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, 20222023

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

 

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 28,627,82729,810,443 shares of common stock outstanding at November 3, 20221, 2023..

 

 

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Table of Contents

 

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)(Unaudited)

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)(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

Moleculin Biotech, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

Moleculin Biotech, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except for shares)

(unaudited)(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

Moleculin Biotech, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Unaudited)

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 Phase 2clinical-stage pharmaceutical company, organized as a Delaware corporation in July 2015, which focuses on the treatment of highly resistantwith clinical programs for hard-to-treat cancers and viruses through the developmentviruses. The Company has three core technologies, each of its drug candidates,which have had one or more drugs successfully complete a Phase 1 clinical trial, based substantially on discoveries made at and licensed from The University of Texas System on behalf of the MD Anderson Cancer Center which the(MD Anderson) in Houston, Texas. The Company refers to as MD Anderson. MBI formedhas two wholly owned subsidiaries, Moleculin Australia Pty. Ltd. (MAPL), a wholly owned subsidiary in June 2018, which was set up 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 actwhich acts 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. The physician-sponsored trials which utilize primarily external funds, usuallysuch as grant funds, which are not presented in thethese 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 outlicensingout-licensing or outsourcing opportunities with development/commercialization strategic partners who are better suited for the marketing, sales and distributiondistribution of its drugs, if approved.

On May 5, 2023, the Company received a letter from the Nasdaq Capital Market (Nasdaq) notifying the Company that for the prior 30 consecutive business days the bid price for the Company's common stock had closed below the minimum $1.00 per share requirement for continued inclusion on Nasdaq pursuant to Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule"). The deficiency letter did not result in the immediate delisting of the Company's common stock from the Nasdaq. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was  provided an initial period of 180 calendar days, until November 1, 2023, to regain compliance with the Bid Price Rule. In addition, the Company was required to notify Nasdaq of its intent to cure the minimum bid price deficiency, which may include, if necessary, implementing a reverse stock split. 

On November 2, 2023, the Company received a 180-calendar day extension, until April 29, 2024, from the Nasdaq to regain compliance with Bid Price Rule. The Company will continue to monitor the closing bid price of its common stock and plans to pursue available options to regain compliance with the Bid Price Rule, including potentially the Company’s Board of Directors authorizing a reverse stock split, as discussed further below. If the Company authorizes a reverse stock split, it will plan to effectuate the split no later than ten business days prior to the end of the extension in order to timely regain compliance. If, at any time before April 29, 2024, the bid price for the Company's common stock closes at $1.00 or more for a minimum of 10 consecutive business days, the Nasdaq Staff will provide written notification to the Company that it complies with the Bid Price Rule, unless the Staff exercises its discretion to extend this 10 day period pursuant to Nasdaq Listing Rule 5810(c)(3)(G).

On October 3, 2023, the Company held a Special Meeting of Stockholders (the "Special Meeting"). The Company's stockholders granted the Board of Directors the authority to effect an amendment to the Company’s amended and restated certificate of incorporation to effect a reverse stock split of the outstanding shares of the Company’s common stock, at a reverse stock split ratio of between 1-for-5 and 1-for-20 as determined by the Board in its sole discretion, prior to the one-year anniversary of the Special Meeting. The Board of Directors has taken no action with regard to this matter.

If the Company does not regain compliance with the Bid Price Rule by April 29, 2024, the Nasdaq Staff will provide written notification to the Company that its common stock may be delisted. The Company would then be entitled to appeal the Nasdaq Staff’s determination to a NASDAQ Listing Qualifications Panel and request a hearing. There can be no assurance that, if the Company does appeal a delisting determination by the Nasdaq Staff to the NASDAQ Listing Qualifications Panel, that such appeal would be successful. There can be no assurance that the Company will be able to regain compliance with the Bid Price Rule. 

2. Basis of presentation, principles of consolidation, and 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),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, 20212022 and for the year then ended, including the notes thereto contained in the Form 10-K filed with the SEC on March 24, 2022.22, 2023.

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 material 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, 20212022. There have been no material changes to the significant accounting policies during the nine months ended September 30, 20222023.

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. 

LiquidityGoing Concern - These condensed consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and Financial Condition -discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain necessary equity financing to continue operations and the attainment of profitable operations. As ofSeptember 30, 2023, the Company had an accumulated deficit of $121.3 million since inception and had not yet generated any revenues from operations. Additionally, management anticipates that its cash on hand of $24.6 million as of September 30, 2023 is sufficient to fund its planned operations into but not beyond the near term. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company may seek additional funding through a combination of equity offerings, debt financings, government or other third-party funding, commercialization, marketing and distribution arrangements, other collaborations, strategic alliances and licensing arrangements and delay planned cash outlays or a combination thereof. Management cannot be certain that such events or a combination thereof can be achieved. 

 In March 2022, the Company received a subpoena from the SEC requesting information and documents, including materials related to certain individuals (none of which are the Company's officers or directors) and entities, and materials related to the development of and statements regarding the Company's drug candidate for the treatment of COVID-19. The Company has received, and expects to continue to receive, periodic further requests from the SEC staff with respect to this matter. The Company is an early stage company and has not generated any revenuesaware of the specific nature of the underlying investigation by the SEC, and to date. As such,the extent that this investigation relates to prior public disclosures that it has made, the Company believes in the accuracy and adequacy of such prior disclosures. The correspondence from the SEC transmitting the subpoena to the Company states that the SEC is subjecttrying to alldetermine 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. The Company cannot predict when this matter will be resolved or what, if any, action the SEC may take following the conclusion of the risks associated with early stage companies. Since inception,investigation. The Company expensed approximately $0.4 million and $1.1 million in related general and administrative fees and expenses for the Company has incurred losses three months ended September 30, 2023 and negative cash flows from operating activities. For2022, respectively, and $1.4 million and $1.9 million for the nine months ended September 30, 20222023 and 20212022, respectively. The Company is in the process of filing a claim with its insurance carriers related to this loss which may cover a portion of the related expenses but not all. The claim is currently under review by the insurance company. The claim has not yet been approved nor has a reimbursement amount been determined. Accordingly, 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. Athas September 30, 2022not, the Company had an accumulated deficit of $95.1 million and cash and cash equivalents of $50.4 million. recorded any provision for insurance reimbursement. The Company expects its cash on hand as of September 30, 2022 willto record the insurance reimbursement at the time that the amount to be sufficient to fundreimbursed is determined and approved by 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.insurance carrier. 

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): 

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 the financial liabilities reported at fair value and measured on a recurring basis at September 30, 20222023 and December 31, 20212022 (table in thousands): 

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. 

The table below of Level 3 liabilities (table in thousands) begins with the valuation as of December 31, 20212022 and then is adjusted for changes in fair value that occurred during the nine months ended September 30, 20222023. 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.

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.anti-dilutive. For the three months ended September 30, 20222023 and 20212022, approximatelyapproximatel 6.0y 8.5 million and 4.56.0 million, respectively, of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their antidilutiveanti-dilutive effect. For the nine months ended September 30, 20222023 and 20212022, approximately 5.27.0 million and 4.1and 5.2 million, respectively, of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their antidilutiveanti-dilutive 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- There are August 2020, nothe Financial Accounting Standards Board, or FASB, recently 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 notaccounting standards updates that are currently expected to have a material impact on the Company's condensed consolidated financial statements.Company. 

In

3. Accrued Expensesexpenses and Other Current Liabilitiesother current liabilities

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

Additionally, accounts payable includes $72,000 and $48,000  $64,000 as of September 30, 20222023 and December 31, 20212022, respectively, for related party payables.

4. Warrants

Liability Classified Warrants

The Company uses the Black-Scholes option pricing model (BSM) 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 Company's outstanding liability classified warrants are as follows:

A summary of the Company's liability classified warrant activity during the nine months ended September 30, 20222023 and related information follows: 

For a summary of the changes in fair value associated with the Company's warrant liability for the nine months ended September 30, 20222023, see Note 2 - Basis of presentation, principles of consolidation and significant accounting policies - Fair Value of Financial Instruments.

Equity Classified Warrants

In September 2022,August 2023, 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 250,000up to 100,000 shares of Company common stock with a five-year term and an exercise price of $0.62. The warrants vest based on performance of certain services. As of September 30, 2023, no related vesting criteria were met.

In June 2023, the Company granted equity-classified warrants to purchase 150,000 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$0.60 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, 2023, the Company had 896,501 equity classified warrants outstanding and 424,084 warrants were exercisable. At December 31, 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 186,560400,859 warrants were exercisable.

The Company recorded stock compensation expense for equity classified warrantsthe non-employee consulting agreements of $232,000$50,000 and $422,000$232,000 for the three months ended September 30, 20222023 and 20212022, respectively, and $398,000and $432,000$142,000 and $398,000 for the nine months ended September 30, 20222023 and 20212022, respectively. At September 30, 20222023, there was $507,000$446,000 of unrecognized stock compensation expense related to the Company's equity classified warrants.

5. Equity 

2022 Stock IssuancesLincoln Park Equity Line

During the nine months ended September 30, 20222023, pursuant to the 2021 Lincoln Park purchase agreement, the Company issued to Lincoln Park 225,568 shares of common stock for gross proceeds of $0.2 million. The 2021 Lincoln Park Agreement, which has $19.8 million available as of September 30, 2023, terminates in June 2024.

Other Components of Equity 

In March 2023, the Company and WPD Pharmaceuticals (WPD) agreed to terminate the WPD Agreement (defined below). Pursuant to the termination, the Company agreed to pay WPD (or its designees) $700,000 in cash and shares of its common stock valued at $800,000. In March 2023, the Company issued 822,115 shares of common stock to WPD (or its designee) as part of satisfying this commitment. See Note 7 - Commitments and Contingencies. In addition, during the nine months ended September 30, 2023, the Company issued 49,489134,933 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.

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.rights to employees, non-employee directors and consultants. In May 2023 and 2022, the 2015 Stock Plan (the Plan) was amended to authorize an additional 1,750,000 shares and 2,000,000 shares, respectively, such that 5,500,000 total shares may be issued under the Plan. As of September 30, 20222023, there werewer 752,296 se 27,752 sharhareses remaining to be issued under the 2015 Stock Plan. 

Stock-based compensation expense for the three and nine months ended September 30, 20222023 and 20212022, respectively, consists of the following componentsis as follows (table in thousands): 

During the nine months ended September 30, 20222023, the Company grantegrantedd 842,832 stock 1,496,000 stock options with a weighted average fair value of $1.26 $0.49 per share and 979,376 shares of restricted stock units with a weighted average fair value of $0.60 per share. These stock options have a weighted average exercise price of $1.49 per share, which optionsof $0.60 and vest over a oneone to four-year 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 452,334period. The restricted stock units with a weighted average fair value of $1.49 per share, that vest over aannually in four year period from the grant date on a straight line basis over the requisite service period.equal installments. 

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 20222023 as a result of the losses recorded during the three and nine months ended September 30, 20222023 and the additional losses expected for the remainder of 20222023 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, 20222023 and December 31, 20212022 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, 20222023 and 20212022, respectively. The effective tax rate for the nine months ended September 30, 20222023 and 20212022 is 0%nil. The income tax rates vary from the federal and state statutory rates primarily due to the change in fair value of the stock warrants, Internal Revenue Code Section 162(m) limitations and ISO activity, as well as the 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.

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, 20222023.

Lease Obligations Payable

The following summarizes quantitative information about the Company's operating leases for the three and nine months ended September 30, 20222023 and 20212022, respectively (table in thousands):

In September 2023, the Company executed an amendment to extend the corporate office lease until August 31, 2029, with an option to renew. The Company is required to remit base monthly rent of approximately $4,700 which will increase at an average approximate rate of 2% each year. The Company is also required to pay additional rent in the form of its pro-rata share of certain specified operating expenses of the building. 

In June 2022, the Company extended the Lab Lease for its lab spacelease 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 $12,000 in sublease income from a related party for the three months ended September 30, 20222023 and 20212022, respectively, and $32,000$37,000 and $31,000$32,000 for the nine months ended September 30, 20222023 and 20212022, 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 $34,000 and $35,000$21,000 for the three months ended September 30, 20222023 and 20212022, respectively, and $91,000 and$109,000 a $103,000nd $91,000 for the nine months ended September 30, 20222023 and 20212022, respectively.

Licenses

MD Anderson - Total expenses related to the Company's license agreements with MD Anderson werewere $64,000 and $56,000 forfor the three months ended September 30, 20222023 and 20212022, and $189,000respectively, and $193,000 and $150,000$189,000 for the nine months ended September 30, 20222023 and 20212022, 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 total expenses osixty days' notice by either party, allows access to laboratory equipment owned by HPIf $59,000 for a payment of $15,000 per quarter. Total expenses related to the Company's agreements with HPI were $59,000 efor eachach of the three months ended September 30, 20222023 and 20212022, respectively, and $176,000 for each of the nine months ended September 30, 20222023 and 20212022., respectively.

Sponsored Research Agreements - In June 2022,October 2023, the Company entered into a newan amendment to the Sponsored Research Agreement with MD Anderson for a total paymentpayments of $1.3$0.8 million to support the continuation of the project through December 31, 2024.2025. In addition, the Company also has Sponsored Research Agreements with other universities, one in the US and one in Europe. TotalThe expenses related torecognized under the Company's Sponsored Research Agreementsagreements were $315,000$221,000 and $220,000$315,000 for the three months ended September 30, 20222023 and 20212022, respectively, and $552,000 and $815,000 and $498,000 for the nine months ended September 30, 20222023 and 20212022, respectively.

License Terminations -

The Company was party to a sublicense agreement with WPD, pursuant to which it sublicensed to WPD certain intellectual property rights, including rights to Annamycin, its WP1122 portfolio, and its WP1066 portfolio (as amended, the “WPD Agreement”). WPD is affiliated with Dr. Waldemar Priebe, the Company's founder. In March 2023, the Company and WPD agreed to terminate the WPD Agreement and agreed to pay WPD (or its designee) $700,000 in cash and shares of its common stock valued at $800,000. In March 2023, the Company issued 822,115 shares of common stock to WPD's designee as part of satisfying this commitment. With the termination of the WPD Agreement, the Company now has acquired the rights in certain territories previously sub-licensed to WPD to all of its licensed intellectual property, other than the rights related to non-human animals. Additionally, the Company acquired the in-process research and development that WPD has created during the term of the agreement.

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,Total expenses, reflected in March 2021, the Company determined the stability of WP1732, a molecule in the WP1066 Portfolio was less than satisfactoryresearch 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. Totaldevelopment expenses, related to the Company's license terminations were zero$1.5 million and $0.4 million for each of the three months ended September 30, 2022 and2021, and $400,000 and zero for the nine months ended September 30, 20222023 and 20212022, 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, 20222023.

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:

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, ofincluding Phase 2 clinical programs for the treatment of highly resistanthard-to-treat cancers and viruses. We have three core technologies, each of which have had one or more drugs successfully complete a Phase 1 clinical trial, based substantially on discoveries made at and licensed from MD Anderson Cancer Center (MD Anderson) in Houston, Texas. We haveThree of our six drug candidates three of which have now shown human activity in clinical trials and are currently in Phase 1B/2 or Phase 2 clinical trials. Since our inception, our drugs have completed, are currently in, or have received approval to proceed in eleven clinical trials.

Our Core Technologies

Our core technologies consist of the following:

a) Annamycin or L-Annamycin is 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); common forms of chemotherapy), designed to be different than currently approved anthracyclines, which are limited in utility because of cardiotoxicity risks and their susceptibility to multidrug resistance mechanisms. Annamycin was designed to avoid multidrug resistance and to be non-cardiotoxic and has shown no cardiotoxicity in subjects treated in clinical trials to date. Furthermore, we have demonstrated safe dosing beyond the dose limitations imposed by regulatory authorities upon currently prescribed anthracyclines due to their inherent cardiotoxicity;

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)transcription 3) 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, and 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 ofviruses that depend upon glycolysis and glycosylation in viruses.to infect and replicate.

In discussions regarding Annamycin’s lack of cardiotoxicity, we rely on our expert's assessment of certain clinical trial subject data including LVEF, ECHO strain analyses, and cardiac biomarkers – troponins I & T and our pre-clinical and clinical data, some of which are preliminary and subject to change.

Our Focus

We are focused on internally funded development of:

1) Annamycin for the treatment of Soft Tissue Sarcoma metastasized to the lungs (STS lung metastases or STS lung mets)

2) Annamycin in combination with Cytarabine (also known as Ara-C, the combination with Annamycin is referred to as AnnAraC) for the treatment of Acute Myeloid Leukemia (R/R AML or AML).

3) A better formulation for delivery of WP1066 to further support current and possibly future externally funded oncology clinical trials. 

We have also recently established a Recommended Phase 2 Dose (RP2D) for WP1122 to potentially enable future externally funded oncology and virology trials. Beyond this, we support development of our core technologies through several externally funded clinical trials and primarily externally funded non-clinical research, with the potential for further studies in the future.

Our Clinical Trials

In the US and Europe, since our inception, we or independent investigators have approval to begin, are currently conducting or have completed eleven internally or externally funded clinical trials for four of our drug candidates – Annamycin, WP1066, WP1220, and WP1122. All clinical trials are or were in the Phase 1 or 2 stage. During 2021, we had four active clinical trials evaluating either Annamycin or WP1066 in the US and Europe. This increased to six active or recently completed trials in 2022 involving Annamycin, WP1066, and WP1122. Starting in 2021 through 2023, there have been seven "right-to-try" (or their foreign equivalent) uses of Annamycin and WP1066. Three of the six clinical trials active in 2022 were internally funded trials of Annamycin and one was an internally funded Phase 1 clinical trial for WP1122 establishing an RP2D.

Moving into 2023 with our internally funded trials focused on Annamycin, we were actively recruiting in two Phase 1B/2 stage clinical trials and have concluded one Phase 1 trial. We have recently concluded recruitment and treatment in one of the Phase 1B/2 trials but are still monitoring progression free survival and overall survival. This now leaves only one Phase 1B/2 clinical trial active with regard to recruiting and treatment. Both of these Phase 1B/2 clinical trials are open label, so we periodically announce safety and efficacy data.

In February 2023, the externally funded Phase 1 clinical trial with WP1066 for the treatment of pediatric brain tumors concluded. We expect up to two externally funded Phase 1B/2 clinical trials for WP1066 in the treatment of GBM and other brain tumors in the first half of 2024. One more pediatric clinical trial may occur later subject to the results of the other two possible clinical trials.

During 2022 and 2023, we or independent investigators filed applications, began recruiting or are currently recruiting for six internally or externally funded clinical trials in the US and Europe.

Additionally, we are in discussions with research institutions in the US and Asia regarding possible externally funded trials or programs involving WP1066.

Recent Business Developments 

Below are recent business developments.

Annamycin

Received AdditionalNew Positive Independent Report Supporting Non-cardiotoxicity of No Cardiotoxicity in Annamycin

In September 2023, we received a new independent assessment for the absence of cardiotoxicity in subjects treated with Annamycin. We now have independent assessments covering 62 subjects that have been treated with Annamycin in Recent Subjectsfour different clinical trials in the U.S. and Europe with no evidence of cardiotoxicity. 50 of all 66 subjects treated to date (which includes the 62 subjects independently assessed) were treated above the FDA’s lifetime maximum anthracycline limit of 550 mg/m², with 1 subject having been treated with 3420 mg/m² (or roughly six times the FDA approved lifetime anthracycline exposure) of standard anthracyclines and Annamycin with no evidence of cardiotoxicity.

On October 11, 2022, we received another reportData 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 42all subjects in our threecompleted and all evaluable subjects in our ongoing clinical trials utilizing Annamycin where(a total of 62 subjects as of the most recent report) were made available to an expert in chemotherapy who is affiliated with a leading research institute in assessing chemotherapy-related cardiotoxicity. After review of this data, the independent expert, in their most recent report, concluded that there was no evidence of cardiotoxicity has been identified by an independent expert cardiologist. All expert reviewscardiotoxicity.

The data made available included analysis ofleft ventricular ejection fraction echo(LVEF) as determined by echocardiograms, ECHO strain imaging, and certain troponinTroponin levels. “ECHO strain imaging” is a method in echocardiography (medical ultrasound) for measuring regional or global deformation (contraction or beating) of the myocardium (heart muscle). By strain rate imaging, the simultaneous function of different regions can be displayed and measured. Cardiac health biomarkers such as blood Troponin levels intended to assess theare considered an indicator of potential for both acute and chroniclong-term 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 ofMB-106 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:

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 Annamycinin Combination with Cytarabine for the Treatment of Subjects with Acute Myeloid Leukemia (AML) That is Refractory to or Relapsed After InductionAML (“5+3 Therapy”)

On September 29, 2022,May 2, 2023, we opened enrollment and began screening subjects at one siteannounced successful completion of the first cohort in Poznan, Poland in theour Phase 11B portion of theour Phase 1/1B/2 study ofclinical trial using Annamycin in combination with Cytarabine (Ara-C) for the treatment of AML (MB-106). This study is utilizing a “5+3” regimen where Annamycin is administered with three days of infusion along with the five days of infusion of Cytarabine. This combination strategy is similar to the familiar “7+3” induction therapy that is considered to be a standard of care in AML, where seven days of Cytarabine infusions are paired with three days of an approved anthracycline (typically, daunorubicin). In the first cohort 3 subjects were treated, all of whom were relapsed from multiple prior therapies. Annamycin was dosed at 190 mg/m², along with acute myeloid leukemia (AML)Cytarabine at 2.0 g/m²/day for five days (total dose of 10g/m²). We, at the recommendation of the safety review committee, deemed the first cohort dose as safe and opened the second cohort with the Annamycin dose being increased to 230 mg/m². 

The median number of prior therapies for these 3 subjects in the first cohort was five (range of one to ten). 1 subject, who was 78 years of age at the time of the study initiation and enrolled after a single prior multi-year therapy, achieved a CR that has continued to be durable at approximately eight months. This subject has received a second course of treatment at the direction of the treating physician and as allowed per the protocol. The other 2 subjects were shown to have disease progression.

On August 7, 2023, we successfully completed the second cohort at 230 mg/m² of Annamycin in this combination study. 4 subjects were treated in this cohort, 1 is believed to be relapsed from one or more prior therapies and 3 are believed to be refractory from up to three prior therapies. 1 subject was replaced due to a Serious Adverse Event (SAE) experienced on Day 1 of dosing. The SAE was determined to be unrelated to Annamycin and definitively related to Cytarabine. We, at the recommendation of the safety review committee, deemed the second cohort dose as safe and opened recruitment, including for both first line therapy and for subjects who are refractory to or relapsed after induction therapy, (MB-106)to the Phase 2 portion of the trial. The median number of prior therapies for the 3 evaluable subjects in the second cohort was two (range of one to three) and the median age was 67. 1 subject, who was 64 years of age at the time of enrollment into the study with one prior therapy, was preliminarily recorded as a complete response with an incomplete recovery of the bone marrow or CRi per the protocol. This has since been deemed a CR (complete response), which has shown to be durable for approximately three months, which has allowed this subject to proceed to a bone marrow transplant. The other 2 subjects were shown to have disease progression. Durability of CRs is confirmed by repeat bone marrow aspirates (BMA's). We plan to open additional sites for this study in Poland and other European countries.

Received Allowance to Proceed withThe total CRs in the Phase 1/2 Study1B portion of Annamycin in Combination with Cytarabine (AnnAraC) for the Treatmentthis combination trial represent 33% (n=6). Notably, these CRs are considered durable. The median age of Acute Myeloid Leukemiathese subjects was 66.

On May 5, 2022,October 2, 2023, 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-Cinitial subjects had been treated 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 inportion of MB-106. The data below are as reported by the near future.

Continued Discussions with Two Academic Institutions Regarding WP1066 for the Treatmentinvestigation sites as 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 ofNovember 9, 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 receivedrecruited, treated, and participatedevaluated 3 subjects in five compassionate use applications with the FDA or foreign equivalent involving WP1066 since 2021 with fourPhase 2 portion of the trial. 1 subject has been evaluated and determined to be a CR. We will assess durability in the near future. Another subject in the Phase 2 portion died from a stroke (deemed not be related to Annamycin) prior to being re-biopsied to determine disease status. The third has undergone a re-biopsy which shows zero blasts in the marrow and that data is now being assessed by the investigator. This latest subject is not included in the chart below. The median age of the first two subjects is 69 years (range of 69 to 70) and the median number of prior therapies for these subjects is three (both are three). Other subjects in the Phase 2 portion of the trial are in the process of screening and treatment. We intend to treat up to 21 subjects in this Phase 2 portion of the trial. We may recruit an additional 3 subjects depending on recruitment. At our rate of recruitment plus the addition of another three sites for the trial, we expect to complete recruitment by early 2024.

The total CR response rate in both Phases to date in MB-106 is 38% (n=8), and although sufficient time has not passed to assess durability for the latest of these occurring in 2022. TheseCRs, the 2 earliest CRs have included adultnow shown durability. The median baseline bone marrow assessments for the 3 CRs was 74.2 (range of 20 to 80). CRc is used to denote composite complete responses including CRs and pediatric subjects both in the US and in Europe.CRis.

Moved IntravenousBelow in Table 1 is a summary of the above responses in MB-106 and Other Formulations of WP1066 into Preclinical Testingin the concluded MB-105 monotherapy trial on AML.

All data presented above from the MB-106 trial are preliminary and subject to change.

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 MB-107 Annamycin Monotherapy for the Treatment of Recurrent Malignant GliomaSTS Lung Mets

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, 2022,21, 2023, we announced that our WP1096 molecule (partthe completion of enrollment in the Phase 2 portion 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 WP1122U.S. Phase 1B/2 clinical trial evaluating Annamycin as monotherapy for the treatment of Glioblastoma Multiforme. soft tissue sarcoma lung metastases (MB107). Subjects who had stable disease at the time of study discontinuation will continue to be followed for progression free response and overall survival. All subjects had pulmonary metastasis from soft tissue sarcoma and at least one prior therapy. There was no limit on how many prior therapies a subject could have prior to entering this study. Most subjects were heavily treated with other therapies prior to entering our trial with our treatment representing the fourth median therapy for all subjects in the Phase 1B and Phase 2 portion of the trial (range of two to twelve). As of November 6, 2023, as reported by the investigation sites, most subjects in Phase 2 are alive so overall survival data are not available at this time. Below in Table 2 is a summary of progression free survival for evaluable subjects, as discussed further below, by groupings and median overall survival for all subjects evaluable in Phase 1B:

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