10-Q 1 t1601962_10q.htm FORM 10-Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarter Ended June 30, 2016

 

Commission File Number 000-13789

 

 

 

MARINA BIOTECH, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware 11-2658569

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

   
P.O. Box 1559, Bothell, WA 98041
(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (425) 892-4322

 

 

 

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 þ   No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).   Yes þ   No ¨

 

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

 

Large accelerated filer ¨ Accelerated filer ¨
       
Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company þ

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

Date   Class   Shares Outstanding
August 15, 2016   Common stock — $0.006 par value   29,759,503

 

 

 

 

 

MARINA BIOTECH, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

 

PART I — FINANCIAL INFORMATION    
     
ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED)   3
Condensed Consolidated Balance Sheets as of December 31, 2015 and June 30, 2016   3
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2016   4
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2016   5
Notes to Condensed Consolidated Financial Statements   6
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   15
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   20
ITEM 4 — CONTROLS AND PROCEDURES   20
     
PART II — OTHER INFORMATION    
     
ITEM 6 — EXHIBITS   21
SIGNATURES   22
EXHIBIT INDEX   23

 

Items 1, 1A, 2, 3, 4 and 5 of PART II have not been included as they are not applicable.

 

2

 

PART I — FINANCIAL INFORMATION

 

ITEM 1 — FINANCIAL STATEMENTS

 

MARINA BIOTECH, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   December 31,   June 30, 
(In thousands, except share and per share data)  2015   2016 
ASSETS          
Current assets:          
Cash  $710   $321 
Prepaid expenses and other current assets   140    125 
Total current assets   850    446 
Intangible assets   6,700    6,700 
Other assets   45    - 
Total assets  $7,595   $7,146 
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable  $763   $1,332 
Accrued payroll and employee benefits   377    69 
Other accrued liabilities   1,296    1,406 
Promissory notes   -    300 
Total current liabilities   2,436    3,107 
Fair value liability for price adjustable warrants   2,491    619 
Fair value of stock to be issued to settle liabilities   60    - 
Deferred income tax liabilities   2,345    2,345 
Total liabilities   7,332    6,071 
Commitments and contingencies          
Stockholders’ equity:          
Preferred stock, $0.01 par value; 100,000 shares authorized          
Series C convertible preferred stock, $0.01 par value; 1,200 shares authorized, 1,020 shares issued and outstanding at December 31, 2015 and June 30, 2016, respectively (preference in liquidation of $5,100 at June 30, 2016)   -    - 
Series D convertible preferred stock, $0.01 par value; 220 shares authorized, 170 and 60 shares issued and outstanding at December 31, 2015 and June 30, 2016, respectively (preference in liquidation of $300 at June 30, 2016)   -    - 
Common stock, $0.006 par value; 180,000,000 shares authorized, 27,704,340 and 29,759,503 shares  issued and outstanding at December 31, 2015 and June 30, 2016, respectively   166    179 
Additional paid-in capital   334,548    334,923 
Accumulated deficit   (334,451)   (334,027)
Total stockholders’ equity   263    1,075 
Total liabilities and stockholders’ equity  $7,595   $7,146 

 

See accompanying notes to the condensed consolidated financial statements.

 

 3

 

MARINA BIOTECH, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   Three Months Ended June 30,   Six Months Ended June 30, 
(In thousands, except per share amounts)  2015   2016   2015   2016 
License and other revenues  $400   $-   $400   $250 
Operating expenses:                    
Research and development   350    31    604    223 
General and administrative   1,072    330    2,133    1,389 
Total operating expenses   1,422    361    2,737    1,612 
Loss from operations   (1,022)   (361)   (2,337)   (1,362)
Other income (expense):                    
Change in fair value liability for price adjustable warrants   1,914    (282)   3,643    1,786 
Gain on settled liabilities   12    -    12    - 
Total other income (expense), net   1,926    (282)   3,655    1,786 
Net income (loss) applicable to common stockholders  $904   $(643)  $1,318   $424 
                     
Net income (loss) per common share                    
Basic  $0.03   $(0.02)  $0.05   $0.01 
Diluted  $(0.03)  $(0.08)  $(0.08)  $(0.06)
                     
Shares used in computing net income (loss) per share                    
Basic   26,036    29,624    26,036    29,013 
Diluted   30,293    5,853    30,293    19,640 

 

See accompanying notes to the condensed consolidated financial statements.

 

 4

 

MARINA BIOTECH, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Six months ended June 30, 
(In thousands)  2015   2016 
Operating activities:          
Net income  $1,318   $424 
Adjustments to reconcile net income to net cash used in operating activities:          
Non-cash license expense   120    - 
Non-cash gain on settlement of liabilities   (12)   - 
Compensation related to stock options and warrants   296    167 
Changes in fair market value of liabilities:          
Stock reserved for issuance to settle liabilities   -    75 
Price adjustable warrants   (3,643)   (1,786)
Cash changes in assets and liabilities:          
Accounts receivable   500    - 
Prepaid expenses and other assets   64    60 
Accounts payable   (173)   569 
Accrued and other liabilities   431    (198)
Net cash used in operating activities   (1,099)   (689)
Financing activities:          
Proceeds from promissory notes   -    300 
Proceeds from exercise of warrants for common stock   1    - 
Net cash provided by financing activities   1    300 
Net decrease in cash   (1,098)   (389)
Cash — Beginning of period   1,824    710 
Cash — End of period  $726   $321 
Supplemental disclosure of cash flow information and non-cash financing activities:          
Issuance of common stock to settle liabilities  $195   $135 
Fair value of warrants issued to purchase common stock to settle liabilities  $65   $- 
Par value of common stock issued upon conversion of Series C convertible preferred stock  $4   $- 
Par value of common stock issued upon conversion of Series D convertible preferred stock  $-   $8 
Fair value of derivative warrant liability reclassified to additional paid-in capital  $-   $86 

 

See accompanying notes to the condensed consolidated financial statements.

 

 5

 

MARINA BIOTECH, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2015 and 2016

(Unaudited)

 

Note 1 — Business, Liquidity and Summary of Significant Accounting Policies

 

Business

 

We are a biotechnology company that has focused on the discovery, development and commercialization of nucleic acid-based therapies to treat orphan diseases. Our pipeline includes CEQ508, a product in clinical development for the treatment of Familial Adenomatous Polyposis (“FAP”), for which we have received Orphan Drug Designation (“ODD”) and Fast Track Designation (“FTD”) from the U.S. Food and Drug Administration (“FDA”), and preclinical programs for the treatment of type 1 myotonic dystrophy (“DM1”) and Duchenne muscular dystrophy (“DMD”).

 

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

 

Strategic Direction and Agreement to Acquire Assets

 

As a result of our financial condition, on February 17, 2016, we announced that our Board of Directors had authorized a process to explore a range of strategic alternatives to enhance stockholder value, and that we have retained an advisor to assist us in exploring such alternatives.

 

In connection with that process of exploring strategic alternatives, on April 29, 2016, we signed a term sheet with Turing Pharmaceuticals AG (“Turing”), a privately-held biopharmaceutical company focused on developing and commercializing innovative treatments for serious diseases, pursuant to which we would acquire Turing’s intranasal ketamine program for consideration consisting of approximately 53 million shares of our common stock (the “Turing Transaction”). The assets to be acquired from Turing would include all patents and intellectual property rights, clinical development plans, regulatory documents and existing product inventories. As per the term sheet, we would pay to Turing up to $95 million in success-based and sales-based milestones plus a mid-single digit royalty on net sales, if any.

 

Completion of the proposed Turing Transaction is contingent upon certain conditions, including the completion of customary due diligence considerations, the negotiation, execution and delivery of a definitive purchase agreement, and the satisfaction or waiver of the conditions set forth in the definitive purchase agreement, including, without limitation, the completion by us of a financing transaction yielding proceeds sufficient to initiate and support the Phase 3 efforts for the intranasal ketamine program to be acquired.

 

There can be no assurance that a definitive purchase agreement will be executed or that a closing of the Turing Transaction will occur. The accompanying consolidated financial statements do not include any adjustments related to the Turing Transaction.

 

Also in connection with the process of exploring strategic alternatives, on March 10, 2016, we signed a term sheet with Microlin Bio, Inc. (“Microlin”) pursuant to which we would sell to Microlin substantially all of the assets of our historical business operations. On May 3, 2016, we announced that we had determined to terminate negotiations with Microlin with respect to the proposed transaction.

 

We will need additional capital in order to execute our strategy of concluding the Turing Transaction, and potentially either acquiring other assets or technology, or selling our existing assets or technology, or if the foregoing do not occur, our previous strategy of initiating the registration trial for and commercializing CEQ508, filing Investigational New Drug (“IND”) applications for both DM1 and DMD and bringing these two programs to human proof-of-concept trials.

 

 6

 

Recent Licensing and IP Developments

 

In February 2016, we entered into an evaluation and option agreement covering certain of our platforms for the delivery of an undisclosed genome editing technology. The agreement contains an option provision for the exclusive license of our SMARTICLES platform in a specific gene editing field.

 

In March 2016, we entered into a license agreement covering certain of our platforms for the delivery of an undisclosed genome editing technology. Under the terms of the agreement, we received an upfront license fee of $0.25 million, and could receive up to $40 million in success-based milestones.

 

In July 2016, we entered into a license agreement with an undisclosed licensee that grants such licensee rights to use our technology and intellectual property to develop and commercialize products combining certain molecules with our liposomal delivery technology known as NOV582. Under the terms of this agreement, the licensee agreed to pay to us an upfront license fee in the amount of $0.35 million (to be paid in installments through the end of 2017), along with milestone payments on a per-licensed-product basis and royalty payments in the low single digit percentages.

 

We believe that, as a result of the issuance of US patent no. 9,023,793 on May 5, 2015, we became entitled to receive a milestone payment in the amount of $2 million under an Asset Purchase Agreement dated August 25, 2010 between us and Cypress Biosciences (“Cypress”), which was subsequently assigned by Cypress to Kyalin Biosciences, Inc., and further assigned to Retrophin, Inc. (“Retrophin”). We have advised Retrophin of our claim to payment of this milestone. However, Retrophin has denied our claim. Although we intend to vigorously pursue our right to receive the milestone payment, there can be no assurance that we will be successful in our endeavors to receive the payments to which we believe we are entitled.

 

Note Purchase Agreement

 

On June 20, 2016, we entered into a Note Purchase Agreement (the “Purchase Agreement”) with certain investors (the “Purchasers”), pursuant to which we issued to the Purchasers unsecured promissory notes in the aggregate principal amount of $0.3 million (the “Notes”). Interest shall accrue on the unpaid principal balance of the Notes at the rate of 12% per annum beginning on September 20, 2016. The Notes will become due and payable on June 20, 2017, provided, that, upon the closing of a financing transaction that occurs while the Notes are outstanding, each Purchaser shall have the right to either: (i) accelerate the maturity date of the Note held by such Purchaser or (ii) convert the entire outstanding principal balance under the Note held by such Purchaser and accrued interest thereon into our securities that are issued and sold at the closing of such financing transaction.

 

Further, if we at any time while the Notes are outstanding receive any cash payments in the aggregate amount of not less than $0.25 million, as a result of the licensing, partnering or disposition of any of the technology held by us or any related product or asset, we shall pay to the holders of the Notes, on a pro rata basis, an amount equal to 25% of each payment actually received by us, which payments shall be applied against the outstanding principal balance of the Notes and the accrued and unpaid interest thereon, until such time as the Notes are repaid in full.

 

In the Purchase Agreement, we agreed: (x) to extend the termination date of all of the warrants to purchase shares of our common stock (such warrants, the “Prior Warrants”) that were delivered to the purchasers pursuant to that certain Note and Warrant Purchase Agreement, dated as of February 10, 2012 between us and the purchasers identified on the signature pages thereto, as it has been amended to date, to February 10, 2020 and (y) to extend the anti-dilution protection afforded of the Prior Warrants so that such protection would apply to any financing transaction effected by us on or prior to June 19, 2017 (with any such adjustment only applying to 80% of the Prior Warrants). As the Prior Warrants were already recorded at fair value as a result of price adjustable terms, the impacts of the modification of the terms is included in the change in fair value of price adjustable warrants in the statement of operations.

 

 7

 

Liquidity

 

The accompanying condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At June 30, 2016, we had an accumulated deficit of approximately $334.0 million, $108.3 million of which has been accumulated since we focused on RNA therapeutics in June 2008. To the extent that sufficient funding is available, we will continue to incur operating losses as we execute our plan to raise additional funds, complete the Turing Transaction, and investigate either acquiring other technology or selling our existing assets or technology. In addition, we have had and will continue to have negative cash flows from operations. We have funded our losses primarily through the sale of common and preferred stock and warrants, the sale of the Notes, revenue provided from our license agreements and, to a lesser extent, equipment financing facilities and secured loans. In 2015 and 2016, we funded operations with a combination of the issuance of the Notes, preferred stock and license-related revenues. At June 30, 2016, we had negative working capital of $2.7 million and $0.3 million in cash. Our limited operating activities consume the majority of our cash resources.

 

We believe that our current cash resources, including the proceeds from the Notes received in June 2016 as noted above, will enable us to fund our intended operations through October 2016. Our ability to execute our operating plan beyond October 2016 depends on our ability to obtain additional funding, the subsequent closing of the Turing Transaction, and any subsequent plans to acquire other technology or sell our existing assets or technology. The volatility in our stock price, as well as market conditions in general, could make it difficult for us to raise capital on favorable terms, or at all. If we fail to obtain additional capital when required, we may have to modify, delay or abandon some or all of our planned activities, or terminate our operations. There can be no assurance that we will be successful in any such endeavors. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

If the Turing Transaction is not consummated and we are unable to either find a viable purchaser for our assets or to obtain sufficient capital to continue our current operations or any other business that we may acquire, we may be forced to file bankruptcy as we will have minimal capital and operating assets to continue the business.

 

Basis of Preparation and Summary of Significant Accounting Policies

 

Basis of Preparation — The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The accompanying unaudited financial information should be read in conjunction with the audited consolidated financial statements, including the notes thereto, as of and for the year ended December 31, 2015, included in our 2015 Annual Report on Form 10-K filed with the SEC. The information furnished in this report reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows for each period presented. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results for the year ending December 31, 2016 or for any future period.

 

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

 

Reclassifications — Certain amounts have been reclassified in prior period condensed consolidated financial statements to conform to the current year presentation.

 

Fair Value of Financial Instruments —We consider the fair value of cash, accounts receivable, accounts payable and accrued liabilities to not be materially different from their carrying value. These financial instruments have short-term maturities.

 

 8

 

We follow authoritative guidance with respect to fair value reporting issued by the Financial Accounting Standards Board (“FASB”) for financial assets and liabilities, which defines fair value, provides guidance for measuring fair value and requires certain disclosures. The guidance does not apply to measurements related to share-based payments. The guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

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

 

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

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

 

Our cash is subject to fair value measurement and value is determined by Level 1 inputs. We measure the liability for committed stock issuances with a fixed share number using Level 1 inputs. We measure the liability for price adjustable warrants and certain features embedded in notes using the Black-Scholes option pricing model (“Black-Scholes”) under various probability weighted scenarios, using Level 3 inputs. The following tables summarize our liabilities measured at fair value on a recurring basis as of December 31, 2015 and June 30, 2016:

 

       Level 1       Level 3 
   Balance at   Quoted prices in   Level 2   Significant 
   December 31,   active markets for   Significant other   unobservable 
(In thousands)  2015   identical assets   observable inputs   inputs 
Liabilities:                    
Fair value liability for price adjustable warrants  $2,491   $-   $-   $2,491 
Fair value liability for shares to be issued   60    60    -    - 
Total liabilities at fair value  $2,551   $60   $-   $2,491 

 

       Level 1       Level 3 
       Quoted prices in   Level 2   Significant 
   Balance at   active markets for   Significant other   unobservable 
(In thousands)  June 30, 2016   identical assets   observable inputs   inputs 
Liabilities:                
Fair value liability for price adjustable warrants  $619   $-   $-   $619 
Total liabilities at fair value  $619   $-   $-   $619 

  

The following presents activity of the fair value liability of price adjustable warrants determined by Level 3 inputs for the six-month period ended June 30, 2016, including the impact of the modifications to the Prior Warrants made in conjunction with the Purchase Agreement:

 

       Weighted average as of each measurement date 
   Fair value                     
   liability for price               Contractual     
   adjustable warrants   Exercise   Stock       life   Risk free 
   (in thousands)   Price   Price   Volatility   (in years)   rate 
                         
Balance at December 31, 2015  $2,491   $0.42   $0.27    99%   1.79    0.46%
Fair value of derivative warrant liability reclassified to additional paid-in capital   (86)                         
Change in fair value included in Statement of Operations   (1,786)                         
Balance at June 30, 2016  $619   $0.43   $0.19    178%   1.94    0.03%

 

 9

 

Net Income (Loss) per Common Share — Basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share includes the effect of common stock equivalents (stock options, unvested restricted stock, warrants) when, under either the treasury or if-converted method, such inclusion in the computation would be dilutive. The following number of shares have been excluded from diluted net income (loss) since such inclusion would be anti-dilutive:

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2015   2016   2015   2016 
Stock options outstanding   1,316,106    1,548,106    1,316,106    1,548,106 
Warrants   1,323,291    3,416,104    1,323,291    9,416,104 
Convertible preferred stock   8,000,000    7,550,000    8,000,000    7,550,000 
Total   10,639,397    12,514,210    10,639,397    18,514,210 

 

The following is a reconciliation of basic and diluted net income (loss) per share:

 

   Three Months Ended June 30,   Six Months Ended June 30, 
(In thousands except per share amounts)  2015   2016   2015   2016 
Net income (loss) – numerator basic  $904   $(643)  $1,318   $424 
Change in fair value liability for price adjustable warrants   (1,914)   197    (3,643)   (1,655)
Net loss excluding change in fair value liability for price adjustable warrants  $(1,010)  $(446)  $(2,325)  $(1,231)
Weighted average common shares outstanding – denominator basic   26,036    29,624    26,036    29,013 
Effect of price adjustable warrants   4,257    (23,771)   4,257    (9,373)
Weighted average dilutive common shares outstanding   30,293    5,853    30,293    19,640 
Net income (loss) per common share – basic  $0.03   $(0.02)  $0.05   $0.01 
Net income (loss) per common share – diluted  $(0.03)  $(0.08)  $(0.08)  $(0.06)

 

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

 

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

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

 

 10

 

Note 2 — Stockholders’ Equity

 

Preferred Stock — Our board of directors has the authority, without action by the stockholders, to designate and issue up to 100,000 shares of preferred stock in one or more series and to designate the rights, preferences and privileges of each series, any or all of which may be greater than the rights of our common stock. We have designated 1,000 shares as Series B Preferred Stock (“Series B Preferred”) and 90,000 shares as Series A Junior Participating Preferred Stock (“Series A Preferred”). No shares of Series B Preferred or Series A Preferred are outstanding. In March 2014, we designated 1,200 shares as Series C Convertible Preferred Stock (“Series C Preferred”). In August 2015, we designated 220 shares as Series D Convertible Preferred Stock (“Series D Preferred”).

 

In August 2015, we entered into a Securities Purchase Agreement with certain investors pursuant to which we sold 220 shares of Series D Preferred, and warrants to purchase up to 3.44 million shares of our common stock at an initial exercise price of $0.40 per share before August 2021, for an aggregate purchase price of $1.1 million. We incurred $0.01 million of stock issuance costs in conjunction with the Series D Preferred, which were netted against the proceeds. The warrants issued in connection with Series D Preferred contain an anti-dilution (“down round”) provision whereby the exercise price per share to purchase common stock covered by these warrants is subject to reduction in the event of certain dilutive stock issuances at any time within two years of the issuance date, but not to be reduced below $0.28 per share. Each share of Series D Preferred has a stated value of $5,000 per share and is convertible into shares of common stock at a conversion price of $0.40 per share. The Series D Preferred is initially convertible into an aggregate of 2,750,000 shares of our common stock, subject to certain limitations and adjustments, has a 5% stated dividend rate, is not redeemable and has voting rights on an as-converted basis.

 

To account for the issuance of the Series D Preferred and warrants, we first assessed the terms of the warrants and determined that, due to the “down round” provision, they should be recorded as derivative liabilities. We determined the fair value of the warrants on the issuance date and recorded a liability and a discount of $0.6 million on the Series D Preferred resulting from the allocation of proceeds to the warrants. We then determined the effective conversion price of the Series D Preferred which resulted in a beneficial conversion feature of $0.7 million. The beneficial conversion feature was recorded as both a debit and a credit to additional paid-in capital and as a deemed dividend on the Series D Preferred in determining net income applicable to common stock holders in the consolidated statements of operations.

 

Each share of Series C Preferred has a stated value of $5,000 per share and is convertible into shares of common stock at a conversion price of $0.75 per share. In June 2015, an investor converted 90 shares of Series C Preferred into 0.6 million shares of common stock. In November 2015, an investor converted an additional 90 shares of Series C Preferred into 0.6 million shares of common stock. Also in November 2015, an investor converted 50 shares of Series D Preferred into 0.6 million shares of common stock.

 

In February 2016, an investor converted 110 shares of Series D Preferred into 1.4 million shares of common stock.

 

Common Stock — Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the holders of our common stock. Subject to the rights of the holders of any class of our capital stock having any preference or priority over our common stock, the holders of our common stock are entitled to receive dividends that are declared by our board of directors out of legally available funds. In the event of our liquidation, dissolution or winding-up, the holders of common stock are entitled to share ratably in our net assets remaining after payment of liabilities, subject to prior rights of preferred stock, if any, then outstanding. Our common stock has no preemptive rights, conversion rights, redemption rights or sinking fund provisions, and there are no dividends in arrears or default. All shares of our common stock have equal distribution, liquidation and voting rights, and have no preferences or exchange rights. Our common stock currently trades on the OTCQB tier of the OTC Markets.

 

In February 2016, we issued 0.21 million shares with a value of $0.06 million to Novosom as the equity component owed under our December 2015 milestone payment from MiNA Therapeutics. In April 2016, we issued 0.47 million shares with a value of $0.075 million to Novosom as the equity component owed under a March 2016 license agreement covering certain of our platforms for the delivery of an undisclosed genome editing technology.

 

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Warrants — As noted above, in the Purchase Agreement, we agreed: (x) to extend the termination date of all of the Prior Warrants to February 10, 2020 and (y) to extend the anti-dilution protection afforded of the Prior Warrants so that such protection would apply to any financing transaction effected by us on or prior to June 19, 2017 (with any such adjustment only applying to 80% of the Prior Warrants). In conjunction with this modification, the fair value of the derivative warrant liability associated with the 20% of the Prior Warrants that no longer have the anti-dilution protection equal to $0.09 million was reclassified to additional paid-in capital.

 

As of June 30, 2016, there were 24,466,783 warrants outstanding, with a weighted average exercise price of $0.47 per share, and annual expirations as follows:

 

Expiring in 2016  - 
Expiring in 2017   2,630,545 
Expiring in 2018   113,831 
Expiring thereafter   21,722,407 

 

Note 3 — Stock Incentive Plans

  

Stock-based Compensation. Certain option and share awards provide for accelerated vesting if there is a change in control as defined in the applicable plan and certain employment agreements. The following table summarizes stock-based compensation expense:

 

   Three months ended June 30,   Six months ended June 30, 
(In thousands)  2015   2016   2015   2016 
Research and development  $5   $2   $31   $13 
General and administrative   112    69    265    154 
Total  $117   $71   $296   $167 

 

Stock Options — Stock option activity was as follows:

 

   Options Outstanding 
   2016 
   Shares   Weighted Average
Exercise Price
 
Outstanding, January 1   1,316,106   $4.66 
Options Issued   232,000   $0.26 
Outstanding, June 30   1,548,106   $4.00 
Exercisable, June 30   1,110,856   $5.24 

 

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The following table summarizes additional information on our stock options outstanding at June 30, 2016:

 

   Options Outstanding   Options Exercisable 
Range of Exercise
Prices
  Number
Outstanding
   Weighted-
Average
Remaining
Contractual
Life (Years)
   Weighted
Average Exercise
Price
   Number
Exercisable
   Weighted
Average
Exercise Price
 
$0.26 - 0.82   484,000    3.99   $0.46    368,000   $0.53 
$1.07 - $2.20   1,021,500    6.99    1.07    700,250    1.07 
$47.60 - $87.60   21,000    1.95    67.60    21,000    67.60 
$127.60 - $207.60   21,500    1.95    158.30    21,500    158.30 
$526.40   106    0.61    526.40    106    526.40 
Totals   1,548,106    5.91   $4.00    1,110,856   $5.24 
    Weighted-Average Exercisable Remaining Contractual Life (Years)    5.39 

 

In January 2016, we issued options to purchase up to an aggregate of 0.152 million shares of our common stock to non-employee members of our board of directors at an exercise price of $0.26 per share as the annual grant to such directors for their service on our board of directors during 2016, and we issued options to purchase up to an aggregate of 0.08 million shares of our common stock to the members of our scientific advisory board at an exercise price of $0.26 per share as the annual grant to such persons for their service on our scientific advisory board during 2016.

 

At June 30, 2016, we had $0.34 million of total unrecognized compensation expense related to unvested stock options. We expect to recognize this cost over a weighted average period of 0.7 years, except as noted below.

 

At June 30, 2016, the intrinsic value of options outstanding or exercisable was zero as there were no options outstanding with an exercise price less than $0.16, the per share closing market price of our common stock at that date.

 

Our Chief Executive Officer resigned from our company effective June 10, 2016, ceasing all work for our company at such time. On July 22, 2016, we entered into an agreement with our former CEO, pursuant to which we agreed (x) to pay $0.07 million of back wages at such time as funds become reasonably available, all of which wages have been accrued as of June 30, 2016, and (y) that all remaining unvested options to purchase shares of our common stock would vest immediately, with the exercise period of such options (as well as such options held by our former CEO that had already vested as of June 10, 2016) extended through the earlier of the option’s exercise period or December 31, 2017. We will recognize any compensation expense associated with these unvested 321,250 options, including the modifications thereof, in the quarter ended September 30, 2016, upon the modification.

 

Note 4 — Intellectual Property and Collaborative Agreements

 

In July 2010, we entered into an agreement pursuant to which we acquired intellectual property for Novosom’s SMARTICLES-based liposomal delivery system. In February 2016, we issued Novosom 0.21 million shares of common stock valued at $0.06 million for amounts due and included in Fair Value of Stock to be Issued to Settle Liabilities at December 31, 2015.

 

In March 2016, we entered into a license agreement covering certain of our platforms for the delivery of an undisclosed genome editing technology. Under the terms of the agreement, we received an upfront license fee of $0.25 million and could receive up to $40 million in success-based milestones. In April 2016 we issued Novosom 0.47 million shares of common stock valued at $0.075 million for amounts due under this agreement.

 

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In July 2016, we entered into a license agreement with an undisclosed licensee that grants such licensee rights to use our technology and intellectual property to develop and commercialize products combining certain molecules with our liposomal delivery technology known as NOV582. Under the terms of this agreement, the licensee agreed to pay to us an upfront license fee in the amount of $0.35 million (to be paid in installments through the end of 2017), along with milestone payments on a per-licensed-product basis and royalty payments in the low single digit percentages.

 

Note 5 — Commitments and Contingencies

 

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

 

Note 6 — Subsequent Events

 

All material subsequent events have been included within footnotes 1, 3 and 4 of the Condensed Consolidated Financial Statements.

 

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ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Overview

 

Statements contained herein that are not historical fact may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are subject to a variety of risks and uncertainties. There are a number of important factors that could cause actual results to differ materially from those projected or suggested in any forward-looking statement made by us. These factors include, but are not limited to: (i) the ability of our company to obtain additional and substantial funding on an immediate basis; (ii) our ability to consummate the acquisition of certain assets from Turing Pharmaceuticals AG, as further described in this report; (iii) the ability of our company to attract and/or maintain research, development, commercialization and manufacturing partners; (iv) the ability of our company and/or a partner to successfully complete product research and development, including pre-clinical and clinical studies and commercialization; (v) the ability of our company and/or a partner to obtain required governmental approvals, including product and patent approvals; and (vi) the ability of our company and/or a partner to develop and commercialize products that can compete favorably with those of competitors. In addition, significant fluctuations in quarterly results may occur as a result of the timing of milestone payments, the recognition of revenue from milestone payments and other sources, and the timing of costs and expenses related to our research and development programs. Additional factors that could cause actual results to differ materially from those projected or suggested in any forward-looking statements are contained in our filings with the Securities and Exchange Commission, including those factors discussed under the captions “Risk Factors” and “Forward-Looking Statements” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as may be supplemented or amended from time to time, which we urge investors to consider. We undertake no obligation to publicly release revisions in such forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events or circumstances, except as otherwise required by securities and other applicable laws.

 

Business

 

We are a biotechnology company that has focused on the discovery, development and commercialization of nucleic acid-based therapies to treat orphan diseases. Our pipeline includes CEQ508, a product in clinical development for the treatment of Familial Adenomatous Polyposis (“FAP”), for which we have received Orphan Drug Designation (“ODD”) and Fast Track Designation (“FTD”) from the U.S. Food and Drug Administration (“FDA”), and preclinical programs for the treatment of type 1 myotonic dystrophy (“DM1”) and Duchenne muscular dystrophy (“DMD”).

 

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

 

Strategic Direction and Agreement to Acquire Assets

 

As a result of our financial condition, on February 17, 2016, we announced that our Board of Directors had authorized a process to explore a range of strategic alternatives to enhance stockholder value, and that we have retained an advisor to assist us in exploring such alternatives.

 

In connection with that process of exploring strategic alternatives, on April 29, 2016, we signed a term sheet with Turing Pharmaceuticals AG (“Turing”), a privately-held biopharmaceutical company focused on developing and commercializing innovative treatments for serious diseases, pursuant to which we would acquire Turing’s intranasal ketamine program for consideration consisting of approximately 53 million shares of our common stock (the “Turing Transaction”). The assets to be acquired from Turing would include all patents

 

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and intellectual property rights, clinical development plans, regulatory documents and existing product inventories. As per the term sheet, we would pay to Turing up to $95 million in success-based and sales-based milestones plus a mid-single digit royalty on net sales, if any.

 

Completion of the proposed Turing Transaction is contingent upon certain conditions, including the completion of customary due diligence considerations, the negotiation, execution and delivery of a definitive purchase agreement, and the satisfaction or waiver of the conditions set forth in the definitive purchase agreement, including, without limitation, the completion by us of a financing transaction yielding proceeds sufficient to initiate and support the Phase 3 efforts for the intranasal ketamine program to be acquired.

 

There can be no assurance that a definitive purchase agreement will be executed or that a closing of the Turing Transaction will occur. The accompanying consolidated financial statements do not include any adjustments related to the Turing Transaction.

 

Also in connection with the process of exploring strategic alternatives, on March 10, 2016, we signed a term sheet with Microlin Bio, Inc. (“Microlin”) pursuant to which we would sell to Microlin substantially all of the assets of our historical business operations. On May 3, 2016, we announced that we had determined to terminate negotiations with Microlin with respect to the proposed transaction.

 

We will need additional capital in order to execute our strategy of concluding the Turing Transaction, and potentially either acquiring other assets or technology or selling our existing assets or technology, or if the foregoing do not occur, our previous strategy of initiating the registration trial for and commercializing CEQ508, filing Investigational New Drug (“IND”) applications for both DM1 and DMD and bringing these two programs to human proof-of-concept trials.

 

Recent Licensing and IP Developments

 

In February 2016, we entered into an evaluation and option agreement covering certain of our platforms for the delivery of an undisclosed genome editing technology. The agreement contains an option provision for the exclusive license of our SMARTICLES platform in a specific gene editing field.

 

In March 2016, we entered into a license agreement covering certain of our platforms for the delivery of an undisclosed genome editing technology. Under the terms of the agreement, we received an upfront license fee of $0.25 million, and could receive up to $40 million in success-based milestones.

 

In July 2016, we entered into a license agreement with an undisclosed licensee that grants such licensee rights to use our technology and intellectual property to develop and commercialize products combining certain molecules with our liposomal delivery technology known as NOV582. Under the terms of this agreement, the licensee agreed to pay to us an upfront license fee in the amount of $0.35 million (to be paid in installments through the end of 2017), along with milestone payments on a per-licensed-product basis and royalty payments in the low single digit percentages.

 

We believe that, as a result of the issuance of US patent no. 9,023,793 on May 5, 2015, we became entitled to receive a milestone payment in the amount of $2 million under an Asset Purchase Agreement dated August 25, 2010 between us and Cypress Biosciences (“Cypress”), which was subsequently assigned by Cypress to Kyalin Biosciences, Inc., and further assigned to Retrophin, Inc. (“Retrophin”). We have advised Retrophin of our claim to payment of this milestone. However, Retrophin has denied our claim. Although we intend to vigorously pursue our right to receive the milestone payment, there can be no assurance that we will be successful in our endeavors to receive the payments to which we believe we are entitled.

 

Note Purchase Agreement

 

On June 20, 2016, we entered into a Note Purchase Agreement (the “Purchase Agreement”) with certain investors (the “Purchasers”), pursuant to which we issued to the Purchasers unsecured promissory notes in the aggregate principal amount of $0.3 million (“Notes”). Interest shall accrue on the unpaid principal balance of the Notes at the rate of 12% per annum beginning on September 20, 2016. The Notes will become due and payable on June 20, 2017, provided, that, upon the closing of a financing transaction that occurs while the Notes are outstanding, each Purchaser shall have the right to either: (i) accelerate the maturity date of the Note held by such Purchaser or (ii) convert the entire outstanding principal balance under the Note held by such Purchaser and accrued interest thereon into our securities that are issued and sold at the closing of such financing transaction.

 

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Further, if we at any time while the Notes are outstanding receive any cash payments in the aggregate amount of not less than $0.25 million, as a result of the licensing, partnering or disposition of any of the technology held by us or any related product or asset, we shall pay to the holders of the Notes, on a pro rata basis, an amount equal to 25% of each payment actually received by us, which payments shall be applied against the outstanding principal balance of the Notes and the accrued and unpaid interest thereon, until such time as the Notes are repaid in full.

 

In the Purchase Agreement, we agreed: (x) to extend the termination date of all of the warrants to purchase shares of our common stock (such warrants, the “Prior Warrants”) that were delivered to the purchasers pursuant to that certain Note and Warrant Purchase Agreement, dated as of February 10, 2012 between us and the purchasers identified on the signature pages thereto, as it has been amended to date, to February 10, 2020 and (y) to extend the anti-dilution protection afforded of the Prior Warrants so that such protection would apply to any financing transaction effected by us on or prior to June 19, 2017 (with any such adjustment only applying to 80% of the Prior Warrants).

 

Liquidity

 

The accompanying condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At June 30, 2016, we had an accumulated deficit of approximately $334.0 million, $108.3 million of which has been accumulated since we focused on RNA therapeutics in June 2008. To the extent that sufficient funding is available, we will continue to incur operating losses as we execute our plan to raise additional funds, complete the Turing Transaction, and investigate either acquiring other technology or selling our existing assets or technology. In addition, we have had and will continue to have negative cash flows from operations. We have funded our losses primarily through the sale of common and preferred stock and warrants, the sale of the Notes, revenue provided from our license agreements and, to a lesser extent, equipment financing facilities and secured loans. In 2015 and 2016, we funded operations with a combination of the issuance of the Notes, preferred stock and license-related revenues. At June 30, 2016, we had negative working capital of $2.7 million and $0.3 million in cash. Our limited operating activities consume the majority of our cash resources.

 

We believe that our current cash resources, including the proceeds from the Notes received in June 2016 as noted above, will enable us to fund our intended operations through October 2016. Our ability to execute our operating plan beyond October 2016 depends on our ability to obtain additional funding, the subsequent closing of the Turing Transaction, and any subsequent plans to acquire other technology or sell our existing assets or technology. The volatility in our stock price, as well as market conditions in general, could make it difficult for us to raise capital on favorable terms, or at all. If we fail to obtain additional capital when required, we may have to modify, delay or abandon some or all of our planned activities, or terminate our operations. There can be no assurance that we will be successful in any such endeavors. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

If the Turing Transaction is not consummated and we are unable to either find a viable purchaser for our assets or to obtain sufficient capital to continue our current operations or any other business that we may acquire, we may be forced to file bankruptcy as we will have minimal capital and operating assets to continue the business.

 

Cash flows

 

Our operating activities used cash of $0.7 million in the six months ended June 30, 2016, compared to $1.1 million in the six months ended June 30, 2015. In the six months ended June 30, 2016, cash used in operating activities related primarily to funding our operating loss, adjusted for non-cash items. Adjustments for non-cash items, totaling $1.5 million, represented the change in fair value of price adjustable warrants, partially offset by stock compensation charges and stock issued to settle certain liabilities. Changes in operating assets and liabilities provided $0.4 million from the deferred payments to vendors, partially offset by the reduction of certain accrued liabilities. During the six months ended June 30, 2015, cash used in operating activities related primarily to funding our operating loss, adjusted for non-cash items. Adjustments for non-cash items, totaling $3.2 million, represented stock compensation, gain on settled liabilities and the change in fair value of price adjustable warrants. Changes in

 

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operating assets and liabilities provided $0.8 million from collecting $0.5 million due under a licensing agreement, and $0.3 million driven mainly by changes in accounts payable and accrued liabilities associated with costs incurred related to SEC filings in preparation for financing activities.

 

We had no investing activities in the six months ended June 30, 2016 or 2015.

 

We received $0.3 million from the Notes during the six months ended June 30, 2016, compared to an immaterial amount of proceeds from warrant exercises in the six months ended June 30, 2015.

 

Consolidated Results of Operations

 

Comparison of Results of Operations for the three and six months ended June 30, 2016 to the three and six months ended June 30, 2015

 

Revenue. We recorded no revenue in the three months ended June 30, 2016, and $0.25 million in revenue in the six months ended June 30, 2016, which consisted of an upfront license fee from a license agreement covering certain platforms for the delivery of an undisclosed genome editing technology. The majority of our licensing deals provide for clinical and regulatory milestones, so significant revenues could result from the existing licenses, but are uncertain as to timing or probability. We will seek R&D collaborations as well as licensing transactions to fund business operations.

 

We recorded $0.4 million in revenue in the six months ended June 30, 2015, which consisted of an accelerated milestone payment from Mirna under our 2011 licensing agreement.

 

Research and Development. Research & development (“R&D”) expense consists primarily of costs of sublicensing fees, clinical development and pre-clinical studies, consulting and other outside services, and other costs. R&D expense decreased $0.32 million from $0.35 million, and decreased $0.38 million from $0.60 million in the three and six months ended June 30, 2015, respectively, to $0.03 million and $0.22 million in the three and six months ended June 30, 2016, respectively, primarily due to the elimination of most consulting and clinical studies, offset partially by a slight increase in the sublicensing fees payable to Novosom from the above mentioned technology license and milestone payment.

 

General and administrative. General and administrative (“G&A”) expense consists primarily of salaries and other personnel-related expenses to support our R&D activities, stock-based compensation for G&A personnel and non-employee members of our Board, professional fees, such as accounting and legal, and corporate insurance costs. G&A costs decreased $0.74 million from $1.07 million, and decreased $0.74 million from $2.13 million in the three and six months ended June 30, 2015, respectively, to $0.33 million and $1.39 million in the three and six months ended June 30, 2016, respectively, and includes the following:

 

  · Personnel-related expenses (compensation, benefits, travel related) decreased from $0.31 million and $0.63 million for the three and six months ended June 30, 2015, respectively, to a negative $0.24 million and a positive $0.05 million in the three and six months ended June 30, 2016, respectively, primarily due to the departure of our Chief Executive Officer during the quarter ended June 30, 2016.  We had previously accrued for several periods of bonus payments totaling approximately $0.4 million to our former Chief Executive Officer, which was reversed during the three months ended June 30, 2016.  In addition, stock compensation expense for our Directors decreased for both the three month and six month periods ended June 30, 2016.

 

  · Costs of legal and accounting fees, consulting, corporate insurance and other administrative costs decreased from $0.70 million and $1.53 million for the three and six months ended June 30, 2015, respectively, to $0.57 million and $1.32 million in the three and six months ended June 30, 2016, respectively, primarily due to a decrease in costs related to financing activities.

 

Interest & other expense. We incurred no interest or other expense in the three and six months ended June 30, 2016. We have determined that the three month interest-free period on the Notes is not material, and thus have chosen not to reduce the carrying value of the notes for any small embedded discount. During the three and six months ended June 30, 2015, we recorded a $0.01 million gain related to credits on vendor payables.

 

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Change in fair value liability for price adjustable warrants. The fair value liability is revalued each balance sheet date utilizing Black-Scholes computations, with the decrease or increase in fair value being reported in the statement of operations as other income or expense, respectively. Stock price decreases, offset by the modifications to the expiration dates on the Prior Warrants, resulted in a $0.28 million loss and a $1.79 million gain during the three month and six month periods ended June 30, 2016, respectively. Stock price decreases resulted in a $1.91 million gain and a $3.64 million gain during the three month and six month periods ended June 30, 2015, respectively.

 

Off-Balance Sheet Arrangements

 

As of June 30, 2016, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

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ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4 — CONTROLS AND PROCEDURES

 

(a) Disclosure Controls and Procedures. As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our senior management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act.

 

(b) Internal Control Over Financial Reporting. There have been no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2016, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II — OTHER INFORMATION

 

ITEM 6 — EXHIBITS

 

The exhibits required by this item are set forth in the Exhibit Index attached hereto.

 

  

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized, on August 15, 2016.

 

  MARINA BIOTECH, INC.
     
  By: /s/ Joseph W. Ramelli
    Joseph W. Ramelli
    Interim Chief Executive Officer
    (Principal Executive Officer and
    Principal Financial Officer)

 

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EXHIBIT INDEX

 

Exhibit 
No. 
  Description
     
31.1   Certification of our Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended. (1)
     
32.1   Certification of our Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (2)
     
101.INS   XBRL Instance Document (2)
     
101.SCH   XBRL Taxonomy Extension Schema Document (2)
     
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document (2)
     
101.DEF   XBRL Taxonomy Extension Definitions Linkbase Document (2)
     
101.LAB   XBRL Taxonomy Extension Label Linkbase Document (2)
     
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document (2)

 

(1) Filed Herewith.
(2) Furnished Herewith.

 

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