cure non-performance.

The loss of or significant modifications to the MLR-1023 Agreement could prevent us from developing, commercializing, or entering into future strategic transactions relating to MLR-1023. Any termination or loss of use of MLR-1023 would have a material adverse effect on our business, which would likely result in the Company discontinuing all operations and seeking bankruptcy protection. Because of our current financial situation, if we do not raise additional capital in the immediate future, we might not have sufficient funds available to meet our obligations the Company may discontinue all operations and seek bankruptcy protection.

The risks described elsewhere pertaining to our other intellectual property rights also apply to the intellectual property rights that we license, and any failure by us or our licensors to obtain, maintain and enforce these rights could have a material adverse effect on our business. In addition, our business depends on our ability to license from third parties. If we fail to meet our obligations under our current license agreements, we may lose the ability to enter into licenses for the development of additional product candidates in the future, which would adversely affect our business.

Our ability to continue as a going concern is in doubt absent obtaining adequate new debt or equity financing.

We have limited capital and have an accumulated deficit of $55.8 million, and have a working capital deficiency of $22.2 million as of December 31, 2022. In addition, we have $12.8 million of indebtedness including principal and interest on convertible notes and promissory notes of which $10.3 million is currently in default. On November 16, 2022, a majority of the holders of approximately $8.3 million in promissory notes including accrued interest, agreed to amend the notes to make them automatically convertible into units consisting of a new series of convertible preferred stock and warrants as defined in the agreement upon an up-listing financing transaction in which the Company’s common stock is listed on The Nasdaq Capital Market or the NYSE American in exchange for the holders agreeing to forbear repayment of their Notes and accrued interest until the offering has been completed. However, there is no assurance that an up-listing financing transaction will occur. If the Company does not complete any significant strategic transactions, or raise substantial additional capital, in the immediate future, it is likely that the Company will seek bankruptcy protection or discontinue all operations. Because we do not have sufficient working capital and cash flows for continued operations for at least the next 12 months, our auditors have issued an unqualified opinion with a going concern explanatory paragraph for the year ended December 31, 2022, indicating that there is substantial doubt about our ability to continue as a going concern. Our continued existence is dependent upon us or obtaining the necessary capital to meet our expenditures. We cannot assure you that we will be able to raise adequate capital to meet our future working capital needs.

We have approximately $12.8 million of indebtedness outstanding including accrued interest, with $10.3 million currently in default with increased interest rates, which we may be unable to pay as and when due or at all, and the conversion when combined with outstanding warrants and convertible preferred stock would have a dilutive effect on our stockholders and could reduce the price of our common stock.

As of December 31, 2022, we have a total of $12.8 million of outstanding indebtedness including approximately $1.8 million of outstanding convertible promissory notes including accrued interest with various conversion prices and $11.0 in non-convertible notes including accrued interest. Given our history of operating losses and continued expenditures, which we expect to increase in the short-term as we attempt to establish and grow our operations and to develop and commercialize existing and new product candidates, we may face difficulty paying these obligations as and when they come due. All of our outstanding convertible notes are in default, with default interest rates from 15% - 24% per annum. The convertible notes may contain price protection or full-ratchets upon the issuance of additional equity which may entitle the holder to receive more shares of common stock upon conversion at a lower exercise price. Conversions of our convertible debt would therefore have a dilutive effect on our stockholders. Further, if we are unable to raise sufficient capital to repay some of our lenders or restructure our outstanding indebtedness, we will likely be forced to cease operations or seek bankruptcy protection, in which case our stockholders would likely receive little to no return on their investment.

Because we expect to need additional capital to fund our growing operations, we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations, discontinue operations and/or commence bankruptcy proceedings.

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

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

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

Prospective investors should be aware that if we are not successful in our new business operations, which may involve the use of our legacy product candidates which we have failed to fully develop and commercialize in the past, or new product candidates which are unproven, their entire investment in the Company could become worthless. Even if the Company is successful, we can provide no assurances that investors will derive a profit from their investment. Even if we can raise sufficient capital or generate revenue, we cannot guarantee any resulting proceeds to us will be sufficient for us to grow our operations and become profitable. If we are not successful, you may lose your entire investment.

Because we have a limited operating history under our current business model to evaluate our company, the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delay frequently encountered by a new company.

Since we have a limited operating history under our current business model, it is difficult for investors to evaluate our business and prospects. You must consider our prospects in light of the risks, expenses and difficulties we face as an early-stage company with a limited operating history. Investors should evaluate an investment in our company in light of the uncertainties encountered by start-up companies in a highly competitive industry such as ours, which contains significant barriers to market entry. There can be no assurance that our efforts will be successful or that we will be able to attain profitability.

If we are unable to successfully commercialize MLR-1019 or any of our other product candidates and are unable to make milestone payments, our result of operations would be adversely affected.

We recently entered into an exclusive license agreement with Melior to develop and commercialize MLR-1019 as a new class of therapeutics for Parkinson’s Disease, or PD. Upon MLR-1019 meeting certain milestones, the Company is required to make milestone payments which total approximately $21.75 million. We currently do not have enough capital to meet any of the milestone payment requirements and cannot assure you will be successful in raising the $250,000 we need to meet the first milestone for the enrollment of a final patient in the Phase 2a study for the product. In the event we are able to negotiate an extension to the MLR 1023 license. The milestone payments are the same as those for the MLR-1019 license. If any milestone is met, there can be no assurance that we will be able to raise sufficient capital in order to fund that milestone. Further, if the drug candidate fails to meet any of the milestones and therefore is unable to be commercialized, we will receive no benefits from these licenses. In any such event, our results of operations will suffer and we may need to cease operations including pursuing bankruptcy. Additionally, MLR–1019 is currently classified as a controlled substance in the United States which may have an adverse effect on our future revenues even if we are able to commercialize it in the United States.

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

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

We have never generated revenue from product sales under our current business model, do not have current research and development operations, and we may continue to incur significant losses for the foreseeable future and never generate revenue from product sales.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Termination of a strategic alliance may require us to seek out and establish alternative strategic alliances with third-party partners. This may not be possible, including due to restrictions under the terms of our existing collaborations, or we may not be able to do so on terms acceptable to us. If we fail to establish alternative strategic alliances with third-party partners on terms acceptable to us, or at all, we may be required to limit the size or scope of one or more of our programs or decrease our expenditures and seek additional funding by other means. Such events would likely have a material adverse effect on our results of operations and financial condition.

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

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

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

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

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

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

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

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

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

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

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

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

The success of our business depends primarily upon our ability to identify, develop and commercialize drug products, an extremely risky business. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for several reasons, including:

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

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

Our long-term success and generation of revenue will depend upon the successful development of new products from research and development activities, including those licensed or acquired from third parties. Product development is very expensive and involves a high degree of risk. Only a small number of research and development programs result in the commercialization of a product. For example, the FDA indicates that approximately 70% of drugs proceed past Phase 1 studies, 33% proceed past Phase 2, and just 25%-30% proceed past Phase 3 to Phase 4 which is the final phase in the FDA review and approval process for marketing therapeutic product candidates. The process for obtaining regulatory approval to market product candidates is expensive, usually takes many years, and can vary substantially based on the type, complexity, and novelty of the product candidates involved. Our ability to generate revenues would be adversely affected if we are delayed or unable to successfully develop our products.

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

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

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

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

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully complete development of, or to successfully commercialize, our product candidates, which would materially harm our business. Most pharmaceutical products that do overcome the long odds of drug development and achieve commercialization still do not recoup their cost of capital. If we are unable to design and develop each drug to meet a commercial need far in the future, the approved drug may become a commercial failure and our investment in those development and commercialization efforts will have been commercially unsuccessful. In addition, we may be unable to demonstrate safety and efficacy of our product candidates to the satisfaction of regulatory authorities or we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates as a result.

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

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

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

These events could prevent us or our partners from achieving or maintaining market acceptance of the affected product and could substantially increase the costs of commercializing our products and impair our ability to generate revenues from the commercialization of these products either by us or by our partners.

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

Even if we or our collaboration partners complete clinical trials and obtain regulatory approval in the United States or elsewhere, the applicable regulators may still impose significant restrictions on the indicated uses or marketing of product candidates or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. The following discussion is based on United States law. Similar types of regulatory provisions apply outside of the United States.

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

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

If we or our partners fail to comply with regulatory requirements following approval of our product candidates, a regulatory agency may:

Our defense of any government investigation of alleged violations of law, or any lawsuit alleging such violations, could require us to expend significant time and resources and could generate negative publicity. Further, the FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates or increase the cost of compliance. The occurrence of any event or penalty described above may prevent or inhibit our ability to commercialize products and generate revenues.

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

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

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

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

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

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

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

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

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

Because of the current inflation affecting the economy, we may be harmed in the future.

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

Risks Related to Our Business Operations and Industry

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

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

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

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

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

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

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

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

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

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

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

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

License agreements impose certain obligations on us, including obligations to use diligent efforts to meet development thresholds, funding requirements and payment obligations. For example, under our license agreement with M1 for the MLR-1023 product, as of February 1, 2023, the Company had not raised the additional $500,000 of capital, commenced API manufacturing, nor completed the Raise Requirement as defined in the MLR-1023 Agreement. In March 2023, the Company obtained a verbal agreement with Melior to extend the terms of the MLR-1023 Agreement until such time that the milestones have been met, including payment of the maintenance costs of the MLR-1023 patent. However, Melior may terminate the license of MLR-1023 at any time due to non-performance of continuing license obligations with a 60-day required notice to cure non-performance. Additionally, under the MLR-1019 license agreement, if the Company fails to get its Common Stock listed on Nasdaq or the NYSE within 12 months after the Company receives a Clinical Trial Authorization from the European Medicines Agency, then the license will terminate.

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

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

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

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

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

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

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

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

Because of the substantial amount of discovery required in intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our Common Stock.

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

We employ individuals previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims asserting that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of our employees’ former employers or other third parties. We may also be subject to claims that former employers or other third parties have an ownership interest in our patents. Litigation may be necessary to defend against these claims. There is no guarantee of success in defending these claims, and if we succeed, litigation could cause substantial cost and be a distraction to our management and other employees.

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

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

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

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

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

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

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

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

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

Schedule 1 drugs, substances, or chemicals are defined as drugs with no currently accepted medical use and a high potential for abuse. Given that MLR1019 has no currently accepted medical use in the USA, the drug is expected to be classified as Schedule 1, until such medical use is granted via an approval from FDA. We can no assurance that even after approval from the FDA that MLR-1019 will be reclassified from a Schedule 1 drug by the Drug Enforcement Division of the U.S. Department of Justice.

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

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

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

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

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

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

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

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

Any future use of our product candidates in clinical trials or the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. Regardless of merit or eventual outcome, product liability claims may cause:

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

If we fail to comply with applicable laws and regulations, including environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes, and the treatment of animals used in research. The research, development and commercialization of drug candidates involve using hazardous and flammable materials, including chemicals and biological materials. These activities also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. If contamination occurs or injury results from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.

Risks Relating to Ownership of Our Common Stock

We may not be able to satisfy listing requirements of Nasdaq Capital Markets or maintain a listing of our common stock on the OTCQB.

Our common stock is quoted on the OTCQB market operated by OTC Markets Group Inc. We plan to apply for the listing of our common stock on Nasdaq Capital Markets. The closing of an offering is contingent upon our up listing to the Nasdaq Capital Markets unless such condition is waived by the underwriter. In addition, we must meet certain financial and liquidity criteria to maintain the listing of our common stock on Nasdaq Capital Markets. If we fail to meet any listing standards or if we violate any listing requirements, our common stock may be delisted. In addition, our Board of Directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common stock from the Nasdaq Capital Markets may materially impair our stockholders’ ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. The delisting of our common stock could significantly impair our ability to raise capital and the value of your investment.

The price of our common stock is volatile, which may cause investment losses for our stockholders.

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

These broad market and industry factors may have a material adverse effect on the market price of our common stock, regardless of our actual operating performance. These factors could have a material adverse effect on our business, financial condition, and results of operations.

The sale or conversion of our shares of common stock could depress the price of our common stock.

As of December 31, 2022, we had 3,160,877 shares of common stock issued and outstanding of which 2,471,881 or 78% of the total shares outstanding are restricted and are thus not currently trading. As of December 31, 2022, there were $1.7 million of outstanding convertible promissory notes including accrued interest with various conversion prices and $11.0 million in non-convertible notes including accrued interest, 446,500 additional shares of our common stock that are reserved for issuance under the 2018 Long-Term Incentive Plan, 100 outstanding shares of Series C Preferred Stock convertible into 3,334 shares of common stock, 40 outstanding shares of Series D Preferred Stock convertible into 2,500 shares of common stock, and 267 outstanding shares of Series E Preferred Stock including accrued dividends convertible into 183,346 shares of common stock. On November 16, 2022, a majority of the holders of approximately $8.6 million of the 2019 non-convertible promissory notes including accrued interest, agreed to amend the notes to make them automatically convertible into units consisting of a new series of convertible preferred stock and warrants as defined in the agreement upon an up-listing financing transaction in which the Company’s common stock is listed on The Nasdaq Capital Market or the NYSE American in exchange for the Holders agreeing to forbear repayment of their Notes and accrued interest until the up-listing transaction has been completed.

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

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

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

Pursuant to our articles of incorporation, we currently have authorized 180,000,000 shares of common stock and 100,000 shares of preferred stock. To the extent that common shares are available for issuance, subject to compliance with applicable stock exchange listing rules, our Board of Directors has the ability to issue additional shares of common stock in the future for such consideration as the Board of Directors may consider sufficient. The issuance of any additional securities could, among other things, result in substantial dilution of the percentage ownership of our stockholders at the time of issuance, result in substantial dilution of our earnings per share and adversely affect the prevailing market price for our common stock.

An issuance of additional shares of preferred stock could result in a class of outstanding securities that would have preferences with respect to voting rights and dividends and in liquidation over our common stock and could, upon conversion or otherwise, have all of the rights of our common stock. Our Board of Directors’ authority to issue preferred stock could discourage potential takeover attempts or could delay or prevent a change in control through merger, tender offer, proxy contest or otherwise by making these attempts more difficult or costly to achieve. The issuance of preferred stock could impair the voting, dividend and liquidation rights of common stockholders without their approval.

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

Our Board of Directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has the authority to issue preferred stock without further stockholder approval. As a result, our Board of Directors could authorize the issuance of a series of preferred stock, beyond the series of preferred stock that has previously been issued, that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our Board of Directors could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing stockholders.

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

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

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

If we raise additional capital by issuing equity securities, our existing stockholders’ percentage ownership will be reduced, and these stockholders may experience substantial dilution. We may also issue equity securities that provide for rights, preferences and privileges senior to those of our common stock. If we raise additional funds by issuing debt securities, these debt securities would have rights senior to those of our common stock and the terms of the debt securities issued could impose significant restrictions on our operations, including liens on our assets. If we raise additional funds through collaborations and licensing arrangements, we may be required to relinquish some rights to our technologies or candidate products, or to grant licenses on terms that are not favorable to us.

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

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business, and we do not anticipate paying any cash dividends on our capital stock in the foreseeable future. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our common stock could be negatively affected.

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

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

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

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

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

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

Our articles of incorporation authorize us to issue up to 100,000 shares of blank check preferred stock. Any preferred stock that we issue in the future may rank ahead of our securities in terms of dividend priority or liquidation premiums and may have greater voting rights than our securities. In addition, such preferred stock may contain provisions allowing those shares to be converted into shares of common stock, which could dilute the value of our securities to current stockholders and could adversely affect the market price, if any, of our securities. In addition, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company. Although we have no present intention to issue any shares of authorized preferred stock, there can be no assurance that we will not do so in the future.

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

On September 30, 2022, we filed a Certificate of Amendment to the Certificate of Incorporation with the Delaware Secretary of State to effect a reverse stock split of all outstanding shares of the Company’s common stock at a ratio of 1-for-20. The Certificate of Amendment became was effected on October 5, 2022. We expect that the reverse stock split may increase the market price of our common stock while our stock is trading. However, the effect of a reverse stock split upon the market price of our common stock cannot be predicted with certainty, and the results of reverse stock splits by companies in similar circumstances have been varied. It is possible that the market price of our common stock following the reverse stock split will not increase sufficiently for us to be in compliance with the minimum market price requirement of the Nasdaq Capital Market, or if it does, that such price will be sustained. If we are unable to meet the minimum market price requirement, we may be unable to list our shares on the Nasdaq Capital Market, in which case such an offering may not be completed.

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

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

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

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

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

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

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

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

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

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 2. PROPERTIES

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

ITEM 3. LEGAL PROCEEDINGS

From time-to-time, we may become a party to litigation and subject to claims incident to the ordinary course of our business. Although the results of such litigation and claims in the ordinary course of business cannot be predicted with certainty, we believe that due to our lack of capital any litigation will have a material adverse effect on our business, results of operations or financial condition. In addition, litigation can have an adverse impact on us because of defense costs, diversion of management resources and other factors.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock trades on the OTCQB under the symbol “ATRX”. On March 27, 2023, the closing price of our common stock reported by the OTCQB was $0.55 per share. 

Holders of record

As of March 31, 2023, there were approximately 172 beneficial holders of record of our common stock. Because many of our shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial holders represented by these record holders.

Dividends

Payment of dividends and the amount of dividends depend on matters deemed relevant by our Board, such as our results of operations, financial condition, cash requirements, future prospects and any limitations imposed by law, credit agreements and debt securities. In addition, convertible note covenants currently limit the Company’s ability to issue dividends while the notes are outstanding. To date, we have not paid any cash dividends or stock dividends on our common stock. We currently anticipate that we will not pay any cash dividends on our common stock in the foreseeable future. Furthermore, the terms of the financing arrangements that we have entered into any financing arrangements that we may enter into in the future, may restrict our ability to pay any dividends on our common stock.

Unregistered sales of equity securities

All unregistered sales of our equity securities during the period covered by this Report have been previously reported.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

This Report includes forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995, including statements regarding our licenses and the development of product candidates thereunder, our ability to resolve issues with holders of our unsecured note holders, our liquidity and need for and ability to access capital and the expected terms of future financings. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements include those described in this Report under “Item 1A – Risk Factors” and in our other filings with the Securities and Exchange Commission (the “SEC”). We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise. For more information regarding some of the ongoing risks and uncertainties of our business.

Overview

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information necessary to understand our audited consolidated financial statements for each of the two-years in the period ended December 31, 2022, and highlight certain other information which, in the opinion of management, will enhance a reader’s understanding of our financial condition, changes in financial condition and results of operations. In particular, the discussion is intended to provide an analysis of significant trends and material changes in our financial position and the operating results of our business during the year ended December 31, 2022, as compared to the year ended December 31, 2021. This discussion should be read in conjunction with our consolidated financial statements for each of the two-years in the period ended December 31, 2022, and related notes included elsewhere in this Report. These historical financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing, particularly in “Item 1A. Risk Factors.”

Corporate Overview

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

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

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

On August 20, 2021, we as licensee entered into an exclusive license agreement regarding the development and commercialization of Melior’s MLR-1023 (the “MLR-1023 Agreement”) with Melior Pharmaceuticals I, Inc. (“MP1”). In this Annual Report, we refer to MP2 and MP1 as “MP” or “Melior”. This second license is for the development and commercialization of MLR-1023, which is being developed as a novel therapeutic for Type 1 diabetes.

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

On November 17, 2021, Melior extended the Company’s timeline under the MLR-1023 Agreement from 120 days to 180 days from the effective of the MLR-1023 Agreement for the Company to raise $4 million unless, by 180 days Adhera is in the process of completing transactions to complete the fundraising, then an additional 30 days would be provided to allow for the completion of required fundraising. On February 16, 2022, an addendum to the MLR-1023 Agreement dated August 4, 2021 (the “First Addendum”), was executed by the Company and Melior, which extended the requirement by the Company to raise $4 million (the “Raise Requirement”) to June 16, 2022.

On July 18, 2022, the Company and Melior entered into the Second Addendum to the License Agreement (the “Second Addendum”). In accordance with the Second Addendum and subject to the terms and conditions therein, the Raise Requirement was extended to February 1, 2023. Pursuant to the Second Addendum, Melior has a right to terminate the MLR-1023 Agreement as a result of the Company’s inability to achieve certain milestones, including the requirement to:

As of February 1, 2023, the Company had not raised the additional $500,000 of capital, commenced API manufacturing, nor completed the Raise Requirement as defined in the MLR-1023 Agreement. In March 2023, the Company obtained a verbal agreement with Melior to extend the terms of the MLR-1023 Agreement until such time that the milestones have been met, including payment of the maintenance costs of the MLR-1023 patent. However, Melior may terminate our license of MLR-1023 at any time but only in response to non-performance of continuing license obligations and with the required notice to cure non-performance. Any termination or loss of use of MLR-1023 would have a material adverse effect on our business, which would likely result in the Company discontinuing all operations and seeking bankruptcy protection.

To the extent that resources have been available, we have continued to work with our advisors in an effort to restructure our Company and to identify potential strategic transactions, including the Melior 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 or seek bankruptcy protection.

Results of Operations

Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021

Operating Expenses

Operating expenses were approximately $1.6 million for the year ended December 31, 2022, a decrease of approximately $924,000 compared to the same period in 2021. The following table summarizes our operating expenses for the years ended December 31, 2022 and 2021:

Sales and Marketing

Sales and marketing expenses decreased by approximately $17,000, primarily due to the termination of our commercial operations related to the sale of Prestalia® in December 2019. Sales and marketing expenses for the year ended December 31, 2021, were primarily related to the storage and destruction of Prestalia® inventory. No sales and marketing expenses were incurred for the year ended December 31. 2022.

General and Administrative

General and administrative expenses increased by approximately $961,000 for the year ended December 31, 2022, as compared to the year ended December 31, 2021. The increase was primarily due to a $137,000 licensing payment to Melior I for the MLR-1023 license agreement, an increase in compensation cost of $262,000 including costs related to the hiring a Chief Scientific Officer, a $161,000 increase in fees paid for director and officer insurance and a $401,000 increase in other public company fees including legal expenses, audit fees, and other consulting.

Other Expenses

The following table summarizes other expenses for the year December 31, 2022 and 2021:

Interest expense for the year ended December 31, 2022, increased by $309,000 compared to the year ended December 31, 2021, primarily due to an increase in outstanding promissory notes. The initial and change in the fair value of the derivative liability as of December 31, 2022, decreased by $6.4 million as a result of a decrease in the fair value of our convertible notes and warrants that were classified as a derivative on our consolidated balance sheet as of December 31, 2022. The gain on extinguishment of debt in 2022 was due to the repayment and conversions of principal and interest on our outstanding convertible notes. The increase of $1.4 million for the amortization of debt discount was due an increase in the amortization of debts discounts as a result of an increase in our promissory notes outstanding.

Liquidity & Capital Resources

Cash Flows

The following table summarizes cash flows for the year ended December 31, 2022 and 2021:

Net cash used in Operating Activities

Net cash used in operating activities was approximately $1.4 million during the year ended December 31, 2022. This was primarily due to our net operating loss of approximately $2.1 million, partially offset by to our derivative income of approximately $2.3 million, non-cash interest expense related to term loans of $1.3 million, non-cash amortization of debt discounts and fees of $1.8 million, gain on extinguishment of debt of approximately $333,000 and other changes in operating assets and liabilities including an increase in operating assets and liabilities of approximately $203,000.

Net cash used in operating activities was approximately $665,000 during the year ended December 31, 2021. This was primarily due to our net operating loss of approximately $6.4 million, partially offset by to our derivative expense of approximately $4.1 million, non-cash interest expense related to term loans of $1.0 million, non-cash amortization of debt discounts of $398,000, loss on extinguishment of debt of approximately $141,000 and other changes in operating assets and liabilities including an increase in prepaid expenses, accounts payable and accrued expenses of approximately $10,000.

Net cash used in Investing Activities

There was no cash used in or provided by investing activities during the years ended December 31, 2022, or 2021.

Net cash provided by Financing Activities

Net cash provided by financing activities of approximately $1.4 million during the year ended December 31, 2022, was primarily due to the issuance of promissory notes with approximately $2.3 million in gross proceeds, partially offset by debt issuance costs of $346,000. In addition, the Company repaid approximately $581,000 of promissory notes during the year-ended December 31, 2022.

Net cash provided by financing activities of approximately $739,000 during the year ended December 31, 2021, was primarily due to the issuance of notes with approximately $840,000 in proceeds, partially offset by debt issuance costs of $101,000.

Working Capital

Negative working capital as of December 31, 2022, was approximately $22.2 million as compared to negative working capital of approximately $25.1 million as of December 31, 2021. The increase in working capital is primarily related to an decrease in current liabilities of approximately $3.1 million including approximately $5.0 million in accrued dividends as a result of the conversion Series E and Series F Preferred Stock during the period, offset by an increase of $1.3 million of accrued expenses including accrued interest for our promissory notes payable, an increase in our promissory notes payable of $1.9 million net of discounts and a decrease of $1.3 million in the fair value of a derivative liability related to our outstanding convertible notes and warrants.

Liquidity

We will need to raise additional operating capital in 2023 and in future periods in order to maintain our operations, continue our efforts to restructure the Company and pursue our business plan. Without additional sources of cash we will not have the cash resources to continue as a going concern.

Additionally, as of December 31, 2022, we had $12.7 million in outstanding indebtedness including promissory notes and convertible notes and accrued interest on these notes. Approximately, $10.3 million notes including accrued interest are in default.

On November 16, 2022, holders of approximately $8.6 million of outstanding 2019 promissory notes including accrued interest representing a majority of the outstanding principal and accrued interest of the Notes, agreed to amend the Notes to make them automatically convertible into units consisting of a new series of convertible preferred stock and warrants upon an uplisting financing transaction in which the Company’s common stock is listed on The Nasdaq Capital Market or the NYSE American, in exchange for the Holders agreeing to forbear repayment of their Notes and accrued interest until the uplisting has been completed.

On January 18, 2023, the Company entered into a Securities Purchase Agreement with an accredited investor pursuant to which the Company issued and sold the investor a non-convertible Original Issue 30% Discount Senior Secured Promissory Note in the principal amount of $285,714 and 452,962 Common Stock Purchase Warrants for total purchase price of $200,000. The Company received total consideration of $173,850 after debt issuance costs.

On February 3, 2023, the Company entered into a Securities Purchase Agreement with an affiliated accredited investor pursuant to which the Company issued and sold the investor a non-convertible Original Issue 30% Discount Senior Secured Promissory Note in the principal amount of $214,286 and 339,722 Common Stock Purchase Warrants for a total purchase price of $150,000. The Company received total consideration of $133,900 after debt issuance costs.

On February 16, 2023, the Company entered into a Securities Purchase Agreement with an affiliated accredited investor pursuant to which the Company issued and sold the investor a non-convertible Original Issue 30% Discount Senior Secured Promissory Note in the principal amount of $214,286 and 339,722 Common Stock Purchase Warrants for a total purchase price of $150,000. The Company received total consideration of $133,850 after debt issuance costs.

We will need to raise substantial additional capital in 2023 in order to satisfy our outstanding indebtedness and mitigate the impact on our balance sheet, and if we are unable to do so we may be forced to cease operations or pursue bankruptcy protection. In order to induce our current lenders to agree to a restructuring, we may be required to issue additional debt or equity securities or submit the Company to restrictive covenants and other terms with the potential to hinder or prevent our planned operations and growth. See “Item 1A. – Risk Factors” of this current report on Form 10-K.

Going Concern

The accompanying 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. As of December 31, 2022, we had a significant accumulated deficit of approximately $55.8 million and negative working capital of approximately $22.2 million. For the year ended December 31, 2022, we had a net loss of approximately $2.1 million and negative cash flows from operations. Our operating activities consume the majority of our cash resources. We have incurred recurring losses and negative cash flows from operations since inception we have funded our operating losses through the sale of common stock, preferred stock, warrants to purchase common stock, convertible notes and secured promissory notes.

Off-Balance Sheet Arrangements

As of December 31, 2022, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Critical Accounting Policies and Estimates

In preparing the financial statements, we make estimates and assumptions that have an impact on the assets, liabilities, revenue, and expenses reported. These estimates can also affect supplemental information disclosed by us, including information about contingencies, risk, and financial condition. We believe, given current facts and circumstances, that our estimates and assumptions are reasonable, adhere to GAAP, and are consistently applied. Inherent in the nature of an estimate or assumption is the fact that actual results may differ from the estimates, and estimates may vary as new facts and circumstances arise. Our significant accounting policies are more fully described in the notes to our financial statements included herein for the period ended December 31, 2022.

New and Recently Adopted Accounting Pronouncements

Any new and recently adopted accounting pronouncements are more fully described in Note 2 to our financial statements included herein for the year ended December 31, 2022.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information called for by Item 8 is included following the “Index to Financial Statements” on page F-1 contained in this Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

As previously disclosed on the Company’s Current Report on Form 8-K filed on May 5, 2021, on April 28, 2021, the Company’s Board of Directors approved the change of the Company’s independent registered public accounting firm from Baker Tilly USA, LLP to Salberg & Company, P,A.

ITEM 9A. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.

Our internal control over financial reporting includes those policies and procedures that:

Our Chief Executive Officer and Chief Operating Officer, who is also serving as our principal accounting and financial officer, has evaluated the effectiveness of our internal control over financial reporting as of December 31, 2022. Based upon that evaluation and subject to the foregoing, our principal executive officer concluded that our internal control over financial reporting were not effective due to the material weakness(es) described below.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed under the supervision of its principal executive and principal financial officer and effected by our Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its consolidated financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Material Weakness in Internal Control over Financial Reporting

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022, based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined that our internal control over financial reporting as of December 31, 2022 was not effective because of certain material weaknesses outlined below.

A material weakness, as defined in the standards established by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The ineffectiveness of our internal control over financial reporting was due to the following material weaknesses:

Management plans to implement measures designed to ensure that control deficiencies contributing to the material weakness outlined above are remediated at such time as sufficient funds are available to do so. The remediation actions planned include:

We intend to continue to reassess our plans to remedy our internal control deficiencies in light of our personnel structure and our financial condition.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the year ended December 31, 2022, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

PART III

The information required by Item 10 (Directors, Executive Officers and Corporate Governance), Item 11 (Executive Compensation), Item 12 (Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters), Item 13 (Certain Relationships and Related Transactions, and Director Independence), and Item 14 (Principal Accounting Fees and Services) is incorporated by reference to the Company’s definitive proxy statement for the 2023 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of December 31, 2022.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

ITEM 16. FORM 10-K SUMMARY

Not applicable.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

ADHERA THERAPEUTICS, INC.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ADHERA THERAPEUTICS, INC.

CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 and 2021

TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of:

Adhera Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Adhera Therapeutics, Inc. (the “Company”) as of December 31, 2022, and 2021, the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for each of the two the years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022, and 2021, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has no revenues and has a net loss and net cash used in operations of approximately $2.1 million and $1.4 million respectively, in 2022 and a working capital deficit, stockholders’ deficit and accumulated deficit of $22.2 million, $22.2 million and $55.8 million respectively, at December 31, 2022. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s Plan in regard to these matters is also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

2295 NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431-7328

Phone: (561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920

www.salbergco.com • info@salbergco.com

Member National Association of Certified Valuation Analysts • Registered with the PCAOB

Member CPAConnect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Derivative Liabilities

As described in Footnote 2 “Fair Value of Financial Instruments”, Footnote 2 “Convertible Debt and Warrant Accounting”, Footnote 4 “Notes Payable and Convertible Promissory Notes” and Footnote 4 “Derivatives Liabilities Pursuant to Convertible Notes and Warrants”, the Company recorded derivative activity during 2022 that resulted primarily in a net aggregate derivative related expense of $2,324 million and derivative liabilities of $6,386 million at December 31, 2022.

We identified the evaluation of instruments and contracts to determine whether there are derivatives to be recorded, the analysis of the accounting treatment and presentation for derivative transactions and the valuation of derivatives as critical audit matters. Auditing management’s analysis of the above critical audit matters was complex and involved a high degree of subjectivity.

The primary procedures we performed to address these critical audit matters included (a) Reviewed and tested management’s conclusions as to whether certain instruments or contracts qualified for derivative treatment by comparing management’s analysis and conclusions to authoritative and interpretive literature, (b) Compared the accounting treatment and presentation to that described by the authoritative and interpretive literature, (c) Tested management’s process for valuing derivatives by comparing it to generally accepted methodologies for valuing derivatives, (d) Tested management’s valuation of the derivatives by testing assumptions and data used in the valuation model including the term, volatility and interest rate, and (e) Recomputed the derivative valuations. We agreed with management’s treatment and valuations.

/s/ Salberg & Company, P.A.

SALBERG & COMPANY, P.A.

We have served as the Company’s auditor since 2021.

Boca Raton, Florida

March 31, 2023

2295 NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431-7328

Phone: (561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920

www.salbergco.com • info@salbergco.com

Member National Association of Certified Valuation Analysts • Registered with the PCAOB

Member CPAConnect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands except share and per share data)

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

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except share and per share data)

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

ADHERA THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT)

(in thousands, except share and per share amounts)