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 March 31,September 30, 2020
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For 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
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
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 60,403,16462,464,564 shares of common stock outstanding at May 6,November 5, 2020.
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PART 1 FINANCIAL INFORMATION Condensed Consolidated Balance Sheets (in thousands, except for share and per share data) (unaudited)March 31, December 31, 2020 2019 Assets Current assets: Cash and cash equivalents $ 11,649 $ 10,735 Prepaid expenses and other current assets 2,138 2,749 Total current assets 13,787 13,484 Furniture and equipment, net 271 316 Intangible assets 11,148 11,148 Operating lease right-of-use asset 266 287 Total assets $ 25,472 $ 25,235 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 1,206 $ 2,153 Accrued expenses and other current liabilities 2,029 1,417 Total current liabilities 3,235 3,570 Operating lease liability - long-term, net of current portion 248 276 Warrant liability - long-term 6,697 5,818 Total liabilities 10,180 9,664 Commitments and contingencies (Note 7) Stockholders' equity Preferred stock, $0.001 par value; 5,000,000 shares authorized, 0 shares issued or outstanding — — Common stock, $0.001 par value; 100,000,000 shares authorized as of March 31, 2020 and December 31, 2019, 53,227,700 and 45,727,700 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively 53 46 Additional paid-in capital 56,011 55,055 Accumulated other comprehensive income (loss) (2) 31 Accumulated deficit (40,770) (39,561) Total stockholders’ equity 15,292 15,571 Total liabilities and stockholders’ equity $ 25,472 $ 25,235
September 30, | December 31, | |||||||
2020 | 2019 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 12,795 | $ | 10,735 | ||||
Prepaid expenses and other current assets | 2,455 | 2,749 | ||||||
Total current assets | 15,250 | 13,484 | ||||||
Furniture and equipment, net | 522 | 316 | ||||||
Intangible assets | 11,148 | 11,148 | ||||||
Operating lease right-of-use asset | 224 | 287 | ||||||
Total assets | $ | 27,144 | $ | 25,235 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,343 | $ | 2,153 | ||||
Accrued expenses and other current liabilities | 2,095 | 1,417 | ||||||
Total current liabilities | 3,438 | 3,570 | ||||||
Operating lease liability - long-term, net of current portion | 190 | 276 | ||||||
Warrant liability - long-term | 9,049 | 5,818 | ||||||
Total liabilities | 12,677 | 9,664 | ||||||
Commitments and contingencies (Note 7) | ||||||||
Stockholders' equity | ||||||||
Preferred stock, $0.001 par value; 5,000,000 shares authorized, no shares issued or outstanding | 0 | 0 | ||||||
Common stock, $0.001 par value; 100,000,000 shares authorized as of September 30, 2020 and December 31, 2019, 61,764,225 and 45,727,700 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | 62 | 46 | ||||||
Additional paid-in capital | 68,649 | 55,055 | ||||||
Accumulated other comprehensive income | 33 | 31 | ||||||
Accumulated deficit | (54,277 | ) | (39,561 | ) | ||||
Total stockholders’ equity | 14,467 | 15,571 | ||||||
Total liabilities and stockholders’ equity | $ | 27,144 | $ | 25,235 |
See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
(unaudited)
Three Months Ended March 31, | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||
Revenues | Revenues | $ | — | $ | — | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||||||||||||||||||
Operating expenses: | Operating expenses: | ||||||||||||||||||||||||||||||||||||||||||||
Research and development | Research and development | 3,206 | 2,932 | 4,435 | 2,785 | 10,971 | 7,816 | ||||||||||||||||||||||||||||||||||||||
General and administrative | General and administrative | 1,810 | 1,591 | 1,659 | 1,672 | 5,122 | 4,748 | ||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | Depreciation and amortization | 46 | 48 | 57 | 51 | 154 | 147 | ||||||||||||||||||||||||||||||||||||||
Total operating expenses | Total operating expenses | 5,062 | 4,571 | 6,151 | 4,508 | 16,247 | 12,711 | ||||||||||||||||||||||||||||||||||||||
Loss from operations | Loss from operations | (5,062) | (4,571) | (6,151 | ) | (4,508 | ) | (16,247 | ) | (12,711 | ) | ||||||||||||||||||||||||||||||||||
Other income: | Other income: | ||||||||||||||||||||||||||||||||||||||||||||
Gain from change in fair value of warrant liability | Gain from change in fair value of warrant liability | 3,845 | 529 | 2,743 | 124 | 1,489 | 3,059 | ||||||||||||||||||||||||||||||||||||||
Other income, net | Other income, net | 5 | — | 10 | 5 | 32 | 5 | ||||||||||||||||||||||||||||||||||||||
Interest income, net | Interest income, net | 3 | 1 | 3 | 5 | 10 | 10 | ||||||||||||||||||||||||||||||||||||||
Net loss before taxes | $ | (3,395 | ) | $ | (4,374 | ) | $ | (14,716 | ) | $ | (9,637 | ) | |||||||||||||||||||||||||||||||||
Income tax benefit | 0 | 229 | 0 | 229 | |||||||||||||||||||||||||||||||||||||||||
Net loss | Net loss | $ | (1,209) | $ | (4,041) | $ | (3,395 | ) | $ | (4,145 | ) | $ | (14,716 | ) | $ | (9,408 | ) | ||||||||||||||||||||||||||||
Net loss per common share - basic and diluted | Net loss per common share - basic and diluted | $ | (0.02) | $ | (0.14) | $ | (0.06 | ) | $ | (0.09 | ) | $ | (0.26 | ) | $ | (0.24 | ) | ||||||||||||||||||||||||||||
Weighted average common shares outstanding, basic and diluted | Weighted average common shares outstanding, basic and diluted | 49,930,997 | 29,064,913 | 61,474,857 | 45,464,746 | 56,979,507 | 39,034,303 | ||||||||||||||||||||||||||||||||||||||
Net Loss | Net Loss | $ | (1,209) | $ | (4,041) | $ | (3,395 | ) | $ | (4,145 | ) | $ | (14,716 | ) | $ | (9,408 | ) | ||||||||||||||||||||||||||||
Other comprehensive income (loss): | Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation | Foreign currency translation | (33) | (11) | 10 | (3 | ) | 2 | (16 | ) | ||||||||||||||||||||||||||||||||||||
Comprehensive loss | Comprehensive loss | $ | (1,242) | $ | (4,052) | $ | (3,385 | ) | $ | (4,148 | ) | $ | (14,714 | ) | $ | (9,424 | ) |
See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended March 31, | Nine Months Ended September 30, | ||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||
Cash flows from operating activities: | Cash flows from operating activities: | ||||||||||||||||||||||||
Net loss | Net loss | $ | (1,209) | $ | (4,041) | $ | (14,716 | ) | $ | (9,408 | ) | ||||||||||||||
Adjustments to reconcile net loss to net cash used in operating activities: | Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||||||||||
Depreciation and amortization | Depreciation and amortization | 46 | 48 | 154 | 147 | ||||||||||||||||||||
Stock-based compensation | Stock-based compensation | 397 | 348 | 1,265 | 1,155 | ||||||||||||||||||||
Gain from change in fair value of warrant liability | (3,845) | (529) | |||||||||||||||||||||||
License rights expense settled in stock | 0 | 490 | |||||||||||||||||||||||
Change in fair value of warrant liability | (1,489 | ) | (3,059 | ) | |||||||||||||||||||||
Operating lease, net of sublease receipts | Operating lease, net of sublease receipts | 99 | — | 90 | (10 | ) | |||||||||||||||||||
Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | ||||||||||||||||||||||||
Prepaid expenses and other current assets | Prepaid expenses and other current assets | 611 | 9 | 294 | (2,337 | ) | |||||||||||||||||||
Accounts payable | Accounts payable | (947) | 1,553 | (810 | ) | 1,942 | |||||||||||||||||||
Accrued expenses and other current liabilities | Accrued expenses and other current liabilities | 506 | (1,235) | 565 | (1,441 | ) | |||||||||||||||||||
Net cash used in operating activities | Net cash used in operating activities | (4,342) | (3,847) | (14,647 | ) | (12,521 | ) | ||||||||||||||||||
Cash flows from investing activities: | Cash flows from investing activities: | ||||||||||||||||||||||||
Purchase of fixed assets | Purchase of fixed assets | (2) | (15) | (360 | ) | (42 | ) | ||||||||||||||||||
Net cash used in investing activities | Net cash used in investing activities | (2) | (15) | (360 | ) | (42 | ) | ||||||||||||||||||
Cash flows from financing activities: | Cash flows from financing activities: | ||||||||||||||||||||||||
Proceeds from exercise of stock options | Proceeds from exercise of stock options | — | 5 | 0 | 5 | ||||||||||||||||||||
Proceeds from exercise of warrants | 5 | 1,557 | |||||||||||||||||||||||
Payment of tax liability for vested restricted stock units | (17 | ) | 0 | ||||||||||||||||||||||
Proceeds from sale of common stock, net of issuance costs | Proceeds from sale of common stock, net of issuance costs | 5,291 | 5,516 | 17,077 | 19,292 | ||||||||||||||||||||
Net cash provided by financing activities | Net cash provided by financing activities | 5,291 | 5,521 | 17,065 | 20,854 | ||||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | Effect of exchange rate changes on cash and cash equivalents | (33) | $ | (11) | 2 | (16 | ) | ||||||||||||||||||
Net change in cash and cash equivalents | Net change in cash and cash equivalents | 914 | 1,648 | 2,060 | 8,275 | ||||||||||||||||||||
Cash and cash equivalents, at beginning of period | Cash and cash equivalents, at beginning of period | 10,735 | 7,134 | 10,735 | 7,134 | ||||||||||||||||||||
Cash and cash equivalents, at end of period | Cash and cash equivalents, at end of period | $ | 11,649 | $ | 8,782 | $ | 12,795 | $ | 15,409 | ||||||||||||||||
Supplemental disclosures of cash flow information: | Supplemental disclosures of cash flow information: | ||||||||||||||||||||||||
Cash paid for interest | Cash paid for interest | $ | — | $ | 1 | $ | 0 | $ | 1 | ||||||||||||||||
Cash paid for taxes | Cash paid for taxes | $ | 6 | $ | 2 | $ | 20 | $ | 15 | ||||||||||||||||
Research and development expense settled in stock | $ | 0 | $ | 490 | |||||||||||||||||||||
Non-cash investing and financing activities: | Non-cash investing and financing activities: | ||||||||||||||||||||||||
Purchases of property and equipment in accounts payable and accrued liabilities | Purchases of property and equipment in accounts payable and accrued liabilities | $ | 23 | $ | 41 | $ | 316 | $ | 21 |
See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except for shares)
(unaudited)
Three Months Ended March 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Par Value Amount | Additional Paid-In Capital | Accumulated Deficit | Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2019 | 45,727,700 | $ | 46 | $ | 55,055 | $ | (39,561) | $ | 31 | $ | 15,571 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issued for cash - sale of common stock, net of issuance costs of $709 | 7,500,000 | 7 | 559 | — | — | 566 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 397 | — | — | 397 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated net loss | — | — | — | (1,209) | — | (1,209) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative translation adjustment | — | — | — | — | (33) | (33) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2020 | 53,227,700 | $ | 53 | $ | 56,011 | $ | (40,770) | $ | (2) | $ | 15,292 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended March 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Par Value Amount | Additional Paid-In Capital | Accumulated Deficit | Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2018 | 28,528,663 | $ | 29 | $ | 40,564 | $ | (26,356) | $ | 35 | $ | 14,272 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issued for cash - sale of common stock, net of issuance costs of $617 | 5,250,000 | 5 | 3,221 | — | — | 3,226 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issued to Lincoln Park - sale of common stock | 605,367 | — | 883 | — | — | 883 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock options exercised | 25,000 | — | 5 | — | — | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 348 | — | — | 348 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated net loss | — | — | — | (4,041) | — | (4,041) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative translation adjustment | — | — | — | — | (11) | (11) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2019 | 34,409,030 | $ | 34 | $ | 45,021 | $ | (30,397) | $ | 24 | $ | 14,682 |
Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||
Common Stock | Additional | Accumulated | Accumulated Other Comprehensive | Stockholders' | ||||||||||||||||||||
Shares | Par Value Amount | Paid-In Capital | Deficit | Income (Loss) | Equity | |||||||||||||||||||
Balance, December 31, 2019 | 45,727,700 | $ | 46 | $ | 55,055 | $ | (39,561 | ) | $ | 31 | $ | 15,571 | ||||||||||||
Issued for cash - sale of common stock, net of issuance costs of $709 | 7,500,000 | 7 | 559 | 0 | 0 | 566 | ||||||||||||||||||
Stock-based compensation | — | 0 | 397 | 0 | 0 | 397 | ||||||||||||||||||
Consolidated net loss | — | 0 | 0 | (1,209 | ) | 0 | (1,209 | ) | ||||||||||||||||
Cumulative translation adjustment | — | 0 | 0 | 0 | (33 | ) | (33 | ) | ||||||||||||||||
Balance, March 31, 2020 | 53,227,700 | $ | 53 | $ | 56,011 | $ | (40,770 | ) | $ | (2 | ) | $ | 15,292 | |||||||||||
Issued for cash - sale of common stock, net of issuance costs of $336 | 7,170,964 | 7 | 10,000 | 0 | 0 | 10,007 | ||||||||||||||||||
Warrants exercised | 4,500 | 0 | 9 | 0 | 0 | 9 | ||||||||||||||||||
Stock-based compensation | — | 0 | 408 | 0 | 0 | 408 | ||||||||||||||||||
Consolidated net loss | — | 0 | 0 | (10,112 | ) | 0 | (10,112 | ) | ||||||||||||||||
Cumulative translation adjustment | — | 0 | 0 | 0 | 25 | 25 | ||||||||||||||||||
Balance, June 30, 2020 | 60,403,164 | $ | 60 | $ | 66,428 | $ | (50,882 | ) | $ | 23 | $ | 15,629 | ||||||||||||
Issued for cash - sale of common stock, net of issuance costs of $135 | 1,301,126 | 2 | 1,778 | 0 | 0 | 1,780 | ||||||||||||||||||
Common stock issued upon vesting of restricted stock units (net of shares withheld for payment of tax liability) | 59,935 | 0 | (17 | ) | 0 | 0 | (17 | ) | ||||||||||||||||
Stock-based compensation | — | 0 | 460 | 0 | 0 | 460 | ||||||||||||||||||
Consolidated net loss | — | 0 | 0 | (3,395 | ) | 0 | (3,395 | ) | ||||||||||||||||
Cumulative translation adjustment | — | 0 | 0 | 0 | 10 | 10 | ||||||||||||||||||
Balance, September 30, 2020 | 61,764,225 | $ | 62 | $ | 68,649 | $ | (54,277 | ) | $ | 33 | $ | 14,467 |
Nine Months Ended September 30, 2019 | ||||||||||||||||||||||||
Common Stock | Additional | Accumulated | Accumulated Other Comprehensive | Stockholders' | ||||||||||||||||||||
Shares | Par Value Amount | Paid-In Capital | Deficit | Income (Loss) | Equity | |||||||||||||||||||
Balance, December 31, 2018 | 28,528,663 | $ | 29 | $ | 40,564 | $ | (26,356 | ) | $ | 35 | $ | 14,272 | ||||||||||||
Issued for cash - sale of common stock, net of issuance costs of $617 | 5,250,000 | 5 | 3,221 | 0 | 0 | 3,226 | ||||||||||||||||||
Issued to Lincoln Park - sale of common stock | 605,367 | 0 | 883 | 0 | 0 | 883 | ||||||||||||||||||
Stock options exercised | 25,000 | 0 | 5 | 0 | 0 | 5 | ||||||||||||||||||
Stock-based compensation | — | 0 | 348 | 0 | 0 | 348 | ||||||||||||||||||
Consolidated net loss | — | 0 | 0 | (4,041 | ) | 0 | (4,041 | ) | ||||||||||||||||
Cumulative translation adjustment | — | 0 | 0 | 0 | (11 | ) | (11 | ) | ||||||||||||||||
Balance, March 31, 2019 | 34,409,030 | $ | 34 | $ | 45,021 | $ | (30,397 | ) | $ | 24 | $ | 14,682 | ||||||||||||
Issued for cash - sale of common stock, net of issuance costs of $1,300 | 9,375,000 | 9 | 3,575 | 0 | 0 | 3,584 | ||||||||||||||||||
Warrants exercised | 1,413,018 | 2 | 4,729 | 0 | 0 | 4,731 | ||||||||||||||||||
Stock-based compensation | — | 0 | 318 | 0 | 0 | 318 | ||||||||||||||||||
Consolidated net loss | — | 0 | 0 | (1,221 | ) | 0 | (1,221 | ) | ||||||||||||||||
Cumulative translation adjustment | — | 0 | 0 | 0 | (2 | ) | (2 | ) | ||||||||||||||||
Balance, June 30, 2019 | 45,197,048 | $ | 45 | $ | 53,643 | $ | (31,618 | ) | $ | 22 | $ | 22,092 | ||||||||||||
Issued to Lincoln Park - sale of common stock, net of issuance costs of $59 | 100,674 | 0 | 52 | 0 | 0 | 52 | ||||||||||||||||||
Common stock issued for license rights | 429,978 | 1 | 489 | 0 | 0 | 490 | ||||||||||||||||||
Stock-based compensation | — | 0 | 489 | 0 | 0 | 489 | ||||||||||||||||||
Consolidated net loss | — | 0 | 0 | (4,145 | ) | 0 | (4,145 | ) | ||||||||||||||||
Cumulative translation adjustment | — | 0 | 0 | 0 | (3 | ) | (3 | ) | ||||||||||||||||
Balance, September 30, 2019 | 45,727,700 | $ | 46 | $ | 54,673 | $ | (35,763 | ) | $ | 19 | $ | 18,975 |
See accompanying notes to unaudited condensed consolidated financial statements.
Notes to the Unaudited Condensed Consolidated Financial Statements
1. Nature of Business and Liquidity
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, with its focus on the treatment of highly resistant cancers viaand viruses through the development of its oncology drug candidates, all of which are based on license agreements with The University of Texas System on behalf of the MD Anderson Cancer Center, which we refer to as MD Anderson. MBI formed Moleculin Australia Pty. Ltd., (MAPL), a wholly owned subsidiary, in June 2018, to beginperform certain preclinical development in Australia for WP1732, an analog of WP1066.Australia. This enables the Company to enjoy the benefits of certain research and development tax credits in Australia. In February 2019, the Company entered into an agreement with Animal Life Sciences, LLC (ALI), where the Company has granted a sublicense to ALI to research, develop, make, have made, use, offer to sell, sell, export or import and commercialize certain licensed products for non-human use and share development data. ALI issued to the Company a 10% interest in ALI. ALI converted into a corporation and became Animal Life Sciences, Inc.
Core Technologies -
MBI has 3 core technologies,The Company believesrefers to Annamycin isas a "Next Generation Anthracycline" since it is designed to avoid the multidrug resistance mechanisms that typically defeat currently approved anthracyclines, as well as to be non-cardiotoxic, which is the dose limiting toxicity offor all currently approved anthracyclines. Annamycin is currently in twoa Phase 1/2 clinical trials,trial in Europe, having successfully completed a Phase 1 safety trial in the US in early 2020, and preliminary clinical data suggests that it may have the potential to become the first therapy suitable for the majority of relapsed or refractory AML patients regardless of gene mutations. During 2019, theseThese trials have so far demonstrated the safety, including nothe absence of any cardiotoxicity, and has begun to showhave demonstrated some initial efficacy. Additionally, preclinical research in animal models at MD Anderson demonstrated that Annamycin is able to significantly improve survival in an aggressive form of triple negative breast cancermultiple tumors that have metastasized to the lungs. Coupled with research demonstrating that Annamycin is capable of accumulating in the lungs at high levels, this suggests that Annamycin may be well suited to become a treatment for lung-localized tumors.
WP1066 is one of several Immune/Transcription Modulators in the Company's pipeline that appear capable of stimulating immune response to tumors by inhibiting the errant activity of Regulatory T-Cells (TRegs) while also inhibiting key oncogenic transcription factors, including p-STAT3,p-STAT3, c-Myc and HIF-1α.HIF-1 alpha. These transcription factors are widely sought targets that may also play a role in the lack of efficacy of immune checkpoint inhibitors in certain resistant tumors. The “proof-of-concept” Phase 1 trial in Poland for WP1220 demonstrated safety and efficacy and preparationsthe Company intends to fileattempt to join efforts with a Phase 2 IND or its equivalent have begun.
The Company is also developing new prodrugs to exploit the potential uses of its WP1122 portfolio of antimetabolites, including inhibitors of glycolysis and glycosylation. Its lead Metabolism/Glycosylation Inhibitor compound, WP1122, provides an opportunity to cut off the fuel supply of tumors and viruses by taking advantage of their overdependence on glucose and glycolysis as compared with healthy cells. New research also points to the potential for the glucose decoy (2-DG)(2-DG) within WP1122 to be capable of enhancing the usefulness of checkpoint inhibitors and inhibiting glycosylation and glycolysis in virally infected cells. In March During 2020, we the Company entered into an agreementagreements with an outsideseveral third party research center who willcenters to conduct research on WP1122 for antiviral properties against a range of viruses, including Coronavirus. Additional research with other molecules in this portfolio with independent contractors has started.also begun.
Drug Candidates - Within the Company's core technologies, it currently has 65 drug candidates representing 3 substantially different approaches to treating cancer.mechanisms of action. Annamycin is a chemotherapy designed to inhibit the replication of DNA of rapidly dividing cells and is the Company's most mature drug candidate. The Company has trialsa trial open in Poland and one that recently completed in the US and Poland.US. The US Phase 1 portion of the Phase 1/2 trial reached key safety end points in early 2020 and2020. As a result of discussions with the FDA, the Company planswill utilize its trial in Europe to discuss next steps withestablish a recommended Phase 2 dose (RP2D) and to generate additional safety and efficacy data as requested by the FDA. The Phase 1/2 trial in Poland continues its dose escalation and is in its fifth cohort. cohort where patients are being treated at 240mg/m2. The second patient in that cohort experienced a dose limiting toxicity (DLT), secondarily related to concomitant medication not being withheld. The DLT was resolved, and that cohort will be expanded to a total of six patients. If a second DLT in this cohort occurs, then we would enroll three subjects that would be treated at 210mg/m2 to confirm the maximum tolerated dosage. If no additional DLT occurs in the current cohort, then we will progress to the sixth cohort at 300mg/m2. We believe the impact of the COVID-19 pandemic is slowing the pace of our patient recruitment in our Polish Annamycin clinical trial. We cannot assess when such an impact on our trial will be alleviated or if it will worsen. So far both trials have provendemonstrated that Annamycin, to date, is safe and is non-cardiotoxic. The trials have demonstrated initial efficacy as well.
In addition to Annamycin, the Company has other drug development projects, 2two of which are also in clinical trials:
• | Two separate Phase 1 physician-sponsored clinical trials are under way to evaluate WP1066. One trial is at MD Anderson Cancer Center for the potential treatment of adult patients with brain tumors and the other is at Emory University for the potential treatment of pediatric brain tumors. Both have begun treating patients. In the Emory trial, one of the patients with DIPG (Diffuse Intrinsic Pontine Glioma), showed an apparent response to the treatment with both clinical improvement and radiologic reduction of tumor size. We caution that this is preliminary data and no conclusions should be drawn from this single event. |
• | The Company is also evaluating WP1066 for the potential treatment of AML, pancreatic and other cancers. MBI has begun pre-clinical work that it expects to generate sufficient data for an IND for an intravenous formulation of one of its STAT3 inhibitors, which filing is expected to be submitted in 2021. |
• | WP1220 is an analog of WP1066 for which Polish authorities approved the Company's Clinical Trial Application (CTA) in 2019 for a Phase 1 "proof-of-concept" clinical trial to study the topical treatment of CTCL. This trial was completed, and the Company believes it demonstrated sufficient efficacy to justify a Phase 2 trial. The Company intends to attempt to join efforts with a strategic partner in 2021 for the further development of WP1220 for the treatment of CTCL. |
• | Several molecules in the WP1122 portfolio are being evaluated for their potential to address hard to treat cancers and viruses. This portfolio of antimetabolites includes WP1122 which inhibits glycolysis and glycosylation. The Company has begun preclinical work on WP1122 and other analogs in this portfolio to possibly position one or more of them as treatments for certain cancers and viruses, including the Coronavirus. The Company believes this work may support an IND or its equivalent for WP1122 and/or related compounds. |
Clinical Trials -
The Company has concluded the initial Phase 1 portion of its Phase 1/2 trial of Annamycin for the potential treatment of AML in the US due to the FDA’s requirement to set the initial dose level relatively low in comparison with previous Annamycin clinical trials. Additionally, the Company believes that patient recruitment for its Annamycin AML clinical trial inIn September 2018, the physician sponsored physician-sponsored WP1066 Phase I1 clinical trial for the treatment of glioblastoma and melanoma metastasized to the brain, which opened for recruitment in July 2018, began treating patients. In April 2020, a second physician-sponsored Phase 1 trial for another physician-sponsored clinical trial for the potential treatment of pediatric brain tumors began recruitment ofand has begun treating patients. In August 2019, the Company completed its proof-of-concept Phase 1 clinical trial in Poland to study WP1220, a part of the WP1066 portfolio, for the treatment of CTCL. This trial demonstrated the safety of WP1220 and also demonstrated, the Company believes, initial efficacy sufficient forto support beginning a Phase 2 trial, which clinical trial. The Company intends to attempt to join efforts with a strategic partner in 2021 for the further development of WP1220 for the treatment of CTCL.
Moleculin has recently announced discoveries (both internally funded and independently developed) supporting the potential use of WP1122 for the treatment of COVID-19 and other viral diseases. The Company is deploying resources on the development of an IND or its equivalent for testing WP1122 in patients with COVID-19 and/or certain cancers, as such preclinical work may support both viral and cancer indications. It expects to prepare forsubmit such an IND or its equivalent in the near future.
Licenses -
The Company has been granted royalty-bearing, worldwide, exclusive licenses for the patent and technology rights related to all of MBI's drug technologies, as these intellectual property rights are owned in part or entirely by MD Anderson. The Annamycin drug substance is no longer covered by any existing patent protection, however, the Company filed new patent applications in July 2019 for formulation, synthetic process and reconstitution related to MBI's Annamycin drug product candidate, although there is no assurance that the Company will be successful in obtaining such patent protection.Independently from potential patent protection, MBI has received Orphan Drug designation (ODD) from the FDA for Annamycin for the treatment of AML and for WP1066 for the treatment of glioblastoma. ODD may provide tax and other benefits during product development, and if either product is approved, may lead to a grant of seven-year market exclusivity. Under that exclusivity, which runs from the date of the approval of the New Drug Application (NDA) in the US, the FDA generally (there are important exceptions) could not approve another product containing the same drug for the designated indication. The Company also intends to apply for similar status in the European Union (EU) where market exclusivity could extend to 10 years from the date of Marketing Authorization Application (MAA) approval. Separately, the FDA may also grant market exclusivity of 5 years for newly approved new chemical entities (which the Company believes Annamycin would be one)one), which would preclude approval of any other annamycin product, but there can be no assurance that such exclusivity will be granted. In April 2019, FDA approved the Company's request for Fast Track Designation for Annamycin for the treatment of relapsed or refractory AML. Fast Track Designation, the purpose of which is to expedite drug development and approval, is granted to drugs intended to treat serious conditions and where data demonstrate the potential to address an unmet medical need.
COVID 19
- In March 2020, the World Health Organization declared the outbreak of a novel CoronavirusNasdaq
- On2. Basis of presentation, principles of consolidation and significant accounting policies
Basis of Presentation – Unaudited Interim Condensed Consolidated Financial Information -
The accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the US (U.S. GAAP) for financial information, and in accordance with the rules and regulations of the US Securities and Exchange Commission (SEC) with respect to FormPrinciples of consolidation
- The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. 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 1 operating segment. All long-lived assets of the Company reside in the US.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.Going 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 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 of March 31,September 30, 2020, the Company has incurred an accumulated deficit of $40.8$54.3 million since inception and had not yet generated any revenue from operations. Additionally, management anticipates that its cash on hand as of March 31,September 30, 2020, 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-partythird-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.
Cash and Cash Equivalents
- The Company considers all highly liquid accounts with original maturities of three months or less at the date of acquisition to be cash equivalents. Periodically in the ordinary course of business, the Company may carry cash balances at financial institutions in excess of the Federally insured limits ofPrepaid Expenses and Other Current Assets -
Prepaid expenses and other current assets consist of the following (in thousands):March 31, 2020 | December 31, 2019 | ||||||||||
Vendor prepayments and deposits | $ | 1,372 | $ | 1,857 | |||||||
Prepaid insurance | 150 | 352 | |||||||||
Non-trade receivables | 1 | 1 | |||||||||
Related party receivables | — | 10 | |||||||||
Other current assets | 615 | 529 | |||||||||
Total prepaid expenses and other current assets | $ | 2,138 | $ | 2,749 |
September 30, 2020 | December 31, 2019 | |||||||
Vendor prepayments and deposits | $ | 1,312 | $ | 1,857 | ||||
Prepaid insurance | 880 | 352 | ||||||
Other current assets | 257 | 529 | ||||||
Related party receivables | 5 | 10 | ||||||
Non-trade receivables | 1 | 1 | ||||||
Total prepaid expenses and other current assets | $ | 2,455 | $ | 2,749 |
Vendor prepayments at March 31,September 30, 2020 and December 31, 2019 respectively,, includes approximately $1.1 million and $1.5 million, respectively, for the expansion of Annamycin production commitments on a commercial scale currently expected to be delivered in through the remainder of 2020 and into the first quarter of 2021 for use in clinical trials.
Intangible Assets
- Intangible assets with finite lives are amortized using the straight-line method over their estimated period of benefit. Acquired intangible assets identified as in-process research and development (IPR&D) assets, are considered indefinite lived until the completion or abandonment of the associated research and development efforts. If the associated research and development effort is abandoned, the related IPR&D assets will be written-off and the Company will record a noncash impairment loss on its statements of operations. For those compounds that reach commercialization, the IPR&D assets will be amortized over their estimated useful lives. The Company evaluates the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. NaN impairments of intangible assets have been identified during any of the periods presented. Intangible assets are tested for impairment on an annual basis, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach.Property and Equipment, net -
Leasehold improvements, furniture, equipment and software are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of the estimated useful life or the remaining lease term. Accumulated depreciation on property and equipment was $0.4 million and $0.3 million atOperating Lease Right-of-Use Asset -
The Company determines if an arrangement is a lease at contract inception or during modifications or renewal of an existing lease. Operating lease assets represent the Company's right to use an underlying asset for the lease term and operating lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. The lease payments used to determine the Company's operating lease assets may include lease incentives, stated rent increases and escalation clauses linked to rates of inflation when determinable and are recognized in the Company's operating lease assets in the Company's condensed consolidated balance sheet. The Company has elected the practical expedient and does not separate lease components from nonlease components for its leases. The Company's operating leases are reflected in operating lease right-of-use asset (ROU), accrued expenses and other current liabilities, and operating lease liability - long-term, net of current portion in the Company's condensed consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Short-term leases, defined as leases that have a lease term of 12 months or less at the commencement date, are excluded from this treatment and are recognized on a straight-line basis over the term of the lease. Refer to Note 7 - Commitments and Contingencies - Lease Obligations Payable for additional information related to the Company’s operating leases.Cost Method Investment -
The Company's cost method investment consists of an investment in a corporation in which it does not have the ability to exercise significant influence over its operating and financial activities. Management evaluates this investment for possible impairment quarterly.Fair Value of Financial Instruments - The Company's financial instruments consist primarily of non-trade receivables, account payables,accounts payable, accrued expenses and its warrant liability. The carrying amount of non-trade receivables, accounts payables,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-levelthree-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)1) and lowest priority to unobservable inputs (Level 3)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 assets and liabilities reported at fair value and measured on a recurring basis at March 31,September 30, 2020 and December 31, 2019 (in thousands):
Description | Liabilities Measured at Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | ||||||||||||||||||||||
Fair value of warrant liability as of March 31, 2020: | $ | 6,697 | $ | — | $ | — | $ | 6,697 | ||||||||||||||||||
Fair value of warrant liability as of December 31, 2019: | $ | 5,818 | $ | — | $ | — | $ | 5,818 |
Quoted Prices | Significant | Significant | ||||||||||||||
Liabilities | in Active | Other | Other | |||||||||||||
Measured | Markets for | Observable | Unobservable | |||||||||||||
at Fair | Identical | Inputs | Inputs | |||||||||||||
Description | Value | Assets (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Fair value of warrant liability as of September 30, 2020: | $ | 9,049 | $ | 0 | $ | 0 | $ | 9,049 | ||||||||
Fair value of warrant liability as of December 31, 2019: | $ | 5,818 | $ | 0 | $ | 0 | $ | 5,818 |
The table below (in thousands) of Level 3 liabilities begins with the valuation as of the beginning of the firstthird quarter and then is adjusted for the issuances and exercises that occurred during the firstthird quarter of 2020 and adjusts for balances for changes in fair value that occurred during the current quarter. The ending balance of the Level 3 financial instrument presented above represents our 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, 2020 | Warrant Liability Current | Warrant Liability Long-Term | Warrant Liability Total | |||||||||
Balance, June 30, 2020 | $ | 0 | $ | 11,792 | $ | 11,792 | ||||||
Exercise of warrants | 0 | 0 | 0 | |||||||||
Change in fair value - net | 0 | (2,743 | ) | (2,743 | ) | |||||||
Balance, September 30, 2020 | $ | 0 | $ | 9,049 | $ | 9,049 |
The table below (in thousands) of Level 3 liabilities begins with the valuation as of December 31, 2019 and then is adjusted for the issuances and exercises, and changes in fair value that occurred during the nine months ended September 30, 2020. The ending balance of the Level 3 financial instrument presented above represents our 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, 2020 | Warrant Liability Current | Warrant Liability Long-Term | Warrant Liability Total | |||||||||
Balance, December 31, 2019 | $ | 0 | $ | 5,818 | $ | 5,818 | ||||||
Issuances of warrants | 0 | 4,724 | 4,724 | |||||||||
Exercise of warrants | 0 | (4 | ) | (4 | ) | |||||||
Change in fair value - net | 0 | (1,489 | ) | (1,489 | ) | |||||||
Balance, September 30, 2020 | $ | 0 | $ | 9,049 | $ | 9,049 |
Three Months Ended March 31, 2020 | Warrant Liability Current | Warrant Liability Long-Term | Warrant Liability Total | ||||||||||||||
Balance, December 31, 2019 | $ | — | $ | 5,818 | $ | 5,818 | |||||||||||
Issuances of warrants | — | 4,724 | 4,724 | ||||||||||||||
Change in fair value - net | — | (3,845) | (3,845) | ||||||||||||||
Balance, March 31, 2020 | $ | — | $ | 6,697 | $ | 6,697 |
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
Stock-based Compensation
- Stock-based compensation expense includes the estimated fair value of equity awards vested or expected to vest during the reporting period. The Company accounts for its stock-based compensation awards in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic (ASC) 718, Compensation—Stock Compensation (ASCSubsequent Events -
The Company’s management reviewed all material events through the date these unaudited condensed consolidated financial statements were issued for subsequent events disclosure consideration, see other notes and specifically Note 8 - Subsequent Events.Recent Accounting Pronouncements
In August 2018, the FASB issued Accounting Standards Update (ASU) No. 2018-13,2018-13, Fair Value Measurement (Topic 820)820) (ASU 2018-13)2018-13). ASU 2018-132018-13 modifies the disclosure requirements on fair value measurements in ASC Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company's adoption of this pronouncement effective January 1, 2020 did not have a material impact on the Company's condensed consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12,2019-12, Income Taxes (Topic 740)740) (ASU 2019-12)2019-12). ASU 2019-122019-12 modifies the requirements for the timing of adoption of enacted change in tax law. The effects of changes on taxes currently payable or refundable for the current year must be reflected in the computation of annual effective tax rate in the first interim period that includes the enactment date of the new legislation, beginning after December 15, 2020. Early adoption is permitted upon issuance of this ASU. The Company is currently evaluating the impact that this standard will have, if any, on its financial statements.
In August 2020, the FASB issued 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 amends the guidance for the derivatives scope exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions. The Board observed that the application of the derivatives scope exception guidance results in accounting for some contracts as derivatives while accounting for economically similar contracts as equity. The Board also decided to improve and amend the related EPS guidance. The amendments in this Update are effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact that this standard will have, if any, on its 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 (in thousands):
September 30, 2020 | December 31, 2019 | |||||||
Accrued chemistry manufacturing and control costs | $ | 1,086 | $ | 49 | ||||
Accrued clinical activities | 311 | 93 | ||||||
Accrued payroll and bonuses | 247 | 436 | ||||||
Operating lease liability - current | 114 | 103 | ||||||
Related party payable | 99 | 99 | ||||||
Accrued license fees and sponsored research agreements | 95 | 201 | ||||||
Accrued legal, regulatory, and professional | 87 | 272 | ||||||
Accrued other | 56 | 164 | ||||||
Total accrued expenses and other current liabilities | $ | 2,095 | $ | 1,417 |
March 31, 2020 | December 31, 2019 | |||||||||||||
Accrued payroll and bonuses | $ | 623 | $ | 436 | ||||||||||
Accrued legal and professional fees | 302 | 272 | ||||||||||||
Accrued clinical testing | 262 | 93 | ||||||||||||
Related party payable | 225 | 99 | ||||||||||||
Accrued drug manufacturing costs | 219 | 49 | ||||||||||||
Accrued license fees and sponsored research agreements | 212 | 201 | ||||||||||||
Operating lease liability - current | 107 | 103 | ||||||||||||
Accrued other | 79 | 164 | ||||||||||||
Total accrued expenses and other current liabilities | $ | 2,029 | $ | 1,417 |
4. Warrants
At March 31,September 30, 2020, and December 31, 2019, respectively, the Company has the following warrants outstanding,
Number of Shares Under Outstanding Warrants at March 31, 2020 | Number of Shares Under Outstanding Warrants at December 31, 2019 | Weighted Average Exercise Price at March 31, 2020 | Remaining Contractual Life at March 31, 2020 (No. Years) | ||||||||||||||||||||
Liability Classified Warrants (1) | |||||||||||||||||||||||
Issued February 2017 | 404,002 | 404,002 | $ | 1.50 | 1.9 | ||||||||||||||||||
Issued February 2018 | 2,273,700 | 2,273,700 | $ | 2.80 | 3.4 | ||||||||||||||||||
Issued June 2018 (2) | 742,991 | 742,991 | $ | 2.03 | 3.7 | ||||||||||||||||||
Issued March 2019 | 1,585,500 | 1,585,500 | $ | 1.10 | 4.0 | ||||||||||||||||||
Issued April 2019 | 5,250,000 | 5,250,000 | $ | 1.75 | 4.1 | ||||||||||||||||||
Issued February 2020 | 6,150,000 | — | $ | 1.05 | 5.3 | ||||||||||||||||||
16,406,193 | 10,256,193 | $ | 1.58 | ||||||||||||||||||||
Equity Classified Warrants | |||||||||||||||||||||||
Issued May 2016 - Bonwick | 107,802 | 107,802 | $ | 7.50 | 1.1 | ||||||||||||||||||
Issued July 2017 - Consulting (3) | 150,000 | 150,000 | $ | 2.61 | 2.3 | ||||||||||||||||||
Issued April 2018 - Consulting | 100,000 | 100,000 | $ | 3.00 | 1.0 | ||||||||||||||||||
Issued August 2019 - Consulting | 150,000 | 150,000 | $ | 1.64 | 2.4 | ||||||||||||||||||
507,802 | 507,802 | $ | 3.44 | ||||||||||||||||||||
Balance outstanding | 16,913,995 | 10,763,995 | $ | 1.63 |
Number of Shares Under Outstanding Warrants at | Number of Shares Under Outstanding Warrants at | Weighted Average Exercise Price at | Remaining Contractual Life at September 30, 2020 | |||||||||||||
September 30, 2020 | December 31, 2019 | September 30, 2020 | (No. Years) | |||||||||||||
Liability Classified Warrants (1) | ||||||||||||||||
Issued February 2017 | 404,002 | 404,002 | $ | 1.50 | 1.4 | |||||||||||
Issued February 2018 | 2,273,700 | 2,273,700 | 2.80 | 2.9 | ||||||||||||
Issued June 2018 (2) | 742,991 | 742,991 | 2.03 | 3.2 | ||||||||||||
Issued March 2019 | 1,581,000 | 1,585,500 | 1.10 | 3.5 | ||||||||||||
Issued April 2019 | 5,250,000 | 5,250,000 | 1.75 | 3.6 | ||||||||||||
Issued February 2020 | 6,150,000 | 0 | 1.05 | 4.8 | ||||||||||||
16,401,693 | 10,256,193 | $ | 1.58 | |||||||||||||
Equity Classified Warrants | ||||||||||||||||
Issued May 2016 - Bonwick | 107,802 | 107,802 | $ | 7.50 | 0.6 | |||||||||||
Issued July 2017 - Consulting (3) | 150,000 | 150,000 | 2.61 | 1.8 | ||||||||||||
Issued April 2018 - Consulting | 100,000 | 100,000 | 3.00 | 0.5 | ||||||||||||
Issued August 2019 - Consulting | 150,000 | 150,000 | 1.64 | 1.9 | ||||||||||||
Issued April 2020 - Consulting | 100,000 | 0 | 1.14 | 4.6 | ||||||||||||
607,802 | 507,802 | $ | 3.06 | |||||||||||||
Balance outstanding | 17,009,495 | 10,763,995 | $ | 1.63 |
(1)(1) If the Company subdivides (by any stock split, stock dividend, recapitalization or otherwise) its outstanding shares of its common stock into a smaller number of shares, the warrant exercise price is proportionately reduced and the number of shares under outstanding warrants is proportionately increased. Additionally, if the Company combines (by combination, reverse stock split or otherwise) its outstanding shares of common stock into a smaller number of shares, the warrant exercise price is proportionately increased and the number of shares under outstanding warrants is proportionately decreased. Also, the Company may voluntarily reduce the warrant exercise price for its warrants issued in March 2019 and February 2017 and may voluntarily extend the contractual term of its warrants issued in February 2017.
(2)(2) Includes warrants to purchase 710,212 shares at an exercise price of $2.02, expiring December 22, 2023, and warrants to purchase 32,779 shares at an exercise price of $2.32, expiring June 21, 2023.
(3)(3) Includes warrants to purchase 100,000 shares at an exercise price of $2.41 and warrants to purchase 50,000 shares at an exercise price of $3.00.
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 US 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. Beginning in 2020, only the volatility of the Company's own stock is used in the BSM as it now has sufficient historic data in its stock price. In 2019, the Company used the volatility of its own stock blended with the volatility of peer entities due to the lack of sufficient historical data of ourits stock price.
The assumptions used in determining the fair value of the Company’s outstanding liability classified warrants are as follows:
March 31, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||||||||||
Risk-free interest rate | 0.2 | % | to | 1.5 | % | 1.6 | % | to | 1.7 | % | ||||||||||||||||||||||||||||
Volatility | 111.4 | % | to | 120.6 | % | 97.5 | % | to | 107.5 | % | ||||||||||||||||||||||||||||
Expected life (years) | 1.9 | to | 5.5 | 2.1 | to | 4.3 | ||||||||||||||||||||||||||||||||
Dividend yield | —% | —% |
September 30, 2020 | December 31, 2019 | |||||
Risk-free interest rate | 0.1% to 0.3% | 1.6% to 1.7% | ||||
Volatility | 112.5% to 124.1% | 97.5% to 107.5% | ||||
Expected life (years) | 1.4 to 4.9 | 2.1 to 4.3 | ||||
Dividend yield | —% | —% |
A summary of the Company's liability classified warrant activity during the threenine months ended March 31,September 30, 2020 and related information follows:
Number of Shares Under Warrant | Range of Warrant Exercise Price per Share | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | ||||||||||||||||||||||||||||||||
Balance at January 1, 2020 | 10,256,193 | $ | 1.10 | $ | 2.80 | $ | 1.89 | 4.0 | |||||||||||||||||||||||||||
Granted | 6,150,000 | $ | 1.05 | $ | 1.05 | $ | 1.05 | 5.3 | |||||||||||||||||||||||||||
Exercised | — | $ | — | $ | — | $ | — | — | |||||||||||||||||||||||||||
Expired | — | $ | — | $ | — | $ | — | — | |||||||||||||||||||||||||||
Balance at March 31, 2020 | 16,406,193 | $ | 1.05 | $ | 2.80 | $ | 1.58 | 4.4 | |||||||||||||||||||||||||||
Vested and Exercisable at March 31, 2020 | 10,256,193 | $ | 1.10 | $ | 2.80 | $ | 1.89 | 3.8 |
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, 2020 | 10,256,193 | $ | 1.10 | $ | 2.80 | $ | 1.89 | 4.0 | ||||||||||||
Granted | 6,150,000 | 1.05 | 1.05 | 1.05 | 4.8 | |||||||||||||||
Exercised | (4,500 | ) | 1.10 | 1.10 | 1.10 | — | ||||||||||||||
Expired | 0 | 0 | 0 | 0 | — | |||||||||||||||
Balance at September 30, 2020 | 16,401,693 | $ | 1.05 | $ | 2.80 | $ | 1.58 | 3.9 | ||||||||||||
Vested and Exercisable at September 30, 2020 | 16,401,693 | $ | 1.10 | $ | 2.80 | $ | 1.89 | 3.9 |
In connection with the Company's stock offering that closed on in February 10, 2020, the Company issued warrants to purchase 5,625,000 shares of its common stock, that are exercisable six months from the date of issuance, at a price of $1.05 per share, subject to adjustment in certain circumstances, and expire five years from the date they are first exercisable, and issued Oppenheimer & Co. Inc. a warrant (Underwriter Warrant) to purchase up to 525,000 shares of its common stock with an exercise price of $1.05 per share, subject to adjustment in certain circumstances, which expires on in February 6, 2025.
For a summary of the changes in fair value associated with our warrant liability for the threenine months ended March 31,September 30, 2020, see Note 2.2 - Basis of presentation, principles of consolidation and significant accounting policies - Fair Value of Financial Instruments.
Equity Classified Warrants
In April 2020, equity warrants to purchase up to 100,000 shares of common stock were issued to a consultant, with vesting contingent on certain conditions focused on generating up to $10 million of approved research and development expenditures on the Company's drug portfolio.
At September 30, 2020 the Company had 607,802 equity classified warrants outstanding and 512,802 warrants were exercisable. At December 31, 2019, the Company had 507,802 equity classified warrants outstanding and all were exercisable.
The Company recorded 0 and $92,000 in stock compensation expense for the non-employee consulting agreement of 0 and $2,000agreements for the three months ended March 31,September 30, 2020 and 2019, respectively, and $5,000 and $94,000 during the nine months ended September 30, 2020 and 2019, respectively. At March 31,September 30, 2020, there was 0$91,000 of unrecognized stock compensation expense related to the Company's equity-classified warrants.
5. Equity
July 2020 Stock Issuances
In July 2020, pursuant to the 2019 ATM Agreement, the Company issued 1,301,126 shares of common stock at an average price of $1.47 per share through the ATM Prospectus Supplement. The Company received total proceeds of $1.9 million, net of $0.1 million in transaction expenses. Previously, in April 2020, pursuant to the 2019 ATM Agreement, the Company issued 7,170,964 shares of common stock at an average price of $1.44 per share through the ATM Prospectus Supplement. The Company received total proceeds of $10.3 million, net of $0.3 million in transaction expenses.
February 2020 Stock Offering
In February 2020, the Company entered into subscription agreements with certain institutional investors for the sale by the Company of 7,500,000 shares of ourits common stock and warrants to purchase 5,625,000 shares of common stock at a combined public offering price of $0.80 per share and related warrant. The Company received total proceeds of $6.0 million, net of $0.7 million in transaction expenses. See Note 4.4 - Warrants for equity classified warrants granted during the threenine months ended March 31, 2020.
Stock-based Compensation and Outstanding Awards
Under the terms of the Company’s 2015 Stock Plan, as amended, and approved by its stockholders on in June 6, 2018, 4.52020, 10.5 million shares of the Company’s common stock were available for grant to employees, non-employee directors and consultants. The 2015 Stock Plan provides for the grant of stock options, stock awards, stock unit awards, or stock appreciation rights. As of March 31,September 30, 2020, there were 297,0934,409,132 shares remaining to be issued under the 2015 Stock Plan.
Stock-based compensation for the three and nine months ended March 31,September 30, 2020 and 2019 are as follows, respectively (in thousands):
Three Months Ended March 31, | |||||||||||||||||
2020 | 2019 | ||||||||||||||||
General and administrative | $ | 334 | $ | 302 | |||||||||||||
Research and development | 63 | 46 | |||||||||||||||
Total | $ | 397 | $ | 348 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
General and administrative | $ | 366 | $ | 430 | $ | 1,029 | $ | 1,003 | ||||||||
Research and development | 94 | 59 | 236 | 152 | ||||||||||||
Total Stock-based Compensation Expense | $ | 460 | $ | 489 | $ | 1,265 | $ | 1,155 |
Each of the Company's stock-based compensation arrangements are discussed below.
Stock Options
Stock option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Stock option awards generally have a 10-year contractual term and vest over a 4-year period for employees and over a 1 to 3-year period for directors from the grant date on a straight-line basis over the requisite service period. The grant-date fair value of stock options is determined using the Black-Scholes option-pricing model. Additionally, the Company’s stock options provide for full vesting of unvested outstanding options, in the event of a change of control of the Company.
The fair value of each stock option is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted below. The expected term of the stock option awards was computed using the “plain vanilla” method as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin 107 because the Company did does not have sufficient data regarding employee exercise behavior to estimate the expected term. Beginning in 2020, the Company used the volatility of its own stock in the BSM as it now has sufficient historic data in its stock price. Prior to 2020, the volatility was determined by referring to the average historical volatility of a peer group of public companies combined with its own due to the lack of sufficient historical data of its stock price. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
The fair value of the option grants has been estimated, with the following weighted-average assumptions:
Nine Months Ended September 30, | ||||||
Stock Option Assumptions: | 2020 | 2019 | ||||
Risk-free interest rate | 0.2% to 0.5% | 1.0% to 1.3% | ||||
Expected volatility of common stock | 125.4% to 128.0% | 85% to 100% | ||||
Expected life (years) | 3.8 to 6.3 | 5.3 to 6.3 | ||||
Expected dividend yield | —% | —% |
Stock option activity for the nine months ended September 30, 2020 is as follows:
Weighted Average Grant Date | Weighted Average | Weighted Average Remaining Contractual | Aggregate Intrinsic | |||||||||||||||||
Number of Shares | Fair Value | Exercise Price | Term (in years) | Value | ||||||||||||||||
Outstanding, December 31, 2019 | 3,836,000 | $ | 1.59 | $ | 2.26 | 8.3 | $ | 0 | ||||||||||||
Granted | 1,554,750 | $ | 0.83 | $ | 0.95 | |||||||||||||||
Exercised | 0 | $ | 0 | $ | 0 | |||||||||||||||
Forfeited | (20,000 | ) | $ | 0.89 | $ | 1.06 | ||||||||||||||
Outstanding, September 30, 2020 | 5,370,750 | $ | 1.37 | $ | 1.88 | 8.1 | $ | 0 | ||||||||||||
Exercisable, September 30, 2020 | 1,978,917 | $ | 1.91 | $ | 2.79 | 7.2 | $ | 0 |
Options granted during 2020 have an aggregated fair value of $1.3 million that was calculated using the Black-Scholes option-pricing model. At September 30, 2020, total compensation cost not yet recognized was $3.0 million and the weighted average period over which this amount is expected to be recognized is 2.65 years. The aggregate fair value of options vesting in the nine months ended September 30, 2020 and 2019, respectively, was $1.2 million and $1.0 million, respectively. In July 2020, the Company granted 1,349,750 employee stock options. In August 2020, the Company issued 100,000 options to Dr. Waldemar Priebe, one of the Company's founders and chair of our Scientific Advisory Board. In October 2020, the Company granted 40,000 stock options, with 3-year annual vesting upon appointment of Elizabeth Cermak to the Company's Board of Director's.
Restricted Stock
Restricted stock units are granted with a grant any stock-based awards duringdate fair value determined using the threeclosing price of the Company's common stock on the grant date. Restricted stock units vest annually in 4 equal installments. Additionally, the Company’s restricted stock unit agreements provide for full vesting of the restricted stock award in the event of a change of control of the Company.
Restricted stock unit activity for the nine months ending March 31, 2020.ended September 30, 2020 is as follows:
Weighted Average Grant Date | Weighted Average Remaining Contractual | |||||||||||
Number of Shares | Fair Value | Term (in years) | ||||||||||
Unvested Shares, December 31, 2019 | 316,907 | $ | 1.31 | 3.5 | ||||||||
Granted | 353,211 | $ | 0.93 | |||||||||
Vested | (79,227 | ) | $ | 1.31 | ||||||||
Unvested Shares, September 30, 2020 | 590,891 | $ | 1.08 | 3.3 |
As of September 30, 2020, total compensation cost not yet recognized was $0.6 million and the weighted average period over which this amount is expected to be recognized is 3.3 years.
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 2020 as a result of the losses recorded during the three and nine months ended March 31,September 30, 2020 and the additional losses expected for the remainder of 2020 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 March 31,September 30, 2020, the Company maintained a full valuation allowance for all deferred tax assets.
The Company recorded 0an income tax provision of 0 and $229,000 for the three and nine months ended March 31,September 30, 2020 and 2019, respectively. The effective tax rate for the three months ended March 31,September 30, 2020 and 2019 is 0%. and 5.2%, respectively. The effective tax rate for the nine months ended September 30, 2020 and 2019 is 0% and 1.4%, respectively. The total income tax benefit for the nine months ended September 30, 2019 was comprised of research and development tax credits recoverable, associated with Moleculin Australia Pty. Ltd, (MAPL), a wholly-owned subsidiary formed in June 2018, related to preclinical development in Australia. There were 0 research and development tax credits for the nine months ended September 30, 2020. 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.
On March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to provide certain relief as a result of the COVID-19COVID-19 pandemic. The CARES Act, among other things, includes provisions relating to net operating loss carry back periods, alternative minimum tax credit refunds, and modification to the net interest deduction limitations. The CARES Act did not have a material impact on ourthe Company's condensed consolidated financial statements for the threenine months ended March 31, 2020. We continueSeptember 30, 2020. The Company continues to monitor any effects that may result from the CARES Act.
7. Commitments and Contingencies
In addition to the commitments and contingencies described elsewhere in these notes, see below for a discussion of ourthe Company's commitments and contingencies as of March 31, 2020.
Lease Obligations Payable
During the threenine months ended March 31,September 30, 2020, the Company did not enter into any lease arrangements requiring any additional right-of-use assets or liabilities to be recorded.
The following summarizes quantitative information about the Company's operating leases for the three and nine months ended March 31,September 30, 2020 the Company recognized $29,000 of lease costs, $4,000 of expenses related to short-term leases and $7,000 of lease costs for variable lease payments. During the three months ended March 31, 2019 the Company recognized $8,000 of lease costs, $14,000 of expenses related to short-term leases and $5,000 of lease costs for variable lease payments. , respectively (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Lease cost: | ||||||||||||||||
Operating lease cost | $ | 29 | $ | 15 | $ | 87 | $ | 31 | ||||||||
Short-term lease cost | 4 | 12 | 13 | 38 | ||||||||||||
Variable lease cost | 7 | 7 | 22 | 19 | ||||||||||||
Total | $ | 40 | $ | 34 | $ | 122 | $ | 88 |
The Company recorded approximately $10,000 and $31,000 in sublease income from a related party for the three and nine months ended March 31, 2020.September 30, 2020, respectively. Sublease income is recorded as other income, net on the Company's condensed consolidated statement of operations and comprehensive loss.
Other supplemental cash paidflow information for the Company's operating leases and right-of-use assets wasis as follows (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||
Operating cash flows from operating leases | $ | 34 | $ | 20 | $ | 100 | $ | 41 | ||||||||
Right-of-use assets obtained in exchange for lease liabilities: | ||||||||||||||||
Operating leases | $ | 0 | $ | 212 | $ | 0 | $ | 321 |
Three Months Ended March 31, | |||||||||||||||||
2020 | 2019 | ||||||||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||||||||
Operating cash flows from operating leases | $ | 33 | $ | 8 | |||||||||||||
Right-of-use assets obtained in exchange for lease liabilities: | |||||||||||||||||
Operating leases | $ | — | $ | 110 |
At March 31,September 30, 2020, future minimum liabilities under ASC 842 for the Company's operating leases were as follows (in thousands):
Maturity of lease liabilities | As of March 31, 2020 | |||||||
2020 (remaining nine months) | $ | 101 | ||||||
2021 | 138 | |||||||
2022 | 105 | |||||||
2023 | 56 | |||||||
2024 | 10 | |||||||
2025 and thereafter | — | |||||||
Total lease payments | 410 | |||||||
Less: imputed interest | (55) | |||||||
Present value of operating lease liabilities | $ | 355 |
Maturity of lease liabilities | As of September 30, 2020 | |||
2020 (remaining three months) | $ | 34 | ||
2021 | 138 | |||
2022 | 105 | |||
2023 | 56 | |||
2024 | 10 | |||
2025 and thereafter | 0 | |||
Total lease payments | 343 | |||
Less: imputed interest | (39 | ) | ||
Present value of operating lease liabilities | $ | 304 |
As of September 30, 2020, the weighted average remaining lease term for operating leases is 2.7 years, and the weighted average discount rate is 9.6%. The interest rate implicit in lease contracts is typically not readily determinable and as such, the Company uses an incremental borrowing rate based on a peer analysis using information available at the commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment.
Licenses
MD Anderson -
Total expenses related to the Company's license agreements with MD Anderson were $61,000 and $60,000 for the three months endedHPI -
On March 16, 2020, the Company entered intoSponsored Research Agreements with MD Anderson -
MBI entered into a Sponsored Laboratory Study Agreement with MD Anderson expiring in October 2021. The expenses recognized under this MD Anderson agreement with regards to the Sponsored Laboratory Study Agreement were8. Subsequent Events
In addition to the subsequent events discussed elsewhere in these notes, see below for a discussion of our subsequent events occurring after March 31, 2020.
2020ATM Issuances Under the Oppenheimer Agreement -
2020 Lincoln Park Equity Line - On November 11, 2020, the Company willentered into a purchase agreement (the “2020 Purchase Agreement”) and a registration rights agreement (the “2020 Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”). Pursuant to the terms of the 2020 Purchase Agreement, Lincoln Park has agreed to purchase from the Company up to $22.0 million of the Company’s common stock (subject to certain limitations) from time to time during the term of the 2020 Purchase Agreement. Pursuant to the terms of the 2020 Registration Rights Agreement, the Company filed with the SEC a registration statement to register the shares that have 60,403,164been or may be issued to Lincoln Park under the 2020 Purchase Agreement.
Pursuant to the terms of the 2020 Purchase Agreement, at the time the Company signed the 2020 Purchase Agreement and the 2020 Registration Rights Agreement, the Company issued 760,194 shares of common stock outstanding.
On November 12, 2020, the Company sold Lincoln Park at $0.707 per share 2,829,214 shares of common stock for aggregate consideration of $2.0 million, and issued to a science advisory board member 27,643 in additional commitment shares.
On November 11, 2020, the Company terminated its purchase agreement dated October 4, 2018 with a term of 10 years vesting in four equal quarterly installments and an exercise price of $1.47.
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:
• | The impact the recent Coronavirus outbreak will have on our ability to continue our operations including our clinical trials, preclinical activities and our ability to raise future financing; |
• | Our ability to continue our relationship with MD Anderson, including our ability to license future intellectual property resulting from our sponsored research agreements with MD Anderson; |
• | Our ability to obtain additional funding to commence or continue our clinical trials, fund operations and develop our product candidates; |
• | Our ability to satisfy any requirements imposed by the FDA (or its foreign equivalents) as a condition of our clinical trials proceeding or beginning as planned; |
• | The success, including the ability to recruit patients, of our clinical trials through all phases of clinical development; |
• | The need to obtain and retain regulatory approval of our drug candidates, both in the United States, in Poland, 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; |
• | 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; |
• | The effects of future government shutdowns on our ability to raise financing; |
• | 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.
Overview
Moleculin Biotech, Inc., a Delaware corporation, is a clinical stage pharmaceutical company focused on the treatment of highly resistant cancers and viruses. We have three core technologies, all of which are based on discoveries made at M.D. Anderson Cancer Center (MD Anderson). We have three drug candidates, representing two of the three core technologies, that are activehave shown human activity in clinical trials.
In 2019, those three drug candidates were active in fourfive clinical trials in the US and Europe with a fifth that began recruiting patients in April 2020.Europe. Of these five clinical trials, two are primarily externally funded. For two of our internally funded trials, we successfully concluded the Phase 1 portion recently and are preparing to potentially move into Phase 2 trials.conducting follow-up observations. We anticipate laying the groundworkpursuing pre-clinical work in 2020 for two additional Phase 1 trials expected to begin in 2021 sponsored by us and two to three other Phase 1 trials we expect to be externally sponsored.
By "internally funded” we mean that the primary costs of the preclinical activity and clinical trials are funded by us. “Externally funded” drug candidates include those for which preclinical work is performed by external collaborators and for which clinical trials are investigator-initiated. In such cases any grant funds that support such preclinical work or clinical trials and most of the associated expenses do not flow through our financial statements. We do provide drug product and other minor supporting activities for externally funded preclinical activities and clinical trials.
We recently announced a collaboration with a major Texas university institution to evaluate our drug candidate, WP1122, and now this has been followed by collaborations with additional entities who bring additional expertisethird parties to assist us in developing potential treatments for diseases like COVID-19. The preclinical work to evaluate WP1122'sthe potential of molecules within the WP1122 portfolio of antimetabolites (which include inhibitors of glycolysis and glycosylation) against the Coronavirusviruses is mostly similar to the preclinical work we originally planned for 2020 to develop againstWP1122 for cancer indications, supporting a cancer-relatedindications. Accordingly, we believe the preclinical work under way for WP1122 will support an Investigational New Drug (IND) application or its equivalent for either cancer-related or virus-related clinical trials (or both) in the first half of 2021.
Based on our positive pre-clinical and clinical activity thus far, we have further narrowed our internal development focus to our nearest term opportunities, includingespecially where human activity has been shown in clinical trials. This focus is primarily on preclinical and clinical activities with Annamycin, WP1222preclinical activities associated with an intravenous version of WP1066 and WP1220, while relyingIND-enabling studies of WP1122. We intend to rely on external funding, to the extent available, for other projects. In addition,light of the COVID-19 pandemic, the associated opportunity related to COVID-19 has pushed theaccelerated our development of the WP1122 portfolio with a combined effort of internally and externally funded preclinical work to support an IND application with the forefront. NotwithstandingFDA or its international equivalent for the emphasis on WP1122, wetreatment of COVID-19 or a cancer indication or both. We believe our overall narrowing of focus will allow us to reducelimit our cash needs to the essential opportunities until we reach a significant value inflection point, although we will continue to require additional external capital during this period. In addition, institutional support for our technologies has increased and we believe such support may provide outsideexternal funding to help reducesupport future cash needs. Such expectations assume some form of government fundingor strategic collaboration for WP1122 if it is successful in bridgingadvancing from preclinical to clinical activity in 2020, although wefor the treatment of viruses. We have no commitments at this time for such funding, and we can provide no assurances that such funding can be obtained.
Of our three clinical stage drug candidates, Annamycin is currently in a clinical trial for the treatment of acute myeloid leukemia (AML) in Poland. It is also being studied for the treatment of relapsed or refractory acute myeloid leukemia (“AML”) and cancers metastasized to the lungs. WP1066, an Immune/Transcription Modulator (p-STAT3 inhibitor) is intended to target a wide range of tumors, including brain tumors such as glioblastoma (GBM) and pediatric brain tumors (like diffuse intrinsic pontine glioma, or DIPG, and medulloblastoma), as well as pancreatic cancer. It is currently in two investigator-initiated clinical trials, one for adult GBM and another for pediatric brain tumors (like DIPG and medulloblastoma). We began and completed a "proof-of-concept" Phase 1 clinical trial in 2019 in Poland for a third drug, WP1220 (a molecule similar to WP1066), for the topical treatment of cutaneous T-cell lymphoma (CTCL) and we are planning. We intend to expandattempt to join efforts with a strategic partner in the near term for external funding for the continued development of this drug intoWP1220 as a Moleculin Phase 2 trial.topical therapy for CTCL. We are also engaged in preclinical development of additional drug candidates, including additional Immune/Transcription Modulators, as well as antimetabolites, including Metabolism/Glycosylation Inhibitors.
We consider Annamycin to be a "next generation" anthracycline, unlike any currently approved anthracyclines, as it is designed to avoid multidrug resistance mechanisms with little to no cardiotoxicity (two problems common to all currently approved anthracyclines). We recently received an independent expert cardiology assessment confirming the absence of cardiotoxicity in the first 1419 patients treated with Annamycin in both our US and European Phase 1 clinical trials, validating Annamycin's lack of cardiotoxicity. Annamycin is currently in one Phase 1/2 clinical trial in Europe with the Phase 1 portion of another Phase 1/2 AML trial having been recently concludingconcluded in the US. Upon receiptUS, subject to continued patient observations. The US trial met its primary endpoint of further data from the European Phase 1 trial, we plan to seek agreementsafety. As a result of discussions with the FDA, for accelerated approval of Annamycin basedthe Company will focus on establishing a pivotalrecommended Phase 2 AMLdose (RP2D) in its trial sponsoredin Europe and generating additional safety and efficacy data as requested by us, although therethe FDA. The Poland trial is in its fifth cohort where patients are being treated at 240 mg/m2. The second patient in that cohort experienced a dose limiting toxicity (DLT), secondarily related to concomitant medication not being withheld. The DLT was resolved, and that cohort will be expanded to a total of six patients. If a second DLT in this cohort occurs, then we would enroll three subjects that would be treated at 210 mg/m2 to confirm the maximum tolerated dosage. If no assurance thatadditional DLT occurs in the FDAcurrent cohort, then we will agree withprogress to the sixth cohort at 300 mg/m2.
We believe the impact of the COVID-19 pandemic is slowing the pace of our proposal.
In 2019, preclinical work on Annamycin demonstrated activity against certain cancers metastasized to the lungs. With this new data, we are planningheld a Pre-IND Meeting with the FDA in the third quarter of 2020, and with that input we intend to startfile an IND or its equivalent for a Moleculin-sponsored US Phase 1clinical trial at MD Anderson for the treatment of cancer metastasized to the lungs with Annamycin by the end of 2020, although no assurances can be given that such trial will begin.
WP1066 is one of several Immune/Transcription Modulators designed to stimulate the immune response to tumors by inhibiting the errant activity of Regulatory TCells (TRegs) while also inhibiting key oncogenic transcription factors, including p-STAT3, c-Myc and HIF-1αHIF-1á. These transcription factors are widely sought targets that may also play a role in the inability of immune checkpoint inhibitors to affect more resistant tumors. WP1066 is currently in atwo US physician-sponsored Phase 1 trialclinical trials, one at MD Anderson for the treatment of glioblastoma ("GBM")GBM in adults and another institutionally sponsored Phase 1 trial has begun recruitingat Emory University for the treatment of pediatric brain tumors. The trial at MD Anderson has begun the fourth and final cohort in the dose escalation phase. The Emory trial has now successfully treated three patients in the first cohort and the first patient in the second cohort has begun treatment at the dose level of 6mg/kg. In that trial, one of the patients with DIPG showed an apparent response to the treatment with both clinical improvement and radiologic reduction of tumor size. We caution that this preliminary data and no conclusions should be drawn from this single event. Another physician-sponsored Phase 1 trial is being considered for the treatment of GBM with WP1066 in combination with radiation, although no assurances can be given that such trial will begin.
Although WP1122 is a prodrug of 2-DG, the WP1122 Portfolio includes other antimetabolites comprising prodrugs of alternate sugar structures that appears to improve the drug-like propertiesmay also prove useful as antiviral and/or anticancer therapies. The Company is currently evaluating some of 2-DG by increasing its circulation time and improving tissue/organ distribution. New research also points to thethese other antimetabolite molecules for potential for 2-DG to be capable of enhancing the usefulness of checkpoint inhibitors and also its potential against viruses like the Coronavirus. Considering that 2-DG lacks sufficient drug-like properties to be practical in a clinical setting, we believe WP1122 has the potential to become an important drug, either as a single agent or to potentiate existing therapies, including checkpoint inhibitors and antiviral treatments. In March 2020, we entered into agreements with several outside research laboratories that will conduct research on WP1122 for antiviral properties against a range of viruses, including Coronavirus. We have also added experts to our Science Advisory Board to support our anti-viral efforts.
Recent Business Developments
Below are recent business developments.
Annamycin
Independent Study Validates Annamycin's Ability to Accelerate European Clinical Trial
On October 21, 2020, we announced on April 28, 2020, that we are now authorized byresults from an independent laboratory validating internal animal studies showing the Polish Department of Registration of Medicinal Products known as URPL to accelerate the Phase 1 dose escalation portion of our clinical trialability of Annamycin to target lung localized tumors. The relevance of targeting lung localized tumors is that it could provide a means to address a significant unmet need in cancer therapy. Specifically, there are limited treatment options for lung metastases resulting from a primary tumor, even though the treatmentprimary tumor may have been treatable.
Successful Completion of AML. The URPL has allowed an amendment to the Annamycin clinical trial protocol, which among other things, includes an increase in the dose escalation increment between cohorts from 30 mg/m2 to 60 mg/m2. The clinical trial is currently recruiting for the 240 mg/m2 cohort, so this amendment allows the next cohort to increase to 300 mg/m2, assuming all requirements for safety are metPre-IND Meeting with the 240 mg/m2 cohort.
On April 2,September 9, 2020, we announced that we successfully completed a Pre-IND Meeting with the latest (210 mg/m2) cohortFDA regarding the development plan for Annamycin, including the clinical study design and dosing strategy for the initial Phase 1b/2 protocol for soft tissue sarcomas with lung metastases. We submitted a proposed clinical protocol for FDA review entitled, "Phase 1b/2 Study of Liposomal Annamycin (Annamycin) in our European open label, single armSubjects with Previously Treated Soft-Tissue Sarcomas with Pulmonary Metastases." The proposed study is an open-label, multicenter, single-arm, dose escalation and expansion study to evaluate single-agent Annamycin in up to 55 patients with soft tissue sarcoma (STS) with lung metastases for whom chemotherapy is considered appropriate. The primary objectives of the dose escalation phase are to evaluate the safety of Annamycin and identify the maximum tolerated dose (MTD) or the recommended Phase 1/2 dose (RP2D).
WP1066
Positive Interim Results in Adult Glioblastoma Clinical Trial
On October 13, 2020, we announced additional preliminary data from the Phase 1 clinical trial of Annamycinour immuno-stimulating STAT3 inhibitor, WP1066, in patients with GBM. This supports the progression of the trial to the fourth and final dose escalation cohort. Three patients have completed treatment in the third cohort at a dose level of 8 mg/kg with no adverse events related to WP1066 and the study will now proceed to the next higher dose of 16 mg/kg.
Positive Interim Results in Pediatric Brain Tumor Phase 1 Clinical Trial
On October 1, 2020, we announced preliminary first cohort data from the Emory University physician-sponsored clinical trial being conducted at the Aflac Cancer and Blood Disorders Center at Children's Healthcare of Atlanta by Dr. Tobey MacDonald, Professor of Pediatrics and Director of the Pediatric Neuro-Oncology Program. He is studying the use of WP1066 (AflacST1901), a proprietary Moleculin drug candidate, as a potential treatment for childhood brain tumors. The first three patients in the trial received treatment at a dose level of 4 mg/kg with no adverse events related to WP1066 and the study will now proceed to the next higher dose of 6 mg/kg. One of these patients with DIPG, showed an apparent response to the treatment with both clinical improvement and radiologic reduction of tumor size. We caution that this is preliminary data and no conclusions should be drawn from this single event.
WP1122
Additional Collaboration on Drug Candidate Targeting COVID-19
On October 29, 2020, we announced we have entered into an agreement with the University of Campinas in São Paulo, Brazil to further enable collaboration into its research on the anti-viral capabilities of our drug candidate WP1122, specifically for the treatmentcoronavirus. Recently the University of relapsed or refractory AML. A totalCampinas published independent research demonstrating that SARS-CoV-2 infection is supported by elevated glucose levels and that inhibition of 19 patientsglycolysis with 2-DG effectively eliminated viral load in vitro. WP1122 is a prodrug of 2-DG.
New Antiviral Drug Candidates Demonstrate In Vitro Activity Against HIV
On October 6, 2020, we announced preliminary new findings from our research collaboration with the Rega Institute in Leuven, Belgium, that demonstrates our drug candidates, WP1096 and WP1097, are showing significant in vitro activity in a range of infectious diseases. In addition to activity against SARS-CoV-2, antiviral activity has now been documented for HIV, Zika and Dengue Fever. WP1096 and its close analog, WP1097, are structurally slightly different agents within our WP1122 portfolio. While we are continuing our preclinical development work on WP1122, including in vivo testing for SARS-CoV-2, we have been treatednow expanded our infectious disease program to include these two molecules.
Significant In Vitro Activity Against COVID-19 Virus for New Antimetabolites
On September 29, 2020, we announced that our research team has discovered that a molecule within our portfolio of antimetabolites has displayed significant in vitro antiviral activity against SARS-CoV-2. Independent laboratory testing of the US and Europe, and all results continue to show Annamycinnew drug candidate, called "WP1096," has now repeatedly demonstrated a therapeutic index of greater than 10, which is considered by our team to be safe, and, especially, all have shown Annamycin to be freean industry-standard commercialization threshold for in vitro performance of cardiotoxicity. Of those, 10 have been treated at or above the FDA lifetime maximum anthracycline exposure.
In Vivo Testing Contracted for WP1122
On April 22,September 14, 2020, we announced that we have retained Dr. Richard Whitleycontracted with an independent laboratory to test the antiviral activity of our Science Advisory Board to guide our development strategyWP1122 portfolio in a COVID-19 animal model. We contracted with an independent laboratory for WP1122 for the potential treatment of COVID-19 and other viral diseases. Richard Whitley, M.D., is a Distinguished Professor of Pediatrics, Professor of Microbiology, Medicine and Neurosurgery; Loeb Eminent Scholar Chair in Pediatrics; Co-Director, Division of Pediatric Infectious Diseases; Vice-Chair, Department of Pediatrics; Senior Scientist, Department of Gene Therapy; Scientist, Cancer Research and Training Center; Faculty, Gene Therapy Center; Associate Director for Drug Discovery and Development and Senior Leader, Pediatric Oncology Program, O'Neal Comprehensive Cancer Center at the University of Alabama at Birmingham (UAB); and Co-Founder and Co-Director, Alabama Drug Discovery Alliance.
Corporate
Appointment of COVID-19. ImQuest BioSciences is a preclinical CRO that provides expert servicesElizabeth Cermak to evaluate the potentialBoard of new and novel pharmaceutical products for the treatment and prevention of viruses, bacteria, cancer and inflammatory diseases.
On April 15,October 5, 2020, we announced that Dr. Dominique Scholsthe appointment of the Rega Institute has joined the MoleculinElizabeth (Liz) Cermak, an accomplished life sciences board director with deep pharmaceutical business development team as a consultant. The Rega Instituteexpertise, to our Board of Medical Research, Belgium, is one of the premier medical research institutes in Europe. Dr. Dominique Schols is Professor and Head of the Laboratory of Virology and Chemotherapy, Department of Microbiology and Immunology and Transplantation of the University of Leuven, Belgium.
2020 Lincoln Park Equity Line
Pursuant to the terms of the 2020 Purchase Agreement, at the time that it believeswe signed the information2020 Purchase Agreement and the 2020 Registration Rights Agreement, we issued 760,194 shares of common stock to Lincoln Park as consideration for its commitment to purchase shares of our common stock under the 2020 Purchase Agreement and may issue an additional 304,077 shares pro-rata when and if Lincoln Park purchases (at our discretion) the $22.0 million aggregate commitment.
On November 12, 2020, we sold Lincoln Park at $.707 per share 2,829,214 shares of common stock for aggregate consideration of $2.0 million, and issued 27,643 in the marketplace about us andadditional commitment shares.
On November 11, 2020, we terminated our securities is accurate and adequate.purchase agreement dated October 4, 2018 with Lincoln Park.
Results of Operations
The following table sets forth, for the periods indicated, data derived from our statement of operations (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 March 31, | |||||||||||||||||
2020 | 2019 | ||||||||||||||||
Revenues | $ | — | $ | — | |||||||||||||
Operating expenses: | |||||||||||||||||
Research and development | 3,206 | 2,932 | |||||||||||||||
General and administrative | 1,810 | 1,591 | |||||||||||||||
Depreciation and amortization | 46 | 48 | |||||||||||||||
Total operating expenses | 5,062 | 4,571 | |||||||||||||||
Loss from operations | (5,062) | (4,571) | |||||||||||||||
Other income (expense): | |||||||||||||||||
Gain from change in fair value of warrant liability | 3,845 | 529 | |||||||||||||||
Other income | 5 | — | |||||||||||||||
Interest income, net | 3 | 1 | |||||||||||||||
Net loss | $ | (1,209) | $ | (4,041) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenues | $ | — | $ | — | $ | — | $ | — | ||||||||
Operating expenses: | ||||||||||||||||
Research and development | 4,435 | 2,785 | 10,971 | 7,816 | ||||||||||||
General and administrative | 1,659 | 1,672 | 5,122 | 4,748 | ||||||||||||
Depreciation and amortization | 57 | 51 | 154 | 147 | ||||||||||||
Total operating expenses | 6,151 | 4,508 | 16,247 | 12,711 | ||||||||||||
Loss from operations | (6,151 | ) | (4,508 | ) | (16,247 | ) | (12,711 | ) | ||||||||
Other income (loss): | ||||||||||||||||
Gain from change in fair value of warrant liability | 2,743 | 124 | 1,489 | 3,059 | ||||||||||||
Other income, net | 10 | 5 | 32 | 5 | ||||||||||||
Interest income, net | 3 | 5 | 10 | 10 | ||||||||||||
Net loss before taxes | $ | (3,395 | ) | $ | (4,374 | ) | $ | (14,716 | ) | $ | (9,637 | ) |
Three Months Ended March 31,September 30, 2020 Compared to Three Months Ended March 31,September 30, 2019
Research and Development Expense.
Research and development (R&D) expense wasGeneral and Administrative Expense.
General and administrative expense wasGain from Change in Fair Value of Warrant Liability.
We recorded a netNine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019
Research and Development Expense. R&D expense was $11.0 million and $7.8 million for the nine months ended September 30, 2020 and 2019, respectively. The increase of $3.2 million is mainly related to increased clinical trial activity, increased license fees and costs related to sponsored research agreements, costs related to manufacturing of additional drug product and two additional employees in R&D headcount.
General and Administrative Expense. General and administrative expense was $5.1 million and $4.7 million for the nine months ended September 30, 2020 and 2019, respectively. The increase of $0.4 million was mainly attributable to increased payroll costs for an additional finance employee, increased stock-based compensation expense for annual employee stock, and increased costs for directors and officer's liability insurance being partially offset by reduced travel expenses.
Gain from Change in Fair Value of Warrant Liability. We recorded a net gain of $1.5 million in the nine months ended September 30, 2020 as compared to a net gain of $3.1 million in 2019, 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.
The following table sets forth our primary sources and uses of cash for the period indicated (in thousands):
Three Months Ended March 31, | ||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||
Net cash used in operating activities | $ | (4,342) | $ | (3,847) | ||||||||||||||||
Net cash used in investing activities | (2) | (15) | ||||||||||||||||||
Net cash provided by financing activities | 5,291 | 5,521 | ||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (33) | (11) | ||||||||||||||||||
Net increase in cash and cash equivalents | $ | 914 | $ | 1,648 |
Nine Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
Net cash used in operating activities | $ | (14,647 | ) | $ | (12,521 | ) | ||
Net cash used in investing activities | (360 | ) | (42 | ) | ||||
Net cash provided by financing activities | 17,065 | 20,854 | ||||||
Effect of exchange rate changes on cash and cash equivalents | 2 | (16 | ) | |||||
Net increase in cash and cash equivalents | $ | 2,060 | $ | 8,275 |
As of March 31,September 30, 2020, there was $0.3 million of cash on hand in Australia. We maintain a bank account in Australia and know of no related limitations impacting our liquidity there.
Cash used in operating activities
Cash used in operations was $4.3$14.6 million f
Cash used in investing activities
Net cash used in investing activities was $2,000$360,000 for the threenine months ended March 31,September 30, 2020 compared to $15,000$42,000 for the threenine months ended March 31,September 30, 2019. The decreaseincrease relates to purchasesmass spectrometer equipment purchased for the lab in 2019 related2020. The equipment will be used to furnitureanalyze uptake, metabolism, and fixturestissue organ distribution of anti-cancer and anti-viral agents, which is critical for our corporate apartment, as well as additional electronic equipment for employeesdetermination of pharmacokinetic and our corporate office.
Cash provided in financing activities
In July 2019, we entered into an At Market Issuance Sales Agreement (2019 ATM Agreement) with Oppenheimer & Co. Inc. (Oppenheimer). Pursuant to the terms of the 2019 ATM Agreement, we may offer and sell, from time to time, our common stock through Oppenheimer, acting as agent, through an "at the market offering" as defined in Rule 415(a)(4) (ATM Offering) promulgated under the Securities Act.
During the nine months ended September 30, 2020, pursuant to the 2019 ATM Agreement, we issued 8,472,090 shares of common stock at an average price of $1.45 per share, resulting in net proceeds of $11.9 million. We paid a commission to Oppenheimer equal to 3.0% of the gross proceeds from the sale of our common stock under the 2019 ATM Agreement. In the third quarter of 2020, the 2019 ATM Agreement expired and was terminated.
On November 11, 2020, we entered into a purchase agreement (the “2020 Purchase Agreement”) and a registration rights agreement (the “2020 Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”). Pursuant to the terms of the 2020 Purchase Agreement, Lincoln Park has agreed to purchase from us up to $22.0 million of the Company’s common stock (subject to certain limitations) from time to time during the term of the 2020 Purchase Agreement. Pursuant to the terms of the 2020 Registration Rights Agreement, we filed with the SEC a registration statement to register the shares that have been or may be issued to Lincoln Park under the 2020 Purchase Agreement.
Pursuant to the terms of the 2020 Purchase Agreement, at the time we signed the 2020 Purchase Agreement and the 2020 Registration Rights Agreement, we issued 760,194 shares of common stock to Lincoln Park as consideration for its commitment to purchase shares of our common stock under the 2020 Purchase Agreement and may issue an additional 304,077 shares pro-rata when and if Lincoln Park purchases (at our discretion) the $22.0 million aggregate commitment.
On November 12, 2020, we sold Lincoln Park at $.707 per share 2,829,214 shares of common stock for aggregate consideration of $2.0 million, and issued 27,643 in additional commitment shares.
On November 11, 2020, we terminated our purchase agreement dated October 4, 2018 with Lincoln Park.
In July 2020, we entered into a new At Market Issuance Sales Agreement with Oppenheimer & Co. Inc. (2020 ATM Agreement). Pursuant to the terms of the 2020 ATM Agreement, the Company may sell from time to time through Oppenheimer shares of the Company’s common stock with an aggregate sales price of up to $15.0 million. Subsequent to the quarter ended September 30, 2020, we issued 700,339 shares of common stock at an average price of $0.83 per share resulting in net proceeds of $0.6 million in October 2020.
In February 2020, we entered into subscription agreements with institutional investors to purchase of 7,500,000 shares of our common stock and warrants to purchase 5,625,000 shares of common stock at a combined public offering price of $0.80 per share and related warrant resulting in gross proceeds of $6.0 million. Each warrant has an exercise price of $1.05 per share and will bewere exercisable six months from the date of issuance and will expire five years from the date they arewere first exercisable.
In April 2019, we completed subscription agreements with institutional investors to purchase an aggregate of 9,375,000 units at a public offering price of $1.60 per unit in a registered direct offering. Each unit is comprised of one share of common stock and 0.5 of a warrant to purchase one share of common stock resulting in gross proceeds of $15.0 million. Each warrant has an exercise price of $1.75 per share and is exercisable immediately. The warrants will expire five years from the three months endeddate of issuance.
Additionally, during the second quarter of 2019, 1,413,018 shares were issued due to the exercise of various warrants related to past public offerings. Gross proceeds received due to these exercises approximated $1.6 million.
In March 2019, we completed an underwritten offering of 5,250,000 shares of our common stock and warrants to purchase 2,650,000 shares of common stock for netgross proceeds of $4.7 million after deducting the underwriting discount and estimated offering expenses and$5.3 million. Additionally, we sold 605,367 shares of our common stock to Lincoln Park Capital Fund, LLC for $0.9 million.
We believe that our existing cash and cash equivalents as of March 31,September 30, 2020 combined withplus the shares we sold in April 2020 throughcash raised and committed subsequent to the At Market Issuance Sales Agreementquarter will be sufficient to fund our planned operations into the firstthird quarter of 2021, without the issuance of additional equity for cash. Any such issuances should extend the funding of our planned operations beyond the firstthird quarter of 2021. Such plans are subject to our stock price, market conditions, changes in planned expenses depending on clinical enrollment progress, the use of drug product or a combination thereof. Based on the Company's current assessment, the Company does not expect any material impact on its long-term development timeline and its liquidity due to the worldwide spread of the COVID-19 virus.
We will not generate revenue from product sales unless and until we successfully complete development of, obtain regulatory approval for and begin to commercialize one or more of our product candidates, which we expect will take a number of years and is subject to significant uncertainty. Accordingly, we anticipate that we will need to raise additional capital to fund our future operations. Until such time that we can generate substantial revenue from product sales, if ever, we expect to finance our operating activities through a combination of equity offerings and debt financings, and we may seek to raise additional capital through strategic collaborations. However, we may be unable to raise additional funds or enter into such arrangements when needed on favorable terms, or at all, which would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our development programs or commercialization efforts or grant to others rights to develop or market product candidates that we would otherwise prefer to develop and market ourselves. Failure to receive additional funding could cause us to cease operations, in part or in full. Furthermore, even if we believe we have sufficient funds for our
Critical Accounting Policies and Significant Judgments and Estimates
There have been no material differences from our accrued expenses to actual expenses.
Not applicable to us, as we are a smaller reporting company.
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
In light of the material weakness described below, we performed additional procedures during the quarter and additional analysis and procedures post-closing to ensure our unaudited condensed consolidated financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the condensed consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board Auditing Standard 1305) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim condensed consolidated financial statements will not be prevented or detected.
During the last quarter of fiscal 2016, and as our operational activities increased, management determined that it does not have sufficient segregation of duties within its accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to maintain effective segregation of duties on our assessment of our internal control over financial reporting and has concluded that the control deficiency represents a material weakness. A number of
Changes in Internal Control Over Financial Reporting
With input and oversight from the issues relatedAudit Committee, management is actively implementing a remediation plan to ensure that control deficiencies contributing to the material weakness are remediated such that these controls will operate effectively. We are taking, and expect to continue to take the following remediation actions which have facilitated the proper segregation of duties were remediated within the initiation of transactions, the recording of transactions, and the custody of assets:
● Implemented new information technology systems and policies and procedures during 2019.procedures;
● Management added additional accounting and IT personnel, including the use of qualified contractors;
● Developed formalized accounting procedures and clearly defined authorities;
● Engaged third party specialists to assess and document the design of our internal controls over financial reporting including the evaluation of proper segregation of duties, and to identify and evaluate any weaknesses in 2019our information systems;
● Reported regularly to the audit committee on the progress and implementedresults of the remediation plan, including the identification, status and resolution of internal control deficiencies;
We believe that these actions, and the improvements we expect to achieve as a new accounting software system, accounting policies,result, will effectively remediate the material weakness previously identified. However, the material weakness in our internal control over financial reporting will not be considered remediated until the remediated controls operate for a sufficient period of time and banking controls. Management intends to further enhance its accounting staff and enhancemanagement has concluded, through testing, that these controls are operating effectively. We expect that the controls surrounding its systemremediation of financial accounting and reporting, as soon as economically feasible and sustainable, to further remediate this material weakness. During 2020, we implemented the ERP system for electronic payments and further updated roles, policies and procedures within those systems.
We continuously seek to improve the efficiency and effectiveness of our internal controls. There hashave been no changes, except for items described above, in our internal control over financial reporting that occurred in the threenine months ended March 31,September 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Specifically, ourOur employees are working remotely due to the COVID-19 pandemic, but we do not believe that our adjustments to how we work have materially impacted our internal controls over financial reporting. We continue to monitor and accessassess the potential impact of the COVID-19 pandemic and the related shelter-in-place requirements, on our internal controls and strive to minimize the impact on our internal control design and operating effectiveness.
None.
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, 2019. 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, 2019 as filed with the SEC.
Interim or preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the tradingfinal data.
We have in the past, and intend in the future, to publicly disclose preliminary data from our clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a full analyses of all data related to the particular trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the preliminary results that we report may differ from future results of the same trials, or different conclusions or considerations may qualify such results once additional data have been received and fully evaluated. Preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, preliminary data should be viewed with caution until the final data are available. We may also disclose interim data from our clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. Further, disclosure of preliminary or interim data by us could result in volatility in the price of shares of our common stock.
In addition, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the SEC pursuant to Section 12(k)importance of data differently, which could impact the approvability of the Securities Exchange Act of 1934, as amended, orderedparticular drug candidate and our business in general. In addition, the temporary suspension of tradinginformation we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular drug candidate or our business. If the securities of Moleculin because of questions regardinginterim data that we report differ from actual results, or if others, including regulatory authorities, disagree with the accuracyconclusions reached, our ability to obtain approval for and adequacy of informationcommercialize our current or any our future drug candidate, our business, operating results, prospects or financial condition may be materially harmed.
The COVID-19 outbreak has delayed recruitment in our clinical trials and may continue or worsen, may affect the marketplace about Moleculin and its securities. Pursuant to the suspension order, the suspension commenced at 9:30 a.m. EDT on May 4, 2020 and terminates at 11:59 p.m. EDT on May 15, 2020. Asbusiness of the dateFDA, EMA or other health authorities, which could result in delays in meetings related to our planned clinical trials and ultimately of this report, we have submitted a petition to terminate the suspension, but there is no assurance that we will be successful. We believe we will be able to demonstrate the accuracyreviews and adequacyapprovals of our public disclosures, but the SEC may determine to extend the trading suspension until such time that it believes the information in the marketplace about us and our securities is accurate and adequate.
The COVID-19 outbreak specifically, such outbreak could also potentially affecthas delayed recruitment in clinical trials and may continue or worsen. Additionally, it may delay the approvals of our product candidates due to its effect on the business of the FDA, EMA or other health authorities, which could result in delays in meetings related to planned clinical trials and ultimately of reviews and approvals of our product candidates.
If we breach any of the agreements under which we license patent rights or if we fail to meet certain development deadlines, pay certain fees including extension fees or exercise certain rights to technology, we could lose or fail to obtain license rights that are important to our business.
We license all of our technology from MD Anderson, and we must meet various payment and other obligations under our license agreements with MD Anderson. Our license agreements generally require that we meet various milestones by certain dates, each of which generally requires the payment of additional fees, including extension fees. To date, we have been able meet such milestones, pay certain fees or have been able to enter into extensions with MD Anderson related to such milestones. However, our failure to meet any financial or other obligations under our license agreements in a timely manner could result in the loss of our rights to our core technologies.
We are a party to a number of license agreements with MD Anderson under which we are granted rights to intellectual property that are critical to our business and we expect that we will need to enter into additional license agreements in the future with MD Anderson based on development work we are pursuing under a sponsored research agreement. With respect to inventions arising from our sponsored research agreement, MD Anderson has provided us with an option to negotiate a royalty-bearing, exclusive license to any invention or discovery that is conceived or reduced to practice. However, regardless of such option to negotiate, we may be unable to negotiate a license within the specified time frame or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue a program based on that technology.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
None.
Not applicable.
On May 1,November 11, 2020, the SECMoleculin Biotech, Inc. (the “Company”) entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to Section 12(k)which Lincoln Park has committed to purchase up to $22.0 million of shares (the “Purchase Shares”) of the Securities Exchange ActCompany’s common stock, $0.001 par value per share (the “Common Stock”). Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which it agreed to provide Lincoln Park with certain registration rights related to the shares issued under the Purchase Agreement (the “Registration Rights Agreement”). On the Commencement Date (as defined below), the Company sold Lincoln Park 2,829,214.00 shares of 1934,Common Stock for aggregate consideration of $2,000,000.
Beginning on the Commencement Date (as defined below) and thereafter, the Company has the right, in its sole discretion, to present Lincoln Park with a purchase notice (a “Regular Purchase Notice”), directing Lincoln Park to purchase up to 500,000 Purchase Shares (the “Regular Purchase Amount”) (a “Regular Purchase”). The Regular Purchase Amount may be increased to up to 750,000 shares if the closing sale price of the Common Stock is not below $1.00 per share, and to up to 1,000,000 shares if the closing sale price of the Common Stock is not below $1.50 per share. The Company and Lincoln Park may mutually agree to increase the Regular Purchase Amount.
The Purchase Agreement provides for a purchase price per Purchase Share for each Regular Purchase (the “Purchase Price”) equal to the lesser of:
• the lowest sale price of the Common Stock on the Nasdaq Capital Market on the purchase date of such shares; and
• the average of the three lowest closing sale prices for the Common Stock on the Nasdaq Capital Market during the ten consecutive business days ending on the business day immediately preceding the purchase date of such shares.
In addition, on any date on which the Company submits a Regular Purchase Notice for the maximum amount allowed for such a Regular Purchase to Lincoln Park, it also has the right, in its sole discretion, to present Lincoln Park with an accelerated purchase notice (an “Accelerated Purchase Notice”), directing Lincoln Park to purchase an amount of Purchase Shares (an “Accelerated Purchase”), which number of Purchase Shares will not exceed the lesser of (i) 300% of the number of shares purchased pursuant to such Regular Purchase and (ii) 30% of the total number of shares of the Common Stock traded on Nasdaq during all or a specified period on the applicable Accelerated Purchase date as amended, ordered the temporary suspension of tradingset forth in the securitiesPurchase Agreement. The purchase price per Purchase Share for each such Accelerated Purchase will be equal to 97% of Moleculin becausethe lesser of:
• the volume-weighted average price of questions regarding the accuracyCommon Stock on the Nasdaq Capital Market during the applicable measurement period on the applicable Accelerated Purchase date; and adequacy
• the closing sale price of informationthe Common Stock on the Nasdaq Capital Market on the applicable Accelerated Purchase date.
The Company may also direct Lincoln Park, on any business day on which an Accelerated Purchase has been completed and all of the shares to be purchased thereunder have been properly delivered to Lincoln Park in accordance with the marketplace about MoleculinPurchase Agreement, to make purchases of an additional amount of our Common Stock upon the same terms as an Accelerated Purchase, (an “Additional Accelerated Purchase”).
The purchase price of Regular Purchases, Accelerated Purchases and its securities. PursuantAdditional Accelerated Purchases and the minimum closing sale price for a Regular Purchase will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring during the business days used to compute the purchase price. The aggregate number of shares that the Company can sell to Lincoln Park under the Purchase Agreement may in no case exceed 12,486,666 shares (subject to adjustment as described above) of the Common Stock (which is equal to approximately 19.99% of the shares of the Common Stock outstanding immediately prior to the suspension order,execution of the suspension commenced at 9:30 a.m. EDTPurchase Agreement) (the “Exchange Cap”), unless (i) stockholder approval is obtained to issue Purchase Shares above the Exchange Cap, in which case the Exchange Cap will no longer apply, or (ii) the average price of all applicable sales of our Common Stock to Lincoln Park under the Purchase Agreement equals or exceeds the lower of (A) the official closing price of our Common Stock on May 4, 2020 and terminates at 11:59 p.m. EDTNasdaq on May 15, 2020. As ofthe trading day immediately preceding the date of this report, wethe Purchase Agreement and (B) the average official closing price of our Common Stock on Nasdaq for the five consecutive trading days ending on the trading day immediately preceding the date of the Purchase Agreement, adjusted such that the transactions contemplated by the Purchase Agreement are exempt from the Exchange Cap limitation under applicable Nasdaq rules); provided that at no time may Lincoln Park (together with its affiliates) beneficially own more than 9.99% of the Company’s issued and outstanding Common Stock. The Company issued 760,194 shares of Common Stock to Lincoln Park as a commitment fee in connection with entering into the Purchase Agreement and may issue an additional 304,077 shares pro-rata when and if Lincoln Park purchases (at the Company’s discretion) the $22,000,000 aggregate commitment (the “Commitment Shares” and together with the Purchase Shares, the “Shares”).
The Purchase Agreement contains customary representations, warranties, covenants, closing conditions and indemnification and termination provisions. Sales under the Purchase Agreement may commence only after certain conditions have submittedbeen satisfied (the date on which all requisite conditions have been satisfied, the “Commencement Date”), which conditions include the delivery to Lincoln Park of a petitionprospectus supplement covering the shares of Common Stock issued or sold by the Company to Lincoln Park under the Purchase Agreement, the filing with The Nasdaq Stock Market of a Listing of Additional Shares notification with respect to the Shares and Nasdaq having raised no objection to the consummation of transactions contemplated under the Purchase Agreement, and the receipt by Lincoln Park of a customary opinion of counsel and other certificates and closing documents. We anticipate that such conditions will be satisfied on or around November 12, 2020.
The Purchase Agreement may be terminated by the Company at any time, at its sole discretion, without any cost or penalty, by giving one business day notice to Lincoln Park to terminate the suspension, but there isPurchase Agreement. Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Common Stock. Although the Company has agreed to reimburse Lincoln Park for a limited portion of the fees it incurred in connection with the Purchase Agreement, the Company did not pay any additional amounts to reimburse or otherwise compensate Lincoln Park in connection with the transaction, other than the issuance of the Commitment Shares.
There are no assurance that we will be successful. We believe we will be ablelimitations on use of proceeds, financial or business covenants, restrictions on future financings (other than restrictions on the Company’s ability to demonstrate the accuracy and adequacy of our public disclosures, but the SEC may determine to extend the trading suspension until such time that it believes the informationenter into variable rate transactions described in the marketplace about usPurchase Agreement), rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. The Company may deliver Purchase Notices under the Purchase Agreement, subject to market conditions, and our securities is accuratein light of its capital needs from time to time and adequate.
On November 11, 2020, the Company terminated its purchase agreement dated October 4, 2018 with Lincoln Park.
Exhibit No. | Description | |||||||||||||
10.1 | ||||||||||||||
31.1* | Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 | |||||||||||||
31.2* | ||||||||||||||
32.1* | ||||||||||||||
32.2* | ||||||||||||||
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.
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: | By: | /s/ Walter V. Klemp | |||||||||||||
Walter V. Klemp, | |||||||||||||||
Chief Executive Officer and Chairman (Principal Executive Officer) | |||||||||||||||
Date: | By: | /s/ Jonathan P. Foster | |||||||||||||
Jonathan P. Foster, | |||||||||||||||
Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer) |