Midatech Pharma US Inc. - FORM 10-Q

Attached files

file	filename
EX-32 - EXHIBIT 32 - Midatech Pharma US Inc.	ex32.htm
EX-31.2 - EXHIBIT 31.2 - Midatech Pharma US Inc.	ex31_2.htm
EX-31.1 - EXHIBIT 31.1 - Midatech Pharma US Inc.	ex31_1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

FORM 10-Q

_______________________

(Mark One)

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

For the quarterly period ended September 30, 2015

£	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 000-23776

DARA BIOSCIENCES, INC.

(Exact name of registrant as specified in its charter)

_______________________

Delaware	04-3216862
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

8601 Six Forks Road, Suite 160
Raleigh, North Carolina	27615
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (919) 872-5578

_______________________

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

_______________________

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 R No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes R No £

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

Large accelerated filer £

Accelerated filer £

Non-accelerated filer £

Smaller reporting company R

(Do not check if a smaller reporting company)

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

The number of shares outstanding of the Registrant’s common stock as of November 2, 2015 was 19,755,595.

Table of Contents

	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements - Unaudited	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures about Market Risk	26
Item 4. Controls and Procedures	26
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	28
Item 1A. Risk Factors	29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3. Defaults Upon Senior Securities	41
Item 4. Mine Safety Disclosures	41
Item 5. Other Information	41
Item 6. Exhibits	41

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

DARA BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	September 30,			December 31,
	2015			2014
Assets
Current assets:
Cash and cash equivalents	$	4,658,815		$	12,026,612
Accounts receivable, net		1,150,631			1,354,880
Inventory, net		266,955			265,280
Prepaid expenses and other assets, current portion		148,282			126,994
Total current assets		6,224,683			13,773,766

Furniture, fixtures and equipment, net		25,776			35,597
Restricted cash		12,893			12,888
Intangible assets, net		2,598,364			3,109,034
Goodwill		821,210			821,210
Total assets	$	9,682,926		$	17,752,495

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	891,680		$	483,244
Accrued liabilities		1,084,517			669,863
Accrued compensation		1,082,977			1,153,109
License milestone liability		–			1,231,559
Other financing agreements		52,276			–
Deferred revenue and other reserves		320,264			200,161
Capital lease obligation, current portion		8,205			7,342
Total current liabilities		3,439,919			3,745,278

Deferred lease obligation		56,823			68,869
Capital lease obligation, net of current portion		15,950			22,217
Total liabilities		3,512,692			3,836,364

Stockholders’ equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized at September 30, 2015
and December 31, 2014.
Series A Preferred stock, 4,800 shares designated,
468 shares issued and outstanding at September 30, 2015, and December 31, 2014.		5			5
Series B2 Preferred stock, 15,000 shares designated,
50 shares issued and outstanding at September 30, 2015 and December 31, 2014.		1			1
Series C1 Preferred stock, 12,500 shares designated,
117 shares issued and outanding at September 30, 2015 and December 31, 2014.		1			1
Common stock, $0.01 par value, 75,000,000 shares authorized,
19,755,595 shares issued and outstanding at September 30, 2015 and December 31, 2014.		197,556			197,556
Additional paid-in capital		80,499,326			79,712,290
Accumulated deficit		(74,526,655	)		(65,993,722	)

Total stockholders' equity		6,170,234			13,916,131

Total liabilities and stockholders’ equity	$	9,682,926		$	17,752,495

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

DARA BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014

Net revenues	$	1,181,060		$	597,777		$	2,824,041		$	1,168,673

Operating expenses:
Cost of Sales		241,284			125,864			650,805			270,384
Sales and marketing		1,563,746			1,099,931			4,686,377			3,702,433
Research and development		336,950			383,159			1,070,430			1,062,339
General and administrative		1,563,307			1,004,081			4,410,226			3,364,368
Depreciation and amortization of intangibles		173,419			159,790			521,729			477,820
Total operating expenses		3,878,706			2,772,825			11,339,567			8,877,344
Loss from operations		(2,697,646	)		(2,175,048	)		(8,515,526	)		(7,708,671	)

Other income (expense):
Other income, net		–			–			–			228,375
Interest expense, net		(135	)		(15,654	)		(17,407	)		(49,655	)
Other income (expense)		(135	)		(15,654	)		(17,407	)		178,720

Net loss before income tax expense		(2,697,781	)		(2,190,702	)		(8,532,933	)		(7,529,951	)
Income tax benefit (expense)		–			–			–			–
Consolidated net loss		(2,697,781	)		(2,190,702	)		(8,532,933	)		(7,529,951	)
Loss attributable to noncontrolling interest		–			80,234			–			178,341
Loss attributable to controlling interest	$	(2,697,781	)	$	(2,110,468	)	$	(8,532,933	)	$	(7,351,610	)

Basic and diluted net loss per common share
attributable to controlling interest	$	(0.14	)	$	(0.11	)	$	(0.43	)	$	(0.59	)

Shares used in computing basic and diluted net loss per
common share		19,755,595			19,461,538			19,755,595			12,512,866

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

DARA BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

Nine Months ended September 30, 2015

	Series A				Series B-2				Series C-1								Additional					Total
	Convertible				Convertible				Convertible								Paid-In		Accumulated			Stockholders’
	Preferred Stock				Preferred Stock				Preferred Stock				Common Stock				Capital		Deficit			Equity
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount


Balance at December 31, 2014		468	$	5		50	$	1		117	$	1		19,755,595	$	197,556	$	79,712,290	$	(65,993,722	)	$	13,916,131

Share-based compensation		–		–		–		–		–		–		–		–		787,036		–			787,036
Net loss		–		–		–		–		–		–		–		–		–		(8,532,933	)		(8,532,933	)

Balance at September 30, 2015		468	$	5		50	$	1		117	$	1		19,755,595	$	197,556	$	80,499,326	$	(74,526,655	)	$	6,170,234

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

DARA BIOSCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine months ended September 30,
	2015			2014
Operating activities
Consolidated net loss	$	(8,532,933	)	$	(7,529,951	)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization		521,729			477,821
Inventory writedown		50,061			–
Accretion of debt discount and other		18,441			51,355
Share-based compensation		787,036			648,538
Deferred lease obligation		(12,046	)		(547	)
Changes in operating assets and liabilities:
Accounts receivable		204,249			(288,683	)
Inventory		(51,736	)		(137,968	)
Prepaid expenses and other assets		151,484			180,743
Accounts payable and accrued liabilities		(376,939	)		544,918
Net cash used in operating activities		(7,240,654	)		(6,053,774	)

Investing activities
Purchases of furniture, fixtures and equipment		(1,238	)		(2,134	)
Net cash used in investing activities		(1,238	)		(2,134	)

Financing activities
Repayments of capital lease obligation		(5,404	)		(3,482	)
Repayments on other financing		(120,496	)		(141,398	)
Net proceeds from issuance of preferred stock and common stock		–			16,777,425
Change in restricted cash		(5	)		(5	)
Net cash (used in) provided by financing activities		(125,905	)		16,632,540
Net (decrease) increase in cash and cash equivalents		(7,367,797	)		10,576,632
Cash and cash equivalents at beginning of period		12,026,612			3,425,543
Cash and cash equivalents at end of period	$	4,658,815		$	14,002,175

Supplemental disclosure of non-cash financing activity
Shares issued to third party for services	$	-		$	30,939
Equipment purchased through financing	$	-		$	14,755

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

DARA BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The Company

DARA BioSciences, Inc. (the “Company”), headquartered in Raleigh, North Carolina is a specialty pharmaceutical company focused on the commercialization of oncology treatment and oncology supportive care products. Through its acquisition of Oncogenerix, Inc., which occurred on January 17, 2012, the Company acquired exclusive U.S. marketing rights to its first commercial, FDA-approved proprietary product license Soltamox® (tamoxifen citrate) oral solution (“Soltamox”). Soltamox has been approved by the U.S. Food and Drug Administration (“FDA”) for the prevention and treatment of breast cancer. On September 7, 2012 the Company entered into a license agreement with Helsinn Healthcare SA (“Helsinn”) to distribute, promote, market and sell Gelclair® (“Gelclair”), an FDA-cleared unique oral gel whose key ingredients are polyvinylpyrrolidone (PVP) and sodium hyaluronate (hyaluronic acid) for the treatment of certain approved indications in the United States, including the management of pain due to oral mucositis. On March 9, 2015, the Company entered into a commercialization agreement with Onxeo SA (“Onxeo”), giving the Company the exclusive, sublicensable rights to distribute, promote, market and sell Oravig® (“Oravig”) in the United States as well as the right to seek regulatory approval for Oravig in Canada. Oravig is the first and only orally-dissolving buccal tablet approved for oral thrush. The Company recently launched Oravig at the beginning of October 2015.

Alamo Pharma Services (“Alamo”) provides the Company with a dedicated national sales team of 20 sales representatives to promote its commercial products (the “Sales Team”), as well as the initiation, beginning in the quarter ended September 30, 2015, of a tele sales effort to reach high volume prescribing oncologists in “white space” areas. Pursuant to an agreement, exclusive to the oncology market, with Mission Pharmacal (“Mission”), Alamo’s parent company, Mission shares in the costs and expenses of the Sales Team. The Sales Team promotes the Company’s products Soltamox and Gelclair and, since its launch in early October 2015, is now promoting Oravig. The Sales Team also promotes two Mission products: Ferralet® 90, and Aquoral®. The Company’s agreements with Alamo and Mission expand the Company’s presence in oncology supportive care and the Mission products complement its portfolio in presenting comprehensive offerings to the oncologist. The Company believes its engagement of the 20-person Sales Team helps us increase the Company’s revenues and its product portfolio’s market acceptance. In March 2015, the Company entered into a co-promotion agreement with Mission for Mission to exclusively promote Oravig in the primary care market. Since the launch of Oravig in early October, 2015 Mission is utilizing their primary care sales force to promote the product within that market segment. In consideration for receiving the exclusive rights to Oravig, the Company will make certain milestone payments at defined sales thresholds.

The Company has a clinical development asset, KRN5500, which is a Phase 2 investigational product targeted for treating patients with painful treatment-refractory chronic chemotherapy induced peripheral neuropathy (“CCIPN”). In July of 2004, the Company obtained an exclusive worldwide license (excluding Australia, New Zealand and Asia) to compounds from Kirin Brewery Co., Ltd. (now Kyowa Hakko Kirin Co., Ltd.) of Japan for the treatment of pain and central and peripheral nervous system conditions or diseases. In May of 2004, the Company also entered into an exclusive worldwide license with Massachusetts General Hospital related to the use of certain spicamycin derivatives for use in treating pain.

KRN5500 was designated a Fast Track Drug by the FDA in 2011. Fast Track designation is intended to facilitate the development and expedite review of drugs and biologics intended to treat serious or life-threatening conditions and for those products that demonstrate the potential to address unmet medical needs. On February 21, 2014 the FDA granted Orphan Drug Designation to KRN5500 for the parenteral treatment of painful CCIPN that is refractory to conventional analgesics. On June 16, 2014 the FDA granted Orphan Drug Designation to KRN5500 for treatment of multiple myeloma. Upon receipt of FDA approval, orphan drug designation provides extended market exclusivity, tax benefits, and the waiver of certain fees associated with the FDA approval process. On July 14, 2015 the Company was awarded a patent from the US Patent and Trademark Office for a modified formulation of KRN5500 that the Company anticipates may allow a simplified dosing regimen. On July 9, 2015 the FDA provided formal agreement with the Company’s proposed development plan, including design of the Phase 2b dose-escalation strategy in patients with a history of cancer with CCIPN. The FDA also indicated agreement with proposed bridging studies for the new KRN5500 formulation. The Company is evaluating options to support further development of KRN5500.

The Company launched Soltamox in the U.S. in late 2012 and subsequently launched its second product, Gelclair in the second quarter of 2013. As of October of this year, the Company has launched its third product, Oravig. In the near-term, the Company’s ability to generate revenues is substantially dependent upon sales of Gelclair, Oravig and Soltamox in the U.S. The Company completed financings in February 2014 and June 2014, raising approximately $5.5 million and $11.3 million, respectively, in net proceeds through the issuance of preferred stock and warrants. See Note 3.

On June 3, 2015, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Midatech Pharma PLC, a public limited company organized under the laws of England and Wales (“Midatech”), Merlin Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of Midatech (the “Merger Sub”), Duke Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of Midatech (the “Secondary Merger Sub”) and Shareholder Representative Services, LLC, a Colorado limited liability company, solely as a representative of the stockholders of the Company (the “Stockholder Representative”), pursuant to which (i) Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger (the “Surviving Corporation”) as the wholly owned subsidiary of Midatech and (ii) immediately following the Merger, Midatech will cause the Surviving Corporation to merge with and into Secondary Merger Sub (the “Secondary Merger”), with Secondary Merger Sub surviving the Secondary Merger as the wholly owned subsidiary of Midatech.

Pursuant to the terms and subject to the conditions of the Merger Agreement, at the effective time of the Merger, each share of common stock, par value $0.01 per share, of the Company (other than (i) any share of common stock that is outstanding immediately prior to the effective time of the Merger and that is held by a stockholder of the Company who has perfected and not withdrawn a demand for, or lost their right to, appraisal with respect to such shares (the “Dissenting Shares”), (ii) any shares held by the Company as treasury stock, (iii) any shares authorized but unissued or (iv) shares of common stock held by Midatech, Merger Sub or any wholly owned subsidiary of Midatech or of the Company) will be converted into rights to receive, without interest, (i) 0.272 ordinary shares (the “Midatech Ordinary Shares”) of Midatech (the “Per Share Stock Consideration”) plus (ii) one contingent value right (“CVR”), which represents the right to receive contingent payments if specified milestones are achieved within agreed time periods, subject to and in accordance with the terms and conditions of the Contingent Value Rights Agreement (as described below). All Midatech Ordinary Shares will be delivered to the holders of common stock in the form of American Depositary Receipts, each representing the right to receive such number of Midatech Ordinary Shares as Midatech may determine to be the optimum number of shares (the “Midatech Depositary Shares”).

The Merger Agreement includes a collar provision under which the initial exchange ratio of 0.272 is subject to adjustment in the event the Exchange Ratio Market Value (as defined in the Merger Agreement) determined one business day prior to closing is less than $1.08 or greater than $1.32 (the “Exchange Ratio”). In such event, the Exchange Ratio shall be determined as follows: (1) if the Exchange Ratio Market Value is an amount less than $1.08, then the Exchange Ratio shall be equal to the quotient obtained by dividing $1.08 by the Exchange Ratio Market Value (subject to a maximum Exchange Ratio of 0.306); and (2) if the Exchange Ratio Market Value is an amount greater than $1.32, then the Exchange Ratio shall be equal to the quotient obtained by dividing $1.32 by the Exchange Ratio Market Value (subject to a minimum Exchange Ratio of 0.249).

In lieu of receiving any fractional shares of Midatech Depositary Shares, holders of common stock will receive from Midatech an amount of cash, without interest, less the amount of any withholding taxes, equal to the product of (i) such fraction, multiplied by (ii) the U.S. Dollar equivalent of the closing price of Midatech Ordinary Shares underlying Midatech Depositary Shares on the Alternative Investment Market of the London Stock Exchange on the last trading day preceding the Closing Date (as defined in the Merger Agreement).

The Per Share Stock Consideration and one CVR, together with any cash to be paid in lieu of fractional shares of Midatech Depositary Shares to be paid, are collectively referred to herein as the “Per Share Merger Consideration.”

Additionally, under the terms and subject to the conditions of the Merger Agreement, at the effective time of the Merger, each share of issued and outstanding Series A Convertible Preferred Stock, Series B-2 Convertible Preferred Stock and Series C-1 Convertible Preferred Stock, other than Dissenting Shares, will be converted into the right to receive, without interest, $1,000 in cash.

Each outstanding and unexercised warrant to purchase shares of common stock (the “Warrant”) as of immediately prior to the effective time of the Merger will be assumed or substituted by Midatech in accordance with the terms of such Warrant and, as of the effective time of the Merger, (i) will be exercisable for (A) the number of whole shares of Midatech Ordinary Shares equal to the product of the number of shares of common stock that were issuable upon exercise of such Warrant immediately prior to the effective time of the Merger multiplied by the Exchange Ratio, rounded down to the nearest whole number of shares of Midatech Ordinary Shares and (B) one CVR multiplied by the total number of shares of common stock that were issuable upon exercise of such Warrants immediately prior to the effective time of the Merger, and (ii) the per share exercise price for each share of Midatech Ordinary Shares issuable upon exercise of Warrants so converted will be equal to the quotient determined by dividing the exercise price per share of common stock at which such Warrant was exercisable immediately prior to the effective time of the Merger by the Exchange Ratio, rounded up to the nearest whole cent. All Midatech Ordinary Shares delivered to the holders of Warrants will be delivered in the appropriate amount of Midatech Depositary Shares.

On February 10, 2014, the Company effected a one-for-five reverse split of its outstanding common stock pursuant to an amendment to the Company’s certificate of incorporation. As a result of the reverse stock split, each share of the Company’s common stock outstanding as of 9:00 a.m. on February 10, 2014 was automatically reclassified into one-fifth of a share of common stock. No fractional shares were issued as a result of the reverse split. Holders of common stock who would have otherwise received fractional shares of the Company’s common stock pursuant to the reverse split received cash in lieu of the fractional share. The reverse split reduced the total number of shares of the Company’s common stock outstanding from approximately 31.0 million shares to approximately 6.2 million shares. In addition, the number of shares of common stock subject to outstanding options, restricted stock units and warrants issued by the Company and the number of shares reserved for future issuance under the Company’s stock plans were reduced by a factor of five to proportionately reflect the reverse split. The reverse split was accounted for retroactively and is reflected in our common stock, warrant, stock option and restricted stock activity as of and for the year ended December 31, 2014 and the periods ended September 30, 2015 and 2014. Unless stated otherwise, all share data in this Quarterly Report on Form 10-Q has been adjusted, as appropriate, to reflect the reverse split.

The Company’s business is subject to significant risks consistent with specialty pharmaceutical and biotechnology companies that develop/distribute products for human therapeutic use. These risks include, but are not limited to, potential product liability, uncertainties regarding research and development, including in connection with any development partner, access to capital, obtaining and enforcing patents and/or licenses, receiving any required regulatory approval and the current regulatory environment in which we sell our products, and competition with other biotechnology and pharmaceutical companies.

Based on the Company’s current operating plan, the Company believes that its existing cash, cash equivalents and marketable securities provide for sufficient resources to fund its currently planned operations into the first quarter of 2016. If the Company incurs unanticipated expenses, its capital resources may be expended more rapidly than is currently expected. The continued losses and lack of capital raise substantial doubt about the Company’s ability to continue independently as a going concern. Should the Merger not occur, management will review alternatives to source adequate financing to continue its business. If adequate financing is not available on acceptable terms, if at all, the Company may be forced to seek bankruptcy protection.

Unaudited Interim Financial Statements

The accompanying unaudited interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable Securities and Exchange Commission (“SEC”) regulations for interim financial information. These financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring accruals) necessary to present fairly the consolidated balance sheets, consolidated statements of operations, consolidated statements of cash flows, and consolidated statement of stockholders’ equity for the periods presented in accordance with GAAP. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations.

The consolidated balance sheet at December 31, 2014 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

For further information refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2014. References to “we”, “us”, “our”, or the “Company” refer to DARA BioSciences, Inc.

Recent Accounting Pronouncements

There have been no recent accounting pronouncements that have significance, or potential significance, to our consolidated financial statements.

Recent Accounting Pronouncements Not Yet Effective

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU 2014-09 completes the joint effort by the FASB and International Accounting Standards Board (“IASB”) to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards (“IFRS”). ASU 2014-09 applies to all companies that enter into contracts with customers to transfer goods or services. ASU 2014-09 is effective for public entities for interim and annual reporting periods beginning after December 15, 2016. Early application is not permitted and entities have the choice to apply ASU 2014-09 either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying ASU 2014-09 at the date of initial application and not adjusting comparative information. The Company is currently evaluating the requirements of ASU 2014-09 and has not yet determined its impact on the Company's consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, which defines management’s responsibility to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date the financial statements are issued and to provide related footnote disclosures in certain circumstances. In connection with each annual and interim period, management must assess if there is substantial doubt about the company’s ability to continue as a going concern within one year after the issuance date. Disclosures are required if conditions give rise to substantial doubt. This standard is effective for all companies in the first annual period ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company does not expect this ASU will have a material impact on its consolidated financial statements.

2. Summary of Significant Accounting Policies

Principles of Consolidation

During 2014, the Company merged DARA Pharmaceuticals, Inc. into DARA BioSciences, Inc. and dissolved Oncogenerix, Inc. The Company reacquired the remaining 25% minority interest in DARA Therapeutics held by Massachusetts General Hospital (“MGH”). Accordingly, the 2015 and 2014 consolidated financial statements include the accounts of DARA BioSciences, Inc. and its wholly-owned subsidiary, DARA Therapeutics, Inc. The Company has control of all subsidiaries, and as such, they are all consolidated in the presentation of the consolidated financial statements. All significant intercompany transactions have been eliminated in the consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual amounts could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents approximate their fair value.

Fair Value Measures

The Company utilizes FASB ASC 820, Fair Value Measurements and Disclosures, to value its financial assets and liabilities. FASB ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. FASB ASC 820 classifies these inputs into the following hierarchy:

Level 1 Inputs – Quoted prices for identical instruments in active markets.

Level 2 Inputs – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs – Instruments with primarily unobservable value drivers.

In determining fair value, the Company utilizes techniques to optimize the use of observable inputs, when available, and minimize the use of unobservable inputs to the extent possible.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and marketable securities. The Company maintains cash deposits with a federally insured bank that may at times exceed federally insured limits. The majority of funds in excess of the federally insured limits are held in sweep investment accounts collateralized by the securities in which the funds are invested. As of September 30, 2015 and December 31, 2014, the Company had bank balances of $4,449,689 and $11,811,816, respectively, in excess of federally insured limits of $250,000 held in non-investment accounts. In addition, our top four customers, Lindencare, Cardinal Health, McKesson Corporation, and Amerisource Bergen Corporation collectively represented 100% and 99.9% of our gross trade accounts receivable as of September 30, 2015 and December 31, 2014, respectively.

Accounts Receivable

Accounts receivable at December 31, 2014 includes trade accounts receivable and a receivable from the FDA of approximately $619,000 to be refunded to the Company due to a reduction in Prescription Drug User Fee Act (“PDUFA”) fees resulting from a waiver granted by the FDA in 2014. The refund from the FDA was received in the first quarter of 2015.

Inventories

Inventories at September 30, 2015 and December 31, 2014 were $266,955 and $265,280, respectively and consisted of finished goods. The Company states finished goods inventories at the lower of cost (which approximates actual cost on a first-in, first-out cost method) or market value. In evaluating whether inventories are stated at the lower of cost or market, management considers such factors as the amount of inventory on hand and in the distribution channel, estimated time required to sell such inventory, remaining shelf life, and current and expected market conditions, including levels of competition. Inventory adjustments are measured as the difference between the cost of the inventory and estimated market value based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales. At the point of the loss recognition, a new, lower-cost basis for that inventory is established, and any subsequent improvements in facts and circumstances do not result in the restoration or increase in that newly established cost basis. During the nine months ended September 30, 2015, the Company recorded an inventory write down of approximately $50,000 associated with inventory still in its warehouse that is approaching product expiration.

Furniture, Fixtures and Equipment

Furniture, fixtures and equipment are recorded at cost and depreciated over the estimated useful lives of the assets (three to five years) using the straight-line method.

Sales and Marketing Costs

Research and Development Costs

The Company expenses research and development costs as incurred. Research and development costs include personnel and personnel related costs, formulation and API manufacturing costs, process development, research costs, patent costs, pharmacovigilance costs, PDUFA fees, regulatory costs and other consulting and professional services.

Goodwill and Intangible Assets

Acquired businesses are accounted for using the acquisition method of accounting, which requires that assets acquired, including identifiable intangible assets, and liabilities assumed be recorded at fair value, with limited exceptions. Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill. If the acquired net assets do not constitute a business, the transaction is accounted for as an asset acquisition and no goodwill is recognized. Other purchases of intangible assets, including product rights, are recorded at cost.

Product rights are amortized over the estimated useful life of the product or the license agreement term on a straight-line or other basis to match the economic benefit received. Amortization begins once product rights are secured. The Company evaluates its product rights on an ongoing basis to determine whether a revision to their useful lives should be made. This evaluation is based on its projection of the future cash flows associated with the products. As of September 30, 2015 and December 31, 2014, the Company had an aggregate of $2.6 million and $3.1 million, respectively, in capitalized product rights, which it expects to amortize over remaining periods of approximately 2.8 to 7.0 years.

Goodwill is reviewed for impairment on an annual basis or more frequently if events or circumstances indicate potential impairment. The Company’s goodwill evaluation is based on both qualitative and quantitative assessments regarding the fair value of goodwill relative to its carrying value. The Company assesses qualitative factors to determine if its sole reporting unit’s fair value is more likely than not to exceed its carrying value, including goodwill. In the event the Company determines that it is more likely than not that its reporting unit’s fair value is less than its carrying amount, quantitative testing is performed comparing recorded values to estimated fair values. If the fair value exceeds the carrying value, goodwill is not impaired. If the carrying value exceeds the fair value, an impairment charge is recognized through a charge to operations based upon the excess of the carrying value of goodwill over the implied fair value. There was no impairment to goodwill recognized during the three and nine months ended September 30, 2015.

Under the terms of the original license agreement for Soltamox, the Company was required to meet minimum sales requirements during the license agreement’s term. However, as of October 1, 2015, the Company and Rosemont amended the original agreement with new terms that will be applicable for the duration of the agreement. Pursuant to these terms, the minimum sales requirements have been deleted and the Company will instead guarantee Rosemont an annual minimum payment, which payment includes a minimum purchase of Soltamox finished goods inventory that the Company believes should be sufficient for its annual inventory needs. In addition, during the final year of the initial term of the agreement, the Company has agreed to pay Rosemont an additional royalty on gross margin for units sold above a specified threshold. The initial term is expected to end on June 29, 2018.

The Company evaluates the recoverability of its intangible assets subject to amortization and other long-lived assets whenever events or changes in circumstances suggest that the carrying value of the asset or group of assets is not recoverable. The Company measures the recoverability of assets by comparing the carrying amount to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment charge equals the amount by which the carrying amount of the assets exceeds the fair value. Any write-downs are recorded as permanent reductions in the carrying amount of the assets. There was no impairment to intangible assets recognized during the three and nine months ended September 30, 2015.

Revenue Recognition

The Company recognizes revenue when there is persuasive evidence that an arrangement exists, title has passed, collection is reasonably assured and the price is fixed or determinable The Company sells Soltamox mostly to wholesalers who, in-turn, sell the product to hospitals and other end-user customers. Sales to wholesalers provide for selling prices that are fixed on the date of sale, although the Company offers certain discounts to group purchasing organizations and governmental programs. The wholesalers take title to the product, bear the risk of loss of ownership, and have economic substance to the inventory.

The Company allows for product to be returned beginning prior to and following product expiration. During the quarter ended June 30, 2015, the Company determined that its wholesalers’ inventories had been reduced to normalized amounts and that it now had sufficient experience with Soltamox and the related wholesaler distribution channel to reasonably estimate product returns from its wholesalers while the wholesalers are still holding inventory. Therefore, effective June 30, 2015, the Company no longer defers the recognition of Soltamox revenue with the exception of one wholesaler for whom the Company will continue to defer revenue recognition until it has obtained sufficient sales history to reasonably estimate that wholesalers’ returns and until that wholesaler’s inventory levels are reduced to normalized amounts. Shipments of Soltamox that are not recognized as revenue are treated as deferred revenue until evidence exists to confirm that pull through sales to retail and specialty pharmacies or other end-user customers have occurred. Soltamox revenue is recognized from products sales directly to hospitals, clinics, pharmacies and other end-user customers at the time of direct shipment. Revenue from Gelclair sales is recognized when the merchandise is shipped to both wholesalers and direct sales to hospitals, clinics, pharmacies and other end-user customers as the Company believes it has achieved normalized inventory levels for Gelclair.

The Company recognizes sales allowances as a reduction of revenues in the same period the related revenue is recognized. Sales allowances are based on amounts owed or to be claimed on the related sales. These estimates take into consideration the terms of the Company’s agreements with wholesale distributors and the levels of inventory within the distribution channels that may result in future discounts taken. The Company must make significant judgments in determining these allowances. If actual results differ from the Company’s estimates, the Company will be required to make adjustments to these allowances in the future, which could have an effect on revenue in the period of adjustment. The following briefly describes the nature of each provision and how such provisions are estimated:

Payment discounts are reductions to invoiced amounts offered to customers for payment within a specified period and are estimated upon shipment utilizing historical customer payment experience.

The returns provision is based on management's return experience for similar products and is booked as a percentage of product sales recognized during the period. These recognized sales include shipments that have occurred out of wholesalers as well as direct shipments made by the Company to other third party purchasers. As the Company gains greater experience with actual returns related to its specific products the returns provisions and related reserves will be adjusted accordingly. The returns reserve is recorded as a reduction of revenue in the same period the related product sales revenue is recognized and is included in accrued expenses.

Generally, credits may be issued to wholesalers for decreases that are made to selling prices for the value of inventory that is owned by the wholesaler at the date of the price reduction. Price adjustment credits are estimated at the time the price reduction occurs and the amount is calculated based on the level of the wholesaler inventory at the time of the reduction.

There are arrangements with certain parties establishing prices for products for which the parties independently select a wholesaler from which to purchase. Such parties are referred to as indirect customers. A chargeback represents the difference between the sales invoice price to the wholesaler and the indirect customer's contract price, which is lower. Provisions for estimating chargebacks are calculated primarily using historical chargeback experience, contract pricing and sales information provided by wholesalers and chains, among other factors. The Company recognizes chargebacks in the same period the related revenue is recognized.

Share-Based Compensation Valuation and Expense

Share-based compensation for stock and stock-based awards issued to employees and non-employee directors, is accounted for using the fair value method prescribed by FASB ASC 718, Stock Compensation, and, is recorded as a compensation charge based on the fair value of the award on the date of grant. Share based compensation for stock and stock-based awards issued to non-employees in which services are performed in exchange for the Company’s common stock or other equity instruments is accounted for using the fair value method prescribed by FASB ASC 505-50, Equity-Based Payment to Non-Employees, and is recorded on the basis of the fair value of the service received or the fair value of the equity instruments issued, whichever is more readily measurable at the date of issuance. See Note 4 for further information.

Income Taxes

The Company uses the liability method in accounting for income taxes as required by FASB ASC 740, Income Taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax credit carry forwards and for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized. At September 30, 2015 and December 31, 2014 a valuation allowance has been recorded to reduce the net deferred tax asset to zero.

The Company's policy for recording interest and penalties is to record them as a component of interest income (expense), net.

Net Loss Per Common Share

The Company calculates its basic loss per share in accordance with FASB ASC 260, Earnings Per Share, by dividing the earnings or loss applicable to common stockholders by the weighted-average number of common shares outstanding for the period less the weighted average unvested common shares subject to forfeiture and without consideration for common stock equivalents. Diluted loss per share is computed by dividing the loss applicable to common stockholders by the weighted-average number of common share equivalents outstanding for the period less the weighted average unvested common shares subject to forfeiture and dilutive common stock equivalents for the period determined using the treasury-stock method. For purposes of this calculation, in-the-money options and warrants to purchase common stock and convertible preferred stock are considered to be common stock equivalents but are not included in the calculation of diluted net loss per share for the three and nine month periods ended September 30, 2015 and 2014 as their effect is anti-dilutive. For the three and nine month periods ended September 30, 2015 the following in-the-money common stock equivalents have been excluded from the calculation because their inclusion would be anti-dilutive: 1,580,956 options with a weighted average exercise price of $0.76. For the three and nine month periods ended September 30, 2014 there were no in-the-money common stock equivalents.

	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
Net loss attributable to controlling interest	$	(2,697,781	)	$	(2,110,468	)	$	(8,532,933	)	$	(7,351,610	)

Basic and diluted net loss per sommon share attributable to controlling interest

Weighted-average shares used in computing basic and diluted net loss per common share		19,755,595			19,461,538			19,755,595			12,512,866

Basic and diluted net loss per common share attributable to controlling interest	$	(0.14	)	$	(0.11	)	$	(0.43	)	$	(0.59	)

3. Stockholders’ Equity

On May 30, 2014, the Company entered into a Securities Purchase Agreement (the “May 2014 Purchase Agreement”) with certain investors providing for the purchase of a total of $12,499,920 of units consisting of (1) an aggregate of 12,499.92 shares of Series C-1 Preferred Stock (convertible into a total of 11,261,189 shares of common stock); (2) Five-Year Warrants to purchase an aggregate of 5,630,595 shares of common stock at an exercise price of $1.67 per share; and (3) Thirteen-Month Warrants to purchase an aggregate of 5,630,595 shares of common stock at an exercise price of $1.67 per share. The closing of the sale of the Series C-1 convertible preferred shares and warrants under the May 2014 Purchase Agreement took place in two closings on June 4, 2014 and June 5, 2014 for net proceeds of approximately $11.3 million, after deducting placement agent fees and other expenses totaling approximately $1,200,000. As of September 30, 2015, 12,382.92 shares of Series C-1 preferred stock have been converted into an aggregate 11,155,765 shares of common stock.

On February 5, 2014, the Company filed with the Delaware secretary of state a certificate of amendment to the Company’s certificate of incorporation in order to effect a one-for-five reverse split of its outstanding common stock. As a result of the reverse stock split, each share of the Company’s common stock outstanding as of 9:00 a.m. on February 10, 2014 was automatically reclassified into one-fifth of a share of common stock. No fractional shares were issued as a result of the reverse split. Holders of common stock who would have otherwise received fractional shares of the Company’s common stock pursuant to the reverse split received cash in lieu of the fractional share. The reverse split reduced the total number of shares of the Company’s common stock outstanding from approximately 31.0 million shares to approximately 6.2 million shares. In addition, the number of shares of common stock subject to outstanding options, restricted stock units and warrants issued by the Company and the number of shares reserved for future issuance under the Company’s stock plans were reduced by a factor of five to proportionately reflect the reverse split. The reverse split was accounted for retroactively and reflected in the Company’s common stock, warrant, stock options and restricted stock activity as of and for the year ended December 31, 2014 and for the periods ended September 30, 2015 and 2014.

On February 11, 2014, the Company entered into a Securities Purchase Agreement (the “February 2014 Purchase Agreement”) with certain institutional investors providing for the issuance and sale by the Company in a registered direct offering of 2,166,501 shares of the Company’s common stock at an offering price of $2.765 per share (the “February 2014 Share Offering”). In a concurrent private placement, the Company granted to those institutional investors a warrant to purchase one share of the Company’s common stock for each share purchased in the February 2014 Share Offering. The closing of the sale of the shares and warrants under the February 2014 Purchase Agreement and the concurrent private placement took place on February 18, 2014 for net proceeds of approximately $5,500,000 after deducting placement agent fees and other expenses totaling approximately $500,000. Each warrant entitles the holder to purchase shares of common stock for an exercise price per share equal to $2.64 and will be exercisable for five years from the closing.

During the nine month period ended September 30, 2014, investors in the Series A preferred stock converted 110 Series A shares into 8,800 shares of common stock, investors in the Series B-4 preferred stock converted 100 Series B-4 shares into 40,816 shares of common stock, and investors in the Series C-1 preferred stock converted 12,382.92 Series C-1 shares into 11,155,765 shares of common stock. After such conversions, there were no shares of Series B-4 preferred stock remaining outstanding.

4. Share-based Compensation

Effective with the adoption of FASB ASC 718, Compensation-Stock Compensation, the Company has elected to use the Black-Scholes option pricing model to determine the fair value of options granted. Share price volatility has historically been based on an analysis of historical stock price data reported for a peer group of public companies. Beginning with the first quarter of 2014 share price volatility is based on an analysis of historical stock price data for the Company. The expected life is the length of time options are expected to be outstanding before being exercised. The Company estimates expected life using the “simplified method” as allowed under the provision of the Securities and Exchange Commission’s Staff Accounting Bulletin No. 107, Share-Based Payment. The simplified method uses an average of the option vesting period and the option’s original contractual term. The Company uses the implied yield of U. S. Treasury instruments with terms consistent with the expected life of options as the risk-free interest rate. FASB ASC 718 requires companies to estimate a forfeiture rate for options and accordingly reduce the compensation expense reported. The Company used historical data among other factors to estimate the forfeiture rate.

The fair value of options granted to employees and non-employee directors for the three and nine months ended September 30, 2015 was estimated using a Black-Scholes option-pricing model with the following weighted-average assumptions:

	Three months ended September 30, 2015			Nine months ended September 30, 2015
Expected dividend yield		-	%		-	%
Expected volatility		89.18	%		100.03	%
Weighted-average expected life (in years)		5.20			5.90
Risk free interest rate		1.52	%		1.64	%
Forfeiture rate		-	%		8.43	%

The Company’s consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014, respectively, include the following share-based compensation expense related to issuances of stock options to employees and non-employee directors as well as warrants to non-employees as follows:

	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
Options to Employees and Non-employee Directors
Research and development	$	6,361	$	16,431	$	26,870	$	69,764
Sales and marketing		21,705		21,941		104,466		86,232
General and administrative		147,892		120,635		655,700		461,603
Total stock-based compensation to employees and non-employee directors		175,958		159,007		787.036		617,599

Warrants to non-employees
Other income, net		-		-		-		939
General and administrative		-		15,000		-		30,000
Total stock-based compensation to non-employees		-		15,000		-		30,939

Total stock-based compensation	$	175,958	$	174,007	$	787.036	$	648,538

The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC 505 Equity, using a fair-value approach. The equity instruments, consisting of shares of restricted stock, stock options and warrants granted to lenders and consultants, are valued using the Black-Scholes valuation model. Measurements of share-based compensation is subject to periodic adjustments as the underlying equity instruments vest and are recognized as an expense over the term of the related financing or the period over which services are received.

The Company recognized $15,000 in share-based compensation related to issuance of 12,000 shares of restricted stock to non-employees (i.e. consultants) in exchange for services during the three months ended September 30, 2014. The Company recognized $30,000 in share-based compensation related to issuance of 24,000 shares of restricted stock to non-employees (i.e. consultants) in exchange for services during the nine months ended September 30, 2014. The Company recognized $939 in share-based compensation related to the issuance of 1,449 warrants in the second quarter of 2014 at an exercise price of $3.45 issued to non-employees in exchange for services during the nine months ended September 30, 2014. No share-based compensation related to non-employees was recognized during the three and nine month periods ended September 30th, 2015. Unrecognized share-based compensation expense, including time-based options and, performance-based options expected to be recognized over an estimated weighted-average amortization period of 2.5 years was $1.3 million at September 30, 2015 and over an estimated weighted-average amortization period of 2.7 years was $1.4 million at September 30, 2014.

A summary of activity under the Company’s stock option plans for the nine months ended September 30, 2015 is as follows:

	Shares Available for Grant			Subject to Outstanding Options			Average Exercise Price
Balance at December 31, 2014		445,577			1,142,101		$	3.96
2008 Stock Plan increase		4,154,748			-			-
Options granted		(1,191,000	)		1,191,000			0.79
Options forfeited		54,850			(54,850	)		(2.94	)
Balance at March 31, 2015		3,464,175			2,278,251		$	2.33
Options granted		(406,456	)		406,456			0.70
Options forfeited		13,156			(13,156	)		2.65
Balance at June 30, 2015		3,070,875			2,671,551		$	2.08
Options granted		(51,104	)		51,104			0.86
Options forfeited		11,988			(11,988	)		0.78
Balance at September 30, 2015		3,031,759			2,710,667		$	2.06

5. Commitments and Contingencies

From time to time, the Company is exposed to various claims, threats, and legal actions in the ordinary course of business. In November, 2012, a suit was filed in the United States District Court District of Columbia naming the Company as a defendant. The plaintiff in the suit is GlycoBioSciences, Inc. Also named as defendant was Innocutis Holdings LLC (“Innocutis”), licensor of the product Bionect, which the Company marketed under a Marketing Agreement with Innocutis until the termination of the Agreement on April 1, 2015. Plaintiff subsequently filed a second suit against Fidia Pharmaceutici S.p.A., the manufacturer of the Bionect product, and that suit has been merged with the suit against DARA and Innocutis. Plaintiff alleges that defendants’ distribution and sale of Bionect infringes on certain of plaintiff’s patents and plaintiff seeks to enjoin defendants’ alleged patent infringement and seeks unspecified damages and costs. Pursuant to the Company’s Marketing Agreement with Innocutis, Innocutis is required to indemnify the Company in connection with this lawsuit, an obligation which survived the termination of the Marketing Agreement between the Company and Innocutis. As a result, Innocutis has assumed the Company’s defense. The defendants filed a motion to dismiss the complaint on February 1, 2013. On June 26, 2014, counsel for the defendants notified the Court that the United States Patent and Trademark Office had completed a reexamination of the two patents which underlie the suit and also filed a Motion to Dismiss. On August 25, 2014, plaintiff filed an amended complaint that replaced the allegations concerning the original two patents and, instead, asserted that defendants infringed on a different patent relating to the sale of Bionect. On September 25, 2014, defendants filed an answer and asserted various affirmative defenses and counterclaims. On April 16, 2015, defendants’ filed a Motion to Dismiss plaintiff’s Amended Complaint. The Motion to Dismiss was denied by the Court on June 10, 2015. The Court has ordered that discovery with respect to damages commence not earlier than January 15, 2016, and that fact discovery shall be completed not later than April 22, 2016. Additional discovery and expert reports are to be submitted at intervals throughout 2016 culminating in dispositive motions being filed on or before August 26, 2016. No assurance can be given regarding the outcome of this litigation. However, the Company believes the plaintiff’s claims are substantially without merit and the resolution of this matter will not have a material adverse effect on the Company’s financial position or results of operations.

The Company, its individual Board of Directors, Midatech, Merger Sub and Secondary Merger Sub are named as defendants in purported class action lawsuits brought by alleged Company stockholders challenging the Company’s proposed merger with Midatech. Three stockholder actions were filed in the Court of Chancery of the State of Delaware (Steve Schnipper v. David J. Drutz, et al., C.A. No. 11262-VCG, filed on June 23, 2015; Matthew Quinn v. DARA Biosciences, Inc., et al., C.A. No. 11217-VCG, filed on June 26, 2015; and Eric Edwards v. David J. Drutz, et al., C,A. No. 11262-VCG, filed on July 8, 2015) and one stockholder action was filed in the Superior Court in Wake County, North Carolina (Jacob Presson v. DARA BioSciences, Inc. et al., filed on July 27, 2015), referred to as the North Carolina Complaint. On August 21, 2015, the plaintiff in the Schnipper action filed an amended complaint, referred to as the Schnipper Amended Complaint. On September 15, 2015, the Delaware Court of Chancery issued an order consolidating all of the Delaware actions into one matter, In re DARA BioSciences Stockholder Litigation, Cons. C.A. 11194-VCG, referred to as the Consolidated Delaware Action, and designated the Schnipper Amended Complaint as the operative complaint. On October 1, 2015, the Superior Court in Wake County, North Carolina entered an order staying the North Carolina Complaint at the request of the parties.

The stockholder actions generally allege, among other things, that (i) each member of the Company’s Board of Directors breached his or her fiduciary duties to the Company and its stockholders by authorizing the sale of the Company to Midatech, (ii) the merger does not maximize value to the Company’s stockholders, and (iii) Midatech, Merger Sub, Secondary Merger Sub and the Company aided and abetted the breaches of fiduciary duty allegedly committed by the members of the Company’s Board of Directors. In addition, the Consolidated Delaware Action alleges that Midatech’s Registration Statement on Form F-4 filed August 11, 2015 omits or misstates certain material information. The stockholder actions seek class action certification and equitable relief, including judgments enjoining the defendants from consummating the merger on the agreed-upon terms. The Company believes the claims asserted by the plaintiffs to be without merit.

6. Income Taxes

The Company did not record any income tax expense or benefit for the three and nine months ended September 30, 2015 or 2014.

The Company is not subject to examination for tax periods prior to 2010 in state and federal jurisdictions.

The Internal Revenue Code provides limitations on utilization of existing net operating losses and tax credit carryforwards against future taxable income based upon changes in share ownership. The Company believes it is highly likely these changes have occurred, and a significant portion of the net operating loss and R&D credit carryforwards could be impaired.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related Notes included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2014, which has been filed with the SEC.

Forward Looking Statements

This Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. When used in this Form 10-Q, the words “believe,” “anticipates,” “intends,” “plans,” “estimates,” and similar expressions are forward-looking statements. Such forward-looking statements contained in this Form 10-Q are based on management’s current expectations and are subject to factors that could cause actual results to differ materially for us from those projected. Those factors include risks and uncertainties relating to our current cash position and our need to raise additional capital in order to be able to continue to fund our operations; the stockholder dilution that may result from future capital raising efforts and the exercise or conversion, as applicable, of our outstanding options, warrants and convertible preferred stock; full-ratchet anti-dilution protection afforded investors in prior financing transactions that may restrict or prohibit our ability to raise capital on terms favorable to the Company and its current stockholders; the potential delisting of our common stock from the NASDAQ Capital Market; our limited operating history which may make it difficult to evaluate our business and future viability; our ability to timely commercialize and generate revenues or profits from Soltamox®, Gelclair®, Oravig® or other products; our ability to achieve the desired results from our agreements with Mission and Alamo; our ability to develop KRN5500 into a commercially viable product; FDA and other regulatory risks relating to our ability to market Soltamox®, Gelclair®, Oravig® or other products in the United States or elsewhere; our ability to in-license and/or partner products; the current regulatory environment in which we sell our products; the market acceptance of those products; dependence on partners and third-party manufacturers; successful performance under collaborative and other commercial agreements; our ability to retain our managerial personnel and to attract additional personnel; potential product liability risks that could exceed our liability coverage; potential risks related to healthcare fraud and abuse laws; competition; the strength of our intellectual property, the intellectual property of others and any asserted claims of infringement, and other risk factors identified in the documents we have filed, or will file, with the SEC. Copies of our filings with the SEC may be obtained from the SEC Internet site at http://www.sec.gov. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions, or circumstances on which any such statements are based. DARA BioSciences and the DARA logo are trademarks of DARA BioSciences, Inc.

Overview

We are a Raleigh, North Carolina based specialty pharmaceutical company primarily focused on the commercialization of oncology supportive care and oncology treatment pharmaceutical products. Through our acquisition of Oncogenerix, Inc., which occurred on January 17, 2012, we acquired exclusive U.S. marketing rights to our first commercial FDA-approved proprietary product, SoltamoxÒ (tamoxifen citrate) oral solution (“Soltamox”). Soltamox has been approved by the U.S. Food and Drug Administration (“FDA”) for the prevention and treatment of breast cancer. On September 7, 2012, we entered into a license agreement with Helsinn Healthcare SA (“Helsinn”), to distribute, promote, market and sell GelclairÒ (“Gelclair”), a unique FDA-cleared, sodium hyaluronate and polyvinylpyrrolidone-containing oral gel indicated for the management and relief of pain due to oral mucositis.

On March 9, 2015, we entered into a commercialization agreement with Onxeo SA (“Onxeo”), giving us the exclusive, sublicensable, rights to distribute, promote, market and sell Oravig® (“Oravig”), in the United States as well as the right to seek regulatory approval for Oravig in Canada with the resulting exclusive, sublicensable rights to distribute, promote, market and sell Oravig there. Oravig is the first and only orally-dissolving buccal tablet approved for oral thrush. We launched Oravig at the beginning of October 2015. At the same time that we acquired the exclusive rights to Oravig from Onxeo, we entered into a co-promotion agreement with Mission Pharmacal (“Mission”) for Mission to exclusively promote Oravig in the primary care market. Since the launch of Oravig in early October, 2015 Mission is utilizing their primary care sales force to promote the product within that market segment. In consideration for receiving the exclusive rights to Oravig, we will make certain milestone payments at defined sales thresholds.

Alamo Pharma Services (“Alamo”) provides us with a dedicated national sales team of 20 sales representatives to promote our commercial products (the “Sales Team”). Pursuant to an agreement, exclusive to the oncology market, with Mission, Alamo’s parent company, Mission shares in the costs and expenses of the Sales Team. The Sales Team promotes our products Soltamox, Gelclair and Oravig. The Sales Team also promotes two Mission products: Ferralet® 90, and Aquoral®. Our agreements with Alamo and Mission expand our presence in oncology supportive care and the Mission products complement our portfolio in presenting comprehensive offerings to the oncologist. We believe our engagement of the 20-person Sales Team helps us increase our revenues and our product portfolio’s market acceptance.

We have a clinical development asset, KRN5500, which is a phase 2 investigational product targeted for treating patients with painful treatment-refractory chronic chemotherapy induced peripheral neuropathy (“CCIPN”). KRN5500 was designated a Fast Track Drug by the FDA in 2011. Fast Track designation is intended to facilitate the development and expedite review of drugs and biologics intended to treat serious or life-threatening conditions and those products that demonstrate the potential to address unmet medical needs. On February 21, 2014 the FDA granted Orphan Drug Designation to KRN5500 for the parenteral treatment of painful CCIPN that is refractory to conventional analgesics. On June 16, 2014 the FDA granted Orphan Drug Designation to KRN5500 for the treatment of multiple myeloma. Upon approval by the FDA, orphan drug designation provides extended market exclusivity, tax benefits, and the waiver of certain fees associated with the FDA approval process. On July 14, 2015 we were granted a patent by the US Patent and Trademark Office for a modified formulation of KRN5500 that will allow a simplified dosing regimen. On July 9, 2015 the FDA provided formal agreement with our proposed development plan, including design of the Phase 2b dose-escalation strategy in cancer patients with CCIPN. The FDA also indicated agreement with proposed bridging studies for the new KRN5500 formulation. We are evaluating options to partner the drug with an established oncology pharmaceutical development company to undertake and support further development costs.

We are employing a multi-disciplinary approach to reach and educate health care providers, dispensers, patient advocacy groups, foundations, caregivers and patients directly. We believe we can accomplish this through utilization of the contract sales organization of 20 sales representatives, a newly implemented telesales program, innovative marketing programs, partnerships with specialty pharmacy providers, working with patient advocacy groups and foundations as well as collaborative arrangements with third party sales organizations. As we gain additional commercial experience with our products, we may modify these activities as appropriate.

In order to successfully achieve these goals, having sufficient liquidity is very important since our revenues from operations to date have been insufficient to support our commercial and development activities. We have liquidated or distributed to our stockholders all of our investments made previously in other companies. Our primary sources of working capital have been proceeds from the sale of our securities and proceeds from the prior sales of securities held in subsidiary companies and marketable securities.

We expect to continue to incur operating losses in the near-term. Our results may vary depending on many factors, including our ability to build a successful sales and marketing organization, our ability to properly anticipate customer needs, the success of our product marketing efforts and the progress of licensing activities of KRN5500 with pharmaceutical partners. We continue to pursue other in-licensing opportunities for approved products.

Proposed Merger

On June 3, 2015, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Midatech Pharma PLC, a public limited company organized under the laws of England and Wales (“Midatech”), Merlin Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of Midatech (the “Merger Sub”), Duke Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of Midatech (the “Secondary Merger Sub”) and Shareholder Representative Services, LLC, a Colorado limited liability company, solely as a representative of the stockholders of our Company (the “Stockholder Representative”), pursuant to which (i) Merger Sub will merge with and into us (the “Merger”), with the us surviving the Merger (the “Surviving Corporation”) as the wholly owned subsidiary of Midatech and (ii) immediately following the Merger, Midatech will cause the Surviving Corporation to merge with and into Secondary Merger Sub (the “Secondary Merger”), with Secondary Merger Sub surviving the Secondary Merger as the wholly owned subsidiary of Midatech.

The Merger Agreement is subject to approval by our stockholders. A special meeting date of December 2, 2015 has been set.

Product Commercialization and the Mission Products

Our primary focus is on the commercialization of the following oncology supportive care and oncology treatment pharmaceutical products:

Gelclair, an FDA-cleared product indicated for the management and relief of pain due to oral mucositis;

Oravig, the first and only orally-dissolving buccal tablet approved for oral thrush launched in October 2015;

Two Mission products: Ferralet 90 (for anemia), and Aquoral (for dry month); and

Soltamox, an FDA-approved oral liquid solution of tamoxifen citrate (for the prevention and treatment of breast cancer).

We currently have exclusive licenses to two FDA approved products, Soltamox and Oravig; an exclusive license to distribute, promote and market an FDA-cleared product, Gelclair; and a marketing agreement to co-promote two Mission products: Ferralet 90 and Aquoral. We are working to expand our portfolio to include additional products through licenses and other collaborative arrangements.

KRN-5500 Clinical Stage Asset

KRN5500 is a novel, non-narcotic/non-opioid intravenous product being investigated for the treatment of painful CCIPN that is refractory to conventional analgesics. In July of 2004, we obtained an exclusive worldwide license (excluding Australia, New Zealand and Asia) to compounds from Kirin Brewery Co., Ltd. (now Kyowa Hakko Kirin Co., Ltd.) of Japan for the treatment of pain and central and peripheral nervous system conditions or diseases. In May of 2004, we also entered into an exclusive worldwide license with Massachusetts General Hospital related to the use of certain spicamycin derivatives for treating pain.

We have successfully completed a Phase 2a proof of concept study of KRN5500 in 19 patients with advanced cancer and analgesia-resistant neuropathic pain where it showed clinically-significant and statistically-significant pain reduction versus placebo (p = 0.03) using standardized pain test scores. There were no major safety concerns although nausea and vomiting were a common occurrence. The FDA has designated KRN5500 a Fast Track drug, based on its potential usefulness in treating a serious medical condition and in fulfilling an unmet medical need. We have made changes which we believe improve and simplify the formulation and have manufactured new drug substance for the next clinical trial. Since KRN5500 would complement our portfolio of oncology treatment and supportive care pharmaceuticals, we are evaluating options to partner the drug with an established oncology development company to undertake and support the cost for the Phase 2b program.

On February 24, 2014 the FDA granted Orphan Drug Designation to KRN5500 for the parenteral treatment of painful, chronic, chemotherapy-induced peripheral neuropathy that is refractory to conventional analgesics. On June 16, 2014 the FDA granted Orphan Drug Designation to KRN5500 for treatment of multiple myeloma. Upon approval by the FDA, Orphan Drug Designation provides extended market exclusivity, tax benefits, and the waiver of certain fees associated with the FDA approval process. On July 14, 2015 we were granted a patent from the US Patent and Trademark Office for a modified formulation of KRN5500 that we anticipate may allow a simplified dosing regimen. On July 9, 2015 the FDA provided formal agreement with DARA’s proposed development plan, including design of the Phase 2b dose-escalation strategy in cancer patients with CCIPN. The FDA also indicated agreement with proposed bridging studies for the new KRN5500 formulation.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those related to clinical trial expenses, stock-based compensation and asset impairment and significant judgments and estimates. We base our estimates on historical experience and on various other factors that are believed to be appropriate under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements included in this report, we believe the following accounting policies are most critical to aid in fully understanding and evaluating our reported financial results.

Revenue Recognition

We recognize revenue when there is persuasive evidence that an arrangement exists, title has passed, collection is reasonably assured and the price is fixed or determinable We sell Soltamox mostly to wholesalers who, in-turn, sell the product to hospitals and other end-user customers. Sales to wholesalers provide for selling prices that are fixed on the date of sale, although we offer certain discounts to group purchasing organizations and governmental programs. The wholesalers take title to the product, bear the risk of loss of ownership, and have economic substance to the inventory.

We allow for product to be returned beginning prior to and following product expiration. During the quarter ended June 30, 2015, we determined that our wholesaler inventories had been reduced to a normalized amount and that we now had sufficient experience with Soltamox and the related wholesaler distribution channel to reasonably estimate product returns from our wholesalers while the wholesalers are still holding inventory. Therefore, effective June 30, 2015, we no longer defer the recognition of Soltamox revenue with the exception of one wholesaler for whom we will continue to defer revenue recognition until the we have obtained sufficient sales history to reasonably estimate that wholesaler’s returns and until that wholesaler’s inventory levels are reduced to normalized amounts. Shipments of Soltamox that are not recognized as revenue are treated as deferred revenue until evidence exists to confirm that pull through sales to retail and specialty pharmacies or other end-user customers have occurred. Soltamox revenue is recognized from product sales directly to hospitals, clinics, pharmacies and other end-user customers at the time of direct shipment.

Revenue from Gelclair sales is recognized when the merchandise is shipped to both wholesalers and direct sales to hospitals, clinics, pharmacies and other end user customers as we believe that we have achieved normalized inventory levels for Gelclair. We recognize sales allowances as a reduction of revenues in the same period the related revenue is recognized. Sales allowances are based on amounts owed or to be claimed on the related sales. These estimates take into consideration the terms of our agreements with wholesale distributors and the levels of inventory within the distribution channels that may result in future discounts taken. We must make significant judgments in determining these allowances. If actual results differ from our estimates, we will be required to make adjustments to these allowances in the future, which could have an effect on revenue in the period of adjustment. The following briefly describes the nature of each provision and how such provisions are estimated:

Payment discounts are reductions to invoiced amounts offered to customers for payment within a specified period and are estimated upon shipment utilizing historical customer payment experience.

Although we do not have significant experience with its current products, the returns provision is based on management's return experience for similar products and is booked as a percentage of product sales recognized during the period. These recognized sales include shipments that have occurred out of wholesalers as well as direct shipments made by us to other third party purchasers. As we gain greater experience with actual returns related to its specific products the returns provisions and related reserves will be adjusted accordingly. The returns reserve is recorded as a reduction of revenue in the same period the related product sales revenue is recognized and is included in accrued expenses.

There are arrangements with certain parties establishing prices for products for which the parties independently select a wholesaler from which to purchase. Such parties are referred to as indirect customers. A chargeback represents the difference between the sales invoice price to the wholesaler and the indirect customer's contract price, which is lower. Provisions for estimating chargebacks are calculated primarily using historical chargeback experience, contract pricing and sales information provided by wholesalers and chains, among other factors. We recognize chargebacks in the same period the related revenue is recognized.

Inventory

Inventory at September 30, 2015 and December 31, 2014 was $266,955 and $265,280, respectively and consisted of finished goods. We state finished goods inventories at the lower of cost (which approximates actual cost on a first-in, first-out cost method) or market value. In evaluating whether inventory is stated at the lower of cost or market, management considers such factors as the amount of inventory on hand and in the distribution channel, estimated time required to sell such inventory, remaining shelf life, and current and expected market conditions, including levels of competition. Inventory adjustments are measured as the difference between the cost of the inventory and estimated market value based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost of sales. At the point of the loss recognition, a new, lower-cost basis for that inventory is established, and any subsequent improvements in facts and circumstances do not result in the restoration or increase in that newly established cost basis. During the nine months ended September 30, 2015, we recorded an inventory write down of approximately $50,000 associated with inventory still in our warehouse that is approaching product expiration.

Income Taxes

We use the liability method in accounting for income taxes as required by FASB ASC 740, Income Taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax credit carry forwards and for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized. At September 30, 2015 and December 31, 2014 a valuation allowance has been recorded to reduce the net deferred tax asset to zero.

Our policy for recording interest and penalties is to record them as a component of interest income (expense), net.

The Internal Revenue Code provides limitations on utilization of existing net operating losses and tax credit carryforwards against future taxable income based upon changes in share ownership. We believe it is highly likely these changes have occurred, and a significant portion of the net operating loss and R&D credit carryforwards could be impaired.

Sales and Marketing Costs

Research and Development Expenses

We expense research and development costs as incurred. Research and development costs include personnel and personnel related costs, clinical material manufacturing costs, process development, research costs, patent costs, pharmacovigilence costs, PDUFA fees, regulatory costs and other consulting and professional services.

Valuation of Goodwill and Acquired Intangible Assets

We have recorded goodwill and acquired intangible assets related to our 2012 acquisition. When identifiable intangible assets are acquired, we determine the fair values of the assets as of the acquisition date.

Intangible assets with definite useful lives are amortized to their estimated residual values over their estimated useful lives and reviewed for impairment if certain events occur.

Goodwill represents the excess of purchase price over fair value of net assets acquired in a business combination and is not amortized. Goodwill is subject to impairment testing at least annually or when a triggering event occurs that could indicate a potential impairment. We are organized as a single reporting unit and therefore the goodwill impairment test is done using our overall market value, as determined by our traded share price, as compared to our book value of net assets. We completed our annual impairment test as of December 31, 2014 and determined the carrying value of goodwill was not impaired.

Under the terms of the original license agreement for Soltamox, we are required to meet minimum sales requirements during the license agreement’s term. As of October 1, 2015 we have amended the original agreement with new terms that will be applicable for the next 36 months. Pursuant to these new terms, the minimum sales requirements have been eliminated and we will instead guarantee Rosemont an annual minimum payment, which payment includes a minimum purchase of Soltamox finished goods inventory which we believe should be sufficient for our annual inventory needs. In addition, during

the final year of the initial term of the agreement, we have agreed to pay Rosemont an additional royalty on gross margin for units sold above a specified threshold. The initial term is expected to end on June 29, 2018.

We evaluate the recoverability of our intangible assets subject to amortization and other long-lived assets whenever events or changes in circumstances suggest that the carrying value of the asset or group of assets is not recoverable. We measure the recoverability of assets by comparing the carrying amount to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment charge equals the amount by which the carrying amount of the assets exceeds the fair value. Any write-downs are recorded as permanent reductions in the carrying amount of the assets. There was no impairment to intangible assets recognized during the three and nine months ended September 30, 2015.

Accrued Expenses

As part of the process of preparing financial statements, we are required to estimate accrued expenses. This process involves reviewing open contracts and purchase orders, communicating with applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when invoices have not yet been sent and we have not otherwise been notified of actual cost. The majority of our service providers invoice monthly in arrears for services performed. We make estimates of accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Examples of estimated accrued expenses include:

fees paid to distribution providers;

fees paid to contract manufacturers in connection with the production of raw materials, drug substance and drug products; and

professional service fees.

Share-Based Compensation

Share-based compensation is accounted for using the fair value based method prescribed by Financial Accounting Standards Board Accounting Standards Codification 718 (“ASC 718, Compensation-Stock Compensation”). For stock and stock-based awards issued to employees, a compensation charge is recorded against earnings based on the fair value of the award. For transactions with non-employees in which services are performed in exchange for our common stock or other equity instruments, the transactions are recorded on the basis of the fair value of the service received or the fair value of the equity instruments issued, whichever is more readily measurable at the date of issuance. Please refer to Note 4 - Share Based Compensation, included in the condensed consolidated financial statements appearing elsewhere in this report, for additional information regarding our adoption of ASC 718.

Significant Judgments and Estimates

The preparation of our consolidated financial statements in conformity with U.S. generally accepted accounting principles requires that we make estimates and assumptions that affect the reported amounts and disclosure of certain assets and liabilities at our balance sheet date. Such estimates include the carrying value of property and equipment and the value of certain liabilities. Actual results may differ from such estimates.

Results of Operations

Three Months Ended September 30, 2015 Compared to Three Months Ended September 30, 2014

Net revenues increased by $583,283 from $597,777 for the three months ended September 30, 2014, to $1,181,060 for the three months ended September 30, 2015, primarily related to increased demand for both Gelclair and Soltamox. Similarly, cost of goods sold increased by $115,420 from $125,864 for the three months ended September 30, 2014, to $241,284 for the three months ended September 30, 2015, also primarily related to increased demand for both Gelclair and Soltamox.

Sales and marketing costs consist of salaries, commissions, and benefits to sales and marketing personnel, sales personnel travel and operating costs, contract sales force costs including pass-throughs, marketing programs, administration costs and advertising costs. Sales and marketing expense increased $463,815 from $1,099,931 for the three months ended September 30, 2014 to $1,563,746 for the corresponding 2015 period primarily as a result of increased personnel costs, including an increase in incentive based field sales compensation driven by higher sales achievement, and increased advertising and sales events expenses, partially offset by decreased public relations expenses.

Research and development costs include personnel and personnel related costs, formulation and API manufacturing costs, process development, research costs, patent costs, pharmacovigilance costs, PDUFA fees, regulatory costs and other consulting and professional services. Research and development expenses decreased $46,209 from $383,159 for the three months ended September 30, 2014 to $336,950 for the corresponding 2015 period, primarily as a result of decreased personnel costs.

General and administrative expenses consist primarily of salaries and benefits, professional fees and other costs related to administrative, finance, human resource, legal and information technology functions as well as the costs associated with listing, stock transfer and filings as a public company. In addition, general and administrative expenses include facility, basic operational and support costs and insurance costs. General and administrative expenses increased $559,226 from $1,004,081 for the three months ended September 30, 2014 to $1,563,307 for the corresponding 2015 period, primarily as a result of increased legal professional services costs related to the Merger Agreement.

Depreciation and amortization expense increased $13,629 from $159,790 for the three months ended September 30, 2014 to $173,419 for the corresponding 2015 period, primarily as a result of higher amortization expense.

Other income (expense) reflects non-operating activities associated with investments, as well as interest earned and expensed and other revenues not related to normal basic operations. Other expense decreased $15,519 from $15,654 in expense for the three months ended September 30, 2014 to $135 in expense for the corresponding 2015 period, primarily as a result of reduced interest expense.

Nine Months Ended September 30, 2015 Compared to Nine Months Ended September 30, 2014

Net revenues increased by $1,655,368 from $1,168,673 for the nine months ended September 30, 2014, to $2,824,041 for the nine months ended September 30, 2015, primarily related to increased demand for both Gelclair and Soltamox. Similarly, cost of goods sold increased by $380,421 from $270,384 for the nine months ended September 30, 2014, to $650,805 for the nine months ended September 30, 2015, also primarily related to increased demand for both Gelclair and Soltamox, as well as a $50,000 inventory write down associated with Soltamox inventory that is approaching product expiration.

Sales and marketing costs consist of salaries, commissions, and benefits to sales and marketing personnel, sales personnel travel and operating costs, contract sales force costs including pass-throughs, marketing programs, administration costs and advertising costs. Sales and marketing expense increased $983,944 from $3,702,433 for the nine months ended September 30, 2014 to $4,686,377 for the corresponding 2015 period primarily as a result of increased personnel costs, including an increase in incentive based field sales compensation driven by higher sales achievement, partially offset by a reduction in public relations expense.

Research and development costs include personnel and personnel related costs, formulation and API manufacturing costs, process development, research costs, patent costs, pharmacovigilance costs, PDUFA fees, regulatory costs and other consulting and professional services. Research and development expenses increased $8,091 from $1,062,339 for the nine months ended September 30, 2014 to $1,070,430 for the corresponding 2015 period, primarily as a result of increased consulting and professional services expense and PDUFA fees, offset by decreased personnel costs.

General and administrative expenses consist primarily of salaries and benefits, professional fees and other costs related to administrative, finance, human resource, legal and information technology functions as well as the costs associated with listing, stock transfer and filings as a public company. In addition, general and administrative expenses include facility, basic operational and support costs and insurance costs. General and administrative expenses increased $1,045,858 from $3,364,368 for the nine months ended September 30, 2014 to $4,410,226 for the corresponding 2015 period, primarily as a result of increased personnel costs, increased stock-based compensation costs and increased professional services costs related to the Merger Agreement.

Depreciation and amortization expense increased $43,909 from $477,820 for the nine months ended September 30, 2014 to $521,729 for the corresponding 2014 period, primarily as a result of higher amortization expense.

Other income (expense) reflects non-operating activities associated with investments, as well as interest earned and expensed and other revenues not related to normal basic operations. Other income decreased $196,127 from $178,720 for the nine months ended September 30, 2014 to $17,407 in expense for the corresponding 2015 period, primarily as a result of approximately $228,375 in net increased license revenue recognized in other income during the first quarter of 2014 related to the sublicense of DB959 to T3D Therapeutics, Inc.

Liquidity and Capital Resources

Overview

At September 30, 2015, our principal sources of liquidity were our cash and cash equivalents which totaled $4,658,815. As of September 30, 2015, we had net working capital of $2,784,764. Our cash resources have been used to acquire licenses, and to fund research and development activities, capital expenditures, sales and marketing and general and administrative expenses.

Cash Flows

During the nine months ended September 30, 2015, cash used in our operating activities was $7,240,654. Cash used in operating activities was primarily due to the $8,532,933 consolidated net loss, a decrease in accounts payable and accrued liabilities of $376,939 and an increase in inventory of $51,736, which was partially offset by a decrease in accounts receivable of $204,249, a decrease in prepaid expenses and other assets of $151,484, non-cash stock-based compensation of $787,036 and non-cash depreciation and amortization of $521,729.

During the nine months ended September 30, 2015, cash used in investing activities was $1,238 and was related to the purchase of furniture, fixtures and equipment.

During the nine months ended September 30, 2015, cash used in financing activities was $125,905 and was related to payments on capital leases and other financing agreements.

Financial Condition and Outlook

We believe we have sufficient working capital to continue our operations into the first quarter of 2016. If the Merger is not completed on a timely basis, we will need to obtain additional investment capital to pursue our future business plan. Our capital requirements will depend upon numerous factors, including our ability to generate revenue through our sales and marketing efforts as well as the level of costs we incur in building our portfolio of products and expanding our sales and marketing organization and our ability to license our technologies to third parties.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of September 30, 2015.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”), our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file under the Securities and Exchange Act of 1934 is recorded, processed, summarized, and reported, within the time periods specified in SEC rules and forms and that material information relating to the Company is accumulated and communicated to management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosures. It should be noted that in designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have designed our disclosure controls and procedures to reach a level of reasonable assurance of achieving desired control objectives and, based on the evaluation described above, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at reaching that level of reasonable assurance.

Changes in Internal Control Over Financial Reporting

During the third quarter of 2015, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

In November, 2012, a suit was filed in the United States District Court District of Columbia naming DARA as a defendant. The plaintiff in the suit is GlycoBioSciences, Inc. Also named as defendant was Innocutis Holdings LLC (“Innocutis”), licensor of the product Bionect, which we marketed under a Marketing Agreement with Innocutis until the termination of the Agreement on April 1, 2015. Plaintiff subsequently filed a second suit against Fidia Pharmaceutici S.p.A., the manufacturer of the Bionect product, and that suit has been merged with the suit against us and Innocutis. Plaintiff alleges that defendants’ distribution and sale of Bionect infringes on certain of plaintiff’s patents and plaintiff seeks to enjoin defendants’ alleged patent infringement and seeks unspecified damages and costs. Pursuant to our Marketing Agreement with Innocutis, Innocutis is required to indemnify us in connection with this lawsuit, an obligation which survived the termination of the Marketing Agreement between us and Innocutis. As a result, Innocutis has assumed our defense. The defendants filed a motion to dismiss the complaint on February 1, 2013. On June 26, 2014, counsel for the defendants notified the Court that the United States Patent and Trademark Office had completed a reexamination of the two patents which underlie the suit and also filed a Motion to Dismiss. On August 25, 2014, plaintiff filed an amended complaint that replaced the allegations concerning the original two patents and, instead, asserted that defendants infringed on a different patent relating to the sale of Bionect. On September 25, 2014, defendants filed an answer and asserted various affirmative defenses and counterclaims. On April 16, 2015, defendants’ filed a Motion to Dismiss plaintiff’s Amended Complaint. The Motion to Dismiss was denied by the Court on June 10, 2015. The Court has ordered that discovery with respect to damages commence not earlier than January 15, 2016, and that fact discovery shall be completed not later than April 22, 2016. Additional discovery and expert reports are to be submitted at intervals throughout 2016 culminating in dispositive motions being filed on or before August 26, 2016. No assurance can be given regarding the outcome of this litigation. However, we believe the plaintiff’s claims are substantially without merit and the resolution of this matter will not have a material adverse effect on our financial position or results of operations.

We, our individual Board of Directors, Midatech, Merger Sub and Secondary Merger Sub are named as defendants in purported class action lawsuits brought by alleged stockholders of ours challenging our proposed merger with Midatech. Three stockholder actions were filed in the Court of Chancery of the State of Delaware (Steve Schnipper v. David J. Drutz, et al., C.A. No. 11262-VCG, filed on June 23, 2015; Matthew Quinn v. DARA Biosciences, Inc., et al., C.A. No. 11217-VCG, filed on June 26, 2015; and Eric Edwards v. David J. Drutz, et al., C,A. No. 11262-VCG, filed on July 8, 2015) and one stockholder action was filed in the Superior Court in Wake County, North Carolina (Jacob Presson v. DARA BioSciences, Inc. et al., filed on July 27, 2015), referred to as the North Carolina Complaint. On August 21, 2015, the plaintiff in the Schnipper action filed an amended complaint, referred to as the Schnipper Amended Complaint. On September 15, 2015, the Delaware Court of Chancery issued an order consolidating all of the Delaware actions into one matter, In re DARA BioSciences Stockholder Litigation, Cons. C.A. 11194-VCG, referred to as the Consolidated Delaware Action, and designated the Schnipper Amended Complaint as the operative complaint. On October 1, 2015, the Superior Court in Wake County, North Carolina entered an order staying the North Carolina Complaint at the request of the parties.

The stockholder actions generally allege, among other things, that (i) each member of our Board of Directors breached his or her fiduciary duties to us and our stockholders by authorizing our sale to Midatech, (ii) the merger does not maximize value to our stockholders, and (iii) Midatech, Merger Sub, Secondary Merger Sub and we aided and abetted the breaches of fiduciary duty allegedly committed by the members of our Board of Directors. In addition, the Consolidated Delaware Action alleges that Midatech’s Registration Statement on Form F-4 filed August 11, 2015 omits or misstates certain material information. The stockholder actions seek class action certification and equitable relief, including judgments enjoining the defendants from consummating the merger on the agreed-upon terms. We believe the claims asserted by the plaintiffs to be without merit.

Item 1A. Risk Factors

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this report, the risks and uncertainties that we believe are most important for you to consider are discussed in Part I, “Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K, as updated by the amendments, additions and changes thereto as set forth below.

Risks Related to Our Business

We have limited cash on hand and may not be able to continue to operate as a going concern.

The accompanying consolidated financial statements have been prepared under the assumption that we will continue as a going concern. Without taking into account funding that we may receive from Midatech if the mergers close in a timely manner, we estimate that we will have sufficient working capital to continue our operations into the first quarter of 2016. If we incur unanticipated expenses, our capital resources may be expended more rapidly than we currently expect. Our continued losses and lack of capital raise substantial doubt about our ability to continue independently as a going concern. Should the Merger not occur, we will review alternatives to source adequate financing to continue our business. If adequate financing is not available on acceptable terms, if at all, we may be forced to seek bankruptcy protection.

Additionally, in the event that the merger is not completed in a timely manner, our independent registered public accounting firm may include in its report regarding our consolidated financial statements for the year ending December 31, 2015 a statement to the effect that our significant losses from operations and our immediate need for financing raise substantial doubt about our ability to continue as a going concern.

We will have an immediate need to raise significant capital if the mergers do not occur in a timely manner.

If the Merger does not occur, we anticipate that significant additional financing will be required in the future to maintain and expand our business, and such financing may not be available on favorable terms, if at all.

If we need funds and cannot raise them on acceptable terms, we may not be able to:

●	continue marketing and sales efforts with respect to our existing products, or begin commercialization of any other products;

●	successfully build a portfolio of additional products for commercialization;

●	successfully out-license, otherwise monetize or commercialize any of our programs; or

●	continue operations.

If the Merger is not completed, we intend to finance our business, in part, through the private placement and public offering of equity and debt securities as needed. We have historically financed our operations primarily from proceeds of registered direct offerings and private placements of equity securities and the sale of securities we acquired through investments made in other companies. If we raise additional equity capital, investors’ interests in us will be diluted and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold. If we issue any such additional equity securities, such issuances will also cause a reduction in the proportionate ownership and voting power of all other stockholders. Further, any such issuance may result in a change in control.

We have a history of losses and do not expect to become profitable in the near future.

We have incurred losses since inception and expect to continue to incur losses for the foreseeable future. We incurred a net loss of $9.2 million for the year ended December 31, 2014, and $8.5 million for the nine months ended September 30, 2015. As of September 30, 2015, our accumulated deficit was $74.5 million. We have not achieved operating profitability on a quarterly or annual basis.

Historically, there have been limited sales of our products. Our revenues were $0.4 million for the year ended December 31, 2013, $1.9 million for the year ended December 31, 2014 and $2.8 million for the nine months ended September 30, 2015. We will need to significantly grow our revenues to become profitable.

Our limited experience selling and marketing pharmaceutical products may make it difficult to evaluate our business to date and future viability.

We are in the early stage of our commercial operations and have only a limited operating history on which to base an evaluation of our current business and prospects. For example, we are in the early stages of building our sales and marketing strategy and organization and have only recently established a national sales team. We have just launched Oravig into the marketplace in October 2015 and cannot accurately predict the effectiveness of our sales and marketing of Oravig. Our operations and development are subject to all of the risks inherent in the growth of an early stage company. We will be subject to the risks inherent in the ownership and operation of a company with a limited operating history such as regulatory setbacks and delays, fluctuations in expenses, competition, the general strength of regional and national economies and governmental regulation. Any failure to successfully address these risks and uncertainties could seriously harm our business and prospects. We may not succeed given the technological, marketing, strategic and competitive challenges we face. The likelihood of our success must be considered in light of the expenses, difficulties, complications, problems and delays frequently encountered in connection with the growth of a new business, the continuing development of new technologies and alternative therapies in the pharmaceutical industry, and the competitive and regulatory environment in which we operate or may choose to operate in the future.

Our business will be harmed if we do not successfully execute our business strategy.

Our business strategy is to in-license products for commercialization, enter into collaborative agreements with drug manufacturers and develop with a partner, out-license or sell KRN 5500, our remaining clinical development asset. Our management believes these measures are critical to successfully building our portfolio of oncological products for commercialization. We may not be able to secure needed licensing or other partnering arrangements, and any such arrangements, even if completed successfully, may not be on terms favorable to us, may not perform as expected, may result in unexpected liabilities and may never contribute significant revenues or cash flow. We depend to a significant extent on the expertise of and dedication of sufficient resources by our licensors, licensees and partners to develop and commercialize products. Each individual licensor, licensee or corporate partner will control the amount and timing of resources devoted by it to these activities. Moreover, the success of any such licenses or other alliances depends in part upon such partners’ own marketing and strategic considerations, including the relative advantages of alternative marketing partners and strategies. Corporate partners may pursue alternative technologies or develop products that are competitive with our products. Disputes may arise between us and one or more of our collaborative partners regarding our collaborative arrangements. In such an event, we may be required to initiate or defend expensive litigation or arbitration proceedings or to seek and attempt to reach agreement with another collaborative partner. We may not be able to resolve successfully a dispute with a collaborative partner or to enter into a satisfactory arrangement with a replacement collaborative partner. If we are not successful in executing our business strategy we will not achieve the revenues we anticipate and our business will be materially harmed.

Our ability to generate revenues or profits from our products will be dependent upon the successful operation of the dedicated sales force that a third party provides to us under a contractual arrangement. Any challenges that may arise in connection with the ongoing operations of the dedicated sales force, or any failure of our marketing strategy to achieve the desired results, could have a material adverse effect on our financial condition, operating results and stock price.

In October 2013, we entered into an agreement with Alamo for a twenty (20) person national sales team in the U.S. oncology market. Pursuant to the agreement and a shared sales force agreement with Mission (Alamo’s parent company), since January 2014 the Alamo sales team has promoted our Soltamox® (tamoxifen citrate) and Gelclair® products, as well as Mission’s Ferralet® 90 (for anemia) and Aquoral® (for cancer related dry mouth). Mission’s products are concurrently being promoted by Mission in other non-oncology related therapeutic markets and all are under patent protection throughout the term of our agreement with Mission. The agreements with Alamo and Mission expand our presence in oncology supportive care to address ongoing areas of unmet medical need.

Our ability to successfully market our product portfolio, and to generate revenues or profits from our products, will depend upon successful operation of the shared sales force that Alamo is providing to us under contract. There can be no assurances that the sales representatives will achieve the desired results or that they will be successful in marketing our products. Pursuant to the contractual arrangements governing the sales force, we will be responsible for significant financial obligations whether or not the sales force achieves the desired results, including fixed monthly fees subject to an annual escalator, reimbursement for certain expenses, implementation fees, and recruiting fees in connection with new hires for the sales force. If the sales force does not effectively market our products as desired, our financial condition, results of operations and stock price could be materially adversely affected.

The success of our current products and any future products we may commercialize will depend on the degree of market acceptance by physicians, patients, healthcare payers and others in the medical community.

Any products that we bring to the market may not gain market acceptance by physicians, patients, healthcare payers and others in the medical community. If these products do not achieve an adequate level of acceptance, we will not generate material product revenues and we will not become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

●	the prevalence and severity of any side effects;

●	the efficacy and potential advantages of alternative treatments;

●	the cost of our product candidates;

●	the willingness of physicians to prescribe our products; and

●	sufficient coverage or reimbursement by government and commercial payers.

Commercialization of a new product or a new method of use for an existing product involves risks of failure inherent in the development of products based on innovative technologies and the risks associated with drug development generally.

Commercialization of a new or newly launched product, including Gelclair, Oravig and Soltamox, or a new method of use for an existing product involves risks of failure inherent in the development of products based on innovative technologies and the risks associated with drug development generally. These risks include the following:

●	the products, even if safe and effective, may be difficult to manufacture on a large scale or uneconomical to market;

●	proprietary rights of third parties may prevent us from exploiting technologies or marketing products; and

●	third parties, who may have larger sales and marketing capacities, may offer equivalent or superior products.

Our ability to commercialize our products will depend on, among other things, our ability to:

●	complete any necessary clinical trials and studies with respect to any partnered clinical assets;

●	obtain and maintain necessary intellectual property rights to our products;

●	obtain and maintain necessary regulatory approvals related to the efficacy and safety of our products;

●	enter into arrangements with manufacturers to provide manufacturing resources;

●	establish marketing and sales channels; and

●	Obtain favorable reimbursement coverage and formulary placement for our products.

If we do not successfully execute some or all of these initiatives, our commercialization efforts may not succeed and our business will be materially harmed.

We cannot guarantee that we will be able to effectively market our existing products and product candidates.

A significant part of our success depends on the various marketing strategies that we plan to implement. Our business model was historically focused solely on product development, and until our launch of Soltamox in late 2012, we had never attempted to commercialize any product. We are in the early stages of building our sales and marketing strategy and organization, and only established a national sales team in January 2014 through our contractual relationships with Mission and Alamo. There can be no assurance as to the success of any such marketing strategy or that we will be able to build a successful sales and marketing organization. If we cannot effectively market those products we seek to commercialize directly, such products’ prospects will be harmed.

We are substantially dependent on a relatively small group of products.

Sales of a limited number of products collectively represent substantially all of our revenues and our management expects this concentration will continue in the foreseeable future. If the volume or pricing of our largest selling products do not increase, or if it declines, in the future or we are unable to satisfy market demand for these products, our business, financial position and results of operations could be materially adversely affected.

If we are unable to continue to commercialize additional products in a timely and cost-effective manner, we may not achieve our expected revenue growth or profitability or such revenue growth and profitability, if any, could be delayed.

Our future success will depend to a substantial degree on our ability to continue to commercialize new products in a timely and cost-effective manner. The acquisition, development and commercialization of new products is complex, time-consuming and costly and involves a high degree of business risk. We may, however, encounter unexpected delays in the launch of any such products, or these products, if fully commercialized by us, may not perform as we expect.

The success of our new product offerings will depend upon several factors, including our ability to properly anticipate customer needs, obtain timely regulatory approvals and locate and establish collaborations for product development and finished product manufacturing in a cost-effective manner. In addition, the acquisition, development and commercialization of new products require significant up-front costs, including costs associated with product development, obtaining regulatory approval, building inventory and sales and marketing. Furthermore, the development and commercialization of new products is subject to inherent risks, including the possibility that any new product may:

●	fail to receive or encounter unexpected delays in obtaining necessary regulatory approvals;

●	be difficult or impossible to manufacture on a larger scale;

●	be uneconomical to market;

●	fail to be developed prior to the successful marketing of similar or superior products by third parties; and

●	infringe on the proprietary rights of third parties.

We may not achieve our expected revenue growth or profitability or such revenue growth and profitability, if any, could be delayed if we are not successful in continuing to develop and commercialize new products.

We rely on third parties for the manufacture of our products, and if such parties fail to supply us with finished products in the quantities we require on a timely basis, sales of our products could be delayed or prevented, our revenues could decline and we may not achieve profitability.

We do not, nor do we intend to, manufacture any products our self. Instead, we rely on third parties to manufacture the products we seek to commercialize. If the third parties we contract with do not provide these services to us in a satisfactory manner, we may not be able to obtain these services from others in a timely manner or on commercially acceptable terms. Likewise, if we encounter delays or difficulties with our manufacturing partners in producing our products, the distribution, marketing and subsequent sales of these products could be adversely affected. If, for any reason, our third party manufacturers are unable to obtain or deliver sufficient quantities of finished products on a timely basis or we develop any significant disagreements with such parties, the manufacture or supply of our products could be disrupted, which may decrease our sales revenue, increase our operating expenses or otherwise negatively impact our operations. In addition, if we are unable to engage and retain third parties for the supply of finished products on commercially acceptable terms, we may not be able to sell our products as planned.

We work with our third party manufacturing parties to maintain the supply of our products and have engaged them in discussions to develop backup supply plans. However, the manufacture of pharmaceutical products is highly exacting and complex and our manufacturing partners may experience problems during the manufacture of finished products for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, manufacturing quality concerns, problems with raw materials, natural disaster related events or other environmental factors. If problems arise during the production, storage or distribution of a batch of product, that batch of product may have to be discarded. If we are unable to find alternative sources of finished products, this could, among other things, lead to increased costs, lost sales and damage to customer relations. If problems are not discovered before the product is released to market, voluntary recalls, corrective actions or product liability related costs may also be incurred. Problems with respect to the manufacture, storage or distribution of our products could materially disrupt our business and reduce our revenues and prevent or delay us from achieving profitability.

A loss of our license rights to use certain critical intellectual property or distribution rights for any reason could have a material adverse effect on our business.

We have entered into exclusive license agreements with third parties to obtain the right to distribute certain products. If we breach or fail to perform the material conditions of our license agreements, including the minimum sales requirements, we may lose all or some of our rights to intellectual property or other contractual rights that are necessary for us to sell our products. Such loss could have a material adverse effect on our business.

Our clinical development asset, KRN 5500, is in an early stage of development, and we may not be able to successfully partner it.

The drug development process is highly uncertain and requires a substantial investment of capital. KRN5500 is in the early stages of development and has not been approved for commercial sale. We do not presently have the resources to fully develop KRN 5500 into a commercial product. We are attempting to partner the drug with other organizations who may have the interest and resources to undertake and support the cost of a Phase 2b program to test for safety and efficacy. Before a drug product is approved by the FDA for commercial marketing, it must be tested for safety and effectiveness in clinical trials that are expensive to conduct and can take many years to complete. Promising results in preclinical development or early clinical trials may not be predictive of results obtained in later clinical trials. Pharmaceutical companies may experience significant setbacks in advanced clinical trials, even after obtaining promising results in earlier preclinical and clinical trials. At any time, new safety information may lead the FDA to place a clinical trial on clinical hold, or permanently stop the trial. We or our collaborators may experience numerous unforeseen events during, or as a result of, the clinical development process that could delay or prevent our drug candidate from being successfully commercialized, including:

●	failure to achieve clinical trial results that indicate a product candidate is effective in treating a specified condition or illness in humans;

●	safety issues, including the presence of harmful side effects;

●	determination by the FDA that the submitted data do not satisfy the criteria for approval;

●	new information that suggests lack of commercial viability of the drug;

●	failure to acquire, on reasonable terms, intellectual property rights necessary for commercialization; and

●	development of competing therapeutics that are more effective.

Our success depends on our ability to retain our managerial personnel and to attract additional personnel (including a sales force).

Our success depends largely on our ability to attract and retain managerial personnel, and to have a fully staffed sales force pursuant to our contractual arrangements with Alamo. We operate with a small staff and a 20-person contracted sales force. Competition for desirable personnel is intense, and there can be no assurance that we will be able to attract and retain the necessary staff. The loss of one or more members of our managerial or commercial staff, or any administrative difficulties associated with the implementation of our sales force through Alamo or difficulties in keeping the sales force fully staffed, could have a material adverse effect on our future operations and on the successful development of products for our target markets. The failure to maintain management, particularly our Chief Executive Officer, Chief Medical Officer and Senior Vice President, Commercial Operations and Business Development, and to attract additional key sales and other personnel could materially adversely affect our business, financial condition and results of operations.

The success of our business depends on our ability to develop and protect our intellectual property rights, which could be expensive.

Our success will depend in large part on our ability to obtain and maintain protection in the United States and other countries for the intellectual property covering or incorporated into our technology and products. The patent situation in the field of pharmaceuticals is highly uncertain and involves complex legal and scientific questions. We may not be able to obtain additional issued patents relating to our technology or products. Even if issued, patents may be challenged, narrowed, invalidated or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length or term of patent protection we may have for our products. Changes in either patent laws or in the interpretations of patent laws in the United States or other countries may diminish the value of our intellectual property or narrow the scope of our patent protection, and any defense of our patent rights would be costly and time-consuming and may adversely affect our overall financial condition and liquidity.

Our patents also may not afford our protection against numerous competitors with similar technology. Patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing and in some cases not at all. Therefore, because publications of discoveries in the scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that we or they were the first to develop the inventions claimed in issued patents or pending patent applications, or that we or they were the first to file for protection of the inventions set forth in these patent applications. Even in the event that our patents are upheld as valid and enforceable, they may not foreclose potential competitors from developing new technologies or “workarounds” that circumvent our patent rights. This means that our patent portfolio may not prevent the entry of a competitive product into the market. In addition, patents generally expire, regardless of their date of issue, 20 years from the earliest claimed non-provisional filing date. As a result, the time required to obtain regulatory approval for a product candidate may consume part or all of the patent term. We are not able to accurately predict the remaining length of the applicable patent term following regulatory approval of any of our product candidates.

If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be adversely affected.

In addition to patented technology, we rely on trademarks, copyrights, trade secrets and know-how to develop, maintain and strengthen our competitive positions. We seek to protect this information in part through confidentiality agreements with our employees, consultants and third parties. If any of these agreements are breached, we may not have adequate remedies for any such breach. Moreover, there can be no assurance that third parties will not know, discover or develop independently equivalent proprietary information or techniques, that they will not gain access to our trade secrets or disclose such trade secrets to the public. Therefore, we cannot guarantee that we can maintain and protect unpatented proprietary information and trade secrets. Misappropriation of our intellectual property would have an adverse effect on our competitive position and may cause us to incur substantial litigation costs.

We may be subject to claims that we infringe the intellectual property rights of others, and unfavorable outcomes could harm our business.

Our operations may be subject to claims, and potential litigation, arising from our alleged infringement of patents, trade secrets or copyrights owned by third parties. We intend to fully comply with the law in avoiding such infringements. However, within the drug development industry, established companies have actively pursued such infringements, and have initiated such claims and litigation, which has made the entry of competitive products more difficult. We may experience such claims or litigation initiated by existing, better-funded competitors. We could also become involved in disputes regarding the ownership of intellectual property rights that relate to our technologies. These disputes could arise out of collaboration relationships, strategic partnerships or other relationships. Any such litigation could be expensive, take significant time, and could divert management’s attention from other business concerns. Our failure to prevail in any such legal proceedings, or even the mere occurrence of such legal proceedings, could substantially affect our ability to meet our expenses and continue operations.

In November 2012, a suit was filed in the United States District Court District of Columbia naming us as a defendant. Plaintiff in the suit is GlycoBioSciences, Inc. Also named as defendant is Innocutis Holdings, LLC. We and Innocutis were parties to a now-terminated Exclusive Marketing Agreement that granted us rights to promote Bionect in the U.S. oncology and radiation oncology marketplace. Plaintiff alleges that defendants’ distribution and sale of Bionect infringes on certain of plaintiff’s patents and plaintiff seeks to enjoin defendants’ alleged patent infringement and seeks unspecified damages and costs. Pursuant to the Exclusive Marketing Agreement, Innocutis is required to indemnify us in connection with this lawsuit, an obligation which survives the expiration or termination of the Exclusive Marketing Agreement. As a result, Innocutis has assumed our defense. The defendants filed a motion to dismiss the complaint on February 1, 2013. On June 26, 2014, counsel for the defendants notified the Court that the United States Patent and Trademark Office had completed a reexamination of two patents which underlie the suit and also filed a Motion to Dismiss. On August 25, 2014, plaintiff filed an amended complaint asserting that defendants infringed on certain patents relating to the sale of Bionect. On September 25, 2014, defendants filed an answer and asserted various affirmative defenses and counterclaims. On April 16, 2015, plaintiff filed a Motion to Dismiss defendant’s Amended Complaint. The Motion to Dismiss was denied by the Court on June 10, 2015. The Court has ordered that fact discovery commence not earlier than January 1, 2016, and that it be completed not later than April 22, 2016. Additional discovery and expert reports are to be submitted at intervals throughout 2016 culminating in dispositive motions being filed on or before August 26, 2016. No assurance can be given regarding the outcome of this litigation or its effect on our financial position or results of operations.

Pending litigation against us in connection with the proposed merger with Midatech could result in an injunction preventing the merger, a judgment resulting in the payment of damages, and significant defense costs.

On June 23, 2015, a putative class action suit entitled Schnipper v. Drutz, et al., was filed by a shareholder in the Chancery Court for the State of Delaware naming us as a defendant along with our individual directors, Midatech, and two subsidiaries of Midatech that were formed in contemplation of the proposed merger between DARA and Midatech. Two additional suits entitled Quinn v. DaraBiosciences, Inc., and Edwards v. Drutz, have also been filed in the Chancery Court for the State of Delaware. The suits allege, among other things, that we and our directors violated certain fiduciary duties owing to our shareholders by entering into the Merger Agreement and that Midatech aided and abetted such actions. The nature of litigation is inherently uncertain and costly. If we do not prevail in the litigation we may be subject to outcomes that could include significant financial judgments in favor of the plaintiffs, the blocking of the proposed merger with Midatech, and other awards which could have a material adverse effect on our business. Although, we have directors’ & officers’ insurance which is designed to cover the costs of defense over a defined self-insured retention along with any damages that may ultimately be awarded for covered claims, we may not be protected by the policies. Additionally, if our insurance underwriters determine that the claims are not fully covered by our policies, we may not be able to rely on insurance to cover the costs of the litigation or any financial damages which could be awarded by the Court, either of which could have a material adverse impact on our operations and financial condition.

Our inability to manage our planned growth could harm our business.

As we work toward building a portfolio of oncology treatment and supportive care pharmaceutical products and a sales organization that will market such products for sale, we expect to require additional personnel. As a result, our operating expenses and capital requirements may increase significantly. Our ability to manage our growth effectively requires us to forecast accurately our sales and growth and manufacturing needs and to expend funds to improve our operational, financial and management controls, reporting systems and procedures. If we are unable to manage our anticipated growth effectively, our business could be harmed.

Risks Relating to the Pharmaceutical Industry in Which We Operate

The pharmaceutical and biotechnology industries are intensely competitive and we may be unable to successfully compete against competitors with substantially more resources than we have.

In general, the pharmaceutical and biotechnology industries are intensely competitive. The technological areas in which we work continue to evolve at a rapid pace. Competition from pharmaceutical, chemical and biotechnology companies, universities and research institutions is intense and we expect it to increase. Many of these competitors are substantially larger than us and have substantially greater capital resources, research and development capabilities and experience, manufacturing, marketing, financial and managerial resources than we do. Acquisitions of competing companies by large pharmaceutical companies or other companies could enhance the financial, marketing and other resources available to these competitors.

An important factor in our ability to compete will be the timing of market introduction of competitive products. Accordingly, the relative speed with which we and competing companies can in-license and develop products, complete the clinical testing and approval processes, and supply commercial quantities of the products to the market will be an important element of market success. Other significant competitive factors include:

●	product safety and efficacy;

●	timing and scope of regulatory approval;

●	product availability;
●	marketing and sales capabilities;

●	reimbursement coverage from insurance companies and others;

●	the extent of clinical benefits and side effects of our products relative to their cost;

●

price;

●	patent protection; and

●	capabilities of partners with whom we may collaborate.

There can be no assurance that we can develop products that are more effective or achieve greater market acceptance than competitive products, or that our competitors will not succeed in developing products and technologies that are more effective than ours or that render our products and technologies less competitive or obsolete.

If the healthcare system or reimbursement policies change, the prices of ours potential products may be lower than expected and our potential sales may decline.

The levels of revenues and profitability of bio-pharmaceutical companies like us may be affected by the continuing efforts of government and third party payers to contain or reduce the costs of healthcare through various means. For example, in the U.S. there have been, and we expect that there will continue to be, a number of federal and state proposals to implement similar governmental control. While we cannot predict whether any legislative or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our business, financial condition and profitability. In addition, in the U.S. and elsewhere, sales of therapeutic and other pharmaceutical products depend in part on the availability of reimbursement to the consumer from third party payers, such as government and private insurance plans. Third party payers are increasingly challenging the prices charged for medical products and services. Moreover, in certain foreign markets, pricing or profitability of therapeutic and other pharmaceutical products is subject to governmental control. We cannot assure you that any of our potential products will be considered cost effective or that reimbursement to the consumer will be available or will be sufficient to allow us to sell our potential products on a competitive and profitable basis.

Government regulation of our business is extensive and drug approvals are uncertain, expensive and time-consuming.

The research, development, pre-clinical and clinical trials of any intended products, including ones we may seek to partner with licensees or collaborators, are subject to an extensive regulatory approval process by the FDA and other regulatory agencies in the U.S. and abroad, such as in the European Union and Japan. The process of obtaining FDA and other required regulatory approvals for drug and biological products, including required pre-clinical and clinical testing, is lengthy, expensive and uncertain. Even if regulatory clearance is obtained, a marketed product is subject to continual review, and later discovery of previously unknown adverse events or failure to comply with the applicable manufacturing, packaging, distribution and marketing requirements may result in restrictions on a product’s marketing or withdrawal of the product from the market as well as possible criminal and civil sanctions.

Currently we have only one clinical development candidate, KRN 5500. We are looking to find a partner with the interest and resources to undertake and support the cost for the Phase 2b program. The Merger Agreement provides that we may, for a period of time following the completion of the Merger, continue to seek a partner for KRN 5500. A delay or setback in the partnering efforts with respect to KRN5500 would have a material adverse effect on our ability to realize any benefits from the drug candidate.

Our business, as well as that of our manufacturers, is strictly regulated by the federal and other governments, and there can be no assurance that either we or our manufacturers will be able to maintain full compliance with all applicable regulations.

The clinical testing, manufacture and sale of pharmaceutical products and medical devices, including ones we currently or may in the future sell independently or through partnerships with licensees or collaborators, are subject to extensive regulation by numerous governmental authorities in the U.S., principally the FDA, and corresponding foreign regulatory agencies. Changes in existing regulations or adoption of new regulations or policies could prevent us from obtaining, or affect the timing of, future regulatory approvals or clearances. We cannot assure you that we or our development partners will be able to obtain necessary regulatory clearances or approvals on a timely basis, or at all, or that we will not be required to incur significant costs in obtaining or maintaining such regulatory approvals. Delays in receipt of, or failure to receive, such approvals or clearances, the loss of previously obtained approvals or clearances or the failure to comply with existing or future regulatory requirements could have a material adverse effect on our business, financial condition and results of operations.

Any enforcement action by regulatory authorities with respect to past or future regulatory noncompliance could have a material adverse effect on our business, financial condition and results of operations. Noncompliance with applicable requirements can result in fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, refusal to authorize the marketing of new products and criminal prosecution.

Our products that are approved for market are still subject to continuing regulation. Any proposed products that may in the future be approved for market will also be subject to continued regulation. We and our collaborative partners, including our manufacturers, will continuously be subject to routine inspection by the FDA and will have to comply with the host of regulatory requirements that usually apply to pharmaceutical products marketed in the U.S., including labeling regulations, the FDA’s Good Manufacturing Practice requirements, Good Clinical Practices and Good Laboratory Practices, review and response to adverse drug experience reports and regulation governing marketing and promotion of approved drug products. Our failure to comply with applicable regulatory requirements could result in enforcement action or sanctions by the FDA and other governmental agencies, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our products, delay, suspension or withdrawal of approvals, license revocation, product seizures or recalls, operational restrictions or criminal prosecutions, any of which could have a material adverse effect on our business, financial condition and results of operations.

Our business exposes us to potential liability for personal injury and product liability claims that could affect our financial condition.

Our business involves the testing of new drugs on human volunteers and the use of our marketed products by patients. This exposes us to the risk of liability for personal injury or death to patients resulting from, among other things, possible unforeseen adverse side effects or improper administration of a drug. Many study volunteers and participants are already seriously ill and are at risk of further illness or death. If we are required to pay damages or incur defense costs in connection with any personal injury claim that is outside the scope of indemnification agreements that we have with clients and collaborative partners, if any indemnification agreement is not performed in accordance with its terms or if our liability exceeds the amount of any applicable indemnification limits or available insurance coverage, we could be materially and adversely affected both financially and reputationally. Any such claims may also prevent us from being able to obtain adequate insurance for these risks at reasonable rates in the future.

If we or our contract sales force market our products in a manner that violates healthcare fraud and abuse laws, or if we violate false claims laws or fail to comply with our reporting and payment obligations under the Medicaid rebate program or other governmental pricing programs, we may be subject to civil or criminal penalties or additional reimbursement requirements and sanctions, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

In addition to FDA restrictions on the marketing of pharmaceutical products, several other types of state and federal healthcare fraud and abuse laws have been applied in recent years to restrict certain marketing practices in the pharmaceutical industry. These laws include anti-kickback statutes and false claims statutes. Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of these laws.

The federal healthcare program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federally financed healthcare program. Although there are several statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly and practices that involve remuneration intended to induce prescribing, purchasing or recommending such healthcare items or services may be subject to scrutiny if they do not qualify for an exemption or safe harbor.

Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, or causing to be made, a false statement in order to have a claim paid. Pharmaceutical and other healthcare companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, such as providing free trips, free goods, sham consulting fees and grants and other monetary benefits to prescribers, reporting inflated average wholesale prices to pricing services that were then used by federal programs to set reimbursement rates and engaging in off-label promotion that caused claims to be submitted to Medicaid for non-covered, off-label uses. Such activities have been alleged to cause the resulting claims for reimbursement to be “false” claims. Most states also have statutes or regulations similar to the federal anti-kickback and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer.

We have initiated participation in the federal Medicaid Rebate Program established by the Omnibus Budget Reconciliation Act of 1990, as well as several state supplemental rebate programs, in connection with the sale of Soltamox and would anticipate participating in these programs with respect to future pharmaceutical products, including Oravig. Though to date invoices for rebates have not been material, under the Medicaid rebate program, we anticipate paying a rebate to each state Medicaid program for our products that are reimbursed by those programs. Federal law requires that any company that participates in the Medicaid rebate program extend comparable discounts to qualified purchasers under the Public Health Service Act pharmaceutical pricing program, which requires us to sell our products to certain customers at prices lower than we otherwise might be able to charge. If products are made available to authorized users of the Federal Supply Schedule, additional pricing laws and requirements apply. Pharmaceutical companies have been prosecuted under federal and state false claims laws in connection with allegedly inaccurate information submitted to the Medicaid Rebate Program or for knowingly submitting or using allegedly inaccurate pricing information in connection with federal pricing and discount programs.

Pricing and rebate calculations vary among products and programs. The calculations are complex and may be subject to interpretation by us or our contractors, governmental or regulatory agencies and the courts. Our methodologies for calculating these prices could be challenged under false claims laws or other laws. We or our contractors could make a mistake in calculating reported prices and required discounts, revisions to those prices and discounts, or determining whether a revision is necessary, which could result in retroactive rebates (and interest, if any). Governmental agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid. If this were to occur, we could face, in addition to prosecution under federal and state false claims laws, substantial liability and civil monetary penalties, exclusion of our products from reimbursement under government programs, criminal fines or imprisonment or the entry into a Corporate Integrity Agreement, Deferred Prosecution Agreement, or similar arrangement.

In addition, federal legislation now imposes additional requirements. For example, as part of the Patient Protection and Affordable Care Act, a federal physician payment disclosure provision based on the Physician Payments Sunshine Act was enacted, which requires pharmaceutical manufacturers to report certain gifts and payments to physicians beginning in 2013. These reports will then be placed on a public database. Failure to so report could subject companies to significant financial penalties.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations could be costly. It is possible that governmental authorities will conclude that ours business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations, including activities conducted by our sales team in the promotion of our licensed or co-promoted products, are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Risks Relating to Our Common Stock

If we issue additional shares in the future, it will result in the dilution of our existing shareholders.

Our articles of incorporation authorize the issuance of up to (i) 75,000,000 shares of common stock with a par value of $0.01 per share, of which 19,755,595 were issued and outstanding at September 30, 2015, and (ii) 1,000,000 shares of preferred stock, par value $0.01 per share, of which 468 shares of Series A preferred stock, 50 shares of Series B-2 preferred stock and 117 shares of Series C-1 preferred stock were issued and outstanding at December 31, 2014. Our Board of Directors may choose to issue some or all of the remaining authorized shares to acquire one or more products and to fund our overhead and general operating requirements. The issuance of any such shares may reduce the book value per share and may contribute to a reduction in the market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will reduce the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our corporation.

Our stock price could be volatile and our trading volume may fluctuate substantially.

The price of our common stock has been and may in the future continue to be extremely volatile. Many factors could have a significant impact on the future price of our common stock, including:

●	our inability to raise additional capital to fund our operations, whether through the issuance of equity securities or debt;

●	our failure to successfully commercialize products we license for commercial sale;

●	our failure to successfully advance the development of our programs or otherwise implement our business objectives;

●	changes in our intellectual property portfolio or developments or disputes concerning the proprietary rights of our product candidates;

●	our ability to successfully enter into and maintain manufacturing relationships for our products;

●	progress or future results of partnered assets;

●	progress of regulatory approval of our partnered products and compliance with ongoing regulatory requirements;

●	market acceptance of our products;

●	technological innovations, new commercial products and clinical activities by us, our partners or our competitors;

●	changes in government regulations;

●	issuance of new or changed securities analysts’ reports or recommendations;

●	general economic conditions and other external factors;

●	actual or anticipated fluctuations in our quarterly financial and operating results;

●	the degree of trading liquidity in our common stock; and

●	our ability to regain compliance with the minimum bid price (and our ability to maintain compliance with other minimum standards) required for remaining listed on the NASDAQ Capital Market.

A significant number of shares of our common stock are issuable pursuant to outstanding shares of convertible preferred stock, options and warrants, and we expect to sell additional shares of our common stock in the future. Sales of these shares will dilute the interests of other security holders and may depress the price of our common stock.

As of September 30, 2015, we had 19,755,595 shares of common stock outstanding. As of December 31, 2014, there were 37,440 shares of common stock issuable upon the conversion of outstanding shares of Series A preferred stock, 20,408 shares of common stock issuable upon the conversion of outstanding shares of Series B-2 preferred stock, 105,405 shares of common stock issuable upon the conversion of outstanding shares of Series C-1 preferred stock, 11,482,525 shares of common stock issuable upon the exercise of outstanding warrants with a weighted average exercise price of $2.77 per share, 2,710,667 shares of common stock issuable upon the exercise of outstanding options with a weighted average exercise price of $2.06 per share, 3,031,759 shares of common stock reserved for future grants and awards under our equity incentive plans and 178,330 shares of common stock reserved for issuance to former Oncogenerix, Inc. stockholders, based upon our achievement of certain revenue or market capitalization milestones during the five year period ending January 2017. The conversion price of the Series B-2 preferred stock is subject to full-ratchet antidilution protection if we sell any common stock at a price lower than the then-conversion price of the Series B-2 (currently, $2.45 per share). Similarly, the conversion price of the Series C-1 preferred stock is subject to full-ratchet anti-dilution protection if we sell any common stock at a price lower than the then-conversion price of the Series C-1 (currently, $1.11 per share).

In addition to the foregoing, we may issue additional common stock, or other securities convertible into common stock, from time to time to finance our operations. We may also issue additional shares in connection with additional stock options or restricted stock granted to our employees, officers, directors and consultants under our equity compensation plans. The issuance of the shares of common stock underlying these instruments, or perception that issuance may occur, will have a dilutive impact on other stockholders and could have a material negative effect on the market price of our common stock.

If we fail to satisfy applicable listing standards, including maintenance of at least $2.5 million of stockholders’ equity and regaining compliance with the $1.00 minimum bid price requirement, our common stock may be delisted from The NASDAQ Capital Market.

As previously disclosed, on November 17, 2014, we received a notification letter from the Listing Qualifications Department of The NASDAQ Stock Market indicating that we were not in compliance with the $1.00 minimum bid requirement. In accordance with Marketplace Rule 5550(a)(2), we have been granted extensions, and pursuant to the current extension, the Company has until November 16, 2015, to regain compliance with the minimum $1.00 price per share requirement. To regain compliance, any time before November 16, 2015, the bid price of our common stock must close at or above $1.00 per share for a minimum of 10 consecutive business days. The NASDAQ Listing Qualifications Staff’s determination to grant the additional 180 day compliance period was based on the Company’s meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the NASDAQ Capital Market, with the exception of the minimum bid price requirement, and our written notice of our intention to cure the deficiency during this second compliance period by effecting a reverse stock split, if necessary. If we do not cure the deficiency during this second compliance period, NASDAQ will provide the Company with written notification that our common stock will be delisted. Upon such notice, we may appeal the NASDAQ Staff’s determination to a NASDAQ Listing Qualifications Panel pursuant to the procedures set forth in the applicable NASDAQ Marketplace Rules. There can be no assurance that, if we appeal any such determination of the NASDAQ Staff, such appeal would be successful.

There can be no assurances that we will regain compliance with NASDAQ’s minimum bid requirement or, even if we do regain compliance, that we will be able to maintain our NASDAQ listing. If our common stock were delisted from NASDAQ, among other things, it would likely lead to a number of negative implications, including an adverse effect on the price of our common stock, reduced liquidity in our common stock, the loss of federal preemption of state securities laws and greater difficulty in obtaining financing. In the event of a de-listing, we would expect to take actions to restore our compliance with NASDAQ’s 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 NASDAQ minimum bid price requirement or prevent future non-compliance with NASDAQ’s listing requirements.

We have never paid cash dividends and do not intend to do so.

We have never declared or paid cash dividends on our common stock. We currently plan to retain any earnings to finance the growth of our business rather than to pay cash dividends. Payments of any cash dividends in the future will depend on our financial condition, results of operations and capital requirements, as well as other factors deemed relevant by our board of directors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

The exhibits required to be filed as a part of this report are listed in the Exhibit Index.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 2, 2015.

	DARA BIOSCIENCES, INC.

Date: November 2, 2015	By:	/s/ Christopher G. Clement
		Christopher G. Clement Chief Executive Officer (Principal Executive Officer)

Date: November 2, 2015	By:	/s/ David L. Tousley
		David L. Tousley Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

EXHIBIT INDEX

3.1	Restated Certificate of Incorporation of DARA BioSciences, Inc., as certified by the Secretary of State of the State of Delaware on June 3, 2014.	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed on August 12, 2014

3.2	Amended and Restated By-Laws of DARA BioSciences, Inc.	Incorporated by reference to the Company’s Current Report on Form 8-K filed on February 12, 2008

31.1	Certification of Christopher G. Clement. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 2, 2015

31.2	Certification of David L. Tousley pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 2, 2015

32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated November 2, 2015

101.INS	XBRL Instance Document****

101.SCH	XBRL Taxonomy Extension Schema****

101.CAL	XBRL Extension Calculation Linkbase****

101.DEF	XBRL Definition Linkbase****

101.LAB	XBRL Taxonomy Extension Label Linkbase****

101.PRE	XBRL Taxonomy Extension Presentation Linkbase****

****	Users of this interactive data file are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of The Securities Act of 1933, is deemed not filed for purposes of Section 18 of The Securities Exchange Act of 1934, and otherwise is not subject of liability under these sections.

Midatech Pharma US Inc. - FORM 10-Q - November 2, 2015

Attached files

Midatech Pharma US Inc. Reports