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, 20212022

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. ☐

IndicateIndicate 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, 2021,2022, was approximately $0.8 3.1million as computed by reference to the closing price of such common stock on the OTC Markets on such date.

The registrant had 17,293,2373,178,738 shares of common stock, par value $0.006 per share, outstanding as of April 14, 2022.

March 31, 2023.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be filed by the registrant for its 20222023 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.10-K

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ADHERA THERAPEUTICS, INC.

20212022 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

PART I

ITEM 1. BUSINESS

Overview

Adhera Therapeutics, Inc. (“Adhera,” the “Company,” “we” “our” or “us”) isWe are an emerging specialty biotech company that,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 extent that resourcesdrug development and opportunities become available, is strategically evaluating its focus including a return to abiotech 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 company.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 Melior Pharmaceuticals II, LLC (“MP2”)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 Parkinson’s disease (“PD”)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 licensing agreementAgreement with MP1 to include two additional clinical indications, one for Non-Alcoholic Steatohepatitis (NASH) and the other for pulmonary inflammation.

The milestones and payment obligations and other material termsOn November 17, 2021, Melior extended the Company’s timeline under the foregoing license agreementsMLR-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 are summarizedto 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 subsection titled “PartneringCompany discontinuing all operations and Licensing Agreements” of this Form 10K.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 companyCompany and to identify potential strategic transactions, including the Melior transactions described above, to enhance the value of the company. BecauseCompany. 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 will discontinueCompany discontinuing all operations and may 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, 19831983.

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 U.S. Food and Drug Administration (the “FDA”)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:

Our efforts to identify and develop product candidates are at an early stage. We may be unable to progress our product candidates through research and development, preclinical testing or 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 not 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 Report,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 INDUSTRYRisks 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 a significant proportionall 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, if we failas 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 raise or be in final negotiations to raise at least $4.0 million or hire a qualified Chief Scientific Officer by June 16, 2022,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 will terminate.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.

DueWe may be subject to the recent change in the United States presidency, we expect 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 actingInterim Chief Scientific Officer, Dr. Zahed Subhan and our Chief Operating Officer and Acting Chief Financial Officer, Andrew Kucharchuk, who is the sole member ofKucharchuk. In addition, services related to our accounting and financial management team and provides his services to the Company as a contractor.are being performed by independent contractors. We do not carry “key-man” life insurance on Mr. Kucharchuk.Dr. Subhan. The loss of the services of Mr. Kucharchuk,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 Mr. Kucharchuk,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 Mr. Kucharchuk,Dr. Subhan, the loss of Mr. KucharchukDr. 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 suffersuffer.

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

As of that date of this Report,Prospectus, we have no employees,employ one employee and our current Chief Executive Officer and servicesOperating 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 and when 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.

RISKS RELATED TO OUR COMMON STOCK

Due to factors beyond our control, our Common StockThe price may be volatile, or may decline regardless of our operating performance, and youcommon stock is volatile, which may not be able to resell your shares.cause investment losses for our stockholders.

The market price of our Common Stock will depend on a number of factors, many of which are beyond our controlcommon stock has been and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our Common Stock since you might be unable to sell your shares at or above the price you paid. Factors that could cause fluctuationsis likely in the marketfuture to be volatile. Our common stock price of our Common Stock include the following:may fluctuate in response to factors such as:

In addition, the securities marketsThese broad market and industry factors may have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affecta material adverse effect on the market price of our Common Stock. As a result, you may be unable to resell your shares at a desired price. In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. Any litigation, if instituted against us, could result in substantial costs and a diversioncommon stock, regardless of our management’s attentionactual operating performance. These factors could have a material adverse effect on our business, financial condition, and resources.

results of operations.

Currently there is no active public market forThe sale or conversion of our Common Stock, and we cannot predictshares of common stock could depress the future prices or the amount of liquidity.

Currently, there is no active public market for our Common Stock and one may never develop. Our Common Stock trades sporadically on the OTCQB under the symbol ATRX. We do not know if an active market will develop. Investors should be aware that the OTCQB is not as liquid as major national securities exchanges. These stock market and industry factors may adversely affect the market price of our Common Stock. These stock market and industry factors may adversely affect the market price of our Common Stock.

The Rule changes could harm the liquidity and/or market price of our Common Stock by either preventing our shares from being quoted or driving up our costs of compliance. If we cannot or do not provide or maintain current public information about our Company our stockholders may face difficulties in selling their shares of our Common Stock at desired prices, quantities or times, or at all, as a result of the amendments to the Rule.

We are subject to the “penny stock” rules which will adversely affect the liquidity of our Common Stock.

The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The market price of our Common Stock on the OTC Pink Open Market is presently less than $5.00 per share and therefore we are considered a “penny stock” company according to SEC rules. Further, we do not expect our stock price to rise above $5.00 in the foreseeable future. The “penny stock” designation requires any broker-dealer selling our securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules limit the ability of broker-dealers to solicit purchases of our Common Stock and therefore reduce the liquidity of the public market for our shares.

Broker-dealers are increasingly reluctant to permit investors to buy or sell speculative unlisted stock and often impose costs which make it uneconomical for small shareholders to do so. Moreover, as a result of apparent regulatory pressure from the SEC and the Financial Industry Regulatory Authority, or FINRA, a growing number of broker-dealers decline to permit investors to purchase and sell or otherwise make it difficult to sell shares of penny stocks. The “penny stock” designation may have a depressive effect upon our Common Stock price.

Because of the Russian invasion of Ukraine, the effect on the capital markets and the economy is uncertain, and we may have to deal with a recessionary economy and economic uncertainty including possible material adverse effects upon our business.

As a result of the Russian invasion of Ukraine, certain events are beginning to impact the global and United States economy including increased inflation, substantial increases in the prices of oil and gas, large Western companies ceasing to do business in Russia and uncertain capital markets with declines in leading market indexes. The duration of this war and its impact are uncertain and continuation may result in Internet access issues if Russia, for example, began illicit cyber activities. Ultimately the economy may turn into a recession with uncertain and potentially severe impacts upon public the capital markets and us. We cannot predict how this will affect our business but the impact may be material and adverse, including potentially by limiting or preventing us from obtaining the capital we require to repay our outstanding indebtedness and continue our business.

Because a single stockholder controls a significant number of shares of our Common Stock, who may have effective control over our actions requiring stockholder approval.common stock.

As of December 31, 2021, a single stockholder beneficially owns approximately 41.8%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 CommonSeries C Preferred Stock including 1,135,425 shares underlying exercisable warrants and 1,513,900convertible into 3,334 shares of Commoncommon stock, 40 outstanding shares of Series D Preferred Stock underlying the Company’sconvertible into 2,500 shares of common stock, and 267 outstanding shares of Series E Preferred Stock. AsStock including accrued dividends convertible into 183,346 shares of common stock. On November 16, 2022, a result, this stockholder, acting alonemajority 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 with others, would have the abilityNYSE American in exchange for the Holders agreeing to influence or controlforbear repayment of their Notes and accrued interest until the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets.up-listing transaction has been completed.

In addition,Significant shares of common stock are held by our principal stockholders acting together, would haveand other large stockholders. As “affiliates,” as defined under Rule 144 under the ability to control the management and affairsSecurities Act, our principal stockholders, other of our company. Accordingly, this concentrationinsiders and other large stockholders may only sell their shares of ownership might harm the market price of our Common Stock by:

Future sales of large amounts of our common stock in the public market or a perception that such sales might occur could cause a decrease in our stock price.

As of December 31, 2021, approximately 48.7 million shares of Common Stock are issuable under our convertible notes and approximately 74.6 million shares are issuable upon exercise of outstanding warrants If we reachpursuant to an accommodation with the holders of our non-convertible notes, we are seeking to raise up to $3.3 million in new convertible notes and may issue up to 133.3 million additional shares of Common Stock upon conversion of these notes and related warrants issued with the notes. We cannot assure you that we will raise as much capital as we hope,effective registration statement or any funds. Moreover, the terms may be more dilutive than anticipated. In addition, if we raise $2.0 million , we expect to effect the conversion of the Company’s Series E and F Convertible Preferred Stock into approximately 47.8 million. shares of Common Stock..

There are outstanding a significant number of shares available for future sales under Rule 144.

Many shares of our common stock (including shares issuable upon conversion of outstanding shares of preferred stock or upon exercise of outstanding warrants) may be deemed “restricted shares” and, in the future, may be sold in compliance with Rule 144 promulgated under the Securities Act of 1933, as amended (the “Securities Act”). Any sales of such shares of our144.

These options, warrants, convertible notes payable and convertible preferred stock could result in further dilution to common stock under Rule 144 could have a depressive effect onstockholders and may affect the market price of ourthe common stock. In general, under Rule 144, a person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to the availability of current public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144. A person who is deemed to be an affiliate of ours and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months would be entitled to sell within any three-month period a number of shares that does not exceed the greater of one percent of the then outstanding shares of our common stock or the average weekly trading volume of our common stock during the four calendar weeks preceding such sale. Such sales are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about us.

OurFuture 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 “blank check” Preferred Stock.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.

Our Certificate of Incorporation authorizes theAn issuance of up to 100,000 shares of “blank check” preferred stock, with such designation rights and preferences as may be determined from time to time by our Board of Directors. Our Board is empowered, without shareholder approval, to issueadditional 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 conversion, voting or other 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 voting power or other 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 issuances,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 additional shares of ourauthorized preferred stock, in the immediate future, 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 April 4, 2022,March 27, 2023, the closing price of our common stock reported by the OTCQB was $0.0683$0.55 per share.

Holders of record

As of April 4, 2022,March 31, 2023, there were approximately 59172 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 convenantscovenants 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 stockstock.

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-yeartwo-years in the period ended December 31, 2021,2022, 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, 2021,2022, as compared to the year ended December 31, 2020.2021. This discussion should be read in conjunction with our consolidated financial statements for each of the two-yeartwo-years in the period ended December 31, 2021,2022, 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

Nature of Business

We are an emerging specialty biotech company that,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 extent that resourcesdrug development and opportunities become available, is strategically evaluating its focus including a return to abiotech 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 company.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 as licensor entered into an exclusive license agreement for the development commercialization and exclusive licensecommercialization of MLR-1019. MLR-1019 is being developed as a new class of therapeutic for Parkinson’s disease (PD)PD and is, to the best of our knowledge, the only drug candidate today to address both movement and non-movement aspects of PD. Under the Agreement, we were granted an exclusive license to use the MP PatentsMP’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 24,20, 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 commercialization and exclusive licensecommercialization 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 licensing agreementAgreement with Melior Pharmaceuticals I, Inc.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, 20212022 to the Year Ended December 31, 20202021

Operating Expenses

Operating expenses were approximately $674,000$1.6 million for the year ended December 31, 2021,2022, a decrease of approximately $1.4 million$924,000 compared to the same period in 2020.2021. The following table summarizes our operating expenses for the years ended December 31, 20212022 and 20202021:

Sales and Marketing

Sales and marketing expenses decreased by approximately $822,000,$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, 2020, were primarily related to regulatory costs incurred for maintaining the Prestalia® NDA. 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 decreasedincreased by approximately $541,000$961,000 for the year ended December 31, 2021,2022, as compared to the year ended December 31, 2020,2021. The increase was primarily due to a reduction$137,000 licensing payment to Melior I for the MLR-1023 license agreement, an increase in corporate governancecompensation 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, including insurance, Boardaudit fees, and other consulting fees incurred to maintain our public company regulatory obligations.consulting.

Other Expenses

The following table summarizes other expenses for the year December 31, 20212022 and 2020:2021:

Interest expense for the year ended December 31, 2021,2022, increased by $100,000$309,000 compared to the year ended December 31, 20202021, primarily due to an increase in the issuance of convertibleoutstanding promissory notes. The amortizationinitial and change in the fair value of debt discountthe derivative liability as of December 31, 2022, decreased by $441,000 primarily due to$6.4 million as a result of a decrease in the maturityfair value of our outstanding convertible notes. The $4.1 million increase in derivative expense was due to conversion features on convertible notes and embedded conversion options that have been bifurcated due to a lack of authorized shareswarrants that were classified as a derivative on our consolidated balance sheet as of December 31, 2021.2022. The lossgain on extinguishment of debt in 2022 was due to the conversionrepayment and conversions of principal and interest on our outstanding convertible notes. Other incomeThe increase of $1.4 million for the year ended December 31, 2020amortization of debt discount was due an increase in the amortization of debts discounts as a result of fees received from release of certain intellectual property rights from a third-party vendor and fees received from the cancellation of a contractual obligation with a third-party vendor.an increase in our promissory notes outstanding.

Liquidity & Capital Resources

Cash Flows

The following table summarizes cash flows for the year ended December 31, 20212022 and 2020:2021: