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Moleculin Biotech, Inc. - Quarter Report: 2022 September (Form 10-Q)

mbrx20220930_10q.htm
 

 Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended September 30, 2022

or

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

For the transition period from                  to                 

Commission File Number: 001-37758

 

moleculinnewlogoresized.jpg

MOLECULIN BIOTECH, INC.

(Exact name of registrant as specified in its charter)

Delaware

 

2834

 

47-4671997

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(IRS Employer

Identification Number)

 

5300 Memorial Drive, Suite 950

 

Houston, TX

77007

(Address of principal executive offices)

(Zip Code)

 

713-300-5160

(Registrant’s telephone number, including area code)

 

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

 

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

 

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

 

Large accelerated filer ☐

 

Smaller reporting company ☒

Non-accelerated filer ☒

Emerging growth company ☐ 

Accelerated filer ☐

  

 

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

 

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

 

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

Title of each class

Trading Symbol (s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

MBRX

The NASDAQ Stock Market LLC

 

The registrant had 28,627,827 shares of common stock outstanding at November 3, 2022.

 

 

 
 

Moleculin Biotech, Inc.

 

Table of Contents

 

   

Page

 

PART I – FINANCIAL INFORMATION

3

     

Item 1.

Condensed Consolidated Financial Statements (unaudited)

3

 

Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021

3

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months ended September 30, 2022 and 2021 (unaudited)

4

 

Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2022 and 2021 (unaudited)

5

 

Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)

6

 

Notes to Condensed Consolidated Financial Statements (unaudited)

7

     

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

13

     

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

20

     

Item 4.

Controls and Procedures

20

     
 

PART II – OTHER INFORMATION

21

     

Item 1.

Legal Proceedings

21

     

Item 1A.

Risk Factors

21

     

Item 2.

Unregistered sales of Equity Securities and Uses of Proceeds

21

     

Item 3.

Defaults Upon Senior Securities

21

     

Item 4.

Mine Safety Disclosures

21

     

Item 5.

Other Information

21

     

Item 6.

Exhibits

22

     
 

Signatures

23

 

 

PART 1 FINANCIAL INFORMATION

 

Item 1. Financial Statements

Moleculin Biotech, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except for share and per share data)

(unaudited)

 

 
  

September 30,

  

December 31,

 
  

2022

  

2021

 

Assets

        

Current assets:

        

Cash and cash equivalents

 $50,392  $70,903 

Prepaid expenses and other current assets

  3,101   1,594 

Total current assets

  53,493   72,497 

Furniture and equipment, net

  306   338 

Intangible assets

  11,148   11,148 

Operating lease right-of-use asset

  425   107 

Total assets

 $65,372  $84,090 
         

Liabilities and Stockholders’ Equity

        

Current liabilities:

        

Accounts payable

 $3,568  $1,364 

Accrued expenses and other current liabilities

  2,794   2,258 

Total current liabilities

  6,362   3,622 

Operating lease liability - long-term, net of current portion

  365   63 

Warrant liability - long-term

  228   1,412 

Total liabilities

  6,955   5,097 

Commitments and contingencies (Note 7)

          

Stockholders' equity

        

Preferred stock, $0.001 par value; 5,000,000 shares authorized, no shares issued or outstanding

      

Common stock, $0.001 par value; 100,000,000 shares authorized; 28,627,827 and 28,578,338 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

  29   29 

Additional paid-in capital

  153,450   151,733 

Accumulated other comprehensive income

  3   41 

Accumulated deficit

  (95,065)  (72,810)

Total stockholders’ equity

  58,417   78,993 

Total liabilities and stockholders’ equity

 $65,372  $84,090 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

Moleculin Biotech, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(unaudited)

 

 

  

Three Months Ended September 30,

  

Nine Months Ended September 30,

 
  

2022

  

2021

  

2022

  

2021

 

Revenues

 $  $  $  $ 
                 

Operating expenses:

                

Research and development

  5,965   4,095   14,790   11,239 

General and administrative

  3,087   2,021   8,704   6,394 

Depreciation and amortization

  32   41   98   130 

Total operating expenses

  9,084   6,157   23,592   17,763 

Loss from operations

  (9,084)  (6,157)  (23,592)  (17,763)

Other income:

                

Gain from change in fair value of warrant liability

  421   1,678   1,184   4,428 

Other income, net

  19   13   39   30 

Interest income, net

  33   87   114   236 

Net loss

 $(8,611) $(4,379) $(22,255) $(13,069)
                 

Net loss per common share - basic and diluted

 $(0.30) $(0.15) $(0.78) $(0.50)

Weighted average common shares outstanding, basic and diluted

  28,627,610   28,573,476   28,596,501   26,302,638 
                 

Net Loss

 $(8,611) $(4,379) $(22,255) $(13,069)

Other comprehensive loss:

                

Foreign currency translation

  (19)  (16)  (38)  (26)

Comprehensive loss

 $(8,630) $(4,395) $(22,293) $(13,095)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

Moleculin Biotech, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 
  

Nine Months Ended September 30,

 
  

2022

  

2021

 

Cash flows from operating activities:

        

Net loss

 $(22,255) $(13,069)

Adjustments to reconcile net loss to net cash used in operating activities:

        

Depreciation and amortization

  98   130 

Stock-based compensation

  1,740   1,817 

Change in fair value of warrant liability

  (1,184)  (4,428)

Operating lease, net

  96   102 

Changes in operating assets and liabilities:

        

Prepaid expenses and other current assets

  (1,507)  133 

Accounts payable

  2,204   261 

Accrued expenses and other current liabilities

  425   361 

Net cash used in operating activities

  (20,383)  (14,693)

Cash flows from investing activities:

        

Purchase of fixed assets

  (67)   

Net cash used in investing activities

  (67)   

Cash flows from financing activities:

        

Proceeds from exercise of warrants

     63 

Payment of tax liability for vested restricted stock units

  (23)  (24)

Proceeds from sale of common stock, net of issuance costs

     74,685 

Net cash (used in) provided by financing activities

  (23)  74,724 

Effect of exchange rate changes on cash and cash equivalents

  (38)  (26)

Net change in cash and cash equivalents

  (20,511)  60,005 

Cash and cash equivalents, at beginning of period

  70,903   15,173 

Cash and cash equivalents, at end of period

 $50,392  $75,178 
         

  

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

Moleculin Biotech, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except for shares)

(unaudited)

 

 
  

Nine Months Ended September 30, 2022

 
  

Common Stock

  

Common Stock Subscribed

        Accumulated        
  

Shares

  

Par Value Amount

  

Shares

  

Par Value Amount

  

Additional Paid-In Capital

  

Accumulated Deficit

  

Other Comprehensive Income (Loss)

  

Subscription Receivable

  

Stockholder's Equity

 

Balance, December 31, 2021

  28,578,338  $29     $  $151,733  $(72,810) $41  $  $78,993 

Stock-based compensation

              527            527 

Consolidated net loss

                 (6,867)        (6,867)

Cumulative translation adjustment

                    12      12 

Balance, March 31, 2022

  28,578,338  $29     $  $152,260  $(79,677) $53  $  $72,665 

Common stock issued upon vesting of restricted stock units (net of shares withheld for payment of tax liability)

  28,368            (12)           (12)

Stock-based compensation

              514            514 

Consolidated net loss

                 (6,777)        (6,777)

Cumulative translation adjustment

                    (31)     (31)

Balance, June 30, 2022

  28,606,706  $29     $  $152,762  $(86,454) $22  $  $66,359 

Common stock issued upon vesting of restricted stock units (net of shares withheld for payment of tax liability)

  21,121            (11)           (11)

Stock-based compensation

              699            699 

Consolidated net loss

                 (8,611)        (8,611)

Cumulative translation adjustment

                    (19)     (19)

Balance, September 30, 2022

  28,627,827  $29     $  $153,450  $(95,065) $3  $  $58,417 

 

  

Nine Months Ended September 30, 2021

 
  

Common Stock

  

Common Stock Subscribed

        

Accumulated

        
  

Shares

  

Par Value Amount

  

Shares

  

Par Value Amount

  

Additional Paid-In Capital

  

Accumulated Deficit

  

Other Comprehensive Income (Loss)

  

Subscription Receivable

  

Stockholders' Equity

 
                                     

Balance, December 31, 2020

  11,536,720  $69   26,966  $  $74,671  $(56,916) $65  $(129) $17,760 

Issuance of common stock, net of issuance costs of $6,159

  16,883,420   18   (26,966)     74,537         129   74,684 

Reverse stock split

  14,285   (60)        60            - 

Warrants exercised

  10,000   1         115            116 

Stock-based compensation

              405            405 

Consolidated net loss

                 (4,445)        (4,445)

Cumulative translation adjustment

                    (4)     (4)

Balance, March 31, 2021

  28,444,425  $28     $  $149,788  $(61,361) $61  $  $88,516 

Issuance of common stock in connection with equity purchase agreement, net of issuance costs of $403

  107,788   1                     1 

Subscription of common stock in connection with Consulting Agreement

        2,500      10         (10)   

Stock-based compensation

              433            433 

Consolidated net loss

                 (4,244)        (4,244)

Cumulative translation adjustment

                    (6)     (6)

Balance, June 30, 2021

  28,552,213  $29   2,500  $  $150,231  $(65,605) $55  $(10) $84,700 

Issuance of common stock in connection with Consulting Agreement

  3,750      (2,500)     (10)        10    

Common stock issued upon vesting of restricted stock units (net of shares withheld for payment of tax liability)

  21,125            (23)           (23)

Stock-based compensation

              977            977 

Consolidated net loss

                 (4,379)        (4,379)

Cumulative translation adjustment

                    (16)     (16)

Balance, September 30, 2021

  28,577,088  $29     $  $151,175  $(69,984) $39  $  $81,259 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

Moleculin Biotech, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

 

1. Nature of Business

 

The terms "MBI" or "the Company", "we", "our", and "us" are used herein to refer to Moleculin Biotech, Inc. MBI is a clinical-stage pharmaceutical company, organized as a Delaware corporation in July 2015, which focuses on the treatment of highly resistant cancers and viruses through the development of its drug candidates, based substantially on discoveries licensed from The University of Texas System on behalf of the MD Anderson Cancer Center, which the Company refers to as MD Anderson. MBI formed Moleculin Australia Pty. Ltd. (MAPL), a wholly owned subsidiary in June 2018, to perform certain preclinical development in Australia. This has enabled the Company to realize the benefits of certain research and development tax credits in Australia. In July 2021, MBI formed Moleculin Amsterdam B.V., a wholly owned subsidiary, primarily to act as its legal representative for clinical trials in Europe. 

 

In 2019, the Company sublicensed essentially all of the rights to its technologies in over 25 countries in Europe and Asia to WPD Pharmaceuticals Sp.z o.o. (WPD or WPD Pharmaceuticals) in exchange for a minimum amount of externally funded collaboration on development in Europe over a certain amount of time. This sublicense was last amended in December 2021 and extended the assignment date in August 2022. Also in 2019, the Company sublicensed its technologies to Animal Life Sciences, Inc. (ALI), to enable research and commercialization for non-human use and share development data. As part of this agreement, ALI issued to the Company a 10% interest in ALI.

 

The Company has three core technologies, based substantially on discoveries made at and licensed from MD Anderson. Having six drug candidates, three of which have now shown human activity in clinical trials, the Company believes that success in its lead program, Annamycin, has allowed and will allow further pipeline expansion into multiple high-value oncology indications.

 

The Company's core technologies consist of the following: a) Annamycin; b) WP1066 Portfolio; and c) WP1122 Portfolio. The Company has six drug candidates, representing all three core technologies, and three of those have shown human activity in clinical trials. In the US and Europe, the Company has conducted, is currently conducting, or plans in the near term to conduct clinical trials for its drug candidates - Annamycin, WP1066, WP1220 (which is part of the WP1066 Portfolio), and WP1122. At the beginning of 2022, all trials are or were in the Phase 1 portion, except the WP1220 trial, which was a proof-of-concept trial. Recently, one of the Annamycin trials moved into its Phase 2 portion of the trial. In 2021 and 2022, there were also multiple "right-to-try" (or their foreign equivalent) uses of Annamycin and WP1066. The Company plans to conduct additional trials and is in the process of obtaining the appropriate regulatory approval and beginning those trials. The Company utilizes its own internal resources and funds to conduct some of these trials and also has trials being conducted via physician-sponsored trials which utilize primarily external funds, usually grant funds, which are not presented in the financial statements.

 

The Company does not have manufacturing facilities and all manufacturing activities are contracted out to third parties. Additionally, the Company does not have a sales organization. The Company’s overall strategy is to seek potential outlicensing opportunities with development/commercialization strategic partners who are better suited for the marketing, sales and distribution of its drugs, if approved.

 

 

2. Basis of presentation, principles of consolidation, significant accounting policies and liquidity

 

Reverse Stock Split - On January 29, 2021, the Company filed a Certificate of Amendment to its amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to effect a reverse stock split of all the issued and outstanding shares of the Company's common stock at a ratio of 1 for 6. The accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements give retroactive effect to the reverse stock split for all periods presented. Certain amounts in the financial statements, the notes thereto, and elsewhere in the Form 10-Q  may be slightly different than previously reported due to rounding up of fractional shares as a result of the reverse stock split.

 

Basis of Presentation – Unaudited Condensed Consolidated Financial Information - The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP) for financial information, and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (SEC) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited condensed consolidated financial statements furnished reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company as of  December 31, 2021 and for the year then ended, including the notes thereto contained in the Form 10-K filed with the SEC on March 24, 2022.

 

Principles of Consolidation - The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP. The Company views its operations and manages its business in one operating segment. All long-lived assets of the Company reside in the U.S.

 

Significant Accounting Policies - The Company's significant accounting policies are described in Note 2, Basis of Presentation, principles of consolidation and significant accounting policies, to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to the significant accounting policies during the nine months ended September 30, 2022.

 

Use of Estimates - The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of financial statements. Estimates are used in the following areas, among others: fair value estimates on intangible assets, warrants, and stock-based compensation expense, as well as accrued expenses and taxes. 

 

7

 

Liquidity and Financial Condition - The Company is an early stage company and has not generated any revenues to date. As such, the Company is subject to all of the risks associated with early stage companies. Since inception, the Company has incurred losses and negative cash flows from operating activities. For the nine months ended September 30, 2022 and 2021, the Company incurred net losses of $22.3 million and $13.1 million, respectively, and had net cash flows used in operating activities of $20.4 million and $14.7 million, respectively. At September 30, 2022, the Company had an accumulated deficit of $95.1 million and cash and cash equivalents of $50.4 million. The Company expects its cash on hand as of September 30, 2022 will be sufficient to fund the Company's operations beyond the near term. Such projections are subject to changes in the Company’s internally funded preclinical and clinical activities, including unplanned preclinical and clinical activity. The Company does not expect to experience positive cash flows from operating activities in the near future and anticipates incurring operating losses for the next few years as it supports the development of its core technologies to the point of generating revenue, most likely via outlicensing, and continues to invest in research and development for additional applications of the Company's core technologies and potentially increase its pipeline of drug candidates. If the Company needs to raise additional capital in order to continue to execute its business plan, there is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the Company. A failure to raise sufficient capital could adversely impact the Company's ability to achieve its intended business objectives and meet its financial obligations as they become due and payable.

 

Cash and Cash Equivalents - Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company maintains cash accounts principally at one financial institution in the U.S., which at times, may exceed the Federal Deposit Insurance Corporation’s limit. The Company has not experienced any losses from cash balances in excess of the insurance limit. The Company’s management does not believe the Company is exposed to significant credit risk at this time due to the financial condition of the financial institution where its cash is held.

 

Prepaid Expenses and Other Current Assets - Prepaid expenses and other current assets consist of the following (table in thousands): 

 

  

September 30, 2022

  

December 31, 2021

 

Prepaid sponsored research

 $1,346  $474 

Prepaid insurance

  938   589 

Vendor prepayments and deposits

  807   486 

Non-trade receivables

  6   23 

Related party receivables

  4   22 

Total prepaid expenses and other current assets

 $3,101  $1,594 

 

Fair Value of Financial Instruments - The Company's financial instruments consist primarily of non-trade receivables, accounts payable, accrued expenses and its warrant liability. The carrying amount of non-trade receivables, accounts payable, and accrued expenses approximates their fair value because of the short-term maturity of such.

 

The Company has categorized its assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).

 

Assets and liabilities recorded in the balance sheets at fair value are categorized based on a hierarchy of inputs as follows:

 

Level 1 – Unadjusted quoted prices in active markets of identical assets or liabilities.

Level 2 – Quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 – Unobservable inputs for the asset or liability.

 

The Company’s financial assets and liabilities recorded at fair value on a recurring basis include the fair value of warrant liability discussed in Note 4.

 

The following table provides liabilities reported at fair value and measured on a recurring basis at September 30, 2022 and December 31, 2021 (table in thousands): 

 

Description

 

Fair Value

  

Level 1

  

Level 2

  

Level 3

 

Fair value of warrant liability as of September 30, 2022:

 $228  $  $  $228 

Fair value of warrant liability as of December 31, 2021:

 $1,412  $  $  $1,412 

 

The table below of Level 3 liabilities (table in thousands) begins with the valuation as of the beginning of the third quarter and then is adjusted for changes in fair value that occurred during the third quarter. The ending balance of the Level 3 financial instrument presented above represents the Company's best estimates and may not be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. 

 

Three Months Ended September 30, 2022

 

Warrant Liability Long-Term

  

Warrant Liability Total

 

Balance, June 30, 2022

 $649  $649 

Change in fair value - net

  (421)  (421)

Balance, September 30, 2022

 $228  $228 

 

The table below of Level 3 liabilities (table in thousands) begins with the valuation as of December 31, 2021 and then is adjusted for changes in fair value that occurred during the nine months ended September 30, 2022. The ending balance of the Level 3 financial instrument presented above represents the Company's best estimates and may not be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. 

 

Nine Months Ended September 30, 2022

 

Warrant Liability Long-Term

  

Warrant Liability Total

 

Balance, December 31, 2021

 $1,412  $1,412 

Change in fair value - net

  (1,184)  (1,184)

Balance, September 30, 2022

 $228  $228 

 

8

 

Loss Per Common Share - Basic net loss per common share is computed by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding during the period. For purposes of this calculation, options to purchase common stock, restricted stock units subject to vesting and warrants to purchase common stock are considered to be common stock equivalents. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be antidilutive. For the three months ended September 30, 2022 and 2021, approximately 6.0 million and 4.5 million, respectively, of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their antidilutive effect. For the nine months ended September 30, 2022 and 2021 , approximately 5.2 million and 4.1 million, respectively, of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their antidilutive effect.

 

Subsequent Events - The Company’s management reviewed all material events through the date of these unaudited condensed consolidated financial statements. See Note 8 - Subsequent Events. 

 

Recent Accounting Pronouncements

 

In August 2020, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) (ASU 2020-06). ASU 2020-06 simplifies the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of both liabilities and equity, including convertible instruments and contracts in an entity's own equity. The guidance was effective for the Company beginning on January 1, 2022 and prescribes different transition methods for the various provisions. The Company's adoption of this pronouncement did not have a material impact on the Company's condensed consolidated financial statements.

 

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 clarifies certain aspects of the current guidance to promote consistency among reporting of an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this update were effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company's adoption of this pronouncement effective January 1, 2022 did not have a material impact on the Company's condensed consolidated financial statements.

 

The Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying condensed consolidated financial statements.

 

3. Accrued Expenses and Other Current Liabilities

 

Accrued expenses and other current liabilities consist of the following components (table in thousands): 

  

  

September 30, 2022

  

December 31, 2021

 

Accrued research and development

 $1,336  $1,005 

Accrued legal, regulatory, professional and other

  803   442 

Accrued payroll and bonuses

  433   606 

Operating lease liability - current

  112   96 

Accrued liabilities due to related party

  110   109 

Total accrued expenses and other current liabilities

 $2,794  $2,258 

 

Additionally, accounts payable includes $72,000 and $48,000 as of September 30, 2022 and December 31, 2021, respectively, for related party payables.

 

4. Warrants

 

Liability Classified Warrants

 

The Company uses the Black-Scholes option pricing model to determine the fair value of its warrants at the date of issue and outstanding at each reporting date. The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds linearly interpolated to obtain a maturity period commensurate with the term of the warrants. Estimated volatility is a measure of the amount by which the Company's stock price is expected to fluctuate each year during the expected life of the warrants. Only the volatility of the Company's own stock is used in the Black-Scholes option pricing model. 

 

The assumptions used in determining the fair value of the liability classified warrants are as follows:

 

  

September 30, 2022

  

December 31, 2021

 

Risk-free interest rate

 

3.6% to 4.3%

  

0.1% to 1.1%

 

Volatility

 

54.4% to 93.4%

  

71.8% to 114.5%

 

Expected life (years)

 

0.4 to 2.9

  

0.1 to 3.6

 

Dividend yield

 

—%

  

—%

 

 

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A summary of the Company's liability classified warrant activity during the nine months ended September 30, 2022 and related information follows: 

 

  

Number of Shares

  

Range of Warrant Exercise

  

Weighted Average

  

Weighted Average Remaining Contractual

 
  

Under Warrant

  

Price per Share

  

Exercise Price

  

Life (Years)

 

Balance at January 1, 2022

  2,723,645  $6.30  $16.80  $9.46   2.6 

Expired

  (67,349)  8.10   9.00       

Balance at September 30, 2022

  2,656,296  $6.30  $16.80  $9.49   1.9 

Exercisable at September 30, 2022

  2,656,296  $6.30  $16.80  $9.49   1.9 

 

For a summary of the changes in fair value associated with the Company's warrant liability for the nine months ended September 30, 2022, see Note 2 - Basis of presentation, principles of consolidation and significant accounting policies - Fair Value of Financial Instruments.

 

Equity Classified Warrants

 

In September 2022, the Company entered into a portfolio advisory agreement with a related party entity, associated with Dr. Waldemar Priebe, and in connection with the agreement, the Company granted equity-classified warrants to purchase 250,000 shares of common stock with a ten-year term and an exercise price of $1.24. The September 2022 warrants vest as follows: (a) 50% vests upon execution of the agreement, provided the advisor does not terminate the agreement prior to the first anniversary of the agreement; and (b) 50% vests 60 days after the end of the one-year term, subject to the Company's Board of Directors determining that the services provided have been adequately performed. In June 2022, the Company granted equity-classified warrants to purchase 50,000 shares of common stock with a ten-year term and an exercise price of $1.49 vesting annually over four years while services are being performed. 

 

In August 2021, the Company entered into a portfolio development advisory agreement with a related party entity, associated with Dr. Waldemar Priebe, and in connection with the agreement, the Company granted equity-classified warrants to purchase 250,000 shares of common stock with a ten-year term and an exercise price of $3.08. The August 2021 warrants vest as follows: (a) 50% vests upon execution of the agreement, provided the advisor does not terminate the agreement prior to the first anniversary of the agreement; and (b) 50% vests 60 days after the end of the one-year term, subject to the Company's Board of Directors determining that the services provided have been adequately performed. The Company's Board of Directors determined that the services had been adequately performed, and, as such, the August 2021 warrants are fully vested. In April 2021, the Company granted equity-classified warrants to purchase 71,500 shares of common stock with a five-year term and an exercise price of $3.63 vesting quarterly over five years while services are being performed. Additionally, both the April 2021 and August 2021 warrants vest in full if there is a change of control event, as defined in the agreements.

 

At September 30, 2022, the Company had 646,501 equity classified warrants outstanding and 272,284 warrants were exercisable. At  December 31, 2021, the Company had 396,502 equity classified warrants outstanding and 186,560 warrants were exercisable.

 

The Company recorded stock compensation expense for equity classified warrants of $232,000 and $422,000 for the three months ended  September 30, 2022 and 2021, respectively, and $398,000 and $432,000 for the nine months ended September 30, 2022 and 2021, respectively. At  September 30, 2022, there was $507,000 of unrecognized stock compensation expense related to the Company's equity classified warrants.

 

5. Equity 

 

2022 Stock Issuances

 

During the nine months ended September 30, 2022, the Company issued 49,489 shares of common stock related to the vesting of restricted stock units. 

 

2021 Stock Issuances

 

In June 2021, the Company entered into an At Market Issuance Sales Agreement (2021 ATM Agreement) with Oppenheimer & Co. Inc. Pursuant to the terms of the 2021 ATM Agreement, the Company may offer and sell, from time to time through Oppenheimer shares of the Company's common stock with an aggregate sales price of up to $50.0 million. As of the date of this report, there have been no issuances under the 2021 ATM Agreement.

 

10

 

In June 2021, the Company entered into a Purchase Agreement with Lincoln Park Capital Fund. Pursuant to the terms of the Purchase Agreement, Lincoln Park agreed to purchase from the Company up to $20.0 million of common stock (subject to certain limitations) from time to time during the term of the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, at the time the Company signed the Purchase Agreement, the Company issued 107,788 shares of common stock to Lincoln Park as an initial fee for its commitment to purchase shares of the Company's common stock under the Purchase Agreement, and has agreed to issue Lincoln Park up to an additional 53,893 shares of common stock as commitment shares pro-rata when and if Lincoln Park purchases (at our discretion) the $20.0 million aggregate commitment. The initial commitment shares issued in June 2021 were valued at $0.4 million, recorded as an addition to equity for the issuance of common stock and treated as a reduction to equity as a cost of capital to be raised under the Purchase Agreement.

 

In February 2021, the Company entered into an underwritten public offering for the sale by the Company of 14,273,684 shares of its common stock at a public offering price of $4.75 per share and granted the underwriters a 30-day option to purchase up to an additional 2,141,052 shares of common stock offered in the public offering, which was exercised. The Company received total proceeds of $78.0 million, prior to deducting the underwriting discount and other estimated offering expenses. In January 2021 the Company issued 468,684 shares for gross proceeds of $2.9 million using the Company's 2020 At The Market Agreement (2020 ATM Agreement) with Oppenheimer & Co., Inc. The Company terminated the 2020 ATM Agreement on February 2, 2021. 

 

Stock-Based Compensation and Outstanding Awards

 

The 2015 Stock Plan, as amended and approved by the Company's stockholders in May 2022, provides for the grant of stock options, stock awards, stock unit awards, and stock appreciation rights. As of September 30, 2022, there were 752,296 shares remaining to be issued under the 2015 Stock Plan. 

 

Stock-based compensation for the three and nine months ended September 30, 2022 and 2021, respectively, consists of the following components (table in thousands): 

 

  

Three Months Ended September 30,

  

Nine Months Ended September 30,

 
  

2022

  

2021

  

2022

  

2021

 

General and administrative

 $378  $443  $1,089  $1,085 

Research and development

  321   534   651   732 

Total stock-based compensation expense

 $699  $977  $1,740  $1,817 

 

During the nine months ended September 30, 2022, the Company granted 842,832 stock options with a weighted average fair value of $1.26 per share and a weighted average exercise price of $1.49 per share, which options vest over a one to four-year period from the grant date on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. In addition, during the nine months ended September 30, 2022, the Company granted 452,334 restricted stock units with a weighted average fair value of $1.49 per share, that vest over a four year period from the grant date on a straight line basis over the requisite service period. 

 

6. Income Taxes  

 

Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

 

The Company does not expect to pay any significant federal, state, or foreign income taxes in 2022 as a result of the losses recorded during the three and nine months ended September 30, 2022 and the additional losses expected for the remainder of 2022 and cumulative net operating loss carryforwards. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is “more likely than not” that some component or all of the benefits of deferred tax assets will not be realized. As a result, as of September 30, 2022 and  December 31, 2021 the Company maintained a full valuation allowance for all deferred tax assets.

 

The Company recorded no income tax provision for the three and nine months ended September 30, 2022 and 2021, respectively. The effective tax rate for the nine months ended September 30, 2022 and 2021 is 0%. The income tax rates vary from the federal and state statutory rates primarily due to the change in fair value of the stock warrants and valuation allowances on the Company’s deferred tax assets. The Company estimates its annual effective tax rate at the end of each quarterly period. Jurisdictions with a projected loss for the year where no tax benefit can be recognized due to the valuation allowance could result in a higher or lower effective tax rate during a particular quarter depending on the mix and timing of actual earnings versus annual projections.

 

11

 
 

7. Commitments and Contingencies

 

In addition to the commitments and contingencies described elsewhere in these notes, see below for a discussion of the Company's commitments and contingencies as of September 30, 2022.

 

Lease Obligations Payable

 

The following summarizes quantitative information about the Company's operating leases for the three and nine months ended September 30, 2022 and 2021, respectively (table in thousands):

 

  

Three Months Ended September 30,

  

Nine Months Ended September 30,

 
  

2022

  

2021

  

2022

  

2021

 

Lease cost:

                

Operating lease cost

 $33  $29  $91  $87 

Variable lease cost

  7   7   22   22 

Total

 $40  $36  $113  $109 

 

In June 2022, the Company extended the Lab Lease for its lab space until September 30, 2027, with no further right or option to renew. The Company will continue to be required to remit base monthly rent which will increase at an average approximate rate of 3% per year. The Company recorded approximately $12,000 and $10,000 in sublease income from a related party for the three months ended September 30, 2022 and 2021, respectively, and $32,000 and $31,000 for the nine months ended  September 30, 2022 and 2021, respectively. Sublease income is recorded as other income, net on the Company's condensed consolidated statement of operations and comprehensive loss. Operating cash flows from operating leases was $21,000 and $35,000 for the three months ended  September 30, 2022 and 2021, respectively, and $91,000 and $103,000 for the nine months ended September 30, 2022 and 2021, respectively.

 

Licenses

 

MD Anderson - Total expenses related to the Company's license agreements with MD Anderson were $56,000 for the three months ended September 30, 2022 and 2021, and $189,000 and $150,000 for the nine months ended September 30, 2022 and 2021, respectively.

 

HPI - The Company has two agreements with a related party, Houston Pharmaceuticals, Inc. (HPI). The first agreement, which was renewed in May 2022, continues a prior consulting arrangement with HPI and requires payments of $43,500 per quarter. The second agreement, which can be cancelled with sixty days' notice by either party, allows access to laboratory equipment owned by HPI for a payment of $15,000 per quarter. Total expenses related to the Company's agreements with HPI were $59,000 for each of the three months ended September 30, 2022 and 2021, and $176,000 for each of the nine months ended September 30, 2022 and 2021.

 

Sponsored Research Agreements - In June 2022, the Company entered into a new Sponsored Research Agreement with MD Anderson for a total payment of $1.3 million to support the continuation of the project through December 31, 2024. In addition, the Company also has Sponsored Research Agreements with other universities, one in the US and one in Europe. Total expenses related to the Company's Sponsored Research Agreements were $315,000 and $220,000 for the three months ended September 30, 2022 and 2021, respectively, and $815,000 and $498,000 for the nine months ended September 30, 2022 and 2021, respectively.

 

License Terminations - In February 2022, the Company and Exploration Invest Pte Ltd. (Exploration) entered into a license termination agreement pursuant to which the Company agreed to pay Exploration $400,000 to terminate certain License Agreements and extend confidentiality requirements until the 10-year anniversary of the license termination agreement. Additionally, in March 2021, the Company determined the stability of WP1732, a molecule in the WP1066 Portfolio was less than satisfactory and, as such, in March 2021 the Company terminated its license for WP1732 with MD Anderson. In October 2022, the Company entered into a two-year option on a license for WP1732. Total expenses related to the Company's license terminations were zero for each of the three months ended September 30, 2022 and 2021, and $400,000 and zero for the nine months ended September 30, 2022 and 2021, respectively.

 

8. Subsequent Events

 

In addition to the subsequent events discussed elsewhere in these notes, no other subsequent events were noted as occurring after September 30, 2022.

 

12

 
 

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

 

This Form 10-Q, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains certain forward-looking statements. Historical results may not indicate future performance. Our forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements.

 

Forward-looking statements include, but are not limited to, statements about:

 

  Our ability to continue our relationship with MD Anderson, including, but not limited to, our ability to maintain current licenses and license future intellectual property resulting from our sponsored research agreements with MD Anderson;
  The success or the lack thereof, including the ability to recruit subjects on a timely basis, for a variety of reasons, of our clinical trials through all phases of clinical development;
  Our ability to satisfy any requirements imposed by the US Food & Drug Administration (FDA) (or its foreign equivalents) as a condition of our clinical trials proceeding or beginning as planned;
 

World-wide events including the war in Ukraine, the COVID-19 pandemic, and the general supply chain shortages effects on our clinical trials, clinical drug candidate supplies, preclinical activities and our ability to raise future financing;

 

Our ability to obtain additional funding to commence or continue our clinical trials, fund operations and develop our product candidates;

 

The need to obtain and retain regulatory approval of our drug candidates, both in the United States and in Europe, and in countries deemed necessary for future trials;

 

Our ability to complete our clinical trials in a timely fashion and within our expected budget and resources;

 

Compliance with obligations under intellectual property licenses with third parties;

 

Any delays in regulatory review and approval of drug candidates in clinical development;

  Potential efficacy of our drug candidates;
 

Our ability to commercialize our drug candidates;

 

Market acceptance of our drug candidates;

 

Competition from existing therapies or new therapies that may emerge;

 

Potential product liability claims;

 

Our dependency on third-party manufacturers to successfully, and timely, supply or manufacture our drug candidates for our preclinical work and our clinical trials;

 

Our ability to establish or maintain collaborations, licensing or other arrangements;

 

The ability of our sublicense partners to successfully develop our product candidates in accordance with our sublicense agreements;

 

Our ability and third parties’ abilities to protect intellectual property rights;

 

Our ability to adequately support future growth; and

 

Our ability to attract and retain key personnel to manage our business effectively.

 

We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.

 

Our Business

 

We are a clinical stage pharmaceutical company with a growing pipeline of clinical programs for the treatment of highly resistant cancers and viruses. We have three core technologies, based substantially on discoveries made at and licensed from MD Anderson Cancer Center (MD Anderson) in Houston, Texas. We have six drug candidates, three of which have now shown human activity in clinical trials.

 

Core Technologies

 

Our core technologies consist of the following: a) Annamycin, a “next generation” anthracycline designed to eliminate the cardiotoxicity associated with currently prescribed anthracyclines (Annamycin has no material cardiotoxicity noted by a specialist in subjects treated and reviewed to date in Moleculin’s clinical trials), while also significantly increasing, as shown in animal studies, drug accumulation in certain key targeted organs (such as the lungs, pancreas and liver) and avoiding multidrug resistance mechanisms when compared in non-human studies with doxorubicin (one of the most commonly used anthracyclines); b) our WP1066 Portfolio, which includes WP1066 and WP1220, two of several Immune/Transcription Modulators in the portfolio designed to inhibit p-STAT3 (phosphorylated signal transducer and activator of transcription) among other transcription factors associated with tumor activity, while also stimulating a natural immune response to tumors by inhibiting the errant activity of Regulatory T-Cells (TRegs); and c) our WP1122 Portfolio, which contains compounds (including WP1122, WP1096, WP1097) designed to exploit, amongst other uses, the potential uses of inhibitors of glycolysis such as 2-deoxy-D-glucose (2-DG), which we believe may provide an opportunity to cut off the fuel supply of tumors by taking advantage of their high level of dependence on glucose in comparison to healthy cells, as well as target the roles of glycolysis and glycosylation in viruses.

 

 

Recent Business Developments 

 

Below are recent business developments.

 

Annamycin

 

Received Additional Report Supporting Non-cardiotoxicity of Annamycin in Recent Subjects

 

On October 11, 2022, we received another report from an independent cardiology expert assessing recent subjects in two of our trials (fifth cohort in MB-105 and the first four cohorts in MB-107) covering 18 subjects. This assessment concluded with “there was no preliminary signal of excessive cardiotoxicity (indeed, no cardiotoxicity) with Annamycin at the administered doses in this dataset.” This brings a total of 42 subjects in our three trials utilizing Annamycin where no evidence of cardiotoxicity has been identified by an independent expert cardiologist. All expert reviews included analysis of ejection fraction, echo strain and certain troponin levels intended to assess the potential for both acute and chronic heart damage. We will, of course, continue to gather these and other data as our trials continue, as they are essential to ultimately demonstrating the safety and effectiveness of Annamycin.

 

For the Treatment of Soft Tissue SarcomaLung Metastases

 

Enrolled First Subjects and Began Treatment in the MB-107 Phase 2 Portion of Phase 1b//2 Study of Annamycin In Subjects With Previously Treated Soft Tissue Sarcomas With Pulmonary Metastases

 

During the third quarter of 2022, we treated in a Phase 2 portion of the MB-107 Phase 1b/2 clinical trial of Annamycin for the treatment of soft tissue sarcoma (STS) lung metastases the first three subjects at 360 mg/m2. Due to adverse events (primarily myelosuppression, which is anticipated with high doses of anthracycline therapy) in the first three subjects, we lowered the Recommended Phase 2 Dose (RP2D) to 330 mg/m2 in October 2022 and we believe that this lower dose will enable continued treatment of subjects with fewer interruptions. Our experience with subjects in the Phase 1b portion of this trial suggested that while 360 mg/m2 may be tolerated by subjects initially, continued treatment may be delayed or interrupted due to adverse events, primarily myelosuppression, hence lowering the dose from 360 mg/m2 to 330 mg/m2 was contemplated in advance of beginning the Phase 2 expansion pending results from the first three subjects in the expansion phase. We expect to treat at least 25 subjects in this Phase 2 portion of the clinical trial. In October 2022, we began dosing the first subject at this new RP2D and enrolled a second subject.

 

In this trial, Annamycin is being used to treat subjects who had prior anthracycline therapy. Accordingly, each of the three subjects treated at 360 mg/m2 had disease progression following prior treatment. In these first three subjects treated at 360 mg/m2, we have received the following preliminary data from the sites:

 

 

-

The first subject received two cycles of Annamycin at 360 mg/m2 but with a two-week delay between the two cycles due to myelosuppression. The end of cycle 2 scan showed that the target lesions were stable but there was disease progression with new lesions.

 

-

The second subject received two cycles with the second cycle reduced to 330 mg/m2 due to myelosuppression. We do not have the data from the end of cycle 2 scan.

 

-

The third subject received one cycle and had a serious adverse event (also myelosuppression) and exited the study. Based on a clinical exam, the subject was deemed to have disease progression upon exit.

 

First Subjects Treated in the Phase 1b Portion of an Externally Funded Phase 1b/2 Clinical Trial with Annamycin Weekly Dosing for the Treatment of STS With Pulmonary Metastases

 

On October 28, 2022, we were notified that the two subjects were dosed in the Phase 1b/2 Study of Liposomal Annamycin (L-Annamycin) in subjects with previously treated soft-tissue sarcomas (STS) with pulmonary metastases at the Maria Sklodowska-Curie National Research Institute of Oncology. We are collaborating with WPD Pharmaceuticals (WPD) and physicians in Poland in this physician-sponsored clinical trial in Europe. The grant-funded clinical trial is led by Prof. Piotr Rutkowski, MD, PhD, Head of Department of Soft Tissue/Bone Sarcoma and Melanoma at the Maria Sklodowska-Curie National Research Institute of Oncology in Warsaw, Poland, and it is operated independently of our study in the US. The trial will use a dosing regimen of once weekly for three weeks in a 28-day cycle rather than once every 21 days as in the US trial.

 

Concludes Phase 1b and Opens Phase 2 Recruitment in MB-107 Phase 1b/2 Clinical Trial of Annamycin for the Treatment of Soft Tissue Sarcoma Lung Metastases

 

On July 28, 2022, we announced that with five US sites active in our MB-107 clinical trial, the safety review of the fourth cohort in a dose escalation clinical trial evaluating Annamycin for the treatment of STS lung metastases was completed, thus concluding the Phase 1b portion of our U.S. Phase 1b/2 clinical trial. The trial began in June of 2021. Preliminary results from the study continue to document clinical activity for Annamycin in the treatment of STS. The safety review committee (SRC) deemed the dose of 390 mg/m2 to be safe after conclusion of the fourth cohort. Notwithstanding that this dose level was deemed to be safe, tolerability issues present at the 390 mg/m2 dose level caused delays in follow-on cycles and the reduction of subsequent doses, suggesting that a RP2D below 390 mg/m2 was warranted.

 

Consistent with the recommendation of the SRC, we determined that the RP2D will be 360 mg/m2 for the first three subjects in the Phase 2 portion of the study. The SRC will then review the clinical safety data at this dose and determine whether the RP2D should be further reduced to 330 mg/m2 prior to proceeding with the additional 22 subjects. See section above “—Enrolled First Subjects and Began Treatment in the MB-107 Phase 2 Portion of Phase 1b//2 Study of Annamycin In Subjects With Previously Treated Soft Tissue Sarcomas With Pulmonary Metastases” for discussion regarding final determination of RP2D. In addition to continuing to assess safety, including gathering additional information about short-term side effects and possible risks, this Phase 2 portion of the study will also explore the efficacy of Annamycin as a single agent for the treatment of subjects with STS lung metastases for whom prior chemotherapy has failed, and for whom new chemotherapy is considered appropriate.

 

In the Phase 1b portion of the study, fifteen subjects were enrolled and treated per the protocol in four cohorts to determine the maximum tolerable dose and/or the RP2D. Of the fifteen subjects, all received prior anthracycline treatment and had disease progression prior to entering our study. Each cohort had three subjects, except for the fourth cohort, which (per the protocol) was expanded to six subjects after a dose-limiting toxicity occurred in a single subject. Up to twenty-eight subjects, to account for potential over enrollment, will be enrolled at the RP2D in Phase 2 to focus more on quantifying efficacy as well as providing additional safety information.

 

 

For the Treatment of Acute Myeloid Leukemia

 

Opened Enrollment in the Phase 1 Portion of the Phase 1/2 Study of Annamycin in Combination with Cytarabine for the Treatment of Subjects with Acute Myeloid Leukemia (AML) That is Refractory to or Relapsed After Induction Therapy

 

On September 29, 2022, we opened enrollment and began screening subjects at one site in Poznan, Poland in the Phase 1 portion of the Phase 1/2 study of Annamycin in combination with Cytarabine (Ara-C) for the treatment of subjects with acute myeloid leukemia (AML) who are refractory to or relapsed after induction therapy (MB-106). We plan to open additional sites for this study in Poland and other European countries.

 

Received Allowance to Proceed with Phase 1/2 Study of Annamycin in Combination with Cytarabine (AnnAraC) for the Treatment of Acute Myeloid Leukemia

 

On May 5, 2022, we announced that we received allowance from the Polish Department of Registration of Medicinal Products (URPL), as well as the requisite Ethics Committee approval, to proceed with our Phase 1/2 clinical trial in Poland of Annamycin in combination with Ara-C in the treatment of subjects with AML who are refractory to or relapsed after induction therapy. The Phase 1/2 AnnAraC trial (MB-106), an open label trial, builds on the safety and dosage data from the two successfully concluded single agent Annamycin AML Phase 1 trials (MB-104 and MB-105) in the U.S. and Europe, respectively, and the preclinical data from our sponsored research studies.

 

Presented Positive Preclinical Annamycin Data at the AACR 2022 Annual Meeting

 

On April 8, 2022, we announced that preclinical data of Annamycin tested in syngeneic models of metastatic colorectal cancer established in lungs or liver was accepted for poster presentation at the American Association for Cancer Research (AACR) Annual Meeting 2022, which was held April 8-13, 2022, in New Orleans, Louisiana. The objective of this animal study was to assess the efficacy of Annamycin in experimental colorectal cancer liver and lung metastasis models. The efficacy of Annamycin was tested in syngeneic models of metastatic colorectal cancer established in lungs or liver. Annamycin exhibited robust antitumor activity in both models. We believe this study demonstrating efficacy of Annamycin in colorectal cancer models provides compelling evidence for further preclinical development aimed at supporting the initiation of clinical studies in metastatic colorectal cancer patients. 

 

WP1066

 

Emory University Phase 1 Pediatric Brain Tumor Clinical Trial Recruits Last Subject

 

In 2021, Emory University researchers filed and received clearance to proceed with an IND for a trial to treat children and young adults (up to age 25) with recurrent or refractory malignant brain tumors without a known cure with WP1066. This trial, which is externally funded except for study drug supplied by us, is being conducted at the Aflac Cancer & Blood Disorders Center at Children's Healthcare of Atlanta. In October 2022, the Emory trial enrolled the last subject in the last cohort at 8 mg/kg. Discussions are underway to explore WP1066 in combination with radiation on similar tumors in a Phase 2 clinical trial in the near future.

 

Continued Discussions with Two Academic Institutions Regarding WP1066 for the Treatment of Brain Tumors

 

During the third calendar quarter of 2022, we continued discussions with two academic institutions in separate programs for the treatment of brain tumors. We expect one to be a Phase 1b/Phase 2 Clinical Trial with WP1066 combined with radiation for the treatment of adult glioblastoma. We expect this trial to begin in the first half of 2023. The other, we expect, will focus on the use of WP1066 for an expanded access program for gliomas that harbor G34R mutations, and we expect this program to begin in the first half of 2023.

 

Continued Compassionate Use of WP1066

 

We have received and participated in five compassionate use applications with the FDA or foreign equivalent involving WP1066 since 2021 with four of these occurring in 2022. These have included adult and pediatric subjects both in the US and in Europe.

 

 

Moved Intravenous and Other Formulations of WP1066 into Preclinical Testing

 

Starting in 2020, we began developing an appropriate intravenous (IV) formulation for WP1066 or its analogs. As a result of these studies, we believe the lead molecule WP1066 may be our best candidate in this portfolio for intravenous administration, and efforts are underway to identify and optimize the best strategy for IV delivery. In the third quarter of 2022, we identified two IV formulas to move into preclinical testing while working on improving oral delivery as well. We believe our WP1066 Portfolio represents a novel class of agents capable of focusing on multiple targets, including the activated form of a key oncogenic transcription factor, STAT3.

 

Received IND Clearance to Conduct Phase 1 Study of WP1066 for the Treatment of Recurrent Malignant Glioma

 

On April 21, 2022, we announced that we received allowance from the FDA for our Investigative New Drug (IND) application to study WP1066 for the treatment of recurrent malignant glioma. With this IND now cleared, we plan to evaluate strategic partnerships and collaborations to conduct a Phase 1 open label, single arm, dose escalation study of the safety, pharmacokinetics, and efficacy of oral WP1066 in adult subjects with recurrent malignant glioma. We expect the clearance of this IND to further support the ongoing pediatric studies being conducted by a team at Emory University, and we are evaluating the potential for additional externally funded investigator-initiated studies, including those mentioned above.

 

WP1122

 

Concluded Phase 1a in Clinical Trial of WP1122 in the UK with a MTD of a Daily Dose of 32mg/kg

 

In late October 2022 after further review of the data and in discussions with our clinical team, we determined that the maximum tolerated dose (MTD) for WP1122 is a daily cumulative dose of 32 mg/kg in two divided doses for seven days, and we concluded the Phase 1a Clinical Trial of WP1122. We believe this will advance future studies of WP1122 in antiviral and oncology indications. With an IND active for WP1122 for the treatment of glioblastoma and a COVID-19 investigator sponsored trial in Brazil in the approval process, we have concluded that advancing WP1122 in these indications will occur only if external funds are available. We will begin to close out the Phase 1a study and generate the clinical study report. With this Phase 1a study coming to a successful conclusion earlier than expected, and with our decision to limit further development to studies for which external funding is available, we believe we are positioned to reduce the use of internal funds on WP1122.

 

Updated Second Multiple Ascending Dose (MAD) Cohort in Phase 1a Clinical Trial of WP1122 in the UK

 

On October 14, 2022, we provided an update on the preliminary results from the second multiple ascending dose (MAD) cohort of our first-in-human Phase 1a study of WP1122. This cohort consisted of an initial 4 subjects, who were scheduled to be dosed daily for 7 days with 64 mg/kg/day of WP1122 or placebo in the dose escalation trial evaluating the safety and pharmacokinetics (PK) of WP1122 in healthy volunteers in the United Kingdom (UK). In conjunction with the study safety review committee, we stopped the second MAD cohort when 2 subjects experienced non-serious adverse events that, although asymptomatic, met the stoppage criteria in the protocol. Although we considered the potential to open a third MAD cohort (2a) to dose subjects at a reduced dose level of 48mg/kg, we subsequently determined that the primary objectives of this Phase 1a study had already been met by establishing a safe and tolerable dose and that continued testing with healthy volunteers would not be a wise use of resources.

 

WP1122 Portfolio Compound, WP1096, Selected for NIAID-Funded Animal Studies as Novel Potential Antiviral

 

On September 27, 2022, we announced that our WP1096 molecule (part of our WP1122 portfolio of D-glucose and D-mannose antimetabolites) will be evaluated in animal studies through the preclinical services offered by the National Institute of Allergy and Infectious Diseases (NIAID), a part of the National Institutes of Health. 

 

Received FDA Orphan Drug Designation of WP1122 for the Treatment of Glioblastoma Multiforme

 

On September 6, 2022, we announced that the FDA granted Orphan Drug Designation of WP1122 for the treatment of Glioblastoma Multiforme. 

 

Completed Third Single Ascending Dose (SAD) Cohort in Phase 1a Clinical Trial of WP1122 in the UK

 

On August 19, 2022, we announced preliminary results from the third cohort of our first-in-human Phase 1a study of WP1122. This cohort consisted of 10 subjects dosed with 32 mg/kg or placebo in the dose escalation trial evaluating the safety and pharmacokinetics (PK) of WP1122 in healthy volunteers in the United Kingdom (UK). Based on the overall results in Cohort 3, the Safety Review Committee (SRC) for the study deemed the third single ascending dose (SAD) cohort dose safe and well-tolerated, allowing us to begin our fourth SAD Cohort with a dose escalation to 64 mg/kg. Additionally, dosing of WP1122 in the multiple ascending dose (MAD) cohorts was to commence at a total daily dose of 32 mg/kg, which had shown to be safe in the single dose cohort.

 

 

Completed Second Single Ascending Dose (SAD) Cohort in Phase 1a Clinical Trial of WP1122 in the UK

 

On July 8, 2022, we announced preliminary results from the second cohort of our first-in-human Phase 1a study of WP1122. This cohort consisted of 8 subjects dosed with 16 mg/kg or placebo in the dose escalation trial evaluating the safety and pharmacokinetics (PK) of WP1122 in healthy volunteers in the United Kingdom (UK). Based on the overall results in Cohort 2, the SRC deemed the second cohort dose safe and well-tolerated and began our SAD Cohort 3 with a dose escalation to 32 mg/kg.

 

Completed First Single Ascending Dose (SAD) Cohort in Phase 1a Clinical Trial of WP1122 in the UK

 

On June 16, 2022, we announced preliminary results from the first cohort of our first-in-human Phase 1a study of WP1122. This cohort consisted of 9 subjects dosed with 8 mg/kg or placebo in the dose escalation trial evaluating the safety and PK of WP1122 in healthy volunteers in the UK. Based on the overall results in Cohort 1, the SRC deemed the cohort dose safe and well-tolerated and began our SAD Cohort 2 with a dose escalation to 16 mg/kg.

 

Commenced Dosing in Healthy Volunteers in Phase 1a Clinical Trial of WP1122 for the Treatment of COVID-19

 

On May 26, 2022, we announced the commencement of dosing in our first-in-human Phase 1a study to evaluate the safety and PK of WP1122 in healthy volunteers for the treatment of COVID-19 (MB-301). 

 

Received Approval from the UKs Medicines and Healthcare Products Regulatory Agency (MHRA) for Protocol Amendment to Phase 1a Clinical Trial of WP1122 for the Treatment of COVID-19

 

On May 10, 2022, we announced that we received approval from the UK's MHRA to proceed with a first-in-human Phase 1a study to evaluate the safety and pharmacokinetics of WP1122 in healthy volunteers as part of studying WP1122 for the treatment of COVID-19 (MB-301). The approval followed us having submitted a protocol amendment allowing for a higher ratio of diluting excipients to drug substance to facilitate a faster and simpler mixing procedure before drug administration.

 

Potential Investigator Led Clinical Trial of Efficacy and Safety of Oral Drug (WP1122) in Adult Subjects With COVID-19 Posted on clinicaltrials.gov

 

On May 9, 2022, Dr. Andrei Carvalho Sposito, as the sponsor, with the University of Campinas, Brazil, posted with clinicaltrials.gov a possible Phase 1, multi-center, dose escalation study that is intended to be followed by a Phase 2 randomized, double-blind, placebo-controlled study of the safety and efficacy of WP1122 administered q12h ±1 hr PO in adult subjects with COVID-19 who require hospitalization with respiratory support. The Phase 1 component, if such study occurs, will enroll COVID-19 positive subjects who are symptomatic, and the Phase 2 component, if such study occurs, will enroll adults with COVID-19 who require hospitalization for respiratory support and those subjects requiring intubation with mechanical ventilation. The initiation of this trial is subject to Brazilian government approvals, contract negotiations with the University of Campinas, and the evolving epidemiology of COVID-19, all of which will determine if we believe that such a study is feasible and inform our decision as to whether to support such a study with drug product and ancillary services. There is no assurance that the foregoing trials will be commenced and funded by the University of Campinas.

 

Corporate

 

Licensing

 

In October 2022 with MD Anderson, we entered into an option on the WP1732 portfolio, a STAT3 inhibitor, and a license for novel esters of 2-deoxy-glucose with high anti-proliferative activity. Discussions with MD Anderson regarding our core technologies are in the ordinary course of our business. 

 

Engaged Wolfram C. M. Dempke, MD, PhD, MBA as its European Chief Medical Officer

 

On May 4, 2022, we announced that we engaged Wolfram C. M. Dempke, MD, PhD, MBA, MRCP as our EU - Chief Medical Officer and part-time contractor for our European clinical trials. Dr. Dempke served as the Vice President, Scientific Solutions: Hematology & Oncology, at Worldwide Clinical Trials. He holds oncology/hematology society memberships in the U.S. and Europe. He has contributed to five textbooks and more than 150 peer-reviewed papers. Dr. Dempke continues to teach classes in the Munich University Medical Oncology department, Germany, and he continues to see patients on a monthly basis.

 

 

Results of Operations

 

The following table sets forth, for the periods indicated, data derived from our statement of operations (table in thousands) and such changes in the periods are discussed below in approximate amounts:

 

Moleculin Biotech, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

  

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2022

   

2021

   

2022

   

2021

 

Revenues

  $     $     $     $  
                                 

Operating expenses:

                               

Research and development

    5,965       4,095       14,790       11,239  

General and administrative

    3,087       2,021       8,704       6,394  

Depreciation and amortization

    32       41       98       130  

Total operating expenses

    9,084       6,157       23,592       17,763  

Loss from operations

    (9,084 )     (6,157 )     (23,592 )     (17,763 )

Other income:

                               

Gain from change in fair value of warrant liability

    421       1,678       1,184       4,428  

Other income, net

    19       13       39       30  

Interest income, net

    33       87       114       236  

Net loss

  $ (8,611 )   $ (4,379 )   $ (22,255 )   $ (13,069 )

 

Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

 

Research and Development Expense. Research and development (R&D) expense was $6.0 million and $4.1 million for the three months ended September 30, 2022 and 2021, respectively. The increase of $1.9 million is mainly related to increased clinical trial activity, as described above, and costs related to manufacturing of additional drug product.

 

General and Administrative Expense. General and administrative expense was $3.1 million and $2.0 million for the three months ended September 30, 2022 and 2021, respectively. The increase of $1.1 million is mainly related to an increase in regulatory and legal services.

 

Gain from Change in Fair Value of Warrant Liability. We recorded a net gain of $0.4 million in the third quarter of 2022 as compared to a net gain of $1.7 million in the third quarter of 2021, for the change in fair value on revaluation of our warrant liability associated with our warrants issued in conjunction with our stock offerings. We are required to revalue our liability-classified warrants at the time of each warrant exercise, if applicable, and at the end of each reporting period and reflect in the statement of operations a gain or loss from the change in fair value of the warrant in the period in which the change occurred. We calculated the fair value of the warrants outstanding using the Black-Scholes model. A gain results principally from a decline in our share price during the period and a loss results principally from an increase in our share price.

 

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

 

Research and Development Expense. R&D expense was $14.8 million and $11.2 million for the nine months ended September 30, 2022 and 2021, respectively. The increase of $3.6 million is mainly related to increased clinical trial activity as described above, a license termination fee, and costs related to manufacturing of additional drug product.

 

General and Administrative Expense. General and administrative expense was $8.7 million and $6.4 million for the nine months ended September 30, 2022 and 2021, respectively. The increase of $2.3 million is mainly related to an increase in regulatory and legal services, consulting and advisory fees.

 

 

Gain from Change in Fair Value of Warrant Liability. We recorded a net gain of $1.2 million during the nine months ended September 30, 2022 as compared to a net gain of $4.4 million during the nine months ended September 30, 2021, for the change in fair value on revaluation of our warrant liability associated with our warrants issued in conjunction with our stock offerings. We are required to revalue our liability-classified warrants at the time of each warrant exercise, if applicable, and at the end of each reporting period and reflect in the statement of operations a gain or loss from the change in fair value of the warrant in the period in which the change occurred. We calculated the fair value of the warrants outstanding using the Black-Scholes model. A gain results principally from a decline in our share price during the period and a loss results principally from an increase in our share price.

 

Liquidity and Capital Resources

 

The following table sets forth our primary sources and uses of cash for the period indicated (table in thousands): 

 

   

Nine Months Ended September 30,

 
   

2022

   

2021

 

Net cash used in operating activities

  $ (20,383 )   $ (14,693 )

Net cash used in investing activities

    (67 )      

Net cash (used in) provided by financing activities

    (23 )     74,724  

Effect of exchange rate changes on cash and cash equivalents

    (38 )     (26 )

Net (decrease) increase in cash and cash equivalents

  $ (20,511 )   $ 60,005  

 

As of September 30, 2022, there was $0.3 million of cash on hand in a bank account in Australia and we know of no related limitations impacting our liquidity in Australia.

 

Cash used in operating activities

 

Cash used in operations was $20.4 million for the nine months ended September 30, 2022. This $5.7 million increaseover the prior year period of $14.7 million was primarily due to payments for increased clinical trial activity, costs related to manufacturing of additional drug product, and increased consulting, legal, and advisory fees. These are all a reflection of the ongoing clinical and pre-clinical activity and the associated increase in general and administrative support for our three core drug technologies.

 

Cash (used in) provided in financing activities

 

We did not sell any stock during the nine months ended September 30, 2022.

 

In June 2021, we entered into an At Market Issuance Sales Agreement (2021 ATM Agreement) with Oppenheimer & Co. Inc. Pursuant to the terms of the 2021 ATM Agreement, we may offer and sell, from time to time through Oppenheimer shares of our common stock with an aggregate sales price of up to $50.0 million. As of the date of this report, there have been no issuances under the 2021 ATM Agreement.

 

In June 2021, we entered into a Purchase Agreement with Lincoln Park Capital Fund. Pursuant to the terms of the Purchase Agreement, Lincoln Park agreed to purchase from us up to $20.0 million of common stock (subject to certain limitations) from time to time during the term of the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, at the time we signed the Purchase Agreement, we issued 107,788 shares of common stock to Lincoln Park as an initial fee for its commitment to purchase shares of our common stock under the Purchase Agreement, and have agreed to issue Lincoln Park up to an additional 53,893 shares of common stock as commitment shares pro-rata when and if Lincoln Park purchases (at our discretion) the $20.0 million aggregate commitment. 

 

In February 2021, we completed an underwritten public offering of an aggregate of 14,273,684 shares of common stock at a public offering price of $4.75 per share. We granted the underwriters a 30-day option to purchase up to an additional 2,141,052 shares of common stock offered in the public offering. The offering closed on February 5, 2021 and gross proceeds of the offering were approximately $67.8 million, prior to deducting the underwriting discount and other offering expenses. On February 10, 2021, the underwriters of the public offering exercised in full their option to purchase an additional 2,141,052 shares of common stock at the public offering price of $4.75 per share, bringing total gross proceeds to approximately $78.0 million before underwriting discount.

 

In January 2021, we issued 468,684 shares for gross proceeds of $2.9 million using our 2020 ATM Agreement with Oppenheimer & Co., Inc. We terminated the 2020 ATM Agreement on February 2, 2021. Additionally, during the first quarter of 2021, 10,000 shares were issued due to the exercise of warrants related to past public offerings. Gross proceeds received due to these exercises approximated $63,000.

 

 

We believe that our existing cash and cash equivalents as of September 30, 2022 will be sufficient to meet our projected operating requirements, which include a potential increase over our current R&D rate of expenditures, beyond the second quarter of 2024. Such projections are subject to changes in our internally funded preclinical and clinical activities, including unplanned preclinical and clinical activity and potential legal costs. We anticipate incurring operating losses for the next several years as we support the preclinical and clinical activities necessary to prepare our drug candidates for successful out licensing, including our efforts to expand our technologies. These factors raise uncertainties about our ability to fund operations in future years. If we need to raise additional capital in order to continue to execute our business plan, there is no assurance that additional financing will be available when needed or that we will be able to obtain financing on terms acceptable to us. A failure to raise sufficient capital could adversely impact our ability to achieve our intended business objectives and meet our financial obligations as they become due and payable.

 

In March 2022, we received a subpoena from the SEC requesting information and documents, including materials related to certain individuals (none of which are our officers or directors) and entities, and materials related to the development of and statements regarding our drug candidate for the treatment of COVID-19. We have received, and expect to continue to receive, periodic further requests from the SEC staff with respect to this matter. We are not aware of the specific nature of the underlying investigation by the SEC, and to the extent that this investigation relates to prior public disclosures that we have made, we believe in the accuracy and adequacy of such prior disclosures. The correspondence from the SEC transmitting the subpoena to us states that the SEC is trying to determine whether there have been any violations of federal securities laws, but that its investigation does not mean that the SEC has concluded that anyone has violated the law or that the SEC has a negative opinion of any person, entity, or security. We cannot predict when this matter will be resolved or what, if any, action the SEC may take following the conclusion of the investigation. During the quarter ended and for the nine months ended September 30, 2022, we have expended approximately $1.1 million and $1.9 million, respectively, in related legal fees and expenses. We estimate that potentially an additional $1.0 million in legal costs will be recognized in the last quarter of 2022 in connection with our response to this subpoena.

 

Critical Accounting Policies and Significant Judgments and Estimates

 

There have been no material changes to our critical accounting policies and use of estimates from those disclosed in our Form 10-K for the year ended December 31, 2021. For a discussion of our critical accounting policies and use of estimates, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Estimates in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

 

Not applicable as we are a smaller reporting company.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures designed to ensure that material information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that material information is accumulated and communicated to our management, including our Chief Executive Officer (CEO), who is our principal executive officer, and Chief Financial Officer (CFO), who is our principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosures. Our CEO and CFO have evaluated these disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q and have determined that such disclosure controls and procedures were effective as of September 30, 2022.

 

Changes in Internal Control Over Financial Reporting

 

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15-d-15(f) under the Exchange Act) during the three months ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 

 

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

For information regarding factors that could affect our results of operations, financial condition and liquidity, refer to the section entitled “Risk Factors” in Part I, Item 1A in our annual report on Form 10-K for the year ended December 31, 2021, and in Part II, Item 1A in our prior quarterly reports on Form 10-Q filed during this fiscal year. Except as updated below, there have been no material changes from the risk factors previously disclosed in our annual report on Form 10-K for the year ended December 31, 2021, and in Part II, Item 1A in our prior quarterly reports on Form 10-Q filed during this fiscal year, as filed with the SEC.

 

New tax laws or regulations that are enacted or existing tax laws and regulations that are interpreted, modified or applied adversely to us or our customers may have a material adverse effect on our business and financial condition.

 

New tax laws or regulations could be enacted at any time, and existing tax laws or regulations could be interpreted, modified or applied in a manner that is adverse to us or our customers, which could adversely affect our business and financial condition. For example, the Tax Cuts and Jobs Act, the Coronavirus Aid, Relief, and Economic Security Act and the Inflation Reduction Act enacted many significant changes to the U.S. tax laws. Future guidance from the Internal Revenue Service and other tax authorities with respect to such legislation may affect us, and certain aspects of such legislation could be repealed or modified in future legislation. In addition, it is uncertain if and to what extent various states will conform to federal tax laws. Any future tax legislation could increase our U.S. tax expense and could have a material adverse impact on our business and financial condition.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 

 

During the three months ended September 30, 2022, the Company entered into a portfolio advisory agreement with a related party entity, associated with Dr. Waldemar Priebe, and in connection with the agreement, the Company granted equity-classified warrants to purchase 250,000 shares of common stock with a ten-year term and an exercise price of $1.24. The September 2022 warrants vest as follows: (a) 50% vests upon execution of the agreement, provided the advisor does not terminate the agreement prior to the first anniversary of the agreement; and (b) 50% vests 60 days after the end of the one-year term, subject to the Company's Board of Directors determining that the services provided have been adequately performed. The foregoing securities were issued pursuant to Section 4(a)(2) of the Securities Act.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURE

 

Not applicable.

 

ITEM 5. OTHER INFORMATION. 

 

None.

 

 

ITEM 6. EXHIBITS 

 

Exhibit No.

 

Description

     
10.1*   Portfolio Development Advisor Agreement dated September 6, 2022 between KEWAT, LLC and Moleculin Biotech, Inc.
     

31.1*

 

Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

     

31.2*

 

Certification of Principal Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

     

32.1*

 

Certification of Principal Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

     

32.2*

 

Certification of Principal Accounting and Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

     

101.INS*

 

Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 

     

101.SCH*

 

Inline XBRL Taxonomy Extension Schema Document

     

101.CAL*

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

     

101.DEF*

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

     

101.LAB*

 

Inline XBRL Taxonomy Extension Label Linkbase Document

     

101.PRE*

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

     
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

* Filed herewith.

 

 

SIGNATURES

 

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

 

 

MOLECULIN BIOTECH, INC.

     

Date: November 10, 2022

By:

/s/ Walter V. Klemp

   

Walter V. Klemp,

   

Chief Executive Officer and Chairman

(Principal Executive Officer)

     
Date: November 10, 2022

By:

/s/ Jonathan P. Foster

   

Jonathan P. Foster,

   

Executive Vice President & Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

23